Claire J. Kay, an individual and CLAYMORE CONSTRUCTION CO., a Michigan Corporation v. United of Omaha Life Insurance Company, a Nebraska Corporation

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 14a0262n.06
Nos. 12-2092/2140
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
CLAIRE J. KAY, an individual and CLAYMORE
CONSTRUCTION CO., a Michigan Corporation
Plaintiffs-Appellees/Cross-Appellants,
v.
UNITED OF OMAHA LIFE INSURANCE
COMPANY, a Nebraska Corporation,
Defendant-Appellant/Cross-Appellee.
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ON APPEAL FROM THE
UNITED STATES DISTRICT
COURT FOR THE EASTERN
DISTRICT OF MICHIGAN
Before: COOK, GRIFFIN, and KETHLEDGE, Circuit Judges.
KETHLEDGE, Circuit Judge. Sherman Kay died before he paid his last life insurance
premium. His insurer, United of Omaha, denied death benefits to his wife, Claire Kay, and the
company he owned, Claymore Construction. Claire and Claymore sued United for breach of
contract and won at trial. United now challenges numerous decisions of the district court. We
vacate and remand for a new trial.
I.
In 2001, Sherman Kay bought a $2 million life-insurance policy from United. At the
time of his death, the plaintiffs—Claire Kay and Claymore Construction (collectively, “Kay”)—
were the policy’s joint owners and beneficiaries.
The policy’s premium was due by the 12th day of each month. If Kay failed to pay by
that date, the policy remained in force during a 31-day grace period. If Kay did not pay by the

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end of the grace period, the policy would terminate. In that event, the policy’s terms required
Kay to do three things to reinstate it: first, submit a written application signed by the owner and
the insured; second, submit evidence of insurability satisfactory to United; and third, pay any
past-due premiums with interest.
In practice, however, United also allowed Kay to reinstate the policy another way—
through a so-called “special offer” that was not part of the policy’s terms. Specifically, once the
grace period expired, United would send Kay a notice in which it offered to reinstate the policy if
Kay simply paid the outstanding premium by the date stated in the notice, so long as the payment
was made “during the lifetime of all persons insured under the policy.” Kay—who routinely
paid premiums late—reinstated the policy in this manner at least seven times.
United sent all premium notices to Claymore’s office, but Claymore ceased operations by
July 2008. Consequently, Claire directed United to send future premium notices to her home.
United complied. Claire thereafter signed the checks for the next four premium payments.
Sherman Kay’s lawyer signed the check for the fifth premium, which was for November 2008.
United did not receive the November 2008 premium until December 18th—36 days past
due. The following day, United sent Kay the December premium notice. United then sent a
second notice on December 26th. The policy’s grace period for the December premium expired
on January 12th. The next day, United mailed a third notice, which included the usual “special
offer” for reinstatement.
Eleven days later, on January 23rd, Sherman Kay died. Kay had not paid the December
premium by then. Six days later, Claire mailed checks for the December and January premiums,
but United returned the payment. In February, Claire filed a claim for death benefits under the
policy; United denied the claim by written notice in March.

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Kay thereafter sued United for breach of contract, negligence, and declaratory judgment.
After discovery, United moved for summary judgment, arguing that Sherman Kay’s policy
terminated by its terms. The district court denied the motion, holding that, under Michigan law,
a jury could find that United’s previous acceptance of Kay’s late payments equitably estopped
United from terminating the policy. Kay also moved for summary judgment, which the court
denied.
Before trial, United moved in limine to bar Kay from admitting as evidence certain
excerpts from the deposition of Dena Austin, United’s customer service representative. The
district court denied United’s motion. During the trial, United again objected and further noted
that Kay’s counsel had given the transcript excerpts (which United now argues were unfair and
misleading) to United’s counsel only minutes before. In response, the court sensibly noted its
preference for live testimony, but for some reason reversed course and allowed Kay to read
deposition excerpts to the jury. Once Kay’s counsel was done, trial adjourned for five days.
Almost a week later, when United was finally able to put Austin on the stand, Kay’s
counsel repeatedly insinuated during cross-examination that United had destroyed documents
that detailed the so-called special-offer policy that was in effect at the time of Sherman’s death.
The court sustained United’s second objection, but denied United’s request for a curative
instruction to the jury.
At the close of Kay’s case-in-chief, United began to argue orally for judgment as a matter
of law, but the court cut United’s counsel short and denied the motion without explanation.
Later, United objected to the court’s jury instructions because they failed to state that, under
Michigan law, the jury should presume that Kay received the premium notices mailed by United.
The court overruled the objection and submitted only Kay’s contract claim to the jury.

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The jury returned a verdict for Kay. United did not renew its motion for judgment as a
matter of law or move for a new trial. Thereafter, over United’s objections, the court awarded
over $350,000 in costs and attorney fees to Kay, although the court stated no statutory or other
legal basis for doing so.
United now appeals the district court’s denial of its motions for summary judgment and
judgment as a matter of law, two of the district court’s evidentiary rulings, its denial of United’s
proposed jury instructions, and the district court’s fee-award and calculation of interest. Kay
cross-appeals the denial of her motion for summary judgment and the court’s failure sua sponte
to render judgment in Kay’s favor on Kay’s declaratory-judgment claim.
II.
A.
United appeals the district court’s denials of its motion for summary judgment and its
Rule 50(a) motion for judgment as a matter of law. We consider the summary judgment motion
first. United’s argument is straightforward: Sherman Kay’s policy had obviously expired by its
terms, on grounds of nonpayment, at the time of his death. Kay does not even dispute the point,
but argues that United was equitably estopped from treating the policy as terminated. As defined
in Michigan, the doctrine of equitable estoppel requires Kay to establish that United’s
representations induced her to believe that the policy was in effect at the time Sherman died, and
that she reasonably relied on those representations. See Morales v. Auto-Owners Ins. Co., 582
N.W.2d 776, 780 (Mich. 1998). And Kay says that United is equitably estopped from rejecting
her final special-offer payment in January 2009 because it had accepted at least seven other
special-offer payments from Kay before then. But United’s response to that assertion is just as
straightforward as its reading of the contract itself: every one of United’s special-offer notices to

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Kay expressly stated that United would reinstate the policy only if it received payment “during
the lifetime” of the insured; and thus Kay could not reasonably think that she could reinstate the
policy by sending United a check almost a week after Sherman Kay had died.
Much less straightforward, however, is whether we have jurisdiction to consider this
argument in this appeal. In Ortiz v. Jordan, the Supreme Court held that we lack jurisdiction to
review a district court’s earlier denial of a motion for summary judgment after a jury trial. 131
S. Ct. 884, 891 (2011). United argues that we do have jurisdiction to review an order denying
summary judgment if the motion raised a “pure question of law.” See In re AmTrust Fin. Corp.,
694 F.3d 741, 751 (6th Cir. 2012). And United contends “[w]hether there are sufficient facts to
create an issue regarding the applicability of equitable estoppel is a question of law.” N. Am.
Specialty Ins. Co. v. Myers, 111 F.3d 1273, 1281 (6th Cir. 1997). Thus, United contends, we can
answer that question here.
United conflates the term “purely legal issues” as used in Ortiz with the term “question of
law” as used in Myers. Purely legal questions “involve disputes about the substance and clarity
of pre-existing laws.” Ortiz, 131 S. Ct. at 892. In other words they are abstract legal questions,
which can be asked and answered without reference to the facts of the case. For example,
whether the doctrine of equitable estoppel in a particular state requires reasonable reliance, as
opposed merely to actual reliance, might be such a question. But a “legal question” in the usual
summary-judgment sense is something quite different. That sort of question asks whether a
particular factual record does or does not present a genuine issue of material fact. The question
here is of the more pedestrian latter sort: whether on this record a jury could find that Kay
reasonably thought she could mail in her premium check after Sherman Kay’s death and reinstate

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his life insurance policy. That question is hardly “purely legal” in the Ortiz sense of the term,
and thus we cannot review the district court’s denial of United’s summary-judgment motion.
The same is true of the district court’s denial of United’s Rule 50(a) motion. That motion
presented the same factbound question that United’s Rule 56 motion did, except that the Rule
50(a) motion was based on the evidence (or lack thereof) that Kay presented at trial. But we are
“powerless” to review a factbound Rule 50(a) motion unless the party also presents a post-trial
motion under Rule 50(b). See Unitherm Food Sys., Inc. v. Swift-Eckrich, Inc, 546 U.S. 394, 405
(2006). United did not present a Rule 50(b) motion here, so we cannot review the district court’s
denial of its factbound motion under Rule 50(a).
B.
United also argues that the district court committed reversible error with respect to its
jury instructions. We review jury instructions for an abuse of discretion. United States v.
Adams, 583 F.3d 457, 468–69 (6th Cir. 2009).
By way of background, Kay contended at trial that Sherman Kay’s policy was still in
effect at the time of his death because, according to Kay, United had not complied with a
Michigan statute that requires insurers to send “written notice . . . to the policyowner’s last
known address at least 30 days prior to termination of coverage.” Mich. Comp. Laws Ann.
§ 500.4012(b). A predicate of that theory was that Kay had not actually received the notice of
termination that United had mailed to Kay on December 18th. Under Michigan law, however, a
mailed letter is presumed delivered and received. Goodyear Tire & Rubber Co. v. City of
Roseville, 468 Mich. 947 (Mich. 2003). Accordingly, United asked the district court to instruct
the jury that Kay was presumed to receive the December premium notices that United had

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mailed to her. That instruction was a correct statement of Michigan law, see id.; but the court
rejected United’s proposed instruction for the following reasons:
I have concluded, as a matter of law, that this case . . . should not go off on facts
which relate to whether notices were received or not received or mailed or not
mailed. It’s more of a body of intent of the contract of insurance, the policy and
whether the whole thing together amounted to carrying out the obligations or not.
We can only conclude that the omission of United’s proposed instruction was an abuse of
discretion. Throughout the trial, Kay repeatedly contended that Sherman and Claire Kay had
never received the December premium notices. Claire twice testified that she had not received
the notices. Moreover, during his closing argument, Kay’s counsel said four times that Kay had
not received the notices. Indeed, Kay’s counsel ended his closing-argument rebuttal by telling
the jury that an examination of Dr. Kay’s mail purportedly showed that the December notices
were never received by Kay. The Jury was thus left without a proper instruction regarding a
factual issue that Claire herself made a centerpiece of the case.
The jury’s confusion was likely compounded by the court’s failure to give the jury any
instruction at all concerning Kay’s theory under M.C.L. § 500.4012 (b) or the equitable estoppel
theory that was the basis for the district court’s denial of United’s motion for summary judgment.
Instead, the court simply instructed the jury that Kay bore the burden of proving that United
breached its contract with Kay. On this record, the district court’s failure to give United’s
proposed instruction impaired United’s theory of the case. See Adams, 583 F.3d at 468-69.
United is therefore entitled to a new trial. See id.
C.
We address three additional matters for the purposes of remand. First, United argues that
the district court erred when, without citing any authority, it awarded over $337,000 in attorney
fees to Kay. Under the American rule, each party normally bears its own attorney fees. Griffin

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Indus., Inc. v. U.S. E.P.A., 640 F.3d 682, 685 (6th Cir. 2011In order to award attorney fees, a
district court must cite specific statutory authority, or a party’s bad faith or willful disobedience
of a court order. Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240 (1975). If in the
latter circumstances a court awards fees as a sanction, it must provide the party to be sanctioned
with notice and an opportunity to be heard beforehand. Roadway Exp., Inc. v. Piper, 447 U.S.
752, 767 (1980). We review a district court’s award of attorney fees for an abuse of discretion.
Imwalle v. Reliance Med. Products, Inc., 515 F.3d 531, 551 (6th Cir. 2008).
Here, the district court did not cite any statutory basis for the award of fees. Nor did the
court characterize the fees as a sanction or give United any notice or opportunity to be heard
regarding any potential sanction. (Nor do we see any basis for an award of fees as a sanction.)
Instead, the court simply explained that “[a] substantial amount of legal work was incurred in
this case, including a jury trial; and the court finds the award appropriate.” That explanation
does not distinguish this case from any other that goes to trial; and thus the court committed
reversible error when it awarded fees to Kay.
Second, and more briefly, we agree with United that the district court abused its
discretion when it allowed Kay’s counsel to read to the jury selected excerpts from Dena
Austin’s deposition transcript notwithstanding that Austin was present in the courtroom and
available to testify. See Fed. R. Civ. P. 32(a)(4); see also Hartman v. United States, 538 F.2d
1336, 1345 (8th Cir. 1976) (Rule 32(a)(4)(B)’s 100-mile exception is determined at the time the
deposition is offered).
Finally, the district court erred when it applied the state rather than the federal rate of
post-judgment interest. See Estate of Riddle ex rel. Riddle v. S. Farm Bureau Life Ins. Co., 421
F.3d 400, 409 (6th Cir. 2005).

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D.
Kay argues in her cross-appeal that the court should have granted her motion for
summary judgment. We lack jurisdiction to review the denial of that motion, however, for the
same reasons that we lack jurisdiction to review the denial of United’s motion for summary
judgment. See Ortiz, 131 S. Ct. at 891.
Second, Kay argues that the district court erred when it failed sua sponte to enter
judgment on her declaratory-judgment claim. But Kay never mentioned her declaratory-
judgment claim during trial or made any effort to present the claim to the jury or the district
court. Kay therefore waived this claim. See, e.g., Smith v. Gulf Oil Co., 995 F.2d 638, 644 (6th
Cir. 1993).
* * *
The judgment of the district court is vacated, and the case remanded for further
proceedings consistent with this opinion.

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