Opinion
CASE NO. 19-80211-CV-MIDDLEBROOKS
2019-09-06
Douglas KUBER, individually, and Rebecca Kuber and Rachel Gross as Trustees Under Douglas Kuber 2008 Family Trust, Plaintiffs, v. BERKSHIRE LIFE INSURANCE COMPANY OF AMERICA, and the Guardian Life Insurance Company of America, Defendants.
Richard Mark Benrubi, Law Office of Richard M. Benrubi, P.A., West Palm Beach, FL, Darren Mitchell Goldman, Gary Charles Rosen, Becker & Poliakoff, P.A., Fort Lauderdale, FL, for Plaintiff Douglas Kuber. Richard Mark Benrubi, Law Office of Richard M. Benrubi, P.A., West Palm Beach, FL, Gary Charles Rosen, Becker & Poliakoff, P.A., Fort Lauderdale, FL, for Plaintiffs Rebecca Kuber, Rachel Gross. Andrea E. Nieto, Kristina Beth Pett, McDowell Hetherington LLP, Boca Raton, FL, Thomas F.A. Hetherington, Pro Hac Vice, McDowell Hetherington, LLP, Houston, TX, for Defendant Berkshire Life Insurance Company of America. Andrea E. Nieto, Kristina Beth Pett, McDowell Hetherington LLP, Boca Raton, FL, for Defendant the Guardian Life Insurance Company of America.
Richard Mark Benrubi, Law Office of Richard M. Benrubi, P.A., West Palm Beach, FL, Darren Mitchell Goldman, Gary Charles Rosen, Becker & Poliakoff, P.A., Fort Lauderdale, FL, for Plaintiff Douglas Kuber.
Richard Mark Benrubi, Law Office of Richard M. Benrubi, P.A., West Palm Beach, FL, Gary Charles Rosen, Becker & Poliakoff, P.A., Fort Lauderdale, FL, for Plaintiffs Rebecca Kuber, Rachel Gross.
Andrea E. Nieto, Kristina Beth Pett, McDowell Hetherington LLP, Boca Raton, FL, Thomas F.A. Hetherington, Pro Hac Vice, McDowell Hetherington, LLP, Houston, TX, for Defendant Berkshire Life Insurance Company of America.
Andrea E. Nieto, Kristina Beth Pett, McDowell Hetherington LLP, Boca Raton, FL, for Defendant the Guardian Life Insurance Company of America.
ORDER ON MOTION TO DISMISS
DONALD M. MIDDLEBROOKS, UNITED STATES DISTRICT JUDGE
THIS CAUSE came before the Court upon a Motion to Dismiss filed by Defendants Berkshire Life Insurance Company of America ("Berkshire") and The Guardian Life Insurance Company of America ("Guardian") (collectively "Defendants") on March 6, 2019. (DE 9). Plaintiffs responded on April, 16, 2019 (DE 16), and Defendants replied on March, 25, 2019 (DE 19). For the following reasons, Defendants' motion is granted in part and denied in part.
I. BACKGROUND
This is a case about the alleged withholding of disability benefits under two insurance policies: the Berkshire Individual Disability Income Insurance Policy ("Berkshire Policy"), issued to Plaintiff Douglas Kuber ("Mr. Kuber"), and the Guardian Whole Life Insurance Policy ("Guardian Policy") issued to Plaintiffs Rebecca Kuber and Rachel Gross, as trustees under Douglas Kuber 2008 Family Trust.
Prior to September 18, 2012, Mr. Kuber worked as a litigation and trial attorney at Kuber Law Group, a law firm where he was a 100% owner. (DE 1-1 at 83; DE 1-1, ¶ 13). He alleges that he was forced to quit work as an attorney, due to "multiple serious disabling conditions." (DE 1-1, ¶ 13). Mr. Kuber reports to suffer from "Major Depression, Generalized Anxiety Disorder, Chronic Fatigue Syndrome, Fibromyalgia, Peripheral Neuropathy, Sjogren's Syndrome, Polyarthralgia and back pain." (DE 1-1, ¶ 12).
Upon leaving work as an attorney, Mr. Kuber notified both Berkshire and Guardian of his disability. (DE 1-1, ¶ 14). Mr. Kuber sought disability benefits from Berkshire and a waiver of his premiums by Berkshire and Guardian. In response, Berkshire agreed to provide disability benefits but stated that as Mr. Ruber's disability resulted from "a mental disorder and/or substance abuse" there was a "24-month lifetime maximum limitation of the indemnity period." (DE 1-1 at 33). Berkshire and Guardian both agreed to suspend premiums for this 24-month period, which began on December 19, 2012 and culminated on December 19, 2014. (DE 1-1, ¶ 15).
Berkshire is a wholly owned subsidiary of and administrator for The Guardian Life Insurance Company.
Plaintiffs contend that Mr. Kuber should not have been limited to the 24-month coverage period for mental disorders or substance abuse issues, but rather should have received lifetime coverage as a result of his physical conditions. (DE 1-1, ¶ 15). To receive such coverage, Mr. Kuber would need to be declared "totally disabled." The Berkshire Policy defines "total disability" as "the inability due to bodily injury or disease to perform substantially all of the duties ... of the insured's regular occupation at the time disability begins." (DE 1-1 at 82). The Guardian Policy similar defines totally disability as "the inability to perform the material and substantial duties of your occupation." (DE 1-1, ¶ 81).
After a period, both policies require total disability from occupations other than the one in which the insured was previously working, but these limitations fall outside the relevant time period for this case and thus are irrelevant.
In support of Mr. Kuber's total physical disability, Plaintiffs offer multiple medical evaluations. In 2014 he received an Attending Physician's statements that opined that his "diagnoses precluded [his] ability to work as a trial attorney." (DE 1-1, ¶ 18). In 2015, he received a comprehensive evaluation wherein he was determined to be "physically disabled from working not only in his own but in any occupation." (DE 1-1, ¶ 18). While both of these were sent to Defendants, they continued to deny coverage.
While not mentioned in Plaintiffs' complaint, I take judicial notice of the fact that on October 11, 2012, Mr. Kuber plead guilty to felony wire fraud. (DE 9-2). On August 9, 2016, he was sentenced to 48 months in prison. (DE 9-2) He was disbarred from New York on June 16, 2017, the District of Columbia on August 17, 2017, and from California on September 27, 2018. In re Kuber , 151 A.D.3d 124, 55 N.Y.S.3d 229 (N.Y. App. Div. 2017) ; In re Kuber , 185 A.3d 723 (D.C. 2018) ; In the Matter of Douglas Alan Kuber , Case No. 16-C-16373 (State Bar Ct. of Cal. 2018). However, his New York disbarment was made effective, nunc pro tunc , to the date of his conviction, October 11, 2012. In re Kuber , 151 A.D.3d 124, 55 N.Y.S.3d 229 (N.Y. App. Div. 2017).
The Court may take judicial notice of facts which are "not subject to reasonable dispute" and are "capable of accurate and ready determination by resort to sources whose accuracy could not reasonably be questioned." Fed. R. Evid. 201(b) ; see also Universal Express, Inc. v. U.S. SEC , 177 F. App'x. 52, 53 (11th Cir. 2006) (per curiam) (citing Stahl v. U.S. Dep't of Agric. , 327 F.3d 697, 700 (8th Cir. 2003) ).
II. LEGAL STANDARD FOR MOTION TO DISMISS
A motion to dismiss under Rule 12(b)(6) challenges the legal sufficiency of the allegations in a complaint. See Fed. R. Civ. P. 12(b)(6). In assessing legal sufficiency, the Court is bound to apply the pleading standard articulated in Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) and Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). That is, the complaint "must ... contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Am. Dental Ass'n v. Cigna Corp. , 605 F.3d 1283, 1289 (11th Cir. 2010) (quoting Twombly , 550 U.S. at 570, 127 S.Ct. 1955 ). "Dismissal is therefore permitted when on the basis of a dispositive issue of law, no construction of the factual allegations will support the cause of action." Glover v. Liggett Grp., Inc. , 459 F.3d 1304, 1308 (11th Cir. 2006) (internal quotations omitted) (citing Marshall Cnty. Bd. of Educ. v. Marshall Cnty. Gas Dist. , 992 F.2d 1171, 1174 (11th Cir. 1993) ).
When reviewing a motion to dismiss, a court must construe plaintiff's complaint in the light most favorable to plaintiff and assume the truth of plaintiff's factual allegations. See Erickson v. Pardus , 551 U.S. 89, 93, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) ; Christopher v. Harbury , 536 U.S. 403, 406, 122 S.Ct. 2179, 153 L.Ed.2d 413 (2002) ; Brooks v. Blue Cross & Blue Shield of Fla., Inc. , 116 F.3d 1364, 1369 (11th Cir. 1997). However, pleadings that "are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 ; see also Sinaltrainal v. Coca-Cola Co. , 578 F.3d 1252, 1260 (11th Cir. 2009) (stating that an unwarranted deduction of fact is not considered true for purposes of determining whether a claim is legally sufficient).
III. DEFENDANTS' MOTION TO DISMISS
Plaintiffs bring seven causes of action in this case, three against Berkshire, and four against Guardian: I) Breach of Contract against Berkshire; II) Breach of the Covenant of Good Faith and Fair Dealing against Berkshire; III) Unfair Business Practices under California Business & Professional Code § 17200 against Berkshire; IV) Breach of Contract against Guardian; V) Specific Performance against Guardian; VI) Breach of the Covenant of Good Faith and Fair Dealing against Guardian; VII) Violation of the New Jersey Consumer Fraud Act under N.J.S.A. 56:8-2 against Guardian.
In their Motion to Dismiss, Defendants argue that Plaintiffs' claims should be entirely dismissed as Mr. Kuber was not legally able to work due to his felony, and thus his disability is irrelevant. In the alternative, Defendants seek dismissal of Counts III, V, VI, and VII on various other bases, addressed in turn below.
A. Legal Disability
Defendants contend that Mr. Kuber is not entitled to disability benefits because, per the Berkshire and Guardian contracts, disability benefits are only available where the insured cannot work "due to" disability. (DE 1-1 at 82). Defendants allege in their motion to dismiss that "[Mr.] Kuber has been legally prohibited from practicing as a trial attorney since October 11, 2012 due to his guilty plea on that same date." (DE 9 at 8). It is his guilt, Defendants' contend, not exclusively his disability, that precludes him from working.
While this specific language does not appear in the Guardian contract, Plaintiffs do not contest that the inability to work must be due to, disability to recover under either contract.
This contention is not sufficiently supported by the factual record to allow dismissal at this stage of the proceedings. Significantly, Plaintiffs do not mention Mr. Ruber's conviction or disbarments at all in their pleadings. On a motion to dismiss, the court may take judicial notice of a fact outside of the pleading "provided that it is central to the plaintiff's claims and is undisputed in terms of authenticity." Maxcess, Inc. v. Lucent Techs. , Inc., 433 F.3d 1337, 1340 n. 3 (11th Cir. 2005) (citing Horsley v. Feldt , 304 F.3d 1125, 1135 (11th Cir. 2002) ). However, I am reticent to stray too far from the language of Plaintiffs' complaint.
As to Defendants' contention that Mr. Kuber has been factually disabled from practicing law since the date of his guilty plea, there is no caselaw directly connecting a guilty plea and a prohibition from working as a lawyer. To the extent that Defendants are contending that Mr. Ruber's disbarment from New York, which was made effective nunc pro tunc to October 11, 2012, is the legal cause for Mr. Kuber's inability to work as a lawyer, that argument is analytically flawed. Defendants are correct that on the date of conviction, Mr. Kuber was effectively disbarred in New York. New York Judiciary Law § 90(4)(a) ("Any person being an attorney and counsellor-at-law who shall be convicted of a felony ... shall upon such conviction, cease to be an attorney and counsellor-at-law, or to be competent to practice law as such."). However, Mr. Kuber was also barred in California and the District of Columbia.
Neither the laws of California nor the District of Columbia' provide for automatic disbarment upon a felony conviction. California employs a holistic standard wherein "suspension or disbarment may be deemed necessary" as a result of a criminal conviction. In re Johnson , 1 Cal. 4th 689, 697, 4 Cal.Rptr.2d 170, 822 P.2d 1317, 1321 (1992) (emphasis added). Defendants argue that the facts mandate a conclusion that Mr. Kuber should be considered to have been disbarred in California in 2012. To support such a conclusion, Defendants require the Court to engage in a series of hypotethicals: if Mr. Kuber has reported his conviction promptly, as required by California law (which he did not), and if the California court had decided his disbarment in line with similar cases (which it was not required to do), he would have been disbarred. (DE 19 at 5,6). Even if supportive facts can be found in the public record, they stray too far from the complaint allegations, which I. am largely confined by at the Motion to Dismiss stage. I take judicial notice of the fact that Mr. Kuber was disbarred in California in September 27, 2018. In the Matter of Douglas Alan Kuber , Case No. 16-C-16373 (State Bar Ct. of Cal. 2018). Otherwise, I will not speculate whether Mr. Kuber would have been disbarred earlier had any number of factual contingencies taken place. That is a fact-intensive inquiry not appropriate for resolution at this stage in the proceedings.
Defendants similarly call for inappropriate speculation about the status of Mr. Ruber's D.C. license. I take judicial notice of Mr. Kuber's disbarment in 2017, but beyond that will not consider whether he should have been disbarred earlier than that date.
The judicially noticed facts show that Mr. Kuber was licensed to practice law in at least one state until 2018. Plaintiffs contend that Mr. Kuber became physically disabled in 2012. Therefore, the facts before me do not reflect that Mr. Kuber's legal inability to work as a lawyer preceded his date of disability. While the issues Defendants raise may factor into summary judgment, they are not appropriate here.
Therefore, at this stage of the proceedings, I need not decide whether loss of a professional license precludes disability benefits.
In light of the facts pled in Plaintiffs' complaint, I decline to dismiss any of Plaintiffs' causes of action on these grounds.
B. California Unfair Competition Act § 17200
Florida adheres to the law of lex loci contractus , meaning that "the law of the jurisdiction where the contract was executed governs the rights and liabilities of the parties in determining an issue of insurance coverage." State Farm Mut. Auto. Ins. Co. v. Roach , 945 So. 2d 1160, 1163 (Fla. 2006). As the Berkshire contract was executed in California, California law governs. (DE 1-1, ¶ 29).
Defendant Berkshire seeks dismissal of Plaintiffs' claim under the California Unfair Competition Act ("UCA"). The UCA prohibits businesses from "engaging in any unlawful, unfair or fraudulent business act or practice." Cal. Bus. & Prof. Code § 17200. The elements of a claim under the UCA are (1) "plaintiff's status as an insured or intended beneficiary of the insurance policy," (2) "the existence of the policy," (3) "the insurer's conduct and that such conduct was an unfair, unlawful or fraudulent business practice in violation of [the UCA]," (4) "a request for injunctive relief and or restitution (monetary damages are not recoverable under the UCA)," and (5) "a request for attorney's fees." Heighley v. J.C. Penney Life Ins. Co. , 257 F. Supp. 2d 1241, 1259 (CD. Cal. 2003).
Defendant Berkshire concedes that Plaintiffs' claim has met every element except the third. Defendant Berkshire argues that Plaintiffs failed to "identify the practice that is unfair or unlawful." (DE 9 at 12). However, Plaintiffs allege in their complaint that Berkshire acted unlawfully and unfairly in that they "adjudicate disability claims in bad faith" and "fail to honor their contracts." (DE 1-1, ¶ 38). These claims are supported by Plaintiffs' factual contention that Berkshire disregarded doctors' reports that Mr. Kuber was totally physically disabled. (DE 1-1, ¶¶18, 19). These allegations provide a short and plain statement of the unfair and unlawful practices of which Plaintiffs complain. Thus, Count III of Plaintiffs' complaint survives dismissal on this ground.
Defendant Berkshire also contend that equitable relief under the UCA is not available as Plaintiffs have an adequate remedy at law. The UCA provides only equitable relief in the form of restitution or an injunction; in this case Plaintiffs seek restitution. (DE 1-1, 39). However, "[t]here is a split of authority in the California district courts on ... whether plaintiffs should be barred from pleading claims for equitable relief ... if they have alleged a claim that would provide an adequate remedy at law." Luong v. Subaru of Am., Inc. , No. 17-CV-03160-YGR, 2018 WL 2047646, at *7 (N.D. Cal. May 2, 2018). Adkins v. Comcast Corp. , No. 16-CV-05969-VC, 2017 WL 3491973, at *3 (N.D. Cal. Aug. 1, 2017) ("[T]his Court is aware of no basis in California or federal law for prohibiting the plaintiffs from pursuing their equitable claims in the alternative to legal remedies at the pleadings stage."); Huu Nguyen v. Nissan N Am., Inc. , No. 16-CV-05591-LHK, 2017 WL 1330602, at *4 (N.D. Cal. Apr. 11, 2017) (granting dismissal because plaintiff had an adequate remedy at law).
When state law is unsettled, "federal authorities must apply what they find to be the state law after giving ‘proper regard’ to relevant rulings of other courts of the State." Comm'r v. Bosch's Estate , 387 U.S. 456, 465, 87 S.Ct. 1776, 18 L.Ed.2d 886 (1967).
The United States Supreme Court has stated "it is axiomatic that a court should determine the adequacy of a remedy in law before resorting to equitable relief." Franklin v. Gwinnett Cty. Pub. Sch. , 503 U.S. 60, 75–76, 112 S.Ct. 1028, 117 L.Ed.2d 208 (1992) ; accord Mort v. United States , 86 F.3d 890, 892 (9th Cir. 1996) ("It is a basic doctrine of equity jurisprudence that courts of equity should not act when the moving party has an adequate remedy at law."). Federal courts applying California law, and thus analyzing how they expect the California Supreme Court to rule, have routinely determined that equitable remedies are not available when plaintiffs have an adequate remedy at law. See e.g., Munning v. Gap, Inc. , 238 F. Supp. 3d 1195, 1203 (N.D. Cal. 2017) ("A plaintiff seeking equitable relief in California must establish that there is no adequate remedy at law available."); Philips v. Ford Motor Co. , No. 14-cv-02989-LHK, 2015 WL 4111448, at *16 (N.D. Cal. July 7, 2015) ("Statutory relief under the [UCA] is subject to fundamental equitable principles, including inadequacy of the legal remedy.") (internal quotation omitted); Zapata Fonseca v. Goya Foods Inc. , No. 16-cv-02559-LHK, 2016 WL 4698942, at *7 (N.D. Cal. Sept. 8, 2016) (dismissing claims for equitable relief under the [Unfair Competition Act] because plaintiff had an adequate remedy at law); Moss v. Infinity Ins. Co. , 197 F.Supp.3d 1191, 1203 (N.D. Cal. 2016) (dismissing a UCA claim where plaintiff had an adequate remedy at law in her other claims, including a breach of contract claim); Gardner v. Safeco Ins. Co. of Am. , No. 14-CV-02024-JCS, 2014 WL 2568895, at *8 (N.D. Cal. June 6, 2014) (dismissing a UCA case with leave to show that equitable remedies were inadequate); Rhynes v. Stryker Corp. , No. 10-5619 SC, 2011 WL 2149095, at *4 (N.D. Cal. May 31, 2011) ("Where the claims pleaded by a plaintiff may entitle her to an adequate remedy at law, equitable relief is unavailable.").
Given the wealth of recent cases firmly advocating this position, as well as the guidance offered by the United States Supreme Court', I hold that a UCA case should be dismissed where plaintiffs have an adequate remedy at law. Here, Plaintiffs seek damages from Berkshire for Breach of Contact and Breach of the Covenant of Good Faith and Fair Dealing. (DE 1-1, ¶¶ 27-35). These claims provide Plaintiffs with an adequate remedy at law. Accordingly, the Motion to Dismiss is granted as to Count III.
C. Specific Performance
Mr. Kuber entered into the Guardian contract in New Jersey (DE 1-1, ¶ 48), thus, per lex loci contractus , the contract is governed by New Jersey law. State Farm Mut. Auto. Ins. , 945 So. 2d at 1163. Defendant Guardian seeks dismissal of Plaintiffs' claim for specific performance as, under New Jersey law, specific performance is an element of a breach of contract claim rather than a stand-alone cause of action. Neither party disputes this legal principal. (DE 16, at 12). Therefore, the Motion to Dismiss is granted as to Count V with leave for Plaintiffs to amend their complaint to include specific performance under Count IV, Breach of Contract. (DE 1-1, ¶ 40-46).
D. Good Faith and Fair Dealing
Defendant Guardian seeks dismissal of Plaintiffs' claim that Guardian violated its duty of good faith and fair dealing. Defendant Guardian contends that the claim is duplicative of the breach of contract claim against Guardian.
"A covenant of good faith and fair dealing is implied in every contract in New Jersey." Wilson v. Amerada Hess Corp. , 168 N.J. 236, 244, 773 A.2d 1121 (2001). Under the implied covenant of good faith and fair dealing, "neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract." Sons of Thunder, Inc. v. Borden, Inc. , 148 N.J. 396, 420, 690 A.2d 575, 587 (1997) (quoting Palisades Properties, Inc. v. Brunetti , 44 N.J. 117, 130, 207 A.2d 522 (1965) ). Breach of Contract claims and Breach of Good Faith and Fair Dealing claims often overlap. While some overlap is to be expected, the good faith and fair dealing claims should be dismissed if they are duplicative, meaning they are "based on the same underlying conduct." Hills v. Bank of Am. , No. CIV.A. 13-4960 ES, 2015 WL 1205007 at *4 (D.N.J. Mar. 17, 2015).
Breach of the implied covenant of good faith and fair dealing may be an independent cause of action only under three limited circumstances: (1) to allow the inclusion of additional terms and conditions not expressly set forth in the contract, but consistent with the parties' contractual expectations; (2) to allow redress for a contracting party's bad-faith performance of an agreement, when it is a pretext for the exercise of a contractual right to terminate, even where the defendant has not breached any express term; and (3) to rectify a party's unfair exercise of discretion regarding its contract performance.
Id. (citing Kumon N. Am., Inc. v. Timban , No. 13-4809, 2014 WL 2812122, at *7–8 (D.N.J. June 23, 2014) ).
Here, Plaintiffs' claim satisfies the second exception, as it alleges a "pretext for the exercise of a contractual right to terminate." Id. Plaintiffs allege that Defendant Guardian breached its duty by "knowingly or recklessly disregarding the lack of a reasonable basis" for denying claims. (DE 1-1, ¶ 48). Essentially, Plaintiffs are alleging not just a breach, but bad-faith leading to that breach. This allegation is supported by Plaintiffs' factual contentions. For instance, Guardian found that Mr. Kuber was not "totally or residually disabled" after a Board-Certified Psychiatrist opined that Mr. Kuber was "physically disabled from working not only [on] his own but in any occupation." (DE 1-1, ¶¶ 18, 19). Taken in the light most favorable to Plaintiffs, these facts support knowing or reckless denial of Mr. Ruber's claims. Thus, Plaintiffs' claim for breach of the implied warranty of good faith and fair dealing is sufficiently distinct from their breach of contract claim and supported by sufficient factual allegations to survive a motion to dismiss. Accordingly, the Motion to Dismiss is denied as to Count VI.
E. New Jersey Consumer Fraud Act
Defendant Guardian seeks dismissal of Count VII of Plaintiffs' complaint, which alleges a violation of the New Jersey Consumer Fraud Act ("CFA") N.J.S.A. § 56:8-2. Defendant Guardian argues that Plaintiffs cannot receive relief under the CFA because denial of insurance benefits is not covered by the CFA. (DE 9 at 15).
The CFA prohibits "any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing concealment, suppression, or omission of any material fact ... in connection with the sale or advertisement of any merchandise or real estate." N.J. Stat. Ann. § 56:8–2 (2010) (emphasis added). There is uncertainty in New Jersey courts about whether the payment of insurance benefits constitutes the "sale or advertisement of any merchandise" and thus is covered by the CFA. While two New Jersey Superior Courts have suggested that the CFA does not apply to insurance benefits, this issue has never been squarely raised. Nikiper v. Motor Club of America , 232 N.J.Super. 393, 557 A.2d 332 (App. Div. 1989) ; Pierzga v. Ohio Cas. Group of Ins. Cos. , 208 N.J.Super. 40, 504 A.2d 1200 (App. Div. 1986). The New Jersey Supreme Court has declined to address this issue. Rodio v. Smith , 123 N.J. 345, 352, 587 A.2d 621 (1991). The New Jersey Supreme Court came closest to speaking on the issue when it stated that "although several lower courts have held that the payment of insurance benefits is not subject to the CFA, our reading of the CFA convinces us that the statute's language is ample enough to encompass the sale of insurance policies as goods and services that are marketed to consumers." Lemelledo v. Beneficial Mgmt. Corp. of Am. , 150 N.J. 255, 265, 696 A.2d 546 (1997). However, this is not an explicit statement that insurance benefits are covered by the CFA.
The reasoning that the New Jersey Supreme Court has used in similar cases supports a finding that the CFA covers disputes about insurance benefits. The Court discussed that "[t]he language of the CFA evinces a clear legislative intent that its provisions be applied broadly in order to accomplish its remedial purpose, namely, to root out consumer fraud." Lemelledo , 696 A.2d 546, 551. Therefore, the language of the CFA should be read expansively. The CFA "could not possibly enumerate all, or even most, of the areas and practices that it covers without severely retarding its broad remedial power to root out fraud in its myriad, nefarious manifestations." Id. The Third Circuit in 2018 agreed with this analysis, noting that they believe the New Jersey Supreme Court would hold, in regard to insurance, that the CFA covers "fraud both in the initial sale (where the seller never intends to pay), and fraud in the subsequent performance (where the seller at some point elects not to fulfill its obligations)." Alpizar-Fallas v. Favero , 908 F.3d 910, 916 (3d Cir. 2018). Thus, I conclude that the best reading of the CFA includes claims for denial of insurance benefits.
As Defendant Guardian raises no other issues with Plaintiffs' CFA claim, viewing Count VII in the light most favorable to Plaintiffs, Plaintiffs have sufficiently pled a cause of action under the CFA. Accordingly, the Motion to Dismiss is denied as to Count VII.
IV. CONCLUSION
Based upon the foregoing, and after careful consideration of Plaintiffs' Complaint (DE 1) and the applicable laws pertaining to the claims at issue,
It is hereby ORDERED AND ADJUDGED that
(1) The Defendants' Motion to Dismiss (DE 9) is GRANTED IN PART AND DENIED IN PART as set forth above.
(2) The Motion to Dismiss is DENIED with respect to Counts I, II, IV, VI, and VII.
(3) The Motion is GRANTED with respect to Count III, and that count shall be dismissed WITH PREJUDICE.
(4) The Motion is GRANTED with respect to Count V. Court V is DISMISSED WITHOUT PREJUDICE and may be reincorporated into Count IV, consistent with the Parties' agreement.
(5) If Plaintiffs wish to file an Amended Complaint, they must do so on or before September 30, 2019.