Waskul v. Metropolitan Life Insurance Company

Filing 13

OPINION AND ORDER Granting Plaintiff's Motion for Leave to Amend (Dkt. 7 )and Granting In Part and Denying In Part Defendant's Motion to Dismiss (Dkt. 3 ). Signed by District Judge Sean F. Cox. (Sandusky, K)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
Carl Waskul,
Plaintiff,
v.

Case No. 17-13932

Metropolitan Life Insurance Company,

Sean F. Cox
United States District Court Judge

Defendant.
______________________________/
OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
FOR LEAVE TO AMEND AND GRANTING IN PART AND
DENYING IN PART DEFENDANT’S MOTION TO DISMISS
Plaintiff had a long-term care insurance policy with Defendant. But when his children
sought a coverage determination on the policy, Defendant informed them that the policy had
been terminated. So, Plaintiff sued Defendant, alleging breach of contract, fraudulent
misrepresentation, and a statutory claim. Defendant has moved to dismiss and Plaintiff, in turn,
seeks leave to amend his complaint.
For the reasons below, the Court shall grant Plaintiff’s motion for leave to amend. The
Court shall also grant Defendant’s motion to dismiss in part and deny it in part. The Court shall
deny the motion to dismiss as to the breach of contract claim, but it shall grant the motion to
dismiss as to the fraudulent misrepresentation and statutory claims.
BACKGROUND
Plaintiff Carl Waskul initially filed this suit in state court against Defendant Metropolitan
Life Insurance Company. Defendant then removed the case to this Court (Doc. # 1) and, on
January 12, 2018, moved to dismiss under Rule 12(b)(6) (Doc. # 3). On February 5, 2018,
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Plaintiff responded to Defendant’s motion (Doc. # 6). That same day, he also moved for leave to
file an amended complaint, which he attached to his motion (Doc. # 7). Defendant opposed the
motion for leave to amend, arguing that it would be futile (Doc. # 11). The Court held a hearing
on these motions on July 12, 2018.
Because Plaintiff seeks leave to amend his complaint, the Court shall consider the facts
as alleged in his proposed complaint. That way, the Court can assess whether leave to amend
would be futile, see Benzon v. Morgan Stanley Distributors, Inc., 420 F.3d 598, 613 (6th Cir.
2005) (noting that although leave to amend “shall be freely given when justice so requires,”
denial may be appropriate if the amendment is futile), in which case Defendant’s Motion to
Dismiss should be granted. See Riverview Health Institute LLC v. Med. Mut. of Ohio, 601 F.3d
505, 512 (6th Cir. 2010) (“A proposed amendment is futile if the amendment could not withstand
a Rule 12(b)(6) motion to dismiss.”). If not, leave to amend should be granted. Thus, the Court
relies on the facts set forth in Plaintiff’s proposed first amended complaint (Doc. # 7, Ex. 2).
In 1996, Plaintiff purchased a long-term care insurance contract from Defendant.1
Proposed Amended Complaint, ¶ 7. The coverage included Plaintiff’s expenses for nursing
home care, capped at $200 per day, and a maximum lifetime benefit of $511,000. Id. at ¶ 11.
The policy was Guaranteed Renewable, meaning Plaintiff merely had to pay the premiums to
keep the policy in force and that Defendant could not cancel the policy. Id. at ¶ 8. Plaintiff paid
his premiums for more than 19 years. Id. at ¶ 9.
In March 2003, Plaintiff designated his son William as his “Lapse Designee” to receive

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Plaintiff’s claims are all predicated on this insurance policy. The policy is part of the
record and the Court may rely upon it when ruling on the parties’ motions. See Bassett v. Nat’l
Collegiate Athletic Ass’n., 528 F.3d 426, 430 (6th Cir. 2008).
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notice of lapse or termination of the policy for non-payment of premium. Id. at ¶ 12. The Lapse
Designee Form stated:
If you elect this option, TIAA-CREF life will notify the person you
designate that your policy is in danger of lapsing due to lack of premium
payment. When this option is chosen, TIAA-CREF life will extend your 31-day
grace period by an additional 30 days from the date we notify your designee about
the potential lapse of your policy. We will not extend your grace period unless
you elect this option.
I understand that I have the right to designate at least one person other
than myself to receive notice of lapse or termination of this long-term care
insurance policy for nonpayment of premium. I understand that notice will not be
given until 30 days after a premium is due and unpaid.
Later, in June 2014, Plaintiff authorized Defendant to disclose personal information to William
and his son Terrance. The Disclosure Authorization provided:
I hereby authorize Metropolitan Life Insurance Company (“MetLife”) to
disclose my personal heath information (including demographic, billing, claim,
and plan information) about my MetLife long-term care insurance to the person(s)
listed below to allow that person(s) to assist me in matters related to my insurance
coverage.
Plaintiff alleges that, through this form, he designated William and his son Terrance as his
powers of attorney as to the policy. Id. at ¶ 13.
On August 8, 2015, Plaintiff was diagnosed as cognitively impaired. Id. at ¶ 14. Three
days later, he completed an application for admission into an assisted living long-term care
facility, where he stayed for two weeks. Id. at ¶ 15.
On November 11, 2015, after a telephone conversation with Plaintiff, Defendant
purportedly terminated Plaintiff’s policy. Id. at ¶ 16. Defendant did not give notice of the
termination to Plaintiff’s Lapse Designee. Id. at ¶ 17. Nor did Defendant refund Plaintiff’s
unused 2015 annual premium. Id. at ¶ 18.

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Several months later, on February 1, 2016, Plaintiff failed to pay his premium. Id. at
¶ 19. Despite the non-payment, Defendant did not notify Plaintiff’s Lapse Designee of this
failure to pay. Id. at ¶ 20.
In May 2017, Plaintiff’s children contacted Defendant to obtain a coverage determination
for Plaintiff. Id. at ¶ 21. Defendant informed them that the contract had been terminated and
could not be reinstated. Id. at ¶ 22. Since then, Plaintiff has lived with Terrance. Id. at ¶ 23.
Plaintiff has now sued Defendant for damages, alleging claims for breach of contract, fraudulent
misrepresentation, and a violation of M.C.L. § 500.3906.
STANDARD OF DECISION
Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a case where the
complaint fails to state a claim upon which relief can be granted. The Court must construe the
complaint in the light most favorable to the plaintiff and accept its allegations as true. DirectTV,
Inc. v. Treesh, 487 F3d 471, 476 (6th Cir. 2007). To survive a motion to dismiss, the complaint
must offer sufficient factual allegations that make the asserted claims plausible on their face.
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (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 (2009).
ANALYSIS
I. Breach of Contract
Plaintiff first claims that Defendant breached the insurance contract. The proper
interpretation of an insurance policy is a question of law, Wilkie v. Auto-Owners Ins. Co., 664
N.W.2d 776, 780 (Mich. 2003), that should be resolved on a Rule 12(b)(6) motion to dismiss.

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See Hudson v. State Farm Fire and Cas. Co., 93 F.Supp.3d 773, 778 (E.D. Mich. 2015)
(dismissing complaint for failure to state a claim after determining that the insurance policy
precluded the claim for relief); see also Iqbal, 556 U.S. at 678 (“[T]he tenet that a court must
accept as true all of the allegations contained in a complaint is inapplicable to legal
conclusions.”).2
To state a claim for breach of contract, Plaintiff must establish (1) the existence of a valid
contract, (2) that Defendant breached the contract, and (3) that the breach resulted in damages to
Plaintiff. Bank of America, NA v. First American Title Ins. Co., 878 N.W.2d 816, 829 (Mich.
2016). Viewing the proposed amended complaint in the light most favorable to Plaintiff, he has
plausibly alleged all three elements here.
First, he alleges that a valid contract existed–the long-term care insurance contract.
Although it was purportedly terminated by Defendant in November 2015, the policy contained a
provision that stated: “This policy is Guaranteed Renewable. We cannot cancel or refuse to
renew this policy. To keep this policy in force, you need only pay the premiums on time.”
Policy, p. 3. This provision appears to have kept Defendant from unilaterally terminating the
policy, and allows for the plausible inference that the purported termination in November was
invalid.
Second, Plaintiff alleges a breach–the failure to inform his lapse designee of the nonpayment of premium in February 2016. Under Plaintiff’s policy, if a premium was not received
within 31 days after the due date, the policy would lapse, resulting in all coverage ceasing.
Policy, p. 18; see also Yarnell v. Transamerica Life Ins. Co., 447 F. App’x 664, 665 n. 2 (6th
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For the purposes of this motion, the parties have stipulated to the application of
Michigan law.
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Cir. 2011) (defining “lapse” as the “termination of coverage . . . for nonpayment of
premiums[.]”). Likely to prevent this from happening, Plaintiff completed the Lapse Designee
form, designating his son to receive notice of any potential lapse. Yet Plaintiff alleges that
Defendant did not meet its obligation under this document when it neglected to inform his son
that Plaintiff had failed to pay his policy premium in February 2016. Thus, viewed in the light
most favorable to Plaintiff, his complaint plausibly alleges a breach.3
Finally, Plaintiff alleges specific damages stemming from the alleged breach of the
contract and subsequent denial of benefits. The damages alleged are not speculative, but arise
directly from the purported breach of contract. Cf. Van Buren Charter Twp. v. Visteon Corp.,
904 N.W.2d 192, 201 (Mich. Ct. App. 2017). At this stage, the Court finds that is enough.
In sum, Plaintiff’s proposed amended complaint plausibly alleges a breach of contract
claim. So, the Court shall grant Plaintiff leave to amend the complaint and deny Defendant’s
motion to dismiss as to Count One.
II. Fraudulent Misrepresentation
Next, Plaintiff brings a fraudulent misrepresentation claim. To state a claim, he must
show: (1) Defendant made a material representation; (2) that was false; (3) Defendant made the
representation knowing it was false or made it recklessly, without any knowledge of its truth and
as a positive assertion; (4) Defendant made it with the intention that Plaintiff should act upon it;
(5) Plaintiff acted in reliance upon it; and (6) Plaintiff thereby suffered injury. Titan Ins. Co. v.

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Plaintiff cannot, however, show a breach based on the Disclosure Authorization. That
provision merely authorized disclosure of personal information to the designated persons, it did
not require it. Indeed, nothing in the authorization imposed any obligation on Defendant to
affirmatively disclose information to Plaintiff’s designees, let alone an obligation to notify them
that the policy had lapsed.
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Hyten, 817 N.W.2d 562, 567-68 (Mich. 2012). The failure to show any of these elements is fatal
to recovery. Id. at 568.
Here, Plaintiff has failed to allege that Defendant knowingly made a false representation.
There is only one representation at issue: Defendant notifying Plaintiff that he could appoint a
Lapse Designee to receive notice of a potential lapse of the policy. But this representation was
true; indeed, Plaintiff took Defendant up on it, completing a Lapse Designee Form and
appointing his son as the designee. This form, by its plain terms, did exactly what Defendant
said it would–it designated Plaintiff’s son as the person to receive notice if the policy was to be
terminated for nonpayment of premium. True, Plaintiff alleges that Defendant did not follow
through after he failed to pay a premium. But, this failure alone does not show that Defendant
knowingly made the false representation that Plaintiff could appoint a lapse designee. And
Plaintiff’s other arguments on this point are not persuasive.
First, he appears to allege that Defendant knowingly failed to disclose its other statutory
notice obligations under M.C.L. § 500.3906, including its obligation to notify Plaintiff’s
designee if the policy was terminated for any reason. But the statute imposes no such obligation.
Instead, it only requires the designation of a person who will receive notice of a lapse in payment
or termination of the policy due to that lapse. See § 3906 (“An individual long-term care policy
or certificate shall not be issued until the insurer has received from the applicant either a written
designation of at least 1 person . . . who is to receive notice of lapse or termination of the policy
or certificate for nonpayment of premium[.]”). And even if Plaintiff’s interpretation were correct,
the existence of other statutory obligations that Defendant had to comply with would not make
the representation here–that Plaintiff could appoint a designee to receive notice of lapse–false.

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Second, Plaintiff argues that Defendant had no intention of notifying Plaintiff of a lapse
in coverage. All he relies on for this contention, however, is an argument from Defendant’s brief
in support of its Motion to Dismiss that states that the Lapse Designee Form was not part of the
policy and cannot form the basis of a breach of contract claim. But this statement does not show
that Defendant’s representation was false or that Defendant had fraudulent intent. Instead, this
allegation is little more than conclusory speculation, which cannot defeat a motion to dismiss.
See In re Omnicare, Inc. Securities Litigation, 769 F.3d 455, 469 (6th Cir. 2014). Thus, because
Plaintiff cannot show a false representation, or that Defendant had fraudulent intent, the
proposed amended complaint does not state a claim for fraudulent misrepresentation and the
Court shall grant Defendant’s motion to dismiss as to Count Two.
III. M.C.L. § 500.3906
Finally, Plaintiff seeks damages for Defendant’s alleged failure to comply with M.C.L.
§ 500.3906(1), a section of the Insurance Code of 1956, which provides in relevant part:
(1) An individual long-term care policy or certificate shall not be issued
until the insurer has received from the applicant either a written designation of at
least 1 person, in addition to the applicant, who is to receive notice of lapse or
termination of the policy or certificate for nonpayment of premium, or a written
waiver dated and signed by the applicant electing not to designate additional
persons to receive notice. The applicant may designate at least 1 person who is to
receive the notice of termination, in addition to the insured.
As noted above, this claim is flawed on the merits. But it also suffers from a more
fundamental defect–Plaintiff has no private right of action to enforce this statute. Unless a
specific statute says otherwise, only the county prosecutor or the state attorney general may sue
an insurer for a violation of the Insurance Code. See M.C.L. § 500.230; Young v. Mich. Mut. Ins.
Co., 362 N.W.2d 844, 846 (Mich. Ct. App. 1984) (“[M.C.L. § 500.230 precludes a private party

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from recovering penalties specified in the code unless otherwise provided.”). Section 3906 is no
exception, its language affords no private right of action. Thus, Plaintiff cannot state a claim for
any violation of this statute and the Court shall grant the motion to dismiss as to Count Three.
CONCLUSION
For the reasons above, IT IS ORDERED that Plaintiff’s Motion for Leave to Amend is
GRANTED. Also, Defendant’s Motion to Dismiss is GRANTED IN PART AND DENIED IN
PART. The Court GRANTS the motion as Counts Two and Three because Plaintiff has failed to
state a claim. But the Court DENIES the motion as to Count One because Plaintiff has, at this
stage, plausibly alleged a breach of contract claim.
IT IS SO ORDERED.
s/Sean F. Cox
Sean F. Cox
United States District Judge
Dated: July 31, 2018
I hereby certify that a copy of the foregoing document was served upon counsel of record on July
31, 2018, by electronic and/or ordinary mail.
s/Karri Sandusky on behalf of
Jennifer McCoy,Case Manager

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