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Jacqueline M. Sewell, Individually and In Her Capacity As v. Liberty Life Insurance Company

April 25, 2012


The opinion of the court was delivered by: (judge Caputo)


Presently before the Court is Plaintiff's Motion for Leave to File an Amended Complaint. (Doc. 16.) Plaintiff seeks to file an amended complaint to assert a claim for bad faith against Defendant Liberty Life Insurance Company for the denial of accidental death benefits under the terms of an insurance policy. Defendant argues that leave should be denied on the basis that the proposed amendment would be futile. (Doc. 20.) Because Plaintiff's proposed bad faith claim is premised on Defendant's conduct in drafting the accidental death benefit insurance policy, as opposed to the unreasonable and intentional denial of benefits, Plaintiff's proposed amendment will be denied as futile.


Plaintiff Jacqueline M. Sewell brings this action individually and as the Executrix of the Estate of Gregson R. Sewell, her deceased son. (Am. Complaint, ¶ 3.) Defendant Liberty Life Insurance Company issued a policy (the "Policy") of accidental death benefit insurance to Mr. Sewell. (Am. Complaint, ¶ 4.) Mr. Sewell died as the result of a fire in his home on January 18, 2011. (Am. Complaint, ¶ 5.)

Plaintiff commenced this breach of contract action on September 15, 2011 after Defendant refused to pay benefits under the Policy. (Doc. 1.) On October 31, 2011, Defendant filed an Answer to Plaintiff's Complaint with Affirmative Defenses. (Doc. 7.) Subsequently, on February 28, 2012, Plaintiff filed a Motion for Leave to File an Amended Complaint. (Am. Complaint.) Plaintiff's proposed Amended Complaint adds a bad faith claim against Defendant. (Doc. 16.) Defendant opposes the proposed amendment on the basis that amendment would be futile. (Am. Complaint.)

As set forth in the proposed Amended Complaint, Defendant, an insurance company doing business in Pennsylvania, was bound by Pennsylvania's insurance laws. (Am. Complaint, ¶ 12.) Plaintiff argues that Exclusions (h) and (i)*fn1 of the Policy are over broad and violate the permissible exclusion set forth in 40 P.S. § 753(B)(11), which states: "Intoxicants and Narcotics: The insurer shall not be liable for any loss sustained or contracted in consequence of the insured's being intoxicated, or under the influence of any narcotic unless administered on the advice of a physician." 40 P.S. § 753(B)(11). Because the Policy's terms "are less favorable to the insured and/or beneficiary than they are to the insurer," Defendant's denial of benefits amounts to bad faith conduct as described in 42 Pa. C.S.A. § 8371 (Am. Complaint, ¶¶ 21-26.) Furthermore, Plaintiff asserts that Defendant's continued denial of benefits pursuant to an alleged cancellation of the Policy amounts to bad faith because Defendant failed to follow the specific notice requirements prior to cancellation of an insurance policy as set forth in 40 P.S. § 753(B)(8).

Defendant, however, argues that Plaintiff's proposed Amended Complaint fails to state a bad faith claim. (Doc. 20.) Specifically, Defendant argues that amendment would be futile because "Liberty Life cannot be said to have acted in bad faith as a result of its reliance upon the exclusions in the Policy." (Doc. 20.) Plaintiff's Motion for Leave to File an Amended Complaint has been fully briefed and is now ripe for disposition.

Legal Standards

A. Motion to Amend Pleadings

Under Federal Rule of Civil Procedure 15(a)(1)(B), "a party may amend its pleadings with . . . the court's leave. The court should freely give leave when justice so requires." Fed.R.Civ.P. 15(a). It is within the sound discretion of the trial court to determine whether a party shall have leave to amend pleadings out of time. See Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962); Heyl & Patterson Int'l, Inc. v. F.D. Rich Housing, 663 F.2d 419, 425 (3d Cir.1981). However, "[i]n the absence of any apparent or declared reason-such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of the allowance of the amendment, futility of the amendment, etc.-the leave sought should, as the rules require, be 'freely given.'" Foman, 371 U.S. at 182.

In the Third Circuit, the touchstone for the denial of leave to amend is undue prejudice to the non-moving party. Lorenz v. CSX Corp., 1 F.3d 1406, 1413-14 (3d Cir.1993); Cornell & Co., Inc. v. OSHRC, 573 F.2d 820, 823 (1978). "In the absence of substantial or undue prejudice, denial instead must be based on bad faith or dilatory motives, truly undue or unexplained delay, repeated failures to cure the deficiency by amendments previously allowed, or futility of amendment." Lorenz, 1 F.3d at 1414 (citing Heyl, 663 F.2d at 425).

The most pertinent issue here is whether Plaintiff's proposed amendment to her Complaint is futile. An amendment is futile if "the complaint, as amended, would fail to state a claim upon which relief could be granted." In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1434 (3d Cir.1997) (citing Glassman v. Computervision Corp., 90 F.3d 617, 623 (1st Cir.1996)). "The standard for assessing futility is the "same standard of legal sufficiency as applies under [Federal] Rule [of Civil Procedure] 12(b)(6)." Great W. Mining & Mineral Co. v. Fox Rothschild LLP, 615 F.3d 159, 174 (3d Cir. 2010) citing (Shane v. Fauver, 213 F.3d 113, 115 (3d Cir.2000)). Thus, the Court must take all "pleaded allegations as true" and view "them in a light most favorable to the plaintiff." Winer Family Trust v. Queen, 503 F.3d 319, 330--31 (3d Cir.2007)

B. Motion to Dismiss

Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a complaint, in whole or in part, for failure to state a claim upon which relief can be granted. When considering a Rule 12(b)(6) motion, the Court's role is limited to determining if a plaintiff is entitled to offer evidence in support of their claims. See Semerenko v. Cendant Corp., 223 F.3d 165, 173 (3d Cir. 2000). The Court does not consider whether a plaintiff will ultimately prevail. See id. A defendant bears the burden of ...

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