Cooper v. Berkshire Life Insurance

ON MOTION FOR RECONSIDERATION ADKINS, Judge. In 1990, Joseph Cooper (“Cooper”), one of the plaintiffs and appellant here, purchased from Berkshire Life Insurance Company (“Berkshire”), one of the appellees, two “vanishing premium” life insurance polices insuring the lives of himself and his wife Annette Cooper. He did so, he asserts, on the basis of misrepresentations by two insurance agents, Thomas Steinhardt and Bernard Fish, also appellees, that he only would have to pay premiums for ten years. Cooper donated one of the policies to the Associated Jewish Charities of Baltimore (“Associated”), and the other to The Joseph & Annette Cooper 1990 Insurance Trust (the “Trust”).

After later finding out that the policies required premium payments for at least seventeen years, Cooper, joined by his wife, Associated, and the Trust (collectively, the “Coopers”), filed a complaint against Berkshire, Steinhardt, and Fish. As amended, the complaint alleges fraud (Count One), fraudulent concealment (Count Two), negligent misrepresentation (Count Three), breach of contract (Count Four), imposition of constructive trust (Count Five), Declaratory and Injunctive Relief (Count Six), reformation (Count Seven), and violation of the Massachusetts Consumer Protection Statute (Count Eight). After discovery, the defendants filed motions for summary judgment, which ultimately were granted by the trial court. In their timely appeal, the Coopers raise the following questions, which we have re-phrased and re-ordered: I. Is there a question of fact whether Berkshire’s policies^ — with “disappearing premium illustrations” attached inside — were so clear that Cooper could not reasonably have relied on the premium illustrations in making his decision to purchase? ⁵⁰ II.

Does the economic loss doctrine bar the Coopers’ tort claims?

III

Is there a question of fact whether Berkshire’s policies — with “disappearing premium illustrations” attached inside — were so clear that the Coopers should have known of their claims when they received the policies? As to issues I and III, we conclude that there are disputed issues of fact material to some of the Coopers’ theories of recovery. As to Issue II, we conclude that the economic loss doctrine does not bar the Coopers’ claims. Accordingly, we reverse the judgment of the trial court.

FACTS AND LEGAL PROCEEDINGS Because this case was decided on a motion for summary judgment, we derive the facts from the complaint, the affidavits, and the deposition transcripts that were part of the summary judgment record, drawing all factual inferences in favor of the Coopers, as the losing parties below. The Policies Cooper, on the advice of his estate planning attorney, decided to purchase a $1 million second-to-die life insurance policy for himself and his wife, which he planned to donate to a trust that would pay estate taxes for his heirs. A second-to-die policy is one that does not pay the death benefit until both insureds have died. Cooper informed Steinhardt and Fish (sometimes referred to as the “insurance agents”), whom he had known for many years, and considered to be trustworthy friends, about his interest in purchasing life insurance.

The insurance agents told Cooper that they were “highly skilled insurance experts” who understood complex insurance projects, and encouraged him “to rely on their expertise and prior relationship of trust in choosing a policy.” Steinhardt and Fish recommended a $1 million Berkshire “disappearing premium” policy, and told Cooper he would have to pay the annual $9,000 premium for nine years. “Neither Steinhardt nor Fish showed [Cooper] a ⁵¹ ‘Supplemental Footnote Page’ or anything else that indicated the disappear-year was not guaranteed.” To the contrary, they specifically told him that he would “not have to pay any premiums beyond the illustrated disappear-year.” The Coopers were unsophisticated regarding life insurance, and unfamiliar with the technical language of the policies. Fish and Steinhardt also showed Cooper the first page of a computer-generated “disappearing premium” sales illustration, (“Illustration I”), which demonstrated that a $1 million policy would cost only $9,000 a year for nine years. It displayed columns showing the “Scheduled Annual Outlay” for each year, as well as the “Dividend End of Prior Yr.” The “Scheduled Annual Outlay” column showed $9,000 for each of the first nine years, and “0” for years ten through thirty. On this illustration, at the bottom of the page, appeared the words: “This illustration is not complete without the accompanying Supplemental Footnote Page.” At the top of the page, the illustration said: “Dividends applied to purchase paid up additions.” Cooper found the Berkshire “disappearing policy” satisfactory.

Indeed, he acknowledged that he thought it was “too good to be true,” and decided to buy two policies, one for the Trust, with a $1.5 million death benefit, and a second, with a $1 million death benefit for the Associated to endow a charitable fund. After Cooper told Steinhardt and Fish of his decision, he was informed that, in the interim, the premiums had increased. The $1 million policy would cost $10,700 a year for ten years, and the $1.5 million would cost $16,000 a year for ten years. Because he was still satisfied with the revised prices, he advised the insurance agents to have the policies issued.

Although not the owners of the policies, the Coopers still planned to pay all premiums through contributions to the Trust and to Associated. In August 1990, the $1.5 million policy was delivered to Cooper. A policy summary on the cover page stated that “Premiums Payable as Specified or Until Death of Survivor.” The cover page also notified the policyholder of his right to ⁵² cancel the policy within a ten-day “free-look” period. On the same page, the policyholder is advised: “READ THIS POLICY CAREFULLY.” On the next page of the policy, the “Policy Specifications” page, under the heading “YEARS PAYABLE,” appears the word “LIFE.” Attached inside the back cover of the policy was a disappearing premium illustration, consisting of eight pages, showing that the “Out of Pocket Outlay” would be $16,000 a year for ten years (“Illustration II”).

On the first page, appearing next to the “Out of Pocket Outlay” column, Illustration II featured columns titled “Dividend End of Previous Year,” “Paid-Up Additions Outlay,” “Cost Term Rider,” and “Total Plan Premium.” These numbers differ for each year of the policy. Illustration II also cautioned at the bottom of each page showing premium projections: “This illustration is not complete without the accompanying Supplemental Footnote Page,” and at the top, on the right side: “Dividends applied to purchase paid up additions.” Unlike Illustration I, however, this Illustration included the full eight pages. The fifth page provided important disclosures: This illustration is not a contract. It is a projection of values based on a combination of guaranteed values and contingent values such as dividends.

Dividends and dividend purchases are neither estimated or guaranteed but are based on current company experience.... The current dividend scale is interest-sensitive which means significant changes in interest rates may affect future dividends. When asked at his deposition whether he “ma[de] any effort to locate the Supplemental Footnote Page,” Cooper responded, “I probably did, but I don’t remember it.” Cooper asserts that, without altering these papers in any way, he stored them in his office safe until the litigation began. The $1 million policy was delivered directly to Associated without ever being shown to Cooper, and he did not see it until the litigation began.

Stapled to the back cover of the $1 million policy was a two-page illustration, dated June 29, 1990. ⁵³ The Coopers assert that the assumptions underlying Berkshire’s illustrations of the premiums that the Coopers would have to pay were inconsistent with Berkshire’s own internal forecasts and estimates, and were based on abnormally high dividends that, to the defendants’ knowledge, Berkshire could not sustain. If the illustration had been based on Berkshire’s real investment earnings rate, the Coopers claim, it would have shown the “disappear year” to be later than the ten years represented to Cooper. In 1996, the Coopers learned for the first time that they would have to pay premiums for many years longer than the insurance agents originally represented. Fish disclosed this to Cooper during presentation of a “Life Insurance Policy Reprojection” as part of a meeting that he scheduled to sell them additional financial products.

Trial Court’s Ruling The trial court granted summary judgment on all counts of the amended complaint, stating that [i]n addition to the briefs of all parties, this Court has read and considered the opinion of the Honorable Deborah K. Chasanow of the United States District Court for the District of Maryland in Thelen v. Massachusetts Mutual Life Insurance Company, [ 111 F.Supp.2d 688 (D.Md.2000) ][and two nisi prius opinions]. This [c]ourt agrees with both the federal and Maryland State nisi prius opinions stated above and the reasoning thrice articulated therein. Although the trial court did not state reasons for its decision, we have gleaned those reasons by reviewing Thelen and the nisi prius decisions (which were included in the record extract). Thelen dismissed a complaint alleging misrepresentations in connection with the sale of a vanishing premium life insurance policy on statute of limitations grounds.

See Thelen, 111 F.Supp.2d at 695 . The nisi prius decisions, also involving vanishing premium policies, dismissed complaints on grounds of: (1) limitations, (2) lack of justifiable reliance for ⁵⁴ fraud or negligent misrepresentation, and (3) the economic loss doctrine. DISCUSSION Choice Of Law Berkshire is a corporation domiciled in Massachusetts. The Coopers live in Maryland, and Associated has its principal offices in Maryland.

Although the Coopers alleged in their complaint that Massachusetts law “governs certain claims raised in this Complaint,” no party argues on appeal that Massachusetts law governs any of the counts. In tort actions, courts apply choice of law principles of the forum state. The Court of Appeals recently restated the Maryland approach to choice of law problems in tort: Maryland adheres to the lex loci delicti rule in analyzing choice of law problems with respect to causes of action sounding in torts. Lex loci delicti dictates that “when an accident occurs in another state substantive rights of the parties, even though they are domiciled in Maryland, are to be determined by the law of the state in which the alleged tort took place.” ...

As a general rule, the place of the tort is considered to be the place of injury. The place of injury is also referred to as the place where the last act required to complete the tort occurred. See RESTATEMENT (FIRST) OF CONFLICT OF LAWS § 377 (stating that the “place of wrong is the state where the last event necessary to make an actor liable for an alleged tort takes place”)[.] Philip Morris Inc. v. Angeletti, 358 Md. 689, 744-46 , 752 A.2d 200 (2000)(case citations omitted). The alleged tort injury here is Cooper’s entry into a contract of insurance that required the Coopers or Associated to pay additional premiums in order to keep the life insurance in force.

Although Berkshire is headquartered in Massachusetts, the alleged misrepresentations were made to Cooper in ⁵⁵ Maryland, the policy was delivered to the Coopers in Maryland, and, because the Coopers live in Maryland, the injury occurred here. Accordingly, we will apply Maryland law to the tort claims. See id. See also Force v. ITT Hartford Life & Annuity Ins.

Co., 4 F.Supp.2d 843, 850 (D.Minn.1998)(applying Florida law when Florida residents purchased vanishing premium policy from insurance company doing business in Minnesota). We will also apply Maryland law to the contract claim. Maryland applies the substantive law of the place where the contract was made, under the doctrine of lex loci contractus. See Commercial Union Ins.

Co., v. Porter Hayden Co., 116 Md.App. 605, 672-73 , 698 A.2d 1167 , cert. denied, 348 Md. 205 , 703 A.2d 147 (1997). A contract is made in the place where the last act occurs necessary under the rules of offer and acceptance to give the contract a binding effect. See id. at 673, 698 A.2d 1167 . Typically, the “locus contractu of an insurance policy is the state in which the policy is delivered and the premiums are paid.” Aetna Cas. & Sur.

Co. v. Souras, 78 Md.App. 71, 77 , 552 A.2d 908 (1989)(citing Sun Ins. Office v. Mallick, 160 Md. 71, 81 , 153 A. 35 (1931)). See also Mut. Life Ins.

Co. v. Mullen, 107 Md. 457, 463 , 69 A. 385 (1908)(“as the first premium on the policy was paid in this State, by a citizen of this State, and the policy delivered here, ... it is a Maryland contract and . .. governed by Maryland laws”). The statute of limitations defense, asserted as to all the counts, is governed by the law of the forum because it is procedural. See Maltas v. Maltas, 197 F.Supp.2d 409, 423 (D.Md.2002)(“Maryland courts apply Maryland’s statute of limitations to claims that arise under the substantive laws of other states”); Chase Manhattan Bank v. CVE, Inc., 206 F.Supp.2d 900, 906 (M.D.Tenn.2002)(“[l]imitations of actions are generally governed by the laws of the forum state”). Standard Of Review The principles governing appellate review of summary judgment are clear: ⁵⁶ Summary judgment is appropriate when there is no dispute of material fact and the moving party is entitled to judgment as a matter of law.

Our review of the grant of summary judgment requires us to determine whether a dispute of material fact exists, and whether the trial court was “legally correct.” Facts necessary to the determination of a motion may be placed before the court by pleadings, affidavit, deposition, answers to interrogatories, admissions of facts, stipulations, and concessions. We will review the “same information from the record and [²⁸⁶] decide the same issues of law as the trial court.” Thacker v. City of Hyattsville, 135 Md.App. 268, 285-86 , 762 A.2d 172 (2000) (citations omitted). A court must be aware of important limitations on its role in deciding summary judgment: “In resolving whether a material fact remains in dispute, the court must accord great deference to the party opposing summary judgment. Even where the underlying facts are undisputed, if those facts are susceptible of more than one permissible inference, the trial court is obliged to make the inference in favor of the party opposing summary judgment.

The court should never attempt to resolve issues of fact or of credibility of witnesses — these matters must be left for the jury.” Id. at 286 , 762 A.2d 172 (citation omitted). Fraudulent And Negligent Misrepresentation Because the issues raised by appellants require familiarity with the law of fraudulent misrepresentation and negligent misrepresentation, we start our analysis by reviewing the elements of each. To sustain an action for fraudulent misrepresentation, the plaintiff must prove: “(1) that the representation made is false; (2) that its falsity was either known to the speaker, or the misrepresentation was made with such a reckless indifference to truth as to be equivalent to actual knowledge; (3) that it was ⁵⁷ made for the purpose of defrauding the person claiming to be injured thereby; (4) that such person not only relied upon the misrepresentation, but had a right to rely upon it in the full belief of its truth, and that he would not have done the thing from which the injury resulted had not such misrepresentation been made; and (5) that he actually suffered damage directly resulting from such fraudulent misrepresentation.” Martens Chevrolet, Inc. v. Seney, 292 Md. 328, 333 , 439 A.2d 534 (1982)(quoting Gittings v. Von Dorn, 136 Md. 10, 15-16 , 109 A. 553 (1920)). “Negligent misrepresentation is one variety of a negligence action.” Walpert, Smullian, & Blumenthal, P.A. v. Katz, 361 Md. 645, 655 , 762 A.2d 582 (2000). “ ‘[T]he action lies for negligent words, recovery being permitted where one relies on statements of another, negligently volunteering an erroneous opinion, intending that it be acted upon, and knowing that loss or injury are likely to follow if it is acted upon.’ ” Id. at 656 , 762 A.2d 582 (quoting Virginia Dare Stores, Inc. v. Schuman, 175 Md. 287, 292 , 1 A.2d 897 (1938)). The principal elements are: (1) the defendant, owing a duty of care to the plaintiff, negligently asserts a false statement; (2) the defendant intends that his statement will be acted upon by the plaintiff; (3) the defendant has the knowledge that the plaintiff will probably rely on the statement, which, if erroneous, will cause loss or injury; (4) the plaintiff, justifiably, takes action in reliance on the statement; and (5) the plaintiff suffers damage proximately caused by the defendant’s negligence.” Martens Chevrolet, 292 Md. at 337 , 439 A.2d 534 (quoting Virginia Dare Stores, 175 Md. at 291-92 , 1 A.2d 897 .) Negligent misrepresentation is more difficult to discern than fraudulent misrepresentation, because it depends on ⁵⁸ the existence of a duty owed by a defendant to the plaintiff. “Patently, the duty to furnish the correct information arises when the relationship is of the nature that one party has the right to rely upon the other for information.

The precise degree of the relationship that must exist before recovery will be allowed is a question that defies generalization.” Giant Food, Inc. v. Ice King, Inc., 74 Md.App. 183, 189, 536 A.2d 1182 , cert. denied, 313 Md. 7 , 542 A.2d 844 (1988). “[T]he most common example of the duty to speak with reasonable care is based on a business or professional relationship, or one in which there is a pecuniary interest.” Id. at 190, 536 A.2d 1182 (citing Prosser & Keeton on the Law of Torts § 107, at 105 (5th ed. 1984, 1988 Supp.)). See also Griesi v. Atlantic Gen. Hosp. Carp., 360 Md. 1, 11 , 756 A.2d 548 (2000)(quoting Giant Food).

An estimate as to future facts by one knowledgeable in a particular field may be the basis of a cause of action for negligent misrepresentation. See Ward Dev. Co. v. Ingrao, 63 Md.App. 645, 655-56 , 493 A.2d 421 (1985). I. Reasonable Reliance Common to the torts of both fraudulent misrepresentation and negligent misrepresentation is the requirement that the plaintiff justifiably rely on the misrepresentation.

See Martens Chevrolet, 292 Md. at 333-37 , 439 A.2d 534 ; Maryland Civil Pattern Jury Instructions (3d ed. 2001) 11:1, 19.6. We shall address the justifiable reliance element of the Coopers’ misrepresentation claims, first against Berkshire, and then against Fish and Steinhardt. A. Claims Against Berkshire With respect to Berkshire, we shall address the alleged misrepresentation that the premiums were guaranteed separately from other types of alleged misrepresentations. ⁵⁹ 1. Misrepresentation That Premiums Would End After Ten Years All three of the defendants argued below, and the trial court apparently agreed, that Cooper’s reliance on the agents’ representations that the premiums were guaranteed was not justifiable because the policies clearly stated that they were not guaranteed.

The Coopers argue that there was a question of fact as to whether the Berkshire policies, with Illustration II attached, were so clear that Cooper could not justifiably have believed that his premium obligations would cease after ten years. The defendants cite Twelve Knotts Ltd. P’ship v. Fireman’s Fund Ins. Co., 87 Md.App. 88 , 589 A.2d 105 (1991), for the proposition that “a policyholder is not justified in relying on prior misrepresentations not incorporated in the written insurance contract where language that is contained in the written contract itself bears on the same subject matter.” In Twelve Knotts, a real estate partnership solicited from several brokers a bid on a property and liability insurance policy. It received several bids, but found the policy offered by the defendant insurance company to provide the highest coverage at the lowest cost.

Further, the defendant broker advised the plaintiff that premiums under the policy would be guaranteed for three years. After the partnership chose that policy, the defendant insurer issued a binder that said nothing about whether the quoted rate was guaranteed. The binder stated that the insurance was “ ‘subject to the terms, conditions and limitations of the policy(ies) in current use by the Company.’ ” Id. at 94 , 589 A.2d 105 . The permanent policy, issued a month later, stated in its first part: “If this policy is issued for a period of three years and premium is not paid in advance, the premiums due for each annual period of this policy shall be computed in accordance with the Companies [sic] ... premiums ... in effect (a) on the inception date of each annual period for ⁶⁰ annualized policies, or (b) on the inception date of the policy for non-annualized policies.” Id. at 95 , 589 A.2d 105 (emphasis in original).

The policy also had an integration cause providing that it “ ‘embodies all agreements existing between [the insured] and the Company or any of its agents relating to the insurance.’ ” Id. When the defendant broker sent the policy to the partnership, he did not mention in his cover letter that the policy stated that there was no rate guarantee. The partnership’s director read only the cover letter and the initial page, and did not read the policy. After the first year, the insurer raised the rate for the coverage.

As a result of the increase in premiums, the partnership filed suit alleging, inter alia, breach of contract, fraud, and negligent misrepresentation. The trial court granted judgment in favor of both defendants at the end of the partnership’s case. We affirmed that judgment, and in the course of ruling on the contract count, 1 followed an extra-jurisdictional body of cases requiring an insured to read its insurance policies: There is ... a body of cases ... to [the] effect, that an insured has a right to assume that the policy issued was based on the application and the failure of the insured to read the policy does not excuse the insurer. See, in general, ⁶¹ 12 J. Appleman, Insurance Law and Practice § 7155.

That is not a universal rule, however, or even a majority one, and it does not appear to have been adopted in Maryland. Indeed, ... [the] recent case of Shepard v. Keystone Ins. Co., 743 F.Supp. 429 (D.Md.1990) [took a contrary approach.] [There,] [t]he Court concluded that: ‘It is the obligation of the insured to read and understand the terms of his insurance policy, unless the policy is so constructed that a reasonable man would not attempt to read it.... If the terms of the policy are inconsistent with his desires, he is required to notify the insurer of the inconsistency and of his refusal to accept the condition.’ Although, to our knowledge, there are no Maryland cases compelling this result, ... it appears to be the general rule....

We believe this to be a reasonable rule, and we therefore adopt it. Id. at 105, 589 A.2d 105 (citations omitted). We agree with the defendants in this case that Twelve Knotts governs the Coopers’ claims against Berkshire based on the oral representations that the ten year premium schedule was guaranteed. We explain.

On the first page of the $1.5 million policy, under the heading “Policy Summary” in bold print, the policy says: “Survivorship Life Policy;” and then “Premiums Payable as Specified or Until Death of Survivor.” Without reading further, this page could suggest that “as specified” referred to the ten-year payment schedule shown in Illustration II. On the second page of the policy, however, appears “Policy Specifications,” and there are two columns. One column is titled “Annual Premiums,” and under that appears the numerical figure “$12,962.50.” The other column is titled “Years Payable,” and under that, the policy says “Life.” This certainly appears to suggest premiums for life. The Coopers argue, and we agree, that Illustration II could be viewed by a reasonable person as part of the policy.

The policy delivered to Cooper specifies that “[t]he policy, the attached application, and any other attached agreements make ⁶² up the entire contract.” Because, as Cooper says in his affidavit, Illustration II was attached to the back cover of his policy, he would be reasonable in believing that Illustration II was part of his contract of insurance. Illustration II contains a schedule showing the “Out of Pocket Outlay” to be $16,000 per year for 10 years. But other columns on that page show the component parts that add up to the $16,000, include payment for “paid-up additions.” For the first twenty years, these columns appear as follows: [[Image here]] The above excerpt from Illustration II readily shows that in the first ten years, the “paid-up additions,” as well as policy dividends, accrue because the $16,000 premium outlay exceeds the “base policy premium” of $12,962. The “paid-up additions” and dividends are then applied to pay the base policy premium in all years after the tenth year.

Not only is this payment plan evident from the columns, but Illustration II explicitly explains, at the top of each page except page 7, “Dividends applied to purchase paid up additions.” Other pages of Illustration II clarify that the dividends are not guaranteed. On page 5, Illustration II says: ⁶³ This illustration is not a contract. It is a projection of values based on a combination of guaranteed values and contingent values such as dividends. Dividends and dividend purchases are neither estimated or guaranteed but are based on current company experience....

The current dividend scale is interest-sensitive which means significant changes in interest rates may affect future dividends. (Emphasis added.) Although Cooper says that he did not understand in 1990 that the illustration was “a projection of values based on a combination of guaranteed values and contingent values such as dividends,” we conclude that he would not be reasonable in holding that belief if he had read Illustration II. Twelve Knotts teaches us that, in the context of an action against Berkshire, Cooper was obligated to read the policy. See Twelve Knotts, 87 Md.App. at 105 , 589 A.2d 105 ; Thelen 111 F.Supp.2d at 693-95 (applying statute of limitations to vanishing premium claims against insurance company as a matter of law because policies were clear that premiums were not guaranteed); In Re: Northwestern Mutual Life Ins.

Co. Sales Practices Litigation, 70 F.Supp.2d 466, 488 (D.N.J.1999)(in action against insurance company, insured cannot rely on oral statements regarding guarantee of vanishing premiums that contradicted the language of the policy). As the defendants here assert, “[a]n insured cannot ignore conflicting or qualifying language in a policy or illustration and thereby ‘close! ] his eyes to avoid discovery of the truth’ ” (quoting Northwestern Mut. Life. Ins., 70 F.Supp.2d at 492 ). 2 ⁶⁴ The Coopers argue that because Associated only received the first two pages of Illustration II with its $1 million policy, Cooper was not on notice that the premiums could vary as to that policy.

We do not find this argument persuasive. Cooper selected the two policies together, and had no reason to assume that the $1 million policy selected for Associated had guaranteed premiums when the $1.5 million policy for the Trust did not. 2. The Financial Assumptions Underlying The Projected Premiums The Twelve Knotts rationale does not bar all of the Coopers’ claims against Berkshire. The Coopers also allege in their complaint that Berkshire is liable for fraudulent and negligent misrepresentation because “the assumptions underlying Berkshire’s illustrations were inconsistent with Berkshire’s own internal forecasts, estimates, analyses and projections[.]” We conclude that this allegation, and similar ones, are sufficient to survive Berkshire’s motion for summary judgment. ⁶⁵ This “inaccurate illustration” claim stands independently from the “guaranteed illustration” claim.

Even though we have rejected the Coopers’ claim against Berkshire based upon the representation that the ten year premium payment was guaranteed, the jury still could hold Berkshire liable if it found that the illustration materially understated the risk that the Coopers’ premiums would not “disappear” in ten years, as the illustration depicted, and that the Coopers were induced to purchase the policy by the inaccurate information presented in the illustration. The Coopers’ amended complaint itemizes many specific non-disclosures that they contend induced them to purchase the policies based on the misleading illustration of a ten year “disappear date.” According to Berkshire’s standard language on page five of Illustration II, the illustration presented to the Coopers reflected its “current company experience.” The Coopers assert that the illustration was an actionable misrepresentation because it did not accurately reflect the financial information regarding Berkshire’s “current company experience” at the time the illustration was prepared for and presented to them. For example, they allege, Defendants failed to disclose to the Coopers ... [that] the dividend scales used to illustrate the performance of Berkshire’s policies included interest rate assumptions that were not supported by Berkshire’s current investment results, lacked any reasonable basis in fact, and would decrease in future policy years .... Without disclosure of the foregoing material facts and information, the “disappearing premium” sales scheme was inherently false, misleading and deceptive.

(Emphasis added.) In support of this “inaccurate illustration” claim and in opposition to summary judgment, the Coopers submitted an affidavit from Philip J. Bieluch, an “expert in the field of life insurance and actuarial science.” Bieluch opined that the ten year premium illustration was materially misleading at the time it was used to sell the policy to the Coopers because, contrary to Berkshire’s claim on page five of Illustration II, ⁶⁶ the illustration did not accurately reflect “current company experience.” [Bieluch] would testify that when Defendants sold the policies to the Coopers in 1990, Berkshire should have known that the “disappear date”portrayed in its sales illustrations was false and that the actual “disappear date” would be later.... [B]ased ... on the information in ... the Complaint[,] ... Berkshire’s Net Investment Yield during the five years before the Coopers purchased their policies (i.e., 1985-89) had been less than Berkshire’s Dividend Rate, and steadily declining. Thus, it was not realistically possible for Berkshire to continue paying dividends as represented in the illustrations while increasing their book of business. In short, Berkshire knew or should have known in 1990 that the Coopers would have to pay more premiums than illustrated.

Given these allegations and this evidence, we must assume for purposes of summary judgment that (1) the Coopers made their decision to purchase the policy on the basis of the illustration showing only ten years of premium payments; (2) the ten year premium period in the illustration was not based on accurate information about the company’s “current” experience; (3) if the company had used its “current” experience at the time the policy was pitched to the Coopers, the'premium period in the illustration would have been longer than ten years; and (4) the Coopers would not have purchased the policy if they understood that the prospect of a ten year “disappear date” was not based on current Berkshire experience or other reasonable factual basis. In these circumstances, we conclude that a reasonable jury could find that the illustration constituted a materially misleading and inaccurate representation regarding the prospect of a ten year “disappear date” for,the Coopers, and that the Coopers reasonably relied on that misleading illustration in deciding to purchase the Berkshire policy. We explain. As the growing body of case law involving claims arising from “vanishing premium” life insurance policies reveals, ⁶⁷ many courts have addressed similar allegations of misrepresented premium periods in illustrations used to sell “vanishing premium” insurance policies.

Although each case varies in its particulars, there are common themes, including some apparent in this case. As the New York Court of Appeals observed in 1999, these cases “are not unique. They involve allegations and practices of a national scope that have generated industry-wide litigation.” Gaidon v. Guardian Life Ins. Co. of Am., 94 N.Y.2d 330 , 704 N.Y.S.2d 177 , 725 N.E.2d 598, 602, 605-08 (1999)(rejecting fraud claim, but allowing claim pursuant to New York’s consumer protection statute). 3 One common element is that the disappearing premium illustrations were presented as having been “custom-made” for the insured.

See, e.g., id. at 177, 725 N.E.2d at 600 (“as part of the company’s standard marketing presentation, the agent prepared a personalized ‘vanishing premium’ illustration for each plaintiff’). Another common aspect in virtually all of these cases is that the illustrations show a “disappear date” that cannot reasonably be justified by the financial circumstances that existed at the time it was presented. See, e.g., id. (“the illustrations were premised on dividend projections that [the insurer] knew or should have known were untenable”).

Courts have recognized the viability of claims based on analogous illustrations showing a “disappear date” that cannot reasonably be supported by the financial information that was available at the time the policy was sold. The rationale is that the illustration misrepresents a present, and not a future, fact, in that it purports to show that current financial information provides a reasonable factual basis for the projected “disappear date” in the illustration, and that the insurer and agent believe that the premiums are likely to “vanish” as stated in the illustration. See, e.g., Greenberg v. Life Ins. Co. of Va., 177 F.3d 507, 515 (6th Cir.1999)(allegation that illustration for ⁶⁸ vanishing premium incorporated a presumed interest rate that was substantially higher than guaranteed rate and had not been attainable in recent years stated claim for fraud); Grove v. Principal Mut.

Life Ins. Co., 14 F.Supp.2d 1101, 1104, 1111 (S.D.Iowa 1998)(viable cause of action stated by claim that insurance company fraudulently concealed the presently known fact that the assumptions upon which the vanishing premium projections were based could not be supported by current experience); Myers v. Guardian Life Ins. Co. of Am., 5 F.Supp.2d 423, 426, 430-31 (N.D.Miss.1998)(complaint sustained when plaintiff alleged insurer manipulated vanishing premium policy illustrations to artificially enhance the policy performance through unsupportable assumptions and actuarial devices); Hignite v. Am. Gen.

Life & Accident Ins. Co., 142 F.Supp.2d 785, 791-92 (N.D.Miss.2001)(allegations that illustrations for vanishing premium depended on abnormally high interest rates that did not represent the company’s experience held to be representation of current fact); Von Hoffmann v. Prudential Ins. Co. of Am., 202 F.Supp.2d 252, 259-60 (S.D.N.Y.2002)(allegations that insurance company and insurance agents failed to disclose that vanishing premium illustrations were based on an out-of-date method for crediting dividends “that likely predicted more optimistic results” stated action for fraud). In this case, we conclude that a reasonable juror could find, based on the expert opinion proffered by the Coopers, that at the time they used the ten year premium illustration to make the sale to the Coopers, Berkshire knew that, given the company’s “current ... experience,” it was highly unlikely that the Coopers would have to make premium payments for only ten years.

In that regard, the illustration ■ could have been both a material misrepresentation of existing fact (ie., that the ten year premium period in the illustration was premised upon “current company experience”), and a materially misleading prediction (ie., that there was a reasonable prospect that the Coopers would have to pay premiums for only the ten year period in the illustration). ⁶⁹ We do not view the fact that Cooper failed to read page five of Illustration II, stating that the illustration was based on “current company experience,” before he accepted the policy as precluding a finding of actual or justifiable reliance. We acknowledge that if Cooper did not read this supplement, then he did not make his decision to purchase the policy based upon an explicit understanding that the illustration reflected “current company experience.” But that does not change the result. In believing the ten year illustration to be guaranteed, Cooper could also implicitly believe that Berkshire offered the policy because the ten year projection had some reasonable basis in fact. If the jury concludes that Cooper reasonably understood the estimate or projection to be based on factual data available to Berkshire, and the numbers used in the projection do not accurately reflect Berkshire’s financial data, then Cooper’s reliance on the estimate or projection may constitute reliance on the financial misrepresentations.

For example, in Von Hoffmann , the insurer and broker used the insurer’s favorable twenty year performance history to induce the insured to purchase a vanishing premium policy. At the time, however, they knew that Prudential had changed its methodology for crediting dividends, and therefore, that the performance information they had given to the insureds was misleading because the new methodology would generate far less favorable results in the future. In presenting an illustration showing an early “disappear date,” the broker also “consistently omitted certain pages from the illustrations.” See Von Hoffmann, 202 F.Supp.2d at 261 . The court concluded that “[although the [insureds] cannot reasonably argue that they were defrauded into believing the premiums were sure to vanish in seven years or that the rates would not change, a reasonable jury could conclude that [the broker] committed fraud by omitting material information in an effort to induce the ... purchase^]” Id.

See also Eisenberg v. Gagnon, 766 F.2d 770, 779 (3d Cir.), cert. denied sub nom., Wasserstrom v. Eisenberg, 474 U.S. 946 , 106 S.Ct. 342 , 88 L.Ed.2d 290 (1985) (reading part of inaccurate projection was sufficient to support a finding of reliance); Brug v. Enstar ⁷⁰ Group, Inc., 755 F.Supp. 1247, 1252 (D.Del.1991)(projection may constitute actionable misrepresentation if it has no valid basis in fact); In re Turkcell Iletisim Hizmetler, A.S. Securities Litig., 202 F.Supp.2d 8, 11-12 (S.D.N.Y.2001)(projection based on data that was inaccurate at time projection was made can be actionable misrepresentation); Alexander v. Evans, Fed. Sec. L. Rep. (CCH)lf 97,795, 1993 WL 427409 , ⁷, 1993 U.S. Dist. LEXIS 14560 , ²³ (S.D.N.Y.1993)(financial projections' not genuinely believed by seller are basis for fraud). The prospective policy holder cannot be required to evaluate the facts underlying the company’s estimate of a ten year premium payment period; nor can the insurer profit from its failure to present that information.

Although there are no “vanishing premium” cases reported by Maryland appellate courts, the legal principles supporting our conclusion are found in well-established Maryland law governing fraud and negligent misrepresentation claims. Maryland courts recognize that “[e]ven in the absence of a duty of disclosure, one who suppresses or conceals facts which materially qualify representations made to another may be guilty of fraud.” Finch v. Hughes Aircraft Co., 57 Md.App. 190, 239 , 469 A.2d 867 , cert. denied, 300 Md. 88 , 475 A.2d 1200 (1984)(adopting circuit court’s opinion). The same principle applies in an action for negligent misrepresentation. In a seller to buyer situation, like Martens Chevrolet and the present one, “ ‘[liability ... arises only where there is a duty, if one speaks at all to give the correct information.’ ” Walpert, Smullian, & Blumenthal, 361 Md. at 667 , 762 A.2d 582 (quoting Int’l Prods.

Co. v. Erie R.R. Co., 244 N.Y. 331 , 155 N.E. 662, 664 , cert. denied, 275 U.S. 527 , 48 S.Ct. 20 , 72 L.Ed. 408 (1927)). The question of whether that duty exists “involves many considerations. There must be knowledge, or its equivalent, that the information is desired for a serious purpose; that he to whom it is given intends to rely and act upon it; that, if false or erroneous, he will because of it be injured in person or property. Finally, the relation ⁷¹ ship of the parties, arising out of contract or otherwise, must be such that in morals and good conscience the one has the right to rely upon the other for information, and the other giving the information owes a duty to give it with care.

An inquiry made of a stranger is one thing; of a person with whom the inquirer has entered, or is about to enter, into a contract concerning the goods which are, or are to be, its subject, is another.” Id. (quoting Int’l Prods. Co., 155 N.E. at 664 ). In determining whether the duty exists to support negligent misrepresentation, a significant factor is whether the promises were an inducement to the plaintiff and provided the defendant with a business ^advantage when the plaintiff acted in conformance with them.

See id. at 672, 762 A.2d 582 ; Village of Cross Keys, Inc. v. United States Gypsum Co., 315 Md. 741, 758 , 556 A.2d 1126 (1989); Jacques, 307 Md. at 537-38 , 515 A.2d 756 . There is a “close interrelationship of the concepts of duty and reliance[.]” Village of Cross Keys, 315 Md. at 757 , 556 A.2d 1126 . Applying the principles of these cases, we conclude that the purchase of a life insurance policy is a transaction in which the insurance company has a duty to be accurate in the information that it provides to the purchaser of the policy. Purchasing a life insurance policy is a significant investment, usually paid for over many years.

Purchasers of life insurance rely on their policies for