McGill v. American Life & Casualty Insurance Co.

ECKRICH, Circuit Judge

(dissenting).

[¶ 19.] I respectfully dissent.

*880[¶ 20.] On November 13, 1986, McGill wrote to American Life regarding the policy. He sought financial information about the company to better “enable [him] to advise her of the prudence of investing all of her assets into your insurance company.”

[¶ 21.] Over the course of the next two and one half years, McGill read the insurance policy, received a policy statement, met with Mrs. Thissell and agent Nordseth regarding the policy and communicated with Mrs. Thissell’s son Charles regarding the policy.

[¶22.] On April'26, 1989, McGill wrote a letter to Mrs. Thissell, her three sons and Nordseth that provided, in pertinent part:

On June 20, 1988 the death benefit of this policy was reduced to $190,000.00. The reason for this was because interest rates had decreased and the mortality charge on the premium was too high.... My two concerns on the policy, and Mr. Nordseth is free to comment on these in any letter that he has in response to this letter, is what is the interest payable on the policy and whether it is possible to convert this policy to paid-up coverage in a certain face amount so that there would be no further mortality charge or premiums due on the policy. ... If it were converted to paid-up insurance, there would be no risk in the mortality charge consuming the principal.

The letter included a copy of American Life’s 1988 policy report.

[¶ 23.] On July 24, 1989, Bonnie Burns, an Insurance Specialist/Consumer Advocate, wrote a letter to Mrs. Thissell’s son Charles, an attorney, following her review of several of Mrs. Thissell’s insurance policies. The letter reiterated the risks associated with the American Life policy and suggested the “future funding of this plan deserves serious consideration and ... the attention of someone with more experience than [she had] in the field of life insurance and financial planning.” In addition, Ms. Burns advised:

If you want to pursue disciplinary action against the agent I will need to examine the code for South Dakota. If the sale of any of these coverages was fraudulent or made under duress or high pressure, or if twisting is involved, you may be able to involve one of the companies. It would seem clear to me that the actual damages pursuant to the sale of the health insurance products are not very high and may not be worth your time and energy. The life insurance sale is another matter. It might be interesting to ask for an opinion from the South Dakota department of insurance on the merits of that sale.

[¶ 24.] The insurance policy was assigned to Mrs. Thissell’s sons in 1990. On February 19, 1990, Mrs. Thissell named her sons as attorneys in fact “to deal with life insurance.” On May 16, 1990, McGill wrote to Charles: “we must watch Mrs. Thissell’s mail for the annual report on the single premium life insurance policy. We have to determine whether the return on the policy is paying the premium without consuming an excessive amount of cash value.”

[¶ 25.] On April 17, 1998, McGill filed a complaint on Mrs. Thissell’s behalf against American Life, Nordseth and Lund alleging negligence, negligent misrepresentation, fraud, deceit, breach of fiduciary relationship, and breach of contract.

[¶ 26.] The substance of McGill’s claims is two-fold: 1) that the insurance product Mrs. Thissell purchased was an entirely inappropriate and risky investment considering her modest estate and advanced age; and 2) that American Life and its agents did not disclose the risky, interest-sensitive nature of her investment, i .&, that her policy “could self-destruct if interest rates continued to decline.”

[¶ 27.] In fact, it appears that as early as 1986, within a month after the purchase was made, McGill actively investigated the appropriateness of the investment. By no later than July 1990, not only were the principals aware that the policy could self-destruct, the possibility of a claim against *881Nordseth for fraud (among other things) was suggested to one of the new policy-owners, Charles Thissell, himself an attorney, and with whom McGill had been communicating.

[¶ 28.] The statute of limitation begins to toll when McGill became aware of facts giving actual or constructive notice to suspect a fraud. Strassburg v. Citizens State Bank, 1998 SD 72 ¶ 10, 581 N.W.2d 510, 514. McGill argues that Nordseth knew the policy was underfunded by $49,111 and that he had an affirmative dufy to disclose this fact. If so, the legal inquiry is the same: when did McGill know enough to suspect he had a case? Fraudulent concealment tolls the statute of limitations until the claim is disclosed or might have been discovered with reasonable diligence. Id., at ¶ 14, 581 N.W.2d at 515. The discovery of the additional $49,111 doesn’t alter the original causes of action. At best it only supports the original theory that the policy was risky and inappropriate.

[¶ 29.] Furthermore, if a confidential relationship is found to exist between Mrs. Thissell and American Life which may require an affirmative duty to disclose the $49,111 underfunding, the statute is only tolled until McGill had sufficient notice of facts to put him on alert that his causes of action existed. It is clear from the record that by no later than 1990, McGill was in possession of sufficient facts to put him on notice of facts supporting the causes of action that the policy was oversold, was interest sensitive, could self-destruct, was an inappropriate and risky investment, was misrepresented as self-sustaining, and that there existed the potential causes of action which he ultimately pled. For nearly eight years after possessing those facts, McGill was idle. There is no genuine issue of material fact that he was in possession of sufficient facts to put him on actual or constructive notice to suspect fraud or any other cause of action asserted in his complaint.