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Butler v. Unified Life Insurance Co.

United States District Court, D. Montana, Billings Division

December 15, 2017

CHARLES M. BUTLER, III and CHLOE BUTLER Plaintiffs,
v.
UNIFIED LIFE INSURANCE COMPANY; HEALTH PLANS INTERMEDIARIES HOLDINGS, LLC, doing business as Health Insurance Innovations, doing business as Health Insurance Innovations, Inc.; ALLIED NATIONAL, INC.; NATIONAL BROKERS OF AMERICA, INC.; THE NATIONAL CONGRESS OF EMPLOYERS, INC.; and DOES 1-10 Defendants.

          FINDINGS AND RECOMMENDATION REGARDING MOTIONS TO DISMISS

          TIMOTHY J. CAVAN UNITED STATES MAGISTRATE JUDGE

         Plaintiffs Charles M. Butler, III and Chole Butler (“Plaintiffs”) bring this action against Defendants Unified Life Insurance Company (“Unified Life”), Health Plan Intermediaries Holdings, LLC d/b/a Health Insurance Innovations, d/b/a Health Insurance Innovations, Inc. (“HII”), Allied National, Inc. (“Allied National”), National Brokers of America, Inc. (“NBoA”), and National Congress of Employers, Inc. (“NCE”). Plaintiffs' Amended Complaint relates to a health insurance policy Mr. Butler purchased in February 2016, and consists of claims for breach of contract, violation of the Unfair Claims Settlement Practices Act, fraudulent inducement, deceit, constructive fraud, negligent misrepresentation, breach of insurance agent duty, estoppel, violation of the Montana Consumer Protection Act, malice, and several alterative claims handling counts. (Doc. 9.)

         Presently before the Court are Defendants Unified Life, Allied National, and HII and NCE's Motions to Dismiss, which have been referred to the undersigned under 28 U.S.C. § 636(b)(1)(B). (Docs. 3, 5, 19.) Plaintiffs have also filed a Motion to Strike portions of Defendants HII and NCE's reply in support of their Motion to Dismiss. (Doc. 36.) The motions are fully briefed and ripe for the Court's review. (Docs. 4, 6, 10, 16, 20, 27, 32, 38, 39.)

         Having considered the parties' submissions, the Court RECOMMENDS Defendants' Motions to Dismiss be GRANTED IN PART and DENIED IN PART, and Plaintiffs' Motion to Strike be GRANTED.

         I. BACKGROUND

         Plaintiffs allege that Plaintiff Chole Butler requested health insurance information for her husband through a website operated by HII. (Doc. 9 at ¶ 11.) On or about February 27, 2016, Plaintiff Charles Butler was contacted by William Corchado who was acting as an agent of NBoA and the other named Defendants. (Id.) Mr. Corchado sold Mr. Butler a Unified Life health insurance policy. (Id.) The policy had an effective date of April 1, 2016, and termination date of February 28, 2017. (Id. at ¶ 13.) The insurance card Mr. Butler received stated that it was an NCE membership card, and instructed Mr. Butler to send claims to Allied National, and direct “billing & non-claims related questions” to HII. (Id.) Plaintiffs allege that Mr. Corchado represented the policy had 80/20 coverage, a $5, 000 deductible, and provided major medical “Obamacare” health insurance coverage. (Id. at ¶¶ 11-12.) Plaintiffs allege that Mr. Corchado did not tell Mr. Butler that the policy was subject to cancellation or non-renewal if he got sick. (Id. at ¶ 12.)

         In August 2016, Mr. Butler was diagnosed with testicular cancer, and began incurring medical costs. (Doc. 9 at ¶ 14.) Plaintiffs allege that although the providers submitted medical bills to Allied National, none of the bills were paid. (Id. at 14-15.) In February 2017, Mr. Butler was diagnosed with metastasis in his lungs. (Id. at ¶ 17.)

         On or about February 23, 2017, Plaintiffs received a message on their home answering machine advising them that the insurance policy was set to expire, and they needed to call back to avoid any lapse in coverage. (Doc. 9 at ¶ 18.) Mrs. Butler called Mr. Corchado that night and spoke with him. (Id.) Plaintiffs claim Mr. Corchado assured them he would personally make sure the policy would be renewed, and that Mr. Butler would be “grandfathered” in. (Id.) Contrary to these representations, however, Plaintiffs allege the policy lapsed and was not renewed as of February 28, 2017, without further notice to Mr. Butler. (Id. at ¶ 19.)

         On March 1, 2017, Plaintiffs were contacted by a representative of MD Anderson Cancer Treatment Center in Houston, Texas, who told them MD Anderson could not treat Mr. Butler because he no longer had health insurance. (Id. at ¶ 20.) Mr. Butler began chemotherapy under the supervision of the Billings Clinic at the Sidney Health Care Cancer Wing, but had no health insurance coverage for the month of March 2017. (Id. at ¶ 21.) Plaintiffs were able to obtain coverage through a different insurer starting on April 1, 2017. (Id. at ¶ 21, n.5.)

         In March 2017, after Plaintiffs filed a complaint with the Montana Insurance Department and contacted legal counsel, Allied National began issuing Explanations of Benefits (“EOBs”). (Doc. 9 at ¶¶ 22-23.) Plaintiffs allege the EOBs improperly excluded certain charges, steeply discounted other billed charges, charged the discounted amounts against the $5, 000 deductible, and payed limited charges after the deductible subject to the 20% co-insurance. (Id. at ¶ 23.) Plaintiffs state they were also exposed to balance billing above the steeply discounted allowed charges. (Id. at ¶ 24.) Plaintiffs further allege that Defendants improperly terminated Mr. Butler's coverage without taking any steps to determine if he was totally disabled for purposes of triggering the Extension of Benefits clause under the policy, despite having received months of medical bills for the treatment of Mr. Butler's cancer. (Id. at ¶ 25.)

         II. ANALYSIS

         A. Motions to Dismiss

         “Dismissal under Rule 12(b)(6) is proper when the complaint either (1) lacks a cognizable legal theory or (2) fails to allege sufficient facts to support a cognizable legal theory.” Zixiang Li v. Kerry, 710 F.3d 995, 999 (9th Cir. 2013) (quoting Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008)). The Court's standard of review under Rule 12(b)(6) is informed by Rule 8(a)(2), which requires that a pleading contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 677-678 (2009) (quoting Fed. R. Civ. P 8(a)).

         To survive a motion to dismiss under Rule 12(b)(6), “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Iqbal, 556 U.S. at 678. “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. A plausibility determination is context specific, and courts must draw on judicial experience and common sense in evaluating a complaint. Levitt v. Yelp! Inc., 765 F.3d 1123, 1135 (9th Cir. 2014).

         A court considering a Rule 12(b)(6) motion must accept as true the allegations of the complaint and must construe those allegations in the light most favorable to the nonmoving party. See e.g., Wyler Summit P'ship v. Turner Broad. Sys., Inc. 135 F.3d 658, 661 (9th Cir. 1998). However, “bare assertions… amount[ing] to nothing more than a ‘formulaic recitation of the elements'…for the purposes of ruling on a motion to dismiss are not entitled to an assumption of truth.” Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (quoting Twombly, 550 U.S. at 555). Such assertions do nothing more than state a legal conclusion, even if the conclusion is cast in the form of a factual allegation. Id.

         Defendants move to dismiss Counts IV-X, of the Amended Complaint.[1]Defendants argue Plaintiffs' claims for negligent misrepresentation, deceit, estoppel, constructive fraud, and breach of insurance agent duty are barred as a matter of law by the Montana Unfair Trade Practices Act. Defendants further contend there is no private right of action against insurers under the ...


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