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GONSALVES v. SUNSET LIFE INS. CO. OF AMERICA

April 5, 2001

LINDA M. GONSALVES, PLAINTIFF,
v.
SUNSET LIFE INSURANCE COMPANY OF AMERICA, DEFENDANT.



The opinion of the court was delivered by: Orrick, District Judge.

MEMORANDUM DECISION AND ORDER

In this diversity insurance action brought by plaintiff Linda Gonsalves ("Gonsalves") against defendant Sunset Life Insurance Company of America ("Sunset"), the parties have filed cross-motions for summary judgment. For the reasons set forth hereinafter, Sunset's motion is granted and Gonsalves' motion is fit, in action alleging that insurer failed to denied.

I.

A.

On or about June 8, 1983, Sunset issued life insurance policy No. U0010774 ("the policy") to Michael J. Gygax ("Gygax"). (Hoffman Decl. Ex. 1 at D 00002.) The policy provided for death benefits in the amount of $500,000. (Id. at D 00008.)

Gygax and Gonsalves were married from 1987 to 1993. When Gygax and Gonsalves divorced, they resolved issues regarding their assets and debts by entering into a Marital Settlement Agreement and Property Settlement Agreement (jointly referred to as the "Settlement Agreement") in October 1992. The Settlement Agreement provides that:

[Gygax] shall grant to [Gonsalves] the following security interest to secure his obligations to pay the Commercial Bank of Fremont credit line, the lease with Shapell Industries, the Fremont Bank car loan, the Dakota plane loan and the Manjo loan:
c. [Gygax] shall irrevocably designate [Gonsalves] as his beneficiary of his life insurance policies in an amount equivalent to the outstanding balances of the Commercial Bank of Fremont credit line, the lease with Shapell Industries, the Fremont Bank car loan, the Dakota plane loan, the Manjo loan and the Ralph and Joan Jepson loan on the LaSalle real property. The insurance companies will be required to provide [Gonsalves] with notice of proposed cancellation of any policy. [Gygax] shall maintain comprehensive insurance coverage on all said assets with [Gonsalves] named as a beneficiary thereon.
d. [Gonsalves] shall promptly execute a reconveyance and/or release as appropriate for the security interest setforth [sic] herein when [Gonsalves] no longer has any individual liability on the Commercial Bank of Fremont loan, the lease with Shapell Industries, the Fremont Bank car loan, the Dakota plane loan, the Manjo loan and the Ralph and Joan Jepson loan on the LaSalle real property.

(Hoffman Decl. Ex. 10 at 000108.) The Court will refer to the six debts itemized referred to above as the "Secured Debts."

On or about July 16, 1993, Gygax and Sunset entered into a Change of Beneficiary Agreement that provided, under the heading "Special Requests":

Linda M. Gonsalves is the irrevocable beneficiary of Policy # U0010774, pursuant to Marital Settlement Agreement dated October 2, 1992. The beneficiary designation of this policy cannot be changed without written consent of Linda M. Gonsalves. Linda M. Gonsalves shall have the right to all information concerning this policy and Sunset Life shall provide any notice of proposed cancellation of this policy. Linda M. Gonsalves shall release this irrevocable designation upon satisfaction of the conditions set forth in the Property Settlement Agreement dated October 5, 1992.

(Gonsalves Decl. Ex. A, Change of Beneficiary Agreement.)

Gygax failed to pay the premiums required to keep the policy in force, and Sunset terminated the policy due to nonpayment of premiums on March 5, 1996. Sunset did not notify Gonsalves that ...


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