Advance Tr. & Life Escrow Servs. v. Protective Life Ins. Co.

• Decision Date: 08 August 2022
• Docket Number: 2:18-cv-01290-MHH
• Parties: ADVANCE TRUST & LIFE ESCROW SERVICES, LTA, as securities intermediary for LIFE PARTNERS POSITION HOLDER TRUST, and WORTH JOHNSON, on behalf of themselves and all others similarly situated, Plaintiffs, v. PROTECTIVE LIFE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Northern District of Alabama

ADVANCE TRUST & LIFE ESCROW SERVICES, LTA, as securities intermediary for LIFE PARTNERS POSITION HOLDER TRUST, and WORTH JOHNSON, on behalf of themselves and all others similarly situated, Plaintiffs, v. PROTECTIVE LIFE INSURANCE COMPANY, Defendant.

No. 2:18-cv-01290-MHH

United States District Court, N.D. Alabama, Southern Division

August 8, 2022

MEMORANDUM OPINION AND ORDER

MIADELINE HUGHES HAIKALA, UNITED STATES DISTRICT JUDGE

In this breach of contract class action involving several universal life insurance policies, plaintiffs Advance Trust & Life Escrow Services and Worth Johnson, on behalf of themselves and others similarly situated, allege that defendant Protective Life Insurance Company forced them to pay unlawful and excessive cost of insurance - COI - charges each month. The plaintiffs contend that Protective Life should have reviewed and adjusted its COI Rate Tables to account for improved future mortality experience. Protective Life contends that the Eleventh Circuit's decision in Slam Dunk I, LLC v. Connecticut General Life Ins. Co., 853 Fed.Appx. 451 (11th Cir. 2021), mandates judgment in the company's favor on the plaintiffs' claims. (Doc. 111). This opinion resolves Protective Life's motion for judgment on the pleadings.

The opinion begins with a discussion of the standard that a district court uses to evaluate motions for judgment on the pleadings. Then, consistent with that standard, the Court describes the plaintiffs' factual allegations. Next, the Court briefly outlines this action's procedural history. Finally, the Court evaluates Protective Life's argument that Slam Dunk requires dismissal of the plaintiffs' claim.

I.

“After the pleadings are closed - but early enough not to delay trial - a party may move for judgment on the pleadings.” FED. R. CIV. P. 12(c). “A Rule 12(c) motion for judgment on the pleadings is analyzed the same as a Rule 12(b)(6) motion to dismiss.” Dial v. City of Bessemer, No.: 2:14-cv-01297-RDP, 2016 WL 3054728, at *3 (N.D. Ala. May 31, 2016). Like a Rule 12(b)(6) motion to dismiss, a Rule 12(c) motion for judgment on the pleadings tests the sufficiency of a complaint against the “liberal pleading standards set forth by Rule 8(a)(2).” Erickson v. Pardus, 551 U.S. 89, 94 (2007). Pursuant to Rule 8(a)(2), a complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” FED. R. CIV. P 8(a)(2). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). “Specific facts are not necessary; the statement need only ‘give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'” Erickson, 551 U.S. at 93 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

In deciding a Rule 12(b)(6) motion to dismiss or a Rule 12(c) motion for judgment on the pleadings, a court must view the allegations in a complaint in the light most favorable to the non-moving party. Watts v. Fla. Int'l Univ., 495 F.3d 1289, 1295 (11th Cir. 2007). A court must accept well-pleaded facts as true. Grossman v. Nationsbank, N.A., 225 F.3d 1228, 1231 (11th Cir. 2000). A court may consider a written instrument attached to the complaint as an exhibit “if it is central to the plaintiff's claims and is undisputed in terms of authenticity.” Maxcess, Inc. v. Lucent Techs., Inc., 433 F.3d 1337, 1340 n.3 (11th Cir. 2005).

II.^[1]

Protective Life offers universal life insurance policies which “combine death benefits with a savings or investment component.” (Doc. 92, p. 2, ¶ 3; Doc. 123, p. 3 ¶ 3). There are five universal life insurance policies at issue in this action.^[2]Advance Trust owns four of the policies. (Doc. 92, pp. 10-11, ¶ 17; Doc. 123, pp. 11-12, ¶ 17).^[3] Worth Johnson owns one of the policies. (Doc. 92, p. 11, ¶ 18; Doc. 123, p. 12, ¶ 18). It is unclear whose lives are insured under the policies.

Every three months, the policyholder must pay the planned premium. (Doc. 1-1, p. 5). For policy #B00087535, the minimum quarterly premium is $128.31. (Doc. 1-1, p. 5). Subject to certain limitations, the policyholder also may pay premiums more frequently and in greater sums. (Doc. 1-1, pp. 11-12). The premiums, less the premium expense charge, go into the policyholder's account. (Doc. 1-1, p. 15).^[4] Once in the account, the money accrues interest according to the guaranteed interest rate provided in the policy. For policy #B00087535, the guaranteed interest rate is 0.36748% per month, compounded monthly, which equals 4.5% per year, compounded annually. (Doc. 1-1, p. 6). This is how the investment component of Protective Life policies grows in value.

Protective Life also makes a monthly deduction from a policyholder's account. “The monthly deduction is the sum of the following four items:”

(1) The cost of insurance and the cost of additional benefits provided by riders for the policy month.

(2) The monthly expense charge applicable to the Initial Face Amount. This charge applies only the first 12 policy months. It is equal to the Monthly Expense Charge per $1,000 (shown in the Policy Schedule) multiplied by the number of thousands of Initial Face Amount.

(3) The monthly expense charge applicable to any increase in face amount. This charge applies only to the first 12 policy months following the day on which an increase becomes effective. It is equal to the Monthly Expense Charge per $1,000 of increase (shown in the Policy Schedule) multiplied by the number of thousands of increase. This charge does not apply to an increase caused solely by a change in death benefit option.

(4) The Monthly Administrative Charge shown in the Policy Schedule.

(Doc. 1-1, p. 15). Given that the second charge applies only during the first 12 months after the policy is purchased, the third charge applies only if the policy's face value increases and only in the first 12 months after that increase, and the fourth charge is only $2.25, (Doc. 1-1, p. 6), the primary component of the monthly deduction is the cost of insurance. The COI represents “the insurer's cost of providing mortality coverage.” (Doc. 92, p. 13, ¶ 25; Doc. 123, p. 14, ¶ 25).

“The cost of insurance is determined at the end of each policy month as follows:”

(1) divide the death benefit at the beginning of the policy month by the sum of 1 plus the guaranteed interest rate;

(2) reduce the result by the amount of policy value (prior to deducting the cost of insurance) at the beginning of the policy month;

(3) multiply the difference by the cost of insurance rate as described in the Cost of Insurance Rates section.

(Doc. 1-1, p. 15). The third component, the cost of insurance rate, functions as a multiplier. As the cost of insurance rate increases, the cost of insurance increases. In turn, as the cost of insurance increases, the monthly deduction increases. As the monthly deduction increases, the policy's investment component loses value.^[5] The policies state that the cost of insurance rate is determined as follows:

The monthly cost of Insurance rate is based on the sex, attained age, and rate class of the Insured and on the policy year. Attained age means age nearest birthday on the prior policy anniversary. Monthly cost of insurance rates will be determined by us, based on our expectations as to future mortality experience. Any change in the monthly cost of insurance rates will be on a uniform basis for insureds of the same class such as age, sex, rate class, and policy year. However, the cost of insurance rates will not be greater than those in the Table of Guaranteed Maximum Insurance rates, shown in the Policy Schedule.

(Doc. 1-1, p. 16). The Table of Guaranteed Maximum Insurance Rates provides:

                                  ATTAINED AGE
                                
                

RATE

                                  ATTAINED AGE
                                
                                  RATE
                                
                                  ATTAINED AGE
                                
                                  RATE
                                
                                  ATTAINED AGE
                                
                                  RATE
                                
                                  ATTAINED AGE
                                
                                  RATE
                                
                                  0
                                
                

$ .097

                                  20
                                
                                  $ .158
                                
                                  40
                                
                                  $ .251
                                
                                  60
                                
                                  $1.341
                                
                                  80
                                
                                  $8.305
                                
                                  1
                                
                

.089

                                  21
                                
                

.159

                                  41
                                
                                  .274
                                
                                  61
                                
                                  1.463
                                
                                  81
                                
                                  9.037
                                
                                  2
                                
                

.082

                                  22
                                
                

.157

                                  42
                                
                                  .296
                                
                                  62
                                
                                  1.601
                                
                                  82
                                
                                  9.867
                                
                                  3
                                
                

.081

                                  23
                                
                

.155

                                  43
                                
                                  .322
                                
                                  63
                                
                                  1.758
                                
                                  83
                                
                

10.803

                                  4
                                
                

.079

                                  24
                                
                

.151

                                  44
                                
                                  .349
                                
                                  64
                                
                                  1.932

...