Dike v. Penn Ins. & Annuity Co.
| Decision Date | 10 January 2018 |
| Docket Number | CIVIL ACTION NO. 17–1410 |
| Citation | 295 F.Supp.3d 530 |
| Parties | David DIKE, v. The PENN INSURANCE AND ANNUITY COMPANY |
| Court | U.S. District Court — Eastern District of Pennsylvania |
Noah H. Charlson, Charlson & Associates, Philadelphia, PA, for David Dike.
Amy B. Boyea, James M. Chambers, Edison McDowell & Hetherington LLP, Arlington, TX, Benjamin E. Gordon, Stradley, Ronon, Stevens & Young LLP, Philadelphia, PA, William T. Mandia, Stradley, Ronon, Stevens & Young, Cherry Hill, NJ, for the Penn Insurance and Annuity Company.
MEMORANDUM RE: MOTION TO DISMISS
In this case, Plaintiff David Dike ("Dike") alleges that Defendant Penn Life and Annuity Insurance Company ("PIA") committed various torts and statutory violations in the course of Dike's relationship with PIA as a PIA life insurance policyholder. Specifically, Dike alleges negligence, fraud, violations of the Texas Insurance Code, and violations of the Texas Deceptive Trade Practices Act. Presently before the Court is Defendant's Motion to Dismiss all of Dike's claims. Dike's claims are as follows:
For the reasons discussed below, Defendant's motion is granted in full. Counts I–III are dismissed with prejudice, while Counts IV and V are dismissed without prejudice, with leave to amend.
The following facts are taken as true from Dike's Amended Complaint. In 2009 David Dike approached PIA about the possibility of purchasing a Flexible Premium Indexed Life Insurance Policy ("the Policy") from them. (ECF 8, Amended Complaint ¶ 7.) PIA's agent William J. Talbot explained to Dike that the Policy required him to pay an initial cash premium, to be followed by yearly cash premiums which would be invested by PIA; the returns would then be paid out to Dike as policy loans, as well as additional tax-free income for the remainder of Dike's life, in addition to funding the life insurance policy and a long-term care policy. (Id. ¶¶ 8–9.) Dike expressed a preference to avoid negative tax consequences, such as those that would be created by a Modified Endowment Contract ("MEC"), and Talbot "expressly represented to [Dike] that a reduction in the Policy's death benefit was an appropriate investment consistent with [Dike's] investment goals, including, without limitation, avoiding the creation of a MEC." (Id. ¶ 10.)
In 2010 Dike purchased the Policy and paid an initial premium of $100,000. (Id. ¶ 11.) He later agreed to pay biannual premium payments of $50,000, which would be returned to him as policy loans for a 10–year period with an annual retirement benefit of $20,000–$22,000 tax-free. (Id. ¶ 12.) In October of 2012, Dike told Talbot that he wanted to begin receiving income from the Policy sooner than previously arranged, and reminded Talbot that he wished to avoid any changes to the Policy that would create an MEC. (Id. ¶¶ 13–14.) Talbot assured Dike that he would be careful to ensure that any changes to the Policy did not create an MEC. (Id. ¶ 15.) Talbot consulted with Wayne Stevens, another PIA employee, who recommended a reduction in the Policy's death benefit to increase the amount of Dike's premium that could be devoted to investment. (Id. ¶¶ 16–17). Talbot asked Stevens how much Dike could reduce the Policy's death benefit without creating an MEC, and Stevens suggested reducing the death benefit to $626,000. (Id. ¶¶ 18–19.) Talbot, in turn, suggested to Dike that he reduce the Policy's death benefit to $626,000 and redirect the difference toward investment. (Id. ¶ 20.) Dike gave written approval for the change on October 25, 2012. (Id. ¶ 21.) Dike's reduction to his Policy's death benefit in fact did create an MEC, thereby subjecting the Policy returns to taxation. (Id. ¶ 25.) Dike learned of this fact on February 1, 2016, when he for the first time received a Form 1099r from PIA reporting "gain on MEC." (Id. ¶ 26.)
Dike filed suit against PIA on March 28, 2017 (ECF 1). He then filed an amended complaint on June 13, 2017 (ECF 8). On June 27, 2017 PIA filed a motion to dismiss all counts of the Amended Complaint (ECF 9). Dike responded on July 7, 2017 (ECF 10), and PIA replied on July 14, 2017 (ECF 11).
In considering a motion to dismiss under Rule 12(b)(6), "we accept all factual allegations as true [and] construe the complaint in the light most favorable to the plaintiff." Warren Gen. Hosp. v. Amgen, Inc., 643 F.3d 77, 84 (3d Cir. 2011) (internal quotation and citations omitted). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim for relief that is plausible on its face.’ " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ).
The Court in Iqbal explained that, although a court must accept as true all of the factual allegations contained in a complaint, that requirement does not apply to legal conclusions; therefore, pleadings must include factual allegations to support the legal claims asserted. Id. at 678, 684, 129 S.Ct. 1937. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. at 678, 129 S.Ct. 1937 (citing Twombly, 550 U.S. at 555, 127 S.Ct. 1955 ); see also Phillips v. County of Allegheny, 515 F.3d 224, 232 (3d Cir. 2008) () (citing Twombly, 550 U.S. at 556 n.3, 127 S.Ct. 1955 ). Accordingly, to survive a motion to dismiss, a plaintiff must plead "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955 ).
With regard to Dike's tort claims, Counts I–III, Texas law applies. There is no choice of law provision included in the Policy. Thus, in a diversity action, the Court applies the choice-of-law rules of the forum state, here, Pennsylvania. Klaxon v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Pennsylvania employs a "flexible rule" which "permits analysis of the policies and interests underlying the particular issue before the court" and instructs courts to apply the law of the state "with the most interest in the problem." Hammersmith v. TIG Ins. Co., 480 F.3d 220, 227 (3d Cir. 2007) (quoting Griffith v. United Air Lines, Inc., 416 Pa. 1, 203 A.2d 796, 805–06 (1964) ). Here, Texas law properly applies. Plaintiff David Dike is a resident of Texas. Dike purchased the Policy in Texas, and the conversations between Dike and PIA's agent Talbot, which are central to the dispute here, apparently took place in Texas. (ECF 9, 10–11, n. 29.) Thus Texas is clearly the forum with a greater interest in this case. There is a two year statute of limitations for the negligence and negligent supervision claims. Tex. Civ. Prac. & Rem. Code § 16.003(a). There is a four year statute of limitations for the fraud claim. Tex. Civ. Prac. & Rem. Code § 16.004.
Both the Texas Insurance Code and the Texas Deceptive Trade Practices Act impose two year statutes of limitations. Tex. Ins. Code § 541.162 ; Tex. Civ. Prac. & Rem. Code § 17.565
PIA argues that the claim accrued on October 25, 2012, the day that Dike gave written approval to lower the Policy's death benefit, which in turn created an MEC. As Dike did not file the original complaint in this case until March 28, 2017, PIA argues that his claims are time-barred. Dike responds that the discovery rule applies. He argues that the limitations period did not begin to run until February 1, 2016, which was the date when he first learned that an MEC had been created, based on receiving, for the first time, a Form 1099r stating as much. Thus, he argues that he was within the two and four year statutes of limitations for all of his claims when he filed suit on March 28, 2017.
The Texas "discovery rule" is "the legal principle which, when applicable, provides that limitations run from the date the plaintiff discovers or should have discovered, in the exercise of reasonable care and diligence, the nature of the injury." Willis v. Maverick, 760 S.W.2d 642, 644 (Sup. Court Tex. 1988). The discovery rule applies by statute to all claims brought under the Texas Insurance Code, and the DTPA. Tex. Ins. Code § 541.162(a)(2) ; Tex. Bus. & Com.Code § 17.565. Where it is not statutorily commanded, the discovery rule applies when two conditions are satisfied: "the nature of the injury must be inherently undiscoverable and [ ] the injury itself must be objectively verifiable." TIG Ins. Co. v. Aon Re, Inc., 521 F.3d 351, 358 (5th Cir. 2008) (internal quotation omitted). The applicability of the discovery rule is determined categorically, that is, it is a question of whether the type of injury at issue is discoverable through reasonable diligence, rather than an evaluation of the specific facts at hand. Id.
PIA concedes that Dike's injury is objectively verifiable, satisfying the first requirement. (Motion to Dismiss, ECF 9 at 15.) As to the second, the parties disagree whether Dike's injury was "inherently undiscoverable." The Texas Supreme Court and the Fifth Circuit have recognized that "[p]rofessional malpractice, such as erroneous tax advice, ‘is inherently undiscoverable.’ " TIG Ins. Co., 521 F.3d at 359 (quoting Murphy v. Campbell, 964 S.W.2d 265, 271 (Tex. 1997) ) (" ‘[T]he very reason to seek expert advice is that tax matters are often not within the average person's common knowledge.’ "). Thus the Texas...
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