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Muckelman v. Companion Life Insurance Co.

United States District Court, Middle District of Pennsylvania

January 15, 2014


Brann Judge


Susan E. Schwab United States Magistrate Judge

In this civil action, the plaintiffs, Tracy and Allison Muckelman, seek to recover incurred medical expenses under a term health insurance policy that was rescinded by the defendant, Companion Life Insurance Co. ("Companion"). In their complaint, the plaintiffs raise three claims: Count I – Bad Faith; Count II – Breach of Contract; and Count III – a Violation of Pennsylvania‘s Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 P.S. § 201.1-1, et. seq. Before me now is Companion‘s motion to dismiss Counts I and III pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the following reasons, I recommend that the motion be granted in part and denied in part.

I. Background.

On March 13, 2013, the plaintiffs initiated this action by filing a complaint against Companion seeking to recover damages for Companion‘s denial of insurance coverage for certain medical expenses and its rescission of a term health insurance policy between the parties. More specifically, by the terms of the insurance policy issued to the plaintiffs (Policy # CST0230000), Companion was to provide coverage in accordance with the provisions of the policy, which was in effect from February 10, 2012 through February 10, 2013. During the policy period, Tracy was diagnosed with multiple myeloma and his doctors recommended that he undergo two bone marrow transplants. Before his diagnosis, Tracy had no knowledge of his condition.

After Tracy‘s doctors informed him of the need for two bone marrow transplants, he promptly sought approval for the procedures from Companion, in accordance with the insurance policy‘s terms. For a period of 10 months, Tracy waited for Companion‘s approval. While Tracy was awaiting approval, he received chemotherapy treatments, and he was assured by Companion that the bills relative to his treatment would be paid. Consequently, Tracy incurred medical expenses exceeding $162, 550.45; expenses that are still due and owing. Through correspondence dated February 8, 2013, Companion denied coverage for his medical expenses, rescinded the insurance policy, and sent Tracy a check for $3, 715.15 representing the payment of all the paid premiums. At no previous time was Tracy aware that Companion was considering rescission. As well, Companion never approved the two bone marrow transplants, and Tracy claims that he cannot obtain other affordable insurance because he now has a "pre-existing condition." Companion‘s decision to rescind the insurance policy was based on Tracy‘s answer to question three on the application for insurance coverage.[1] Question three apparently had to do with previous treatments and diagnosis. As such, based upon the plaintiffs‘ information and belief, Companion‘s decision to rescind was based on a neurative stress test that Tracy received in 2007, five years before applying for the insurance policy, and which was allegedly not disclosed on the insurance application. Plaintiffs claim, however, that Tracy‘s answer was not fraudulent, intentional, or material; similarly Companion has not contended that Tracy‘s answer to question three was fraudulent, intentional, or material.

Moreover, the plaintiffs claim that Companion‘s rescission was retroactive given part three of the policy in regard to termination of insurance, which states in pertinent part:

Coverage of a Covered Person under the Policy shall automatically terminate on the earliest of the following dates: …8. The date We specify that the Covered Person‘s insurance is terminated because of: … c. Material misrepresentation, fraud, or omission of information on any application form, or in requesting the receipt of benefits under the Policy.

Doc. 1 at ¶ 28-29.

In addition to not paying for Tracy‘s medical expenses, Companion has not paid for any other person covered by the policy, including Allison and the plaintiffs‘ children. Based on these allegations, the plaintiffs raise three claims: Count I for bad faith under 42 Pa.C.S. § 8371; Count II for breach of contract; and Count III for violation of the UTPCPL.[2] By way of remedy, plaintiffs demand judgment against Companion in an amount in excess of $100, 000 plus additional compensation or consequential damages or both, with interest, court costs, attorney‘s fees, and delay damages.

On May 13, 2013, Companion filed this motion to dismiss Counts I & III, along with a corresponding brief in support and exhibits. Docs. 8 & 9. On May 28, 2013, plaintiffs filed a timely brief in opposition. Doc. 10. Subsequently, on June 6, 2011, Companion filed a timely reply brief. The motion, having been fully briefed by the parties, is ripe for disposition on the merits.

II. Jurisdiction and Legal Standard.

Given the alleged citizenship of the parties, Doc. 1 at ¶¶ 1-2, coupled with the alleged amount in controversy, I find that this Court maintains subject matter jurisdiction over the plaintiffs‘ claims pursuant to 28 U.S.C. § 1332. Moreover, Companion has not challenged the Court‘s personal jurisdiction, and since it is a defense than can be waived, see Fed.R.Civ.P. 12(h)(1), I do not address that issue here.

With respect to the applicable legal standard, 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. Fed.R.Civ.P. 12(b)(6). Under Rule 12(b)(6), a dismissal motion may be granted only if, accepting all well-pleaded allegations in the complaint as true and viewing them in the light most favorable to the plaintiff, a court finds that plaintiff's claims lack facial plausibility. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555–56, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). This requires a plaintiff to plead "sufficient factual matter to show that the claim is facially plausible, " thus enabling "the court to draw the reasonable inference that the defendant is liable for misconduct alleged." Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009) (internal quotations and citation omitted). After Twombly and Ascroft v. Iqbal, 556 U.S. 662 (2009), "conclusory or bare-bones allegations will no longer survive a motion to dismiss: threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, ...

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