ORDER ON DEFENDANT’S MOTION FOR SUMMARY JUDGMENT
This case arises from the purchase of life insurance polices by Plaintiffs Melvin Dias (“Melvin”) and Evelyn Dias (“Evelyn”) from Defendant Nationwide Life Insurance Company (“Nationwide”). Plaintiffs allege a single claim of fraud and seek to recover inter alia over $400,000 in premiums. Nationwide removed the case from the Fresno County Superior Court on the basis of diversity jurisdiction. Nationwide now moves for summary judgment. For the reasons that follow, the motion will be denied.
FACTUAL BACKGROUND 1
From 1996 to 2007, John Pena (“Pena”) served as the Diases’ financial advisor. JUMF 5. During this time, Pena was a Florida resident, and Melvin spoke to him about twenty times per month. JUMF 5, 7. In his capacity as financial advisor, Pena provided Plaintiffs with advice regarding the sale of their family business as well as the purchase of stocks, bonds, mutual funds, real estate, IRA’s, and life insurance.
2
JUMF 6. Plaintiffs had a relation
In late summer or fall of 1998, Plaintiffs, who resided in Fresno, California, notified Pena that they were interested in purchasing life insurance for estate planning purposes in the event of their deaths. JUMF 1, 8. At that time, Plaintiffs had invested around $4 million through Pena. JUMF 9. Melvin, Pena, and Harvey Stein, an insurance agent of Nationwide, spoke about life insurance policies offered by Nationwide. See Dias Dec. ¶¶ 5-6; Pena Depo. at 29:1-30:10. According to Melvin, Pena told him that the Nationwide policy was “kind of like an investment policy” which would be “hooked in with the stock market, like I guess you might equate it with a mutual fund.” JUMF 10. Melvin claims that Pena told him that the “monies [in the policy] would ... generate additional income, income to take care of the insurance premiums ...” because the “stock would grow and basically increase in value.” JUMF 13. Melvin also claims that Pena said that the policy was a “good policy” because it would “grow in time,” and that by paying premiums for two years, such investment would be “sufficient” to sustain the policy over Melvin’s life. 3 See JUMF 14. Although Pena never told Plaintiffs what the anticipated rate of return would be on the policies, see DUMF 8, Melvin declares that Pena told him that the Policies were like a good investment and that Melvin would have the choice of putting more money into this investment if he so chose. See Dias Dec. ¶ 6.
Upon Pena’s recommendation, Plaintiffs decided to purchase Nationwide variable life insurance policies with death benefits of $5 million each. JUMF 18. According to Plaintiffs, Pena told them that, for Melvin’s policy, they would only have to make two annual premium payments of $98,050 and thereafter the policy would be self-funding. JUMF 19. As for Evelyn’s policy, Plaintiffs claim that Pena told them that they would only have to make two annual premium payments of $96,319.30 and thereafter the policy would be self-funding. JUMF 20. In other words, Plaintiffs claim that Pena told them that the policies were like good retirement investments and that after two annual payments, the policies would pay for themselves. PUMF 3; see also Dias Dec. ¶ 6 (“... the policy would generate its own premiums, and I would not be required to make any additional out-of-pocket payments.”). 4
Melvin understood that the Policies would increase with time because they would increase along with the stock market and generate additional revenues.
See
JUMF 11. Melvin stated that he did not understand that the Policy values could decrease if the stock market decreased because in 1998 the predictions for the stock market were all “upside.”
See
JUMF 12. Melvin did not think of a
On November 2, 1998, Melvin and Evelyn each applied to Nationwide for variable life insurance policies with $5 million face amounts ($10 million total). JUMF 22, 23. Melvin and Evelyn submitted separate applications. See Ison Exhibits A, C. Melvin admits that he read the application before he signed it. JUMF 24. Evelyn left all financial decisions to Melvin and had nothing to do with the purchase of the Nationwide policies, other than signing her name to the application and other required forms. JUMF 25.
On Melvin and Evelyn’s applications, in response to Section 10, they indicated that planned annual premiums of $98,050 for Melvin and $96,319 for Evelyn. JUMF 26, 27. On both of the applications, at Section 12 (entitled “suitability”), the following questions were answered “yes”: “A. Do you understand the death benefit and surrender value may increase or decrease depending on the investment experience of the variable account? B. Do you believe that this policy will meet your insurance needs and financial objectives? C. Have you received a current copy of the prospectus?” JUMF 28; see also DUMF 9, 10. Nationwide would not have issued the Policies if Plaintiffs had not answered these questions “yes” and signed the applications. DUMF 11. Application § 24 is entitled “IMPORTANT NOTICE” and reads:
I understand that the Death Benefits under a Variable Life Insurance Policy may increase or decrease, depending on the investment return of the subaccount I select. Regardless of any investment return, the Death Benefit can never be less than the Specified Amount as long as the policy is in force. The Contract Value may increase or decrease on any day, depending on the investment return for the Policy. No minimum Contract Value is guaranteed. On request, we will furnish illustrations of benefits, including Death Benefits, and Contract Values for a Variable Life Insurance Policy and a Fixed Life Insurance Policy for the same premium.
JUMF 29. Finally, above the signatures is the “Agreement, Authorization, and Signatures” section, which contains the following language, “I have read this Application. I understand each of the questions. All of the answers and statements on the form are complete and true to the best of my knowledge and belief. I understand and agree that: 1. This application as well as any forms the Company designates as part of the application, including any related medical questionnaire signed by me, will become part of the Policy and are the basis of any insurance issued upon this application.... ” JUMF 30. Pena’s signature appeared as agent on each application. See Ison Dec. Exhibits A, C; PUMF 6.
Around the time of the application, Pena presented Plaintiffs with letters to sign, which requested that Pena be the representative on the Policies. See Melvin Dias Supplement Dec. ¶ 4 & Exhibit B. Melvin and Evelyn each signed the letters, which were dated November 3, 1998. See id. at Exhibit B. When Pena presented the letters to Plaintiffs, Melvin believed that Pena was a Nationwide agent, although he believed that Stein was the agent who sold the Policies. See id. at ¶ 4. 5
The Policies provided that the premium mode was “annual.” JUMF 33, 37. Melvin’s Policy indicated that the “scheduled premium” was $98,050, and Evelyn’s policy indicated that the “scheduled premium” was $96,319. JUMF 34, 35, 37. The first page of each Policy states:
PLEASE READ YOUR POLICY CAREFULLY...
The Cash Surrender Value of this Policy will vary from day to day. It may increase or decrease depending on the investment experience of the Policy. Refer to the Non-Forfeiture Provisions on page 11 for details. There is no guaranteed Cash Surrender Value.
The amount of the death benefit may be variable and depends on the investment experience of the Policy. The duration on the death benefit will be variable and depend on the investment experience of the Policy. The death benefit will never be less than the specified amount as long as your Policy is in force. Refer to the Death Benefit Provisions.
RIGHT TO EXAMINE POLICY
You may return this Policy to us within [10 or 45 days depending on circumstances] .... The return Policy will be treated as if we had never issued it, and we will pay you the amount specified for the laws of the state in which the Policy was issued.
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
— Adjustable Death Benefits
— Flexible Premiums payable during Insured’s lifetime and until the Maturity Date
— Death Proceeds payable at Insured’s death prior to the Maturity Date
— Maturity Proceeds payable on the Maturity Date
— Not eligible for dividends
— Investment experience reflected in benefits.
JUMF 36. Pena testified that he spoke to Melvin the day Melvin received the Policies in the mail and they specifically discussed the 10-day “free look” provisions of the Policies.
See
DUMF 16, 17.
6
Plaintiffs did not return the Policies within 10 days, or otherwise.
See
JUMF 60. On
ENTIRE CONTRACT:
The entire contract consists of this Policy, any attached riders or endorsements, and the attached copy of any written application, written supplemental applications. No agent, registered representative, or other person may change this Policy or waive any of its provisions. Any agreement to alter this Policy must be in wiiting, signed by our President or Secretary and attached to or endorsed on your Policy. We will not be bound by any promised representation made by any agent or other persons.
JUMF 39. Page 9 of the Policies states: Premium payments: The Initial Premium is due on the Policy Date. It will be credited on the Initial Investment Date. Any due and unpaid monthly deductions will be subtracted from the Cash Value at this time. Insurance will not be effective until the Initial Premium is paid. The Initial Premium is shown on the Policy Data Page.
Premiums other than the Initial Premium may be paid at any time while your Policy is in force subject to the limits described below. Premium payment reminder notices will be furnished upon request. We will send them according to the premium mode shown on the Policy Data Page. You may pay the Initial Premium to us at our Home Office or to an authorized agent. All premiums after the first are payable at our Home Office. Premium receipts will be furnished upon request.
JUMF 40. Finally, page 13 of the Policies states:
CONTINUATION OF INSURANCE
Insurance coverage under your Policy and any benefits provided by riders will continue in force until the Cash Surrender Value is insufficient to cover any policy charges which are due but unpaid as provided by the Grace Period Provision. This provision will not continue your Policy beyond its Maturity Date. The Planned premium together with any additional premium payments may not continue the Policy in force until the Maturity Date even if these amounts are paid as planned and no further changes take place. The period for which the Policy will continue will depend on:
1. The planned premiums and the timing and amount of additional premium payments;
2. Changes in the specified Amount and death benefits options;
3. Investment experience of the Policy;
4. Change in monthly cost of insurance charges and other policy charges;
5. Change in the cost of additional benefits provided by riders, if any; and
6. Policy loans.
JUMF 41.
The agent of record for Plaintiffs’ Policies was Pena. DUMF 1. Pena has never been an employee of Nationwide, but in 1998 was an independent contractor appointed to sell Nationwide policies. DUMF 2;
see also
JUMF 58. A Nationwide employee has declared that Nationwide authorized Pena to solicit applications on behalf of Nationwide, but did not authorize Pena to accept risks or contracts or
On November 9, 1998, Plaintiffs paid premiums of $98,050 and $96,318.61 to Nationwide. See JUMF 42, 43. On December 27, 1999, Plaintiffs paid premiums of $98,050 and $96,319.30 to Nationwide. See id.
Melvin received a premium notice from Nationwide in November 2000. See JUMF 44; PUMF 11. Melvin contacted Pena and asked Pena what the notice was for. PUMF 11. Pena told Melvin that Melvin did not need to pay the premiums since there was plenty of money in the policies. JUMF 44; PUMF 11. Upon Pena’s advisement, Melvin chose not to make a payment. PUMF 11. Melvin continued to receive premium notices from Nationwide on an annual basis, but did not make payments in 2001, 2002, and 2003 based on Pena’s representation to Melvin in 2000. See JUMF 46; PUMF 12. Melvin did not pay any premiums in 2001 because he believed that the funds in the account were taking care of any premiums. See JUMF 45.
In late 2004, Melvin received another premium notice. JUMF 47; PUMF 13. Melvin called Pena and asked whether this was something Melvin should pay. PUMF 13. Pena told Melvin, “If you want to pay it, pay it, if not, don’t.” JUMF 47; PUMF 13. Melvin understood this to be consistent with the prior representation that he always had a choice whether to pay money into this investment. PUMF 13. It also occurred to Melvin that there may have been a miscalculation in the original premium billings. See id. Melvin decided to make a payment of $10,357.47 to Nationwide, in part because he thought of a miscalculation and in part because he thought the Policy was a good investment. See JUMF 48; PUMF 13.
In 2005, Melvin received another premium notice and again thought that there was a miscalculation and that he needed to add to the investment again. JUMF 49. Dias did not call anyone at Nationwide about the assumed “miscalculation” because he had “relied on” Pena. See id. As such, he made another payment. See JUMF 42.
In 2006, Melvin also paid additional premiums after receiving two premium notices because he again thought “it was a miscalculation and that [he] needed to add to the investment.” JUMF 50; see also JUMF 42.
In 2007, Melvin received premium notices from Nationwide and paid additional premiums because he thought there was a miscalculation. JUMF 51;
see also
JUMF 42. In the Spring of 2007, Melvin contends that he discovered that Pena had been stealing money from him and then changed brokers.
See
PUMF 16.
8
Anoth
Pena never told Melvin that there was a “miscalculation,” rather Melvin just assumed that there was. JUMF 52. However, despite the fact that Melvin and Pena spoke regularly, Pena never told Melvin that there was any kind of problem with the Policies. PUMF 15. Further, Plaintiffs did not receive premium notices on Evelyn’s policy until 2008, which further led Melvin to believe that the original representation regarding the fact that the Policies would pay for themselves was true. See PUMF 14; DUMF 19. Melvin declared that he believed Pena’s representations and would not have bought the policies if he had known that the premiums of nearly $100,000 per policy would be required beyond the first two years. See PUMF 4.
On May 6, 2008, Melvin and Evelyn took out loans on their Policies for $2,743.16 and $32, 227.16, respectively. JUMF 53, 54.
Melvin’s Policy lapsed effective July 9, 2008, due to non-payment of premiums. JUMF 55. Nationwide had sent two lapse notices in 2004, four lapse notices in 2005, four lapse notices in 2006, four lapse notices in 2007, and three lapse notices in 2008, all reminding Melvin to pay premiums on the Policy. DUMF 18. Evelyn’s Policy lapsed effective September 8, 2008, due to non-payment of premiums. JUMF 56. Nationwide had sent Evelyn lapse notices in July, August, and September 2008, reminding her to pay premiums on her Policy. DUMF 19.
SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate when it is demonstrated that there exists no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c);
Adickes v. S.H. Kress & Co.,
The evidence of the opposing party is to be believed, and all reasonable inferences that may be drawn from the facts placed before the court must be drawn in favor of the opposing party.
See Anderson,
DEFENDANT’S MOTION
Nationwide relies on three bases to support its motion for summary judgment.
2. Reasonable Reliance
Defendant’s Contention
Nationwide argues that Plaintiffs’ fraud claim fails because they cannot show justifiable reliance on the alleged misrepresentations of Pena. California courts have ruled that there is no reliance on representations when the representations are contrary to the express terms of the policy. Where an insured accepts a policy without reading it, the insured cannot complain that the policy was not what they expected. Plaintiffs were under a duty to read the policy, but did not do so. The Policies clearly and conspicuously provided that premiums were due and payable each and every year. Further, the Policies had a 10-day “free look” period, and if the Polices were not what Plaintiffs expected, the Policies could have been cancelled in the period of time and their premiums could have been refunded. Additionally, the Policies contain an express integration clause, which prevents the introduction of extrinsic evidence of pre-purchase representations regarding the number of premium payments that are contrary to the terms of the Policies. Pena’s representations regarding the number of policy payments flatly contradicts the terms of the applications and the Policies. Finally, Plaintiffs admit that they thought of the Policies as an investment and that their values would fluctuate with the stock market, but did not consider any “down side.” There is no reasonable reliance.
Plaintiffs’ Opposition
Plaintiffs argue that justifiable reliance is generally a question of fact and is evaluated in light of a plaintiffs own information and intelligence. The state cases relied upon by Nationwide do not deal with “vanishing premium” situations. In a recent case involving “vanishing premium” fraud {Broberg), the California court of appeal refused to dismiss a fraud claim because nothing in the policy language made reliance on the agent’s representations unreasonable. The only language that could have arguably placed Melvin on notice that annual premiums could be required after two years is buried in small print. However, it could still be found that Melvin reasonably relied on the specific representations of the Pena. Under the rationale of Broberg, summary judgment is inappropriate.
Legal Standard
Fraud
The “elements of fraud are: (1) a misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (or scienter); (3) intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) resulting damage.”
Robinson Helicopter Co., Inc. v. Dana Corp.,
Parol Evidence of Fraud
The parol evidence rule “generally prohibits the introduction of any extrinsic evidence, whether oral or written, to vary, alter or add to the terms of an integrated written instrument.”
Casa Herrera, Inc. v. Beydoun,
Discussion
Nationwide’s first argument is based on Plaintiffs’ failure to read the Policies and the Policies’ language. A line of California cases recognize that an insured is under a duty to read his insurance policy, and the insured will be charged with constructive knowledge of policy provisions which are plain, clear, and conspicuous.
See Spray, Gould & Bowers v. Associated Internat. Ins. Co.,
Nationwide cites several provisions of the Policies, but expressly relies on the 10-day “free look” provision and the provision of the Policies that states the mode of the premiums was “annual.” 10 See Court’s Docket Doc. No. 13 at 15:11— 13; see also JUMF 36, 37. However, Plaintiffs do not contend that premiums were not due, rather they contend that they were told that the Policies would generate their own premiums after two years of premium payments. See UMF 13, 19, 20; Dias Dec. ¶ 6. This is similar to Broberg.
In
Broberg,
the misrepresentation at issue was that an insurance policy would generate enough income to pay its own premiums after eleven annual premium payments.
See Broberg,
However, Powell does not allege he was told premiums would stop, rather that premiums after the 11th year would be paid from earnings from the policy and that no further out-of-pocket payments would be required. Accordingly, even though Powell may be charged with knowledge of the terms of the policy he received, nothing in the policy itself was inconsistent with the misrepresentations on which the lawsuit is based. See Paper Savers, Inc. v. Nacsa (1996)51 Cal. App.4th 1090 , 1102,59 Cal.Rptr.2d 547 (“The instant case has nothing to do with the interpretation of insurance policy terms. No one is disputing the policy terms or their meaning. The dispute is whether [the insurer’s agent] actively misled [the insured’s representative] as to the effect of those terms.”].)
Id. The same is true in the case at bar. Assuming that Plaintiffs had constructive knowledge of the Policies’ terms, Nationwide has not shown the Court a clear Policy provision that is contrary to Pena’s misrepresentation. The Court does not see that the Policies’ language (as presented in Nationwide’s arguments) makes Melvin’s reliance unreasonable as a matter of law.
Nationwide’s second argument is based on the parol evidence rule. The Court reads Nationwide’s argument as alleging that the Policies are fully integrated. Plaintiffs make no argument regarding integration. Assuming full integration, the parol evidence rule would foreclose evidence of a prior or contemporaneous agreement that contradicts or adds to the Policies.
See
Cal.Code Civ. Pro. § 1856(b);
Esbensen,
11 Cal.App.4th at
Finally, Nationwide’s last argument is that Melvin did not consider that the market could go down. However, the issue is whether Melvin’s reliance on Pena’s misrepresentations was “justifiable” or “reasonable.” Although Melvin’s belief about the stock market may be “naive,” that is simply one piece of evidence for the jury to consider in determining whether reliance in Pena’s misrepresentation was “justifiable.” It does not tip the scale to the point that the Court can rule that reliance was unreasonable as a matter of law.
Justifiable reliance is normally a question of fact for a jury, and Nationwide has not shown this to be one of the “rare cases” in which there is only one conclusion that reasonable minds could reach.
See Alliance,
2. Vicarious Liability
Defendant’s Contention
Nationwide argues that Pena was Plaintiffs’ agent. 14 The evidence shows that Melvin went to Pena and requested that Pena find life insurance. Under these circumstances, California courts hold that Pena would be the agent of Melvin, not Nationwide. In this sense, Pena is more like an insurance broker and brokers are the agents of the insured. However, even if Pena was acting as Nationwide’s agent, Pena did not have the actual authority to make promises and representations on behalf of Nationwide. At best, Pena would be a “soliciting agent,” who was authorized only to solicit applications. Such an agent only initiates contracts, but does not consummate them or bind the principal by anything he says or does during negotiations. Also, the Policies contain an “entire contract” provision, the terms of which show that Nationwide is not responsible for Pena’s conduct. 15
Plaintiffs’ Opposition
Plaintiffs argue that Pena was a licensed agent who was appointed by Nationwide. Under the California Insurance Code, a life insurance licensee (like Pena) is one who is authorized to act on behalf of a life insurer. The Insurance Code makes Pena Nationwide’s agent as a matter of law, and thus, Nationwide is liable for Pena’s misrepresentations. Pena is not a “broker” since the Insurance Code specifically excludes life insurance agents from the definition of a “broker.” Nationwide is also responsible for Pena’s conduct because it placed him in a position to commit the fraud.
Legal Standard
“An individual cannot act as an insurance agent in California without a valid license issued by the commissioner of insurance. (Ins.Code, § 1631). In addition to possessing a license, an insurance agent must be authorized by an insurance carrier to transact insurance business on the carrier’s behalf. This authorization must be evidenced by a notice of agency appointment on file with the Department of Insurance. (Ins.Code, § 1704(a)).”
Krumme v. Mercury Ins. Co.,
The California Supreme Court has stated that an “insurance company can, like any other principal, prescribe limitations upon the power and authority of agents, and persons dealing with such agents with knowledge of the limitations
As a general rule the powers of an agent of an insurance company are governed by the general law of agency. His powers are varied by the character of the functions he is employed to perform. He may be a general agent with general powers, or his powers may be limited by the company; or he may be a special agent with authority limited to a specific transaction. In any event, an insurance agent, whether general or special, possesses such powers as have been conferred by the company, or as third persons have a right to assume that he possesses under the circumstances of the case; and as a general rule his powers, as to those dealing with him, are determined by the nature of the business entrusted to him and are prima facie coextensive with its requirements.
Frasch v. London & Lancashire Fire Ins. Co.,
Discussion
Nationwide relies on
Eddy v. Sharp,
The Court is not convinced that
Eddy
is controlling at this point. First, the
Eddy
rule applies when an “insurance agent is the agent for several companies.” The evidence shows that Pena was an agent for Nationwide. The evidence also shows that Pena was “probably” licensed as a life agent in California in 1998. Critically, however, there is no evidence before the Court that Pena was an agent for any insurance companies besides Nationwide in 1998. Since there is no evidence that Pena
Second, Eddy has been distinguished on grounds that apply to this case. In Loehr v. Great Republic, the court of appeal explained:
The fact that Doyle was an “independent” insurance agent so licensed to transact insurance business for several different carriers did not insulate Great Republic from responsibility for Doyle’s actions as its agent, or make appellant liable therefor.
The case of Eddy v. Sharp (1988)199 Cal.App.3d 858 ,245 Cal.Rptr. 211 , on which respondent relies for its contention that Doyle was appellant’s agent rather than Great Republic’s, is clearly distinguishable from the instant case. The court in Eddy was concerned with whether the defendant insurance agent or broker in question owed any duties to the consumer plaintiff. The case did not address the issue of whether the defendant’s acts or omissions were binding on the carrier, or even whether the defendant in fact was an agent of the carriers he dealt with, as opposed to being an independent insurance broker. (Id., at pp. 864-867,245 Cal.Rptr. 211 .)
The evidence in the record establishes that Doyle was an agent of Great Republic. As such, his acts and omissions as agent were binding on respondent. (Marsh & McLennan of Cal., Inc. v. City of Los Angeles (1976)62 Cal.App.3d 108 , 117,132 Cal.Rptr. 796 ) Of course, Doyle may perform acts outside his agency or in excess of his authority for which Great Republic would have no responsibility or liability, and there may be factual questions as to representations he made to the insured.
Loehr v. Great Republic Ins. Co.,
The evidence indicates that Pena was an agent for Nationwide in 1998, prior to the sale of the Policies to Plaintiffs.
See
JUMF 57; DUMF 1, 3; Ison Dec. at ¶ 21; Pena Depo. at 19:4-20:13. The declaration of Christopher Ison indicates that Pena was not a “general agent” of Nationwide, but instead appears to have been a “soliciting agent” with limited authority.
See
Ison Dec. at ¶ 22; DUMF 1, 3;
see also
Court’s Docket Doc. No. 13 at p. 18:7-8. As a soliciting agent, Pena could not bind Nationwide into a contract through the negotiation or explanation process.
See Duarte,
Lastly, Nationwide also relies on the “integration clause” of the Policies. The relevant provision reads, “We will not be bound by any promised representation made by any agent or other persons.” The Court understands Nationwide’s reliance on this clause to be an argument that Pena exceeded his authority by making the specific misrepresentations. However, this very argument has recently been reject. The clause in
Broberg
read, “[the insurer] will not be bound by any promise or statement made by any agent .... ”
Broberg,
Summary judgment on the basis that Nationwide is not responsible for Pena’s acts is not appropriate at this time.
3. Statute of Limitations
Defendant’s Contention
Nationwide argues that Plaintiffs have filed suit beyond the statute of limitations period. The evidence shows that Plaintiffs either knew or should have suspected that they had been defrauded from 2000 forward. In that time, Plaintiffs received notices from Nationwide stating that additional premium payments were due to keep the policies in force. Plaintiffs’ allegations that they had been misled by Pena until 2007 does not save their claim since a “suspicion” of wrongdoing is all that is necessary. The latest date on which Plaintiffs’ suspicions were or should have been aroused was 2000.
Plaintiffs’ Opposition
Plaintiffs argue that the language of the Policies themselves were insufficient to place them on inquiry notice. Further, after Melvin received the premium notice in 2000, he made an inquiry to Pena, who advised Melvin not to worry as there was plenty of money in the account. Further, when Melvin spoke to Pena again in 2004, Pena said that Melvin could choose to pay or not pay. Where a defendant conceals the facts giving rise to a cause of action, the statute of limitations is tolled. Further, Pena had a fiduciary relationship with Melvin and Pena’s failure to disclose the true nature of the policies tolls the statute of limitations. The language of the Policies and the conduct of Pena create disputes that can only be resolved by the jury.
Legal Standard
The statute of limitations for a fraud claim in California is three years.
See
CaLCode Civ. Pro. § 338(d);
Broberg v. The Guardian Life Ins. Co. of Am.,
Discussion
There is no doubt that Plaintiffs suspicions were raised at least in 2007 when they were told that they had been the victims of “vanishing premiums” fraud. 16 See PUMF 16. However, Nationwide argues -that Plaintiffs’ suspicions should have been raised in 2000 and forward because Melvin received notices that a premium was due. The Court admits that the number of payment notices that Melvin received from at least 2004 to 2008 is compelling evidence in Nationwide’s favor. See DUMF 18. Nevertheless, the Court believes that there are other facts in Plaintiffs’ favor that create a triable issue.
When Melvin received the premium notice in 2000, he contacted Nationwide’s
Viewing this evidence in the light most favorable to Plaintiffs as the non-moving parties, the total weight of these facts and considerations could support the inference that Plaintiffs were not on inquiry notice from 2000 through 2007. As such, the Court cannot determine when Plaintiffs had “knowledge of facts sufficient to make a reasonably prudent person suspicious of fraud, thus putting [them] on inquiry.”
See Cleveland,
CONCLUSION
Nationwide moves for summary judgment on Plaintiffs’ single cause of action for fraud. Summary judgment through the absence of justifiable reliance is not appropriate because Nationwide has not shown that a Policy term squarely contradicts Pena’s misrepresentations. Summary judgment on the issue of vicarious liability is not appropriate because, assuming that Pena was a soliciting agent, the misrepresentations appear to fall within the natural scope of authority of a soliciting agent. Finally, summary judgment on the statute of limitations is not appropriate because Pena’s statements in 2000 and 2004, Pena’s relationship with Melvin, the failure of Nationwide to cancel the policies
Accordingly, IT IS HEREBY ORDERED that Defendant’s motion for summary judgment is DENIED.
IT IS SO ORDERED.
Notes
. "JUMF” refers to a joint undisputed material fact, “DUMF" refers to Defendant’s undisputed material fact, and “PUMF” refers to Plaintiff's undisputed material facts. The Court appreciates the parties's use of JUMF's.
. Plaintiffs also utilized the services of inter alia lawyers, accountants, and stock brokers in their business and financial affairs, and did so in 1998. JUMF 3.
. It is unclear precisely when or how often Pena made these statements to Melvin.
. Pena, however, denies making these statements to Plaintiffs and instead testified that he told Plaintiffs that they would have to pay premiums each and every year and that Plaintiffs understood this. JUMF 21, 62. Pena also testified that he and Harvey Stein provided Plaintiffs illustrations regarding various projections for the Policies.
See
DUMF 4, 5, 6, 7. However, Plaintiffs deny receiving these illustrations.
See
Melvin Dias Dec. ¶21. Since Plaintiffs are the non-moving parties, the Court will credit their version of events.
See Stegall v. Citadel Broad. Co.,
. Nationwide objects that Melvin’s contention that he believed Pena spoke for Nationwide is
. Plaintiffs dispute DUMF 17 by stating that they do not believe they ever discussed the 10-day "free look” provision. Plaintiffs cite Paragraph 9 of Melvin’s declaration. However, Paragraph 9 states that Melvin received the Policies (although he does not specifically remember receiving them), he does not remember reading the Policies, and the copy of the Policy submitted in this motion by Nationwide matches his own copy. See Dias Dec. ¶ 9. Paragraph 9 makes no reference to the "free look” provision, to discussions with Pena, or to discussions with Pena about the "free look” provision. DUMF 17 is undisputed.
. Pena testified that he had been licensed to sell life insurance in California, that he was "probably” licensed in California before selling the Policies, and that he had been appointed by Nationwide to sell policies at the time he sold the Policies. See Pena Depo. at 19:4-20:13.
. Nationwide states that whether Pena stole money is irrelevant, Pena denies that he stole anything, and Pena’s alleged theft is the sub
. Nationwide objects that the assertion regarding "vanishing premiums fraud" is based on inadmissible hearsay. However, the Court is not considering the evidence for the truth of the matter asserted, that is, the Court is not considering the statement to be evidence that Melvin was in fact the victim of vanishing premiums fraud. See Fed.R.Evid. 801(c). The statement from the other broker is considered in context of the statute of limitations.
. The Court assumes this is the provision relied upon. The memorandum only states, "The Policies clearly and conspicuously provided that premiums were due and payable each and every year.” Court’s Docket Doc. No. 13 at 15:11-12. The only provision that has been cited to the Court that would seem to fit this description is on the "data page” wherein it is written that the “premium mode” is "annual.” JUMF 37.
. Nationwide seeks to distinguish
Broberg
by properly pointing out that misrepresentations in that case were made in a written and oral form, and the case was in the context of a demurrer, not summary judgment. However, in our case, Plaintiffs have alleged a clear oral misrepresentation by Pena and the Court does not see, nor does
Broberg
require, that there must also be a written misrepresentation. Also, that
Broberg
dealt with a demurrer is not troubling given the evidence that has been presented in this case. Like the allegations in Broberg's complaint, the evidence presented to this Court does not show a contradiction/inconsistency between the misrepresentation and the terms of the Policies.
Cf. Broberg,
. Considering the relationship that Melvin had with Pena, the misrepresentation may also be a “breach of confidence.”
See Pendergrass,
.Nationwide relies heavily on
Jaclcson National.
In that case, the parol evidence rule defeated breach of contract claims.
In re Jackson Nat. Life Ins. Co. Premium Litig.,
. There is no issue regarding respondeat superior as the parties agree Pena was not Nationwide’s employee.
. Nationwide also argues that there is insufficient evidence of a ostensible agency, to the extent that Plaintiffs may rely on this theory. Plaintiffs dispute this argument. However, because there are genuine disputes regarding Pena's authority as a soliciting agent, it is unnecessary to discuss ostensible agency at this point.
. This lawsuit was filed in state court on February 3, 2009. See Court’s Docket Doc. No. 1. Obviously, if the three year statute of limitations begins running in 2007, then there is no statute of limitations problem.