Woods v. Liberty Nat'l Life Ins. Co.

• Decision Date: 04 January 2018
• Docket Number: Civil Action No.: 1:17-CV-1586-VEH
• Court: U.S. District Court — Northern District of Alabama
• Parties: SUE S. WOODS, et al, Plaintiffs, v. LIBERTY NATIONAL LIFE INSURANCE COMPANY, Defendant.

SUE S. WOODS, et al, Plaintiffs, v. LIBERTY NATIONAL LIFE INSURANCE COMPANY, Defendant.

Civil Action No.: 1:17-CV-1586-VEH

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

January 4, 2018

MEMORANDUM OPINION AND ORDER

I. INTRODUCTION

On August 10, 1987, Sue Woods and her husband, Fred Woods¹, purchased policy number 027835793 (the "Policy"), a cancer policy, from Liberty National Life Insurance Company ("Liberty National"). The Plaintiffs claim that the agent who sold them the Policy

represented to Fred prior to the Plaintiffs' purchase of the Policy in 1987 that [the Policy] would cover all costs and expenses arising out of any cancer suffered by Sue after the Policy's inception. Amongst other things, the agent specifically told Fred that the cancer policy the Plaintiffs were purchasing would cover anything Sue and Fred needed it to cover pertaining to any cancer suffered by Sue in the future.

(Doc. 1-1, at 5, ¶11). The Plaintiffs allege that Fred relayed this information to Sue, andthat, based on the agent's representations, Sue and Fred then decided to purchase the policy.

In February 2015, Sue was diagnosed with cancer. The Plaintiffs contend that Liberty National has failed to live up to its promise to pay "anything Sue and Fred needed it to cover pertaining to any cancer suffered by Sue in the future." On August 9, 2017, they filed suit against Liberty National and various "fictitious defendants" in the Circuit Court of Calhoun County, Alabama. (Doc. 1-1). The Complaint alleges that Liberty National is liable for: breach of contract (Count One); fraud (Counts Three, Four, Five); deceit (Count Six); and promissory fraud (Count Seven). The Complaint alleges that the fictitious defendants are liable for breach of contract (Count Two); fraud (Counts Eight, Nine, and Ten); deceit (Count Eleven); and promissory fraud (Count Twelve). As to both Liberty National and the fictitious defendants, the Complaint also sets out a claim for rescission. (Count Thirteen). On September 15, 2017, Liberty National removed the action to this Court. (Doc. 1).

The case comes before the Court on Liberty National's Partial Motion To Dismiss (the "Motion") pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. (Doc. 8). For the reasons stated herein, the motion will be GRANTED.

II. ANALYSIS²

A. Fictitious Party Practice

Liberty National "moves this Court to dismiss all counts not directed against Liberty National as there is no fictitious party practice in federal court." (Doc. 8 at 2). The Eleventh Circuit has stated:

As a general matter, fictitious-party pleading is not permitted in federal court. See, e.g., New v. Sports & Recreation, Inc., 114 F.3d 1092, 1094 n. 1 (11th Cir.1997). We have created a limited exception to this rule when the plaintiff's description of the defendant is so specific as to be "at the very worst, surplusage." Dean v. Barber, 951 F.2d 1210, 1215-16 (11th Cir.1992).

Richardson v. Johnson, 598 F.3d 734, 738 (11th Cir. 2010). The Plaintiffs concede that Count Two of the Complaint is due to be dismissed because it "does not state a claim against a specific real party using a specific name." (Doc. 9 at 16, n. 4). Accordingly, Count Two will be dismissed.

The Plaintiffs argue that the remaining counts, to the extent directed towards the name of "the specific agent [who] sold them the subject policy," should not be dismissed, because this fictitious party is specifically described. (Doc. 9 at 16; see alsodoc. 9 at 17).³ The Court agrees to the extent that the Complaint describes all persons who "acted as an agent or agency for any named or fictitiously named Defendant herein in the sale of the insurance policy" (doc. 1-1 at 4, ¶5), otherwise identified as "Fictitious Defendants 'G,' 'H,' and 'I'" (doc. 1-1 at 4, ¶5).⁴

B. The Rule of Repose

The Eleventh Circuit has written:

"Alabama's judicially created rule of repose serves to bar claims that arise out of events that are more than twenty years old. Ex parte Grubbs, 542 So.2d 927, 930-31 (Ala.1989). Alabama's rule of repose " 'is similar to a statute of limitations, but [is] not dependent upon one,' " and has a greater breadth than any such statute. McDurmont v. Crenshaw, 489 So.2d 550, 552 (Ala.1986) (quoting Boshell v. Keith, 418 So.2d 89, 91 (Ala.1982)). Unlike a statute of limitations, "the only element of the rule of repose is time." Boshell, 418 So.2d at 91. "[The rule of repose] is not affected by the circumstances of the situation, by personal disabilities, or by whether prejudice has resulted or evidence obscured." Id. There is some debate in Alabama law concerning the types of claims to which the doctrine is applicable. It is unclear, for example, whether the rule applies to personal injury actions. Spain v. Brown & Williamson Tobacco Corp., 230 F.3d 1300, 1307 (11th Cir.2000) (acknowledging uncertainty about the scope of actions to which the rule of repose applies). However, it is clear that any claim in Alabama courts, brought more than twenty years after the time when it first could have been, is barred if the rule of repose applies. Boshell, 418 So.2d at 91. The Alabama Supreme Court articulated the rationale for the rule as follows:

As a matter of public policy ... it has long been the settled policy of this state ... that antiquated demands will not be considered by the courts.... It is necessary for the peace and security of society that there should be an end of litigation, and it is inequitable to allow those who have slept upon their rights for a period of 20 years ... to demand an accounting."

Moore v. Liberty Nat. Life Ins. Co., 267 F.3d 1209, 1213-14 (11th Cir. 2001) (quoting Snodgrass v. Snodgrass, 176 Ala. 276, 58 So. 201, 201-02 (Ala.1912)). "The rule of repose begins running on a claim as soon as all of the essential elements of that claim coexist so that the plaintiff could validly file suit." Am. Gen. Life & Acc. Ins. Co. v. Underwood, 886 So. 2d 807, 812 (Ala. 2004) (citing Spain v. Brown & Williamson Tobacco Corp., 872 So.2d 101, 129 (2003) (Johnstone, J., writing specially)). "If a plaintiff's actual injury resulting from a tort is the payment of premiums for an insurance policy, the payment of the first premium for the policy establishes the element of damage essential to a claim for the tort." Underwood, 886 So. 2d at 813 (emphasis added) (citing Boswell v. Liberty Nat'l Life Ins. Co., 643 So.2d 580 (Ala.1994), and Donoghue v. American Nat'l Ins. Co., 838 So.2d 1032 (Ala.2002)).

1. The Fraud-Based Claims (Counts Three Through Six and Eight Through Eleven)

The holding in the Underwood case resolves the issue before the Court. Counts Three though Six and Eight through Eleven all sound in some type of fraud, which requires the showing of a reliance by the Plaintiffs upon the Defendant'smisrepresentation⁵ of a material existing fact which proximately caused the Plaintiffs damage. Deng v. Scroggins, 169 So. 3d 1015, 1024 (Ala. 2014). According to the Complaint, in 1987, Liberty National misrepresented that the Policy would cover "anything Sue and Fred needed it to cover pertaining to any cancer suffered by Sue in the future." (Doc. 1-1 at 5, ¶ 11). This was a representation of a material fact-the Policy's coverage. The Plaintiffs claim that they relied on this representation to their detriment by purchasing the Policy in 1987, and, beginning in 1987, paying premiums. (Doc. 1-1 at 5, ¶¶ 13-14). Accordingly, all of the essential elements of the Plaintiffs' fraud based claims coexisted in 1987, and the rule of repose began running at that time. See, Am. Gen. Life and Acc. Ins. Co. v. Underwood, 886 So. 2d 807, 812 (Ala. 2004) ("The rule of repose begins running on a claim as soon as all of the essential elementsof that claim co-exist so that the plaintiff could validly file suit."). Since more than 20 years elapsed between the payment of the first premium and the filing of this lawsuit, the rule of repose bars the fraud-based claims.

The Plaintiffs argue that Underwood is distinguishable on its facts because it involved a life insurance policy and not a cancer policy. (Doc. 9 at 8). They state:

In that context, Woods respectfully suggests that it is essential that this Court recognize the very nature of a cancer policy and that it do so in light of the facts here. Unlike a life insurance policy, which only pays one benefit at the death of the insured, a cancer policy does not begin paying any benefits to the living insured until a diagnosis of cancer. In effect, a cancer policy is not a contract fully performed by both parties until cancer occurs.

For purposes of repose, the "actual injury" suffered by Woods here includes not just premiums paid but also benefits promised but unpaid. Woods did not suffer the latter actual injury until after February of 2015 when Sue Woods first received benefits from Liberty National for her cancer.

(Doc. 9 at 8) (emphasis added). The Plaintiffs cite no authority for this argument.

Contrary to the Plaintiffs' assertion, in this context there is no relevant distinction between a cancer policy and a life insurance policy. Both pay a benefit, whatever that might be, upon the happening of a triggering event, whether that be the contracting of cancer by an insured or the death of an insured. Furthermore, a misrepresentation as to the coverage of either type of policy would necessarily result in "benefits promised but unpaid." Whether or not the contract was "fully performed," and whether or not all ofthe Plaintiffs' injuries had manifested, the Plaintiffs were injured when, in 1987, they paid the first premium. The rule of repose began running at that time.

The Plaintiffs also argue that the running of the rule of repose was stayed. As stated in Underwood:

"The only circumstance that will stay the running of the 20-year period of repose is a recognition of the existence of the claimant's right by the party defending against the claim." Boshell, 418 So.2d at 92. The

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