Opinion ID: 2518386
Heading Depth: 1
Heading Rank: 3

Heading: Termination Penalty

Text: Because we affirm the court of appeals' decision that Coors failed to establish significant public impact to support his CCPA claim, we now consider whether Security Life may enforce the contract's early termination penalty against Coors. Under contract law, a party to a contract cannot claim its benefit where he is the first to violate its terms. Scientific Packages, Inc. v. Gwinn, 134 Colo. 233, 237, 301 P.2d 719, 722 (1956) (material breach deprives party of right to demand performance by other). It is undisputed that there was a valid contract between Security Life and Coors, and that Coors performed under the terms of the contract by paying his annual premiums. Hence, if Security Life materially breached the contract, it should not be entitled to enforce the early termination penalty against Coors. Whether a breach is material is a question of fact. Kaiser v. Mkt. Square Disc. Liquors, Inc., 992 P.2d 636, 640 (Colo. App.1999). A material term goes to the root of the matter or essence of the contract. Interbank Invs., L.L.C. v. Vail Valley Consol. Water Dist., 12 P.3d 1224, 1229 (Colo.App. 2000). Materiality must be assessed in the context of the expectations of the parties at the time the contract was formed. Id. at 1229. The trier of fact should consider the importance or seriousness of the breach and the likelihood that the injured party will nonetheless receive substantial performance. Converse v. Zinke, 635 P.2d 882, 887 (Colo. 1981). Finally, findings supported by the record will not be disturbed on appeal. Page v. Clark, 197 Colo. 306, 592 P.2d 792 (1979). Coors' insurance policy expressly provided a $.131 per $1,000 benefit monthly expense charge. Each month, Security Life deducted an expense charge of $.90 per $1,000. The trial court found that the expense overcharge had a material impact on the performance and surrender value of Coors' policy in the amount of $89,973.00 with interest in the amount of $44,880.80. Although the court of appeals agreed with the trial court's finding that a material breach occurred, the court of appeals concluded Security Life was entitled to the termination penalty against Coors on the grounds that it would be inappropriate for Coors to receive 3 1/2 years of free life insurance and that Security Life serviced the policy and would have been obligated to pay the face amount of the policy in the event of Coors' death. We disagree. In the case before us, Security Life materially breached the contract. As a result of that breach, Coors attempted to exercise his twenty-day right to return the policy. This should have relieved him of any obligation to pay a termination penalty. However, Security Life claimed the updated face page did not create a new twenty-day right to review. Coors then chose to surrender his policy. We hold that as the breaching party, Security Life is not entitled to enforce the termination penalty provision.