MITRA v. PRINCIPAL INSURANCE COMPANY

Filing 24

OPINION. Signed by Magistrate Judge James B. Clark on 7/7/2015. (anr)

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

RANJIT MITRA, M.D.,
Plaintiff,
v.
PRINCIPAL INSURANCE COMPANY,
Defendant.

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Civil Action No. 15-1259 (CCC)

MEMORANDUM OPINION

CLARK, Magistrate Judge
This matter has been opened to the Court upon Plaintiff Ranjit Mitra, M.D.’s (“Plaintiff”)
motion for leave to file an amended complaint to add one new cause of action alleging bad faith
on the part of Defendant Principal Insurance Company (“Defendant”). [Docket Entry No. 12-1.]
Defendant opposes Plaintiff’s motion. [Docket Entry No. 13.] The Court has fully reviewed and
considered all arguments made in support of, and in opposition to, Plaintiff’s motion. The Court
considers Plaintiff’s motion without oral argument pursuant to L.Civ.R. 78.1(b). For the reasons
set forth more fully below, Plaintiff’s Motion to Amend is DENIED.
I.

BACKGROUND

Plaintiff is a New Jersey physician who specializes in the field of psychiatry. Compl. at
¶1; Docket Entry No. 1. On June 21, 2011 Plaintiff entered into a written agreement with the
State of New Jersey, Department of Law and Public Safety, to cease prescribing controlled
dangerous substances. Afterward, the New Jersey Board of Medical Examiners issued charges
against Plaintiff for alleged violations of the agreement, and Plaintiff agreed to a temporary
suspension of his medical license while the charges were pending. Id. at ¶¶7-8. A Suspension
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Order was entered and filed on September 30, 2013, to be effective October 9, 2013. Id.
Plaintiff’s license to practice medicine and surgery was eventually revoked on July 10, 2014 by
the New Jersey Board of Medical Examiners for the indiscriminate prescribing of Controlled
Dangerous Substances, which presented a clear and imminent danger to the public health, safety,
and welfare. Defendants’ Brief in Surreply at 4; Docket Entry No. 20.
In accordance with his employment, Plaintiff is insured with Defendant Principal Life
Insurance Company under two separate insurance policies (the “Policies”). See Compl. at ¶1.
The first policy (Policy #779241) provides coverage for disability income, and the second policy
(Policy #7779242) provides coverage for overhead expense. Id. at ¶3. The combined purpose of
these policies is to “insure Plaintiff for monetary loss of income from his medical practice in the
event of a medical disability.” Id. According to the terms of the former policy, “total disability”
is defined as “(1.) being unable to perform the substantial and material duties of one’s occupation
and (2.) not working.” Id. at ¶4.
On February 3, 2014 Plaintiff submitted a Disability Claim Notice to Defendant, claiming
total disability and inability to perform in his specialty as a physician beginning October 9, 2013,
as a result of depression. Prop. Am. Compl. at ¶9; Docket Entry No. 14-2. Defendant
subsequently reviewed the following information in evaluating Plaintiff’s claim: Plaintiff’s
Disability Claim Notice, Medical Professional Occupational & Financial Questionnaire, a report
of Plaintiff’s treating physician, and financial information including profit and loss statements.
Defendant also conducted an in-home interview of Plaintiff, arranged for an Independent
Medical Examination (“IME”) of the Plaintiff, and reviewed the IME physician’s
“comprehensive, ten-page report.” Id. at ¶¶9-15. Ultimately, on June 26, 2014, Defendant sent
Plaintiff a letter informing him that his illness “does not meet the contractual definition of total

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disability,” and that he had the option to appeal the decision through a request for
reconsideration, within 180 days of the letter. Id. at ¶¶16-17. On November 4, 2014, via
correspondence by his counsel, Plaintiff advised Defendant that he would appeal Defendant’s
decision, and also requested reconsideration of Defendant’s decision. Id. at ¶18. In response,
Defendant reviewed Plaintiff’s additional proof of loss, requested and received further
information, submitted the claim for medical review, and scheduled an updated IME. Id. at ¶¶823. Plaintiff did not appear at the updated IME, and instead filed suit against Defendant before
the decision on his appeal was rendered. See Deft. Br. Surreply at 5.
Plaintiff filed the complaint in this action on February 18, 2015, seeking declaratory
judgment for coverage pursuant to N.J.S.A. 2A:16-51 et. seq.; see generally Compl. Plaintiff
alleges that Defendant has a clear duty to affirm his claim for total disability, and make payment
on that claim for both Policies, in accordance with the parties’ contract. Id. at Count 2- ¶2(a).
Defendant answered Plaintiff’s complaint on March 31, 2015. By way of the instant motion,
Plaintiff seeks to amend his Complaint to add a Second Count for Breach of the Implied
Covenant of Good Faith and Fair Dealing or a Bad Faith Claim. Plaintiff’s Brief in Support at 3;
Docket Entry No. 12-1. Plaintiff alleges that Defendant acted in bad faith by being unreasonable
and causing undue delay in the investigation, evaluation, and processing of Plaintiff’s claim
Prop. Am. Compl. at Count 2 - ¶11. Plaintiff claims that Defendant’s actions are therefore “in
breach of the parties’ binding insurance agreement.” Id. at ¶12. Additionally, Plaintiff claims
that his reliance on Defendant’s policy has resulted in further deterioration of his mental
condition. Id. at ¶14.

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Defendant filed an opposition to Plaintiff’s motion on May 4, 2015 and Plaintiff filed a
letter in reply on May 5, 2015. Additionally, Defendant was given leave to file a surreply and
did so on June 4, 2015.
II.

LEGAL STANDARD

Under Federal Rule of Civil Procedure 15(a)(1), “[a] party may amend its pleading once
as a matter of course within: (A) 21 days after serving it; or (B) if the pleading is one to which a
responsive pleading is required, 21 days after service of a responsive pleading or 21 days after
service of a motion under Rule 12(b), (e), or (f), whichever is earlier.” Otherwise, pursuant to
Rule 15(a)(2) “a party may amend its pleading only with the opposing party’s written consent or
the court’s leave. The Court should freely give leave when justice so requires.” See Foman v.
Davis, 371 U.S. 178, 182 (1962); Alvin v. Suzuki, 227 F.3d 107, 121 (3d Cir. 2000).
Nevertheless, the Court may deny a motion to amend where there is “undue delay, bad
faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by
amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of
the amendment, [or] futility of the amendment.” Id. However, where there is an absence of
undue delay, bad faith, prejudice or futility, a motion for leave to amend a pleading should be
liberally granted. Long v. Wilson, 393 F.3d 390, 400 (3d Cir. 2004). “‘Futility’ means that the
complaint, as amended, would fail to state a claim upon which relief could be granted.” In re
Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1434 (3d Cir. 1997). To evaluate futility,
the District Court uses “the same standard of legal sufficiency” as applied for a motion to dismiss
under Rule 12(b)(6). Shane v. Fauver, 213 F.3d 113, 115 (3d Cir. 2000).
The Supreme Court refined the standard for summary dismissal of a complaint that fails
to state a claim in Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009). The Court examined Rule 8(a)(2) of

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the Federal Rules of Civil Procedure, which provides that a complaint must contain “a short and
plain statement of the claim showing that the pleader is entitled to relief.” FED.R.CIV.P. 8(a)(2). 1
Citing its opinion in Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007), for the proposition that
“[a] pleading that offers ‘labels and conclusions’ or a ‘formulaic recitation of the elements of a
cause of action will not do,” Iqbal, 129 S. Ct. at 1949 (quoting Twombly, 550 U.S. at 555), the
Supreme Court identified two working principles underlying the failure to state a claim standard.
First, the tenet that a court must accept as true all of the allegations contained in a
complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do not suffice …. Rule 8 …
does not unlock the doors of discovery for a plaintiff armed with nothing more than
conclusions. Second, only a complaint that states a plausible claim for relief survives a
motion to dismiss. Determining whether a complaint states a plausible claim for relief
will … be a context-specific task that requires the reviewing court to draw on its judicial
experience and common sense. But where the well-pleaded facts do not permit the court
to infer more than the mere possibility of misconduct, the complaint has alleged--but it
has not “show[n]” -- “that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2).
Iqbal, 129 S. Ct. at 1949-1950 (citations omitted). The Court further explained that:
a court considering a motion to dismiss can choose to begin by identifying pleadings that,
because they are no more than conclusions, are not entitled to the assumption of truth.
While legal conclusions can provide the framework of a complaint, they must be
supported by factual allegations. When there are well-pleaded factual allegations, a court
should assume their veracity and then determine whether they plausibly give rise to an
entitlement of relief.
Id. at 1950.
Thus, to prevent a summary dismissal, a civil complaint must allege “sufficient factual
matter” to show that the claim is facially plausible. Id. at 1949. This then “allows the court to
draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. The
Supreme Court’s ruling in Iqbal emphasizes that a plaintiff must demonstrate that the allegations
of his complaint are plausible. Id. at 1949-50.

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Rule 8(d)(1) provides that “[e]ach allegation must be simple, concise, and direct. No technical form is required.
FED.R.CIV.P. 8(d).
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In the context of insurance coverage cases, the New Jersey Supreme Court has
established that a cause of action may exist for an insurance company’s “bad faith” failure to pay
an insured’s claim. Tarsio v. Provident Ins. Co., 108 F. Supp. 2d 397, 400 (D.N.J. 2000). Such
bad faith claims are to be analyzed in light of a “fairly debatable” standard, which posits that
"[i]f a claim is 'fairly debatable,' no liability in tort will arise." Pickett, 621 A.2d at 453. Thus,
under the “fairly debatable” standard, a claimant must be able to establish a right to summary
judgment, as a matter of law, for coverage before asserting a bad faith claim against an insurer
for their refusal to pay a claim. See Polizzi Meats v. Aetna Life & Cas. Co., 931 F. Supp. 328,
339 (D.N.J. 1996). “[I]f plaintiff cannot establish a right to summary judgment, the bad faith
claim fails. In other words, if there are material issues of disputed fact which would preclude
summary judgment as a matter of law, an insured cannot maintain a cause of action for bad
faith.” Am. Gen. Life Ins. Co. v. Ellman Sav. Irrevocable Trust, 2010 U.S. Dist. LEXIS 133713,
at *20 (D.N.J. Dec. 17, 2010) (citations omitted). See also Tariso, 108 F. Supp. 2d at 401 (“[i]f
factual issues exist as to the underlying claim… the Court must dismiss plaintiff's second cause
of action--the “bad faith” claim”); Hudson Universal v. Aetna Ins. Co., 987 F. Supp. 337, 342
(D.N.J. 1997) (“an insurer’s disclaimer of coverage cannot be held to be in bad faith unless the
insured is granted summary judgment on the issue of coverage”) (emphasis in the original).
“When the insured’s complaint contains issues of material fact as to the underlying claim,
dismissal of a related bad faith claim is proper.” N.J. Title Ins. Co. v. Nat'l Union Fire Ins. Co.,
2011 U.S. Dist. LEXIS 149162, *21 (D.N.J. Dec. 27, 2011).
III.

DISCUSSION

Plaintiff seeks to add a cause of action for breach of the Implied Covenant of Good Faith
and Fair Dealing or Bad Faith. Plaintiff alleges that Defendant acted unreasonably and did not

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have a valid reason for denying his claim, since Plaintiff was “diagnosed by two (2) independent
qualified physicians with a legitimate illness, which rendered Plaintiff totally disabled and
completely unable to work.” Prop. Am. Compl. at Count 2 - ¶5. Plaintiff also alleges that
Defendant caused undue delay, noting that Defendant took longer than the pre-established 45day waiting period to respond to Plaintiff’s request for reconsideration. Id. at ¶¶6-7; 11.
Additionally, Plaintiff argues that Defendant unreasonably required another IME before
rendering a decision. Id. at ¶8.
In response to Plaintiff’s motion, Defendant argues that leave to amend should be denied
for four reasons. First, Defendant argues that Plaintiff’s motion should be denied because it is in
violation of the Court’s April 7, 2015 Order, which requires leave to be obtained from the Court,
prior to the filing of a motion. Defendant’s Brief in Opposition at 4; Docket Entry No. 13.
Second, Defendant notes that Magistrate Judge Clark’s Standing Procedures “expressly state that
no motions are permitted unless a letter setting forth the basis of the motion and a request for
telephone conference precedes the motion.” Id. at 4-5. Plaintiff did not submit a letter in
accordance with these procedures, and thus Defendant argues that Plaintiff’s motion should be
denied. Id. at 5. Third, Defendant argues that Plaintiff’s motion should be denied because it does
not comply with Local Civil Rule 7.1(f), which requires the moving party to attach a copy of the
proposed amended complaint to the motion for leave to amend. 2 Id. at 5. Lastly, Defendant
argues that Plaintiff’s amended complaint should be denied on the grounds of futility, since it
would not survive a motion to dismiss for failure to state a claim upon which relief may be
granted, pursuant to Federal Rule of Civil Procedure 12(b)(6). Id. at 7. Defendant argues that

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The Court notes that Plaintiff filed its proposed amended complaint in conjunction with its Reply Brief, due to
technical difficulties. See generally Prop. Am. Compl. The Court shall accept Plaintiff’s proposed amended complaint
as timely filed and declines to deny under Rule 7.1(f).
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there are “numerous issues of material fact with respect to Principal Life’s claim determination,”
and thus Plaintiff’s bad faith claim would be dismissed. Deft. Br. Opp. at 12.
In order to prevail on a claim of action for breach of the Implied Covenant of Good Faith
and Fair Dealing or Bad Faith, Plaintiff must satisfy the two-factor test set forth in Pickett v.
Lloyd’s (A Syndicate of Underwriting Members), 621 A.2d 445, 453 (N.J. 1993) which holds that
“to show a claim for bad faith, a plaintiff must show the absence of a reasonable basis for
denying benefits of the policy and the defendant’s knowledge or reckless disregard of the lack of
a reasonable basis for denying the claim.” Specifically, “in the insurance context, a bad faith
claim is premised on the insurer’s failure to investigate an insured’s claim for benefits.” Id.
The Court finds that, even when viewed in the light most favorable to Plaintiff, Plaintiff
has failed to allege sufficient facts that would allow him to establish a right to summary
judgment on his insurance coverage claim. Moreover, Plaintiff’s amended complaint relies on
the same allegations that he cited in connection with his request for Declaratory Judgment. In
this regard, Plaintiff does not allege any additional facts that would allow him to sustain a claim
for bad faith. Indeed, Plaintiff’s amended complaint catalogues the many steps that Defendant
took to investigate his claim. See Prop. Am. Compl. at ¶¶9-15.
The Court finds that Plaintiff’s Proposed Amended Complaint relies on allegations of
mere “labels and conclusions,” leaving numerous factual issues unresolved. See Twombly, 550
U.S. at 555. Specifically, Plaintiff’s Proposed Amended Complaint evidences the many material
issues of disputed fact surrounding Defendant’s investigation into Plaintiff’s claims. For
instance, though Plaintiff repeatedly asserts the legal conclusion that Defendant’s denial of his
claim was in “bad faith,” he does not plead facts that would allow a reasonable person to
plausibly, and definitively, conclude that Defendant denied the claim intentionally, and also

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recklessly disregarded the lack of a reasonable basis. The uncertainty of the facts surrounding
Defendant’s denial of Plaintiff’s claim is “fairly debatable,” which would preclude summary
judgment as a matter of law. Because of the presence of such material issues of disputed fact,
Plaintiff’s bad faith claim would not survive a motion to dismiss, and is thus futile.
Because the Court finds Plaintiff’s proposed amendment to be futile, it declines to
address Defendant’s remaining arguments.
IV.

CONCLUSION

For the foregoing reasons, Plaintiff’s motion for leave to file an amended complaint is
hereby DENIED. 3

Dated: July 7, 2015
s/James B. Clark, III
HONORABLE JAMES B. CLARK, III
UNITED STATES MAGISTRATE JUDGE

3

The Court is loathe to deny an amendment so early in the litigation, especially when Plaintiff sought consent from
Defendant written the time when Plaintiff could have amended as of right. However, the Court is also loathe to permit
a claim that it finds futile, only to have litigation likely prolonged by a motion to dismiss.
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