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Scully v. Guardian Life Insurance Co.

March 19, 2008


On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-6275-03.

Per curiam.


Argued December 12, 2007

Before Judges Lisa, Lihotz and Simonelli.

This matter involves a whole life insurance policy plaintiff Michael R. Scully purchased in 1990 from defendant The Guardian Life Insurance Company (Guardian).*fn1 Plaintiff alleges he suffered damages as a result of certain misrepresentations made about the policy by Thomas Hogan, a representative of defendant Hanson & Ryan, Inc. Plaintiff appeals from the order of October 22, 2006, denying his motion for reconsideration of the order of August 10, 2006, granting summary judgment to defendant and dismissing the complaint with prejudice. We affirm.

The following facts are derived from the record submitted by the parties in support of and in opposition to the summary judgment motion, viewed in a light most favorable to plaintiff. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). On or about July 21, 1990, plaintiff purchased a $500,000 whole life insurance policy from Guardian. Plaintiff claims that Hogan represented that the policy had a "vanishing premium" option*fn2 where, after paying an annual premium of $6665.65 for ten years, the policy would accumulate sufficient dividends to pay all future premiums for the rest of plaintiff's life. Plaintiff also claims Hogan represented that the policy was an investment vehicle, and Guardian would reinvest a portion of the premium in the stock market and guarantee a minimum four percent return or growth of the policy's cash value.*fn3

To obtain the "vanishing premium" option, a policyholder had to select dividend option D, "Paid Up Additional Insurance." However, to qualify for that option, the policy had to accumulate sufficient dividends. Thus, plaintiff did not qualify for that option at the time he purchased the policy. Also, plaintiff did not select any method of premium reinvestment. Instead, he selected option B, "Reduced Premiums." Under this option, plaintiff's annual dividend was applied to the following year's premium, thus reducing the amount of that premium. As a result, from 1990 to 1995, plaintiff only paid an annual premium of $6000.

In 1995, without consulting Guardian, plaintiff signed a form changing his dividend option to the "Purchase Paid Up Life Additions" option. He began paying the $6665.65 annual premium, and his annual dividend was reinvested rather than applied to reduce the amount of future premiums. Eventually, if plaintiff had continued this way, by 2000 or 2001, he would have generated sufficient dividends to qualify for the "vanishing premium" option, and those dividends would have paid future premiums. However, plaintiff never selected this option, and he stopped paying his premiums in 2000. As a result, pursuant to the policy, the unpaid premiums were paid by an automatic loan. Nevertheless, the policy's value continued to grow during the period in which automatic loan payments were made.

On or about August 25, 2003, Guardian advised plaintiff that the policy would be cancelled effective August 30, 2003, for non-payment of premiums. Plaintiff then commenced this litigation alleging breach of contract, equitable estoppel, negligent misrepresentation, negligence, breach of fiduciary duties, equitable and common law fraud, and consumer fraud.*fn4

Plaintiff's liability expert opined that defendant breached its duty of care to plaintiff. However, the expert could not opine as to causation or damages, and was not qualified to determine when the policy premiums could vanish. He also admitted that the "vanishing premium" option was still available to plaintiff, and plaintiff merely had to fill out a form and submit it to Guardian. Plaintiff never did so.

Defendant's expert opined that plaintiff suffered no damages because (1) the vanishing premium option was still available to plaintiff as of January 31, 2006, and, since the policy had performed well, if plaintiff chose that option his premiums would vanish; (2) for five years plaintiff paid a reduced premium; and (3) plaintiff paid no premiums during the time they were paid by automatic loan. The expert also emphasized that as of August 4, 2005, the policy had a cash value of $96,625, and the 2005 dividend was $3610.95.

As a result of plaintiff's failure to produce an expert on causation and damages, defendant filed a motion for summary judgment, contending that absent expert testimony, plaintiff could not prove causation and damages. Defendant argued that without evidence of a loss and the aid of expert testimony, a jury would have to speculate on damages in areas where laypersons do not have sufficient knowledge or expertise; that plaintiff's formulation of damages ignored the fact that he paid a reduced premium from 1990 to 1995, which is an offset against his damages claim, the amount of which requires expert testimony to establish; and that plaintiff's formulation of damages ignored the fact that from 2001 to 2006, the policy's dividends were applied in a way that increased the value of the policy.

In response, plaintiff contended that expert testimony is not required to prove causation and damages. He argued that at a minimum, his damages include $52,000 for the automatic loan payments of the unpaid premiums; that the court could take judicial notice of the stock market's performance as shown by the NASDAQ Composite Index during the ten-year period; and that the jury could compute damages by comparing the policy's actual performance to that of the stock market utilizing an index such as the NASDAQ. In a written opinion, Judge Toskos concluded as follows:

The Court agrees with Defendant that expert testimony is necessary in this case in order for a jury to determine what damages, if any, Plaintiff suffered as a result of Defendant's actions in this matter. Without expert testimony, a jury simply does not have the knowledge, skill or experience to make a fair and reasonable estimate of Plaintiff's damages in this case. The Court finds very difficult Plaintiff's claim that the damages [he] suffered are readily ascertainable by reference to the amount of its premium loan, or by comparison with the performance of the stock market in the 1990s. With respect to the former, the Court notes that the Plaintiff's policy has continued to grow in value during the period in which the automatic premium loans have been incurred. With respect to the latter, judicial notice of the performance of the stock market during a specific period in time does not alone provide a reasonable estimate of Plaintiff's damages, nor does it provide the requisite showing of causation. The motion record does not contain any expert opinion on Plaintiff's economic loss, or an opinion [causally] connecting any such loss to Defendant's actions. Furthermore, a reasonable estimate of Plaintiff's damages is not apparent to the Court from the ...

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