Williams et al v. National Union Fire Insurance Company of Pittsburgh, PA et al
Filing
98
ORDER denying 79 Motion to Dismiss for Failure to State a Claim; denying 79 Motion to Strike. Signed by Judge Thomas W. Thrash, Jr on 09/04/2014. (ss)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
RANDY WILLIAMS, et al.,
Plaintiffs,
v.
CIVIL ACTION FILE
NO. 1:14-CV-309-TWT
NATIONAL UNION FIRE
INSURANCE COMPANY OF
PITTSBURGH, PA
doing business as
National Union Fire Insurance
Company, et al.,
Defendants.
OPINION AND ORDER
This case is about the marketing and sale of allegedly illusory insurance
policies. It is before the Court on the Defendant National Union Fire Insurance
Company of Pittsburgh, PA’s Motion to Dismiss [Doc. 79]. For the reasons set forth
below, the Defendant’s Motion to Dismiss [Doc. 79] is DENIED.
I. Background
The Defendants HealthExtras, LLC, National Union Fire Insurance Company
of Pittsburgh, PA, and Catamaran Health Solutions, LLC were involved in the
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marketing, sale, and administration of disability insurance policies.1 In 1999 or 2000,
HealthExtras sent the Plaintiffs Randy Williams, Mary Williams, Larry Lake, and
Linda Lake information concerning a disability insurance policy providing the
following benefits:
First, the Accidental Permanent and Total Disability insurance purports to
provide “coverage” of a One Million Dollar . . . benefit in the event of
permanent disability as a result of an accident [Permanent Disability Benefits].
Second, an Emergency Accident and Sickness Medical Expense Benefit that is
. . . purported to cover up to Two Thousand Five Hundred [dollars] . . . in
medical expenses in the event of accident or sickness while away from home
[Emergency Benefits].2
The Plaintiffs enrolled in this policy through Catamaran, and paid premiums from
2000 until 2013.3 On January 1, 2005, the Defendant National Union became the
underwriter for the Permanent Disability Benefits.4
The Plaintiffs claim that the insurance program was illegal under Georgia law.
For example, the Plaintiffs allege that the insurance policy was never filed with the
Commissioner of Insurance, as required by Georgia law.5 In addition, the Plaintiffs
1
Am. Compl. ¶ 19.
2
Am. Compl. ¶¶ 36, 49.
3
Am. Compl. ¶¶ 41, 52.
4
Am. Compl. ¶ 50.
5
Am. Compl. ¶ 66.
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allege that HealthExtras was often unwilling or unable to satisfy claims by those
entitled to benefits under the policy.6 Specifically, the Plaintiffs allege that the
majority of the premium payments were used to cover marketing expenses or were
converted into profits for HealthExtras.7 They were allegedly not earmarked to cover
potential payments owed to the insured, and so many were wrongfully denied
benefits.8 The Plaintiffs, however, never claim that they personally sought and were
denied benefits. The Plaintiffs filed suit, asserting claims for unjust enrichment,
breach of the duty of good faith and fair dealing, and violations of the Georgia
Racketeer Influenced and Corrupt Organizations (“RICO”) Act. The Defendant
National Union moves to dismiss.
II. Legal Standard
A plaintiff may survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6) if the
factual allegations in the Complaint give rise to a plausible claim for relief.9 For a
claim to be plausible, the supporting factual matter must establish more than a mere
6
Am. Compl. ¶ 56.
7
Am. Compl. ¶ 54.
8
Am. Compl. ¶¶ 55-56.
9
See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007) (“Factual allegations must be enough to raise a
right to relief above the speculative level . . . on the assumption that all the allegations
in the complaint are true (even if doubtful in fact).”).
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possibility that the plaintiff is entitled to relief.10 In determining whether a plaintiff has
met this burden, the Court must assume all of the factual allegations in the Complaint
to be true. The Court, however, need not accept as true any legal conclusions found
in the Complaint.11
III. Discussion
The Court begins by addressing the legal dispute underlying the Plaintiffs’
claims: whether the insurance policies that they purchased were valid and legally
enforceable. The Plaintiffs argue that they paid premiums for “illusory” insurance
policies. They argue that, because the insurance policies allegedly violated Georgia
insurance laws, they were legally void. In response, the Defendant argues that even
if the insurance policies did not comply with certain insurance laws, they were
nonetheless enforceable. Thus, the Defendant argues, the Plaintiffs got what they paid
for.
Under O.C.G.A. § 33-24-12(a), “[a]ny insurance policy . . . otherwise valid
which contains any condition or provision not in compliance with the requirements
10
See Iqbal, 556 U.S. at 678.
11
See Iqbal, 556 U.S. at 678; Twombly, 550 U.S. at 555 (A “plaintiff’s
obligation to provide the grounds of his entitle[ment] to relief requires more than
labels and conclusions, and a formulaic recitation of the elements of a cause of action
will not do.”) (internal quotation marks omitted).
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of [Title 33, which governs insurance policies] shall not be rendered invalid due to the
noncomplying condition or provision but shall be construed and applied in accordance
with such conditions and provisions as would have applied had the policy . . . been in
full compliance with [Title 33].” Furthermore, the very next paragraph – O.C.G.A.
§ 33-24-12(b) – states that “[n]o illegality . . . shall be deemed to relieve the insurer
of any liability incurred by it under the contract while in force or to prohibit the
insurer from retaining the pro rata earned premium on the contract.” Thus, even
assuming the Plaintiffs’ allegations to be true, the insurance policies they received
were not “illusory.” To the contrary, if the Plaintiffs had been entitled to any benefits
under the policies, the Defendant would have been legally obligated to provide them.
In response, the Plaintiffs first refer to O.C.G.A. § 13-8-2(a), which states that
“[a] contract that is against the policy of the law cannot be enforced.”12 But the
problem with this argument, of course, is that there is a specific statute indicating that
insurance contracts are enforceable despite violations of Georgia’s insurance laws.13
And Georgia courts have made clear that “a specific statute will prevail over a general
statute, absent any indication of a contrary legislative intent, to resolve any
12
Pls.’ Resp. Br., at 6-7.
13
See O.C.G.A. § 33-24-12(a).
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inconsistency between them.”14 Even more, the Georgia Supreme Court has stated that
O.C.G.A. § 33-24-12 “controls if a policy is inconsistent with insurance laws.”15
The Plaintiffs then argue that O.C.G.A. § 33-24-12 only calls for the
enforcement of an insurance policy when a “condition or provision can be altered to
make [the] policy conform to Georgia law.”16 This argument is without merit. To
begin, as noted earlier, O.C.G.A. § 33-24-12(b) expressly states that “[n]o illegality
. . . shall be deemed to relieve the insurer of any liability incurred by it under the
contract while in force.” Additionally, the Plaintiffs’ reading is inconsistent with how
Georgia courts have interpreted section 33-24-12. For example, in Security Life Ins.
Co. v. Clark,17 the defendant – in violation of Georgia law – had failed to file the
entire policy with the Georgia Department of Insurance.18 The Georgia Court of
14
Marshall v. Speedee Cash of Georgia, 292 Ga. App. 790, 791 (2008)
(internal citations omitted).
15
Flewellen v. Atlanta Cas. Co., 250 Ga. 709, 713 (1983); see also Penn
America Ins. Co. v. Miller, 228 Ga. App. 659, 660 (1997) (supporting the proposition
that, based upon O.C.G.A. 33-24-12(a), “the legislature did not intend a technical
violation of” state insurance regulations “automatically to invalidate” an insurance
policy.).
16
Pls.’ Resp. Br., at 13.
17
229 Ga. App. 593 (1997), rev’d in part sub nom. Clark v. Sec. Life Ins.
Co. of Am., 270 Ga. 165 (1998).
18
See id. at 599.
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Appeals nonetheless found that “although failing to file the policy is a misdemeanor,
such failure does not void the policy.”19 No provision was altered to bring the policy
into compliance with Georgia’s insurance laws. Accordingly, based on the allegations
in the Amended Complaint, the insurance policies were valid and enforceable.
The Defendant National Union argues that the Plaintiffs suffered no harm
because they got the insurance that they paid for and never made any claims for
disability benefits. This may be true, but it cannot be determined as a matter of law
from the face of the pleadings. Therefore, the case may proceed with discovery and
the issues raised by the motion may be revisited at the summary judgment stage.
IV. Conclusion
For these reasons, the Defendant National Union Fire Insurance Company’s
Motion to Dismiss [Doc. 79] is DENIED.
SO ORDERED, this 4 day of September, 2014.
/s/Thomas W. Thrash
THOMAS W. THRASH, JR.
United States District Judge
19
Id. at 600.
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