Opinion
SUCV201801106BLS2
01-24-2019
The MUFFIN TRUST et al. v. MONY LIFE INSURANCE COMPANY OF AMERICA et al.
MEMORANDUM OF DECISION AND ORDER ON DEFENDANTS’ PARTIAL MOTIONS TO DISMISS AND MOTION TO STRIKE PORTIONS OF PLAINTIFFS’ DEMAND FOR RELIEF
Janet L. Sanders, Justice of the Superior Court
This case challenges the defendants’ calculation of premiums and other charges on three life insurance policies owned by the plaintiffs. Defendant MONY Life Insurance Company of America (MONY) issued two of the policies (the MONY Policies). Defendant AXA Equitable Life Insurance Company (AXA) issued the third policy (the AXA Policy). Also named as defendants are Dale Peatman, the insurance broker who sold the policies to the plaintiffs, and Protective Life Insurance Company (Protective) which now owns MONY as a subsidiary.
The First Amended Verified Complaint (the Complaint) asserts the following counts against the defendants: declaratory judgment (Counts I and II); breach of contract (Counts III and IV); breach of implied covenant of good faith and fair dealing (Count V); violation of G.L.c. 93A (Count VI); violation of G.L.c. 19A, § 14 (Count VII); violation of G.L.c. 93A (Count VIII); violation of G.L.c. 110A, § 410 (Count IX); unjust enrichment (Count X); and breach of fiduciary duty (Count XI). Among other relief, plaintiff’s request that the life insurance policies be rescinded. Pursuant to Mass.R.Civ.P. 12(b)(6), defendants now move to dismiss some but not all of these counts, and also request that this Court strike plaintiffs’ demand for rescission. This Court concludes that the Motions to Dismiss must be ALLOWED in part and DENIED in part, and that the Motion to Strike must be DENIED .
MONY’s Motion seeks to dismiss Count I, a portion of Counts VI through VIII, Count IX, and Count X. AXA’s Motion seeks to dismiss Counts VI through X to the extent those counts concern the AXA Policy. With respect to striking the remedy of rescission, AXA joins with MONY in this request, although it makes the request as part of its motion to dismiss.
BACKGROUND
The three life insurance policies at issue are:
1. Flexible Premium Variable Life to Maturity Age Policy, No. 2VUL008292 ("Policy No. 292 "): This policy was issued by MONY in 1998 as life insurance for plaintiff Leonard Lewis, now 89 years old. The face value of the policy is $ 2.5 million. Plaintiff, the Muffin Trust (the Trust), is the owner of this policy. Plaintiff Ann Marie Lewis is the trustee and beneficiary of the Trust and also named as the beneficiary of Policy No. 292.
2. Flexible Premium Adjustable Life to Maturity to Age Policy, No. 2ULA000309 ("Policy No. 309 "): This policy was issued by MONY in 2003 as life insurance for plaintiff Ann Marie Lewis, currently 83 years old. Ann Marie Lewis is Leonard Lewis’ wife. The face value of this policy is also $ 2.5 million. The owner of this policy is plaintiff Barbara Lewis, Ann Lewis’ daughter. Barbara Lewis is 50 years old.
3. Joint Survivorship Universal Life Insurance Policy, No. 156 231 340 ("Policy No. 340 "): This policy was issued by AXA in 2007 and insures the life of both Leonard Lewis and his wife, Ann Marie. The face value of this policy is $ 5 million. Barbara Lewis is the owner of this policy.
The defendant, Dale Peatman, was the insurance broker who, as an agent of the defendants MONY and AXA, sold the three policies to plaintiffs. Plaintiffs had a long standing relationship with Peatman dating back to 1993 and relied upon his advice with respect to which insurance products would be suitable for them considering their net worth, their age, and their financial goals.
When plaintiffs purchased the MONY Policies, they understood that the monthly premiums would be in a fixed amount: $ 3, 410.46 for Policy No. 309 and $ 5, 594 a month for Policy No. 292. They understood that the maximum amount of premiums that would be paid on either policy would not exceed what the policy described as the "Guideline Premium Limit." That Limit was $ 1, 518, 010 for Policy No. 292 and $ 1, 211, 374.30 for Policy No. 309. With respect to the AXA Policy, plaintiffs understood that it had "guaranteed fixed premiums" for the life of the policy. Policy No. 340 further provided that any changes in "policy cost factors ... will be on a basis that is equitable to all policy holders of a given class and will be determined based on reasonable assumptions as to expense, mortality, policy and contract claims, taxes, investment income and lapses." ¶ 54, Complaint.
At some point (according to the Complaint), MONY began to charge the plaintiffs far in excess of the amounts permitted by the policies. By way of example, the Complaint states that MONY is demanding an annual payment of $ 400, 000 a year under Policy No. 292 such that plaintiffs will have to pay more than the face value of the policy itself within two and a half years. As to both Policy No. 292 and No. 309, MONY has required premium payments that exceed the Guideline Premium Limit. With respect to Policy No. 340, the Complaint alleges that AXA has raised the Cost of Insurance beyond anything that is equitable or actuarially justified. More generally, the Complaint alleges that the defendants have "targeted the elderly" by raising premiums so that policyholders like the plaintiffs are forced to abandon their policies and thus relinquish death benefits paid for with premiums over twenty years. ¶ 1, Complaint. "By indiscriminately and unlawfully raising the Cost of Insurance and the premiums on these policies without proper basis or explanation, [the defendants] have breached the express and implied terms of the policies" which are in any event "unconscionable" and "oppressive." ¶ 4, Complaint.
DISCUSSION
I. AXA’s and MONY’s Motions to Dismiss
The standard that this Court applies to these motions is well established. To withstand a motion to dismiss under Rule 12(b)(6), the complaint must contain "allegations plausibly suggesting (not merely consistent with) an entitlement to relief ..." Iannacchino v. Ford Motor Co., 451 Mass. 623, 636 (2008), quoting Bell A. Corp. v. Twombly, 550 U.S. 544, 555-57 (2007). Although a complaint need not set forth detailed factual allegations, a plaintiff is required to present more than labels and conclusions and must raise a right to relief "above the speculative level." Id. Thus, dismissal is proper when a fair reading of the Complaint establishes that the facts alleged do not support a cause of action which the law recognizes. Nguyen v. William Joiner Center for the Study of War and Social Consequences, 450 Mass. 291, 295 (2007). It is therefore not enough simply to allege that defendants owed a duty to plaintiffs, that the duty was breached, and that such duty was the cause of harm to the plaintiffs without sufficient factual allegations to support each of those legal conclusions.
Applying this legal standard, this Court turns to each of the counts targeted by defendants’ Motions to Dismiss.
A. Declaratory Relief as to MONY Policies (Count I)
Count I of the Complaint seeks declaratory judgment pursuant to G.L.c. 231A regarding the parties’ respective rights and obligations under the MONY Policies. In support of its request to dismiss this Count, MONY asserts that there is no "actual controversy." This Court disagrees. Count I alleges that MONY’s calculation of the "Monthly Deduction Rate," which included the Cost of Insurance, does not derive from a "reasonable application" of the criteria set forth in the two policies. It also states that there is a dispute as to the calculation of the Guideline Premium Limit, which the Complaint alleges that MONY has wrongfully increased. These allegations are sufficient to satisfy the standard that this Court applies at this early stage in the case.
AXA does not seek to dismiss Count II, which seeks the same relief as to Policy No. 340, the AXA Policy.
In seeking a dismissal of Count I, MONY essentially challenges the factual accuracy of these allegations. As to the Monthly Deduction, MONY says that the amount has risen not because the rate has changed but because the Cost of Insurance has risen— an increase that the MONY contends is permitted under both Policy No. 292 and 309. According to MONY, this increase occurred because plaintiffs did not pay premiums for certain periods of time: although these "premium holidays" were permitted by the MONY Policies, they had the effect of depleting the "Guaranteed Interest Account" which was used under the policies to fund the Cost of Insurance. As to the Guidelines Premium Limit, MONY says that plaintiffs have failed to take into account 26 U.S.C. § 7702, which defines that term to be the greater of the "Guidelines Single Premium" or the sum of the "Guidelines Level Premiums" as of a certain date. To demonstrate why the Guideline Premium Limit is in compliance with the statute, MONY at the motion hearing offered a chart: that chart was based at least in part on an affidavit submitted by the defendants at an earlier hearing. See Affidavit of Nathan Eshelman, attached as Exhibit B to MONY’s Memorandum in Support of its Motion to Dismiss. In essence, MONY contends that plaintiffs have simply misunderstood the meaning of Policy No. 309 and Policy No. 272, and that this misunderstanding is not enough to create a justiciable controversy under G.L.c. 231A.
MONY, however, seems to have misunderstood the standard that this Court applies to a Rule 12(b)(6) motion. In determining whether the Complaint should be dismissed this Rule, this Court takes as true the factual allegations it sets forth and draws all reasonable inferences in favor of the plaintiff. A court may consider documents attached to a complaint or incorporated in it without converting the motion to one for summary judgment. Harhen v. Brown, 431 Mass. 838, 840 (2000). It is otherwise confined to the four corners of the complaint itself. In the instant case, both Policy 292 and Policy 309 are attached to the Complaint and MONY’s argument rests, at least in part, on its interpretation of certain provisions in those policies. If the policies themselves were straightforward such that this Court could on its own determine their meaning without the assistance of an expert in life insurance, then this argument might have some merit. This is not the case, however.
MONY arguments are also based on more than the Complaint’s attachments. Specificallly, it relies on an affidavit that it submitted in opposition to plaintiffs’ motion for a preliminary injunction made earlier in this litigation. That affidavit was prepared by an actuary who, after analyzing various documents (attached as Exhibits 1 through 7 to the affidavit), made various calculations and, based on those calculations, drew certain conclusions. At least some of these documents are not among the exhibits attached to the Complaint itself nor directly referenced by it. Such material is not appropriately considered on a motion to dismiss. Moreover, the affidavit contains factual assertions and conclusions. Plaintiffs must have a chance to explore the basis for those factual assertions and have their own actuarial expert analyze the material in order to test the conclusions drawn therefrom. Indeed, an affidavit contradicted by other evidence in the record would not even be sufficient to support summary judgment.
Accordingly, MONY’s Motion to Dismiss this Count is DENIED .
B. Violation of G.L.c. 93A (Count VI)
Defendants’ motions are aimed at Count VI only as it pertains to MONY Policy No. 309 and AXA Policy No. 340. They contend that plaintiffs cannot assert claims with respect to these policies without first sending a demand letter describing the unfair or deceptive acts or practices. See G.L.c. 93A, § 9(3). Although plaintiffs did send a demand letter with respect to Policy No. 292, that letter does not mention either Policy No. 309 or Policy No. 340, much less describe what the defendants have done with respect to either policy that would constitute a Chapter 93A violation. Plaintiffs concede this, but state that they have since served on the defendants demand letters regarding both of these policies. They ask that this Court dismiss the Chapter 93A claim regarding these policies without prejudice, but at the same time allow plaintiffs to seek leave to amend the Complaint to add this claim back to Count VI. This Court would permit that, so long as that motion to amend is filed promptly. In so doing, however, this Court does not suggest that the motion to amend will be allowed, since there may well be other grounds for dismissing this claim apart from the failure to send demand letters.
Accordingly, defendants’ Motions to Dismiss this Count is ALLOWED as to so much of this Count as pertains to MONY Policy No. 309 and AXA Policy No. 340. This Count is therefore limited to MONY Policy No. 309 unless plaintiffs are successful in seeking to amend the count to include the other two policies.
C. Violation of G.L.c. 19A, § 14 (Count VII)
Plaintiffs allege that the defendants violated the Elder Protection Statute, G.L.c. 19A, § 1 et seq. That statute creates the Department of Elder Affairs and defines its powers, duties and responsibilities. The statute also contains various definitional sections, one such section being G.L.c. 19A, § 14. That section sets forth definitions to be used for purposes of sections 15 through 26 of the statute. Among the terms defined by section 14 is "financial exploitation," which constitutes an "act or omission by another person which causes a substantial monetary or property loss to an elderly person." An elderly person is defined as an individual who is 60 years or older. Plaintiffs allege that the acts or omissions of the defendants constitute financial exploitation within the meaning of G.L.c. 19A, § 14. Even assuming that to be true, this Court agrees with the defendants that this Count fails as a matter of law, for at least two reasons.
First, the definition of financial exploitation expressly excludes "any act or practice in the conduct of any trade or commerce declared unlawful by section two of ninety-three A." G.L.c. 19A, § 14. In other words, Chapter 19A was intended to apply to exploitation of the elderly that arises outside of the commercial context. Here, plaintiffs have alleged a violation of Chapter 93A, which already provides a powerful tool for any Massachusetts consumer to combat unlawful behavior committed in the course of trade or commerce. Moreover, the Complaint does not allege any other acts or omissions that might be lawful under Chapter 93A but unlawful under G.L.c. 19A, § 14.
Second, there is no indication in the statute that it creates a private right of action. As noted, this statute creates the Department of Elder Affairs and speaks directly to its duties and responsibilities. It contains no language suggesting that a private citizen can sue based on any violation of its provisions. Section 14 by its terms provides definitions for sections 15 through 26. Those sections have to do with certain programs, committees, boards, and services for elders administered or overseen by the Department of Elder Affairs. Without any indication from the legislature that it intended to create a private right of action under this statute, this Court declines to infer one. See All Brands Container Recovery, Inc. v. Merrimack Valley Distrib. Co., 54 Mass.App.Ct. 297, 301 (2002). See also Loffredo v. Center for Addictive Behaviors, 426 Mass. 541, 544 (1998). Thus, this Count fails to state a claim: the defendants’ Motion to Dismiss this Count are therefore ALLOWED and this Count is DISMISSED .
Even if there were a private right of action, only the owner of the policy would have standing to assert such a claim, since it is the owner, not the insured, who would suffer a monetary injury. Here, the owner of Policy No. 309 and Policy No. 340 is Barbara Lewis who (at 50 years old) is not an elderly person as defined by the statute.
D. Violation of G.L.c. 110A, § 410 (Count IX)
This count, alleging a violation of the Uniform Securities Act, is asserted against all defendants as to all three Policies. Defendants’ Motions target only so much of Count IX as it pertains to MONY Policy No. 309 and AXA Policy No. 340. In support, the defendants point out that that the statute defines "security" to exclude insurance policies like Policy No. 309 and Policy No. 340. Plaintiffs agree and do not offer any opposition to defendants’ request to dismiss this count as to those two policies. Defendants’ Motions as to this count are ALLOWED as to MONY Policy No. 309 and AXA Policy No. 340. This count therefore remains in the case only as to MONY Policy No. 272.
E. Unjust Enrichment (Count X)
This count alleges that defendants were unjustly enriched by receiving premium payments in excess of what was permitted by the policies at issue. In essence, plaintiffs allege a breach of contract. Unjust enrichment is an equitable remedy available to a party who otherwise has no adequate remedy at law. See Santagate v. Tower, 64 Mass.App.Ct. 324, 329 (2005), citing Taylor Woodrow Blitman Constr. Corp. v. Southfield Gardens Co., 534 F.Supp. 340, 347 (D.Mass. 1982). Where there is an enforceable contract, then plaintiffs have an adequate remedy at law in the event they can prove a breach of contract. The Complaint contains no allegations to suggest otherwise. Accordingly, the defendants’ motions as to this Count are ALLOWED and Count X is DISMISSED .
F. Breach of Fiduciary Duty (Count XI)
MONY and AXA ask that this Court dismiss this count on the grounds that there is no fiduciary relationship between an insurer and its insured. Plaintiffs agree that, as a general rule, defendants are correct, but note that the law also recognizes that an insurance agent may assume a greater duty of investigation, advice, and assistance to an insured— and thus be regarded as a fiduciary— by reason of special circumstances. See Szymanski v. Boston Mut. Life Ins. Co., 56 Mass.App.Ct. 367, 381-82 (2002) and cases cited therein. See also Martinonis v. Utica Natl. Ins. Group, 65 Mass.App.Ct. 418, 420 (2006). Such special circumstances "include (1) a prolonged business relationship; (2) the complexity and comprehensiveness of the customer’s coverages; (3) the frequency of contact between a customer and agent to attend to the customer’s insurance needs; and (4) the extent to which a customer relies on the advice of the agent by reason of the complexity of the policies." Perreault v. AIS Affinity Insurance Agency of New England, Inc., 93 Mass.App.Ct. 673, 667-78 (2018). Enhanced duties may also arise "when the agent holds himself out as an insurance specialist, consultant or counselor and is receiving compensation for consultation and advice apart from premiums paid by the insured." Baldwin Crane & Equip. Corp. v. Riley & Rielly Ins. Agency, Inc., 44 Mass.App.Ct. 29, 32 (1997) (citation omitted). Plaintiffs argue that their long standing relationship with defendant Peatman and their reliance on him for advice and guidance (all as alleged in the Complaint) would support a finding of a fiduciary relationship. Since Peatman was acting as MONY’s and AXA’s agent, then (it is argued), MONY and AXA are also liable.
Although the allegations in the Complaint with respect to Peatman are indeed skimpy and are more conclusory than factual, this Court nevertheless concludes that it is premature to dismiss this count at this early stage in the case. Peatman has already answered the Complaint and so would remain as a defendant in any event. Moreover, the question of whether a fiduciary relationship existed based on special circumstances is inherently a factual one not easily resolved by way of a 12(b)(6) Motion. This count can be revisited by way of summary judgment. The Defendants’ Motions as to this Count are therefore DENIED .
II. The Remedy of Rescission
In their Prayer for Relief, plaintiffs request that all three insurance policies be rescinded. MONY moves to strike this request pursuant to Rule 12(f), Mass.R.Civ.P. AXA makes the same request, although it does so as part of its Motion to Dismiss pursuant to Rule 12(b)(6). Both motions make the same legal argument, however, which is that plaintiffs are barred as a matter of law from seeking this remedy. In support they rely on G.L.c. 175, § 181 which contains a two-year statute of repose, and the SJC’s decision in Passatempo v. McMenimen, 461 Mass. 279, 290 (2012) construing that statute. This Court does not read Passatempo as broadly as the defendants do. Moreover, this request does not seek to eliminate any substantive claim in the case nor is it apparent that dealing with this issue now would change the way discovery is conducted. Given the case law’s lack of clarity on the issue raised by this motion, this Court sees no need to deal with it now. The Motion is therefore DENIED .
SO ORDERED.