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Principal Life Insurance Co. v. Minder

July 1, 2009

PRINCIPAL LIFE INSURANCE CO.
v.
MARTIN W. MINDER



The opinion of the court was delivered by: Bartle, C.J.

MEMORANDUM

Plaintiff Principal Life Insurance Company ("Principal Life"), in this diversity action, has sued defendant Martin W. Minder ("Minder"), as trustee of the Joseph C. Minder Family Trust (the "Trust"). Principal Life, among other relief, seeks to have declared void an insurance policy on the life of Minder's father, Joseph Minder who is living. Martin Minder was the agent who wrote the Policy, and he is also the trustee of the Trust, which is the record owner and beneficiary of the Policy. Minder has filed an answer in which he states a counterclaim with four claims.

Before the court is the motion of Principal Life to dismiss Minder's counterclaim for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.

For present purposes, we accept as true the following factual allegations underlying Minder's counterclaim. We also consider relevant admissions made by Minder in his answer to the complaint.

Principal Life commenced this action on December 19, 2008. It alleges that the Policy is invalid as an unlawful stranger-originated life insurance policy (a "STOLI"),*fn1 a fact which Principal Life contends Joseph Minder concealed in his application. Principal Life seeks a judgment declaring that (1) the Policy is void or voidable due to a lack of insurable interest at its inception; (2) the Policy is void or voidable due to material misrepresentations in the application; and (3) Principal Life may retain some or all of the premiums paid on the Policy to off-set the costs and expenses it incurred as a result of the issuance of the Policy.

Minder has admitted that the Trust is the owner and beneficiary of the Policy, but he specifically denies that the Policy is a STOLI or was part of any STOLI scheme. He further denies that Joseph Minder entered into a premium financing agreement and contends that the Trust has properly paid the premiums.

Minder in his counterclaim seeks a declaratory judgment in Count I that the Policy is valid and enforceable. He alleges in Count II that Principal Life has acted in bad faith in violation of 42 Pa. Cons. Stat. § 8371 because it has no reasonable legal or factual basis for seeking a declaration that the Policy is void or voidable. Consistent with the terms of § 8371, Minder seeks punitive damages. Minder brings a claim for breach of contract in Count III based on the theory that Principal Life "anticipatorily repudiated its obligations to provide the agreed upon and intended benefits to [Minder's] beneficiaries upon his death" by filing the instant lawsuit. Finally, in Count IV,*fn2 Minder alleges that Principal Life breached its duty of good faith and fair dealing by "bringing this Action in an effort to improperly avoid [its] obligations under the Policies and forcing the Trust and/or Minder Trustee to engage in litigation to defend the benefits under the Policy."

Under Rule 12(b)(6) of the Federal Rules of Civil Procedure the defending party bears the burden of showing that a pleading has not stated a claim upon which relief may be granted. Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1409 (3d Cir. 1991). To avoid dismissal, the party filing the pleading must state "'enough facts to raise a reasonable expectation that discovery will reveal evidence of' the necessary element[s]" of the cause of action. Phillips, 515 F.3d at 234 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)). In this diversity action, we apply Pennsylvania substantive law to Minder's claims. See Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938).

First, Principal Life moves to dismiss Count I of Minder's counterclaim on the ground that it is the "mirror image" of its own claim for declaratory relief. Having reviewed the pleadings, we agree. There is a "complete identity of factual and legal issues" between the parties' respective requests for declaratory judgment. See Aldens, Inc. v. Packel, 524 F.2d 38, 51-52 (3d Cir. 1975). Count I of Minder's counterclaim is redundant of the issues that will necessarily be adjudicated under Principal Life's claim. Accordingly, we will exercise our discretion to dismiss this Count. See Aldens, 524 F.2d at 53; De Lage Landen Fin. Servs., Inc. v. Miramax Film Corp., No. 06-2319, 2009 WL 678625, at *7 (E.D. Pa. Mar. 16, 2009).

In Count II Minder alleges that Principal Life violated Pennsylvania's statute governing bad faith insurance actions, 42 Pa. Cons. Stat. § 8371, by intentionally instituting a lawsuit for declaratory judgment without any reasonable legal or factual basis. Specifically, he states that Principal Life "filed this lawsuit in order to wrongfully avoid its obligations and duties under the Policy" and that Principal Life has "no reasonable legal or factual basis" for its requested relief. In his brief Minder explains that Principal Life has been involved in litigation with the Delaware Valley Financial Group, Inc. ("DVFG"), the company which employs Minder. He suggests that Principal Life has been filing lawsuits against DVFG, its agents, and its clients in retaliation for DVFG's decision to terminate its relationship with Principal Life. These allegations appear to go beyond what Minder alleged in his counterclaim. However, even if we take them as true, Minder has not stated a claim for bad faith under § 8371.

Section § 8371 provides:

In an action arising under an insurance policy, if the court finds that the insurer has acted in bad faith toward the insured, the court may take all of the following actions:

(1) Award interest on the amount of the claim from the date the claim was made by the insured in an amount equal to the ...


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