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Drew v. Pacific Life Insurance Co.

Court of Appeals of Utah

July 18, 2019

LaMar Drew and LaRene Drew, Appellants,
Pacific Life Insurance Company, Appellee.

          Fourth District Court, Provo Department The Honorable Darold J. McDade No. 120402017

          Steven G. Loosle, Paula W. Faerber, and Platte S. Nielson, Attorneys for Appellants

          Scott M. Petersen and David N. Kelley, Attorneys for Appellee

          Judge Gregory K. Orme authored this Opinion, in which Judge Michele M. Christiansen Forster concurred. Judge Jill M. Pohlman dissented, with opinion.

          ORME, JUDGE

         ¶1 LaMar and LaRene Drew appeal the district court's grant of summary judgment in favor of Pacific Life Insurance Company (Pacific) and the court's denial of the Drews' cross-motion for partial summary judgment on the issue of vicarious liability. The Drews contend that the district court erroneously determined that Pacific was not vicariously liable for the unlawful misrepresentations made by one of its appointed insurance producers, R. Scott National, Inc. (RSN). We reverse the summary judgment in favor of Pacific, and we remand for the entry of partial summary judgment in favor of the Drews.


         ¶2 Before turning to the merits, we pause briefly to consider our jurisdiction. The order appealed from was interlocutory in nature but was certified as final in contemplation of rule 54(b) of the Utah Rules of Civil Procedure. The certification does not meet the requirements laid out in a recent line of opinions from the Utah Supreme Court. See EnerVest, Ltd. v. Utah State Eng'r, 2019 UT 2, ¶¶ 16-20, 435 P.3d 209 (amended opinion); Copper Hills Custom Homes, LLC v. Countrywide Bank, FSB, 2018 UT 56, ¶¶ 15-17, 23-28, 428 P.3d 1133 (amended opinion); First Nat'l Bank v. Palmer, 2018 UT 43, ¶¶ 13-14, 427 P.3d 1169. Ordinarily in such a case, we dismiss for lack of jurisdiction. See, e.g., Hayes v. Intermountain GeoEnvironmental Services Inc., 2018 UT App 223, ¶ 1, 437 P.3d 650. But these cases all recognize that we "have the discretion to treat an improper rule 54(b) certification as a request for leave to take an interlocutory appeal under rule 5(a) of the Utah Rules of Appellate Procedure." Id. ¶ 5 n.2. Accord EnerVest, 2019 UT 2, ¶ 20; Copper Hills, 2018 UT 56, ¶ 29 n.15; Palmer, 2018 UT 43, ¶ 14 n.4. This discretion to treat an appeal taken from a non-final order as though it were an authorized interlocutory appeal is exercised "judiciously and sparingly." Copper Hills, 2018 UT 56, ¶ 29 n.15. But it is exercised from time to time. See, e.g., Hawkins ex rel. Hawkins v. Peart, 2001 UT 94, ¶ 3 n.2, 37 P.3d 1062 (flawed rule 54(b) certification); Chaparro v. Torero, 2018 UT App 181, ¶¶ 28-31, 436 P.3d 339 (non-final order due to an outstanding attorney fee issue). Cf. EnerVest, 2019 UT 2, ¶ 20 (suggesting that discretion to treat a flawed rule 54(b) certification as an authorized interlocutory appeal might have been exercised if appellant had standing on appeal).

         ¶3 We believe that the considerations that have prompted Utah's appellate courts in prior cases to exercise their discretion to treat a flawed rule 54(b) certification as, instead, a granted petition for interlocutory appeal, or to decline to exercise that discretion, are of only limited relevance in a subsequent case. Our resistance to a formulaic approach is inherent in the very concept of discretion. See Warren v. United States Parole Comm'n, 659 F.2d 183, 196 (D.C. Cir. 1981) ("[T]he essence of discretion is the absence of fixed rules."). See also United States v. Richards, 659 F.3d 527, 551 (6th Cir. 2011) ("It is the essence of discretion that it may properly be exercised in different ways and likewise appear differently to different eyes.") (quotation simplified); Walen v. United States, 246 F.Supp.3d 449, 462 (D.D.C. 2017) ("Flexibility in the face of competing priorities . . . is the essence of discretion.") (quotation simplified).

         ¶4 We determine that this case is appropriate for the exercise of our discretion to treat the flawed rule 54(b) certification as an interlocutory appeal pursuant to rule 5(a) of our appellate rules. Having done so, we now turn to a resolution of the appeal on its merits.


         ¶5 In 2009, Pacific appointed RSN as its insurance producer and authorized it to "solicit and procure applications for [Pacific's] life insurance and annuity products." The agreement, however, prohibited RSN from soliciting insurance products that did not meet the "customer's insurance needs and financial objectives." At the time the parties executed the agreement, Pacific had appointed other companies and individuals to sell its insurance products, [2] and RSN sold annuities and insurance policies on behalf of numerous companies and individuals.

         ¶6 LaMar and LaRene Drew are retired senior citizens who, after seeing an advertisement, sought out one of RSN's employees as a financial advisor. At the outset, the employee assisted the Drews in the acquisition and sale of multiple annuities. Later on, and with the assistance of another RSN employee, the initial employee informed the Drews that, even though they were approaching eighty, they could purchase a life insurance policy with a high death benefit and resell it on the secondary market for a large profit.[3] Based on this information, the Drews purchased two $1.5 million life insurance policies, the first from PHL Variable Insurance Company (PHL) and the second from Pacific.[4] To fund the premiums on the policies, the RSN employees advised the Drews to obtain a reverse mortgage on their home. The Drews followed this advice.

         ¶7 RSN was unable to sell the policies on the secondary market. After the Drews paid more than $300, 000 in premiums and lost much of the equity in their home, the policies lapsed when the Drews could no longer afford the premiums. In total, they lost three-fourths of their life savings, and interest on their reverse mortgage is accruing at a rate of approximately $1, 000 per month.

         ¶8 The Drews sued Pacific, claiming that it was vicariously liable for the tortious conduct of RSN's employees, whom the Drews contended were acting as Pacific's agents. Pacific and the Drews submitted cross-motions for summary judgment, and the district court granted summary judgment to Pacific. Although the court did not address whether an agency relationship existed between Pacific and RSN, it concluded that, even assuming such a ...

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