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Toscano v. National Automobile Dealers Association

United States District Court, E.D. Pennsylvania

March 24, 2015

KENNETH R. TOSCANO, Plaintiff,
v.
NATIONAL AUTOMOBILE DEALERS ASSOCIATION d/b/a NATIONAL AUTOMOBILE DEALERS INSURANCE TRUST, and EVERCORE TRUST COMPANY (as trustee for NATIONAL AUTOMOBILE DEALERS INSURANCE TRUST), Defendants.

MEMORANDUM OPINION

EDWARD G. SMITH, District Judge.

The plaintiff and his co-owner of an automobile dealership had "key man" life insurance policies in which they named each other as beneficiaries under their respective policies. The co-owner died, and the plaintiff was unable to collect the proceeds under the co-owner's life insurance policy after the insurer informed him that prior to his death, the co-owner had removed the plaintiff as the beneficiary of the policy and named two other individuals as beneficiaries. The plaintiff initially brought an action in state court against a variety of individuals and entities, including the two beneficiaries. Although the plaintiff eventually settled that matter with the two beneficiaries, he did not resolve his claims with the entity (and its trustee) through which he and the co-owner purchased their policies. As such, the plaintiff filed another state court action against these defendants in which he asserted causes of action for breach of contract, breach of fiduciary duty, and negligence against these two defendants. The defendants removed the case to this court, and they now move to have the court dismiss the complaint because (1) the plaintiff has failed to state a claim for breach of contract, (2) the gist of the action and economic loss doctrines bar the plaintiff's breach of fiduciary duty and negligence claims, and (3) the plaintiff cannot prove that the defendants caused his damages. The court is constrained to agree that the plaintiff has failed to state a claim for breach of contract, the gist of the action doctrine bars his breach of fiduciary duty claim, and the economic loss doctrine bars his negligence claim. Accordingly, the court will dismiss the case without prejudice.

I. ALLEGATIONS AND PROCEDURAL HISTORY

William Keyte ("Keyte") and Thomas F. Murphy ("Decedent") previously owned an automobile dealership known as Northeast Lincoln Mercury, Inc. ("Northeast Lincoln"). Notice of Removal ("Notice"), at Ex. A, Compl. at ¶ 6 & Ex. A, Doc. No. 1. In approximately 1986 or 1987, Keyte and Decedent purchased "key man" life insurance policies for the benefit of Northeast Lincoln from The Prudential Insurance Company of America ("Prudential"). Compl. at ¶ 6 & Ex. D. Keyte and Decedent purchased the policies through the National Automobile Dealers Insurance Trust ("NADIT") because Northeast Lincoln, Keyte, and Decedent were members of the National Automobile Dealers Association ("NADA"). Id. at ¶ 6.

After Keyte died in 1998, Prudential paid the proceeds of the life insurance policy to Decedent. Id. at ¶ 7. Also, shortly after Keyte's death, the plaintiff, Kenneth R. Toscano purchased Keyte's share of Northeast Lincoln. Id. Once the plaintiff became a co-owner of Northeast Lincoln, he and Decedent placed each other as cross-beneficiaries under "key man" life insurance policies. Id. at ¶ 8.

Regarding Decedent's life insurance policy with Prudential (the "Policy"), on or about October 12, 1998, Decedent executed a "Change of Beneficiary and/or Name" form naming Northeast Lincoln as the beneficiary of the Policy and he submitted the form to NADIT. Id. at ¶ 10. NADIT recorded the form on October 16, 1998, and sent copies to the plaintiff on October 19, 1998. Id. at ¶ 10 & Ex. A. NADIT also forwarded the change of beneficiary form to Prudential. Id. at ¶ 11.

After receiving the form, Prudential notified Northeast Lincoln and the plaintiff that Decedent needed to change the beneficiary from Northeast Lincoln to a person. Id. at ¶ 11. On or about November 30, 1998, NADIT forwarded a change of beneficiary form for Decedent to execute. Id. at ¶ 12. Decedent executed the form on December 3, 1998, naming the plaintiff as the beneficiary. Id. at ¶ 12 & Ex. B. Prudential eventually received the form, and the plaintiff received confirmation of the beneficiary change. Id.

Since 1998, the plaintiff or Northeast Lincoln paid all premiums under the Policy, and NADIT submitted the bills to the plaintiff.[1] Id. at ¶ 13. The plaintiff never received notice that the beneficiary of the Policy was anyone other than him. Id. at ¶ 16.

Decedent died on April 19, 2011. Id. at ¶ 17. Thereafter, the plaintiff attempted to process a claim under the Policy through NADIT, the defendant, Evercore Trust Company (as trustee for NADIT), Gilsbar, Inc. ("Gilsbar") (the third-party administrator for NADIT), and Prudential. Id. at ¶¶ 17, 18. In particular, he submitted his claim with Gilsbar and Evercore. Id. at ¶ 18. Prudential refused to pay the plaintiff any proceeds under the Policy because prior to his death, Decedent changed the beneficiaries of the Policy from the plaintiff to Decedent's ex-wife "Silva" and his adult daughter, "Ms. Murphy." Id. at ¶¶ 19, 20.

To attempt to recover the unpaid life insurance proceeds, the plaintiff and Northeast Lincoln commenced an action against Prudential, NADIT, Evercore, Gilsbar, Silva, Ms. Murphy, and Decedent's estate, in the Court of Common Pleas of Philadelphia County. See id. at ¶¶ 27, 28; Mem. of Law in Supp. of Def.'s Mot. to Dismiss at Exs. B, C.[2] In this action, the plaintiff "was forced to enter into a settlement agreement with Silva and [Ms.] Murphy for only a fraction of the policy proceeds." Compl. at ¶ 28.

After the resolution of the first state court action, the plaintiff commenced this second action against NADA, doing business as NADIT, and Evercore in Philadelphia County by filing a praecipe for a writ of summons on April 18, 2013. See Notice at Ex. A, Doc. No. 1-5. On December 23, 2013, the defendants filed a praecipe for the court to enter a rule upon the plaintiff to file a complaint. See id. at Ex. C. On January 13, 2014, the plaintiff filed a complaint in which he asserts causes of action for breach of contract, breach of fiduciary duty, and negligence against the defendants. See id. at Ex. B.

Regarding the breach of contract claim, the plaintiff alleges that as a member of NADIT and the purchaser of an insurance policy through them, he relied on the actions of NADIT concerning the Policy. Compl. at ¶ 22. In addition, he claims that Evercore, as NADIT's trustee, had a duty to him to ensure that any changes to the insurance policy were correctly processed. Id. at ¶ 29. He asserts that NADIT processed or helped to process a change of beneficiary form from someone other than the true owner of the policy. Id. at ¶ 24. In addition, NADIT and Evercore failed to notify him, as the true (or rightful) owner of the Policy, of the request to change the beneficiary or of the actual change in beneficiaries. Id. at ¶¶ 25, 30, 31. If NADIT and Evercore had notified the plaintiff of the change, he could have taken steps to prevent it such as by filing an action for injunctive relief to force Decedent to reinstate him as the beneficiary. Id. at ¶¶ 26, 32. Instead, because the defendants breached their duties, the plaintiff had to sue to obtain "his rightful claim to the policy proceeds, " and he eventually entered into a settlement agreement with Silva and Murphy "for only a fraction of the [P]olicy proceeds." Id. at ¶¶ 27, 28, 34.

For his breach of fiduciary duty claim, the plaintiff claims that Evercore and NADIT had the duty to protect his interest because he is a member of the National Auto Dealers Association. Id. at ¶ 36. The defendants breached this duty by changing the name of the beneficiary without notifying him as the owner of the Policy. Id. at ¶ 37. As for the negligence claim, the plaintiff asserts that the defendants were negligent because they failed to advise him of the change in beneficiary. Id. at ¶ 41.

On February 4, 2014, the defendants timely removed the action to federal court. See Notice.[3] The defendants then filed the instant motion to dismiss the complaint and a supporting memorandum of law on February 11, 2014. See Doc. No. 3. The plaintiff filed a memorandum of law in opposition to the motion to dismiss on March 28, 2014. See Doc. No. 5. The defendants filed a motion for leave to file a reply brief on April 4, 2014, and the Honorable Norma L. Shapiro granted the motion on April 21, 2014. See Doc. Nos. 6, 7. The defendants filed a reply brief on April 22, 2014. See Doc. No. 8. On that same date, Chief Judge Petrese B. Tucker reassigned this case to the ...


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