Ernst v. N. Am. Co. for Life & Health Ins.

• Decision Date: 27 March 2017
• Docket Number: 1:16CV705
• Citation: 245 F.Supp.3d 680
• Court: U.S. District Court — Middle District of North Carolina
• Parties: Benjamin M. ERNST, Plaintiff, v. NORTH AMERICAN COMPANY FOR LIFE AND HEALTH INSURANCE, Defendant. North American Company for Life and Health Insurance, Cross- and Counter-claim Plaintiff v. Donna M. Jackson and Benjamin M. Ernst, Cross- and Counter-claim Defendants

245 F.Supp.3d 680

Benjamin M. ERNST, Plaintiff,

v.NORTH AMERICAN COMPANY FOR LIFE AND HEALTH INSURANCE, Defendant.

North American Company for Life and Health Insurance, Cross- and Counter-claim Plaintiff

v.Donna M. Jackson and Benjamin M. Ernst, Cross- and Counter-claim Defendants

1:16CV705

United States District Court, M.D. North Carolina.

Signed March 27, 2017

Filed March 28, 2017

James J. Mills, Burns Day & Presnell, P.A., Theodore B. Smyth, Jennifer Welch, Cranfill Sumner & Hartzog LLP, Raleigh, NC, for Plaintiff.

Kip Nelson, Manning A. Connors, III, Smith Moore Leatherwood LLP, Greensboro, NC, Vittorio F. Terrizzi, Chittenden Murday & Novotny, LLC, Chicago, IL, for Cross- and Counter-claim Plaintiff/Defendant.

J. Michael Malone, Hendren Redwine & Malone, PLLC, Raleigh, NC, for Cross-and Counter-claim Defendants.

MEMORANDUM OPINION AND ORDER

THOMAS D. SCHROEDER, District Judge.

This action arises out of a dispute over entitlement to the proceeds of an annuity administered by Defendant North American Company for Life and Health Insurance ("NAC"). Plaintiff Benjamin Ernst contends that NAC improperly paid the proceeds to his aunt, cross-claim Defendant Donna A. Jackson, and brings this action as the putative beneficiary. Faced now with conflicting claims of entitlement, NAC seeks to recover the annuity proceeds from the aunt, deposit them with the court, and leave it to Ernst and the aunt to litigate the question of which one is entitled to recovery.

Before the court are NAC's motion to dismiss three counts of Ernst's complaint (Doc. 15) and Jackson's motion to dismiss NAC's cross-claims (Doc. 22). For the reasons set forth below, NAC's motion to dismiss will be granted as to count II, which alleges violations of North Carolina's trade practice laws, and as to count III, which alleges waiver and equitable estoppel, but denied as to count IV, which alleges negligent misrepresentation. Jackson's motion to dismiss will be granted as to count I of NAC's counterclaim and cross-claim, which alleges interpleader, and denied as to count II, which alleges unjust enrichment.

I. BACKGROUND

The allegations of the pleadings, viewed in the light most favorable to the non-moving parties, show the following:

Ernst's mother, Sharon Murray, died of colon cancer in 2003, when Ernst was eleven years old. Her life insurance policy paid $451,751.91 to her father, Theron Murray, its designated beneficiary. (Doc. 5 at 2, ¶¶ 5, 7, 10.)

In 2008, when Ernst was seventeen years old, Theron Murray placed the life insurance proceeds in the NAC annuity that is the subject of this dispute. (Id. at 3, ¶ 13.) At the time, the named beneficiary was Jackson, Ernst's aunt.¹ (Id. ; Doc. 14–2.)

In June of 2012, Theron Murray executed a Beneficiary Change Request Form to designate Ernst the annuity's beneficiary. (Doc. 5 at 4, ¶ 18; Doc. 14–3.) NAC issued an amendatory endorsement reflecting Ernst as the beneficiary. (Doc. 5 at 4, ¶ 19; Doc. 14–4.)

Two years later, in July of 2014, Theron Murray purportedly restored Jackson as the sole beneficiary, using the same form.² On this occasion, Jackson was designated an "irrevocable beneficiary." (Doc. 5 at 4, ¶ 21; Doc. 14–5 at 2, 5.) The form stated: "If you choose an irrevocable beneficiary, written consent is required before any future changes can be made." (Doc. 14–5 at 2.) NAC responded with an amendatory endorsement listing Jackson as the primary beneficiary. (Doc. 5 at 5, ¶ 23; Doc. 14–6.) The endorsement said nothing about Jackson's purported status as an "irrevocable" beneficiary.

On August 5, 2014, less than a month after NAC sent its amendatory endorsement, Theron Murray sent NAC yet another Beneficiary Change Request Form, again listing Ernst as the primary beneficiary. (Doc. 5 at 5, ¶ 24; Doc. 14–7.) Ernst was listed as a "revocable" beneficiary, and the form stated: "If you choose an irrevocable beneficiary, written consent is required before any future changes can be made." (Doc. 14–7 at 2.) NAC responded with an amendatory endorsement, dated August 16, 2014, listing Ernst as the primary beneficiary. (Doc. 5 at 6, ¶ 28; Doc. 14–8.) The endorsement did not refer to Jackson or to the question of revocability.

Theron Murray died six months later, on February 1, 2015. (Doc. 5 at 6, ¶ 31.)

On February 19, 2015, NAC mailed Ernst claim forms and a letter stating that "[o]ur records indicated that you are a primary beneficiary of the above referenced Contract." (Doc. 5–3 at 1.) The letter states that his portion of the proceeds was $651,861.64. It lists a toll-free customer-service phone number and states that "[a] service professional within the Claims and Benefit Department will be happy to take your important call." (Id. )

Ernst alleges that after NAC sent that letter, Jackson "pressed" NAC to pay her the annuity proceeds. (Doc. 5 at 6, ¶ 32.) NAC alleges that Jackson submitted an "Annuity Proof of Death Claimant's Statement" dated February 25, 2015. (Doc. 14 at 9, ¶ 12; see Doc. 14–9.) NAC did in fact pay Jackson the annuity's proceeds, in the amount of $685,643.92. (Doc. 5 at 6–7, ¶ 33; Doc. 14 at 10, ¶ 15; Doc. 14–12.)

NAC alleges that it sent Ernst three letters, dated June 12, 2015, June 30, 2015, and July 31, 2015, informing him that he was not the beneficiary and that he should call NAC if he had questions. (Doc. 14 at 10, ¶ 14; see Doc. 14–11.) It appears undisputed that on September 3, 2015, NAC issued a check to Jackson in the amount of $685,643.92 in payment of the annuity proceeds. (See Doc. 14–12.)

On June 7, 2016, Ernst brought the present action against NAC in North Carolina Superior Court, alleging breach of contract (count I), violations of North Carolina's trade practice laws (count II), "estoppel/waiver" (count III), and "negligent misrepresentation—gross negligence" (count IV). (Doc. 5 at 1, 7–19.) On June 23, 2016, NAC removed the case on diversity grounds.³ (Doc. 1.) It answered Ernst's complaint as to the breach of contract claim (Doc. 14 at 1–7, ¶¶ 1–44) and moved to dismiss the remaining counts (Doc. 15).

NAC also brings a counterclaim against Ernst for interpleader (Doc. 15 at 8–13, ¶¶ 1–28) and a cross-claim against Jackson for interpleader and for unjust enrichment (id. at 8–11, 13–14, ¶¶ 1–18, 29–36). Jackson now moves to dismiss both claims. (Doc. 22.) Ernst supports Jackson's motion to dismiss NAC's interpleader claim. (Doc. 24 at 6.) The motions are fully briefed and ready for decision.

II. ANALYSIS

A. Standard of Review

The purpose of a Rule 12(b)(6) motion is to "test[ ] the sufficiency of a complaint" and not to "resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses." Republican Party of N.C. v. Martin , 980 F.2d 943, 952 (4th Cir. 1992). In considering a Rule 12(b)(6) motion, a court "must accept as true all of the factual allegations contained in the complaint," Erickson v. Pardus , 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (per curiam), and all reasonable inferences must be drawn in the non-moving party's favor, Ibarra v. United States , 120 F.3d 472, 474 (4th Cir. 1997). To be facially plausible, a claim must "plead[ ] factual content that allows the court to draw the reasonable inference that the defendant is liable" and must demonstrate "more than a sheer possibility that a defendant has acted unlawfully." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Bell Atl. Corp. v. Twombly , 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). While "the complaint, including all reasonable inferences therefrom, [is] liberally construed in the plaintiff's favor," this "does not mean that the court can ignore a clear failure in the pleadings to allege any facts [that] set forth a claim." Estate of Williams–Moore v. All. One Receivables Mgmt., Inc. , 335 F.Supp.2d 636, 646 (M.D.N.C. 2004) (citing McNair v. Lend Lease Trucks, Inc. , 95 F.3d 325, 327 (4th Cir. 1996) ). Mere legal conclusions are not accepted as true, and "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937.

B. NAC's Motion to Dismiss

1. Misrepresentation—Unfair Claims Handling Practices Claim (Count II)

NAC first moves to dismiss count II of the complaint, in which Ernst alleges that NAC violated North Carolina's Unfair and Deceptive Trade Practices Act ("UDTPA"), N.C. Gen. Stat. § 75–1.1 et seq., and North Carolina statutory provisions governing life insurance claims handling, see N.C. Gen. Stat. § 58–63–15(11) (prohibiting certain claims investigation and handling acts); id. § 58–58–40 (prohibiting the misrepresentation of policy terms).⁴ Ernst limits this claim to NAC's conduct after Theron Murray's death and in connection with its June 12 and 30, 2015 and July 31, 2015 letters to Ernst denying payment. (Doc. 20 at 8–9.)

To succeed on a UDTPA claim, Ernst must "demonstrate (1) an unfair or deceptive act or practice or unfair method of competition, (2) in or affecting commerce, which (3) proximately caused actual injury to the plaintiff." Westchester Fire Ins. Co. v. Johnson , 221 F.Supp.2d 637, 642–43 (M.D.N.C. 2002) (citing Spartan Leasing v. Pollard , 101 N.C.App. 450, 460, 400 S.E.2d 476, 482 (1991) ). Ernst alleges that NAC committed three kinds of unfair or deceptive acts to satisfy the first element: making "malicious[,] intentional misrepresentations" regarding the annuity's beneficiary; and engaging in conduct prohibited by N.C. Gen. Stat. §§ 58–63–15(11) and 58–58–40. (Doc. 5 at 9–12, ¶¶ 45–61.) In essence, Ernst alleges that NAC "attempted to hide the fact that Ernst was the current official designated beneficiary on the Annuity" under the August 16, 2014 endorsement and "attempted to discourage him from seeking benefits pursuant to the Annuity." (Id. at 9, ¶ 48.) NAC makes several arguments in support of its motion to dismiss, the principal ones being that the alleged conduct cannot be unfair or deceptive...