NOT RECOMMENDED F OR F ULL-TEXT PUBLICATION File Na me: 11a0579n.06 No. 10-5367 UNITED STAT ES COURT OF AP P EALS F OR THE S IXTH CIRCUIT

L AURA YARNEL L , P laintif f–Ap pellant,

v. T R A N S A M E R I C A L I F E I NSURANCE CO., et al., Defendan ts–Appellees.

_______________________________________ ) ) ) ) ) ) ) ) ) ) ) ON AP P EAL FROM THE UNI TED STATES DI STRI CT COURT FOR THE E ASTERN DI STRI CT OF TEN

NESSEE
O P I N I O N

Before: M OORE an d GIBBONS, Circuit Jud ges; BORMA N, Distric t Judge. * P AUL D. BORMAN, District Judge. Plaintiff-Appellant L aura Yar nell filed a complaint in Tenne ssee state court alleg ing that Def endant- Appellee Transa

merica L ife I nsuranc e C om p an y (“Transame rica ”) brea ched its contra ct with her when it denied her claim to her husband’s l i fe insurance benef

its. Transa

merica remove d the ca s e t o t h e United States District Court for the Easter n District of Tenne ssee on the basis of diversity jurisdiction. Yar nell then filed an amende d complaint adding Def

endants-A

ppellees SunTrust Securities, I nc. and S u n T ru st Annuities, I nc. (“SunTrust”) , and asser

ting neg lige nce claims ag ainst both Transa merica and SunTrust. The 1 Fe dera l District Court construed the complaint as bring ing two claims ag ainst both Def endants: (1)

The Honora

ble Paul D. Bor

man, Uni t ed S tates District J udg e for the Easter n District of * Michig an, sitting by

desig nation. The Trial court modi fied and corr ecte d the docket so that “SunTrust S ec u ri t ies, I nc.” and 1 “SunTrust Annuities, I nc.” c ollectively ref err ed to “SunTrust I

nvestment Service s, I nc.”No. 10-5367

Y arnell v. Transamerica Life Insurance Co., et al.

neg lige nce, and (2) brea ch of contra ct. The District Court g rante d Transa merica ’s and SunTrust’s motions to dismiss the neg lige nce claim, dismiss ing all claims ag ainst SunTrust. The District Court then g rante d Transa

merica ’s motion for summary judgme nt, dismiss ing all rema ining brea ch of
contra ct claims ag ainst Transa merica

. Ya rn el l has timely appea led both of these dismiss als. Be cause we f

ind that the District Court did not err, we AF F IRM

.

I. BACKG ROUND A. The Lif

e Insurance P olicy On J anuar y 1, 2003, Transa

merica issued a policy insuring the life of S. Cameron Yar nell in the amount of $1,000,000. The benef iciary of the po l i cy was an irrevoc able trust cre ated for the benef it of Mr. Yar

nell’s children, and the owner of the policy was Mr. Yar nell’s wife, Plaintiff L aura Yar nell. Chris For d, an insurance ag ent with SunTrust, assisted Mr. Yar nell with his application for the life insura

nce policy

. The following policy provis i o n s are rele vant to the instant appea l. The Yar nells wer e require d to pay an annual p re m i u m o n t he policy , which Mr. Yar nell elec ted to pay in quarte rly installments. I f a payment was missed, Transa merica would mail a notice to Mrs. Yar nell’s last known addre ss informing her that she had a 31-day g rac e period to make the overdue pay ment befor e the policy lapsed. I f the pay ment was not ma de and the policy lapsed, it c ould be re instated if the 2

The Merr iam-Webster Dictionary define s “lapse ” as “(1) the termination or failure of a rig ht 2 or privileg e throug h neg lect to exercise it within some limit of time or th ro u gh fa i l u re of some conting ency . . . (3) termination of cover ag e (as by life insurance ) for nonpay ment of premiums[.] ” Webster’s Third Ne w I nterna tional Dictionary Unabr idge d 1272 (1993). 2No. 10-5367

Y arnell v. Transamerica Life Insurance Co., et al.

p re m i u m s d u e at the time of reinstateme nt wer e paid, and if Mr. Yar nell was still considere d insurable by Transa

merica ’s standards. The policy also provided that it was incontestable if it was “in forc e” for at least two y ear s. (R. 36, Def .’s Mot. Summ. J ., Ex

. C, I nsuranc e Poli cy at 6.) Howeve r, to keep the policy “in forc e,” the Yar nells wer e require d to pay eac h premium in advanc e. A policy lapse and subsequent rein s t atement there fore cause d the two-y ear contestable period to restar t. B. Transame rica’ s P rem ium A dm inis trat ion S ystem During the period rele vant to the instant case , Transa merica utiliz ed the L if

e I n suranc e Policy Administration Sy stem (“L I PAS”), a computer prog ram that automatically trac ked and g e n e r a te d th e various notices require d for policy holders. Specifica lly , L I PAS g ener ated the following notices: (1) a “pr emium notice,” g ener ated a nd mailed 30 day s prior to the pre mium due da te; (2) a “re minder notice,” g ener ated and mailed 20 day s afte r the premium due date if pay ment had not been rec eived, and (3) a “la

pse notice,” g ener ated a

nd mailed 53 day s afte r t he premium due date if pay ment had not been r ece ived. Transa merica descr ibes the proc ess of mailing the var ious notices as follows: At all rele vant times, L I PAS, which was located in Kansa s City , Missouri, g ener ated and printed all the premium, reminder and lapse notices that wer e to be mailed on a g iven day

. A T ra nsameric a employ ee then took the notices from L I PAS’s printing room to its onsite Offic e Service s Depart ment. An Offic e Service s employ ee or employ ees then p l aced the printed notices into a mail sorting machin e. The sorting machine folded the notices, place d them in envelope s along with self-a ddresse d return envelope s, sealed and aff ix ed first-cla ss postag e to th e envelope s. Once this proce ss was completed, the envelop es wer e taken to a “pre -sort house,” located 3No. 10-5367

Y arnell v. Transamerica Life Insurance Co., et al.

approximately four t o five blocks from the building that housed L I PAS. At the pre-sort h ouse, t he envelopes were sorted acc ording to zip code. T h er eafter, a U.S. Post Offic e employ ee or employ ees retrie ved the e nvelopes fr om the pre- sort house for mailing. (R. 36, Ex

. E, Cox Aff. ¶ 14.) Transa merica did not keep h ar d co p i es o f any notices during the rele vant period, but instead relied on Billing Refer ence L ists (“BRL s”) g ener ated by L I PAS when it printed the notices. The L I PAS sy stem listed the Yar nells’ mailing addre ss as 1816 Hix son Pike, Chattanoog a, Tenne ssee 37405. Mrs. Yar nell admits tha t she rec eived mail f rom Transa

merica at this a ddress. C. P olicy Lapse and Reinstate m ent The BRL g ener ated on September 6, 2006, ref lects that a “p re m i u m” notice reg arding the October 6, 2006 premium pay ment was printed for Mrs. Yar nell. A second BRL g ener ated on October 26, 2006, ref

lects that a “re minder” notice was printed for Mrs. Yar nell, informing her that the 31-da y g rac e per iod had beg un. A third BRL g ener ated on Nove mber 28, 2006, re flec ts that a “lapse ” noti ce was printed for Mrs. Y arne ll’s policy . All three BRL s list the Hix son Pike addre ss under the “Addr ess L ines” c olumn. Mrs. Yar nell denies rec eiving “any let t er o r co rre spondence involving the lapse of this policy [.] ” (R. 43, Pl.’s Opp’n Summ. J ., Ex

. 1, Yar nell Aff. ¶ 3.) Howeve r, she also admits that her hus b an d wa s p ri marily responsible for all of the household bills. Although Mrs. Yar nell would

occa sionally open bills if she was tem p o r a r ily responsible for making a pay ment, normally she would “just hand them all to [her husband]” to pay . (R. 36, Ex

. B, Yar nell Dep. 29-30.) Mrs. Yar nell does not know what her

husband did with the bills or notices from Tra nsameric a af

ter he paid them. 4No. 10-5367

Y arnell v. Transamerica Life Insurance Co., et al.

On Dec ember 11, 2006, Transa merica rec eived a chec k from Mr. Yar nell for the amount of the overdue policy premium, as well as the remittance stub from the Novembe r 2 8 , 2 0 0 6 l apse notice, evidencing that the B RL proce ss was func tioning prope rly

. Howeve r, because a l apse had

occur red, the policy require d Mr. Yar nell to complete a reinstateme nt application. I n J anuar y 2007, Transa merica rec eived a completed reinstateme nt application from Mr. Yar nell dated Dec ember 12, 2006. Transa

merica reinstated the policy

based on Mr . Yar

nell’s answe rs in this application. The Yar nells’ insurance ag ent, Chris For d, assisted Mr. Yar nell with t h e re i n statement application. F ord testified a s follows:

Q Th en , if y ou would, tell me as I asked y ou befor e, what happene d when Mr. Yar

nell came in a

nd y ou completed this reinstateme nt application? How did that g o? A He came in, sa t dow n. I actua lly rea d these questions to him v er bally , waited for him to respond, and then I chec k ed t h e box es based on how he answe red that question, or if there was something that he neede d to s ay , I wrote those comments down on the application. (R. 36, Ex . A, For d Dep. 42.) Question nine on the re instatement applica tion asked the following : During the past five y ear s, have y ou: a) H ad any

illness, injury

or disease ? b) Consulted or bee n examined by any phy sician? c) Requir ed any

hospitaliz ations?

. . .
5No. 10-5367

Y arnell v. Transamerica Life Insurance Co., et al. (Cox Aff., Ex

. E, Reinstatement Application.) For parts a) and c), For d, based on the response s he

rec eived from Mr. Yarnell, chec ked “NO” on the applica tion. For pa rt b), he c hecke d “YES” a nd wrote in the r emar

ks section: “B roke f

our ribs in skiing a ccide nt in 2003.” ( Id .) Ba sed on its review of Mr. Ya rnell’s rec ords, Transa

merica found that Mr. Yar nell did not disclose on his reinstateme nt application the following signific ant and undisputed medical history :

On Marc h 8, 2006, Mr. Yar nell was admitted to The Mea d o ws , an alcohol and drug reha

bilitation fac ility located in Wick en b erg , Arizona. Mr. Yar

nell was an in-patient at The Meadow s from Marc h 8, 2006, to April 9, 2006. Whil e he was at The Meadow s, a phy sician diag nosed Mr. Yar

nell with alcohol depende nce, major depre ssion, and hy perte nsion. Prior to his d ischarg e on April 9, 2006, another phy sician at t h e [ s i c] Meadow s, Dr. Wil liam Firth, diag nosed Mr. Yar nell with alcohol depe ndence , depre ssion, and hy perte nsion. On J une 1 3 , 2 006, Mr. Yar nell went to Memorial Hospital in Chattanoog a, Tenne s s e e , due to having drunk rubbing alcohol. Whil e Mr. Yar nell was at Memorial Hospital on J une 13, 2006, a phy sician diag nosed him with alcoholism. On J u ly 11, 2006, Mr. Yar nell was voluntarily admitted to the C orner stone of Recove ry , a reha bilitation fac ility located i n L ouisvill e, Tenne ssee. Upon his admission, Mr. Ya rnell was “slig htly intox icated” and his admitting diag nosi s wa s “Ac ute I ntox ication and/o r Wit hdraw al Potential.” Mr. Yar nell was in medical detox at the Cornerstone of Recove ry until J uly 14, 2006, at which time he was transfe rre d t o “Adult Residential.” Mr. Yar nell left the fac ility ag ainst medical advice on J uly 22, 2006. Whil e at the Cornerstone of Recove ry , Mr. Yar nell rec eived car e from, am o n g others, phy sician Ga

ry O’Shaug hnessy , the Medica l Direc tor. On or about J uly 24, 2006, Mr. Yar nell was admitted to the intensive out-patient thera

py prog ram at Parkridg e Valley Ho s p ital in Chattanoog a, Tenne ssee due to alcoholism. M r. Yar nell was discharg ed from Parkridg e on Aug ust 23, 2006. Whil e at Parkridg e, Mr. Yar nell participa ted re g ularly in Alcoholics Anony

mous.

6No. 10-5367

Y arnell v. Transamerica Life Insurance Co., et al. (R. 36, Ex

. G, L ivingston Aff. ¶ 12.) Cameron Yar nell had thus spent more than 70 day s in hospital

or alcohol trea tment pr og rams within the nine months prior to his c ompletion of the reinstateme nt application, all of which he failed to disc l o s e to Transa merica

. Significa

ntly , despite the direc t inquiry in question nine, Mr. Yar nell did not disclose hi s J u n e 1 3 , 2006 hospitaliz ation, or his consultations with either Dr. Firth or Dr. O’Shaug hnessy

. I f this medical history had been disclosed, Transa merica would h ave classified Cameron Yar nell as uninsurable due to alcoholism. (L ivingston Aff. ¶ 15.) Mr. Yar nell died on October 3, 2007. Transa merica subsequently ref

used pay ment under the policy based on ma terial misrepr esenta tions that render ed the r einstatement a pplication void. D. P roce dural Hi story L aura Yar

nell filed a complaint in the Chance ry Court of Hamilton County , Tenne ssee, on J anuar y 29, 2009. On Fe bruar

y 27, 2009, Transa

merica filed for remova l on the basis of diversity jurisdiction. Yar

nell subsequently filed two amende d complaints on Septe mb e r 1 , 2 0 0 9 , a n d O c tobe r 12, 2009. The Second Amended Complaint alleg es that Transa merica and SunTrust wer e neg lige nt in hir ing a

nd training their employ ees a nd in failing to insti tute policies and proce dures to pr event insurance policies from lapsing

. The Complaint also alleg es that Transa merica and SunTrust failed
to notify the Yar

nells that their g rac e p er i o d had beg un as require d by the policy , and that their ref usal to pay policy benef

its was “without cause .” Transa merica and SunTrust both filed motions

7No. 10-5367

Y arnell v. Transamerica Life Insurance Co., et al.

to dismiss and motions for summary judgme nt. The District Court g rante d both motions to dismiss and Tra nsameric a’s Motion for Summary J udg ment. This timely

appea l followed. 3 II. ANALYSIS A. Standard of

Review This Court revie ws de novo the district court’s dismiss al of a claim pursuant to Fe d. R. Civ. P. 12(b)( 6). DirectTV, Inc. v. Treesh , 487 F.3d 471, 476 (6th Cir. 2007). I n re v i ew i n g a R ule 1 2 (b)( 6) motion, a court must “construe the complaint in the light most favor able to the plainti ff ,
acc ept its alleg ations as true, and draw all rea sonable infere nces in favor of the plaintiff.” Id

. at 476. The motion “will be g rante d if the fac t s as al l eged are insufficient to make a valid claim or if the claim shows on its fa ce that relief is ba rre d by an aff

irmative defe nse.” Riverv iew Health Institute LLC v. Medic al Mutual of Ohio , 601 F.3d 505, 512 (6th Cir. 2010). This require s “more than labels and co n cl u s i o n s , an d a formulaic rec itation of the elements of a cause of action will not do

. . . . Fa ctual alleg ations mu s t b e en o u gh to raise a rig ht to relief above the specula tive level.” Bell

There wer e seve ral proc edura l irreg ularities in the District Court reg arding the motions t o 3 d i s m i s s and for summary judgme nt. Howeve r, these irreg ularities do not aff ect the merits o f t h e instant appea l. Transa merica and SunTrust initially fil ed motions to dismiss Yar nell’s first Amended Complaint. Ya rnell filed a Response, but then also filed a second Amended Complaint without seeking leave to do so from the District Court

. Transa merica and SunTrust there afte r filed new Motions to Dismiss that incorporate d the ar g uments raised in their initial motions. Yar nell filed a Response to these Motions as we ll. Transa merica and SunTrust als o fi l ed Motions for Summary J udg ment. Yar nell filed a response and both Def

endants filed replies. Yar

nell then filed a response to both replies, attempting to raise additional arg uments. Transa merica filed a Motion to Strike Yar nell’s response to the reply briefs, w hich was g rante d by the District Court. 8No. 10-5367

Y arnell v. Transamerica Life Insurance Co., et al.

Atlantic Corp. v. Twombly , 550 U.S. 544, 555 (2007). The complaint must “per mit the court to infer

more than a mere possibili ty of misconduct[.] ” Ashcroft v. Iqbal , --- U.S.

--- -, 129 S.Ct

. 1937, 1950 (2009). This Court revie ws a district court’s g rant of summary judgme nt de novo . Allen v. Highlands Hosp. Corp. , 545 F.3d 387, 393 ( 6th Cir. 2008). S ummary judgme nt is proper unde r F ed. R. Civ. P. 56(c) wher e “the pleading s, the discovery and disclosure materia ls on file, and any aff idavits show that there is no g enuine issue as to any materia l fac t[ .]” The fac ts must be viewed and all rea sonable infere nces must be draw n in favor of the nonmoving party

. Pennington v. State Farm Mut. Auto Ins. Co. , 553 F.3d 447, 450 (6th Cir. 2009) (citing Matsushita Elec. Indus. Co. v. Z enith Radio Corp. , 475 U.S. 574, 587 (1986))

. The Court must ultimately deter mine “whe ther the evidenc e prese nts a sufficie nt disag ree ment to require submissi on to a jury or whe ther it is so one-sided tha t one par ty must prevail as a

matter of la

w.” Anderson v. Liberty Lobby, I nc. , 477 U.S. 242, 251-52 (1986). B. Negligence When fede ral courts have jurisdiction over state law claims due to the diversity of the parties, the substantive law of the forum state g overns. Erie R.R. Co. v. Tompkins , 304 U.S. 64 (1938). The Tenne ssee Supreme Court has rec og nized the following elements with rega rd t o a claim of neg lige nce: “(1) a duty of car e owed by the defe ndant to the plaintiff; (2) conduct falling below the applicable standard of car e amounting t o a breac h of t hat dut y ; (3 ) an injury or l oss; (4) causation in fac t; and (5) proxi mate, or leg al cause .” Bradshaw v. Daniel , 854 S.W .2d 865, 869 (Tenn. 1993). 1. Failure to Preve nt Lapse of Policy

9No. 10-5367

Y arnell v. Transamerica Life Insurance Co., et al.

Yar nell alleg es that Transa

merica and SunTrust wer e neg lige nt in allowing premiums to be unpaid on policies, ca

using the m to lapse. The Tr ial court dismiss ed Yar nell’s neg lige nce claims, finding that she had not established that either insurer owed her a duty to preve nt the i n suranc e policy from lapsing

. Yar

nell arg ues that this was err or, rely ing primarily on W

ood v. Newman, Haye

s & Dixon Insuranc e Age ncy , 905 S.W .2d 559 (Tenn. 1995) , which states:

I t i s als o well established that an insurance ag ent employ ed to m ai n t ai n insurance cover ag e for a client may be held liable on a neg lige nce theory if the ag ent fails to use rea s o nable car e and diligence i n continuing the insurance , either by obtaining a renewa l or repla ceme nt policy or by proper ly maintaining an exis ting policy

. Id

. at 562. Transa

merica and SunTrust arg ue that , ab s en t an ag ree ment cre ating a continuing responsibility

to the insured, an insure r has no duty to preve nt the lapse of a

n insurance policy

. “[T] he exis tence or nonexis tence of a duty owed to the plaintiff by the defe ndant is entirely

a question of law for the court.” Carson v. Headrick , 900 S.W .2d 685, 690 (Tenn. 1995). Tenne ssee courts have consistent l y held that a duty to preve nt an insurance policy from lapsing only arises wher e there is a

n express or implied ag ree ment to maintain cover ag e on behalf of the insured. See Ezell v. Associates Capital Corp. , 518 S.W .2d 232 (Tenn. 1974) (finding the defe ndant liable under

an implied contra ct to procur e and maintain collision insurance for the plaintiff’s vehicle) ; Nidif fer

v. Clinchfield R.R. Co. , 600 S.W .2d 242, 246 (Tenn. App. 1980) (holding that holders of g roup life insurance cer

tificates had no vested rig ht to continuation of t h e p o l i cy “[i] n the absenc e of a provision in the policy

or ce rtificate to the contra ry or other inde pendent c ontrac t . . . .”)

10No. 10-5367

Y arnell v. Transamerica Life Insurance Co., et al.

The lang uag e from W

ood that Appellant relies on is unavailing

. I n that case , plaintiff, who owned and opera ted a marina, employ ed the defe ndant insurance ag ency to procur e “all-r isk” insurance for the marina. W ood , 905 S.W .2d at 560. The “all-r isk” policy included ice and snow damag e. Id

. When the policy was near ing its expiration, plaintiff asked defe ndant to procur e a like repla ceme nt policy

. Id

. Def endant was unable to find another “all-r isk” policy , howeve r, and instead purchased i n s u ra n ce cover ing only “name d perils.” Id

. Def endant informed pl aintiff that the new policy included “extended cover ag e,” but did not disclose that ice and snow cover ag e was excluded. Id

. When a subsequent ice and snow storm damag ed plaintiff’s marina and the insurance

car rier declined cover ag e, plaintiff sued defe ndant, alleg ing that defe ndant’s ag ent was neg lige nt for failing to disclose that the new policy did not cover ic e and snowdamag e. Id . at 561. The defe ndant ag ency in W ood was there fore “employ ed to maintain insurance cov er age ” beca use the plaintiff had ex p re s s ly direc ted it to procur e a like repla ceme nt policy

. W ood , 905 S.W .2d at 562. The d ef en d an t ’s liability thus arose out of an express contra ct to maintain the insurance policy , which cre ated the nece ssary duty element. This is distinguishable from the instant

case , wher e SunTrust’s ag ent had procur ed an insurance policy for the Ya rn el l s , and the policy lapsed a ccor ding to its terms due to Mr. Y arne ll’s failure to timely pay the pre mium. Quintana v. Tennessee Farmers Mutual Insurance Co. , 774 S.W .2d 630 (Tenn. App. 1989), prese nts a more appropr iate compar ison with the instant case . I n Quintana , the plaintiffs purcha sed proper ty insurance from defe ndants throug h an independe nt insurance ag ent. Id

. at 631. After plaintiffs filed two claims due to their far m being burg larized on two differ ent occa sions, defe ndants

11No. 10-5367

Y arnell v. Transamerica Life Insurance Co., et al.

decide d to canc el the plaintiffs’ pr operty insurance policy

. Id

. Def endant sent plaintiffs and their insur ance ag ent letters stating that the policy had been canc eled; the insurance ag ent rec eived his letter, but plaintiffs wer e on vaca tion in Texas when their letter arr ived. Id

. The plaintiffs’ insurance ag ent did not att empt to contac t them afte r rec eiving the notice, even though he was awa re the plaintiffs wer e on vaca

tion. Id

. at 632. After the insurance was canc elled, but befor e plaintiffs had
returne d from vac ation, an ar son fire de stroy ed the plaintiffs’ barn. Id

. The Tenne ssee Court of Appea ls enter ed judgme nt in favor of defe ndants, noting that, “[i] n the absenc e of an ag ree ment cre ating continuing responsibilities, an insurance ag ent’s obliga tion to a client end s wh en the age nt obtains the i nsuranc e for the client.” Quintana , 774 S.W .2d at 634. The court held that, even though the plaintiffs had a long business rela tionship with their insurance ag ent, and the a g ent knew the plaintiffs had rece ntly left for a vacation i n Texas, he “did not have

a duty to tr

y to c ontact the [pl aintiffs] whe n he rec eived his c opies of the canc ellation letters.” Id

. That Quintana involved casua lty insurance and the instant case involv es l i fe i n s u ranc e is not of critica l importance. The Complaint in the instant case does not alleg e the exis tence of any ag ree ment to c ontinue the l ife insurance policy or prevent i ts lapsing

. Wit hout such an agr eeme nt, neither Transame rica

nor S u n T ru s t had an aff

irmative duty to do so. Absent a duty to Appellant, Transa merica and SunTrust are not liable under a neg lige nce theory

. The Distr i ct C ourt there fore did not err in dismiss ing Y arne ll’s neg lige nce c laim.

12No. 10-5367

Y arnell v. Transamerica Life Insurance Co., et al.

Yar nell contends that the opinion testimony of her proposed expert witness, Wil liam Br itain Oehmig , contra dicts Transa merica ’s and SunTrust’s asser tions that no duty exis ts to preve nt a policy from lapsing . I t does not. Oehmig ’s aff

idavit states that For d could have done more to preve nt the Yar nells’ p o l i cy from lapsing

. This would be some evidenc e that, if a duty ex i s t ed , For d may have brea ched the standard of care. S

ee Bradshaw , 854 S.W .2d at 869. Howeve r, Oehmig’s affida vit cannot crea te

a leg al duty wher e Tenne ssee law rec og nizes none. See Carson , 900 S.W

. 2 d at 690. Fur ther, Oehmig ’s deposition testimony conce des that there is no law or rule applicable to insurance ag ents that establishes a duty

to preve nt a policy

from lapsing : Q I s there any

thing with Chris For d’s signa ture on it obliga ting himself to provide notice to either Cameron Yar nell or L aura Yar nell? A We are dealing in the moral - - Q Would y ou answe r my question. A I am. We’re dealing in the moral and ethical wor l d, wher e, oftentimes, things a

re not wr itten. (. . . .) Q You have not seen a ny such docume nts, have y

ou? A I have not seen and I don’t know of the exis tence , one way or the other.

13No. 10-5367

Y arnell v. Transamerica Life Insurance Co., et al. (R

. 43, Pl.’s Supp. Resp. Summ. J ., Ex

. A - Oehmig Dep. 53.) Moreove r, For d’s d ep o s i t i o n testimony ref

lects that ear ly -on he informed Mr. Yar nell of an automatic premium withdraw option, and Ya rnell re jected it: Q Well, did y ou ever rec ommend to [Mr. Yar nell] that he put an automatic pre mium draw [on his account]? A I think at some point we did, y es. (. . . .) Q Why

didn’t y ou do it earlier ? A When I asked – when I mentioned this to Mr. Yar nell, it wa s something tha t he did not want to do at that time. Q So he didn’t – he didn’t do it? A He did not want to do it. Q Are y ou sure a

bout that? A Yes. Q Did he ever , sir, sign a premium authorization to SunTrust to take the pr emiums out? A My

understanding at the end, y es, he did. (. . . .) Q How did that come up about the automatic premium withdraw? A I think – well, l et m e re phrase that. After two reinstateme nt applications we suggest ed – I sug g ested that he do an automatic bank draf

t versus pay ing for the policy with a chec k and run the risk of having the policy lapse a g ain. 14No. 10-5367

Y arnell v. Transamerica Life Insurance Co., et al.

Q Why

didn’t y ou sug g est that he do that a fter the first one? A I was g oing off the first comment that Mr. Yar nel l s ai d

. I don’t want to do a ba

nk draf t. Q Once ag ain, why

did y ou ask him that ag ain? A I t had happe ned twice

. (F ord De p. 70-71.) I n summary , th e r e w a s no leg al or contra ctual basis requiring For d to rec ommend that Yar nell participa te in automatic premium withdrawa l. Fur ther, For d did ear ly -on inform Yar nell of that option, and Yar

nell reje cted it. Acc ording ly , we aff irm the District Court’s dismissal of Yarne ll’s neg lige nce c laims ag ainst both Transame rica and SunTrust. B. Breach of Contract Yar nell alleg es that Transa

merica failed to notify her that the policy was enter ing the g rac e period, a nd that Transa

merica ref used to pay

the proc eeds of

the policy

“without cause .” The two i s s ues rele vant to the instant deter mination are there fore : (1) whether Transa merica satisfied th e notification require ments set forth in the policy an d under Tenne ssee law, and (2) whether the reinstateme nt application contained materia l misstatements that justified Transa merica ’s ref

usal to pay the insuranc e proc eeds.

15No. 10-5367

Y arnell v. Transamerica Life Insurance Co., et al.

The District Court g rante d summary judgme nt for Transa merica , finding that there was no

4 issue of materia l fac t as to either of these issues. Yar nell now ar gu es t h at h er aff idavit cre ates a question of fac t as to whether Transam er i ca co m plied with the g rac e period and lapse notice require ments, t h at Transa merica ’s proof of mailing the requisite notices is insufficient under Tenne ssee law, and that Mr. Oehmig ’s aff idavit cre ates a question of fac t. I n response , Transa merica arg ues t hat no rea sonable juror could conclude t h at Mr. Yarnell did not make a misrepre sentation

on the application for reinstat em en t , an d that it need only produce evidenc e that it mailed the requisite notices, not that the Y arne lls actually rec eived them. 1. Notif ication Requireme nt The policy provided that, once the g rac e period b ega n, Transa merica would notify Mrs. Yar nell “by sending a notice to [her] last known addre ss . . . .” (I nsuranc e Policy at 5) Under Tenne ssee law, the po l i cy co u l d not lapse within six months of nonpay ment “unless a written or printed notice

. . . has been duly addre ssed and mailed with the require d postag e aff ix ed, to the policy

owner at the policy owner ’s last known post office addre ss as shown by the rec ords of the insurance company .” Te nn. Code § 56-7-2303( a). Yar nell arg ues that a question of fac t ex i s t s as to whether Transa merica mailed the g rac e period notice and lapse notice. As evidenc e that it did mail the require d notic es t o t h e Ya rnells,

Be cause the insurance policy was betwee n the Yar nells and Transa

merica , not SunTrust, the 4 District Court found that Yar nell’s brea ch of contra ct alleg ation d i d not state a claim upon which relief could be g rante d as to SunTrust. 16No. 10-5367

Y arnell v. Transamerica Life Insurance Co., et al.

Transa merica has produce d the aff idavit of J ohn Cox , which descr ibes the proce ss by which notices

wer e g ener ated by

L I PAS and mailed to policy holders. Te nn. Code § 56-7-2303( b) states: The aff idavit of any responsible office r, cler k o r age nt of the insurance company authorized to mail the notice that it is the standard prac tice of the company to duly addre ss and mail to policy owner s the notice require d by this sec tion sha ll be prima fac ie evidenc e that the notice has be en duly

g iven. See also Cherokee Ins. Co. v. Hardin , 302 S.W .2d 817, 819 (Tenn. 1957) (holding that evidenc e of the reg ular routine in a business office can satisfy the burde n of proving the mailing of a notice by

an insurance company

); Blurton v. Grange Ins. & Cas. Co. , 159 S.W .3d 1, 10-11 (Tenn. App. 2004) (same)

. Yarn el l ar gu es that the Cox aff idavit does not satisfy this provision beca use, althoug h it indicates that a cler

k is authorized to mail the notice, it does not state that Cox is authorized to mail the notice. Yar

nell further arg ues that this section only applies to notices rega rding insurance premiums, not notices reg arding the start of the g rac e per iod. Reg ardle ss of the technica l require ments of § 56-7-2303( b ), Transa merica has produce d evidenc e that it mailed the require d notices to the Yar nells. Most notably , Transa merica produce d the actua l remittance stub from the lapse not i ce s en t t o the Yar nells, that was sent back to Transa merica by Mr. Yar

nell. I n addition, Transa

merica has produce d the BRL s g ener ated eac h time

a notice was sent to the Yar nells. These lists ref

lect specific dates when a notice was mailed to the Yar nells, the ty

pe of notice sent, and indicate that eac h notice was addre ssed t o the Hix son Pike addre ss.

17No. 10-5367

Y arnell v. Transamerica Life Insurance Co., et al.

Yar nell arg ues, howeve r, that the BRL printouts are insufficient proof of mailing, rely ing on Finch v. Monume ntal Life Insurance Co. , 820 F.2d 1426 (6th Cir. 1987). I n Finch , the def endant insurer challeng ed the sufficie ncy of evidenc e afte r a jury trial finding the insurer liable. Id

. at 1427. Whil e there was no direc t evidenc e that the defe ndant had mailed a premium notice to the plaintiff, the insurer arg ued that the computer responsible for producing the notices had been working p r o p e r ly during the time period whe n the notices in dispute would have been se nt. Id . at 1431. This Court found that the de fenda

nt had fa iled to show that the notice ha d been se nt. Id

. T h e BR L s produce d by Transa merica are much m ore detailed t han the evidenc e produc ed by the defe ndant in Finch

. They include the specific dates the notices we re ma iled to the Yar nells and the addre ss to which the notices wer e mailed. Moreove r, Transa merica has produce d evidenc e of its customary business prac tice of mailing notices. See Groove r v. Torkell , 645 S.W .2d 403, 407 (Tenn. App. 1982) (holding that “evide nce that an act was customarily done under like ci r c u ms ta n ces will be rec eived as evidenc e that it was d one on the particula r occa sion.”) Fur

thermore , Transa merica has produce d the remittance stub Mr. Yar nell mailed with a late pay ment – evidenc e that the Yar

nells actua lly

rec eived the la

pse notice. I n rebuttal, Mrs. Yar

nell has submitt ed her own aff idavit, stating that she “neve r rec eived any letter or corr espondenc e about any g rac e period taking eff ect under this p o l i cy [ ,]” and “neve r

rec eived a

ny letter or corre spondence involving the lapse of this policy from either

[Transamer ica

or SunTrust] .” (Ya

rnell Aff. ¶ 3.) Howeve r, this aff idavit does not pass muster, beca use Mrs. Yar nell’s asser

tions are g rea tly undermined by her own deposition testimony

. The aff idavi t also

18No. 10-5367

Y arnell v. Transamerica Life Insurance Co., et al.

offe rs no specific fac ts bey ond the conclusory statement that Mrs. Yar nell never rea d a lapse notice. She did testify

that she re ceive d mail from Tra nsameric a but did not open and r ead the letters: Q

. . . When a b i l l came from Transa merica , who was it addre ssed to? A I have no ide a. (. . . .) Q Would y ou ever

see the se bills in the mail? A Not – I mean, only when I was in cha

rg e – Q Okay

. A – did I actua lly

open, look and se e. Q Okay

. A Otherw ise, I– y eah. Q L et’s say that y ou went and picked up y our mail and there was a bill from Transa

merica in there

. What would – what would y ou do with that while Mr. Yar n ell was in char g e of pay ing the bills? A I ’d just hand them all to him. Q Okay

. And do y ou know what he would do with them once y ou g ave the m to him? A No. Q Okay

. I f – would he, on occa sion, pick up those bills himself from the mail? A I mean, I ’m sure he picked the ma il up –

19No. 10-5367

Y arnell v. Transamerica Life Insurance Co., et al.

Q Sure. A – ever

y now and then. Q Okay . Do y ou have a ny of those notices now ? A No. (Ya rnell De p. 29-30.) Thus, Mrs. Yar

nell’s blanket asser

tion in her aff

idavit that she never rec eived the notices is
contra dicted by her deposition testimony that she did rec eive mail but didn’t open it up and/or rea d the letters. Acc ording ly , in the instant case, the aff idavit is not suf

ficient to c rea te an issue of materia l fac t in light of t he evidence from M rs. Yarnell’s depositi on and the evidence of mailing produce d by Transa

merica. See Emmons v. McLaughlin , 874 F.2d 351, 358 (6th Cir. 1989) (holding that aff idavits that “mer ely repe ated the vag ue and conclusory alleg atio n s ” i n t h e complaint “we re insufficient to g ener ate a

g enuine issue of

materia l fac t.”); see also Dolan v. G uarantee Trust Li fe Ins. Co. , 485 F. Supp. 2d 1046, 1054 (S.D. I owa 2007) (holding that “[plaintiff’s] statement that ‘we ’ did not rec eive the notice mailed to [pl aintiff’s husband], is leg ally insufficient to g ener ate a g enuine issue of materia l fac t on the issue of whether [defendant] mailed the notice.”) We there fore conclude that the District Court did not err in g ranting Transa merica ’s Motion for Summary J udg ment on this issue. 2. Material Misreprese ntation Tenn. Code Ann. § 56- 7-103 states:

20No. 10-5367

Y arnell v. Transamerica Life Insurance Co., et al.

No written o r oral misrepre sentation

. . . in the application for contra ct or policy of insurance , by the insured or in t he insured’s behalf , shall be deeme d m at er ial or defe at or void the policy or p revent its attaching , unless the misrepre sentation or war ranty i s made with actua l intent to dece iv e, or unl ess t he matter repr esente d incre ases the r isk of loss. “A misrepre sentation in an application for insurance incre ases the insurance company ’s risk of loss if it natura lly and rea sonably influence s the judgme nt of the insurer in making the contra ct.” Lane v. Am. Gen. Life a n d Acc

. Ins. Co. , 252 S.W .3d 289, 295-96 (Tenn. App. 2007). Whil e intentional mis representa tion is a question of fac t, “dete rmining whether a particula r misrepre sentation incre ases an insurance company ’s risk of loss is a question of law for the court.” Smith v. Tenn. Farmers Life Reassurance Co. , 210 S.W .3d 584, 589 (Tenn. A pp. 2006). Yar nell arg ues that the misrepre sentations contained in the reinstateme nt application should
not have voided the policy beca use they wer e not attache d to the policy , rely ing on Tenn. Code § 56- 7-2307(4)

. Howeve r, Tenne ssee courts have long held this section inapplicable to applications for reinstateme nt. See Linder v. Metropolitan Life Ins. Co., 255 S.W

. 43 (Tenn. 1923); Duncan v. Penn Mut. Life I

ns. Co. , 65 S.W .2d 882, 895 (Tenn. App. 1933). This arg ument is there fore unavailing

. Yar nell next arg ues that insurance ag ent For d’s deposition testimony reg arding his assisting Mr. Yarnell with t h e reinstatement application crea tes a question of fact. Rely ing on Morrison v. Allen , No. M2007-01244-COA- R3-CV, 2009 WL 230220 (Tenn. App. J a n . 3 0 , 2 0 0 9 ) ( u

n p u b li s h e d), Yar nell arg ues that For d’s testimony should not be acc epted as true beca use she cannot produce her

21No. 10-5367

Y arnell v. Transamerica Life Insurance Co., et al.

husband to rebut For d’s statements. Be cause Mr. For d is an employ ee of SunTrust, Transa merica 5 does not respond to this arg ument. SunTrust, however , has re sponded in its brief on appe al. SunTrust arg ues that the rea soning in Morrison is inapplicable to the instant case . Morrison involved a claim ag ainst an insurance ag ent for failure t o p rocur e an enfor cea ble life insurance policy

. 2009 WL 230220 at *1. T h e i n s u rance ag ents in that case , Paul Allen and J ody Roberts, filled out life insurance applications for plaintiff and her husband “base d on informati o n [ Al l en ] alleg e[d] Mr. and Mrs. Morrison provided in person . . . or over t h e p hone

. . . .” Id

. Allen then mailed the completed applications to plaintiff and her husband “with ‘sticky notes’ indicating wher e to sign.” Id

. Plaintiff alleg ed that neither she nor her husband rea d the applications befor e signing them. Id

. After plaintiff’s husband died, the insurance company discover ed t hat the life insurance application contained a misstatement and denie d plaintiff’s claim. Id

. Plaintiff then broug ht suit ag ainst Allen and his e mploy er for failure to procur e an enfor cea ble life insurance policy

. Id

. The

We note that this arg ument was not addre ssed by the District Court beca use Yar nell initially 5 raised it in her response to SunTrust’s reply , which was stricken by the trial court. “While we have never articula t ed p rec isely what constit utes raising an is sue wit h the di strict court, we have found issues to be waived when they are raised for the first time in motions reque sting rec onsideration or in replies to response s.” Scottsdale Ins. Co. v. Flowers , 513 F.3d 546, 553 (6th Cir. 2008). See Am. Fam. Prepaid Legal Corp. v. Columbus Bar Ass’n. , 498 F.3d 328, 335 (6th Cir. 2007) (holding that arg ument raised for the f

irst time in mot ion to clarify should be dee med waive d); but se e Lexicon, Inc. v. Safeco Ins. Co. of Am., Inc. , 436 F.3d 662, 670 n. 6 (6th Cir. 2006) (holding t hat arg ument was not waived wher e it was raised for the first time in a response to a reply brief, wher e the district court addre ssed the arg

ument and both parties fully briefe d the arg ument on appea l). Whil e it is arg uable he re tha t Yarne ll has waived this ar g ument, we will addr ess it. 22No. 10-5367

Y arnell v. Transamerica Life Insurance Co., et al.

trial court enter ed judgme nt in plaintiff’s favor , and the Tenne ssee Court of Appea ls aff irmed. 2009 WL 230220 at *2. The Tenne ssee Supreme Court rec ently issued an opinion aff irming in part and reve rsing in part the court of appea ls decision in Morrison

. See Morrison v. Allen , 338 S.W .3d 417 (Tenn. 2011). I n its opinion, the Tenne ssee Supreme Court rec og nized that, when an insurance claim is denied, “(1)

a cause of action may arise for failure of the ag ents to procur e a policy not subject to contest; [and] (2) the claim for failure to procur e may be actionable , notwithstanding the policy holders’ admission that they did not read the insurance application . . . .” Id

. at 420. The court then noted that fa ilure to procure claims are distinct from direct c laims ag ainst an insurer , citing Beasley v. Me tropolit an Life Insurance Co. , 229 S.W .2d 146 (Tenn. 1950)

. Id . at 428. The c ourt stated as f ollows: I n addre ssing a suit by the insured direc tly ag ainst the insurer, and not i n v o lving a claim ag ainst an ag ent for failure to procur e, this Co u rt observe d that contra ct principles place d a duty o n Be asley to “lea rn the contents of a written contra ct” befor e signing and, in conseque nce, he could not sustain a claim ag ainst the insurer. Id . (citing Beasley , 229 S.W .2d at 148). Turning to the instant matter, Yar nell has not stated a claim ag ainst Fo rd fo r failure to procur e an enfor cea

ble insurance polic y . I n d ee d, For d is not named any wher e in Yar

nell’s Complaint. Rather, the Complaint al l eges that Transa merica and SunTrust wer e neg lige nt in allowing the policy to lapse. Yar nell’s claim should there fore be construed as a direc t claim ag ainst

an insurer, not a failure to procur e claim ag ainst an insurance ag ent. Acc ording ly , the rea soning in Morrison is inapplicable in the instant matter.

23No. 10-5367

Y arnell v. Transamerica Life Insurance Co., et al.

The fac ts in the ins t ant appea l more closely rese mble Beasley

. I n that case , the defe ndant insur an ce agent assisted plaintiff’s husband with his application for life insurance

. Beasley , 229 S.W .2d at 147. Plaintiff testified that her husband answe red the questions truthfully , “b ut that without her knowledg e the ag ent chang ed the answe rs . . . . ” Id

. Plaintiff also testified that she signe d the application without rea ding it. Id

. After her husband died, the insurer denied plaintiff’s claim and she broug ht suit. Id

. The Tenne ssee Supreme Court held that plaintiff had a duty to rea d the contra ct and order ed that judgme nt should have been enter ed in f avor of the def endants. Id . at 148. See also Giles v. Allstate Ins. Co., Inc. , 871 S

. W

. 2 d 1 5 4 , 1 5 6 (Tenn. App. 1993). Mrs. Yar nell’s failure to rea d the reinstateme nt application befor e signing it does not abrog ate the materia l misrepre sentations contained in the a pplication under Te nnessee law. Finally , the trial court did not err in g ranting summary judgme nt on the issue of Mr. Yar nells’ materia l misrepre sentations in the reinstateme nt application. Mr. Yar nell had been diag nosed with alcoholism prior to completing the reinstateme nt application. He had spent more than 70 day s in various alcohol trea tment c enter s in the months prior to completing the reinstateme nt a pplication. He had also been ad m i t t ed t o t h e hospital at least once, and he had consulted with at least two phy sicians conc erning alcohol abuse . Howeve r, he did not disclose any of this infor mation on the application. Transa

merica has prese nted evidenc e that Mr. Yar nell’s alcoholism would have incre ased its risk of loss on his life insurance policy

. “[A] showing that the insurer was denied information that it, in g ood faith, soug ht and deeme d nece ssary to an honest appra isal of insurability is sufficie nt to establish the g rounds for an incre ased ris k o f l o s s . ” Smith , 210 S.W .3d at 590.

24No. 10-5367

Y arnell v. Transamerica Life Insurance Co., et al.

Yarnell has not produce d any evidenc e ref uting this proposition, and no rea sonable finder of fac t could resolve the issue i n h er fa v o r. Acc ording ly , we find that the District Court did not err in g ranting summary

judgme nt in favor of

Transa merica

. 6 III. CONCLUSION Be cause we have determined t hat t he trial court did not err in dismiss ing Yarne ll’s cl ai m s ag ainst Transamerica

and SunTrust, we AF F IRM the judg ment below.

Beca u s e s u m mary judgme nt was warra nted on Yar

nell’s breach of contra ct claim ag ainst 6 Transa merica , we do not addre ss Yar n el l’s arg uments reg arding SunTrust’s liability as Transa merica ’s ag ent under

the insuranc e contr act.

25