ZODDA v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA. et al
Filing
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OPINION & ORDER granting deft. Catamaran Health Solutions, LLC's 38 Motion to Dismiss; counts IV, V & Vl are dismissed w/out prejudice; count VII is dismissed with prejudice; pltf may file an amended complt. within 30 days. Signed by Judge Faith S. Hochberg on 4/21/2014. (nr, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
ROBERT ZODDA
Administrator of the ESTATE OF DANIEL
DANIELS,
Plaintiff,
v.
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA., et al.,
Defendants.
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:
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: Civil Case No. 13-7738 (FSH)
:
: OPINION & ORDER
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: Date: April 21, 2014
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:
:
:
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HOCHBERG, District Judge:
This matter comes before the Court upon Defendant Catamaran Health Solutions, LLC’s
motion to dismiss (Dkt. No. 38) pursuant to Federal Rule of Civil Procedure 12(b)(6). 1 The
Court has reviewed the submissions of the parties and considers the motion pursuant to Federal
Rule of Civil Procedure 78.
I.
BACKGROUND 2
This matter arises from the allegedly wrongful denial of the claims of the Estate of Daniel
Daniels, through the estate’s administrator, Robert Zodda, (“Zodda” or “Plaintiff”) under an
accident disability insurance policy. Zodda also alleges that Daniels’ policy is illegal because it
was not issued to a valid blanket group under New Jersey’s insurance regulations, leading to the
illegal marketing (including allegedly misleading and false advertising) and sale of insurance by
the various defendants.
1
The other three defendants in this matter have filed answers to Plaintiff’s complaint.
2
These facts are taken from Plaintiff’s complaint (Dkt. No. 1), unless otherwise noted.
Zodda names four defendants in his complaint: Catamaran Health Solutions, LLC f/k/a
HealthExtras, Inc. (“Catamaran”); 3 HealthExtras, LLC; 4 National Union Fire Insurance
Company of Pittsburgh, P.A. (“National Union”); and American International Group, Inc. d/b/a
AIG Group Insurance Trust, for the Account of HealthExtras (“AIG”).
Zodda asserts the
following causes of action: breach of contract, equitable reformation, and insurance bad faith
against National Union; violations of the New Jersey Consumer Fraud Act, breach of the duty of
good faith and fair dealing, civil conspiracy, and punitive damages against all Defendants.
In the late 1990s, the HealthExtras Defendants established a marketing relationship with
several of the nation’s banks to get access to their customers’ information to market a long term
disability insurance product to people in New Jersey and throughout the country.
The
HealthExtras Defendants initially engaged Reliance National Insurance Company to underwrite
its disability coverage product.
Sometime between 1999 and 2001, Daniels received marketing materials from the
HealthExtras Defendants featuring Christopher Reeve, which were forwarded by his bank. 5
Zodda alleges that the marketing material Daniels received indicated, inter alia, that the
HealthExtras program would provide a $1 million benefit to Daniels if he was permanently
disabled due to an accident. According to the complaint, Daniels purchased the HealthExtras
Accidental Permanent Disability Insurance Policy and paid premiums through 2009 via his bank
3
In the complaint, Zodda does not refer to “Catamaran.” Instead, Zodda refers to “Catalyst
Health Solutions, Inc.,” formerly known as HealthExtras, Inc., but both parties appear to agree
that Catamaran is the same entity as HealthExtras, Inc. and Catalyst Health Solutions, Inc.
4
5
Zodda refers to Catamaran and HealthExtras, LLC collectively as “HealthExtras.”
Mr. Reeve, known for his portrayal of Superman, became paralyzed as the result of an
equestrian accident.
2
credit card. Plaintiff alleges that Daniels never received a copy of the policy that governed
claims.
The policy at issue was first underwritten by Federal Insurance Company, a member of
the Chubb Group of Insurance Companies, a successor underwriter to Reliance National
Insurance. On January 1, 2005, the underwriter was changed to Defendant National Union.
On February 28, 2009, Daniels fell and suffered a massive cerebral hemorrhage, resulting
in permanent brain damage. Due to this brain damage, Daniels suffered a permanent loss of
speech, inability to communicate, inability to use his arms and legs, loss of cognitive function,
and inability to swallow. From February 28, 2009 until he passed away on June 5, 2011, Daniels
remained under constant institutional medical care. In January 2013, the Daniels’ estate made a
claim for disability benefits under the HealthExtras policy. On October 24, 2013, National
Union denied the claim alleging that Daniels did not meet the definition of disability under the
policy.
Plaintiff also alleges that the policy issued by Defendants is illegal because it does not
fall into one of the seven eligible blanket groups authorized by the relevant New Jersey insurance
statute, N.J.S.A. § 17b:27-32(a)(1)-(7). Therefore, according to Plaintiff, the policy is against
public policy and constitutes an unlawful and deceptive trade practice under the New Jersey
Consumer Fraud Act. Plaintiff also alleges that this same conduct caused Defendants to breach
their duty of good faith and fair dealing with Daniels.
Plaintiff alleges that Defendants knowingly violated the New Jersey insurance statute to
“avoid the policy being issued to an actual group of persons.” According to the complaint, if the
policy had been issued to a group of persons that was organized for a purpose other than selling
insurance, then “the policy, the advertised promises, the excessive premiums, and the broad,
3
harsh exclusions that make recovery under the policy virtually impossible, would have been
subject to scrutiny by an actual group of persons.” Plaintiff goes on to allege that those
hypothetical people would have had the opportunity to determine the relative merit and value of
the policy before providing the group’s members with the opportunity to purchase it. Instead,
Defendants allegedly issued the policy to themselves under the name “AIG Group Insurance
Trust, for the Account of HealthExtras,” an alleged alter-ego of Defendants.
Plaintiff states that people like Daniels were “members” of the policy group, paid
“membership fees,” but could not communicate with each other about any unfair business or
claims practices. According to the complaint, this structure was designed to keep the “members”
in the dark and conceal the nature of the master policy, which National Union allegedly uses to
wrongfully deny claims. In short, Plaintiff alleges that Defendants used an illegal insurance
blanket group to avoid insurance regulation and disguise the fact that the policy has virtually no
value to the persons who were—and are—paying premiums for it.
II.
STANDARD OF REVIEW
“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 129 S.
Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also
Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (“[S]tating . . . a claim requires
a complaint with enough factual matter (taken as true) to suggest the required element. This
does not impose a probability requirement at the pleading stage, but instead simply calls for
enough facts to raise a reasonable expectation that discovery will reveal evidence of the
necessary element.”) (internal quotations omitted).
4
When considering a motion to dismiss under Iqbal, the Court must conduct a two-part
analysis. “First, the factual and legal elements of a claim should be separated. The District
Court must accept all of the complaint’s well-pleaded facts as true, but may disregard any legal
conclusions. Second, a District Court must then determine whether the facts alleged in the
complaint are sufficient to show that the plaintiff has a plausible claim for relief.” Fowler v.
UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009) (internal citations and quotations
omitted). “A pleading that offers labels and conclusions or a formulaic recitation of the elements
of a cause of action will not do. Nor does a complaint suffice if it tenders naked assertions
devoid of further factual enhancement.” Iqbal, 129 S. Ct. at 1949 (internal quotations and
alterations omitted).
“As a general matter, a district court ruling on a motion to dismiss may not consider
matters extraneous to the pleadings.
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.’” In re Burlington Coat
Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997) (internal citations omitted) (emphasis in
original).
III.
DISCUSSION
Plaintiff asserts four claims against Catamaran:
(i) violation of the New Jersey
Consumer Fraud Act; (ii) breach of the covenant of good faith and fair dealing; (iii) civil
conspiracy; and (iv) punitive damages. Catamaran moves to dismiss all of these causes of action
for various reasons. Each cause of action is addressed below.
5
a. New Jersey Consumer Fraud Act (“CFA”)
Catamaran argues that Plaintiff’s CFA claim must be dismissed because it fails to meet
the requirements of Rule 9(b) by lumping together the various Defendants and not identifying
which allegations relate to each defendant.
Under New Jersey law, “[a] consumer may proceed with a private cause of action against
a merchant under the CFA if she can show that the merchant engaged in an ‘unlawful practice,’
as defined in N.J.S.A. 56:8-2, and that she ‘suffer [ed] [an] ascertainable loss . . . as a result of
the use or employment’ of the unlawful practice.” Lee v. Carter-Reed Co., L.L.C., 203 N.J. 496,
521 (2010) (citing N.J.S.A. § 56:8-19). If a consumer proves (1) an unlawful practice, (2) an
ascertainable loss, and (3) a causal relationship between the unlawful conduct and the
ascertainable loss, she is entitled to legal and/or equitable relief, treble damages, and reasonable
attorneys’ fees. Id.
Under the CFA, an unlawful practice is “any unconscionable commercial practice,
deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment,
suppression, or omission of any material fact with intent that others rely upon such concealment,
suppression or omission, in connection with the sale or advertisement of any merchandise or real
estate.” N.J.S.A. § 56:8-2. “An ascertainable loss is a loss that is quantifiable or measurable; it
is not hypothetical or illusory.” Lee, 203 N.J. at 522 (internal quotation marks omitted).
CFA claims are subject to Federal Rule of Civil Procedure 9(b), which requires parties
alleging fraud to state the circumstances constituting the fraud “with particularity.” Fed. R. Civ.
P. 9(b); see also Frederico v. Home Depot, 507 F.3d 188, 200-202 (3d Cir. 2007); F.D.I.C. v.
Bathgate, 27 F.3d 850, 876 (3d Cir. 1994). To meet this standard, “a plaintiff alleging fraud
must state the circumstances of the alleged fraud with sufficient particularity to place the
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defendant on notice of the precise misconduct with which [it is] charged. . . . [T]he plaintiff
must plead or allege the date, time and place of the alleged fraud or otherwise inject precision or
some measure of substantiation into a fraud allegation.” Frederico, 507 F.3d at 200 (internal
citations and quotation marks omitted).
When multiple defendants are involved the complaint must plead with particularity by
specifying the allegations of fraud applying to each defendant. MDNet, Inc. v. Pharmacia Corp.,
147 F. App’x 239, 245 (3d Cir. 2005); see also John Wiley & Sons, Inc. v. Rivadeneyra, Civ. No.
13-1085, 2013 WL 6816369, *6 (D.N.J. Dec. 20, 2013) (“[a] fraud claim will be dismissed
where a [p]laintiff lumps all defendants together as having engaged in wrongful conduct without
specifying which defendant was responsible for which actions” (internal quotation marks and
brackets omitted)).
Here, Plaintiff’s complaint fails under Rule 9(b) by lumping together two defendants (i.e.,
Catamaran (formerly known as HealthExtras, Inc.) and HealthExtras, LLC) and by lumping
together all four defendants at various points in the complaint. There is not a single allegation
directed to Catamaran individually. 6 Indeed, much of the material from the complaint that
Plaintiff relies on in opposition to Catamaran’s motion refers only to “Defendants.” (Dkt. No. 45
at 8-9 (citing Compl., ¶¶ 59-69.) In opposition, Plaintiff argues that the complaint specifically
alleges that the HealthExtras Defendants solicited Daniels with misleading and false advertising
about the policy, but the text of the complaint does not support Plaintiff’s arguments. Instead,
6
On occasion, the Third Circuit has noted that the requirements of Rule 9(b) might be relaxed
when the necessary knowledge is within the defendant’s exclusive knowledge or control. See
Craftmatic Sec. Litig. v. Kraftsow, 890 F.2d 628, 645 (3d Cir. 1989). But even in those
situations, “pleaders must allege that the necessary information lies within defendants’ control,
and their allegations must be accompanied by a statement of the facts upon which the allegations
are based.” Id. Plaintiff has failed to do so in this case. Nor does Plaintiff allege any sort of
relationship between Catamaran and HealthExtras, LLC.
7
the complaint only notes that the HealthExtras Defendants used marking materials featuring
Christopher Reeve, alleged that the policy would apply if you were permanently disabled, and
touted the policy’s $1 million coverage (see Compl., ¶¶ 18-21); the complaint never alleges that
the HealthExtras Defendants in particular made false or misleading statements.
The other
allegations Plaintiff seeks to rely on only refer to “Defendants” in general. (Dkt. No. 45 at 9-11
(citing Compl., ¶¶ 36-38, 60-68).) While the Court can ascertain the general outline of Plaintiff’s
fraud allegations, i.e., using an unauthorized group to intentionally hide the allegedly strict
nature of the policy while simultaneously misrepresenting the nature of coverage in advertising
material, the Court cannot ascertain what role each individual defendant played in the alleged
fraud. That is, there are no individual allegations other than the following: (i) the HealthExtras
Defendants advertised the policy; (ii) National Union was the policy underwriter and made
representations about the policy to Daniels; and (iii) AIG was the policy holder. But critically,
all the allegations of fraud are directed to Defendants as a group.
This is not enough to meet the requirements of Rule 9(b).
As such, this claim is
dismissed without prejudice.
b. Breach of the Covenant of Good Faith & Fair Dealing
Catamaran moves to dismiss Plaintiff’s breach of the covenant of good faith and fair
dealing on a single ground, to wit, that Plaintiff never alleges that Daniels entered into a contract
with Catamaran. In response, Plaintiff argues that it alleged that all the Defendants issued the
disability policy at issue to themselves in the form of the “AIG Group Insurance Trust, for the
Account of HealthExtras,” which, according to the complaint, is an “alter-ego of the
Defendants.” (Compl., ¶ 38.) Plaintiff argues that this claim should not be dismissed because
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discovery is necessary to determine what role the HealthExtras Defendants have in the trust and
whether Plaintiff has any contractual relationship with those defendants. (Dkt. No. 45 at 12-13.)
“The covenant of good faith and fair dealing is implied in every contract in New Jersey;
thus, it is axiomatic that a contract must exist between two parties before a court will infer this
covenant.” J.M. ex rel. A.M. v. East Greenwich Tp. Bd. of Educ., Civ. No. 07-2861, 2008 WL
819968, at *9 (D.N.J. March 25, 2008).
Zodda does not claim that Catamaran is party to any agreement with Daniels. Instead, he
alleges that National Union issued Daniels’ policy and that the policy was placed with AIG. 7
Moreover, Zodda concedes that he does not know if there is any contract between Daniels and
either of the HealthExtras Defendants. (Dkt. No. 45 at 12-13.) Indeed, Zodda does not even
know what role, if any, HealthExtras has in the AIG trust. (Id.) Because Zodda does not plead
that Catamaran has a contract with Daniels, his claim for breach of the covenant of good faith
and fair dealing is dismissed.
c. Civil Conspiracy
Catamaran argues that Zodda’s civil conspiracy claim fails because it is derivative of his
CFA claim. Therefore, it fails for the same reasons noted above. Catamaran also argues that
Zodda’s allegations fail to meet the requirements of Rule 8 because they do not contain enough
factual matter to support a claim for civil conspiracy. Instead, Catamaran argues the complaint
only contains bare conclusory allegations about the Defendants in general.
7
While Plaintiff argues that the “AIG Group Insurance Trust, for the Account of HealthExtras”
is an alter ego of the Defendants, he does not provide any factual allegations in the complaint to
support this legal conclusion. See, e.g., Luppino v. Mercedes-Benz USA, LLC, Civ. No. 09-5582,
2013 WL 6047556, at *6 (D.N.J. Nov. 12, 2013); Wrist Worldwide Trading GMBH v. MV Auto
Banner, Civ. No. 10-2326, 2011 WL 1321794, at *4-*6 (D.N.J. Mar. 30, 2011); Chen v. HD
Dimension, Corp., Civ. No. 10-863, 2010 WL 4721514, at *3-*4 (D.N.J. Nov. 15, 2010).
9
In New Jersey, a civil conspiracy is “a combination of two or more persons acting in
concert to commit an unlawful act, or to commit a lawful act by unlawful means, the principal
element of which is an agreement between the parties to inflict a wrong against or injury upon
another, and an overt act that results in damage.” Banco Popular N. Am. v. Gandi, 184 N.J. 161,
177 (2005).
“[T]o succeed on a civil conspiracy claim, the plaintiff must assert an underlying tort
claim.” Trico Equip., Inc. v. Manor, Civ. No. 08-5561, 2011 WL 705703, at *8 (D.N.J. Feb. 22,
2011). If there is no valid underlying tort, a claim for civil conspiracy should be dismissed.
Dist. 1199P Health & Welfare Plan v. Janssen, L.P., 784 F. Supp. 2d 508, 533 (D.N.J. 2011)
(“Under New Jersey law, a claim for civil conspiracy cannot survive without a viable underlying
tort, and because all of Plaintiffs’ tort claims fail as a matter of law, Plaintiffs’ civil conspiracy
claim must be dismissed.”).
As explained above, the Court is dismissing Plaintiff’s CFA claim. Because Plaintiff’s
civil conspiracy claim is derivative of its CFA claim, the Court will also dismiss Plaintiff’s civil
conspiracy claim. 8
d. Punitive Damages
Catamaran argues that Plaintiff’s punitive damages count should be dismissed because
punitive damages are not a distinct cause of action. This court agrees. It is well settled that that
the general rule is that there is not cause of action for “punitive damages.” See, e.g., Incorvati v.
Best Buy Co., Inc., Civ. No. 10-1939, 2010 WL 4807062, at *12 (D.N.J. Nov. 16, 2010). This
count will be dismissed from the complaint, but the Court notes that Plaintiff has preserved its
8
The Court need not address Catamaran’s other arguments.
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right to argue for punitive damages as a remedy if allowed under the remaining causes of action.
See N.J.S.A. § 2A:15-5.11.
Catamaran also argues that Plaintiff fails to plead enough facts to support a finding of
punitive damages. Under the New Jersey Punitive Damages Act, “[p]unitive damages may be
awarded to the plaintiff only if the plaintiff proves, by clear and convincing evidence, that the
harm suffered was the result of the defendant’s acts or omissions, and such acts or omissions
were actuated by actual malice or accompanied by a wanton and willful disregard of persons
who foreseeably might be harmed by those acts or omissions.” N.J.S.A. § 2A:15-5.12. Here,
Plaintiff has made such allegations in the Complaint and the possibility of punitive damages
survives a motion to dismiss. (See Dkt. No. 1, ¶ 83 (alleging that Defendants knowingly violated
New Jersey law).)
Moreover, Plaintiff need not prove their claim for punitive damages (a remedy) at the
motion to dismiss stage.
There is no heightened pleading requirement under Rule 8, or
otherwise, that is aimed at the remedies sought in a matter. See Jones v. Francis, Civ. No. 1304562, 2013 WL 5603848, at *2 (D.N.J. Oct. 11, 2013) (“The excerpt from the Punitive
Damages Act upon which Defendants rely is, quite simply, an evidentiary inquiry, since it
defines the quantum of proof [Plaintiffs] must present on the issue of punitive damages. Under
the Federal Rules of Civil Procedure, however, an evidentiary standard is not a proper measure
of whether a complaint fails to state a claim.” (internal citation and quotation marks omitted)).
IV.
CONCLUSION & ORDER
For the reasons stated above,
IT IS on this 21st day of April, 2014,
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ORDERED that Catamaran Health Solutions, LLC’s motion to dismiss (Dkt. No. 38) is
GRANTED; and it is further
ORDERED that Counts IV (CFA), V (breach of duty of good faith and fair dealing), and
VI (civil conspiracy) are DISMISSED WITHOUT PREJUDICE with respect to Catamaran;
and it is further
ORDERED that Count VII (punitive damages) is DISMISSED WITH PREJUDICE;
and it is further
ORDERED that Plaintiff may file an amended complaint addressing the deficiencies
discussed herein within 30 days of this Order.
IT IS SO ORDERED.
/s/ Hon. Faith S. Hochberg
Hon. Faith S. Hochberg, U.S.D.J.
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