Berg v. Viaticus, Inc. et al
Filing
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ORDER DENYING MOTION TO DISMISS by Judge William Alsup [denying 13 Motion to Dismiss]. (whasec, COURT STAFF) (Filed on 10/11/2019)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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PHILIP BERG,
Plaintiff,
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For the Northern District of California
United States District Court
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No. C 19-04259 WHA
v.
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VIATICUS, INC.; CONTINENTAL
CASUALTY COMPANY; DOES 1–10;
and DOE CORPORATIONS 1–10,
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Defendants.
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ORDER DENYING
MOTION TO DISMISS
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Plaintiff AIDS victim brings this civil action against defendants viatical investors.
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Defendants move to dismiss plaintiff’s complaint under FRCP 12(b)(6). For the reasons set
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forth below, the motion is DENIED.
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The viatical industry profits from the misfortune of AIDS victims by purchasing
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life insurance policies with the expectation that the victims will die sooner rather than later.
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After plaintiff Philip Berg came down with AIDS, he acquired a life insurance policy from
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Mutual of New York (MONY) Life Insurance Company of America. The policy’s death payout
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would automatically increase yearly until his sixtieth birthday. For the years between his
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sixtieth and seventieth birthdays, however, the death payout would increase only if he were
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found insurable by MONY (Dkt. No. 1-1 at 4-7, 16-20).
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In 1996, Berg entered into a viatical agreement with defendant Viaticus, Inc. under
which Viaticus would pay him a percentage of the death payout increase. Defendant
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Continental Casualty Company is a successor by merger to Viaticus. Section 3.02 of the
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agreement provided “[i]n the event that the [p]olicy contains a provision which raises the
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amount of life insurance benefits, Viaticus, Inc. agrees to pay within 30 days of satisfactory
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confirmation from MONY Life Insurance Co. by Viaticus an amount equal to no less than 84%
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of the life insurance increase” (Dkt. No. 1-1 at 33-34).
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After Berg reached his sixtieth birthday, the annual increases were no longer automatic
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and had to be applied for, but Viaticus allegedly failed to make the application. As a result,
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death benefits did not increase and Berg claims to have been damaged at the amount of 84% of
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what the increase would have been (Dkt. No. 20 at 5).
The motion to dismiss contends that, on its face, Section 3.02 left discretion in Viaticus
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For the Northern District of California
United States District Court
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as to whether or not to apply for increased death benefits. In the pleading stage this contention
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must be rejected. Even where discretion is vested in one party to a contract, that discretion
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must be exercised subject to the covenant of good faith and fair dealing so as not to deprive the
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other side of the benefit of their bargain. Carma Developers (Cal.), Inc. v. Marathon Dev. Cal.,
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Inc., 2 Cal. 4th 342, 374 (1992). At oral argument, both sides agreed that California law
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governs. In addition, at least at the pleading stage, the provision in question is subject to
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interpretation which favors Berg and presupposes that Viaticus will do whatever reasonably
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necessary to seek the increase in life insurance benefits (Dkt. No. 13 at 14-17).
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In light of the foregoing, the motion to dismiss is DENIED.
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IT IS SO ORDERED.
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Dated: October 11, 2019.
WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE
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