in the florida supreme court case no. sc09 … the florida supreme court case no. sc09-1956 _____...
TRANSCRIPT
IN THE FLORIDA SUPREME COURT
Case No. SC09-1956 ____________________________________________________________
WAYNE ATKINSON, as the Executor of the Estate of Rita Atkinson, and
RICHARD ARMATROUT, as the Executor of the Estate of Karen Armatrout,
Appellants,
vs.
WAL-MART STORES, INC. and WAL-MART STORES, INC. CORPORATION GRANTOR TRUST,
Appellees.
____________________________________________________________
On Certified Question from the United States Court of Appeals
for the Eleventh Circuit Case No. 09-12973-H
____________________________________________________________
APPELLEES’ ANSWER BRIEF ____________________________________________________________
EDWARD A. MOSS
EILEEN TILGHMAN MOSS DANIEL B. ROGERS
SHOOK, HARDY & BACON LLP Miami Center, Suite 2400
201 South Biscayne Boulevard Miami, Florida 33131
Tel: 305-358-5171 Fax: 305-358-5171
Counsel for Appellees
i
TABLE OF CONTENTS
Page
TABLE OF CONTENTS ............................................................................................ i
TABLE OF AUTHORITIES ................................................................................... iii
STATEMENT OF THE CASE AND OF THE FACTS ........................................... 1
A. Statement of the Facts ........................................................................... 1
1. Wal-Mart Institutes a COLI Program ......................................... 1
2. Wal-Mart Employees Received a Variety of Information About the COLI Program ............................................................ 3
3. Wal-Mart Ends Its COLI Program .............................................. 4
B. Proceedings in the United States District Court for the Middle District of Florida .................................................................................. 5
C. Proceedings in the United States Court of Appeals for the Eleventh Circuit ..................................................................................... 8
STANDARD OF REVIEW ....................................................................................... 9
SUMMARY OF THE ARGUMENT ...................................................................... 10
ARGUMENT ........................................................................................................... 12
I. FLORIDA LAW DID NOT PROVIDE THE ESTATES WITH STANDING TO SUE WAL-MART FOR THE COLI POLICY BENEFITS WHEN IT RECEIVED THEM IN 1996 AND 1997; AND SECTION 627.404(4), FLORIDA STATUTES, WHICH BECAME EFFECTIVE JULY 1, 2008, DOES NOT APPLY RETROACTIVELY TO PROVIDE THE ESTATES WITH STANDING TO RECOVER THOSE BENEFITS................................... 12
A. Before July 1, 2008, Florida Law Did Not Provide Parties Like the Estates with Standing to Assert Claims Like Those They Assert Against Wal-Mart. ................................................................... 13
ii
B. The Statutory Amendment Adding the New Cause of Action in Subsection 627.404(4) Became Effective July 1, 2008 and Does Not Apply Retroactively to Provide the Estates with Standing to Bring Such an Action Based on Policies Concluded in 1996 and 1997. .................................................................................................... 20
1. Section 627.404(4) is Presumed to Apply Prospectively. ........ 21
2. The Legislature Did Not Clearly Express Its Intent that Section 627.404(4) Apply Retroactively, So the Default Rule of Prospective Application Controls. ............................... 25
3. Retroactively Applying Section 627.404(4) Would be Unconstitutional. ....................................................................... 38
CONCLUSION ........................................................................................................ 43
CERTIFICATE OF SERVICE ................................................................................ 44
CERTIFICATE REGARDING FONT STYLE AND SIZE ................................... 45
iii
TABLE OF AUTHORITIES
Cases Alamo Rent-A-Car, Inc. v. Mancusi, 632 So. 2d 1352 (Fla. 1994)...................................................................... 22-23 Arrow Air, Inc. v. Walsh, 645 So. 2d 422 (Fla. 1994)...................................................... 21-23, 25-26, 41 Basel v. McFarland & Sons, Inc., 815 So. 2d 687 (Fla. 5th DCA 2002) .................................................. 29, 41-42 Bates v. State, 750 So. 2d 6 (Fla. 1999)..................................................................... 21, 25, 29 Brockton v. S. Life & Health Ins. Co., 556 So. 2d 1138 (Fla. 3d DCA 1989) ................................................. 15-17, 30 Chawla v. Transamerica Occidental Life Ins. Co., 2005 WL 405405 (E.D. Va. Feb. 3, 2005) aff’d in part, vacated in part, 440 F.3d 639 (4th Cir. 2006) ..................... 34-36 City of Lakeland v. Catinella, 129 So. 2d 133 (Fla. 1961)............................................................................. 23 City of Sanford v. McClelland, 163 So. 513 (Fla. 1935) .................................................................................. 40 Cooper v. Paris, 413 So. 2d 772 (Fla. 1st DCA 1982) ........................................................ 15-16 Cundiff v. Cain, 707 So. 2d 187 (Miss. 1998) .......................................................................... 42 E.A.R. v. State, 4 So. 3d 614 (Fla. 2009)................................................................................. 28 Gerstel v. Arens, 196 So. 616 (Fla. 1940) ............................................................................. 18-19
Page
iv
Gordon v. John Deere Co., 264 So. 2d 419 (Fla. 1972)............................................................................. 41 Gupton v. Village Key & Saw Shop, Inc., 656 So. 2d 475 (Fla. 1995)............................................................................. 39 Guyana Tel. & Tel. Co. v. Melbourne Int’l Commc’ns, Ltd., 329 F.3d 1241 (11th Cir. 2003) .......................................................... 23-24, 41 Hassen v. State Farm Mut. Auto. Ins. Co., 83 So. 627 (Fla. 1920) ............................................................................... 24-25 Hotelera Naco, Inc. v. Chinea, 708 So. 2d 961 (Fla. 3d DCA 1998) ........................................................ 39-40 In Re Seven Barrels of Wine, 83 So. 627 (Fla. 1920) .................................................................................... 22 Knott v. State ex rel. Guar. Income Life Ins. Co., 186 So. 788 (Fla. 1939) ............................................................................. 13-15 L. Ross, Inc. v. R.W. Roberts Constr. Co., 481 So. 2d 484 (Fla. 1986)............................................................................. 23 Landgraf v. USI Film Prods., 511 U.S. 244 (1994) ......................................................................21, 24-26, 38 Liss v. Liss, 937 So. 2d 760 (Fla. 4th DCA 2006) ............................................................. 19 Lopez v. Life Ins. Co. of Am., 406 So. 2d 1155 (Fla. 4th DCA 1981), approved, 443 So. 2d 947 (Fla. 1983) ........................................................... 13 Macola v. Gov’t Employees Ins. Co., 953 So. 2d 451 (Fla. 2006)............................................................................... 9 Mayo v. Hartford Life Ins. Co., 220 F. Supp. 2d 714 (S.D. Tex 2002) .............................................................. 4
v
McCord v. Smith, 43 So. 2d 704 (Fla. 1949)............................................................................... 39 McMullen v. St. Lucie County Bank, 175 So. 721 (Fla. 1937) .................................................................................. 18 Melendez v. Dreis & Krump Mfg. Co., 515 So. 2d 735 (Fla. 1987)............................................................................. 27 Metro. Dade County v. Chase Fed. Housing Corp., 737 So. 2d 494 (Fla. 1999)...................................................................... passim Old Port Cove Holdings, Inc. v. Old Port Cove Condo. Ass’n One, Inc., 986 So. 2d 1279 (Fla. 2008)..................................................................... 20, 29 Pearsall v. Great N. Ry. Co., 161 U.S. 646 (1896) ....................................................................................... 40 Poss v. Craven, 15 So. 2d 671 (Fla. 1943)............................................................................... 19 Promontory Enters., Inc. v. S. Eng’g & Contracting, Inc., 864 So. 2d 479 (Fla. 5th DCA 2004) ............................................................. 28 Rice v. Wal-Mart Stores, Inc., 2004 WL 1638241 (D. N.H. July 23, 2004) .................................................... 4 Smith v. Pinch, 45 N.W. 183 (Mich. 1890) ............................................................................. 42 State v. Ashley, 701 So. 2d 338 (Fla. 1997)............................................................................. 13 State v. Zuckerman-Vernon Corp., 354 So. 2d 353 (Fla. 1977)............................................................................. 27 State Farm Mut. Auto. In. Co. v. LaForet, 658 So. 2d 55 (Fla. 1995).......................................................................... 38-39
vi
Trs. of Tufts Coll. v. Triple R. Ranch, Inc., 275 So. 2d 521 (Fla. 1973)............................................................21-22, 25, 37 Wiley v. Roof, 641 So. 2d 66 (Fla. 1994)............................................................................... 40 Zack v. State, 753 So. 2d 9 (Fla. 2000)................................................................................. 41 Statutes
§ 2.01, Fla. Stat. ....................................................................................................... 13 § 627.404, Fla. Stat. .......................................................................................... passim Ga. Code Ann. § 33-24-3(d)(2) ................................................................................ 13 Statute of 14 George III, c. 48 (1774) .....................................................13-15, 25, 37 Legislation
Ch. 2008-36, Laws of Fla.. ................................................................................. 27-28 Ch. 2006-122, Laws of Fla.. .................................................................................... 26 Ch. 2005-187, Laws of Fla. ..................................................................................... 26 Ch. 2003-257, Laws of Fla. ..................................................................................... 28 Ch. 2003-154, Laws of Fla. ................................................................................ 26-27
3 Couch on Insurance § 41:5 (3d ed. 1997) ............................................. 16-17
Other Authorities
Herbert Broom, Legal Maxims 24 (8th ed. 1911) .................................................... 21 Bertram Harnett & Irving I. Lesnick, 28 Appleman on Insurance § 174.02[F] (2d ed. 2006) .................................. 17 Lee R. Russ & Thomas F. Segalla,
1
A. Statement of the Facts
STATEMENT OF THE CASE AND OF THE FACTS
In the late 1980s and early 1990s, the accounting rules governing how
employers accounted for and funded their employee-benefit programs changed.
[DE 43-2 at ¶3]1
1. Wal-Mart Institutes a COLI Program
To help employers address these changes, the insurance industry
developed and heavily marketed a new form of corporate-owned life insurance
(“COLI”). [DE 43-2 at ¶3; DE 51 at 3] Employers have used COLI policies for
decades for “key-person insurance” and other purposes. [DE 43-2 at ¶2]
Employers buy such policies on the lives of their employees and receive the
insurance proceeds should the employees die while the policies are in force. [Id.]
Relying on advice from insurers, brokers, and consultants regarding how to
address the changes in accounting rules, Wal-Mart Stores, Inc. (“Wal-Mart”)
adopted a COLI program in 1993. [DE 43-2 at ¶4] Wal-Mart established the Wal-
Mart Stores, Inc. Corporation Grantor Trust (“the Trust”) in Georgia to purchase
COLI policies for all employees who enrolled in the company’s health plan and
chose not to opt out of the COLI program. [DE 43-2 at ¶¶4-6; DE 51 at 1-2] From
December 1993 to July 1995, Wal-Mart, through the Trust, purchased over 1 Record references in this Answer Brief are to the Docket Entry (“DE”) in the record of proceedings before the United States District Court for the Middle District of Florida, followed by the applicable paragraph or page number of the cited document entry.
2
350,000 COLI policies for its salaried and hourly-rate employees around the
United States. [DE 43-2 at ¶¶4, 8; DE 51 at 2]
Wal-Mart did not purchase the COLI policies to provide financial benefits to
the company from the deaths of its employees. [DE 43-2 at ¶27] Rather, Wal-
Mart instituted the COLI program because it had been advised of the substantial
tax benefits it could derive from the tax deductions allowed for interest payments
made on loans Wal-Mart took out to pay the COLI policy premiums. [DE 43-2 at
¶¶27-35; DE 51 at 3]
To purchase the COLI policies, Wal-Mart provided the insurers with basic
employee information, consisting of the employee’s name, social security number,
sex, date of birth, state and zip code of residence, and annual compensation. [DE
43-2 at ¶17; DE 51 at 2] Wal-Mart, through the Trust, then paid all of the
premiums and other costs of the COLI policies. [DE 43-2 at ¶11; DE 51 at 2]
Employees who participated in the COLI program did not incur any costs or suffer
the loss of any benefits they otherwise would have received. [DE 43-2 at ¶11] In
fact, the beneficiaries of employees enrolled in the program through May 1995
received a special death benefit of either $5,000 or $10,000. [DE 43-2 at ¶¶11-14;
DE 51 at 2-3] A $1,000 special death benefit was provided to those who cancelled
medical coverage or terminated their employment. [DE 43-2 at ¶23] Wal-Mart
received the remainder of the proceeds paid by each COLI policy. [DE 51 at 3]
3
2. Wal-Mart Employees Received a Variety of Information About the COLI Program
Wal-Mart informed its employees about the essential characteristics of the
COLI program – including its optional nature – at various times in various ways.
[DE 43-2 at ¶¶18-24] At the inception of the program in December 1993, Wal-
Mart sent a memorandum to its store managers, instructing them to distribute to all
employees enrolled in the company medical plan a “For Your Information”
brochure describing the COLI program, its special death benefits, the fact that
Wal-Mart owned and would obtain financial benefits from the policies, and the fact
that employee participation was optional. [DE 43-2 at ¶¶19-20; DE 51 at 2]
As employees became eligible for the COLI program, Wal-Mart provided
them with a “Personal Choice” form providing similar information about the COLI
program, including their right to opt out. [DE 43-2 at ¶24; DE 51 at 2] Hundreds
of employees across a wide cross-section of Wal-Mart locations choose to opt out
of the program. [DE 43-2 at ¶21]
Wal-Mart also provided employees with notices about the COLI program’s
different special death benefits. Wal-Mart informed employees in February 1994
about the $1,000 special death benefit for those who cancelled medical coverage or
terminated their employment. [DE 43-2 at ¶23] Wal-Mart also advised
employees, via a flyer in May 1996 and then a memorandum to store and personnel
4
managers in February 1998, that the special death benefit for new enrollees had
been cancelled. [DE 43-2 at ¶14]
Wal-Mart additionally provided a toll-free number to its Benefits
Department, where a team of customer service representatives, armed with a set of
“Questions and Answers,” responded to employee inquires about COLI. [DE 43-2
at ¶¶21-22] As time passed and national news reports about Wal-Mart’s COLI
program surfaced in Newsweek, the Washington Post, and the New York Times,
Wal-Mart developed a new set of “Questions and Answers” for its call center. [DE
43-2 at ¶26]2
3. Wal-Mart Ends Its COLI Program
In August 1996, Congress passed the Health Insurance Portability and
Accountability Act, which, among other things, effectively eliminated tax
deductions for interest paid on loans used to fund COLI policies. [DE 43-2 at ¶38;
DE 51 at 3] Because the financial benefits of its COLI program depended on those
2 The Estates allege that Wal-Mart did not provide employees with adequate notice concerning the COLI program, citing Mayo v. Hartford Life Insurance Co., 220 F. Supp. 2d 714 (S.D. Tex 2002). (IB at 1, n.2) Another court addressing this issue has refused to follow Mayo. See Rice v. Wal-Mart Stores, Inc., 2004 WL 1638241, *3 n.3 (D. N.H. July 23, 2004). The court in Rice, which had addressed more than one case concerning Wal-Mart’s COLI program, found “evidence demonstrating that all of its employees received the December 1993 memorandum notifying them about Wal-Mart’s intention to purchase the COLI policies. The notice clearly provided information that Wal-Mart was going to purchase life insurance policies on its employees’ lives, and that it - not the employees’ survivors - would receive the financial gains.” Id. at *3.
5
tax deductions, Wal-Mart began unwinding its program. [DE 43-2 at ¶38; DE 51
at 3] By January 2000, Wal-Mart had fully surrendered all of its COLI policies.
[DE 43-2 at ¶38; DE 51 at 3]
As with other COLI programs, the Internal Revenue Service challenged the
tax benefits to Wal-Mart under its COLI program. [DE 43-2 at ¶40] Wal-Mart
eventually settled with the IRS, with the net result that Wal-Mart lost tens of
millions of dollars as a result of its COLI program. [DE 43-2 at ¶40]
B. Proceedings in the United States District Court for the Middle District of Florida
Rita Atkinson and Karen Armatrout worked as hourly-rate Wal-Mart
employees in Florida and participated in the COLI program. [DE 41-2 at 1-2; DE
51 at 3] When Mrs. Atkinson passed away in 1996 and Mrs. Armatrout passed
away in 1997, Wal-Mart received $66,048.70 and $72,820.30, respectively, in
COLI policy benefits. [DE 41-2 at 1-2; DE 51 at 4]
Approximately 12 years later, on March 5, 2008, Wayne Atkinson, as the
Executor of the Estate of Rita Atkinson, and Richard Armatrout, as Executor of the
Estate of Karen Armatrout, (hereafter collectively “the Estates”) filed a putative
class action against Wal-Mart and the Trust (hereafter collectively “Wal-Mart”)
seeking to recover the proceeds Wal-Mart received from the COLI policies
insuring the lives of its rank-and-file Florida employees, like Mrs. Atkinson and
Mrs. Armatrout. [DE 2] Count I sought a declaratory judgment that Wal-Mart had
6
no insurable interest in the lives of its rank-and-file Florida employees and sought
imposition of a constructive trust over the COLI policy benefits paid to Wal-Mart
from those employees’ deaths. [DE 2 at ¶¶42-43; DE 51 at 4] Count II, for unjust
enrichment, sought disgorgement of the COLI policy benefits Wal-Mart received
because it allegedly obtained the policies by using employees’ personal
information without their consent. [DE 2 at ¶¶47-50; DE 51 at 4]
The Atkinson Estate filed an amended motion for class certification, seeking
to certify a class of the probate estates of certain rank-and-file Wal-Mart
employees in Florida whose deaths resulted in Wal-Mart’s receipt of COLI policy
benefits. [DE 35-36, 42]3
The trial court denied class certification and dismissed the case because,
under applicable Florida law, the Estates lacked standing to challenge the COLI
program and recover the proceeds of the COLI policies. [DE 51 at 6-11] To reach
Wal-Mart opposed class certification on numerous
grounds, including that the Atkinson Estate and the putative class members lacked
standing under Florida law to seek recovery of the COLI policy benefits, that the
statute of limitations barred their claims, and that the Atkinson Estate failed to
satisfy the class-certification requirements of Federal Rule of Civil Procedure 23.
[DE 43]
3 The amended motion for class certification withdrew the Armatrout Estate’s request for appointment as a class representative. [DE 35 at 1; DE 51 at 4, n.4] The Armatrout Estate remained in the case as a party-plaintiff.
7
this conclusion, the court first found that, because “[a]ll relevant events occurred
prior to January 2000,” the “Florida common law and statutory law in effect in
2000 would be applicable in the analysis of this case.” [DE 51 at 6, n.7] Given the
law applicable to the Estates’ claims, the court observed that the Estates “ha[d] not
and cannot cite any applicable Florida statutory or case law that supports a right to
institute this action against [Wal-Mart].” [DE 51 at 6]
The trial court then recognized that, on July 1, 2008, the Florida Legislature
had “substantially amended” Florida’s insurable interest statute, section 627.404,
Florida Statutes. [DE 51 at 8] Citing the Senate Staff Analysis & Economic
Impact Statement for the enabling legislation, the court found that the statutory
amendments adding the new subsection 627.404(4) “created for the first time in
Florida a statutory right of recovery by an estate against persons who receive
insurance policy benefit if such persons did not have an insurable interest in the
insured.” [DE 51 at 8 (emphasis added)] The court further found “no indication
in the relevant staff analysis or statutory notes that the amendments were meant
to apply retroactively.” [DE 51 at 8 (emphasis added)] The court thus ruled that:
applicable Florida law does not provide [the Estates] with a legally cognizable right to institute an action against [Wal-Mart] seeking: (I) declaratory relief that Wal-Mart lacked an insurable interest; (ii) a constructive trust against the proceeds of insurance policies under the COLI program; or (iii) a claim for unjust enrichment. The sole available remedy under applicable Florida law is to void such policies. For these reasons, the Court concludes that [the Estates] lack[] standing to bring Counts I and II.
8
[DE 51 at 9]
Due to the dispositive nature of the Estates’ lack of standing, the trial court
never considered whether the Atkinson Estate satisfied the class-certification
requirements in Rule 23. [DE 51, passim] For the same reason, the trial court
stated it would not address Wal-Mart’s statute of limitations argument. [DE 51 at
10, n.12] The trial court went on to note, however, that it appeared Counts I and II
would be barred by Florida’s four year statute of limitations. [DE 51 at 10, n.12]
C. Proceedings in the United States Court of Appeals for the Eleventh Circuit
The Estates appealed. [DE 52] The Eleventh Circuit framed “[t]he question
presented in this case [as] whether § 627.404(4) is retroactively applicable and thus
confers standing upon the personal representative of an insured.” Slip Op. at 2.
The Eleventh Circuit thus certified the following question to this Court:
Whether the amendments to Fla. Stat. § 627.404 apply retroactively and enable the representative of an insured to sue for COLI benefits received by a party lacking an insurable interest or whether the amendments create a new cause of action such that a family would lack standing to sue for benefits obtained prior to the enactment of the amendments.
Slip Op. at 7.
9
Wal-Mart agrees with the Estates that the issues before this Court present
questions of law, which this Court reviews de novo. See Macola v. Gov’t
Employees Ins. Co., 953 So. 2d 451, 454 (Fla. 2006).
STANDARD OF REVIEW
10
The Estates make two arguments in their Initial Brief. First, they argue that
the new cause of action in section 627.404(4), Florida Statutes, effective July 1,
2008, applies retroactively to provide the Estates with standing to sue Wal-Mart to
recover COLI policy benefits Wal-Mart had received more than a decade earlier.
Second, the Estates argue that this cause of action existed in Florida even before
the 2008 enactment of section 627.404(4). The Estates are wrong on both
accounts.
The 2008 amendments to section 627.404 do not apply retroactively. To
rebut the presumption against retroactive application of statutes, the Legislature
must unequivocally express its intent that the statute apply retroactively. Here,
there is no proof – much less unequivocal proof – that the Legislature intended for
the new cause of action in section 627.404(4) to apply retroactively. The only
purported proof of retroactive intent which the Estates point to is a statement in the
enabling legislation that the amendments were intended to “clarify existing law.”
That is hardly an unequivocal expression of legislative intent that the statute apply
retroactively – and it did not even refer to the specific amendment creating
subsection 627.404(4). The presumption of prospective application thus controls.
SUMMARY OF THE ARGUMENT
Even if the Legislature had clearly expressed its intent that section
627.404(4) apply retroactively (it did not), such retroactive application would be
11
invalid. Retroactively applying section 627.404(4) would create a new obligation
or penalty and thereby unconstitutionally infringe on Wal-Mart’s vested right to
money it has possessed for more than 10 years.
The trial court, after surveying Florida law, correctly ruled that the law
applicable to the Estates’ claims did not provide them with standing to allege their
claims against Wal-Mart. Although Florida law declares void all life insurance
policies where the policy holder lacks an insurable interest in the life of the
insured, before the 2008 amendments to section 627.404, Florida law did not
permit an insured, or the insured’s representative, to sue for the proceeds of a
policy procured without an insurable interest. The sole remedy under Florida law
before the 2008 amendments was to declare such policies null and void. The trial
court thus properly found that applicable Florida law did not provide the Estates
with standing to allege their claims against Wal-Mart and appropriately dismissed
their claims.
For these reasons, the Court should answer the certified question from the
Eleventh Circuit by holding that the statutory amendment to section 627.404
adding the new cause of action in subsection (4) does not apply retroactively but,
instead, creates a new cause of action in Florida such that the Estates lack standing
to sue Wal-Mart for benefits received prior to the enactment of that statutory
amendment.
12
I. FLORIDA LAW DID NOT PROVIDE THE ESTATES WITH STANDING TO SUE WAL-MART FOR THE COLI POLICY BENEFITS WHEN IT RECEIVED THEM IN 1996 AND 1997; AND SECTION 627.404(4), FLORIDA STATUTES, WHICH BECAME EFFECTIVE JULY 1, 2008, DOES NOT APPLY RETROACTIVELY TO PROVIDE THE ESTATES WITH STANDING TO RECOVER THOSE BENEFITS.
ARGUMENT
The Estates contend that they have standing to sue Wal-Mart to recover the
COLI policy benefits paid in 1996 and 1997 because the statutory amendment
adding section 627.404(4), Florida Statutes, which became effective July 1, 2008,
applies retroactively. The Estates further contend that Florida law pre-dating that
statutory amendment already provided for the new cause of action in section
627.404(4). Neither of these arguments has merit. Because an analysis of the pre-
amendment state of Florida law provides context for and informs the retroactivity
analysis, Wal-Mart will address that issue first.
13
A. Before July 1, 2008, Florida Law Did Not Provide Parties Like the Estates with Standing to Assert Claims Like Those They Assert Against Wal-Mart.
Wal-Mart recognizes that Florida law has long prohibited life insurance
policies in which the policy holder has no insurable interest.4
Section 2.01, Florida Statutes, provides that the “common and statute laws
of England . . . down to the 4th day of July, 1776, are declared to be of force in this
state.” Accord State v. Ashley, 701 So. 2d 338, 341 (Fla. 1997). Hence, the British
statute of 14 George III, c. 48 (1774), became part of and still is Florida law. That
See Knott v. State ex
rel. Guar. Income Life Ins. Co., 186 So. 788, 789-90 (Fla. 1939); Lopez v. Life Ins.
Co. of Am., 406 So. 2d 1155, 1158 (Fla. 4th DCA 1981), approved, 443 So. 2d 947
(Fla. 1983). Insurance polices obtained without an insurable interest are
considered wagering contracts and thus void as against public policy. See Knott,
186 So. at 790. This has been the law in Florida since its inception.
4 As the Estates point out (IB at 11), Wal-Mart established the Wal-Mart Stores, Inc. Corporation Grantor Trust (“the Trust”) in Georgia to purchase the COLI policies. The trust instrument contained a choice-of-law provision for questions regarding the validity, construction, and administration of the Trust, and the Trust applied for and took delivery of the policies in Georgia. [DE 43-2 at ¶¶6 & 8] Accordingly, affirmative defense seven in Wal-Mart’s Answer and Affirmative Defenses asserts that Georgia law governs the policies. [DE 7 at 8] Georgia law provides that a trustee of a trust established by a corporation providing benefits to its employees has an insurable interest in the lives of those employees. See Ga. Code Ann. § 33-24-3(d)(2). Wal-Mart thus disputes the Estates’ contention that it lacked an insurable interest in the lives of its hourly-wage employees. However, for purposes of the class certification briefing before the trial court only, Wal-Mart assumed, arguendo, the Estates’ contention. [DE 43 at 9, n.3]
14
statute prohibits an insurance policy in which the one procuring and benefiting
from the policy does not have an interest in the life of the insured:
Whereas it hath been found by experience, that the making [of] insurances on lives, or other events, wherein the assured shall have no interest, hath introduced a mischievous kind of gaming: For remedy whereof, be it enacted by King’s most excellent majesty, by and with the advice and consent of the lords spiritual and temporal, and commons, in this present parliament assembled, and by the authority of the same, That from and after the passing of this act, no insurance shall be made by any person or persons, bodies politick or corporate, on the life or lives of any person or persons, or on any other event or events whatsoever, wherein the person or persons for whose use, benefit, or on whose account such policy or policies shall be made, shall have no interest, or by way of gaming or wagering; and that every assurance made, contrary to the true intent and meaning hereof, shall be nul and void, to all intents and purposes whatsoever.
Knott, 186 So. at 790 (emphasis added) (citing the Summary of British Statutes,
part of the Common Law of Florida under Section 87, C.G.L. 1927, Published
Under Supervision of the Attorney General State of Florida, January, 1931).
As this Court made clear in Knott, the sole remedy provided by the statute of
George III for violating the insurable interest requirement – and thus the sole
remedy provided by Florida law before July 1, 2008 – is that such policies are
“nul[l] and void.” Id. Nowhere in the statute of George III, Knott, or subsequent
Florida case law is the insured, or insured’s successor, given a cause of action to
recover the insurance proceeds. Before July 1, 2008, no statute or legal decision
changed that long-standing Florida law.
15
Since Wal-Mart’s COLI program concluded by 2000, the Florida law in
effect at the time Wal-Mart took out COLI policies on its employees and received
benefits from those policies did not provide the employees or their beneficiaries
with the right to recover those benefits from Wal-Mart. In fact, the law did not
even provide them with the right to contest the policies. As a result, the employees
and their representatives, like the Estates here, lacked standing under applicable
Florida law to complain about Wal-Mart’s COLI program and seek recovery of the
COLI policy proceeds. The only party with standing to contest Wal-Mart’s lack of
an insurable interest was the insurer from which Wal-Mart bought the policy. See,
e.g., Brockton v. S. Life & Health Ins. Co., 556 So. 2d 1138, 1139 (Fla. 3d DCA
1989) (involving an insurer’s claim that it did not have to pay a beneficiary who
allegedly lacked an insurable interest).
The Estates do not mention that Knott and the statute of George III dictate
the sole remedy provided by Florida law for violating the insurable interest
requirement before the 2008 statutory amendments. Instead of addressing that
controlling law, the Estates cite Cooper v. Paris, 413 So. 2d 772 (Fla. 1st DCA
1982), for the proposition that Florida law generally does not allow parties who
violate public policy to benefit from their wrongdoing. But neither Cooper nor any
other case cited by the Estates goes the next step and recognizes a cause of action
for someone like the Estates to recover those benefits from the alleged wrongdoer.
16
Cooper involved a realtor who received an illegal commission on a sale of
property in Florida because he lacked a Florida realtor license. The court held the
realtor’s client could seek restitution for the commission he paid since a party who
violates public policy cannot benefit from their wrongdoing. See id. at 774. The
client’s restitution action against the realtor in Cooper differs materially from the
Estates’ putative action against Wal-Mart because the client in Cooper (i) actually
suffered an injury in the form of the commission he paid and (ii) was a party to the
contract from which the realtor recovered the illegal commission. In stark contrast,
neither the Estates nor their decedents paid a penny for the COLI policies and were
not parties to the insurance contracts that allegedly offend Florida public policy.
Moreover, as previously mentioned, Wal-Mart did not ultimately benefit from its
purported wrongdoing. In the end, the net result of Wal-Mart’s COLI program was
that it lost tens of millions of dollars.
Under Cooper, the insurer may have a cause of action for lack of an
insurable interest, as it paid benefits under its insurance contract with Wal-Mart.
See, e.g., Brockton, 556 So. 2d at 1139. The Estates, however, do not have a cause
of action. Florida law pre-July 1, 2008 was thus in line with the common law of
the vast majority of states that only the insurer had standing to object to the policy
holder’s lack of an insurable interest. See Lee R. Russ & Thomas F. Segalla, 3
Couch on Insurance § 41:5 (3d ed. 1997) (“The majority of courts which have
17
considered the issue hold that only the insurer can raise the objection of want of
insurable interest.”); Bertram Harnett & Irving I. Lesnick, 28 Appleman on
Insurance § 174.02[F] (2d ed. 2006) (“[T]he predominant common law rule is that
only the insurer may raise the issue of lack of an insurable interest, even to the
exclusion of the estate of the insured.”).5
The Estates wrongly criticize the trial court’s reliance on Couch, a leading
treatise on insurance law, for the proposition that the majority common law rule is
that only insurers can contest the lack of an insurable interest. According to the
Estates, Couch “no longer correctly states the ‘majority view,’ if it ever did.” (IB
at 19) The Estates then provide a string-cite of statutes across the country that
provide insureds or their representatives with standing to raise the objection of lack
of an insurable interest, followed by only two states (Texas and Virginia) which
provided such standing through case law. (IB at 19-21) The Estates miss the
point. The trial court correctly cited Couch for the proposition that the “majority
of courts,” like the courts of Florida, did not recognize the cause of action alleged
by the Estates. That those states, and now Florida, have provided such a cause of
5 The Estates argue the law providing “that only insurers have standing to sue, and then only to void the policy, makes no sense in the context of this case.” (IB at 22) They argue that “[s]uch a situation cannot be Florida law” and speculate that insurers, such as AIG in this case, will not contest a beneficiary’s lack of an insurable interest. (Id.) Yet, the Estates’ Initial Brief cites a Florida case where the insurer did exactly that—contest a beneficiary’s insurable interest and thus refuse to pay on a life insurance policy. See Brockton, 556 So. 2d at 1139.
18
action through statute does not change the fact that the majority common law rule
(followed in Florida) was that only insurers, not insureds or their representatives,
had standing to raise the lack of an insurable interest.
The Estates’ contention that McMullen v. St. Lucie County Bank, 175 So.
721 (Fla. 1937), recognized an insured’s heirs’ standing to raise the beneficiary’s
lack of an insurable interest is similarly incorrect. In that case, the heirs of a bank
president sought to recover the proceeds the bank received from policies insuring
the president’s life. The heirs claimed the president had assigned the policies to
the bank “for the purpose of securing certain loans, and that the said loans had
been paid and discharged in full.” Id. at 747. The bank disputed that claim,
contending the policies constituted “keyman insurance.” Id. This Court agreed,
finding that:
the bank procured the policies to protect it against any loss it might sustain in the event of McMullen’s death, he being president of the bank, and against any loss sustained in the event of failure to restore the loans which he as president of the bank had caused it to make to corporations in which he was the directing head.
Id. at 748. The Court had no need to address whether the heirs had a remedy for
the alleged lack of insurable interest because the Court found the bank actually had
an insurable interest in the president’s life.
The Estates again seize of dicta in Gerstel v. Arens, 196 So. 616 (Fla. 1940),
and attempt to distort it into a holding authorizing their claims. Gerstel involved a
19
partnership which took out life insurance on one of the partner’s lives. The dispute
centered around whether, upon dissolution of the partnership, its interest in the
policy remained a partnership asset or vested in the insured. This Court held it
remained a partnership asset, rejecting a claim from the insured’s heirs that the
policy proceeds belonged to the insured’s probate estate. See id. at 619. Contrary
to the Estates’ assertion, the heirs did not claim, and the Court did not adjudicate a
claim, that the proceeds belonged to the probate estate because the partnership
lacked an insurable interest in the partner’s life.
The remaining cases cited by the Estates are equally inapposite. Liss v. Liss,
937 So. 2d 760 (Fla. 4th DCA 2006), involved life insurance provided for in a
divorce agreement to secure payment of alimony and child support. The court
addressed whether the former wife had a sufficient insurable interest in the former
husband’s life to require him to sign papers the former wife needed to procure
additional insurance on his life. Importantly, the former husband never sought to
void the policy or recover its proceeds for lack of an insurable interest. Poss v.
Craven, 15 So. 2d 671 (Fla. 1943), also does not help the Estates. It involved a
mother’s claim to life insurance proceeds which her son had allegedly designated
for her but which his widow received instead. The case has no relevance to the
insurable interest and standing issues at hand.
20
The Estates’ effort to find a Florida case supporting their standing simply
comes up short. The trial court correctly ruled that, although Florida law renders
void insurance policies in which the beneficiary lacks an insurable interest, only
parties to that contract of insurance, such as the insurer, have the legal right to
complain. Neither the insureds nor representatives of the insureds’ probate estates
were parties to the COLI policies in question here; and therefore neither had
standing under applicable Florida law to bring causes of action to contest the
policies or recover their proceeds.
B. The Statutory Amendment Adding the New Cause of Action in Subsection 627.404(4) Became Effective July 1, 2008 and Does Not Apply Retroactively to Provide the Estates with Standing to Bring Such an Action Based on Policies Concluded in 1996 and 1997.
This Court recently restated the appropriate analysis in determining whether
a statutory amendment should be applied retroactively:
In the absence of clear legislative intent to the contrary, a law is presumed to operate prospectively. In determining whether a statute applies retroactively, we consider two factors: (1) whether the statute itself expresses an intent that it apply retroactively; and, if so, (2) whether retroactive application is constitutional.
Old Port Cove Holdings, Inc. v. Old Port Cove Condo. Ass’n One, Inc., 986 So. 2d
1279, 1284 (Fla. 2008) (citations omitted). Here, the presumption that section
627.404(4) applies prospectively controls based on the absence of clear legislative
intent that it apply retroactively. Retroactive application would also be
unconstitutional, as it would impair Wal-Mart’s vested rights.
21
1. Section 627.404(4) is Presumed to Apply Prospectively.
The trial court and the Eleventh Circuit both properly recognized the black-
letter law that statutory amendments are presumed to apply prospectively:
Historically, courts have indulged in the presumption that the Legislature intended a statute to have prospective effect only. The bias against retroactive legislation is deeply rooted in the Anglo-American law. Coke established the maxim, “Nova constitutio furturis forman imponere debet non praeteritas”. (A new state of law ought to affect the future, not the past). Blackstone wrote that it was a matter of justice that statutes should operate in futuro.
Trs. of Tufts Coll. v. Triple R. Ranch, Inc., 275 So. 2d 521, 524 (Fla. 1973).
There are meaningful policy reasons why “[r]etroactive application of the
law is generally disfavored.” Bates v. State, 750 So. 2d 6, 10 (Fla. 1999). The
“presumption against retroactivity is . . . founded on notions of fairness and
separation of powers concerns,” Metro. Dade County v. Chase Fed. Housing
Corp., 737 So. 2d 494, 499 n.8 (Fla. 1999), and “will generally coincide with
legislative and public expectations,” Arrow Air, Inc. v. Walsh, 645 So. 2d 422, 425
(Fla. 1994) (quoting Landgraf v. USI Film Prods., 511 U.S. 244, 272 (1994)). As
one commentator observed:
Retrospective laws are, as a rule, of questionable policy, and contrary to the general principle that legislation by which the conduct of mankind is to be regulated ought to deal with future acts, and ought not to change the character of past transactions carried on upon the faith of the then existing law.
Bates, 750 So. 2d at 10 (quoting Herbert Broom, Legal Maxims 24 (8th ed. 1911)).
22
The presumptive rule against retroactive application of statutes “applies with
peculiar force,” Trs. of Tufts Coll., 275 So. 2d at 525 (quoting In Re Seven Barrels
of Wine, 83 So. 627, 631 (Fla. 1920)), when the statute “affects substantive rights,
liabilities, or duties,” Arrow Air, 645 So. 2d at 425. “Thus, if a statute attaches
new legal consequences to events completed before its enactment, the courts will
not apply the statute to pending cases, absent clear legislative intent favoring
retroactive application.” Chase Fed. Housing Corp., 737 So. 2d at 499. This rule
applies even where a statute can be called “remedial” because, “if a statute
accomplishes a remedial purpose by creating new substantive rights or imposing
new legal burdens, the presumption against retroactivity would still apply.” Id. at
500 n.9.
Here, the presumption against retroactive application of section 627.404(4)
applies because section 627.404(4) creates a “new substantive right” for insureds
or their representatives to recover benefits received from policies in which the
beneficiary lacked an insurable interest. Id. Section 627.404(4) also imposes a
“new legal burden” on beneficiaries lacking an insurable interest, who are now
subject to claims by insureds or their representatives. Id. “The establishment or
elimination of such a claim is clearly a substantive, rather than procedural, decision
of the legislature because such a decision does, in fact, grant or eliminate a right or
entitlement.” Alamo Rent-A-Car, Inc. v. Mancusi, 632 So. 2d 1352, 1358 (Fla.
23
1994) (holding statutory amendment limiting punitive damages to three times
compensatory damages for misconduct in a commercial transaction was a
substantive change and thus not retroactive).
This case is not like City of Lakeland v. Catinella, 129 So. 2d 133 (Fla.
1961), which is cited by the Estates for the proposition that “[t]here is no
presumption against retroactive application of remedial legislation.” (IB at 9)
Catinella involved a procedural statutory amendment that merely provided for
which entity had jurisdiction to decide a claim. Hence, this Court held it could be
retroactively applied. See Catinella, 129 So. 2d at 136.
This case is, instead, just like this Court’s prior decision in Arrow Air, which
addressed a statute creating a private-sector whistleblower cause of action. As
here, such a cause of action did not previously exist in Florida common or statutory
law and thus constituted a substantive amendment, even though it could be said to
further a remedial purpose. This Court explained that “we have never classified a
statute that accomplishes a remedial purpose by creating substantive new rights or
imposing new legal burdens as the type of ‘remedial’ legislation that should be
presumptively applied in pending cases.” Arrow Air, 645 So. 2d at 424 (citing L.
Ross, Inc. v. R.W. Roberts Constr. Co., 481 So. 2d 484 (Fla. 1986) (statute creating
right to attorney’s fees could not be applied retroactively)); see also Guyana Tel. &
Tel. Co. v. Melbourne Int’l Commc’ns, Ltd., 329 F.3d 1241, 1247 (11th Cir. 2003)
24
(holding amendment expanding those with standing to make a FDUTPA claim
from only “consumers” to anyone was not retroactive because the amendment was
substantive, providing a right to sue where none existed before, and there was no
legislative intent that it be retroactively applied).
In Landgraf, a case upon which this Court relied heavily in Arrow Air, the
U.S. Supreme Court addressed whether new provisions in the Civil Rights Act of
1991 applied retroactively. Although the provisions were designed to serve a
remedial purpose of expanding protections to victims of discrimination, they
attached new consequences to events completed before the Act’s enactment and
thus could not be applied retroactively absent clear evidence of legislative intent to
apply it retroactively. See Landgraf, 511 U.S. at 283.
This Court’s opinion in Hassen v. State Farm Mutual Automobile Insurance
Co., 674 So. 2d 106 (Fla. 1996), which concerned amendments to Florida’s
uninsured motorist statute, is also instructive. Prior to the amendment, an insurer
had no obligation to pay its insured the amount of any settlement offer it refused to
approve in order to preserve its subrogation rights. The amendment required such
payment to preserve the insurer’s right to subrogation. This Court held that the
amendment constituted a substantive change to the law governing an insurer’s right
to subrogation. See id. at 109 (ultimately holding the statute did not apply
retroactively because there was no clear expression of legislative intent sufficient
25
to overcome the presumption against retroactive application of substantive
amendments).
In a remark particularly pertinent to the insurance issues in this case, the
Court stated that “it is generally accepted that the statute in effect at the time an
insurance contract is executed governs substantive issues arising in connection
with that contract.” Id. at 108. Here, the statute in effect at the time Wal-Mart
executed and received benefits from the subject COLI policies, and thus governs
those policies, was the statute of George III. Because it did not provide the Estates
with standing to recover those COLI policy benefits, the Estates simply have no
cause of action.
2. The Legislature Did Not Clearly Express Its Intent that Section 627.404(4) Apply Retroactively, So the Default Rule of Prospective Application Controls.
The presumption against retroactive application of section 627.404(4) is
controlling because the Legislature did not express its intent – much less, express
its intent “in language to[o] clear and explicit to admit of reasonable doubt” – that
section 627.404(4) be applied retroactively. Trs. of Tufts Coll., 275 So. 2d at 524.
“[A]ny basis for retroactive application must be unequivocal and leave no doubt as
to the legislative intent.” Bates, 750 So. 2d at 10. This Court has agreed with the
U.S. Supreme Court that:
Requiring clear intent assures that [the legislature] itself has affirmatively considered the potential unfairness of retroactive
26
application and determined that it is an acceptable price to pay for the countervailing benefits. Such a requirement allocates to [the legislature] responsibility for fundamental policy judgments concerning the proper temporal reach of statutes, and has the additional virtue of giving legislators a predictable background rule against which to legislate.
Arrow Air, 645 So. 2d at 425 (quoting Landgraf, 511 U.S. at 272-73).
“In order to determine legislative intent as to retroactivity, both the terms of
the statute and the purpose of the enactment must be considered.” Chase Fed.
Housing Corp., 737 So. 2d at 500. Analyzing the terms and the purpose of section
627.404(4) fails to reveal any unequivocal proof that the Legislature intended the
statute to apply retroactively.
(a) The Terms of Section 627.404(4) Do Not Demonstrate a Clear Intent to Apply It Retroactively.
The Legislature could have provided an express provision in the enabling
legislation for the amendments to section 627.404 that they apply retroactively.
The Legislature has done so before. See, e.g., Ch. 2006-122, § 7, Laws of Fla.
(“The amendments made by this act to s. 29.008(4), Florida Statutes, apply
retroactively to July 1, 2004.”); Ch. 2005-187, § 11, Laws of Fla. (“Sections 1
through 10 of this act shall take effect [June 10, 2005] and shall apply retroactively
to October 1, 2001.”); Ch. 2003-154, § 21, Laws of Fla. (“The amendments to
section 95.031, Florida Statutes, are remedial in nature and shall have retrospective
27
effect.”). But, here, the Legislature did not include express language as to
retroactivity.
Instead, the Legislature provided that the statutory amendments to section
627.404 “shall take effect July 1, 2008.” Ch. 2008-36, § 3, Laws of Fla. The trial
court correctly recognized that simply including an effective date, without more, is
evidence that the Legislature did not intend the statute to apply retroactively. [DE
51 at 8-9 (citing State v. Zuckerman-Vernon Corp., 354 So. 2d 353, 358 (Fla.
1977)] See also Melendez v. Dreis & Krump Mfg. Co., 515 So. 2d 735, 736 (Fla.
1987) (holding amendment eliminating the products liability statute of repose was
not retroactive because the Legislature included only an effective date for the
amendment and there was thus no clear legislative intent that it apply
retroactively).
An example of a clear manifestation of legislative intent as to retroactivity is
found in this Court’s decision in Chase Federal Housing Corp. In that case, the
newly-enacted statutes provided that their immunity provisions applied “regardless
of when the drycleaning contamination was discovered” and applied to clean-ups
“commenced before or on or after” the statute’s effective date. Chase Federal
Housing Corp., 737 So. 2d at 501-02. The amendments to section 627.404 do not
include any language remotely similar to these clear expressions of retroactive
intent.
28
The only evidence the Estates point to as purported evidence of Legislative
intent as to retroactivity is the statement in the enabling legislation that “[t]he
amendments to s. 627.404, Florida Statutes, made by this act are intended to clarify
existing law.” Ch. 2008-36, § 2, Laws of Fla. But a statement that a statute is
intended to “clarify existing law” is not an unequivocal expression of legislative
intent that leaves no doubt as to retroactive application.
In Promontory Enterprises, Inc. v. Southern Engineering & Contracting,
Inc., 864 So. 2d 479 (Fla. 5th DCA 2004), the Legislature expressed a clear intent
to apply the statute at issue retroactively. The Legislature did provide in the
enabling legislation that the statute at issue was intended to “clarify existing law.”
Id. at 484 (quoting Ch. 2003-257, § 1, Laws of Fla.). But the Legislature then went
further and made its intent unequivocal by expressly stating that the amendments
“shall apply retroactively to all actions.” Id. If a statement that a statute is
intended to “clarify existing law” were a clear expression of intent to apply the
statute retroactively, there would have been no need for the Legislature to add that
express statement as to retroactivity. See E.A.R. v. State, 4 So. 3d 614, 633 n.32
(Fla. 2009) (applying the basic rule of statutory construction that the Legislature
does not include useless language or provisions). By not including such an express
statement as to retroactivity in the enabling legislation for the amendments to
29
section 627.404 at issue here, the Legislature certainly expressed no clear intention
to apply those amendments retroactively.
This Court has never held a mere statement by the Legislature that a statute
is meant to “clarify existing law” to be an unequivocal expression of the intent to
confer retroactivity. Instead, arguably ambiguous expressions of intent have
repeatedly been held insufficient to overcome the presumption against
retroactivity. See, e.g., Old Port Cove Holdings, 986 So. 2d at 1284-85 (holding
statute that abrogated the common law rule against perpetuities did not reflect, or
even imply, an intent to apply retroactively and thus applied prospectively only);
Bates, 750 So. 2d at 10 (holding statute did not apply retroactively due to absence
of “unequivocal language that the Legislature intended this amendment to apply
retroactively”); Basel v. McFarland & Sons, Inc., 815 So. 2d 687, 693 (Fla. 5th
DCA 2002) (holding arguable expression of Legislative intent to retroactively
apply amendment to joint and several liability statute was insufficient; “what is
necessary in this regard is an explicit or clear intent by the legislature that the
amendment be applied retroactively”).
Most importantly, the enabling legislation’s statement about “clarif[ication
of] existing law” did not even apply to the specific amendment adding the cause of
action in subsection 627.404(4), as there was no existing Florida law to “clarify”
relating to such a cause of action. As discussed above, there were no conflicting
30
judicial decisions – or non-conflicting ones, for that matter – regarding whether
such a cause of action existed in Florida. Rather, as is reflected in the legislative
history (discussed below), the statement about “clarif[ication of] existing law”
referred to the other amendments to section 627.404 that clarified the existing –
and confusing – law in Florida as to when an insurable interest exists.
The Estates’ Initial Brief itself proves this point by contrasting one statement
of the common law definition of an insurable interest with the amended definition
of insurable interest in subsection 627.404(2)(b)(3), which clarified the common
law definition. (IB at 12-13) “Insurable interest was described at common law as
‘a cognizable interest, whether pecuniary or arising from natural affection, in the
life of the insured.’” (IB at 12 (citing Brockton, 556 So. 2d at 1139)) The
amendments to section 627.404 clarified that:
An individual has an insurable interest in the life, body, and health of another person if such individual has an expectation of a substantial pecuniary advantage through the continued life, health, and safety of that other person and consequent pecuniary loss by reason of the death, injury, or disability of that person.
§ 627.404(2)(b)(3), Fla. Stat. (eff. July 1, 2008). As of July 1, 2008, estate
planning and insurance professionals had a clear, clarified definition regarding
when an insurable interest exists under Florida law.
The legislative history of the amendments to section 627.404 clearly
demonstrates that the amendments were intended to clarify when an insurable
31
interest exists, not to “clarify” whether insureds or their representatives have a
cause of action to recover proceeds received by a beneficiary that lacked an
insurable interest. The sponsor of the enabling legislation in the Florida House of
Representatives explained the purpose of the amendments to the House’s
Committee on Insurance as follows:
Members, I am pleased to present today House Bill 375, and this relates to insurable interest. Members, currently the circumstances under which a person may insure the life or health of another is not currently addressed in statute. It has been set forth in various court decisions. Basically, what this bill does is codify when and how one can insure the -- the life of another person.
There is one amendment to this bill . . . Basically, the amendment describes certain very specific circumstances when someone can insure the life of another, for instance, dealing with a person who is acting in a fiduciary capacity as a trustee or a guardian or other fiduciary capacity; a charitable organization; a retirement fund; and a business. This is in addition to what are listed as specific instances in the original filed bill.
* * * *
Members, let me just reiterate that this is really codifying and providing additional protections, codifying what has been in existence for approximately 500 years throughout the world and the last couple hundred of years in Florida.
We are putting into statute so that there is certainty as to what an insurable interest is, rather than leaving it to a particular interpretation. Interpretation from court decision to court decision can be different from one court to another, from one district to another.
This provides certainty. This is what exists now. Without the bill, we have basically very little definition of what insurable interest is in
32
Florida. This brings us in line with that has been decided, substantially, in court cases, and how insurable interest is defined throughout the country.
[DE 49-23 at 2:7 – 3:6, 34:12 – 35:5 (emphasis added)] The sponsor of the
enabling legislation in the Florida Senate similarly explained the purpose of the
amendments to the Senate’s Banking and Insurance Committee as follows:
Senate Bill 648’s intent [is] to clarify a Florida law relating to an insurable interest required for purchasing life insurance policies and other insurance contracts as recommended by the Real Property, Probate and Trust Law Section of the Florida Bar.
Current law prohibits the issue of a life insurance policy to someone who does not have an insurable interest in the insured. But the statutes [and] the case law provide very little guidance in determining on whether an insurable interest exists.
The bill designs -- defines the various circumstances that constitute an insurable interest.
[DE 49-24 at 4:18 – 5:7 (emphasis added)]
The sponsors of the amendments to section 627.404 thus both made clear
that the amendments they sponsored were intended to clarify Florida law regarding
when an insurable exists. They never stated that their proposed amendments were
intended to “clarify” Florida law on whether insureds or their representatives had a
cause of action to recover proceeds from policies obtained without an insurable
interest. During the debate over the amendments before Senate Judiciary
Committee, a speaker remarked that:
33
Florida Statute 627.404 says that you cannot purchase an insurance product for a party that you do not have an insurable interest in. But the term “insurable interest” is left vague, undefined by the case law in Florida.
There has been a recent federal law that gives us a pause as to whether some of the estate planning products that people have purchased would be valid in Florida or would be recognized in Florida if we don’t codify what current case law is in Florida.
[DE 49-25 at 2:10-20 (emphasis added)] Again, no one expressed any “pause” as
to whether insureds or their representative have a cause of action, just “pause” as to
when an insurable interest exists.
The Estates cite the Staff Analysis for the Senate Judiciary Committee
concerning the statutory amendments. (IB at 8) But the Staff Analysis merely
provides further support for the proposition that the amendments were intended to
clarify Florida law as to when an insurable interest exits. The first paragraph of the
“Summary” to the Staff Analysis states that:
This bill is expressly intended to clarify current Florida law relating to insurable interests and the purchase of life insurance. Florida case law has interpreted Florida law as prohibiting the issuance of a life insurance policy to someone who does not have an insurable interest in the insured, but the statutory and case law provides very little guidance on determining whether an insurable interest exists. The bill contains the recommendations of the Real Property, Probate and Trust Law Section of the Florida Bar.
34
[DE 49-15 at 2]6 The Staff Analysis explains how “life insurers and estate
planners remain concerned given the lack of clarity under current Florida law,” as
exemplified by Chawla7
The Estates specifically cite the Staff Analysis’s discussion of the current
situation concerning COLI policies. (IB at 8) But that section of the Staff
Analysis merely discusses the existence of litigation (notably, not in Florida) over
whether companies taking out COLI policies have a sufficient insurable interest in
their employees. [DE 49-15 at 4] The Staff Analysis notes that “[m]any of these
so-called ‘janitor insurance’ cases have been decided against the corporations
because of an absence of an insurable interest in the lives of the insured
employees.” [DE 49-14 at 4-5] The Staff Analysis then explains that the “primary
concern” motivating the statutory amendments is to clarify the uncertainty as to
when an insurable interest exists, both for estate planning, “as well as the COLI
issues.” [DE 49-14 at 5] Importantly, the Staff Analysis never states that the
purpose of the amendments was to “clarify” whether an employee’s heirs have a
litigation in Virginia over whether an insurable interest
existed and thus whether life insurance benefits should be paid. [DE 49-14 at 4]
6 The Staff Analysis provided to the Senate Judiciary Committee addressing the proposed amendments [DE 49-15] contains nearly identical language to the Staff Analysis provided to the Senate Banking and Insurance Committee [DE 49-14]. 7 See Chawla v. Transamerica Occidental Life Ins. Co., 2005 WL 405405 (E.D. Va. Feb. 3, 2005), aff’d in part, vacated in part, 440 F.3d 639 (4th Cir. 2006).
35
cause of action to recover proceeds received from a COLI policy by a company
that lacked an insurable interest in the life of the employee.
As noted above, the amendments were instigated by the Real Property,
Probate, and Trust Law Section of the Florida Bar, which had prepared a White
Paper on Proposed Revisions to the Florida Statutes Section 627.404. [DE 49-21]
The purpose of the White Paper, prepared by the Bar Section’s Estate and Trust
Tax Planning Committee, was to clarify when an insurable interest exists and
thereby provide guidance in an uncertain area of Florida law. The White Paper
noted the consequences of an uncertain definition of insurable interest, pointing to
the Chawla litigation in Virginia and the COLI litigation in New Hampshire,
Texas, and Oklahoma. [DE 49-21 at 9-10] With respect to COLI litigation, the
Florida Bar Section’s Estate and Trust Tax Planning Committee explained that:
The starting point for many COLI matters is an inquiry by a court or by insurance regulation authorities is [sic] whether there is an insurable interest; this, in turn, requires reference to the insurable interest statute of the state law whose governs. The Committee is concerned that Florida’s current insurable interest statute is in need of substantial revision if it is to provide meaningful guidance for planners, insurance professionals and regulatory bodies called upon to consider ongoing COLI issues.
[DE 49-21 at 10-11 (emphasis added)]
The Florida Bar Committee’s White Paper then discussed the specific
amendments proposed to section 627.404. [DE 49-21 at 11-15] Notably, when
addressing the proposed amendments defining when an insurable interest exists,
36
the Committee states that one proposed subsection “will make insurable interest
law clear in the context of partnership, corporate and limited liability company
redemption and cross-purchase agreements.” [DE 49-21 at 12 (emphasis added)]
The Committee says that another proposed insurable interest definition subsection
is “the Chawla fix, and clarifies that, in Florida, a trust, and its trustee, have an
insurable interest in the life of the trust grantor.” [DE 49-21 at 13 (emphasis
added)] Importantly, the Committee uses no language about clarifying Florida law
when addressing the new cause of action proposed to be added as subsection
627.404(4). [DE 49-21 at 14] That is because the purpose of section 627.404(4)
was not to “clarify existing law” as to whether Florida recognized that cause of
action. Instead, as the sponsor of the statutory amendments explained, the purpose
of section 627.404(4) was “providing additional protections.” [DE 49-23 at 34
(emphasis added)]
In short, the Estates’ argument – that the “clarify existing law” phrasing in
the enabling legislation unequivocally demonstrates the Legislature’s intent that
section 627.404(4) apply retroactively – is wrong. Far from being the required
clear expression of retroactive intent, that language does not even apply to
subsection 627.404(4).
Reviewing the terms of section 627.404(4) actually shows that the
Legislature did not intend for it to apply retroactively. It provides that an insured
37
or his or her representative “may maintain an action” where a beneficiary
“receives” benefits from a policy in which the beneficiary lacked insurable interest
at the time the policy was made. § 627.404(4), Fla. Stat. (eff. July 1, 2008)
(emphasis added). This Court must assume that the Legislature’s use of “receives”
and its omission of the past tense “received” was intentional. See Trs. of Tufts
Coll., 275 So. 2d at 526 (looking to verb tense used in statute as evidence of
Legislature’s retroactive intent). Accordingly, the Legislature did not intend for
section 627.404(4) to retroactively provide a cause of action for the Estates to
recover COLI policy benefits Wal-Mart received over a decade ago.
(b) The Purpose of the Amendment Adding Section 627.404(4) Does Not Demonstrate an Unequivocal Intent to Apply that Provision Retroactively.
As previously explained, the Legislative history reflects that the purpose of
the amendment adding the new cause of action in section 627.404(4) was to
“provid[e] additional protections” against using life insurance policies as wagering
contracts beyond those protections already provided in Florida under the statute of
George III (i.e., declaring the policies null and void). [DE 49-23 at 34]
Retroactively applying that new cause of action to cause disgorgement of benefits
received from such policies over a decade ago would not further the amendment’s
purpose to discourage companies from taking out these policies now or continuing
to hold policies already in place. In any event, “the mere fact that ‘retroactive
38
application of a new statute would vindicate its purpose more fully . . . is not
sufficient to rebut the presumption against retroactivity.’” Chase Fed. Housing
Corp., 737 So. 2d at 500 (quoting Landgraf, 511 U.S. at 285-86).
In the end, there is no clear, unequivocal expression from which this Court
can find beyond a reasonable doubt that the Legislature intended section
627.404(4) to apply retroactively. The default rule of prospective application
therefore controls. The July 1, 2008 amendment adding section 627.404(4) does
not retroactively provide the Estates with standing to assert claims to money Wal-
Mart received over a decade ago.
3. Retroactively Applying Section 627.404(4) Would be Unconstitutional.
This Court does not even need to reach the constitutional issue in this case
because the legislative intent analysis above is dispositive. But if the Court does
get this far, it should easily conclude that retroactive application of section
627.404(4) would create a new obligation or penalty and thereby unconstitutionally
infringe on Wal-Mart’s vested rights.
“Generally, due process considerations prevent the State from retroactively
abolishing vested rights.” Chase Fed. Housing Corp., 737 So. 2d at 503.
Consequently, “[e]ven when the Legislature does expressly state that a statute is to
have retroactive application, this Court has refused to apply a statute retroactively
if the statute impairs vested rights, creates new obligations, or imposes new
39
penalties.” State Farm Mut. Auto. In. Co. v. LaForet, 658 So. 2d 55, 61 (Fla.
1995); see also Gupton v. Village Key & Saw Shop, Inc., 656 So. 2d 475, 477 (Fla.
1995) (“[A] substantive law that interferes with vested rights -- and thus creates or
imposes a new obligation or duty -- will not be applied retrospectively.”). That is
especially true where “vested rights are adversely affected or destroyed or when a
new obligation or duty is created or imposed, or an additional disability is
established, in connection with transactions or considerations previously had or
expiated.” McCord v. Smith, 43 So. 2d 704, 708-09 (Fla. 1949) (emphasis added).
As discussed above, section 627.404(4) provides for a new cause of action in
Florida, and thereby creates a new right in estates to recover COLI policy
proceeds. If applied retroactively, it would also create a new obligation for Wal-
Mart to disgorge COLI policy proceeds it has possessed in connection with
transactions completed more than a decade ago. Such retroactive application of
section 627.404(4) is plainly unconstitutional. See LaForet, 658 So. 2d at 61
(holding new subsection in insurance statute allowing additional damages for first-
party bad faith claim could not be applied retroactively, even though Legislature
stated amendment was intended to clarify existing statute, because it was a
substantive change that added new penalties for conduct predating the
amendment’s enactment); Hotelera Naco, Inc. v. Chinea, 708 So. 2d 961, 962 (Fla.
3d DCA 1998) (holding statutory amendment providing for additional damages
40
could not be retroactively applied, despite express statement that it apply to all
pending actions, because it was a substantive change in the law that affected
existing rights).
The Estates argue that section 627.404(4) constituted a mere remedial
change in the law, and did not impair any of Wal-Mart’s vested substantive rights,
as insurance policies in which the beneficiary lacks an insurable interest have
always been against Florida public policy. This argument misses the mark.
First, the Estates’ argument fails to recognize that retroactively applying the
statute to their claims would force Wal-Mart to disgorge money it has possessed
for over a decade pursuant to insurance contracts that were completed and fully
performed more than 10 years ago. Wal-Mart thus has a vested substantive right to
the money, as “[a] vested right has been defined as an ‘immediate, fixed right of
present or future enjoyment’ and also as ‘an immediate right of present enjoyment,
or a present fixed right of future enjoyment.’” City of Sanford v. McClelland, 163
So. 513, 514-15 (Fla. 1935) (quoting Pearsall v. Great N. Ry. Co., 161 U.S. 646,
673 (1896)).
If applied as the Estates suggest, section 627.404(4) is akin to an amendment
reopening a statute of limitations that has expired, which is patently improper. See
Wiley v. Roof, 641 So. 2d 66, 68-69 (Fla. 1994). It is also like a statute that adds
new conduct as an aggravating factor supporting the death penalty, which could
41
not be applied retroactively to events preceding the statutory amendment. See
Zack v. State, 753 So. 2d 9, 25 (Fla. 2000). The Estates’ approach could also be
analogized to creating long-arm jurisdiction over a claim that did not exist at the
time the conduct underlying the claim occurred, which this Court held improper.
See Gordon v. John Deere Co., 264 So. 2d 419, 420 (Fla. 1972).
Second, the Estates’ argument, at best, only tells half the story. Section
627.404(4) creates an entirely new substantive cause of action for the Estates to
sue Wal-Mart to recover the policy proceeds. Legislation that “creat[es] a new
cause of action” that at common law “has never been recognized within this state”
is one that “directly affects substantive rights and liabilities.” Arrow Air, 645 So.
2d at 424; see also Guyana Tel. & Tele. Co., 329 F.3d at 1247 (“Retroactive
application would affect substantive rights by creating rights where none existed
before.”).
In Basel, 815 So. 2d 687, the Fifth District Court of Appeal addressed
amendments to the joint and several liability statute, which specified when liability
was joint and several and provided for caps on joint and several liability depending
on percentages of parties’ fault. The court recognized that “the change in joint and
several liability affects a defendant’s existing legal obligation to pay economic
damages and a plaintiff’s right to recover such damages from a particular
defendant where joint tortfeasors are involved.” Id. at 694. “[T]he 1999
42
amendment alters the size of Basel’s enforceable judgment against certain of the
defendants.” Id. at 695. Accordingly, the court concluded that “the 1999
amendment must be applied prospectively.” Id. at 696.
No other state has retroactively applied its statutory cause of action to
provide insureds or their representatives with the right to recover proceeds
previously paid from policies in which the beneficiary lacked an insurable interest.
See, e.g., Cundiff v. Cain, 707 So. 2d 187, 189 (Miss. 1998) (holding trial court
improperly applied “a statute not in effect at the time the policy was taken out or
the benefits paid” to authorize action to recover benefits paid from a policy
obtained without an insurable interest); Smith v. Pinch, 45 N.W. 183, 184 (Mich.
1890) (holding that, under Michigan common law, an insured’s heirs could not
recover the proceeds of a policy in which the policy holder lacked an insurable
interest, and the fact that Michigan had subsequently created a statutory cause of
action did not change that result). The analysis above dictates that Florida’s new
section 627.404(4) should likewise not be applied retroactively.
43
For the foregoing reasons, this Court should answer the certified question
from the Eleventh Circuit by holding that the statutory amendment to section
627.404 adding the new cause of action in subsection (4) does not apply
retroactively but, instead, creates a new cause of action in Florida such that the
Estates lack standing to sue Wal-Mart for benefits received prior to the enactment
of that statutory amendment.
Respectfully submitted, SHOOK, HARDY & BACON LLP Counsel for Appellees Miami Center, Suite 2400 201 South Biscayne Boulevard Miami, Florida 33131 Tel: 305-358-5171 Fax: 305-358-5171 By:
CONCLUSION
/s/ Daniel B. Rogers EDWARD A. MOSS Florida Bar No. 057016 EILEEN TILGHMAN MOSS Florida Bar No. 570524 DANIEL B. ROGERS Florida Bar No. 195634
44
I HEREBY CERTIFY that a true and correct copy of the foregoing has been
served by U.S. Mail this 28th day of December, 2009 to:
CERTIFICATE OF SERVICE
Michael D. Myers Robert H. Espey, II MCCLANAHAN MEYERS ESPY, LLP 3355 West Alabama, Suite 210 Houston, Texas 77098 Tel: 713-223-2005 Fax: 713-223-3664 Counsel for Appellants
Major B. Harding John Beranek Jason B. Gonzalez Erik Matthew Figlio AUSLEY & MCMULLEN 227 South Calhoun Street P.O. Box 391 (zip 32302) Tallahassee, FL 32301 Tel: 850-224-9115 Fax: 850-222-7560 Counsel for Appellants
Craig P. Kalil Carlos F. Osorio ABALLI MILNE KALIL & ESCAGEDO, P.A. 2250 Sun Trust International Center One Southeast Third Avenue Miami, FL 33131 Tel: 305-373-6600 Fax: 305-373-7929 Counsel for Appellants
/s/ Daniel B. Rogers Daniel B. Rogers
45
Appellees certify that the size and style of type used in the Answer Brief is
Times New Roman 14-point font.
CERTIFICATE REGARDING FONT STYLE AND SIZE
Daniel B. Rogers /s/ Daniel B. Rogers
623251 v1