Morse v. Life Ins. Co. of N. Am.

• Decision Date: 02 July 2019
• Docket Number: Civil Action Number 2:18-cv-01681-AKK
• Parties: Brian MORSE, Plaintiff, v. LIFE INSURANCE COMPANY OF NORTH AMERICA, Defendant.
• Court: U.S. District Court — Northern District of Alabama

399 F.Supp.3d 1236

Brian MORSE, Plaintiff,

v.LIFE INSURANCE COMPANY OF NORTH AMERICA, Defendant.

Civil Action Number 2:18-cv-01681-AKK

United States District Court, N.D. Alabama, Southern Division.

Signed July 2, 2019

Amanda Lane Stansberry, Stansberry Law, LLC, Birmingham, AL, for Plaintiff.

Grace Robinson Murphy, William B. Wahlheim, Jr., Ashlee Dee Riopka, Maynard Cooper & Gale PC, Birmingham, AL, for Defendant.

MEMORANDUM OPINION AND ORDER

ABDUL K. KALLON, UNITED STATES DISTRICT JUDGE

Brian Morse brings this action against Life Insurance Company of North America ("LINA") for breach of contract and bad faith, alleging that LINA wrongfully refused to pay him long term disability benefits.

Doc. 1. LINA has moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), arguing that Morse's breach of contract claim is time barred by the limitations period included in the insurance policy and that Michigan law does not recognize bad faith as a separate and independent tort. See doc. 10. In light of the ambiguity of the contractual provision LINA cites in support for its limitations argument, the motion to dismiss the breach of contract claim is due to be denied. However, because LINA is correct that Michigan does not recognize bad faith as a separate tort, that claim is due to be dismissed.

I. STANDARD OF REVIEW

Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." "[T]he pleading standard Rule 8 announces does not require ‘detailed factual allegations,’ but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." 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, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). Mere "labels and conclusions" or "a formulaic recitation of the elements of a cause of action" are insufficient. Id. (citations and internal quotation marks omitted). By contrast with Rule 8(a)'s fairly liberal pleading standard, Federal Rule of Civil Procedure 9(b) requires a party to "state with particularity the circumstances constituting fraud or mistake."

Federal Rule of Civil Procedure 12(b)(6) permits dismissal when a complaint fails to state a claim upon which relief can be granted. "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Id. (citations and internal quotation marks omitted). A complaint states a facially plausible claim for relief "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citation omitted). Ultimately, this inquiry is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679, 129 S.Ct. 1937.

However, a district court "must convert a motion to dismiss into a motion for summary judgment if it considers materials outside the complaint." Day v. Taylor , 400 F.3d 1272, 1275-76 (11th Cir. 2005) (citation omitted); see Fed. R. Civ. P. 12(d). "[T]he district court may always consider exhibits attached to the complaint on a 12(b)(6) motion, because exhibits are part of the pleadings." Basson v. Mortgage Electronic Registration Sys., Inc. , 741 F. App'x 770, 771 (11th Cir. 2018) (citing Fed. R. Civ. P. 10(c) and Thaeter v. Palm Beach Cty. Sherriff's Office , 449 F.3d 1342, 1352 (11th Cir. 2006) ). Furthermore, "the court may consider a document attached to a motion to dismiss without converting the motion into one for summary judgment if the attached document is (1) central to the plaintiff's claim and (2) undisputed," meaning "the authenticity of the document is not challenged." Day , 400 F.3d at 1276 (citation omitted). In determining whether a document is "central to the plaintiff's claim," the court may consider "whether the plaintiff would have to offer the document to prove his case." Lockwood v. Beasley , 211 F. App'x 873, 877 (11th Cir. 2006).

Here, LINA has attached six exhibits to its motion to dismiss, including a copy of the long-term disability policy at issue, Policy No. LK-980083, and six letters from LINA addressed to Morse and Morse's attorneys. See docs. 10-1, 10-2, 10-3, 10-4, 10-5, 10-6.¹ The policy document and the letters dated September 4, 2013, October 7, 2014, August 3, 2015, September 23, 2015, and September 21, 2017 were also attached to and referenced in the Complaint and are, therefore, undisputed and central to Morse's claims. See docs. 1 at 2, 4-6, 9; 1-1; 1-5; 1-9; 1-12; 1-14; 1-22. In ruling on this motion, the court did not consider LINA's October 25, 2012 letter informing Morse that it was terminating his benefits effective October 24, 2012. See doc. 10-1 at 2. Although its authenticity is uncontested, this letter was not attached to or referenced in the Complaint, and the court finds that Morse would not have to offer it to prove his claims. See docs. 1; Lockwood , 211 F. App'x at 877. Accordingly, the court has not converted the motion into a motion for summary judgment. See Miranda v. Ocwen Loan Servicing, LLC , 148 F. Supp. 3d 1349, 1353 (S.D. Fla. 2015) (declining to convert a motion to dismiss where the court did not consider a disputed document that was not central to the plaintiff's claims).

II. BACKGROUND

This action arises from a group insurance policy for long-term disability benefits issued by LINA to Morse's former employer, Michigan State University (MSU). See doc. 1 at 2. Under this policy ("the Policy"), eligible employees of MSU can receive long-term disability benefits if they satisfy the Policy's criteria for having a disability. See doc. 1-1 at 7-8. However, a policyholder's disability benefits terminate if and when LINA "determines he or she is not Disabled." Id. at 23. The Policy also provides for payment of additional benefits for Cost of Living Adjustment (COLA) and the MSU 403b Retirement Plan. Id. at 8. Finally, the Policy has a "Legal Action" provision which states:

No action at law or in equity may be brought to recover benefits under the Policy less than 60 days after written proof of loss, or proof by any other electronic/telephonic means authorized by the Insurance Company, has been furnished as required by the Policy. No such action shall be brought more than 3 years after the time satisfactory proof of loss is required to be furnished.

Id. at 25.

While insured under the Policy, Morse was diagnosed with multiple impairments that prevented him from continuing to work. Doc. 1 at 2-3. The Social Security Administration subsequently determined that he qualified for Social Security disability benefits with a disability onset date of October 27, 2010. Doc. 1 at 3. On April 25, 2011, Morse began receiving long-term disability benefits under the Policy, which he continued to receive until October 24, 2012. Id. Following the termination of his benefits, Morse submitted four different appeals with updated medical information to LINA seeking to overturn its determination. Id. at 3-5. Morse prevailed finally on his fourth appeal, when, by letter dated August 3, 2015, LINA notified Morse's attorneys that LINA had overturned its prior determination and that Morse was "entitled to benefits payable under [the Policy] so long as [he] continue[s] to meet the terms and conditions of the policy." Docs. 1 at 5; 1-12 at 2. In light of its decision, LINA subsequently issued a check payable to Morse for $1,305.00 in disability income for October 25, 2012 through April 24, 2013. See docs. 1 at 5-6; 1-13 at 2. The approval lasted only for a brief period, and, roughly six weeks later, LINA notified Morse that it had determined that he "no longer remained disabled as defined by [the Policy]" and "no further benefits" were due beyond April 24, 2013. Docs. 1 at 6; 1-14 at 2-3. Morse submitted two appeals to no avail, see doc. 1 at 8-9, and LINA refused to accept his third appeal because Morse had purportedly "not provided any additional new relevant medical documentation to refute [the] previous determinations." Id. at 10.

III. ANALYSIS

Morse alleges that LINA breached the insurance contract by failing to provide all benefits owed to Morse for the October 24, 2012 through April 23, 2013 period, and by denying any benefits beyond that period. Doc. 1 at 11. Morse also alleges that LINA acted in bad faith by intentionally and unreasonably refusing to pay Morse's claim and delaying its review of his appeals. Doc. 1 at 12-13. The court addresses LINA's contentions in support of its motion to dismiss below.

A. Breach of Contract

LINA avers that the breach of contract claim is time-barred by the Policy's "Legal Action" provision, which purportedly imposes a three-year limit on legal actions to recover benefits under the Policy. See doc. 1-1 at 25. Morse responds that either Michigan's or Alabama's six-year statutes of limitations for breach of contract, rather than the Policy, determines the limitations period for his claim. See doc. 14 at 6-7; Mich. Comp. Laws § 600.5807(8) ; Ala. Code § 6-2-34(9). The resolution of this issue hinges, in part, on which state's law governs this dispute.

1. Whether Michigan or Alabama Law Governs

"A federal court in a diversity case is required to apply the laws, including principles of conflict of laws, of the state in which the federal court sits." Colonial Life & Accident Ins. Co. v. Hartford Fire Ins. Co. , 358 F.3d 1306, 1308 (11th Cir. 2004) (citation omitted). "In a contractual dispute, Alabama law ... first look[s] to the contract to determine whether the parties have specified a particular sovereign's law to govern." Stovall v. Universal Const. Co. , 893 So. 2d 1090, 1102 (Ala. 2004). Absent "such a contractual specification," the court follows "the principle of lex loci contractus , applying the law of the state where the...