No. 21-3648 ___________________________

GWG DLP Funding V, LLC; Wells Fargo Bank N.A., solely in its capacity as Securities Intermediary

Plaintiffs - Appellants

v.

PHL Variable Insurance Company

Defendant - Appellee ____________

Appeal from United States District Court for the District of Minnesota ____________

Submitted: October 18, 2022 Filed: December 6, 2022 ____________ Before LOKEN, GRUENDER, and GRASZ, Circuit Judges. ____________ GRUENDER, Circuit Judge.

GWG DLP Funding V, LLC was the policyowner and beneficiary of a life insurance policy issued by PHL Variable Insurance Company. After GWG transferred beneficiary rights and ownership to Wells Fargo, PHL terminated the policy. GWG and Wells Fargo disputed the termination, and the parties attempted to settle the dispute. After some negotiations, the insured died, and PHL refused to honor the alleged agreement the parties had reached. GWG and Wells Fargo sued PHL for breach of contract and breach of the covenant of good faith and fair dealing and sought a declaratory judgment that prevents PHL from terminating the policy. The plaintiffs appeal the district court’s 1 dismissal of their claims. We affirm.

I.

In 2007, PHL issued a policy insuring the life of Barry Keller. The policy contained a $500,000 death benefit to be paid out upon Keller’s death. It also contained a guarantee of the death benefit, allowing the policy to remain in effect when it otherwise might be in default. The policy stated that the death-benefit guarantee would terminate if a third party without an insurable interest became the policyowner or beneficiary. The policy terminates if a policyholder does not pay required premiums within a sixty-one-day grace period after default. If a policy terminates, policyowners may pay the required premium payment to reinstate the policy but only “while the Insured is alive.”

At some point, GWG became the policyowner and beneficiary of the policy. GWG is a publicly traded financial institution with substantial investments in the secondary life insurance market. In September 2020, GWG transferred ownership and beneficiary rights to Wells Fargo and notified PHL. As a result, PHL informed Wells Fargo that the death-benefit guarantee terminated and that Wells Fargo would need to make additional premium payments to prevent the policy from lapsing. PHL claims that it subsequently sent Wells Fargo two notices stating the policy was in default and in danger of lapsing unless additional premium payments were made. GWG and Wells Fargo allege they never received either notice. Because the plaintiffs made no additional premium payments, PHL terminated the policy.

1 The Honorable David S. Doty, United States District Judge for the District of Minnesota.

-2- The parties disputed whether the death-benefit guarantee and policy should have terminated. In an attempt to settle, on February 1, 2021, PHL offered to restore the policy in return for a grace payment, higher premium payments, and the plaintiffs’ agreement that the death-benefit guarantee remain terminated. On February 5, the plaintiffs agreed by email to the terms of PHL’s offer, confirming they “will agree to reinstatement on the conditions below and will be in contact shortly.”

PHL then drafted an agreement to memorialize the terms of the alleged February 5 agreement. The draft agreement contained many terms not mentioned in the emails, for example, a