Coldren v. Am. Gen. Life Ins. Co.
| Decision Date | 05 December 2012 |
| Docket Number | 3:12-cv-28-RLY-WGH |
| Parties | STEVE COLDREN, and JAYE H. COLDREN, on behalf of the Steven M. Coldren Irrevocable Trust, Plaintiffs, v. AMERICAN GENERAL LIFE INSURANCE COMPANY, A member of American International Group, Inc., and LAWRENCE A. RASCHE Defendants. |
| Court | U.S. District Court — Southern District of Indiana |
Plaintiffs, Steve and Jaye M. Coldren, on behalf of the Steven M. Coldren Irrevocable Trust (collectively, "Plaintiffs") sued American General Life Insurance Company ("American General") and Lawrence A. Rasche ("Rasche") (collectively, "Defendants"), alleging common law and statutory violations in connection with an American General life insurance policy sold to them. Plaintiffs now move to apply Florida substantive law. For the reasons set forth below, their motion is GRANTED.
The following facts are considered true for the purposes of this motion. The Plaintiffs, residents of Florida, purchased a life insurance policy from American General, a Texas-based subsidiary of American International Group, Inc. ("AIG"), authorized to do business in Indiana and Florida. (Amended Complaint ¶¶ 1-3, 28). Rasche, an Indiana resident, was an American General agent authorized to sell life insurance products in Indiana, Florida, and other states. (Id. ¶4). Clyde Benninghoff ("Benninghoff"), a Florida resident and another American General agent (id. ¶ 6), recommended to Steve Coldren "that he consider purchasing an American General life insurance policy with premiums that could be borrowed." (Id. ¶ 13). This type of policy is known as premium-financed life insurance. (Id.). Benninghoff put Plaintiffs in contact with Rasche after Benninghoff told Plaintiffs that Rasche claimed to be one of the top agents in the country selling these "zero net outlay" policies. (Id. ¶¶ 13, 17). Rasche had made arrangements with Old National Bank ("ONB"), under which the Plaintiffs would obtain a $150,000 line of credit to serve as collateral for the loan Rasche and ONB had arranged. This loan was to provide at least $980,000 in premium payments by ONB over the first four years of the policy. (Id. ¶¶ 28-29).
Plaintiffs purchased the policy and ONB paid the first two annual premiums. (Id. ¶ 30). However, citing concerns over AIG's financial status, ONB was unwilling to pay subsequent premiums. (Id. ¶ 31). Plaintiffs were unable to obtain financing after ONB withdrew its financing, so the policy lapsed. (Id. ¶¶ 33). ONB also "called upon thePlaintiffs to pay approximately $200,000 in principal and interest in November of 2009" (id.); that payment constitutes the money damages claimed by Plaintiffs. (Id. ¶ 20).
On July 8, 2011, Plaintiffs filed suit in the United States District Court for the Western District of Kentucky against both Defendants, alleging violations of Kentucky and Florida law. On September 8, 2011, American General moved to transfer the case to the Southern District of Indiana pursuant to 28 U.S.C. § 1406(a). American General's motion was granted on March 12, 2012. On May 9, 2012, Plaintiffs filed their motion to apply Florida substantive law, and on May 23, 2012, filed their Amended Complaint. The amended complaint alleged common law and Florida and Indiana statutory violations. Also on May 23, 2012, Defendants filed briefs in opposition to Plaintiffs' motion to apply Florida law. Jurisdiction is proper pursuant to 28 U.S.C. § 1332(a)(1).
Choice of law matters present the court with a fairly straightforward analysis. In Erie R.R. Co. v. Tompkins, the United States Supreme Court held that a federal court exercising its diversity jurisdiction is to apply the proper state's substantive law in its analysis. 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). When, as in this case, multiple states' laws could apply (Florida or Indiana), the choice of law rules of the forum state—Indiana—dictate which state's substantive law should apply. Horn v. Transcon Lines, Inc., 7 F.3d 1305, 1307 (7th Cir. 1993). Under Indiana law, the choice of law analysis is a two-step process. Simon v. United States, 805 N.E.2d 798 (Ind. 2004). The court must first "determine whether the differences between the laws of the states are 'important enough to affect the outcome of the litigation.'" Id. at 805 (quotingHubbard Mfg. Co., Inc. v. Greeson, 515 N.E.2d 1071, 1073). If the differences are important enough, "the traditional lex loci delicti rule (the place of the wrong) will apply." Id. (citation omitted). This rule is overcome only if the place of the last wrong has little connection to the legal questions in issue. Id.
The substantial difference standard is a very modest one for Plaintiffs to meet. A single different legal standard or higher burden of proof is generally sufficient to find there is a substantial difference in the states' substantive laws. See, e.g., Kentucky Nat'l Ins. Co. v. Empire Fire & Marine Ins. Co., 919 N.E.2d 565, 576 (Ind. Ct. App. 2010); Alli v. Eli Lilly Co., 854 N.E.2d 372, 377-78 (Ind. Ct. App. 2006). Rasche claims that proving the harm resulting from the alleged violations requires the same evidence in Indiana and Florida. Therefore, there are no differences that would affect the outcome of the litigation, and Indiana law should apply. This court does not find Rasche's argument persuasive.
Plaintiffs accused Rasche of negligent misrepresentation. (Amended Complaint ¶¶ 51-57). They claim that Rasche "undertook a duty to supply the Plaintiffs with specific information . . . At all relevant times, Rasche knew or should have known that the Plaintiffs would place significant importance on the information he gave them in makingthe decision to enter into the scheme described herein." (Id. ¶ 54). This cause of action appears to be allowed in Florida as a matter of law, whereas it is unavailable in Indiana outside of the employment context. See, e.g., Ormond v. Anthem, Inc., 2008 WL 906157, at *30 (S.D. Ind. Mar. 31, 2008). The court therefore concludes that the availability of a cause of action for negligent representation in Florida but not in Indiana is a significant difference between the states' laws.
Plaintiffs claim that the greater potential scope of an agency relationship in Florida makes their claim against Rasche for breach of fiduciary duty viable there, whereas it may not necessarily be viable in Indiana. In both Indiana and Florida, an insurance broker represents the insured and an agent represents the insurer, and in neither state does an insurance agent owe a duty to the insured. Estate of Jerome Mintz v. Conn. Gen. Life Ins. Co., 905 N.E.2d 994, 1000-01 (Ind. 2009); Moss v. Appel, 718 So. 2d 199, 201 (Fla. Ct. App. 1999) (internal quotation omitted), abrogated on other grounds, Wachovia Ins. Servs., Inc. v. Toomey, 994 So. 2d 980, 990 (Fla. 2008). However, Plaintiffs claim that a cause for breach of fiduciary duty exists as a matter of law in some instances in Florida, since an agent may act in a dual capacity as broker for the insured and agent to the insurer. Toomey, 994 So. 2d at 990. In Indiana, however, Plaintiffs will likely have to show there was at least a confidential relationship and reliance. Callaway v. Callaway, 932 N.E.2d 215, 225 (Ind. Ct. App. 2010); Dolatowski v. Merrill Lynch, 808 N.E.2d 676, 681 (Ind. Ct. App. 2004) (citation omitted).
Defendants do not claim that Rasche was American General's captive agent. In the absence of such captivity, the Steele Court held that an independent agent generally owes a duty to the insured with respect to the procurement of insurance, even if he is being compensated by the insurer for his services. Steele v. Jackson Nat'l Life Ins. Co., 691 So. 2d 525, 527 (Fla. Ct. App. 1997) (citations omitted). It may ultimately be determined that Rasche acted as a captive American General agent, and thus owed no duty to Plaintiffs. However, for the purposes of this motion, the higher burden to sustain a valid claim in Indiana versus Florida constitutes a substantial difference for step one of the Simon analysis.
Plaintiffs have alleged several violations of Florida and Indiana statutory law by Defendant Rasche. Plaintiffs claim Rasche violated the Florida Deceptive and Unfair Trade Practices Act ("DUTPA") (Amended Complaint ¶¶ 39-43) and the Florida Unfair Insurance Trade Practices Act ("UITPA"). (Id. ¶¶ 44-50). Further, Plaintiffs allege Rasche violated the Indiana Crime Victims Act ("ICVA") (id. ¶¶ 104-07) and the Indiana Deceptive Consumer Sales Act ("Consumer Sales Act"). (Id. ¶¶ 108-13). Whereas the Indiana statutes "appear to require allegations and evidence of intentional misconduct on the part of the Defendant" (Plaintiffs' Memorandum at 6), the Florida statutes do not. However, Rasche argues that any differences between the UITPA and Consumer Sales Act are overridden by the fact that neither law affords a private right of action with regard to personal insurance sales. While the court agrees that the differences between the UITPA and Consumer Sales Act are meaningless for this lawsuit, the court finds that thedifference in proof between the ICVA and DUTPA constitutes a difference in Indiana and Florida substantive law.
Finally, Rasche argues that the harm resulting from the Defendants' alleged negligent misrepresentation and violations of the ICVA or DUTPA are the same as Plaintiffs' common law claims. Therefore, since the same proof is necessary to prevail on any and all claims regardless of the state law applied, the differences are not important enough to affect the outcome of the litigation, and Indiana law should apply. Simon, 805 N.E.2d at 805. The court disagrees, mindful that Plaintiffs' burden at step one in the Simon analysis is very...
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