Opinion ID: 2978164
Heading Depth: 3
Heading Rank: 2

Heading: any remaining dividends held; plus

Text: 3. the value of any dividend additions in force; less 4. any debt to us on the policy. (Record on Appeal (“ROA”) 74.) The policies also contain the following language: -2- 08-5499 The debt secured by this policy includes loans, unpaid loan interest and accrued loan interest not otherwise due. All or any part of the debt may be paid at any time prior to 1. the death of the Insured; and 2. default in payment of any premium unless the policy is in force as paid up life insurance; and 3. surrender of the policy while in force as paid up life insurance. When any of these events occurs, all debt shall become due at once. It shall then be paid from the policy values. (Id. at 78.) After purchasing the life insurance policies for themselves, Ward and Edgar entered into “split dollar agreements” (“SDAs”) with their employer, the Cape Coral Medical Center (“Cape Coral”). Pursuant to the SDAs, Cape Coral agreed to pay the premiums on the policies, while Ward and Edgar assigned the cash value of the policies—the amount payable upon the “surrender” of the policies before the death of the insured—to Cape Coral. More specifically, under the SDAs, Cape Coral received a promise from Ward and Edgar that it would receive either a refund of all the premiums it had paid on the insurance policies or the entire cash value of the policy, whichever was lesser, when an insurance policy was surrendered. The assignment forms executed by Ward and Edgar indicate that the assignments were “subject to all the terms and conditions of the Policy and to all superior liens, if any, which the Insurer (National Life) may have against the [P]olicy.” (Id. at 76.) The SDAs define cash value as “the cash surrender value as defined in the policy, including the cash value of any paid-up additional insurance.” (Id. at 79.) In 1995, Cape Coral stopped paying the annual premiums on the policies, but the policies were not surrendered for their cash value. The district court found that although there was no direct evidence of why the parties stopped paying the premiums, there was evidence that Ward -3- 08-5499 and Edgar had been indicted and convicted of embezzlement for transactions ending in 1994. The court stated that this circumstance “likely account[ed] for the cessation in the payment of the annual premiums for the life insurance policies.” (Id. at 76-77.) Defendant maintained the policies by funding premium payments with loans from the policies, as authorized under the policy terms. On April 7, 2005, Cape Coral transferred its interests in the three policies to Woodruff. Later that year, Woodruff surrendered the policies to Defendant for payment of their cash values. Defendants paid Woodruff, but deducted the principal and interest owed on the premium loans made to maintain the policies from 1995 to 2005. Woodruff thereafter filed suit, claiming compensatory and punitive damages for alleged unauthorized deductions of the policyholder loans from the policy cash values. He alleged that the improper deductions of loans and loan interest on the three policies resulted in shortfalls of $56,537.10 on policy number 2102499, $14,2236.01 on policy number VL0029793, and $9,663.62 on policy number 2090868. He claimed that these deductions violated the SDAs and the terms of the policies and he therefore objected to the surrender cash values he received. The case proceeded to a bench trial, in which Ward testified that the SDAs and collateral forms were provided to him by representatives of “Life Planning Associates” who were acting as agents of Defendant. Defendant denied these allegations and the district court found that there was no competent proof that Defendant created or participated in the creation of the SDAs or the collateral agreements attached to them, and that even if it did, Defendant was not a party to any of the agreements and did not participate in their execution. -4- 08-5499 Woodruff also testified that no notices were sent indicating that the claims exceeded the value of the policies. Likewise, Ward testified that he did not receive notice that the value of the policies was insufficient to pay the annual premiums. After considering this testimony and the contents of the policies, the district court found that “there was no basis for National Life to send notice to the owners pursuant to the language of the policies.” (Id. at 79-80.) The district court ultimately entered judgment in favor of Defendant, finding that Defendant did not breach the terms of the life insurance contract assigned to Woodruff. In support of its judgment, the district court issued conclusions of law that corresponded to specific issues raised by Woodruff in his “Second Amended Proposed Findings of Fact and Conclusions of Law.” In its first conclusion of law, the court found that, contrary to Defendant’s position, Woodruff had standing to assert his claims. The court found in favor of Defendant with respect to the remaining issues. More specifically, the court found: The split dollar agreements and the collateral assignments were contracts that were entered into by Ward and Edgar with their employer at Cape Coral. National Life was not a party to those agreements; it was not a beneficiary of those agreements; and it had no obligations under those agreements. The life insurance policies that had been purchased prior to the execution of the split dollar agreements are referenced and are incorporated in part into the split dollar agreements, but they are not controlled by or subject to the terms of the split dollar agreements. The split dollar agreements incorporate the definition of cash surrender value from the policies and the collateral assignments specifically reference the agreements being “subject to all the terms and conditions of the Policy.” The split dollar agreements were side contracts that Ward, Edgar, and Cape Coral entered into regarding how the annual premiums on the life insurance policies would be paid. The agreements were theirs not National Life’s and there is no basis to find that National Life potentially could or did breach those split dollar agreements on any basis. -5- 08-5499 There is also no basis for National Life to have considered or included Cape Coral’s and subsequently Woodruff’s claim under the split dollar agreements as a claim or “debt” against the policy. The policies include in the definition of net cash value “any debt to us on this policy.” There is also no language under the policies definitions of policy loan, loan value, or debt that could conceivably encompass outside claims or “debt” against the policy as asserted by Woodruff. Thus, there is no showing that the policy debt equaled or exceeded the loan value triggering any notice requirement. Therefore, there is also no showing that National Life improperly calculated the surrender cash value of the three policies when it subtracted the loan and loan interest amounts from the cash value and dividends on each policy surrendered by Woodruff. (Id. at 81-82.) Finally, the court found that because Woodruff was not entitled to recover from Defendant, it did not need to address the issue of punitive damages. However, the court also stated that punitive damages would not be appropriate because the case did not involve fraud, malice, gross negligence, or oppression. The court entered judgment in favor of Defendant, and Woodruff filed this timely appeal.