Pearson v. Provident Life & Accident Ins. Co.

• Decision Date: 17 March 2004
• Docket Number: Civil No. 01–1202–AS.
• Citation: 834 F.Supp.2d 1199
• Parties: Neal A. PEARSON, Plaintiff, v. PROVIDENT LIFE AND ACCIDENT INSURANCE CO., a Tennessee corporation, UnumProvident Corporation, a Delaware corporation, Defendants.
• Court: U.S. District Court — District of Oregon

834 F.Supp.2d 1199

Neal A. PEARSON, Plaintiff,

v.PROVIDENT LIFE AND ACCIDENT INSURANCE CO., a Tennessee corporation, UnumProvident Corporation, a Delaware corporation, Defendants.

Civil No. 01–1202–AS.

United States District Court,

D. Oregon.

March 17, 2004.

Gary M. Bullock, Bullock & Regier, PC, Portland, OR, for Plaintiff.

Katherine S. Somervell, Robert B. Miller, Bullivant Houser Bailey, PC, Robert C. Muth, Kilmer Voorhees & Laurick, Portland, OR, for Defendants.

OPINION AND ORDER

ASHMANSKAS, United States Magistrate Judge:

Defendants Provident Life and Accident Insurance Co. (“Provident”) and UnumProvident Corporation (“Unum”)(collectively “Defendants”) move to dismiss Unum as an improperly named defendant in this action filed by plaintiff Neal A. Pearson (“Plaintiff”). Additionally, Defendants move to dismiss all but one of the claims asserted against them in the Second Amended Complaint filed with the court on June 20, 2003 (the “Complaint”). Defendants argue that Plaintiff has failed to state claims for: 1) violation of 18 U.S.C. § 1962(c), which is part of the federal Racketeering Influenced and Corrupt Organization Act (18 U.S.C. § 1961 et seq.)(“RICO”)(First Claim for Relief); 2) conspiracy to violate RICO (Second Claim for Relief); 3) breach of implied provisions of an insurance contract (Third Claim for Relief, Count Two); 4) estoppel (Third Claim for Relief, Count Three); 5) common law fraud by concealment (Fourth Claim for Relief); 6) common law fraud by active misrepresentation (Fifth Claim for Relief); and 7) unlawful business practices under the Tennessee Consumer Protection Act (TCA § 47–18–101 et seq.)(the “Tennessee Act”) (Sixth Claim for Relief). Defendants do not move against Plaintiff's original claim for breach of contract based on Provident's denial of Plaintiff's claim for permanent disability benefits (Third Claim for Relief, Count One).

Background

Plaintiff developed a process to freeze baked potatoes that reduced the time required to reheat and serve the potatoes to the ultimate consumer. Plaintiff built a plant and designed and manufactured the machinery necessary to produce the frozen baked potatoes. In 1982, a Japanese corporation and primary client of Plaintiff's corporation, Enway, purchased a controlling interest in the company. Plaintiff continued as CEO of Enway and was responsible for executive management, problem resolution and planning and interacting with customers, suppliers and regulatory agencies. However, Enway was controlled by the majority shareholders in Japan.

In February 1988, Plaintiff purchased a disability insurance policy from Provident that protected Plaintiff in the event he became unable to “perform the substantial and material duties” of his occupation as CEO of Enway and he was “receiving care by a Physician which is appropriate for the condition causing the disability” (the “Policy”). The Policy was effective for a one-year term ending in February 1989 and was renewable on a annual basis by timely payment of the premium. Provident sent an annual renewal notice to Plaintiff and Plaintiff renewed the Policy annually by forwarding a payment to Provident.

In October 1998, Plaintiff suffered from depression and began seeing a psychiatrist. Plaintiff's condition worsened despite treatment and on August 31, 1999, Plaintiff quit his job as a result of his depression and filed a claim with Provident for disability benefits. The majority shareholders in Japan decided to close the plant the following day.

Plaintiff's disability claim was initially denied but, after additional review, Defendants conditionally accepted liability under the Policy. In July 2000, Defendant initiated the payment of disability benefits for the period beginning on February 28, 2000. Shortly thereafter, Defendant engaged in some additional investigation and arranged for Dr. Les Goldman and Dr. Eric Goranson to perform independent psychological examinations of Plaintiff on behalf of Defendants. Dr. Goldman opined that, while depressed, Plaintiff was capable of engaging in consulting work but that he was choosing not to work. Dr. Goranson did not find “convincing evidence” that Plaintiff was severely depressed. Based on these opinions, Defendants informed Plaintiff that he did not qualify for total disability benefits under the policy and that his disability benefits would cease effective April 28, 2001.

Plaintiff filed an action for breach of the Policy in state court in June 2001. Defendant removed the action to this court in a timely manner. By Opinion and Order dated May 6, 2002, this court found that Plaintiff failed to met the Policy definition of “totally disabled” and granted summary judgment in favor of Defendants. Plaintiff appealed and, on April 7, 2003, 62 Fed.Appx. 777 (9th Cir.2003), the Ninth Circuit reversed and remanded the action finding that “[t]here remains a material dispute of fact as to whether Pearson is capable of performing the duties of the occupation, rather than merely the particular job at Enway, given the unusual and noncustomary way he performed that job.”

On remand, Plaintiff filed the Complaint, which added claims for breach of implied contact, estoppel, RICO violations, fraud and violation of the Tennessee Act. In support of the new claims, Plaintiff alleges that Unum, as the claims handler for Provident, targeted Plaintiff's disability claim for termination because it had such a high reserve requirement. Unum then hired doctors from GenEx, one of its subsidiaries, to perform independent psychological examinations of Plaintiff and directed the doctors to suggest that if Plaintiff received the recommended treatment for his depression on a more frequent basis, or received a different more appropriate treatment, he would no longer be disabled. Based on these reports, Defendants then found that Plaintiff was not “totally disabled” under the terms of the Policy and denied his disability claim for all future payments. Plaintiff asserts that the scheme to prevent Plaintiff from receiving benefits under the Policy existed during the period Plaintiff was electing to renew his Policy on an annual basis and that Defendants' failure to advise Plaintiff of the scheme was intentional and fraudulent. Additionally, Plaintiff alleges that Defendants have employed the scheme in denying several other claims for disability benefits under their policies.

Legal Standard

Defendants' motion to dismiss for failure to state a claim challenges the legal sufficiency of the complaint. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). Because the court rules before it receives any evidence, such motions are disfavored. C. Wright & A. Miller, Federal Practice and Procedure § 1357 (1984). For purposes of the motion, the factual allegations in the complaint are presumed to be true and are viewed in the light most favorable to the non-moving party. Cassettari v. County of Nevada, 824 F.2d 735, 737 (9th Cir.1987). A motion to dismiss under Rule 12(b)(6) will be granted only if “it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Gibson v. United States, 781 F.2d 1334, 1337 (9th Cir.1986), cert den., 479 U.S. 1054, 107 S.Ct. 928, 93 L.Ed.2d 979 (1987). The question is not whether the plaintiff ultimately will prevail, but whether he cannot possibly prevail even if the allegations in the complaint are assumed to be true. The court may not dismiss a claim merely because the pleadings indicate that the likelihood of prevailing is remote. See Scheuer, 416 U.S. at 236, 94 S.Ct. 1683. Nor, at this stage of the proceedings, does the court consider whether there is any evidence to support the allegations that have been made in the complaint.

Discussion

Dismissal of Unum as a Defendant

Defendants contend that, because Unum did not exist until June 30, 1999, after Plaintiff renewed the Policy for the final time, there is no contractual privity between Plaintiff and Unum. Plaintiff appears to concede this issue, assuming that the June 1999 date is correct, but argues that Unum remains liable on the claims relating to the handling of Plaintiff's disability claim, all of which occurred after June 1999. Plaintiff then seeks to amend the Complaint to include allegations that Unum was actually formed no later than December 1996 under the name Provident Companies, Inc., and that it merely changed its name in June 1999. Defendants do not object to this amendment in their responsive memorandum or address Plaintiff's argument that Unum is a proper defendant based on the new date. Accordingly, the court will allow Plaintiff to amend the Complaint to state the proper incorporation date for Unum and denies Defendants' motion to dismiss Unum from this action.

First and Second Claims for Relief—RICO Violations

Defendants assert that the McCarran–Ferguson Act (15 U.S.C. 1012(b)) (the “Act”), which preempts federal laws that “invalidate, impair, or supersede” state laws regulating insurance, bars Plaintiff from pursuing his RICO claims in this instance. The Act provides, in pertinent part, that:

No Act of Congress shall be construed to invalidate, impair or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance * * *.

The test for determining when the Act preempts application of federal law requires consideration of whether: 1) the federal statute at issue specifically relates to the business of insurance; 2) the state statute at issue was enacted for the specific purpose of regulating the business of insurance within the state; and 3) application of the federal statute in the case at hand would “invalidate, impair or supersede” the state statute. United States Dep't of Treasury v. Fabe, 508 U.S. 491, 501, 113 S.Ct. 2202, 124 L.Ed.2d 449 (1993). H...