Melin v. Wash. Nat'l Ins. Co., Case No. 14 C 1238

• Decision Date: 17 March 2015
• Docket Number: Case No. 14 C 1238
• Parties: The Estate of LOIS MELIN, by its executor CATHY JAGER, individually and on behalf of all others similarly situated, Plaintiff, v. WASHINGTON NATIONAL INSURANCE COMPANY, Successors in Interest to Pioneer Life Insurance Company, Defendant.
• Court: U.S. District Court — Northern District of Illinois

The Estate of LOIS MELIN, by its executor CATHY JAGER,individually and on behalf of all others similarly situated, Plaintiff, v. WASHINGTON NATIONAL INSURANCE COMPANY,Successors in Interest to Pioneer Life Insurance Company, Defendant.

Case No. 14 C 1238

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

March 17, 2015

Judge Joan B. Gottschall

MEMORANDUM OPINION AND ORDER

The predecessor to Washington National Insurance Company issued a home health care policy (the "Policy") to Lois Melin more than twenty years ago.¹ In her second amended complaint, which is styled as a class action, Melin contends that Washington National wrongfully limited a provision that escalates benefits 8% per year to her daily home health care benefit, which started at $90 per day. According to Melin, Washington National should also have increased other benefits in the Policy by 8% per year. Washington National seeks to dismiss Melin's complaint, arguing that her interpretation of the Policy is at odds with Illinois law. For the following reasons, Washington National's motion to dismiss is denied.

I. BACKGROUND²

A. The Policy

Melin purchased the Policy in January 1991 from Pioneer Life Insurance Company, which is Washington National's predecessor in interest. The Policy (which is attached to the second amended complaint) contains a "Benefits" section that applies to all policyholders, as well as a "Certificate Schedule" that is unique to each policyholder. The "Benefits" section includes four types of benefits that refer the policyholder to a corresponding section of the Certificate Schedule:

A. HOME HEALTH CARE: We will pay 100% of the usual and customary charges for Home Health Care expenses if the care was pre-authorized. If the care was not pre-authorized we will pay 75% of the usual and customary charges for Home Health Care expenses incurred, up to 75% of the Daily Benefit Amount shown in the schedule. All benefits will be limited to the Per Occurrence Maximum Benefit for each injury or sickness and the Lifetime Maximum Benefit Amount for ALL injuries and sicknesses which are shown in the certificate schedule . . . .

B. AUTOMATIC DAILY BENEFIT INCREASE: On each policy anniversary, we will increase the Home Health Care Daily Benefit payable under this policy by the Automatic Benefit Increase Percentage shown on the schedule page . . . .

E. PER OCCURENCE MAXIMUM BENEFIT: No further benefits will be payable for sickness or injury when the total sum of Home Health Care or Adult Day Care of benefits for that occurrence equals the amount shown in the schedule for the Per Occurrence Maximum Benefit. Successive confinement due to the same or related cause not separated by at least six months of normal daily living will be considered as the same occurrence.

F. LIFETIME MAXIMUM BENEFIT: This coverage shall terminate and no further benefits will be payable when the total sum of Home Health Care or Adult Day Care benefits paid equals the amount shown in the schedule for the Lifetime Maximum Benefit Amount. Any premium paid for a paid for a period after termination will be refunded.

(Dkt. 27-1 at PageID #311-12.)

The Certificate Schedule in the Policy is on its own page and provides that:

CERTIFICATE SCHEDULE

HOME HEALTH CARE BENEFIT

$90/DAY

LIFETIME MAXIMUM BENEFIT AMOUNT

$250,000.00

PER OCCURRENCE MAXIMUM BENEFIT

$75,000/ILLNESS

AUTOMATIC BENEFIT INCREASE

PERCENTAGE

Benefits increase by 8% each year

(Id. at PageID #309.)

B. Denial of Coverage

In November 2012, Washington National began to deny claims made by Melin based on its finding that she had reached her Per Occurrence Maximum Benefit cap of $75,000. Melin contends that Washington National wrongfully limited the 8% annual increase to the Home Health Care Daily Benefit. According to Melin, the 8% annual increase also applied to the Per Occurrence Maximum Benefit cap and the Lifetime Maximum Benefit.

The second amended complaint attaches a letter dated April 24, 2013, from Melin's attorney to Washington National. (Dkt. 27-1 at PageID #322.) In the letter, Melin's attorney stated that Melin suffered from dementia and asked Washington National to reconsider its decision that Melin had exceeded the plan maximum for in home care based on the Per Occurrence Maximum Benefit cap. Counsel noted that Washington National had stated thatMelin could not receive further benefits until she had a "six month separation date" between times she received care and that this was impossible because "dementia is not something that someone recuperates from and has a separation period."³ (Id.)

After Washington National adhered to its position regarding coverage, Melin filed suit in the Circuit Court of Kane County, Illinois. Washington National removed the case to federal court based on diversity jurisdiction, 28 U.S.C. § 1332(a), and the Class Action Fairness Act of 2005, 28 U.S.C. § 1332(d)(2). Melin, on behalf of a putative class, contends that Washington National breached the Policy by refusing to apply the 8% annual increase to the Lifetime Maximum and Per Occurrence benefits (Count I). She also seeks a declaratory judgment to this effect (Count II).

II. STANDARD OF REVIEW

To survive a motion to dismiss pursuant to Rule 12(b)(6), a complaint must "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim satisfies this pleading standard when its factual allegations "raise a right to relief above the speculative level." Twombly, 550 U.S. at 555-56. For purposes of a motion to dismiss, the court takes all facts alleged by the plaintiff as true and draws all reasonable inferences from those facts in the plaintiff's favor, althoughconclusory allegations that merely recite the elements of a claim are not entitled to this presumption of truth. Virnich v. Vorwald, 664 F.3d 206, 212 (7th Cir. 2011).

III. DISCUSSION

Melin contends that pursuant to the doctrine of collateral estoppel, Washington National is bound by a judgment in favor of the insured in a prior Florida case involving Washington National and the 8% provision that is at issue in this case. Alternatively, she contends that the court should deny Washington National's motion to dismiss because the relevant portions of the Policy are ambiguous and can be read to support her claim that the 8% increase applies to all three types of benefits, not just the Home Health Care Daily Benefit.

A. Collateral Estoppel

Melin states, without elaboration, that "[a]t this stage of the proceeding, the Court is not compelled to rule on the collateral estoppel issue." (Dkt. 25 at 1 n.1.) It is unclear why the court would reach the merits of the parties' arguments about contract interpretation without first deciding whether collateral estoppel prevents Washington Mutual from defending this case. The court thus turns to Melin's contention that collateral estoppel applies because Washington National has already "litigated this very same issue with the very same policy language before Florida's highest court and in the Eleventh Circuit." (Dkt. 25 at 5.)

1. The Ruderman Decisions

Ruderman ex rel. Schwartz v. Washington Nat'l Ins. Corp., 671 F.3d 1208 (11th Cir. 2012), involved the same issue and Policy language that are at issue in this case and was anappeal from the grant of summary judgment in favor of the insured.⁴ The Eleventh Circuit found that the Policy was ambiguous and that Florida law governing interpretation of the Policy was unsettled. Id. at 1211-12. Thus, the Eleventh Circuit certified the following question to the Florida Supreme Court:

In this case, does the Policy's "Automatic Benefit Increase Percentage" apply to the dollar values of the "Lifetime Maximum Benefit Amount" and the "Per Occurrence Maximum Benefit"?

We understand answering this question might include answering the three following sub-questions:

A. Does an ambiguity exist about whether the Policy's "Automatic Benefit Increase Percentage" applies only to the "Home Health Care Daily Benefit" or whether it also applies to the "Lifetime Maximum Benefit Amount" and the "Per Occurrence Maximum Benefit"?

B. If an ambiguity exists in this insurance policy—as we understand that it does—should courts first attempt to resolve the ambiguity by examining available extrinsic evidence?

C. Applying the Florida law principles of policy construction, does the Policy's "Automatic Benefit Increase Percentage" apply to the "Lifetime Maximum Benefit Amount" and to the "Per Occurrence Maximum Benefit" or does it apply only to the "Home Health Care Daily Benefit"?

Id.

The Florida Supreme Court answered the certified question in Washington Nat'l Ins. Co. v. Ruderman, 117 So.3d 943, 945 (Fla. 2013). The Florida Supreme Court concluded that the Policy was ambiguous, and that the 8% benefit increase applied to the Lifetime MaximumBenefit and Per Occurrence Maximum Benefit, as well as the Home Health Care Daily Benefit. Id. at 948-958. Based on the Florida Supreme Court's decision, the Eleventh Circuit affirmed the district court's grant of summary judgment in favor of the insured. Ruderman ex rel. Schwartz v. Washington Nat'l Ins. Corp., 731 F.3d 1188, 1189 (11th Cir. 2013).

2. Does Ruderman Have Preclusive Effect in This Case?

The doctrine of collateral estoppel, which is also known as issue preclusion, bars "'successive litigation of an issue of fact or law actually litigated and resolved in a valid court determination essential to the prior judgment,' even if the issue recurs in the context of a different claim." Taylor v. Sturgell, 553 U.S. 880, 892 (2008) (quoting New Hampshire v. Maine, 532 U.S. 742, 748-749 (2001)). Melin asserts that Washington National was a party in Ruderman and that the outcome in Ruderman is binding and prevents Washington National from challenging the Florida courts' interpretation of the insurance policy that is at issue in this case.

Pursuant to the...