Opinion ID: 178744
Heading Depth: 3
Heading Rank: 2

Heading: The Argument Against Retroactive Refund

Text: Addressing Wilson's argument that Northwestern's termination of the policy retroactive to February 2005 was not in accordance with Kenneth's instructions or understanding, the District Court concluded that no reasonable jury could find that Kenneth's request in May 2005 that Northwestern refund his last premium payment and let the policy lapse could be construed as terminating the Term Life Policy as of May 2005. See Wilson, 603 F.Supp.2d at 712. This conclusion is primarily based on the fact that Kenneth made one payment of $215.60 on April 29, 2005, to cover ten months' premiums. Id. at 708. Although the months of February, March, and April had passed at the time of Kenneth's request, the District Court found that a refund of the last premium payment was for the entire $215.60, since a payment in that amount was the last transaction in Kenneth's ISA account. See id. at 708, 712. There is evidence, however, that Kenneth did not intend or expect that the premium refund he requested would include premiums already earned by Northwestern for the coverage provided for February, March, and April. Indeed, it seems unusual that an insurance company would make such a refund. That Kenneth did not contemplate a refund for those months may be derived from the language of his request: to refund premium and let the policy lapse. See id. at 709. The use of such language would not be entirely logical unless Kenneth meant to cancel his policy as of May 2005, when there was time left for the policy to lapse. Had Kenneth intended to receive a retroactive refund for his entire payment, there would have been no grace period at all. In other words, if Kenneth requested a retroactive cancellation more than thirty days after the effective termination date, both the policy coverage and the grace period would have been long expired in May, and there would have been nothing that could still have lapse[d] as of the date of his phone call. But if Kenneth meant to simply end his policy coverage as of the date of the beginning of the next monthly cycle, the grace period would have remained in effect for thirty days after that date, meaning some time remained before the policy coverage could lapse. The words let the policy lapse would have no meaning if Kenneth intended his refund to be retroactive. Although the word lapsehere referring to the end of a grace period that endures following the cancellation of an insurance policymay be a term of art in insurance policies, there is no reason to believe that Kenneth was unaware of its meaning when he used the term. His occupation was listed as Bank Officer and his employer as J.P. Morgan Chase on his life insurance application, and it can be assumed that he was a sophisticated, or at least a well-informed, consumer of life insurance products and well understood what he meant when he directed that the policy lapse. Kenneth may well have had in mind the option to renew the policy during the grace period before the policy lapsed. In any event, he had the option to do so. There is also evidence in the record that Northwestern did not regard the cancellation as retroactive so as to oblige it to return premiums already earned. At least initially, Northwestern appeared to agree with the position here taken by Wilson. On May 23, 2005, Knueppel reversed the premiums only for the months of May onward, closed the ISA as of May 29, 2005, and refunded the balance for those months in the amount of $154.07 by check dated May 31, 2005. In a Notice prepared on May 23, 2005, and sent shortly thereafter, Northwestern advised Kenneth that his Term Life Policy was paid to May 29, 2005, and that the grace period would expire on June 29, 2005. It was not until after this never-rescinded notice that Northwestern mailed the never-received check for $81.03 to refund the already-earned premiums for February, March, and April. Supposedly, Knueppel required further authorization before she could issue that second check in response to Kenneth's request. It is noteworthy that the retroactive refund was treated as an additional step that was not possible without further authorization, suggesting that the ordinary practice is against retroactive refunds and terminations. Since Wilson never received the second refund check, although she did receive the first after her husband's death, neither she nor her late husband could have been aware that Kenneth's coverage could be shortened by a retroactive refund of premiums. A reasonable jury could find that the retroactive refund was a self-serving afterthought by Northwestern, designed to reduce the length of Kenneth's policy coverage.