Cozzi v. United of Omaha Life Ins. Co.
| Decision Date | 26 March 2021 |
| Docket Number | No. 1:20-CV-04031,1:20-CV-04031 |
| Parties | HEATHER COZZI, ASHLEY COZZI, MICHAEL COZZI, AND MICHELLE COZZI, Plaintiffs, v. UNITED OF OMAHA LIFE INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
Plaintiffs Heather Cozzi, Ashley Cozzi, Michael Cozzi, and Michelle Cozzi sued Defendant United of Omaha Life Insurance for breach of contract and attorney fees under 215 Ill. Comp. Stat. 5/155 in the Circuit Court of Cook County, Illinois, seeking compensation under a life insurance policy issued by Defendant to their mother. [1-2]; [14-2]. Defendant subsequently removed this case to federal court, [1], filed its answer and affirmative defenses to the complaint, [11], and filed an amended notice of removal, [14]. Plaintiffs now move to strike Defendant's affirmative defenses. [15]. For the reasons explained below, this Court grants in part, and denies in part, Plaintiffs' motion to strike.
On May 5, 2017, Rebecca Cozzi signed an application for a life insurance policy (the "Application") and submitted it to Defendant. [14-2] at 56-61. The Application stipulated that coverage would become effective upon satisfaction of three conditions: (1) full payment of the initial premium; (2) proper notice to Defendant of any changes in applicant's health or habits between the issuance of the Application and delivery of the policy; and (3) delivery of the policy in accordance with its delivery requirements. Id. at 61. The Application required Ms. Cozzi to answer questions about her medical history and disclose any medical or therapeutic treatments received during the previous five years. Id. at 59-60.
One question on the Application required Ms. Cozzi to state whether she had consulted with a doctor, been hospitalized, or treated by a healthcare provider "for any other health condition." Id. at 60. Ms. Cozzi responded "No." Id. Ms. Cozzi further certified she would notify Defendant about changes to her stated responses, should any occur prior to delivery of the policy, and that no policy would go into effect if Defendant deemed her ineligible for one. Id. at 60-61.
Defendant alleges that on May 17 and 18, 2017, Ms. Cozzi visited a physician, Dr. Riskin of DMG Neurology, who informed her of abnormal results from a monoclonal protein test and Electromyography (EMG) and noted that she would require additional testing. [11] at 2. Defendant alleges that Ms. Cozzi failed to disclose this information, despite certifying that she would do so in the Application. Id. Defendant admits it knew Ms. Cozzi was undergoing physical and occupationaltherapy before issuing a policy and that it charged her more for life insurance because she presented a greater risk. Id. ¶¶ 14, 16; [14-2] at 22.
On June 2, 2017, Defendant issued a $349,000 life insurance policy to Ms. Cozzi, which she accepted on that date. [14-2] at 2-3. In September 2017, Ms. Cozzi received a diagnosis of amyotrophic lateral sclerosis (ALS). [14-2] at 4-5; [1-4] at 1. Ms. Cozzi passed away from ALS on April 18, 2019. [14-2] at 4-5; [1-4] at 1. Defendant, citing Ms. Cozzi's failure to disclose her May 2017 medical appointments as grounds for rescission of the policy, refused to issue payment to Ms. Cozzi's beneficiaries. [11] ¶ 22.
Plaintiffs filed a claim against Defendant in the Circuit Court of Cook County, Illinois alleging breach of contract and seeking attorney fees. [1-2]. Defendant removed the case to this Court on July 9, 2020 pursuant to this Court's diversity jurisdiction. [1]. On August 6, 2020, Defendant filed its answer including affirmative defenses. [11]. Plaintiffs now move to strike all affirmative defenses. [15].
Rule 12(f) allows this Court to "strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous material." Fed. R. Civ. P. 12(f). Courts generally disfavor motions to strike because they "potentially serve only to delay" proceedings. NewNet Commc'n Techs., LLC v. VI E-Cell Tropical Telecom, Ltd., 85 F. Supp. 3d 988, 993 (N.D. Ill. 2015) (quoting Heller Fin., Inc. v. Midwhey Powder Co., 883 F.2d 1286, 1294 (7th Cir. 1989)). The burden for a motion to strike is high; movants "must show that the allegations being challenged are so unrelatedto plaintiff's claim as to be void of merit and unworthy of any consideration and that the allegations are unduly prejudicial." VitalGo, Inc. v. Kreg Therapeutics, Inc., 370 F. Supp. 3d 873, 880 (N.D. Ill. 2019) (quoting Cumis Ins. Soc'y, Inc. v. Peters, 983 F. Supp. 787, 798 (N.D. Ill. 1997)).
If the targeted material has at least some "possible relation to the controversy" and does not "cause the objecting party prejudice," the court should deny the motion to strike. Siegel v. HSBC Holdings, plc, 283 F. Supp. 3d 722, 730 (N.D. Ill. 2017) ). The first inquiry asks whether the language at issue is relevant. Id. And in the second inquiry, prejudice results "when the matter complained of has the effect of confusing the issues, or where it is so lengthy and complex that it places an undue burden on the responding party." Id. (quoting Sun Life Assurance Co. of Can. v. Great Lakes Bus. Credit LLC, 968 F. Supp. 2d 898, 903 (N.D. Ill. 2013)).
But when a plaintiff moves to strike an affirmative defense, several other considerations apply. In addition to being properly pled as an affirmative defense, the defense must meet Rule 8 and Rule 9's pleading requirements and "must withstand a Rule 12(b)(6) challenge." Raquet v. Allstate Corp., 348 F. Supp. 3d 775, 781 (N.D. Ill. 2019).
To survive a Rule 12(b)(6) challenge, a defense must include a "short and plain statement of the claim" showing the pleader merits relief, Fed. R. Civ. P. 8(a)(2), and giving the opposing party "fair notice" of the claim "and the grounds upon which it rests," Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quotingConley v. Gibson, 355 U.S. 41, 47 (1957)). The defense must also contain "sufficient factual matter" to state a facially plausible claim to relief, allowing this Court to "draw the reasonable inference that the [opposing party] is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). Thus, "threadbare recitals of the elements of a cause of action" and mere conclusory statements "do not suffice." Iqbal, 556 U.S. at 678.
This Court begins with the Introduction to Defendant's Answer. In a single paragraph, Plaintiffs ask this Court to strike Introduction to the Answer in its entirety, arguing that it presents an immaterial, redundant, and inaccurate account of relevant facts and law. [15] at 3. Plaintiffs do not claim that the Introduction bears no relation to the case; accordingly, this Court asks whether Introduction prejudices Plaintiffs. See Siegel, 283 F. Supp. 3d at 730. Here, Plaintiffs neither identify any offending material, nor articulate how such material actually prejudices them. Absent further proffer, this Court finds no basis to strike the Introduction. Thus, this Court denies the motion to strike as to the Introduction.
Plaintiffs challenge five distinct affirmative defenses from the Defendant's answer: (1) failure to state a claim, [11] Affirmative Defenses ¶ 2; (2) misrepresentation, id. ¶¶ 3-8; (3) unclean hands, id. ¶ 9; (4) estoppel, id.; and (5)that denial of coverage here was not vexatious or unreasonable under Illinois law, id. ¶¶ 10-13. This Court addresses each affirmative defense below.
Defendant's first affirmative defense asserts that the complaint "fails to state a claim or cause of action upon which relief can be granted." Id. ¶ 2. Until such time as the Seventh Circuit confirms the viability of using an affirmative defense to argue a purported a failure to state a claim, this Court finds that Defendant's proper tool remains a motion to dismiss. See Raquet, 348 F. Supp. 3d at 785-86 (citing Ill. Wholesale Cash Register, Inc. v. PCG Trading, LLC, No. 08 C 363, 2009 WL 1515290, at *2 (N.D. Ill. May 27, 2009)) ( that a Rule 12(b)(6) motion is "the proper vehicle to establish a failure to state a claim defense"). Accordingly, this Court strikes Paragraph Two of Defendant's affirmative defenses with prejudice (but allows Defendant to present this theory via the proper rule at a later time).
In Paragraphs Three through Eight, Defendant appears to invoke an affirmative defense of misrepresentation, alleging Ms. Cozzi made a false statement in her Application, thus justifying Defendant's rescission of her policy. [11] Affirmative Defenses ¶¶ 3-8.
Plaintiffs do not argue that this defense is irrelevant or prejudicial. [15] at 2-3. Moreover, although Defendant did not clearly label this affirmative defense in its answer, given Plaintiffs' ability to properly identify the defense of misrepresentation, [15] at 2, Defendant has satisfied Rule 8.
This Court then asks whether the defense complies with Rule 9, which requires a party "alleging fraud or mistake" to "state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). As a practical matter, this means Plaintiffs must plead the "who, what, when, where, and how" of the alleged fraud. Benson v. Fannie May Confections Brands, Inc., 944 F.3d 639, 646 (7th Cir. 2019).
Under Illinois law, an insurer may rescind a policy if the insured, or someone acting on his behalf, makes a misrepresentation while negotiating the policy. 215 Ill. Comp. Stat. 5/154. The statement "must be false" and it "must have been made with an actual intent to deceive or must 'materially affect the acceptance of the risk or hazard assumed by the insurer.'" Ill. State Bar Ass'n Mut. Ins. Co. v. Law Office of Tuzzolino and Terpinas, 27 N.E.3d 67,...
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