Massachusetts Appeals Court holds that contractual limitations period in life insurance policy does not apply to 93A claim

Daniel Brown purchased a life insurance policy from SBLI.  Ten years later, the premium on the policy was due to increase by more than ten times.  An SBLI sales agent left Daniel and his wife Michelle a voicemail message pointing out that the premium was going through the roof and that they had options available to keep the coverage going.  He recommended that they purchase a new policy. 

 

Daniel did not pay the increased premium, so his policy lapsed.  He also did not  purchase a new policy.  When Michelle learned of this, the SBLI agent advised her that Daniel should apply for a new policy.  He did not offer the option of reinstating Daniel's policy pending approval of the new policy.  Daniel's application for a new policy was denied.  Michelle, who had separated from Daniel, was not informed of the denial until after Daniel's death a month later. 

 

Michelle sued SBLI more than two years after Daniel's death, for breach of contract, deceit by failing to recommend that she should continue to pay the premium on the old policy while the application for the new policy was pending, negligent supervision of the agent, and breach of ch. 93A. 

 

SBLI argued that the suit was untimely because the policy set forth a two year contractual limitations period for any suit "brought on or in respect to this policy." 

 

Michelle agreed that her breach of contract claim was time-barred.  In Brown v Savings Bank Life Ins. Co., 93 Mass App. Ct. 572 (2018), the Massachusetts Appeals Court held that the contractual limitations periods did not apply to the deceit and negligent supervision claims.  It also held that the contractual limitations period did not apply to the 93A claim.  The court gave a number of interrelated reasons for that decision.  First, the claim was based on deceit and did not arise "in respect to" the policy.  Second, the term "on or in respect to" is ambiguous and must be interpreted against the insurer.  Third, imposition of a contractually shortened limitations period on a tort-based consumer protection claim would violate public policy. 

Massachusetts Appeals Court holds that discovery rule does not apply to allegation that insurance agency employed unlicensed broker

In my last post I discussed Anawan Ins. Agency, Inc. v. Division of Ins., 76 Mass. App. Ct. 447 (2010), in which an insurance agency was accused of employing an unlicensed broker.

After determining that a four year statute of limitations applied, the court held that the discovery rule does not apply. The discovery rule tolls the statute of limitations until a plaintiff knew or should have known that he or she may have a cause of action. For example, in a medical malpractice claim, under the discovery rule in certain circumstances the statute of limitations may be tolled until the plaintiff develops symptoms putting him or her on notice of the malpractice.

In Anawan, in 1999 the division of insurance received anonymous letters stating that Anawan had illegally opened a second location. The division investigated and learned that Prum was doing business at the second location under an expired broker's license. On June 23, 2004, Anawan's director confirmed in writing that it had paid commissions to Prum.

The Massachusetts Appeals Court held that the discovery rule did not apply to punitive civil statutes including the one prohibiting an insurance agency from employing an unlicensed broker. In support of its determination the court quoted 3M Corp. v. Browner, 17 F.3d 1453, 1455 (D. C. Cir. 1994), which stated:

In an action for a civil penalty, the government's burden is to prove the violation; injuries or damages resulting from the violation are not part of the cause of action; the suit may be maintained regardless of damages.

Massachusetts Appeals Court holds that four year statute of limitations applies to allegation that insurance agency employed unlicensed agent

In Anawan Ins. Agency, Inc. v. Division of Insurance, 76 Mass. App. Ct. 447 (2010), the Division of Insurance alleged that Anawan Insurance Agency paid compensation to Kuntthy Prum at a time that Prum was not licensed as an insurance agent.

The first issue addressed by the Massachusetts Appeals Court was which statute of limitations applied. Mass. Gen. Laws 260 § 5 states that the statute of limitations on actions for penalties or forfeitures is either one or two years. By its terms, that statute does not apply if § 5A applies.

Mass. Gen. Laws 260 § 5A states that the statute of limitations for actions arising on account of violations of "any law intended for the protection of consumers" is four years.

The court held that Mass. Gen. Laws ch. 175 § 177, which prohibits payments to unlicensed brokers, is a statute intended to protect consumers, and that therefore the four year statute of limitations applies.