Sycks v. Transamerica Life Ins. Co.

• Decision Date: 02 December 2022
• Docket Number: 3:22-cv-00010-JMK
• Parties: LILA SYCKS, ESTATE OF VERNON SYCKS, Plaintiffs, v. TRANSAMERICA LIFE INSURANCE COMPANY, BANKERS UNITED LIFE INSURANCE COMPANY, Defendants.
• Court: U.S. District Court — District of Alaska

1

LILA SYCKS, ESTATE OF VERNON SYCKS, Plaintiffs, v. TRANSAMERICA LIFE INSURANCE COMPANY, BANKERS UNITED LIFE INSURANCE COMPANY, Defendants.

No. 3:22-cv-00010-JMK

United States District Court, D. Alaska

December 2, 2022

ORDER GRANTING IN PART DEFENDANT'S MOTION TO DISMISS FIRST AMENDED COMPLAINT WITH PREJUDICE

JOSHUA M. KINDRED, UNITED STATES DISTRICT JUDGE

Pending before the Court at Docket 28 is Defendant Transamerica Life Insurance Company's^[1]Motion to Dismiss Plaintiffs' First Amended Complaint with Prejudice. Plaintiffs Lila Sycks and Vernon Sycks^[2] filed a response in opposition at Docket 29. Defendant filed a reply at Docket 34. For the following reasons, Defendant's motion is GRANTED IN PART, and Plaintiff's claim for fraudulent or intentional misrepresentation is DISMISSED WITHOUT PREJUDICE and with LEAVE TO AMEND.

I. PROCEDURAL BACKGROUND

This lawsuit arises from the lapse of Plaintiffs' Last Survivor Flexible Premium Interest Indexed Universal Life Insurance Policy Number B119812 (the “Policy”).^[3]Plaintiffs filed suit on December 6, 2021 bringing claims for a declaration that Defendant must continue the Policy in force without payment of additional premium, breach of contract, and breach of the covenant of good faith and fair dealing.^[4]Defendant subsequently removed the action to this Court on January 13, 2022.^[5]On March 3, 2022, Defendant filed a motion to dismiss the Complaint for failure to state a claim.^[6]Shortly after that motion became ripe for a decision, Plaintiffs filed a motion for leave to file an amended complaint.^[7]The Court granted Plaintiffs leave to amend, and Plaintiffs filed their amended complaint on June 17, 2022.^[8]Plaintiffs' amended complaint adds a new claim for fraud, negligent, or intentional misrepresentation.^[9] Defendant filed a motion to dismiss the amended complaint with prejudice for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6).^[10]This motion is ripe for a decision.^[11]

II. FACTUAL BACKGROUND

Although Defendant has not yet submitted its answer to Plaintiffs' original complaint or the amended complaint, the parties for the most part do not appear to dispute this case's basic facts, which the Court generally accepts as articulated in Plaintiffs' amended complaint for the purposes of deciding this motion.^[12]As relevant here, Defendant issued the Policy to Plaintiffs in Alaska on June 25, 1993.^[13]Around that time, Plaintiffs made one premium payment of $50,000.^[14]

In 2021, Defendant notified Plaintiffs that the Policy would lapse without payment of additional premiums of $21,683.12 by August 2, 2021.^[15]After receiving this notice, Plaintiffs-aged 91 (Vernon) and 86 (Lila) at the time-requested that Defendant withdraw the lapse notification and continue their coverage without the payment of additional premiums.^[16]By letter dated October 1, 2021, Defendant responded to Plaintiffs' request, stating, “Based on our research and the terms of the contract, we did not find a way for the policy to remain in force until the maturity date without payment of additional premium.”^[17]Defendant's letter explained its interpretation of the operative provisions of the “flexible” Policy which, according to Defendant, does not require minimum premium payments at set intervals in order for the insured to secure coverage:

This type of policy requires premium payments to create an accumulation value, from which a sum is deducted each month to pay for the cost of the insurance. Premiums for this type of policy are flexible, and can vary in amount and frequency, subject to requirements and limitations. The Maximum Initial Premium of $50,000.00 was paid at issue, an amount that is equal to the Maximum Total Premiums as reflected on the policy specifications page. Should the policy owner wish to contribute premiums, the Maximum Annual Premium allowed is $5,184.93. Enclosed for your review is a duplicate copy of the policy, including the application for insurance.

According to the original illustration, “The policy will terminate without further value, based on guaranteed interest and Cost of Insurance rates, if additional premiums are not paid before the end of the 24^th policy year.”.[sic] The initial premium amount of $50,000.00 was sufficient for the policy to remain in force until the end of the 24^th policy year. Although payments are flexible, the policy must always have sufficient accumulation value to cover the monthly deduction amount. If at any time the accumulation value is not sufficient to cover the monthly deduction, the policy will enter the grace period, as it did on June 3, 2021.

The policy has a 61-day grace period following the date a premium payment is required to keep the policy in force. The Grace Period Provision states that “A premium will be required if, on the last day of a policy month, the Policy Value is less than the Monthly Deduction schedule [sic] to be made.” A notification letter was sent to request a payment of $21,683.12 by August 2, 2021 to maintain the coverage. As stated in our response dated August 20, 2021, an extension for submitting the premium was granted until October 2, 2021.

When the policy was issued, the single premium of $50,000.00 was sufficient to carry the policy until the 24^thpolicy year (2017), at a minimum. However, an interest rate that has declined since issue and an increase in the monthly deduction amount has caused a decline in the accumulation value. It has also caused the policy to enter the grace period and require additional premiums to maintain the coverage. Based on our review of the policy values and the terms of the contract, the policy will not remain in force until the maturity date unless changes are made to the premium contribution amount.^[18]

Defendant's letter referenced and, according to Plaintiffs, contained a “duplicate copy of the insurance policy,” which included Plaintiffs' original application for the Policy.^[19]Not long after receiving this letter, Plaintiffs filed suit against Defendant, seeking “speedy” judicial review of their claim for insurance coverage under Alaska law in light “of their age and the place life insurance holds in their financial and insurance planning ”^[20]

Although the parties do not appear to dispute these basic facts, Plaintiffs' amended complaint raises some factual concerns that Plaintiffs seek to address through this litigation, namely identification of “a true and correct copy of the Policy.”^[21]In essence, Plaintiffs allege that Defendant's October 1, 2021, letter provided an incorrect copy of the Policy (the “October 1, 2021, Copy”) because it differed from a copy of the Policy Defendant submitted as an exhibit with its since-stricken March 3, 2022, motion to dismiss Plaintiffs' original complaint (the “March 3, 2022, Copy”) at Docket 15.^[22]The parties do not identify any contractual provisions or application materials that differ between these copies of the Policy. However, Plaintiffs have noted that the two copies of the Policy contain slightly different footers and other differing components, such as a table of contents that appears in the October 1, 2021, Copy but not the March 3, 2022, Copy.^[23]Another difference between the two copies is what Defendant describes as an “illustration” that appears in the March 3, 2022, Copy but does not appear in the October 1, 2021, Copy.^[24]The illustration provides an example of the “projected policy value” over time as adjustments are made to the cost of insurance, interest rates, and premium payments.^[25]This illustration generally purports to contextualize the degree to which premium payments impact the value, and, in turn, coverage, of the Policy over time.^[26]Notwithstanding the differences Plaintiffs point out between the two copies of the Policy provided in the parties' filings and the fact that Plaintiff points to some provisions of the Policy in its amended complaint, Plaintiffs' amended complaint and its briefing in response to Defendant's motion suggest that the certified, operative copy of the Policy has yet to be produced through this litigation.^[27]

III. LEGAL STANDARD

The Federal Rules of Civil Procedure require pleadings to include “a short and plain statement of the claim showing that the pleader is entitled to relief ....”^[28]If a claim “fail[s] to state a claim upon which relief can be granted,” a defendant may move to dismiss the claim under Rule 12(b)(6).^[29]A Rule 12(b)(6) motion challenges the legal sufficiency of the claims alleged.^[30]To survive a motion to dismiss under Rule 12(b)(6), “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'”^[31]This test requires a complaint to provide “well-pleaded facts, not legal conclusions, that ‘plausibly give rise to an entitlement to relief.'”^[32]The determination of whether a complaint meets this standard is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.”^[33]When a heightened pleading standard, such as that required of Federal Rule of Civil Procedure 9 for fraud claims, does not apply, the complaint “need only satisfy the [Federal Rule of Civil Procedure] 8(a) notice pleading standard . . . to survive a Rule 12(b)(6) dismissal.”^[34]Under Rule 8(a), a plaintiff must “give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.”^[35]

In deciding Rule 12(b)(6) motions to dismiss, district courts “accept as true all well-pleaded allegations of material fact, and construe them in the light most favorable to the non-moving party.”^[36]Courts need not accept as true “allegations that contradict exhibits attached to the [c]omplaint or matters properly...