Schultz v. Ability Ins. Co.
| Decision Date | 09 October 2012 |
| Docket Number | No. C11-1020,C11-1020 |
| Parties | PHYLLIS SCHULTZ, Plaintiff, v. ABILITY INSURANCE COMPANY, f/k/a MEDICO LIFE INSURANCE COMPANY, ABILITY RESOURCES, INC., ABILITY REINSURANCE LIMITED, A BERMUDA LIMITED COMPANY, ABILITY REINSURANCE HOLDING LIMITED, A BERMUDA LIMITED COMPANY, ABILITY RESOURCES HOLDINGS, INC., Defendants. |
| Court | U.S. District Court — Northern District of Iowa |
TABLE OF CONTENTS
I. INTRODUCTION ......................................2
II. PROCEDURAL HISTORY.................................2
III. MOTION TO AMEND COMPLAINT .........................4
IV. MOTION FOR JUDGMENT ON THE PLEADINGS .............. 11
V. ORDER ............................................ 21
I. INTRODUCTION
This matter comes before the Court on the Motion for Judgment on the Pleadings (docket number 35) filed by Defendants Ability Reinsurance (Bermuda) Limited, Ability Reinsurance Holdings Limited, Ability Resources, Inc., and Ability Resources Holdings, Inc. (collectively, the "non-contracting Defendants") on May 30, 2012; the Response (docket number 49) filed by the Plaintiff, Phyllis E. Schultz, on July 19; and the Reply (docket number 65) filed by the non-contracting Defendants on August 14.
Also before the Court is the Motion to Amend Complaint (docket number 37) filed by Schultz on June 18, 2012; the Resistance (docket number 44) filed by Defendant Ability Insurance Company ("Ability") on June 28; and the Reply (docket number 46) filed by Schultz on July 2.
Pursuant to Local Rule 7.c, the motions will be decided without oral argument.
II. PROCEDURAL HISTORY
This case was initiated with the filing of a complaint on June 21, 2011. Plaintiff Phyllis Schultz sued Ability Insurance Company following its denial of Schultz's claim for benefits allegedly owed pursuant to a long-term care insurance policy issued by Ability. Schultz claimed breach of contract, bad faith, and fraudulent misrepresentation. Schultz asked for both compensatory and punitive damages. Ability answered on August 29, 2011, admitting the issuance of a policy, but denying Schultz's right to recover under the terms of the policy. The answer also asserts certain affirmative defenses.
On October 20, 2011, the Court adopted a Scheduling Order and Discovery Plan submitted by the parties. The parties agreed to various pretrial deadlines, including deadlines for completion of discovery and filing dispositive motions. In reliance on those deadlines, trial has been scheduled for January 14, 2013.1
On December 19, 2011, Schultz filed an amended complaint. The amended complaint added four additional "Ability" companies. For convenience, the Court will refer to the four additional Defendants as the "non-contracting Defendants."2 After asserting that "[t]he defendants are an association of entities acting together for the purpose of providing long term care insurance under the name Ability Insurance and also act as the alter egos and/or agents of each other," Schultz repeated the claims made in her original complaint.3 All five Defendants jointly filed an answer to the amended complaint on February 16, 2012.
On May 30, 2012, the non-contracting Defendants filed a Motion for Judgment on the Pleadings, which is now under consideration by the Court. On June 18, Schultz filed her initial response to the Defendants' motion, and filed a Motion to Amend Complaint, which is intended to address the "futility" argument raised by the non-contracting Defendants. The motion to amend complaint is also pending before the Court. On August14 - the deadline for filing dispositive motions - Ability Insurance filed a Motion for Partial Summary Judgment.4
In addition to the dispositive motions described above, there are three motions pending relating to discovery. On July 19, 2012, Schultz filed a motion asking that Defendants be compelled to supplement their responses to Schultz's requests for production of documents. On August 10, Ability filed a motion to quash the deposition of an in-house attorney - Donald Lawler - and filed a Motion for a Protective Order, asking that various discovery documents be held confidential. All three motions are pending before the Court.5
A final pretrial conference is scheduled on December 21, 2012, and trial is set on January 14, 2013.
III. MOTION TO AMEND COMPLAINT
This case was initiated on June 21, 2011, when Plaintiff Phyllis Schultz filed a complaint against Defendant Ability Insurance Company. Schultz claimed that Ability Insurance breached its contract to pay for long-term care services, violated an obligation "to engage in good faith and fair dealing," and was guilty of fraud and misrepresentation. Schultz asked for compensatory and punitive damages.
While Schultz's initial complaint identified only Ability Insurance as Defendant, it asserted that "Ability Resources, Inc., Ability Reinsurance Holdings Limited and AbilityReinsurance Limited have their primary place of business outside the state of Iowa."6 There is no other mention of those three companies elsewhere in the complaint. Throughout the complaint, however, Schultz refers to "Defendants" - plural. Ability Insurance filed an answer on August 29, 2011.
On October 20, 2011, the Court adopted a Scheduling Order and Discovery Plan submitted by Schultz and Ability Insurance. Among other things, the parties agreed to a November 28, 2011 deadline for adding parties and amending the pleadings. In reliance on the pretrial deadlines, a jury trial was scheduled on January 14, 2013. On November 28 - the deadline established in the Scheduling Order - Schultz filed a motion to add parties and amend the pleadings. The motion was granted.7 The amended complaint was separately docketed on December 19, 2011.
The amended complaint adds four additional "Ability" companies as defendants - Ability Resources, Ability Reinsurance (Bermuda), Ability Reinsurance Holdings, and Ability Resources Holdings. The amended complaint asserts - and Defendants admit - that Ability Resources acquired Medico Life Insurance Company on September 28, 2007, including the policy issued to Schultz. The name of Medico was then changed to Ability Insurance. The amended complaint asserts that Ability Insurance purchases reinsurance from Ability Reinsurance (Bermuda). According to the amended complaint, "[t]he defendants are an association of entities acting together for the purpose of providing long term care insurance under the name Ability Insurance and also act as the alter egos and/or agents of each other."8 The substantive allegations contained in the amended complaint otherwise remained unchanged.
On May 30, 2012, Ability Reinsurance (Bermuda), Ability Reinsurance Holdings, Ability Resources, and Ability Resources Holdings (collectively, the "non-contracting Defendants") filed a motion for judgment on the pleadings. Schultz responded to the motion for judgment on the pleadings on June 18 and, contemporaneously, filed the instant motion to amend complaint. Schultz's proposed second amended complaint is attached to the motion. The first 46 paragraphs of the proposed second amended complaint appear to be identical to those found in the amended complaint.9 However, the proposed second amended complaint then adds 58 paragraphs under the heading "Relationships Between the Defendants." The additional language purports to describe the relationship between the companies and asserts that the purpose of Ability Reinsurance Holdings, the parent company, "is to compartmentalize the assets and investments, and to isolate them from payment of U.S. taxes, regulatory oversight, or other public obligations in the United States."10 Schultz asserts that Ability Reinsurance (Bermuda) is "a sham reinsurance operation," and Ability Resources is "another means of extracting profits and leaving expenses in the U.S. entities."11 Similarly, Schultz claims that Ability Resources Holdings was organized "to further compartmentalize and evade legal obligations and public convenience."12 Schultz asserts that the companies act "in concert" to improperly reduce claim payments.13 According to Schultz, the non-contracting companies give "substantial assistance or encouragement" to Ability Insurance in conducting theiroperations and handling claims. The proposed second amended complaint provides detailed allegations regarding the interrelationship between the "Ability" entities.
Schultz asks that she be permitted to amend her complaint a second time, to add allegations regarding the "relationships between the Defendants." Except when amending her pleadings "as a matter of course," as defined in FEDERAL RULE OF CIVIL PROCEDURE 15(a)(1), a party may amend her pleadings "only with the opposing party's written consent or die court's leave." FED. R. CIV. P. 15(a)(2). Schultz is not entitled to amend her complaint "as a matter of course" and Defendants do not consent to Schultz's proposed amendment. Accordingly, Schultz seeks leave of the Court to amend her complaint.
Rule 15(a)(2) provides that "[t]he court should freely give leave [to amend] when justice so requires." The United States Supreme Court has made it clear that "this mandate is to be heeded." Foman v. Davis, 371 U.S. 178, 182 (1962). A party does not, however, have an absolute or automatic right to amend. See U.S. ex rel Lee v. ...
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