177 F.3d 507 (6th Cir. 1999), 98-3156, Greenberg v. Life Ins. Co. of Virginia

Docket Nº:98-3156.
Citation:177 F.3d 507
Party Name:Peggy GREENBERG and Pamela Rossmann, Individually and on behalf of others similarly situated, Plaintiffs-Appellants, v. THE LIFE INSURANCE COMPANY OF VIRGINIA, Defendant-Appellee.
Case Date:May 19, 1999
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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Page 507

177 F.3d 507 (6th Cir. 1999)

Peggy GREENBERG and Pamela Rossmann, Individually and on

behalf of others similarly situated, Plaintiffs-Appellants,

v.

THE LIFE INSURANCE COMPANY OF VIRGINIA, Defendant-Appellee.

No. 98-3156.

United States Court of Appeals, Sixth Circuit

May 19, 1999

Argued March 10, 1999.

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Ron Parry (argued and briefed), David A. Baker (briefed), Arnzen, Parry & Wentz, Covington, KY, for Plaintiffs-Appellants.

David G. Hetzel, LeBoeuf, Lamb, Greene & MacRae, Hartford, CT, Robin E. Harvey (briefed), Baker & Hostetler, Cincinnati, OH, Watson B. Tucker (argued and briefed), Chicago, IL, for Defendant-Appellee.

Before: SILER, DAUGHTREY, and GILMAN, Circuit Judges.

OPINION

GILMAN, Circuit Judge.

Peggy Greenberg and Pamela Rossmann appeal from the district court's dismissal of their putative class action lawsuit filed against The Life Insurance Company of Virginia ("Life of Virginia"). Their complaint alleged six causes of action under Ohio law relating to their 1984 purchases of what they understood to be "single-premium" life insurance policies. Life of Virginia filed a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. After concluding that Greenberg and Rossmann had failed to state a claim upon which relief could be granted, the district court granted the motion to dismiss. For the reasons set forth below, we AFFIRM in part, REVERSE in part, and REMAND the case for further proceedings consistent with this opinion.

I. BACKGROUND

Greenberg and Rossmann are sisters. Before purchasing life insurance policies from Life of Virginia, the sisters owned three paid-up life insurance policies on the life of their father. Rossmann owned one of the policies in the face amount of $25,000, which was issued by Continental Assurance Company. Greenberg owned the other two policies. One of these policies was also issued by Continental in the face amount of $25,000, and the other was issued by Travelers Insurance Company in the face amount of $10,000.

In 1984, Life of Virginia agent Ronald Klein advised Greenberg and Rossmann that it would be financially advantageous for them to surrender their existing life insurance policies in order to purchase new

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policies from Life of Virginia. According to Greenberg and Rossmann, Klein represented to them that the new policies would require only a "single-premium" payment. Klein told Rossmann that, for a $29,000 single payment, she could obtain an $80,000 life insurance policy on the life of her father, with no additional premium payments required to maintain that death benefit during her father's lifetime. Similarly, Klein represented to Greenberg that, for a $38,940 single payment, she could obtain a $150,000 life insurance policy on the life of her father, with no additional premium payments due.

In reliance upon Klein's representations, Greenberg and Rossmann surrendered their previous policies, obtained the cash values, and applied the cash toward the purchase of the purported single-premium policies from Life of Virginia. Twelve years later, they discovered that Life of Virginia would require substantial additional premium payments to keep their policies in force.

Based on diversity jurisdiction under 28 U.S.C. § 1332, Greenberg and Rossmann filed suit in the district court against Life of Virginia in May of 1997. Their complaint raised the following six claims: (1) fraud, (2) negligent misrepresentation, (3) negligent training and supervision, (4) breach of contract, (5) breach of the duty of good faith and fair dealing, and (6) breach of fiduciary duty.

Instead of filing an answer, Life of Virginia moved to dismiss all of the claims, arguing that the complaint failed to state a claim upon which relief could be granted. For the purposes of its motion to dismiss, Life of Virginia accepted all of Greenberg and Rossmann's factual allegations as true. Attached to Life of Virginia's motion were copies of the following three documents: (a) the life insurance policy that it had issued to Greenberg, including the application form, (b) the life insurance policy that it had issued to Rossmann, including the application form, and (c) an illustration that Klein allegedly presented to Greenberg and Rossmann before they purchased the policies from Life of Virginia.

Before the district court ruled on Life of Virginia's motion to dismiss, Greenberg and Rossmann moved to convert the motion into a motion for summary judgment. They claimed that Life of Virginia's attachment of documents constituted materials outside of the pleadings, warranting a conversion of the motion. The district court denied Greenberg and Rossmann's motion to convert on the basis that it perceived no impediment to the sisters' responding substantively to the motion to dismiss and including any challenges that they had regarding the authenticity of the attachments.

After receiving an extension of time, Greenberg and Rossmann filed a memorandum in opposition to Life of Virginia's motion to dismiss. One week later, they requested leave to file a second amended complaint. The district court subsequently granted Life of Virginia's motion to dismiss the first amended complaint, and denied the sisters' motion for leave to amend, ruling that the amendment would be futile because it failed to cure any of the previous complaint's defects.

The sisters then filed a motion to alter, amend, or vacate the judgment under Rule 59(e) of the Federal Rules of Civil Procedure. They contemporaneously moved to file the deposition of agent Klein. He corroborated the sisters' claim that they had applied for single-premium policies. The district court neither ruled on the sisters' motion to file Klein's deposition nor considered it for any purpose. After the district court denied their motion to alter, amend, or vacate the judgment of dismissal, Greenberg and Rossmann filed the instant appeal.

On appeal, they contend that (1) the district court erred in refusing to convert Life of Virginia's motion to dismiss into a motion for summary judgment, given that the district court considered materials beyond the pleadings, and (2) the district

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court's analysis was tainted by its erroneous factual finding that Greenberg and Rossmann knew or should have known that they had applied for and purchased life insurance policies that provided for the possibility of additional premium payments beyond the initial premium.

II. ANALYSIS

A. The district court's refusal to convert the dismissal motion into a summary judgment motion

1. The attachments

Life of Virginia attached three exhibits to its motion to dismiss. One was a copy of the insurance policy issued to Greenberg, consisting of a cover letter, the application form, a policy data sheet, and the boilerplate language of the policy. Another was a copy of the insurance policy issued to Rossmann, consisting of the same component parts. The final exhibit was an illustration of projected values and benefits based on the life of the insured, Charles A. Phillips. Life of Virginia's agent Klein allegedly showed the illustration to Greenberg and Rossmann, but this is denied by the sisters. Because the illustration is a matter beyond the pleadings and raises a disputed issue of fact, the district court properly declined to consider the document in ruling on Life of Virginia's motion to dismiss.

The face page of both insurance policies reads as follows:

Please read your policy carefully. You, the owner, have benefits and rights described in this policy. We will pay the cash value, if any, to you on the maturity date if the insured is living on that date.

The insured is named below. The beneficiary is as named in the attached application, unless later changed. We will pay the proceeds of this policy when we receive due proof that the insured died while the policy was in effect.

You may return this policy within 20 days after its delivery for a refund of any premium paid. If you do, we will treat the policy as if it had never been issued. Return it to our home office, or to our agent or agency.

The policy data sheet found on page 3 of Greenberg's policy includes the following information:

SCHEDULE OF BENEFITS SCHEDULE OF PREMIUMS AMOUNT PAYABLE LIFE INSURANCE PLANNED PERIODIC PREMIUM $38,940.00 SINGLE PAYMENT NOTE: MATURITY DATE SHOWN IS THAT ELECTED BY THE OWNER. IT IS POSSIBLE THAT COVERAGE WILL EXPIRE PRIOR TO THE MATURITY DATE SHOWN WHERE EITHER NO PREMIUMS OR SUBSEQUENT PREMIUMS ARE INSUFFICIENT TO CONTINUE COVERAGE TO SUCH DATE. . . .

Page 3 of Rossmann's policy includes the identical information except for the amount of the single payment.

Included with both insurance policies were the application forms, which are incorporated into Life of Virginia's definition of the term "policy." In response to the planned periodic premium requested, both application forms state "-0-." For the type of "premiums payable," Greenberg's application form has a line crossed through the terms "Premiums payable." In addition, on the copy of her form submitted by Life of Virginia, there is an "X" with a line through it next to "Annually," with no other markings, but on the copy of the same form submitted by Greenberg, the application form also has an "X" marked

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next to "Single Premium." On Rossmann's form, there is an "X" placed next to "Annually" and another "X" placed next to "Single Premium" in the box below "Premiums Payable."

Finally, both policies include the following pertinent provisions in the "boilerplate" portion of the documents:

INTRODUCTION

This is a flexible premium adjustable life...

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