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Hilston v. American General Life Insurance Co.

United States District Court, E.D. Pennsylvania

May 12, 2015

SHARON O. HILSTON, individually and as trustee of the James A. Hilston Irrevocable Trust
v.
AMERICAN GENERAL LIFE INSURANCE COMPANY

MEMORANDUM

KEARNEY, J.

We now review claims brought by a successor trustee of her late father's trust and beneficiary of his trust and lapsed life insurance policy arguing her father's life insurer did not provide the predecessor trustee with the contractually mandated written notice of the premium due in December 2008 and subsequent delinquency and termination. The policy lapsed for lack of premium and when her father died in July 2012, the insurer did not tender the death benefits. At this preliminary stage, we are not interpreting policy provisions but first determine whether Ms. Hilston, as either the substitute trustee of her late father's trust or as the trust's and insurance policy beneficiary may seek damages in this action filed in December 2014 for breach of contract and bad faith in light of Pennsylvania's tort and contract statutes of limitations and discovery rule. As successor trustee, her complaint details notice to the predecessor trustee long before 2012 and thus her trustee claims for bad faith are barred by Pennsylvania's two year tort statute of limitations. Her individual beneficiary claim for bad faith is timely. As there are fact questions concerning notice in 2011 or earlier, she may also proceed on the breach of contract with a four year statute of limitations. Plaintiff sufficiently pleads both claims at this preliminary stage.

I. FACTS

Defendant American General Life Insurance Company ("AGLIC"), through a predecessor, sold a life insurance policy ("Policy") to Dr. James Hilston on December 1, 1995. (ECF Doc. No. 9, Am. Compl., ¶¶ 6, 8.) On May 30, 1996, Dr. Hilston transferred ownership of the Policy to D. Kevin Laughlin, Esquire, as trustee for the James A. Hilston Irrevocable Trust (the "Trust"). (Id. ¶ 10.) AGLIC sent all premium bills and correspondence to Attorney Laughlin. (Id. ¶ 12.)

Attorney Laughlin paid the Policy premiums as they became due. (Id. ¶ 13.) AGLIC billed premiums semi-annually, and Attorney Laughlin paid them from Trust accounts or through reimbursement from Trust accounts.[1] (Id. ¶ 12, 14.) The premium amount remained steady at $313.56 over the first seven (7) Policy years. (Id. ¶ 15.) The Policy then automatically renewed as an Annual Renewable Term Plan, effective December 1, 2002. (Id. ¶ 16.) The premium amount of the Annual Renewable Plan remained steady for the first year at $686.40 but was subject to an annual increase in an amount not to exceed the Policy's maximum renewal premium. (Id. ¶ 18.)

The Policy required AGLIC to provide written notice at the beginning of each policy year of the required premium for that year. (Id. ¶ 25.) From July 1, 1996 to June 1, 2008, Attorney Laughlin, as trustee, made all premium payments. (Id.) Plaintiff alleges that AGLIC failed to provide written notice of the premium due in December 2008. (Id. ¶ 28.) As a result, Attorney Laughlin did not pay the premium for December 2008. (Id. ¶ 29.) Plaintiff alleges that after not receiving payment, AGLIC decided to lapse the Policy for non-payment of premiums. (Id.) Plaintiff alleges that in addition to the notice of premium, AGLIC failed to send a notice of lapse, grace period, termination, or reinstatement of rights. (Id.) Accordingly, she alleges that Dr. Hilston, Attorney Laughlin, and Plaintiff did not know of the coverage lapse until March 3, 2011, when AGLIC informed Attorney Laughlin that the Policy lapsed on January 31, 2009 for non-payment of premiums.[2] (Id. ¶ 30.) In June 2011, AGLIC sent Attorney Laughlin a reinstatement application but due to Dr. Hilston's health he was unable to present evidence of insurability necessary for reinstatement. (Id. ¶ 32.) Dr. Hilston passed away on July 19, 2012. (Id. ¶ 33.)

In 2013, Plaintiff sued Attorney Laughlin for his failure as trustee to prevent the Policy lapse.[3] (Id. ¶ 35.) Attorney Laughlin answered he was not responsible for the Policy lapse because he never received notice from AGLIC. (Id. ¶ 36.) Plaintiff then subpoenaed AGLIC requesting "[a]ll premium due notices for the Policy", "[a]ll lapse notices for the Policy", and "[a]ll termination or cancellation notices for the Policy." (Id. ¶ 36.) AGLIC ultimately never provided those particular documents and informed Plaintiff that it does not keep those records from that long ago. (Id. ¶ 42.) On April 2, 2014, Plaintiff demanded payment of death benefits allegedly owed under the Policy. (Id. ¶ 45.) On April 28, 2014, an associate general counsel for AGLIC advised that AGLIC denied the demand because the Policy lapsed in December 2008. (Id. ¶ 47.)

Plaintiff, as the substitute trustee and the trust beneficiary, waited until December 2014 to sue AGLIC for breach of contract (Count I) and statutory bad faith pursuant to 42 Pa. Con. Stat. §8371 (Count II).

II. STANDARD OF REVIEW

AGLIC moves to dismiss the Amended Complaint arguing that both claims are barred by the applicable statute of limitations and Plaintiff fails to state a claim upon which relief can be granted. AGLIC also requests a rule to show cause that Plaintiff is the lawful trustee.

A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure for a failure to state a claim upon which relief can be granted examines the sufficiency of the complaint. See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). When considering a motion to dismiss pursuant to Rule 12(b)(6), we "consider only the complaint, exhibits attached to the complaint, [and] matters of public record, as well as undisputedly authentic documents if the complainant's claims are based upon these documents." Mayer v. Belichick, 605 F.3d 223, 230 (3d Cir.2010) (alteration in the original) (citing Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir.1993)). We must "accept all the factual allegations as true [and] construe the complaint in the light most favorable to the plaintiff." Warren Gen. Hosp. v. Amgen Inc., 643 F.3d 77, 84 (3d Cir. 2011) (alteration in original) (citing Pinker v. Roche Holdings Ltd., 292 F.3d 361, 374 n.7 (3d Cir. 2002).

A plaintiff is obligated to plead "a short and plain statement of the claim." Fed.R.Civ.P. 8(a)(2). It must give the defendant " 'fair notice of what the ... claim is and the grounds upon which it rests.' " Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (alteration in original) (quoting Conley, 355 U.S. at 47.) The complaint need not contain "detailed factual allegations" but must set forth " '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 [the] misconduct alleged.' " Warren Gen. Hosp., 643 F.3d at 84 (quoting Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). Any "pleading offering only 'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will not do.' " Fowler, 578 F.3d at 210 (quoting Twombly, 550 U.S. at 555.).

"A statute of limitations defense may be asserted in a motion to dismiss under Rule 12(b)(6) 'where the complaint facially shows noncompliance with the limitations period and the affirmative defense clearly appears on the face of the pleading." Frasier-Kane v. City of Philadelphia, 517 F.App'x 104, 105 n.l (3d Cir. 2013) (quoting Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1384 n. 1 (3d Cir.1994)). "When evaluating a Rule 12(b)(6) motion to dismiss on statute of limitations grounds, a court may consider matters of public record, or orders, exhibits attached to the complaint and undisputedly authentic documents if the plaintiffs claims are based on those ...


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