Court Opinion

ID: 3030176
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:43:57.089757+00
Date Added: 2024-06-11T12:23:37.480629
License: Public Domain

United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT
                                   ___________

                                   No. 02-1601
                                   ___________

Kendall Dodson; Dennis D. Dodson;    *
Jerry Dodson; Loyal S. Dodson,       *
                                     *
      Plaintiffs - Appellants,       *
                                     *
      v.                             * Appeal from the United States
                                     * District Court for the Eastern
J.C. Penney Company, Inc.;           * District of Arkansas.
                                     *
      Defendant,                     *
                                     *
J.C. Penney Life Insurance Company, *
                                     *
      Defendant - Appellee.          *
                                ___________

                             Submitted: September 13, 2002

                                 Filed: November 6, 2002
                                  ___________

Before BYE, BEAM and MELLOY, Circuit Judges.
                          ___________

BYE, Circuit Judge.

       Kendall, Dennis, Jerry and Loyal Dodson (Dodson children) appeal the district
court's adverse grant of summary judgment in favor of J.C. Penney Life Insurance
Company dismissing their claim for life insurance proceeds in connection with the
deaths of their parents, J.B. and Viola Dodson (Dodsons). We reverse.
                                            I.

      In February, 1998, the Dodsons purchased an accidental death and
dismemberment insurance policy from J.C. Penney which provided a $100,000 death
benefit in the event of J.B.'s death, and a $50,000 benefit in the event of Viola's death.
The monthly premium was billed to the Dodsons' J.C. Penney charge card. In June,
1999, J.C. Penney solicited the Dodsons by mail offering to sell them additional death
and dismemberment coverage. The offer advised the Dodsons to return a form
attached to the mailing by August 9, 1999, if they wanted the additional coverage.

      On June 30, 1999, Mr. Dodson called J.C. Penney's offices in Oklahoma City
and spoke with J.C. Penney employee, Camilla Frazier. Ms. Frazier has no
independent recollection of the conversation with Mr. Dodson, but based upon entries
made in her computer at the time of the call she testified Mr. Dodson called to cancel
the death and dismemberment policy. Ms. Frazier's computer notes indicate Mr.
Dodson had concerns about the policy and wanted it cancelled. She attempted to
dissuade him but he said they had other coverage and did not need the policy. Ms.
Frazier told Mr. Dodson the coverage would be in addition to any other similar
coverage but he insisted on cancellation. Finally, the computer notes reflect Mr.
Dodson was given the option of cancelling the policy immediately and receiving a
rebate of the unused premium or allowing the policy to lapse as of the date the next
premium was due (August 13, 1999). Mr. Dodson chose to allow the policy to lapse.

       On September 11, 1999, the Dodsons were killed in an automobile accident.
The Dodson children found J.C. Penney's offer of additional life insurance among
their parents' personal effects. The Dodson children contacted J.C. Penney and made
a claim for the policy proceeds but were told the policy had been cancelled effective
August 13, 1999.

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      The Dodson children brought suit against J.C. Penney seeking to collect on the
policy. J.C. Penney sought summary judgment arguing the undisputed facts showed
the policy had been cancelled by the Dodsons effective August 13, 1999. The
Dodson children argued there was a genuine question of material fact as to whether
the Dodsons called to cancel the policy on June 30, 1999, or whether they simply
called to decline the offer of additional coverage and the policy was mistakenly
cancelled. They also argued J.C. Penney should be estopped from claiming the policy
had been cancelled, because it failed to follow a company policy requiring written
notice confirming cancellation be sent within 7 days of cancellation. Finally, the
Dodson children argued Arkansas's statutory 31-day grace period extended coverage
from August 13, 1999, the date the policy lapsed, until September 13, 1999, beyond
the date the Dodsons were killed. The district court held there was no issue of
material fact concerning cancellation of the policy; estoppel did not apply because the
Dodson children could not show detrimental reliance; and the grace period did not
apply because the policy had been cancelled by the Dodsons. Because the district
court mistakenly concluded the 31-day grace period did not apply, we reverse.

                                          II.

      We review a grant of summary judgment de novo, applying the same standard
as the district court. Jaurequi v. Carter Mfg. Co., 173 F.3d 1076, 1085 (8th Cir.
1999). Rule 56(c) of the Federal Rules of Civil Procedure provides that summary
judgment shall be awarded to a party if there exists no genuine issue as to any
material fact and the moving party is entitled to judgment as a matter of law.

      The Dodson children contend the district court erroneously concluded there
was no genuine issue of material fact as to whether the Dodsons' insurance policy had
been cancelled. They further argue J.C. Penney should be estopped from relying
upon the alleged cancellation because it failed to send out written notice of
cancellation as required by company policy. We agree the district court properly

                                         -3-
rejected these arguments. We disagree, however, with the district court's application
of Arkansas's statute imposing a 31-day grace period on group life insurance policies.

      Ark. Code Ann. § 23-83-110 provides:

      (a) The group policy, excluding an annuity policy, shall contain a
      provision that the policyholder is entitled to a grace period of thirty-one
      (31) days for the payment of any premium due except the first, during
      which grace period the death benefit coverage shall continue in force
      unless the policyholder shall have given the insurer written notice of
      discontinuance in advance of the date of discontinuance and in
      accordance with the terms of the policy. (emphasis added).

The district court concluded the statute applied to policies for which a premium was
due, and, because Mr. Dodson cancelled the policy orally, no premium was due. The
district court, however, failed to consider the additional statutory language requiring
written notice from the Dodsons in advance of discontinuance.

      The district court correctly noted the burden was on J.C. Penney to show the
policy was no longer in effect and that cancellation was done in accordance with the
terms of the insurance policy.1 Am. Colonial Ins. Co. v. Mabry, 245 Ark. 288, 291,
432 S.W.2d 15, 18 (1968). The district court found Mr. Dodson's intent to cancel was
unequivocal and absolute, Am. States Ins. Co. v. S. Guar. Ins. Co., 53 Ark.App. 84,
88, 919 S.W.2d 221, 223 (1996), and, inasmuch as the insurance contract had been
cancelled as of August 13, 1999, the grace period did not apply. This case is not,
however, governed solely by the language of the insurance policy.

      1
       The policy provides "[y]ou may cancel your coverage upon notice to us.
Notice is deemed to be due or given when made in writing, communicated verbally
by telephone or in person, or by any other means acceptable to us." App. 43 (policy
renewal conditions).

                                         -4-
       Insurance carriers transacting business in Arkansas are required to include
within their insurance contracts "such standard or uniform provisions as are required
by the applicable provisions of this code pertaining to contracts of particular kinds
of insurance." Ark. Code Ann. § 23-79-111. Among the provisions to be included
in group life insurance policies is the grace period required by § 23-83-110. Ark.
Code Ann. § 23-83-109. Section 23-83-110 unambiguously requires life insurance
carriers to provide a 31-day grace period. Equally unambiguous is its message to life
insurance carriers that the grace period applies "unless the policyholder shall have
given the insurer written notice of discontinuance in advance of the date of
discontinuance and in accordance with the terms of the policy." Id. Thus, in order
for J.C. Penney to avoid the grace period, Mr. Dodson's cancellation had to meet the
statutory requirements and be done in accordance with the terms of the policy. We
do not doubt Mr. Dodson's oral cancellation was unequivocal and fell within the
terms of the policy. We find no evidence, however, that written notice of
discontinuance in advance of August 13, 1999, was provided. Thus, Mr. Dodson's
oral cancellation of the policy, while perhaps effective for some other purpose, did
not relieve J.C. Penney of its statutory duty to provide a 31-day grace period once the
policy lapsed.

                                         III.

      The judgment of the district court inasmuch as it relates to the application of
§ 23-83-110 is reversed and the case is remanded for further proceedings consistent
with this opinion.

      A true copy.

             Attest:

                CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

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