United States District Court, M.D. Pennsylvania
NICHOLAS LOMMA, and J.L., a Minor, by ANTHONY LOMMA, Guardian Plaintiffs,
OHIO NATIONAL LIFE ASSURANCE CORPORATION, and OHIO NATIONAL LIFE INSURANCE COMPANY, Defendants.
D. Mariani United States District Judge.
the Court is Defendants', Ohio National Life Assurance
Corporation and Ohio National Life Insurance Company,
("Defendants"), motion to dismiss pursuant to
Federal Rule of Civil Procedure 12(b)(6). (Doc. 4). For the
reasons that follow, Defendants' motion will be granted
in part and denied in part.
INTRODUCTION AND PROCEDURAL HISTORY
Nicholas Lomma and J.L., a minor, by his guardian, Anthony
Lomma, ("Plaintiffs"), seek to recover $100, 000 as
beneficiaries of a replacement term life insurance policy
issued by Defendants (the "Replacement Policy") on
the life of their mother, Lora Marie Lomma ("Ms.
Lomma"). Ms. Lomma committed suicide in May of 2009 and
Defendants have denied payment of full death benefits based
on a suicide exclusion in the Replacement Policy.
commenced this action on November 2, 2016, in the Court of
Common Pleas of Lackawanna County. The complaint
("Complaint") asserts five causes of action: (1)
breach of contract; (2) unjust enrichment; (3) promissory
estoppel; (4) breach of implied covenant of good faith and
fair dealing; and (5) statutory bad faith pursuant to 42 Pa.
C.S.A. § 8371. (Doc. 14). Defendants removed the action
to this Court on December 2, 2016, (Doc. 1), and promptly
moved to dismiss the Complaint in its entirety on December 9,
2016. (Doc. 4).
Complaint and the exhibits attached thereto allege the
Nicholas Lomma and J.L., are or were minors residing in
Scranton Pennsylvania and are the surviving children of Ms.
Lomma. (Doc. 1-4, at ¶¶ 1-2). Anthony Lomma
("Mr. Lomma") is the natural parent of Nicholas
Lomma and J.L and is the surviving former husband of Ms.
Lomma and is also J.L.'s guardian. (Id. at
¶¶ 3-4). Defendants are Ohio corporations with
registered addresses in Cincinnati, Ohio and are licensed to
sell insurance in Pennsylvania. (Id. at ¶ 5).
September 1986, Ms. Lomma applied for, and was issued, a life
insurance policy (the "Original Policy") by
Pennsylvania National Life Insurance Company with a coverage
amount of $25, 000. (Id. at ¶ 6). The Original
Policy contained a suicide exclusion.Although the facts
surrounding Defendants' purchase of the Original Policy
from Pennsylvania National Life Insurance Company are not
entirely clear, Plaintiffs allege Defendants "purchased
or otherwise acquired the Original Policy from Pennsylvania
National Life Insurance Company." (Id. at
December 4, 1995, Ms. Lomma applied to increase the amount of
coverage under the Original Policy from $25, 000 to $100,
000. (Id. at ¶ 8). In order to do so, she
executed a "Request For Universal Life Policy
Change" with Defendants. (Doc. 1-4 at 30-32). Ten days
later Defendants informed Ms. Lomma that "[u]pon written
request... the stated amount is hereby increased from $25,
000 to $100, 000 effective December 4, 1995."
(Id. at 32). The Original Policy was set to expire
on September 4, 2028.
Lomma filed an application for a new life insurance policy
with Defendants with a coverage amount of $100, 000 on June
6, 2007. (Doc. 1-4 at 33-49). On the application, a
box is checked indicating that the "proposed
policy" would "replace or cause change in any
existing policy." (Doc. 1-4 at 35). It identified the
"existing policy" that the "proposed
policy" would replace as "Ohio National, "
"Universal, " "$100, 000, " and again a
box is checked indicating that the existing policy will
"be replaced." (Id.). Written on the
application was that the "replacement date" would
be "upon issue of this policy." (Id.)
August 15, 2007, Defendants issued the Replacement Policy to
Ms. Lomma with a benefit value of $100, 000. (Id. at
¶ 13). Both the amount of insurance coverage and the
beneficiaries are identical to those under the Original
Policy. (Id.). The Replacement Policy
identifies the "Contract Date" as August 10, 2007,
and the "Issue Date" as August 15, 2007. (Doc. 1-4
at 51). It also contains a definition of "Contract
Months and Years, " and states: "[t]his contract
takes effect on the contract date shown on page 3. Contract
months and years are marked from the contract date. The first
day of the contract year is the contract date and its
anniversaries." (Id. at 60).
Replacement Policy, like the Original Policy, contains a
suicide exclusion. The two exclusions, however, do not
contain the same language. The suicide exclusion in the
Replacement Policy provides:
If the insured dies by suicide while sane or insane or by
intentional self-destruction while insane, we will not pay
any death proceed payable on amounts of insurance which have
been in effect for less than 2 years. If the suicide or
intentional self- destruction is within the first 2 contract
years, we will pay as death proceeds the premiums you paid.
(Doc. 1-4 at 62). Although the Replacement Policy defines the
term "contract years, " it does not contain a
definition for "amounts or insurance" and does not
provide guidance for determinations of whether those
"amounts of insurance" have or have not "been
in effect for less than 2 years." (Id.).
Lomma committed suicide on May 24, 2009. (Doc. 1-4 at ¶
15). At the time of her death she had timely paid all
premiums due under both the Original Policy and the
Replacement Policy and no premiums were due. (Id. at
¶ 26). Shortly after her death, Mr. Lomma filed a claim
for death benefits under the Replacement Policy on behalf of
Nicholas Lomma and J.L., requesting the $100, 000 full death
benefit. (Id. at ¶ 16). On August 31, 2009,
Defendants' informed Mr. Lomma that they were denying the
claim "on the grounds that Ms. Lomma's suicide
violated the provisions of the policy." (Id. at
¶ 17). Specifically, Defendants wrote that "[b]ased
on the information we have received and in accordance
with" the suicide exclusion in the Replacement Policy,
"the death proceeds for death due to 'Suicide'
within the first two contract years is a refund of premiums
paid." (Doc. 1-4 at 69). Enclosed with the letter were
two checks each in the amount of $144.27 (totaling $288.54)
representing the premiums Ms. Lomma paid on the Replacement
Policy plus 4.5% interest. (Id.).
STANDARD OF REVIEW
complaint must be dismissed under Federal Rule of Civil
Procedure 12(b)(6) if it does not allege "enough facts
to state a claim to relief that is plausible on its
face." Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007).
"A claim has facial plausibility when the plaintiff
pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the
misconduct alleged." Ashcroft v. Iqbal, 556
U.S. 662, 678, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009).
a complaint attacked by a Rule 12(b)(6) motion to dismiss
does not need detailed factual allegations, a plaintiffs
obligation to provide the 'grounds' of his
'entitlement to relief requires more than labels and
conclusions, and a formulaic recitation of a cause of
action's elements will not do." Twombly,
550 U.S. at 555 (internal citations and alterations omitted).
In other words, "[f]actual allegations must be enough to
raise a right to relief above the speculative level."
(Id.) A court "take[s] as true all the factual
allegations in the Complaint and the reasonable inferences
that can be drawn from those facts, but... disregard[s] legal
conclusions and threadbare recitals of the elements of a
cause of action, supported by mere conclusory
statements." Ethypharm S.A. France v. Abbott
Laboratories, 707 F.3d 223, 231 n.14 (3d Cir. 2013)
(internal citations and quotation marks omitted).
Twombly and Iqbal require [a court] to take
the following three steps to determine the sufficiency of a
complaint: First, the court must take note of the elements a
plaintiff must plead to state a claim. Second, the court
should identify allegations that, because they are no more
than conclusions, are not entitled to the assumption of
truth. Finally, where there are well-pleaded factual
allegations, a court should assume their veracity and then
determine whether they plausibly give rise to an entitlement
Connelly v. Steel Valley Sch. Dist., 706 F.3d 209,
212 (3d Cir. 2013).
Federal Rule of Civil Procedure 8, a complaint need not
anticipate or overcome affirmative defenses; thus, a
complaint does not fail to state a claim simply because it
omits facts that would defeat" an affirmative defense.
Schmidt v. Skolas, 770 F.3d 241, 248 (3d Cir. 2014)
(citations omitted). "Technically, the Federal Rules of
Civil Procedure require a defendant to plead an affirmative
defense... in the answer, not in a motion to dismiss."
(Id. at 249) (citing Robinson v. Johnson,
313 F.3d 128, 134-35 (3d Cir. 2002)). However, in limited
circumstances an affirmative defense may properly be raised
in a Rule 12(b)(6) motion to dismiss. But when the
affirmative defense "is not apparent on the face of the
complaint, then it may not afford the basis for a dismissal
of the complaint under Rule 12(b)(6)."
Robinson, 313 F.3d at 134-35 (internal citations and
quotation marks omitted).
decide a motion to dismiss, courts generally consider only
the allegations contained in the complaint, exhibits attached
to the complaint and matters of public record."
Pension Benefit Guar. Corp. v. White Consol. Indus.,
Inc., 998 F.2d 1192, 1196 (3d Cir. 1993) (citations
omitted); accord Mayer v. Belichick, 605 F.3d 223,
230 (3d Cir. 2010). "If, on a motion under Rule 12(b)(6)
or 12(c), matters outside the pleadings are presented to and
not excluded by the court, the motion must be treated as one
for summary judgment under Rule 56. All parties must be given
a reasonable opportunity to present all the material that is
pertinent to the motion." Fed.R.Civ.P. 12(d).
"However, an exception to the general rule is that a
document integral to or explicitly relied upon in the
complaint may be considered without converting the motion to
dismiss into one for summary judgment."
Schmidt, 770 F.3d at 249 (internal citations and
quotation marks omitted).
move pursuant to Rule 12(b)(6) to dismiss each of the five
counts alleged in Plaintiffs' Complaint. In resolving
Defendants' motion, the Court considers the following
exhibits attached to the Complaint: (1) the Original Policy;
(2) Ms. Lomma's 1995 application with Defendants to
increase coverage under the Original Policy from $25, 000 to
$100, 000; (3) Ms. Lomma's application to obtain the
Replacement Policy; (4) the Replacement Policy; and (5)
Defendants' letter denying Plaintiffs' claim. (Doc.
1-4 at 12-69). Defendants also attach these documents to
their motion to dismiss. (Docs. 4-1 at 9-60; 4-2).
Court has jurisdiction over this diversity action pursuant to
28 U.S.C. § 1332 because Plaintiffs are citizens of
Pennsylvania and Defendants are citizens of Ohio and the
amount in controversy is over $75, 000. The parties, and the
Court, agree that Pennsylvania law applies to this action.
See Canal Ins. Co. v. Underwriters at Lloyd's
London, 435 F.3d 431, 434 (3d Cir. 2006) ("Under
Pennsylvania choice-of-law rules, an insurance contract is
governed by the law of the state in which the contract was
made.") (citations omitted). The Court will address each
Count in turn.
Breach of Contract
Count I, Plaintiffs allege that Defendants breached the
Replacement Policy by refusing to pay the full $100, 000
death benefit upon Ms. Lomma's death. Defendants seek
dismissal of Count I on the theory that the Replacement
Policy's suicide exclusion unequivocally establishes that
the $100, 000 death benefit was not payable to Plaintiffs. In
opposition to Defendants' motion. Plaintiffs raise two
principal arguments. First, they claim the suicide exclusion
is ambiguous and therefore must be construed against the
Defendants. Second, Plaintiffs argue that the facts alleged
in the Complaint and the totality of circumstances plausibly
demonstrate that Ms. Lomma had a reasonable expectation of
coverage. In either case, because Defendants are relying on
affirmative defenses to defeat Count I, it is Plaintiffs'
position that Defendants' Rule 12(b)(6) motion must be
denied. Before addressing the parties' contentions, the
Court will discuss Pennsylvania law governing the
interpretation of insurance policies.
policies are contracts, and the rules of contract
interpretation provide that the mutual intention of the
parties at the time they formed the contract govern its
interpretation." Am. & Foreign Ins. Co. v.
Jerry's Sports Ctr., Inc., 606 Pa. 584, 2
A.3d 526, 540 (2010) (citations omitted). "It is
well-established that three elements are necessary to plead a
cause of action for breach of contract: (1) the existence of
a contract, including its essential terms, (2) a breach of
the contract, and (3) resultant damages." Meyer,
Darragh, Buckler, Bebenek & Eck, P.L.L.C. v. Law Firms of
Malone Middleman, P.C., 635 Pa. 427, 137 A.3d 1247, 1258
(2016) (citations omitted).
interpretation of an insurance contract regarding the
existence or non-existence of coverage is generally performed
by the court." Minnesota Fire & Cas. Co. v.
Greenfield, 579 Pa. 333, 344, 855 A.2d 854 (2004)
(internal citations and quotation marks omitted). In
interpreting an insurance contract, the Court must
"ascertain the intent of the parties as manifested by
the terms used in the written insurance policy."
Donegal Mut. Ins. Co. v. Baumhammers, 595 Pa. 147,
155, 938 A.2d 286 (2007) (citing 401 Fourth Street, Inc.
v. Investors Ins. Grp., 583 Pa. 445, 454, 879 A.2d 166,
171 (2005)). "[W]hen a written contract is clear and
unequivocal, its meaning must be determined by its contents
alone. It speaks for itself and a meaning cannot be given to
it other than that expressed." Lesko v. Frankford
Hosp.-Bucks Cnty., 609 Pa. 115, 15 A.3d 337, 342 (2011)
(internal citations and quotation marks omitted); see
also Ins. Adjustment Bureau, Inc. v. Allstate Ins. Co.,
588 Pa. 470, 905 A.2d 462, 481 (2006) ("When the terms
of a contract are clear and unambiguous, the intent of the
parties is to be ascertained from the document itself.")
term in an insurance policy is ambiguous, "parol
evidence is admissible to explain or clarify or resolve the
ambiguity, irrespective of whether the ambiguity is patent,
created by the language of the instrument, or latent, created
by extrinsic or collateral circumstances." Insurance
Adjustment Bureau, 588 Pa. at 481 (citations omitted).
"While unambiguous contracts are interpreted by the
court as a matter of law, ambiguous writings are interpreted
by the finder of fact." (Id.). When a provision
in an insurance policy is ambiguous, courts applying
Pennsylvania law must construe the language against the
insurer. See, e.g., West v. Lincoln Benefit Life
Co., 509 F.3d 160, 169 (3d Cir. 2007) ("An unclear,
ambiguous provision will be construed against the insurer and
in favor of the insured."); Baumhammers, 595
Pa. at 155 ("However, when a provision in the policy is
ambiguous, the policy is to be construed in favor of the
insured ... and against the insurer, as the insurer drafts
the policy and controls coverage.") (internal citations
and quotation marks omitted). "Pennsylvania's courts
have long recognized that insurance contracts are not freely
negotiated agreements entered into by parties of equal
status." Reliance Ins. Co. v. Moessner, 121
F.3d 895, 905 (3d Cir. 1997) (internal citations and
quotation marks omitted). "In recognition of the unique
dynamics between insurer and insured, courts have attempted
to favor the insured in a number of ways, including adapting
the contra proferentem principle of
interpretation to the insurance context, by which ambiguities
in policies are construed against the insurer."
(Id.) (emphasis in original).
Pennsylvania law, "the insurer bears the burden of
proving the applicability of any exclusions or limitations on
coverage, since disclaiming coverage on the basis of an
exclusion is an affirmative defense." Koppers Co.,
Inc. v. Aetna Cas. & Sur. Co., 98 F.3d 1440, 1445
(3d Cir. 1996) (citations omitted); see also Canal,
435 F.3d at 436 ("Where an insurer relies on a policy
exclusion as the basis for its denial of coverage and refusal
to defend, the insurer has asserted an affirmative defense
and, accordingly, bears the burden of proving such
defense.") (internal citations and quotation marks
omitted). "An exclusion in an insurance policy is a
'limitation of liability or carving out of certain types
of loss to which the coverage or protection of the policy
does not apply.'" Borough of Moosic v. Darwin
Nat'l Assurance Co., 556 F.App'x 92, 97 (3d Cir.
2014) (quoting 17 Williston on Contracts § 49:111 (4th
ed.)). "Exclusionary clauses generally are strictly
construed against the insurer and in favor of the
insured." Swarner v. Mut. Benefit Grp., 72 A.3d
641, 645 (Pa. Super. 2013) (citations omitted).
the most clearly written exclusion will not bind the insured
where the insurer or its agent has created in the insured a
reasonable expectation of coverage." Moessner,
121 F.3d at 903 (citations omitted). Pennsylvania law thus
"dictates that the proper focus for determining issues
of insurance coverage is the reasonable expectations of the
insured." (Id.). "In most cases, the
language of the insurance policy will provide the best
indication of the content of the parties' reasonable
expectations." (Id. (internal citations and
quotation marks omitted). "Courts, however, must examine
'the totality of the insurance transaction involved to
ascertain the reasonable expectations of the
insured.'" (Id.) (quoting Dibble v.
Sec. of Am. Life Ins. Co., 404 Pa. Super. 205, 590 A.2d
352, 354 (1991)).
Defendants' Motion Must Be Denied Because The Suicide
Exclusion Is Ambiguous And, Even If The Suicide Exclusion Was
Unambiguous, Plaintiffs Have Alleged Sufficient Facts
Demonstrating That Ms. Lomma Had A Reasonable
Of Coverage The parties propose two different interpretations
of the Replacement Policy's suicide exclusion. The
suicide exclusion consists of two sentences. The first
sentence provides: "[i]f the insured dies by suicide
while sane or insane or by intentional self-destruction while
insane, we will not pay any death proceed payable on amounts
of insurance which have been in effect for less than 2
years." (Doc. 1-4 at 62). The second sentence, in turn,
states: "[i]f the suicide or intentional
self-destruction is within the first 2 contract years, we
will pay as death proceeds the premiums you paid."
principally rely on the second sentence of the suicide
exclusion in support of their motion. They claim the second
sentence is clear and unambiguous and unequivocally requires
dismissal of Count I. The second sentence of the suicide
exclusion provides that in the event the insured commits
suicide within the first two contract years, as explicitly
defined in the Replacement Policy, Defendants will not pay
the full death benefits due under the Replacement Policy.
Instead, Defendants will only pay death benefits representing
the premiums paid by the insured.
first sentence of the suicide exclusion is less clear. Unlike
the term "contract years" in the second sentence,
which is explicitly defined in the Replacement Policy, key
terms in the first sentence of the suicide exclusion are not
defined. The Replacement Policy neither defines "amounts
of insurance" nor does it use a defined term like
"contract years" to indicate whether those
"amounts of insurance", which Defendants will not
pay in the event of suicide, have or have not "been in
effect for less than 2 years." (/of.). Plaintiffs thus
take the position that the first sentence renders the entire
suicide exclusion ambiguous and, under Pennsylvania law,
ambiguities in an instance policy must be interpreted against
the insurer. They also claim that, because Ms. Lomma
maintained $100, 000 in life insurance coverage with
Defendants since 1995, she had a reasonable expectation of
coverage because the suicide exclusion would not apply.
in contrast, interpret the first sentence as applying
"if a policyholder increased his or her death benefits
from $100, 000 to $500, 000 during the 25th year of the
policy and then committed suicide within the next two
years." (Doc. 11, at 3). They also argue that
Plaintiffs' interpretation of the suicide exclusion is
untenable because it would effectively nullify the second
sentence of the suicide exclusion. In support, Defendants
direct the Court to the Pennsylvania Supreme Court's
decision in Capek v. Devito, 564 Pa. 267, 767 A.2d
1047 (2001). With respect to Plaintiffs "reasonable
expectations" argument, Defendants theorize that any
expectation of coverage was unreasonable and that the
Original Policy is entirely irrelevant to the issues in this
initial matter, the Court rejects Defendants' reliance on
Capek. The argument that Plaintiffs' proposed
interpretation would, in effect, render the second sentence
of the suicide exclusion a nullity does not mean that
Defendants' interpretation, therefore, must prevail. In
Capek, an attorney brought suit against his former
client seeking recovery of a contingency fee and the Court
was called upon to interpret the parties' contract. The
Pennsylvania Supreme Court noted that when construing a
contract, courts "must determine the intent of the
parties and give effect to all the provisions therein."
Capek, 564 Pa. at 274. Accordingly, "[a]n
interpretation will not be given to one part of the contract
which will annul another part of it." (Id.)
(internal citations and quotation marks omitted).
Capeks conclusion that a court may not interpret one
part of a contract to annul another does not apply when a
court interprets an insurance policy because, as discussed,
Pennsylvania law requires any ambiguities in the policy to be
interpreted against the insurer and in ...