French v. Nw. Mut. Life Ins. Co.
| Decision Date | 05 November 2021 |
| Docket Number | Case No. 20-cv-1090-bhl |
| Citation | 570 F.Supp.3d 650 |
| Parties | William J. FRENCH, Sandra M. French, Plaintiffs, v. NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, Northwestern Long Term Care Insurance Co., Defendants. |
| Court | U.S. District Court — Eastern District of Wisconsin |
William J. French, Essex, CT, Pro Se.
Sandra M. French, Essex, CT, Pro Se.
Justin O. Kay, Faegre Drinker Biddle & Reath LLP, Chicago, IL, Nolan Tully, Steven H. Brogan, Timothy J. O'Driscoll, Faegre Drinker Biddle & Reath LLP, Philadelphia, PA, for Defendants.
DECISION AND ORDER
If the phrase "tax-qualified, guaranteed renewable, comprehensive, long-term care insurance policy" were any more impenetrable, it might be mistaken for an excerpt from Finnegan's Wake. But this Joycean jumble of surplus adjectives means a great deal to the millions of—predominantly elderly—Americans who rely on such policies for medical support. Take, for example, Plaintiffs William and Sandra French. In 2007, they purchased long-term care insurance policies from Defendant Northwestern Long-Term Care Insurance Company, a wholly owned subsidiary of Northwestern Mutual Life Insurance Company (collectively NML). Although neither Plaintiff required daily assistance at that point, they anticipated long, happy lives, and wanted to lock in reasonable premiums early. They reveled in the belief that they had done so, until May 2018 when, after 11 years of punctual payments, NML increased their annual rates by over $4,000.
According to Plaintiffs, this substantial rate increase represented the final step in a decades-long scheme whereby NML collected premiums from forethoughtful customers, with no intention of fulfilling its corresponding obligations. They contend that the rate increase was designed to drive policyholders off their plans and relieve NML of its duty to provide the benefits those policyholders had paid for over the years. Consequently, the Frenches hired counsel and filed this class action lawsuit. NML answered, denying Plaintiffs’ claims and raising the Filed Rate Doctrine as an affirmative defense. It then moved for judgment on the pleadings based on this defense. After firing their lawyers, Plaintiffs responded to NML's motion pro se , and the motion is now fully briefed. Because the Court concludes that the Filed Rate Doctrine bars Plaintiffs’ claims, NML's motion will be granted.
In August 2007, while living in Texas, Plaintiffs purchased tax-qualified, guaranteed renewable, comprehensive, long-term care insurance policies (QLTCI) from Defendant Northwestern Long-Term Care Insurance Company, a wholly owned subsidiary of Northwestern Mutual Life Insurance Company. (ECF No. 1 at 2.) Before selling a new QLTCI policy in Texas, an insurer must submit a Rate Filing to the Texas Department of Insurance (TDI). (Id. at 14.) The TDI reviews the submission, which includes an Actuarial Memorandum, Actuarial Certification, the policy form, and other relevant materials, to determine if the proposed policy and its design comply with governing law. (Id. ) The QLTCI policies that Plaintiffs purchased were issued on policy form (ECF No. 24 at 9.) NML filed that form and its associated premium rate schedules, and the TDI initially approved them for sale on March 28, 2002. (ECF No. 1 at 14.) The first page of the policy stated: (ECF No. 24 at 9) (italics added.) The premium rates as approved by the TDI differentiated among policyholders based on age, benefit period, and other appropriate factors. (Id. at 10.)
In 2016, NML filed a request with the TDI for a premium rate increase on the RS-LTC.(1101) policy series. (Id .) The 2016 Rate Increase was approved by the TDI on February 9, 2018. (Id. at 11.) NML sought a substantial average rate increase of 86%, but the TDI, following its review of NML's submissions, approved only a 62% average rate increase. (Id. at 11.) The TDI requested—and NML provided—an implementation plan and final rate schedules for the 2016 Rate Increase, which included the applicable percentage increases by benefit period and age. (Id. at 11.) On May 2, 2018, NML advised Plaintiffs that, effective August 8, 2018, each Plaintiff's Annual Premium of $6,679.30 would increase by $4,285.70. (ECF No. 1 at 2.) This increase was in accordance with the 2016 Rate Increase approved by the TDI and as per the implementation plan NML provided to the TDI. (ECF No. 24 at 11.)
NML raises the Filed Rate Doctrine as an affirmative defense and has moved for judgment on the pleadings under Fed. R. Civ. P. 12(c) based on that defense. (ECF No. 24 at 2). This is procedurally correct. The Seventh Circuit has confirmed that Rule 12(c) is "the appropriate vehicle for resolving an affirmative defense." Gunn v. Continental Casualty Co. , 968 F.3d 802, 806 (7th Cir. 2020).
In resolving a Rule 12(c) motion, the Court applies the same standard as the more-typical Rule 12(b)(6) motion to dismiss. "The only difference between a motion for judgment on the pleadings and a motion to dismiss is timing; the standard is the same." Federated Mut. Ins. Co. v. Coyle Mech. Supply Inc. , 983 F.3d 307, 313 (7th Cir. 2020). "When a [party] moves for judgment on the pleadings, the motion should not be granted unless it appears beyond doubt that the nonmovant cannot prove facts sufficient to support its position[.]" Scottsdale Ins. Co. v. Columbia Ins. Grp., Inc. , 972 F.3d 915, 919 (7th Cir. 2020). Therefore, the Court must "view the facts in the complaint in the light most favorable to the nonmoving party," but it "need not ignore facts set forth in the complaint that undermine the plaintiff's claim or give weight to unsupported conclusions of law." Buchanan-Moore v. Cnty. of Milwaukee , 570 F.3d 824, 827 (7th Cir. 2009).
Plaintiffs bring four claims. The first three are common law claims for: breach of contract, breach of the covenant of good faith and fair dealing, and common law fraud. Plaintiffs’ fourth claim is for alleged violations of the Texas Deceptive, Unfair, and Prohibited Practice in the Business of Insurance Act. Plaintiffs seek to certify national classes on the first three claims and a Texas subclass on the fourth. NML argues the Texas Filed Rate Doctrine precludes all four claims.
Plaintiffs filed this case in federal court pursuant to the Court's diversity jurisdiction and 28 U.S.C. § 1332(d), the Class Action Fairness Act. (ECF No. 1 at 4.) In support of their motion, Defendants argue that Texas law applies to Plaintiffs’ claims. (ECF No. 24 at 9-10.) The Frenches, proceeding without the benefit of counsel, call Defendants’ invocation of state law "remarkable" and suggest federal law, in the form of the Internal Revenue Code, applies. (ECF No. 32 at 2.) Contrary to Plaintiffs’ suggestion, all four of the claims raised in the complaint are state-law claims. Plaintiffs’ Texas Deceptive, Unfair, and Prohibited Practice in the Business of Insurance Act is obviously a Texas statutory claim. And there is no federal cause of action for Plaintiffs’ common law breach of contract, breach of the implied duty of good faith, or common law fraud claims.
As a federal court exercising its diversity jurisdiction, the Court must apply Wisconsin's choice of law rules to determine which state's laws apply to Plaintiffs’ common law claims. See Auto-Owners Ins. Co. v. Websolv Computing, Inc. , 580 F.3d 543, 547 (7th Cir. 2009) (). Under Wisconsin law, "the ‘first rule’ in the choice-of-law analysis is ‘that the law of the forum should presumptively apply unless it becomes clear that nonforum contacts are of the greater significance.’ " In re Jafari , 569 F.3d 644, 649 (7th Cir. 2009) (quoting Drinkwater v. Am. Fam. Mut. Ins. Co. , 2006 WI 56, ¶40, 290 Wis. 2d 642, 714 N.W.2d 568 (2006) ). In the insurance context, when a policy does not include a choice-of-law provision, Wisconsin applies the "grouping-of-contacts" approach, which "provides that insurance coverage is ‘determined by the law of the jurisdiction with which the contract has its most significant relationship.’ " Wis. Pharmacal Co., LLC v. Neb. Cultures of Cal., Inc. , 2016 WI 14, ¶14, 367 Wis. 2d 221, 876 N.W.2d 72 (Wis. 2016) (quoting State Farm Mut. Auto. Ins. Co. v. Gillette , 2002 WI 31, ¶26, 251 Wis. 2d 561, 641 N.W.2d 662 (2002) ).
Following this approach, NML argues that Texas law applies to all of Plaintiffs’ claims because Texas has the most significant relationship to Plaintiffs’ insurance policies. (ECF No. 24 at 9-10.) The Court agrees. The QLTCI policies were issued and delivered in Texas, where Plaintiffs resided at the time. (ECF No. 1 at 2.) Plaintiffs received them on a Texas policy form that had been filed with and approved by the Texas Department of Insurance (TDI). (Id. at 14.) And the increased premium rates that prompted this suit only existed because of TDI assent. (Id. at 19.) Therefore, under Wisconsin choice-of-law principles, the Court must apply Texas law.
NML argues that the Filed Rate Doctrine, as adopted under Texas law, bars all four of Plaintiffs’ claims. Under Texas law, "[t]he filed rate doctrine bars "judicial recourse against a regulated entity based upon allegations that the entity's ‘filed rate’ is too high, unfair or unlawful." Texas Comm'l Energy v. TXU Energy, Inc. , 413 F.3d 503, 507 (5th Cir. 2005) (citing Square D Co. v. Niagara Frontier...
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