Opinion
18 C 3314
2022-08-19
Carlton F. GUNN, individually and on behalf of all persons similarly situated, Plaintiff, v. CONTINENTAL CASUALTY COMPANY, Defendant.
Daniel J. Kurowski, Hagens Berman Sobol Shapiro LLP, Chicago, IL, John M. DeStefano, III, Pro Hac Vice, Robert B. Carey, Pro Hac Vice, Hagens Berman Sobol Shapiro LLP, Phoenix, AZ, Steve W. Berman, Hagens Berman Sobol Shapiro LLP, Seattle, WA, for Plaintiff. Brent R. Austin, Gregory M. Schweizer, Michael L. McCluggage, Caroline Malone, Eimer Stahl LLP, Chicago, IL, for Defendant. Elizabeth Anne Thompson, Saul Ewing Arnstein & Lehr LLP, Chicago, IL, for Amici American Council of Life Insurers, American Property Casualty Insurance Association. Michael Raupp, Husch Blackwell LLP, Kansas City, MO, for Amicus National Association of Insurance Commissioners.
Daniel J. Kurowski, Hagens Berman Sobol Shapiro LLP, Chicago, IL, John M. DeStefano, III, Pro Hac Vice, Robert B. Carey, Pro Hac Vice, Hagens Berman Sobol Shapiro LLP, Phoenix, AZ, Steve W. Berman, Hagens Berman Sobol Shapiro LLP, Seattle, WA, for Plaintiff. Brent R. Austin, Gregory M. Schweizer, Michael L. McCluggage, Caroline Malone, Eimer Stahl LLP, Chicago, IL, for Defendant. Elizabeth Anne Thompson, Saul Ewing Arnstein & Lehr LLP, Chicago, IL, for Amici American Council of Life Insurers, American Property Casualty Insurance Association. Michael Raupp, Husch Blackwell LLP, Kansas City, MO, for Amicus National Association of Insurance Commissioners. MEMORANDUM OPINION CHARLES P. KOCORAS, District Judge:
This matter is before the Court on Defendant Continental Casualty Company's ("Continental") Consolidated Rule 56 Filed Rate Defense Motion and Rule 12(b)(6) Motion to Dismiss. For the following reasons, the Court denies the Rule 56 Motion and grants the Motion to Dismiss in part.
BACKGROUND
Plaintiff Carlton Gunn brought this case as a putative class action against Continental, which issued a group long-term care insurance policy to Gunn's employer, the federal judiciary, in Washington D.C. Gunn alleged that Continental breached its contract, committed torts, and violated consumer protection laws by raising his premiums dramatically. This Court originally dismissed the case on the pleadings based on Continental's assertion of a filed-rate defense, relying on the Washington State Insurance Commissioner's approval of the new, higher premiums for individuals insured in Washington.
Gunn appealed, however, and the Seventh Circuit remanded the case back to this Court with instructions to engage in a comprehensive choice of law analysis. See Gunn v. Cont'l Cas. Co., 968 F.3d 802 (7th Cir. 2020). Continental subsequently filed the instant "Consolidated Rule 56 Filed Rate Defense Motion and Rule 12(b)(6) Motion to Dismiss." The motions are fully briefed, and the Court accepted briefs from the American Council of Life Insurers, American Property Casualty Insurance Association, and the National Association of Insurance Commissioners as amici curiae.
The factual allegations of Gunn's First Amended Complaint ("FAC") are fully set forth in the Seventh Circuit's opinion, but it bears repeating them here. For purposes of Continental's Motion to Dismiss, we assume the truth of the following factual allegations.
In 1999, Continental delivered a group long-term care insurance policy to the federal judiciary—specifically, to the Federal Judiciary Group Long Term Care Insurance Trust in Washington D.C. As with life insurance, the cost of long-term care insurance increases with the age of the applicant. As Continental advertised for this policy, "the younger you are when your coverage begins, the lower your premiums will be for the duration of your participation in the plan."
In 2000, Gunn was an assistant federal defender in the State of Washington eligible for coverage under the judiciary's policy. He purchased coverage under the policy, relying in part on Continental's representation in its marketing materials that it would raise premiums, if at all, only "for everyone in your age category who has the kind of coverage plan that you do." The master policy and Gunn's individual coverage certificate similarly promised that Continental would raise premiums "only if we change the premiums for all insureds in the same premium class." The master policy provided specifically that "Premium is computed as stated in the Master Application," which contained tables of premium rates according to payment schedule, age on effective date of coverage, and amount of daily benefit. No mention was made of rates varying based on the individual insured's state of residence.
To protect against the long-term effects of inflation on the policy's costs and benefits, Gunn also purchased what Continental called a "Lifetime Compound Automatic Benefit Increase benefit." That feature would "automatically increase the daily benefit for nursing home care that you select now by 5% annually on a compounded basis." "This means," Continental explained, "you will not need to worry about increasing your premium in the future." Purchasing the automatic benefit increase feature more than doubled Gunn's baseline premium.
Seventeen years later, Gunn received a letter from Continental informing him that his premium rates would rise by 25 percent each year for the next three years, adding up to a near doubling of the premium, from about $700 to about $1,400 annually. The letter also said that the effective dates of the increases would depend ultimately on the approval of "certain states," which might or might not be forthcoming at the same time, or at all. Gunn believes this geographic disparity breaches Continental's promise to raise rates only uniformly within a "premium class." He also contends he should be protected from the dramatic premium increases precisely because he already paid to protect himself against inflation by buying the automatic benefit increase.
Gunn's FAC asserts claims for breach of contract (Count I), breach of the implied covenant of good faith and fair dealing (Count II), unfair and deceptive practices under the District of Columbia's consumer protection statute (Count III), fraud (Count IV), and fraudulent concealment (Count V). On behalf of himself and a putative class of insureds under the judiciary's group policy, Gunn seeks rescission (whether of the master policy or his individual certificate, he does not say) and an injunction against further rate increases, or alternatively compensatory, statutory, and punitive damages.
Continental brings a combined Rule 56 filed rate defense motion and a Rule 12(b)(6) motion to dismiss. Continental argues the filed rate doctrine bars all of Gunn's claims. Alternatively, Continental argues Gunn's claims must be dismissed for failure to state a claim.
DISCUSSION
I. Choice of Law for Common Law Claims
First things first. A federal court exercising its diversity jurisdiction over state-law claims applies the choice-of-law rules of the state in which it sits. Gunn, 968 F.3d at 808. Here, that state is Illinois, which applies forum law unless an actual conflict with another state's law is shown, or the parties agree that forum law does not apply. Id. Importantly, Illinois recognizes the doctrine of dépeçage, or "cutting into pieces" a single claim and subjecting different issues to different jurisdictions' laws. Spinozzi v. ITT Sheraton Corp., 174 F.3d 842, 848 (7th Cir. 1999). "The party seeking the choice-of-law determination bears the burden of demonstrating a conflict." Bridgeview Health Care Ctr., Ltd. v. State Farm Fire & Cas. Co., 2014 IL 116389, ¶ 14, 381 Ill.Dec. 493, 10 N.E.3d 902.
We begin with Gunn's breach of contract claim. Continental argues for the application of D.C. law, whereas Gunn insists Illinois law applies. While the Seventh Circuit suggested Illinois would likely choose D.C. law to govern the breach of contract claim, it is important to note that neither party argued for the application of Illinois law to any of Gunn's claims before the Seventh Circuit. Gunn, 968 F.3d at 808-09. That is not the case here. And, here, Continental makes no attempt to articulate any difference between Illinois, Washington, and D.C. law—much less an outcome determinative one. Continental's failure to demonstrate any conflict between Illinois and D.C. law renders a choice-of-law analysis inappropriate. Sosa v. Onfido, Inc., 8 F.4th 631, 638 (7th Cir. 2021). Accordingly, Illinois law applies to Gunn's breach of contract claim.
The same can be said for Gunn's common law fraud claims. Gunn argues for the application of Illinois law, whereas Continental claims Washington law applies. Again, Continental fails to demonstrate a conflict between Illinois and Washington law, so a choice-of-law analysis is not required. Illinois law applies to Gunn's common law fraud claims. See Sieving v. Cont'l Cas. Co., 535 F.Supp.3d 762, 772-73 (N.D. Ill. 2021); Brown v. Cont'l Cas. Co., 591 F.Supp.3d 340, 348-49 (N.D. Ill. 2022).
With respect to Gunn's claim for breach of the covenant of good faith and fair dealing, Continental has identified a conflict: Illinois recognizes no such cause of action, but D.C. does. LaSalle Bank Nat'l Ass'n v. Paramont Props., 588 F. Supp. 2d 840, 853 (N.D. Ill. 2008); Wright v. Howard Univ., 60 A.3d 749, 754 (D.C. Cir. 2013). Continental argues D.C. law controls, presumably because it also argues D.C. law controls the breach of contract claim. Gunn's Response does not address the choice of law issue with respect to its breach of the duty of good faith claim, and only mentions the covenant of good faith and fair dealing within the context of its breach of contract argument. The Court need not conclusively resolve whether Illinois or D.C. law applies to this claim, however, because as discussed below, the claim fails no matter which State's law applies. See Brown, 591 F.Supp.3d at 346-47.
Neither party argues for the application of Washington law to this claim.
II. Rule 56 Filed Rate Defense Motion
First, a few words about state-based regulation of insurance. The McCarran-Ferguson Act, 15 U.S.C. §§ 1011-15 (1945), commits the regulation of insurance, including long-term care insurance, to the individual states and the District of Columbia, such that insurers must follow the laws of each state where they do business. The parties' proffered experts agree: each state has the authority to regulate the permissible rates for its residents regardless of where the insurer is headquartered or a group policy issued, including certificate holders of a group policy issued from another state.
Each state takes a different approach to handling the regulation of long-term care insurance sold to its residents. Some states choose to defer to the regulatory regimes of the state where the group policy is sitused, while others—like Washington—apply their own regulatory regimes to group long-term care certificates issued to their residents under master policies sitused in other states. The salient point is that states have the choice.
States like Washington are referred to as "extra-territorial" ("ET") jurisdictions. An ET jurisdiction requires an insurer to file its policy and certificate forms, as well as rate increase requests, with the state's insurance commissioner before the insurer can sell insurance to or increase the rate for an insured in that state. The Washington State Office of the Insurance Commissioner's ("OIC" or "Commissioner") ET jurisdiction is reflected in multiple provisions of Washington law. If an insurer fails to comply with these laws, it is subject to the revocation of its certificate of authority to sell insurance in Washington. The experts agree that, because Gunn was a Washington resident when he purchased coverage, the Washington OIC has jurisdiction over Gunn's coverage, including rate increases. The rate increased at issue here was filed with, reviewed, modified, and ultimately approved by the Washington OIC.
Next, the filed rate doctrine. Washington has adopted the filed rate doctrine in the insurance context. Gunn, 968 F.3d at 811 (citing McCarthy Fin., Inc. v. Premera, 182 Wash.2d 936, 347 P.3d 872, 875 (2015)). The filed rate doctrine provides that "any 'filed rate'—a rate filed with and approved by the governing regulatory agency—is per se reasonable and cannot be the subject of a legal action against the private entity that filed it." McCarthy Fin., 347 P.3d at 875. The filed rate doctrine recognizes the authority of the Washington OIC to approve premium rates, making a choice of law analysis inapplicable on this point. Here, no one disputes premium rates are governed by state law. And this is all to say there is only one place to look for the source of rates to be applied, and a choice of law analysis and determination of rates in this case is not open to challenge or dispute.
Continental argues the filed rate doctrine bars all of Gunn's claims. Gunn, however, contends the filed rate doctrine is not implicated in this case because "Plaintiff's contract claims . . . precede, and arise independent of, Washington's (or any other state's) review of Continental's premium increase." Dkt. # 81, at 6. We conclude that, contrary to Continental's argument, the filed rate doctrine does not operate to bar Gunn's claims. Gunn is not challenging the reasonableness of the rates or challenging Washington's authority to review rates charged to its residents. Rather, Gunn's claims address "Continental's conduct in marketing and selling the policy and failing to comply with its terms—by promising a nationwide rate class but nonetheless seeking premium increases without regard to that promise." Dkt. # 107, at 5. Courts "may consider claims that are related to rates approved by an agency but do not require the courts to reevaluate such rates." McCarthy Fin., 347 P.3d at 873. Here, we are not being asked to reevaluate the rate approved by the Washington OIC. Deciding whether Continental contractually promised not to raise rates unless it did so for a national premium class or whether Continental engaged in fraudulent marketing practices does not require the Court to evaluate the reasonableness of the premium rate itself. Continental's Rule 56 Filed Rate Defense Motion is denied.
III. Rule 12(b)(6) Motion to Dismiss
Moving on to Continental's Rule 12(b)(6) Motion to Dismiss, we address each claim in turn.
A. Legal Standard
A motion to dismiss under Rule 12(b)(6) "tests the sufficiency of the complaint, not the merits of the case." McReynolds v. Merrill Lynch & Co., 694 F.3d 873, 878 (7th Cir. 2012). The Court accepts as true well pled facts in the complaint and draws all reasonable inferences in favor of the plaintiff. AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th Cir. 2011). The allegations in the complaint must set forth a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2).
A plaintiff need not provide detailed factual allegations, but it must provide enough factual support to "raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The claim must be described "in sufficient detail to give the defendant 'fair notice of what the . . . claim is and the grounds upon which it rests.' " E.E.O.C. v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007) (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements," are insufficient to withstand a Rule 12(b)(6) motion to dismiss. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). A claim is facially plausible if the complaint contains sufficient alleged facts that allow the Court "to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.
A plaintiff alleging fraud, however, "must state with particularity the circumstances constituting fraud." Fed. R. Civ. P. 9(b). To satisfy this standard, plaintiffs must describe "the who, what, where, when, and how of the fraud," though precisely how much information is required for each of those descriptions varies depending on the facts of a case. Webb v. Frawley, 906 F.3d 569, 576 (7th Cir. 2018). Rule 9(b)'s purpose is "to ensure that the party accused of fraud . . . is given adequate notice of the specific activity that the plaintiff's claims constituted the fraud so that the accused party may file an effective responsive pleading." Lachmund v. ADM Inv. Servs., Inc., 191 F.3d 777, 783 (7th Cir. 1999).
B. Count I: Breach of Contract
To succeed on a breach of contract claim under Illinois law, a plaintiff must ultimately prove that: (1) a valid contract existed; (2) they performed the conditions precedent required by the contract; (3) the defendant breached the contract; and (4) the plaintiff suffered damages as a result of the breach. Smart Oil, LLC v. DW Mazel, LLC, 970 F.3d 856, 861 (7th Cir. 2020).
Gunn alleges that, under the express terms of the policy, Continental agreed that while it could "change the Insured's premiums based on his or her premium class," it could do so "only if We change the premiums for all other Insureds in the same premium class." Gunn asserts Continental breached its contract with him by increasing premiums without increasing the premiums for all other Insureds in the same premium class. "Premium class" is nowhere defined in the policy. Gunn suggests "premium class" refers to age, and therefore any premium increases must be based on age, not geography.
Continental also urges the view that Plaintiff is presumed, as a matter of law, to know of the state-by-state regulation of insurance. It argues that it would be unreasonable to read the policy as promising nationwide premiums. To do so "would strip the policy of its factual context, ignore the state-based regulatory environment, and thus fail to take into account the type of insurance at issue. Dkt. # 81, at 11.
The argument that all citizens are presumed to know the law, however complex and far-reaching it may be, cannot stand as a bulwark against Gunn's claims. The virtual abandonment by the federal government of the regulation of the insurance industry and the ceding of its governance to each of the 50 states of the union cannot support Continental's presumption of knowledge imputed to Gunn. We doubt that the intricacies of 50 different bodies of insurance law are topics of dinner conversation among American families, nor can it be said we are all steeped in the jargon of insurance and long-term care insurance policies.
The myriad details of the states' regulatory schemes and meaning of common industry terms, we daresay, are mysteries to most citizens, including those in the general practice of law. It is simply not reasonable to expect buyers of insurance to divine the meaning of "premium class" to the exclusion of all other possible definitions.
The ready vehicle for insurance industry terms and phrases to be defined and explained was the marketing material Continental issued to Gunn. In this case, there was no parity of knowledge of insurance language between Continental and Gunn. The more reasonable position would have been for Continental to have addressed the meaning of terms and definitions in its materials rather than rely on the unsustainable presumption of knowledge of the law on the part of its potential and actual customers.
Three other courts in this District considered the term "premium class" in the context of Continental's long-term care insurance policies and found it ambiguous, thereby allowing the plaintiffs to proceed on their breach of contract claims. See Cheslow v. Cont'l Cas. Co., 2022 WL 1641888, at *4 (N.D. Ill. 2022) (Kendall, J.); Brown, 591 F.Supp.3d at 349-50 (Rowland, J.); Sieving, 535 F.Supp.3d at 769-70 (Bucklo, J.). Continental argues these decisions were incorrect because these judges were only considering Rule 12(b)(6) motions to dismiss and did not have the benefit of an evidentiary or expert record. Continental says if Judges Bucklo, Rowland, and Kendall had the benefit of the evidentiary record developed in this case and a motion in the same procedural posture as here, they would not give credence to the lowest-approved rate theory or sustain the propriety of the claims in those other cases. We respectfully disagree. The Court is limited in what it may consider in ruling on the Rule 12(b)(6) motion to dismiss. See Geinosky v. City of Chi., 675 F.3d 743, 745 n.1 (7th Cir. 2012) ("A motion under Rule 12(b)(6) can be based only on the complaint itself, documents attached to the complaint, documents that are critical to the complaint and referred to in it, and information that is subject to proper judicial notice."); Mueller v. Apple Leisure Corp., 880 F.3d 890, 895 (7th Cir. 2018) (courts ordinarily cannot consider extrinsic evidence without converting a motion to dismiss into one for summary judgment).
Continental recognizes this, stating its Rule 12(b)(6) arguments rely only on the FAC, the background section of its brief, and the policy because it is referred to and central to the FAC. Dkt. # 80, at 27. Thus, the Court is unable to consider the expert reports and briefs submitted by the American Council of Life Insurers, American Property Casualty Insurance Association, and the National Association of Insurance Commissioners, in ruling on the Rule 12(b)(6) motion to dismiss.
Without these materials in the mix and limited to the face of the FAC and the policy at issue, the Court concludes that the term "premium class" is ambiguous, as both sides have advanced at least one reasonable interpretation of the term. See Cheslow, 2022 WL 1641888, at *4; Brown, 591 F.Supp.3d at 349-50; Sieving, 535 F.Supp.3d at 769-70. Again, the bar to survive a motion to dismiss is not high. Bonte v. U.S. Bank, N.A., 624 F.3d 461, 463 (7th Cir. 2010). "[A] well-pleaded complaint may proceed even if it strikes a savvy judge [that] 'recovery is very remote and unlikely.' " Twombly, 550 U.S. at 556, 127 S.Ct. 1955. The parties will be able to present extrinsic evidence bearing on the term's meaning at a later stage of the litigation. For now, Continental's motion to dismiss is denied as to Count I with respect to the allegations pertaining to "premium class."
The motion to dismissed is also denied when it comes to Gunn's breach of contract claims related to the inflation protection option. Gunn has not identified any provision in the policy that he alleges was breached; rather, he relies solely on statements made in the marketing brochure. Some Illinois courts have held that a "descriptive brochure furnished to an individual insured becomes a part of the insurance contract." Dobosz v. State Farm Fire & Cas. Co., 120 Ill. App. 3d 674, 678-79, 76 Ill.Dec. 211, 458 N.E.2d 611 (2nd Dist. 1983). But whether or not a brochure is properly considered part of the insurance contract involves questions of fact that cannot be properly resolved at the motion to dismiss stage. Sieving, 535 F.Supp.3d at 770-71.
C. Count II: Breach of Implied Covenant of Good Faith and Fair Dealing
As stated above, Gunn's breach of the implied covenant of good faith and fair dealing fails no matter which state's law applies. If Illinois law applies, such a cause of action does not exist. See Sieving, 535 F. Supp. 3d 762 (observing that "the implied covenant of good faith and fair dealing is merely a rule of construction that applies in the context of a breach-of-contract claim"). If D.C. law applies, the claim fails because an implied duty claim is not an independent cause of action when its "allegations are identical to other claims." Capitol Just., LLC v. Wachovia Corp., 2008 WL 11388566, at *7 (D.D.C. 2008). Continental's motion to dismiss is granted as to Count II.
D. Count III: Violation of the District of Columbia Consumer Protection Procedures Act
Continental moves to dismiss Gunn's DCCPPA claim because Gunn cannot establish the necessary nexus with D.C. to maintain such a claim. Illinois applies Section 148 of the Second Restatement to consumer fraud claims. Gunn, 968 F.3d at 802; see also Barbara's Sales, Inc. v. Intel Corp., 227 Ill. 2d 45, 65-67, 316 Ill.Dec. 522, 879 N.E.2d 910 (2007). In tort claims, including unfair and deceptive consumer practices, the Second Restatement's presumptive rule is if the deception took place in the same place as the reliance, the law of that place applies. Restatement (Second) of Conflict of Laws § 148(1). However, if the deception and reliance took place in different states, the court determines which jurisdiction has "the most significant relationship" to the case by reviewing a list of relevant contacts. Id. § 148(2); see also Gunn, 968 F.3d at 809. The factors to consider are: "(a) the state where plaintiff acted in reliance upon defendant's representations, (b) the state where plaintiff received the representations, (c) the state where defendant made the representations, (d) the domicile, residence, place of incorporation, and place of business of the parties, and (e) the place where a tangible thing which is the subject of the transaction between the parties was situated at the time." Barbara's Sales, 227 Ill. 2d at 66-67, 316 Ill.Dec. 522, 879 N.E.2d 910.
In this case, Gunn purchased coverage in Washington from an Illinois-based insurer and alleges to have relied on misleading promotional materials sent to him in Washington. It is true the DCCPPA does not exclude claims by nonresident plaintiffs and has also been applied to non-D.C. merchants. Margolis v. U-Haul Int'l, Inc., 818 F. Supp. 2d 91, 101 (D.D.C. 2011). However, the only "most significant relationship" factor here that may weigh towards applying D.C. consumer protection laws is the final factor, "the place where a tangible thing which is the subject of the transaction between the parties was situated at the time," namely, the group policy purchased by Gunn's employer.
Gunn says Continental marketed and sold the policy to a D.C. resident, namely, the Federal Judiciary Group Long Term Care Insurance Trust, for the benefit of certificate holders located both inside and outside of D.C. Therefore, according to Gunn, he may sue Continental on behalf of the nationwide group under the DCCPPA. But we agree with Continental that it is not enough that the master policy was issued to a trust in D.C. Gunn cannot escape these simple facts: Washington is the state where Gunn received the representations and where he acted in reliance upon those representations, Continental is an Illinois-based company, and Gunn was a Washington resident at the time he received and relied on the representations. The nexus to D.C.'s consumer fraud statute is too attenuated to Gunn's relationship with Continental. See, e.g., Cheslow, 2022 WL 1641888, at *5-6 (applying the "most significant relationship" test to a claim brought under the New Jersey Consumer Fraud Act). Continental's motion to dismiss is granted as to Count III.
Because no class has been certified, the residency of the putative class is irrelevant here. Margolis, 818 F. Supp. 2d at 105.
E. Counts IV and V: Fraud and Fraudulent Concealment
Continental argues Gunn's fraud claims fail to meet the requirements of Rule 9(b), fail to adequately allege necessary elements of each cause of action, and are patently implausible because insureds are presumed to know the law when they enter into a contract. To succeed on a fraud claim in Illinois, a plaintiff must establish:
Continental argues Gunn's fraud claims are barred by the economic loss rule. However, this argument relies on Washington law, rather than Illinois law which governs Gunn's fraud claims.
(1) a false statement of material fact; (2) known or believed to be false by the person making it; (3) an intent to induce the plaintiff to act; (4) action by the plaintiff in justifiable reliance on the truth of the statement; and (5) damage to the plaintiff resulting from such reliance.Newman v. Metro. Life Ins. Co., 885 F.3d 992, 1003 (7th Cir. 2018) (citing Doe v. Dilling, 228 Ill. 2d 324, 342-43, 320 Ill.Dec. 807, 888 N.E.2d 24 (2008)).
To state a claim for fraudulent concealment, rather than a false statement, "a plaintiff must allege that the defendant concealed a material fact when he was under a duty to disclose that fact to the plaintiff." Toulon v. Cont'l Cas. Co., 877 F.3d 725, 737 (7th Cir. 2017). A duty to disclose may be based on a fiduciary relationship or a relationship of trust and confidence where the "defendant [is] in a position of influence and superiority over plaintiff." Connick v. Suzuki Motor Co., 174 Ill. 2d 482, 500, 221 Ill.Dec. 389, 675 N.E.2d 584 (1996). Under Illinois law, no fiduciary relationship exists between an insurer and an insured. Toulon, 877 F.3d at 737. Nevertheless, a duty to disclose may arise when a defendant tells a "half-truth" and then becomes obligated to tell the full truth. Id. Thus, a "half-truth" may be sufficient for a claim of fraudulent concealment. Abazari v. Rosalind Franklin Univ. of Med. & Sci., 2015 IL App (2d) 140952, ¶ 33, 396 Ill.Dec. 611, 40 N.E.3d 264. More specifically, "[a] statement that is technically true may nevertheless be fraudulent where it omits qualifying material since a 'half-truth' is sometimes more misleading than an outright lie." W.W. Vincent & Co. v. First Colony Life Ins. Co., 351 Ill. App. 3d 752, 762, 286 Ill.Dec. 734, 814 N.E.2d 960 (1st Dist. 2004).
Here, Gunn alleges Continental's brochure and other marketing materials contained deceptive statements about future premium increases. Gunn specifically points to the language from the brochure which states that "[f]or premiums to change, Continental would have to change premiums for everyone in your age category who has the kind of coverage plan that you do." Dkt. # 24, ¶ 122. The same brochure also states that when the automatic benefit increase inflation protection features is purchased, "you will not need to worry about increasing your premium in the future or about tracking offers of additional coverage." Id. Gunn claims these representations were deceptive, false, and misleading because at the time they were made, Continental knew that it would not uniformly increase premiums for everyone in a given age category, but would raise premiums at different intervals and in different amounts from one state to the next. Gunn alleges Continental intended that the deceptive representations be relied on by purchasers of its long-term care policies and asserts he would not have purchased the long-term care coverage had he known premium increases would vary state by state, or that premiums would increase despite the purchase of inflation protection.
While the brochure was not attached to the FAC, the Court may nevertheless consider it because it is referenced in the FAC and is central to Gunn's claims. See Williamson v. Curran, 714 F.3d 432, 436 (7th Cir. 2013) (when ruling on a motion to dismiss, "a court may consider, in addition to the allegations set forth in the complaint itself . . . documents that are central to the complaint and are referred to in it").
In support of his claim for fraudulent concealment, Gunn alleges Continental's brochure and other marketing materials failed to disclose that future premium increases would not be uniform across an age category but would vary from one state to the next. Gunn further alleges the marketing materials also failed to disclose that purchasers of the automatic benefit increase option would be subject to future premium increases.
As an initial matter, the Court rejects Continental's argument that Gunn's fraud claims fail to meet Rule 9(b)'s heightened pleading requirements. The claims adequately set forth the "who, what, when, where, and how" of the fraud. United States ex rel. Mamalakis v. Anesthetix Mgmt. LLC, 20 F.4th 295, 301 (7th Cir. 2021). Furthermore, Gunn has plausibly alleged Continental told a half-truth—that it would only raise premiums on a nationwide basis for a particular age group—while omitting the entire truth that the premium increases would vary by an insured's state of residency. See Brown, 591 F.Supp.3d at 350-51. Continental's motion to dismiss is denied as to Counts IV and V is denied.
F. Count VI: Declaratory and Injunctive Relief
Finally, Continental moves to dismiss Count VI on the basis that Gunn has not alleged any violation of his legal rights and suffered no irreparable harm. Because Gunn has stated viable claims, the Court denies Continental's motion to dismiss Count VI. See, e.g., Cheslow, 2022 WL 1641888, at *7; Brown, 591 F.Supp.3d at 352; Sieving, 535 F.Supp.3d at 774-75.
CONCLUSION
For the foregoing reasons, the Court denies Continental's Rule 56 Filed Rate Defense Motion and grants the Rule 12(b)(6) Motion in part as set forth above. Counts II and III of Gunn's First Amended Complaint are dismissed. Status hearing is set for 9/15/2022 at 9:50 a.m.
It is so ordered.