Mineral Wells insurance lawyers know to tell clients to not negotiate checks from an insurance company that represent a refund of paid premiums. But what happens if the check is cashed by the client? A 2006, Federal District Court in Houston Texas is worth reading. The style of the case is, Kirk v. Kemper Investors.
This case arises from a life insurance policy issued by Kemper. Ms. Kirk passed away on while the policy was in effect. Because her death occurred within two years of the policy’s issuance, Kemper conducted a routine investigation, which revealed that Ms. Kirk had been treated for chest pain, respiratory disorder, mental disorder, and uncontrolled high blood pressure. Ms. Kirk had denied that she had ever had or been treated for any of these conditions in her application for the Kemper life insurance policy. Based on these alleged misrepresentations, Kemper denied payment of any benefits on the policy.
Kemper issued a refund check for the paid premiums that was cashed. Kemper then filed a motion for summary judgment saying Kirk had waived his rights to any benefits by cashing Kemper’s premium refund check.
An insurer may also avoid liability under an insurance policy if the beneficiary has waived his rights to policy benefits. Here, the parties agree that Kemper sent Ashley Kirk a letter denying his claim for benefits under Ms. Kirk’s life insurance policy in May 2004. The parties agree that Kemper enclosed with the letter a check refunding all of the premiums that had been paid on the policy, and that Ashley Kirk cashed the refund check. Kemper argues that, by cashing the refund check, Ashley Kirk waived his claim against Kemper for benefits under the policy. Kirk’s contend, on the contrary, that Ashley Kirk lacked the requisite knowledge of his rights under the insurance policy in order to waive them.
Waiver is the voluntary or intentional relinquishment of a known right. The application of the doctrine of waiver thus presupposes full knowledge of the existing right. It follows, therefore, that Kemper must prove that Ashley Kirk knew of his right to pursue his claim to benefits under Ms. Kirk’s policy, and that he intentionally gave up his right to pursue any benefits when he cashed Kemper’s refund check.
Here, the evidence of Ashley Kirk’s knowledge of his right to pursue a claim against Kemper at the time that he cashed the refund check is less than clear. At his deposition, Ashley Kirk testified that he understood Kemper’s letter to be stating that there was a misrepresentation in Ms. Kirk’s policy, and to be giving him a refund check for the policy. Ashley Kirk further testified that:
Well, I was honestly ignorant of the — I read from what I — well, from what I understood, it seemed like a closed matter. So I didn’t honestly didn’t dig into it any deeper. I did hand it over to my father, who has more knowledge. You know, he’s older, more experienced in these types of legal matters. So I handed it over to him to take a look at it.
Ashley Kirk also noted that he was surprised and confused by what was written in Kemper’s letter, and stated that, “I guess I just assumed according to the technicalities the matter was closed, you know. . . . I was surprised. As far as my emotional response to receiving it, I was surprised.”
As Kemper points out, Ashley Kirk’s testimony shows that he understood that the check enclosed with Kemper’s letter represented a refund for the insurance premiums paid on Ms. Kirk’s policy. His testimony also tends to show that he understood Kemper to be denying his claim to benefits under the policy. His testimony does not demonstrate, however, that he was aware of his right to pursue a claim against Kemper for the insurance benefits, or that he would be giving up this right by cashing the refund check. On the contrary, Ashley Kirk’s testimony that “it seemed like a closed matter” tends to show that he did not appreciate his right to bring a claim against Kemper. Additionally, while Ashley Kirk gave the letter to his father, who he felt to be more experienced in these types of matters, he did not consult an attorney prior to cashing the check. There is no evidence that Ashley Kirk’s father had any legal background or knowledge of the doctrine of waiver, and no evidence that Ashley Kirk ever learned of his right to bring a claim against Kemper for the denied benefits prior to cashing the refund check.
In deciding a motion for summary judgment, a Court is bound to view the evidence in the light most favorable to the non-movant and to draw all reasonable inferences in that party’s favor. Viewing the evidence in the light most favorable to Kirk, the Court could not conclude that Ashley Kirk understood his right to pursue a claim for benefits against Kemper, or that he intentionally waived this right by cashing the refund check. In light of these issues of material fact with respect to Ashley Kirk’s knowledge, summary judgment on the issue of waiver would be inappropriate, and Kemper’s motion must be denied.
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