Caroline Reynolds v. USAA Life Insurance Company

USCA4 Appeal: 23-1770 Doc: 40 Filed: 05/31/2024 Pg: 1 of 7

UNPUBLISHED

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

No. 23-1770

CAROLINE B. REYNOLDS; ALISON W. REYNOLDS; PAIGE A. REYNOLDS, individually and as Administrator of the Estate of John Paul Reynolds,

Plaintiffs - Appellants,

v.

USAA LIFE INSURANCE COMPANY,

Defendant - Appellee.

Appeal from the United States District Court for the Eastern District of Virginia, at Richmond. Henry E. Hudson, Senior District Judge. (3:22-cv-00577-HFH)

Argued: May 7, 2024 Decided: May 31, 2024

Before NIEMEYER and THACKER, Circuit Judges, and MOTZ, Senior Circuit Judge.

Affirmed by unpublished per curiam opinion.

ARGUED: Churchill G. Bowles, BOWLES AFFILIATES, PC, Richmond, Virginia, for Appellants. Duncan Robert Becker, COZEN O’CONNOR P.C., Philadelphia, Pennsylvania, for Appellee. ON BRIEF: Paul McCourt Curley, SIX EAST LAW GROUP, Richmond, Virginia, for Appellants. Laura M. Zulick, Philadelphia, Pennsylvania, Chad E. Kurtz, COZEN O’CONNOR P.C., Washington, D.C., for Appellee.

USCA4 Appeal: 23-1770 Doc: 40 Filed: 05/31/2024 Pg: 2 of 7

Unpublished opinions are not binding precedent in this circuit. *3 USCA4 Appeal: 23-1770 Doc: 40 Filed: 05/31/2024 Pg: 3 of 7

PER CURIAM:

Paige, Caroline, and Alison Reynolds (collectively, “Appellants”) appeal the

district court’s order granting summary judgment to USAA Life Insurance Company

(“USAA”) on their breach of contract claim. Because the life insurance contract was

validly canceled at the time of the insured’s death and the grace period does not apply,

we affirm.

I.

Appellants’ breach of contract claim arises out of USAA’s life insurance policy

with John Paul Reynolds (“J.P.”). J.P. was married to Paige, and they had two daughters:

Caroline and Alison. On November 4, 2010, USAA issued a $1,000,000 twenty-year

term life insurance policy to J.P. J.P. initially listed Paige as the policy’s beneficiary.

J.P. opted to pay his policy premium monthly, and for USAA to automatically draft his

monthly premium from his bank account. Because the policy measured monthly

premium due dates from the effective date, November 4, 2010, J.P.’s premium was

automatically drafted on the 4th of each month. The policy also contained a 31-day grace

period provision, which would go into effect if J.P. failed to pay his monthly premium by

the 4th of the month. J.P. maintained the policy for nearly ten years. The only change

that J.P. made to the policy was in 2018, when he changed the beneficiary from Paige to

his daughters after he and Paige divorced. *4 USCA4 Appeal: 23-1770 Doc: 40 Filed: 05/31/2024 Pg: 4 of 7

On August 3, 2020, J.P. called USAA. The telephone conversation was recorded.

J.P. began by stating that he wanted “to cancel [his] Term Life Insurance.” J.A. 290. *

When the customer service representative, Velma Rodriguez, offered to explore less

expensive coverage options and transfer his call to an agent who could reduce his policy

coverage, J.P. said he wanted to “skip that” and “just cancel it.” J.A. 292. Rodriguez

clarified that J.P. wanted to “just go ahead and cancel[.]” J.A. 292. J.P. responded,

“Yeah . . . so I just don’t need to pay [my monthly premium].” J.A. 292. Then, the

following exchange occurred:

[Rodriguez]: Yeah, okay, so, we can go ahead and cancel the policy, [J.P.]. It looks like you are currently paid through— uh—August the 4th, which is tomorrow, so what we can do is we can cancel it effective tomorrow. That’ll stop the automatic payment, so we won’t be drafting that payment tomorrow.

[J.P.]: Perfect.

[Rodriguez]: Okay, looks like it was perfect timing whether you were going to reduce it or cancel it, it would have happened tomorrow[.] Alright, and so we’ll cancel it.

J.A. 292. Rodriguez then canceled the policy over the phone, effective August 4. USAA

sent J.P. a letter confirming that the policy had been canceled and that his premium

payments would no longer be drafted from his bank account. J.P. died two weeks later,

on August 17, 2020.

* Citations to the “J.A.” refer to the Joint Appendix filed by the parties in this appeal.

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After J.P.’s death, Appellants sought the policy benefits from USAA, but USAA

explained that because J.P. terminated the policy, no benefits were payable to them.

Appellants then filed a complaint with the Virginia Bureau of Insurance, who declined to

direct USAA to pay the policy’s proceeds because the policy was canceled at the time of

J.P.’s death. Finally, Appellants sued USAA in Virginia state court, alleging breach of

contract, negligence, constructive fraud and fraudulent inducement, and unjust

enrichment. USAA removed the case to federal court on diversity grounds. Then, the

district court granted USAA’s partial motion to dismiss, dismissing Appellants’

negligence, constructive fraud and fraudulent inducement, and unjust enrichment claims,

leaving only Appellants’ breach of contract claim.

Following discovery, the parties filed cross motions for summary judgment.

Appellants argued that J.P.’s oral cancellation during his phone call with USAA was

invalid because it was not supported by adequate consideration and because by the time

J.P. called to cancel, the policy had entered its grace period. USAA countered that J.P.’s

cancellation was a valid contract, supported by adequate consideration, and J.P.’s policy

had not entered a grace period when J.P. called. The district court granted summary

judgment to USAA for the reasons articulated by USAA.

This timely appeal followed.

II.

We review a district court’s grant of summary judgment de novo. Bhattacharya v.

Murray, 93 F.4th 675, 686 (4th Cir. 2024). *6 USCA4 Appeal: 23-1770 Doc: 40 Filed: 05/31/2024 Pg: 6 of 7

III.

On appeal, Appellants reiterate the arguments they made before the district court:

that J.P.’s cancellation was not supported by adequate consideration and that J.P.’s policy

was in a grace period when he called. And therefore, in Appellants’ view, J.P.’s policy

was still in effect when he died, entitling Appellants to the policy’s proceeds.

At oral argument, counsel for Appellants highlighted that “precision is crucial.”

Oral Argument at 32:24–26, Caroline Reynolds v. USAA Life Ins. Co., No. 23-1770 (4th

Cir. May 7, 2024), https://www.ca4.uscourts.gov/oral-argument/listen-to-oral-arguments.

We agree. J.P. was precise and quite clear when he called USAA. J.P. made clear that he

wanted to cancel his life insurance policy. Indeed, in the span of the recorded telephone

conversation, J.P. indicated no less than four times that he wanted to cancel the policy.

J.A. 290 (“I would like to cancel my Term Life Insurance.”); id. at 292 (“[L]et’s skip

[modifying the policy]—let’s just cancel it.”); id. (responding “Yeah” to “You wanna just

go ahead and cancel?”); id. (responding “[p]erfect” to Rodriguez explaining that USAA

would cancel the policy effective August 4th, which would “stop the automatic

payment”). And USAA agreed to cancel the policy. By canceling his policy, J.P.

received the benefit of no longer paying his monthly premium and USAA received the

benefit of no longer insuring J.P. This is sufficient consideration. Sfreddo v. Sfreddo,

720 S.E.2d 145, 153 (Va. Ct. App. 2012) (“Virginia has long followed the ‘peppercorn’

theory of consideration under which even a peppercorn suffices as consideration.”); R.K.

Chevrolet, Inc. v. Hayden, 480 S.E.2d 477, 480 (Va. 1997) (explaining that even a “slight

advantage” or a “trifling inconvenience” is sufficient consideration). *7 USCA4 Appeal: 23-1770 Doc: 40 Filed: 05/31/2024 Pg: 7 of 7

Like the district court, we reject Appellants’ argument that the grace period had

already begun when J.P. called USAA on August 3 to cancel the policy. J.P.’s policy

would have entered a grace period only if J.P. missed his August 4th payment. That did

not happen. Instead, J.P. called and canceled the policy the day before payment was due.

J.A. 292 (explaining that USAA would “cancel [the policy] effective tomorrow,” August

4, which would “stop the automatic payment”).

Thus, J.P.’s oral cancellation was a valid contract, supported by sufficient

consideration, and the policy’s grace period does not apply. The district court properly

concluded that Appellants’ breach of contract claim failed as a matter of law.

IV.

Therefore, the district court’s order granting summary judgment to USAA is

AFFIRMED.