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Bucher v. American Health and Life Insurance Co.

United States District Court, W.D. Pennsylvania

August 28, 2014

KAREN BUCHER, Plaintiff,
v.
AMERICAN HEALTH AND LIFE INSURANCE COMPANY, et al., Defendants.

MEMORANDUM AND ORDER

ROBERT C. MITCHELL, Magistrate Judge.

Plaintiff, Karen Bucher, filed this action in the Court of Common Pleas of Allegheny County, Pennsylvania, alleging claims of breach of contract, unjust enrichment and bad faith under 42 Pa. C.S. § 8371 against Defendants, American Health and Life Insurance Company (American Health), CitiFinancial Servicing LLC (which states that it was erroneously identified as CitiFinancial Services Inc.) (CitiFinancial), and OneMain Financial Services, Inc. (OneMain). The claims arise out of the alleged cancellation of and failure to pay the proceeds of a life insurance policy following the death of Plaintiff's husband, Clarence Bucher, on April 21, 2013.

Defendants removed the case to this Court on the basis of diversity of citizenship and filed a motion to compel arbitration and stay proceedings. Plaintiff filed an Amended Complaint and Defendants again filed a motion to compel arbitration and stay proceedings. For the reasons that follow, the motion will be denied.

Facts

On or around September 7, 2005, Plaintiff and her husband, Clarence Bucher (together, the Buchers), took a mortgage secured loan from CitiFinancial for a principal balance of $98, 146.32. (Am. Compl. ¶ 9 & Ex. 1.)[1] At the same time, upon advice and recommendation of CitiFinancial, the Buchers obtained a debtor group insurance policy on Clarence Bucher's life for up to $100, 000.00 that was issued through American Health. (Am. Compl. ¶¶ 10, 24 & Ex. 2.) On or around February 20, 2007, the Buchers took a second mortgage secured loan from CitiFinancial for a principal balance $15, 591.79. (Am. Compl. ¶ 11 & Ex. 3.) CitiFinancial advised them not to refinance their first mortgage as they would lose their debtor group insurance on Clarence Bucher's life. Had CitiFinancial not provided this advice, the Buchers would have refinanced their first mortgage. (Am. Compl. ¶¶ 12-13.)

At some time prior to April 21, 2013, OneMain began servicing both loans taken by the Buchers. The Buchers made all the required payments on the group life insurance policy. (Am. Compl. ¶¶ 14-15, 18.)

On April 21, 2013, Clarence Bucher died as a result of complications of coronary artery disease and diabetes mellitus. (Am. Compl. ¶ 16 & Ex. 4.) At the time, he was still under the age of 66. (Am. Compl. ¶ 19.)

Subsequently, Plaintiff discovered that Defendants had unilaterally canceled the group life insurance policy without providing notice of any kind. Prior to April 21, 2013, the Buchers were never notified that the policy was being canceled or terminated. (Am. Compl. ¶¶ 17, 20.) "Plaintiff suffered damages in the amount of the value of benefits owed under the group life insurance policy and interest." (Am. Compl. ¶ 21.)

Procedural History

Plaintiff filed this action in the Court of Common Pleas of Allegheny County, Pennsylvania on April 15, 2014, alleging claims of breach of contract, bad faith and unjust enrichment. On May 21, 2014, Defendants removed the action to this Court on the basis of diversity jurisdiction, 28 U.S.C. § 1332, in that: Plaintiff is a citizen of Pennsylvania; American Health is a citizen of Texas; CitiFinancial is a citizen of Delaware; OneMain is a citizen of Delaware and Maryland; and the amount in controversy, exclusive of interest and costs, exceeds the sum of $75, 000.00. (Notice of Removal ¶¶ 6-9, 20, 26-30.)

On June 4, 2014, Defendants filed a motion to compel arbitration and stay proceedings (ECF No. 5). Plaintiff filed a brief in opposition on June 30, 2014 (ECF No. 11). On July 8, 2014, Defendants filed a reply brief (ECF No. 12-1).

On July 18, 2014, Plaintiff filed an Amended Complaint (ECF No. 16). Count I alleges that American Health breached the insurance contract. Count II alleges that American Health acted in bad faith in violation of § 8371. Count III seeks a declaratory judgment that Plaintiff's obligations in regard to the mortgage ceased as of April 21, 2013 and became the responsibility of American Health. Finally, Count IV alleges that American Health was unjustly enriched by retaining the premiums Plaintiff and her husband paid on the policy as well as the debt-servicing costs associated with the loans subsequent to the death of Clarence Bucher.

On July 31, 2014, Defendants filed a second motion to compel arbitration and stay proceedings (ECF No. 17). On August 14, 2014, Plaintiff filed a brief in opposition (ECF No. 21) and on August 27, ...


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