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Butler v. Unified Life Insurance Co.

United States District Court, D. Montana, Billings Division

July 18, 2018




         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”) relating to a health insurance policy Mr. Butler purchased in February 2016.

         In their Second Amended Complaint, Plaintiffs assert 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, promissory estoppel, equitable estoppel, violation of the Montana Consumer Protection Act, common law bad faith, negligence, negligence per se, breach of fiduciary duty, and malice. (Doc. 47.)

         Presently before the Court is Defendants Unified Life and Allied National's Motion to Dismiss, which has been joined, in part, by Defendants HII and NCE.[1](Doc. 50, 51, 54.) The Motion has been referred to the undersigned under 28 U.S.C. § 636(b)(1)(B), and is fully briefed and ripe for the Court's review. (Docs. 52, 55, 58, 64, 67.)

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

         I. BACKGROUND

         Plaintiffs allege Plaintiff Chole Butler requested health insurance information for her husband through a website operated by HII. (Doc. 47 at ¶ 11.) Thereafter, Plaintiff Charles Butler was contacted by William Corchado, who was allegedly acting as an agent of NBoA and the other named Defendants. 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.)

         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.)

         After purchasing the policy, Mr. Butler received an insurance card which stated that it was an NCE membership card. The card instructed Mr. Butler to send claims to Allied National, and direct “billing & non-claims related questions” to HII. (Id.)

         In August 2016, Mr. Butler was diagnosed with testicular cancer, and began incurring medical costs. (Doc. 47 at ¶ 14.) Plaintiffs allege that although the providers submitted medical bills to Allied National, none of the bills were paid. (Id. at 14-15.) He was later diagnosed with metastasis in his lungs in February 2017, and chemotherapy was ordered. (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. 47 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.) Plaintiffs allege the Defendants improperly terminated Mr. Butler's coverage under the terms of the policy. (Id. at ¶ 25.)

         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.) Therefore, 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.)

         After Plaintiffs filed a complaint with the Montana Insurance Department in March 2017, Allied National began issuing Explanations of Benefits (“EOBs”). (Doc. 47 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 paid limited charges after the deductible subject to the 20% co-insurance. (Id. at ¶ 23.) Plaintiffs also state they were exposed to balance billing above the steeply discounted allowed charges. (Id. at ¶ 24.)

         Plaintiffs filed this action on April 25, 2017. (Doc. 1.) Thereafter, they filed an Amended Complaint (Doc. 9), alleging multiple claims against Defendants, including claims related to claims-handling under the Unfair Trade Practices Act (UTPA), common law tort claims for non-claims-handling conduct, a claim under the Montana Consumer Protection Act, and claims of loss of consortium by Mrs. Butler. Id. Defendants subsequently moved to dismiss certain counts and claims. (Docs. 3, 5, 19.)

         On December 15, 2017, this Court issued Findings and Recommendations, which recommended that Defendants' motion to dismiss be granted in part and denied in part. (Doc. 40.) The Court recommended Plaintiffs be permitted to proceed with their common law tort claims to the extent they were based on non-claims-handling conduct. (Id. at 7-11.) The Court recommended dismissal with prejudice of Plaintiffs' claim under the Montana Consumer Protection Act. (Id. at 11-12.) The Court further recommended dismissal without prejudice of Mrs. Butler's claims for loss of consortium. (Id. at 12-14.) U.S. District Judge Susan P. Watters adopted the Findings and Recommendation without change on January 4, 2018. (Doc. 46.)

         On January 5, 2018, Plaintiffs filed a Second Amended Complaint. (Doc. 47.) In the Second Amended Complaint, Plaintiffs re-assert the same causes of action that appeared in the Amended Complaint. Plaintiffs also add allegations to support additional common law tort claims under Counts II-VII and XI-XIV, and include more factual allegations regarding Mrs. Butler's derivative loss of consortium claims.

         Defendants now move to dismiss Count VII of the Second Amended Complaint (breach of insurance agent absolute duty), Count X (violation of Consumer Protection Act), Counts XI-XIV (alternative common law claims relative to claims-handling), and all claims of Mrs. Butler.

         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 ...

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