ERNST v. NORTH AMERICAN COMPANY FOR LIFE AND HEALTH INSURANCE
Filing
30
MEMORANDUM OPINION AND ORDER. Signed by JUDGE THOMAS D. SCHROEDER on 3/27/2017, that NAC's motion to dismiss (Doc. 15 ) is GRANTED as to count II (misrepresentation - unfair claims handling practices) and count III (estoppel/waiver) of the c omplaint, which will be DISMISSED WITH PREJUDICE, and DENIED as to count IV (negligent misrepresentation - gross negligence) to the extent noted herein. FURTHER that Jackson's motion to dismiss (Doc. 22 ) is GRANTED as to count I of the counter-claim against Ernst and cross-claim against Jackson (interpleader), which will be DISMISSED WITH PREJUDICE, and DENIED as to count II (unjust enrichment). (Daniel, J)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
BENJAMIN M. ERNST,
Plaintiff,
v.
NORTH AMERICAN COMPANY FOR
LIFE AND HEALTH INSURANCE,
Defendant.
______________________________
NORTH AMERICAN COMPANY FOR
LIFE AND HEALTH INSURANCE,
Cross- and Counter-claim
Plaintiff
v.
DONNA M. JACKSON and BENJAMIN
M. ERNST
Cross- and Counter-claim
Defendants
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1:16CV705
MEMORANDUM OPINION AND ORDER
THOMAS D. SCHROEDER, District Judge.
This action arises out of a dispute over entitlement to the
proceeds of an annuity administered by Defendant North American
Company for Life and Health Insurance (“NAC”).
Plaintiff Benjamin
Ernst contends that NAC improperly paid the proceeds to his aunt,
cross-claim Defendant Donna A. Jackson, and brings this action as
the putative beneficiary.
Faced now with conflicting claims of
entitlement, NAC seeks to recover the annuity proceeds from the
aunt, deposit them with the court, and leave it to Ernst and the
aunt to litigate the question of which one is entitled to recovery.
Before the court are NAC’s motion to dismiss three counts of
Ernst’s complaint (Doc. 15) and Jackson’s motion to dismiss NAC’s
cross-claims (Doc. 22).
For the reasons set forth below, NAC’s
motion to dismiss will be granted as to count II, which alleges
violations of North Carolina’s trade practice laws, and as to count
III, which alleges waiver and equitable estoppel, but denied as to
count IV, which alleges negligent misrepresentation.
Jackson’s
motion to dismiss will be granted as to count I of NAC’s counterclaim and cross-claim, which alleges interpleader, and denied as
to count II, which alleges unjust enrichment.
I.
BACKGROUND
The allegations of the pleadings, viewed in the light most
favorable to the non-moving parties, show the following:
Ernst’s mother, Sharon Murray, died of colon cancer in 2003,
when Ernst was eleven years old.
$451,751.91
beneficiary.
to
her
father,
Her life insurance policy paid
Theron
Murray,
its
designated
(Doc. 5 at 2, ¶¶ 5, 7, 10.)
In 2008, when Ernst was seventeen years old, Theron Murray
placed the life insurance proceeds in the NAC annuity that is the
subject of this dispute.
(Id. at 3, ¶ 13.)
2
At the time, the named
beneficiary was Jackson, Ernst’s aunt. 1
(Id.; Doc. 14-2.)
In June of 2012, Theron Murray executed a Beneficiary Change
Request Form to designate Ernst the annuity’s beneficiary.
5 at 4, ¶ 18; Doc. 14-3.)
(Doc.
NAC issued an amendatory endorsement
reflecting Ernst as the beneficiary.
(Doc. 5 at 4, ¶ 19; Doc. 14-
4.)
Two years later, in July of 2014, Theron Murray purportedly
restored Jackson as the sole beneficiary, using the same form. 2
On
this
occasion,
beneficiary.”
Jackson
was
designated
an
“irrevocable
(Doc. 5 at 4, ¶ 21; Doc. 14-5 at 2, 5.)
The form
stated: “If you choose an irrevocable beneficiary, written consent
is required before any future changes can be made.”
2.)
(Doc. 14-5 at
NAC responded with an amendatory endorsement listing Jackson
as the primary beneficiary.
(Doc. 5 at 5, ¶ 23; Doc. 14-6.)
The
endorsement said nothing about Jackson’s purported status as an
“irrevocable” beneficiary.
On August 5, 2014, less than a month after NAC sent its
amendatory
endorsement,
Theron
Murray
sent
NAC
yet
another
Beneficiary Change Request Form, again listing Ernst as the primary
beneficiary.
(Doc. 5 at 5, ¶ 24; Doc. 14-7.)
Ernst was listed as
1
Murray had three daughters: Sharon Murray, Kathryn Murray Garrison,
and Jackson. (Doc. 5 at 2, ¶ 4.)
2
Jackson had attempted to add
earlier, but when she sent the
spoke with Theron Murray about
forward the form to NAC. (Doc.
herself
form to
it and,
5 at 4,
3
as a beneficiary about a month
the insurance agent, the agent
as a result, the agent did not
¶ 20.)
a “revocable” beneficiary, and the form stated: “If you choose an
irrevocable beneficiary, written consent is required before any
future changes can be made.”
(Doc. 14-7 at 2.)
NAC responded
with an amendatory endorsement, dated August 16, 2014, listing
Ernst as the primary beneficiary.
8.)
(Doc. 5 at 6, ¶ 28; Doc. 14-
The endorsement did not refer to Jackson or to the question
of revocability.
Theron Murray died six months later, on February 1, 2015.
(Doc. 5 at 6, ¶ 31.)
On February 19, 2015, NAC mailed Ernst claim forms and a
letter stating that “[o]ur records indicated that you are a primary
beneficiary of the above referenced Contract.”
(Doc. 5-3 at 1.)
The letter states that his portion of the proceeds was $651,861.64.
It lists a toll-free customer-service phone number and states that
“[a] service professional within the Claims and Benefit Department
will be happy to take your important call.”
Ernst
alleges
that
after
NAC
sent
(Id.)
that
“pressed” NAC to pay her the annuity proceeds.
¶ 32.)
letter,
Jackson
(Doc. 5 at 6,
NAC alleges that Jackson submitted an “Annuity Proof of
Death Claimant’s Statement” dated February 25, 2015.
9, ¶ 12; see Doc. 14-9.)
(Doc. 14 at
NAC did in fact pay Jackson the annuity’s
proceeds, in the amount of $685,643.92.
(Doc. 5 at 6-7, ¶ 33;
Doc. 14 at 10, ¶ 15; Doc. 14-12.)
NAC alleges that it sent Ernst three letters, dated June 12,
4
2015, June 30, 2015, and July 31, 2015, informing him that he was
not
the
beneficiary
questions.
and
that
he
should
call
NAC
if
(Doc. 14 at 10, ¶ 14; see Doc. 14-11.)
he
had
It appears
undisputed that on September 3, 2015, NAC issued a check to Jackson
in the amount of $685,643.92 in payment of the annuity proceeds.
(See Doc. 14-12.)
On June 7, 2016, Ernst brought the present action against NAC
in North Carolina Superior Court, alleging breach of contract
(count I), violations of North Carolina’s trade practice laws
(count
II),
“estoppel/waiver”
(count
III),
misrepresentation – gross negligence” (count IV).
7-19.)
grounds. 3
and
“negligent
(Doc. 5 at 1,
On June 23, 2016, NAC removed the case on diversity
(Doc. 1.)
It answered Ernst’s complaint as to the
breach of contract claim (Doc. 14 at 1-7, ¶¶ 1-44) and moved to
dismiss
the
remaining
counts
(Doc.
15).
NAC
also
brings
a
counterclaim against Ernst for interpleader (Doc. 15 at 8-13, ¶¶ 128) and a cross-claim against Jackson for interpleader and for
unjust enrichment (id. at 8-11, 13-14, ¶¶ 1-18, 29-36).
now moves to dismiss both claims.
(Doc. 22.)
Ernst supports
Jackson’s motion to dismiss NAC’s interpleader claim.
3
Jackson
(Doc. 24 at
Complete diversity exists.
Ernst is a resident of Massachusetts.
(Doc. 5 at 1, ¶ 1.) NAC is an Iowa corporation with its principle place
of business in Iowa. (Doc. 14 at 2, ¶ 2.) Jackson is a resident of
North Carolina. (Id. at 10, ¶ 16.) Because the annuity’s proceeds were
over $75,000 and Ernst claims he is entitled to the whole of the annuity,
the amount-in-controversy requirement is also met.
See 28 U.S.C.
§ 1332(a).
5
6.)
The motions are fully briefed and ready for decision.
II.
ANALYSIS
A.
Standard of Review
The purpose of a Rule 12(b)(6) motion is to “test[] the
sufficiency
of
a
complaint”
and
not
to
“resolve
contests
surrounding the facts, the merits of a claim, or the applicability
of defenses.”
Republican Party of N.C. v. Martin, 980 F.2d 943,
952 (4th Cir. 1992).
In considering a Rule 12(b)(6) motion, a
court “must accept as true all of the factual allegations contained
in the complaint,” Erickson v. Pardus, 551 U.S. 89, 94 (2007) (per
curiam), and all reasonable inferences must be drawn in the nonmoving party’s favor, Ibarra v. United States, 120 F.3d 472, 474
(4th Cir. 1997).
To be facially plausible, a claim must “plead[]
factual content that allows the court to draw the reasonable
inference that the defendant is liable” and must demonstrate “more
than a sheer possibility that a defendant has acted unlawfully.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 556 (2007)).
including
all
reasonable
inferences
While “the complaint,
therefrom,
[is]
liberally
construed in the plaintiff’s favor,” this “does not mean that the
court can ignore a clear failure in the pleadings to allege any
facts [that] set forth a claim.”
Estate of Williams-Moore v. All.
One Receivables Mgmt., Inc., 335 F. Supp. 2d 636, 646 (M.D.N.C.
2004) (citing McNair v. Lend Lease Trucks, Inc., 95 F.3d 325, 327
6
(4th Cir. 1996)). Mere legal conclusions are not accepted as true,
and “[t]hreadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice.”
Iqbal,
556 U.S. at 678.
B.
NAC’s Motion to Dismiss
1.
Misrepresentation
–
Unfair
Practices Claim (Count II)
Claims
Handling
NAC first moves to dismiss count II of the complaint, in which
Ernst
alleges
that
NAC
violated
North
Carolina’s
Unfair
and
Deceptive Trade Practices Act (“UDTPA”), N.C. Gen. Stat. § 75-1.1
et seq., and North Carolina statutory provisions governing life
insurance claims handling, see N.C. Gen. Stat. § 58-63-15(11)
(prohibiting certain claims investigation and handling acts); id.
§ 58-58-40 (prohibiting the misrepresentation of policy terms). 4
Ernst limits this claim to NAC’s conduct after Theron Murray’s
4
Ernst argues that NAC is a “life insurance company” as defined by N.C.
Gen. Stat. § 58-58-1, thereby subjecting NAC to liability under N.C.
Gen. Stat. §§ 58-63-15(11) and 58-58-40. (Doc. 20 at 6.) He also argues
that the annuity is covered by N.C. Gen. Stat. §§ 58-7-15(1) and (2),
which define the terms “life insurance” and “annuities,” because the
annuity was to be paid on the death of a person and because the statute
defines “annuities” to include all agreements to make periodical payments
at specified intervals. (Id. at 6-7.) In its reply, NAC responds that
because the annuity does not insure a life, it cannot be “life insurance”
and therefore cannot support claims under N.C. Gen. Stat. §§ 58-6315(11) and 58-58-40. (Doc. 21 at 2-3 (citing Hager v. Lincoln Nat. Life
Ins. Co., 126 N.C. App. 349, 484 S.E.2d 828 (1997)).) It is the case
that these statutes do not provide a private right of action but where
applicable can serve as the basis for a Chapter 75 violation. See Pearce
v. Am. Def. Life Ins. Co., 316 N.C. 461, 468-69, 343 S.E.2d 174, 179
(1986). Because Ernst’s UDTPA claims fail for the reasons set forth
below, the court assumes, without deciding, that the annuity falls within
the scope of these statutes.
7
death and in connection with its June 12 and 30, 2015 and July 31,
2015 letters to Ernst denying payment.
(Doc. 20 at 8-9.)
To succeed on a UDTPA claim, Ernst must “demonstrate (1) an
unfair
or
deceptive
act
or
practice
or
unfair
method
of
competition, (2) in or affecting commerce, which (3) proximately
caused actual injury to the plaintiff.”
Westchester Fire Ins. Co.
v. Johnson, 221 F. Supp. 2d 637, 642–43 (M.D.N.C. 2002) (citing
Spartan Leasing v. Pollard, 101 N.C. App. 450, 460, 400 S.E.2d
476, 482 (1991)).
Ernst alleges that NAC committed three kinds of
unfair or deceptive acts to satisfy the first element: making
“malicious[,]
intentional
misrepresentations”
regarding
the
annuity’s beneficiary; and engaging in conduct prohibited by N.C.
Gen. Stat. §§ 58-63-15(11) and 58-58-40.
61.)
(Doc. 5 at 9-12, ¶¶ 45-
In essence, Ernst alleges that NAC “attempted to hide the
fact that Ernst was the current official designated beneficiary on
the Annuity” under the August 16, 2014 endorsement and “attempted
to discourage him from seeking benefits pursuant to the Annuity.”
(Id. at 9, ¶ 48.)
NAC makes several arguments in support of its
motion to dismiss, the principal ones being that the alleged
conduct cannot be unfair or deceptive and that Ernst has not
alleged sufficient facts to establish causation.
The court agrees
with NAC.
In Jefferson-Pilot Life Insurance Co. v. Spencer, the Supreme
Court of North Carolina held that a misrepresentation to an insured
8
“as to who was the owner and who was the beneficiary of the policy”
did not constitute an unfair or deceptive practice under § 58-6315(1),
which
proscribes
certain
misrepresentations
and
false
advertising of policy contracts (including those that induce the
policyholder to lapse, forfeit, or surrender his insurance).
N.C. 49, 53, 442 S.E.2d 316, 318 (1994).
so
because
“[a]n
insurance
company
336
The court held this is
gains
no
advantage
if
it
incorrectly advises a person as to who is the owner or beneficiary
of a policy.”
Id. at 53, 442 S.E.2d at 318.
In light of this, it
is unlikely the North Carolina Supreme Court would find that an
insurer gains an advantage by telling a policy’s beneficiary that
he
is
not
the
beneficiary.
misrepresentation
does
not
Therefore,
constitute
an
as
in
unfair
Spencer,
or
that
deceptive
practice.
In addition, as NAC argues, Ernst fails to allege adequately
that NAC’s violations of North Carolina’s trade practice laws
proximately caused his injuries.
UDTPA
claim
is
founded
on
(Doc. 16 at 7-8.)
alleged
Where the
misrepresentations,
the
proximate-cause prong of the three-part UDTPA test “is similar to
the detrimental reliance requirement under a fraud claim.”
Wysong
& Miles Co. v. Emp’rs of Wausau, 4 F. Supp. 2d 421, 433 (M.D.N.C.
1998) (quoting Pearce v. Am. Def. Life Ins. Co., 316 N.C. 461,
471, 343 S.E.2d 174, 180 (1986)); see also Johnson, 221 F. Supp.
2d at 649 (applying the rule to a claim based on conduct listed in
9
§ 58-63-15(11)).
Therefore, to make out a claim, Ernst would have
to allege sufficient facts to make this aspect of his claim - that
he
detrimentally
plausible.
relied
on
the
alleged
misrepresentations
-
Johnson, 221 F. Supp. 2d at 649; Solum v. CertainTeed
Corp., No. 7:15-CV-114-D, 2015 WL 6505195, at *5 (E.D.N.C. Oct.
27, 2015) (finding that a plaintiff “must plausibly allege actual
reliance and reasonable reliance” (citing Caper Corp. v. Wells
Fargo Bank, N.A., 578 F. App’x 276, 287 (4th Cir. 2014); Bumpers
v. Cmty. Bank of N. Va., 367 N.C. 81, 89, 747 S.E.2d 220, 227
(2013))).
Nowhere in his complaint does Ernst allege that he relied in
any fashion on NAC’s alleged misrepresentations or conduct.
cursorily
claims
that
including
sending
him
NAC’s
claims
letters
handling
telling
him
he
He
“activities”
was
not
–
the
beneficiary - proximately caused him injury (Doc. 5 at 12, ¶ 59),
but that is only because he was not paid.
Ernst fails to allege
that he changed his position in any way in reliance on NAC’s
statements, all of which came after Theron Murray’s death. Rather,
his claim is that NAC denied paying him the annuity proceeds for
the wrong reasons, in contradiction to the company’s earlier letter
acknowledging him as the beneficiary.
Ernst therefore fails to allege facts to make a UDTPA claim
plausible, and the motion to dismiss this claim will be granted.
10
2.
Estoppel/Waiver Claim (Count III)
NAC also moves to dismiss count III of the complaint, which
alleges that NAC waived any ability to rely on its internal
procedures
requiring
Jackson,
as
irrevocable
beneficiary,
to
approve the naming of Ernst as beneficiary and that the company is
otherwise estopped from relying on those procedures based on its
conduct in designating Ernst as beneficiary.
NAC argues that this claim should be dismissed because it is
equitable and Ernst has an adequate remedy at law through his
breach of contract claim.
(Doc. 16 at 10.)
Under North Carolina
law, equitable remedies are generally only available in the absence
of legal remedies.
See Hinson v. United Fin. Servs., Inc., 123
N.C. App. 469, 473, 473 S.E.2d 382, 385 (1996) (citation omitted).
As a general matter, however, an equitable claim can be alleged as
an alternative to a legal claim.
Civ. P. 8(b)(2), (3).
(Doc. 20 at 15.)
See Fed. R.
At some point, a plaintiff will have to
make an election of remedies. But Ernst’s claim for “waiver” fails
for a related reason.
Waiver is “an intentional relinquishment or abandonment of a
known right or privilege.”
Bombardier Cap., Inc. v. Lake Hickory
Watercraft, Inc., 178 N.C. App. 535, 540, 632 S.E.2d 192, 196
(2006) (citation omitted).
To establish waiver, it must be shown
that at the time of the waiver, the waiving party had actual
knowledge of a right, advantage, or benefit that they intended to
11
relinquish.
Fetner v. Rocky Mount Marble & Granite Works, 251
N.C. 296, 302, 111 S.E.2d 324, 328 (1959).
When an insurer is
alleged to have waived a provision of an insurance contract, the
waiver is “predicated on knowledge on the part of the insurer of
the pertinent facts and conduct thereafter inconsistent with an
intention to enforce the condition.”
Cullen v. Valley Forge Life
Ins. Co., 161 N.C. App. 570, 575, 589 S.E.2d 423, 428 (2003)
(citation omitted).
An insurer is presumed to be cognizant of its
own files and of its communications with the insured.
Id.
Count III of Ernst’s complaint alleges that NAC waived its
right to enforce its internal change-of-beneficiary policies when
it issued the amendatory endorsement on August 16, 2014.
(Doc. 5
at 14, ¶ 70 (alleging that NAC’s waiver of “its own procedures for
changing a beneficiary” caused “[a]ny internal defect in the
process of changing the beneficiary from” Jackson to Ernst through
the endorsement); id. at 15, ¶ 75 (alleging that when NAC issued
that endorsement, it “voluntarily waived any procedure that it may
have
otherwise
beneficiary”).)
internally
established
for
changing
a
In his brief, Ernst argues that NAC’s change-of-
beneficiary procedures exist for its own benefit and thus may be
waived by acts inconsistent with them.
(Doc. 20 at 16-17.)
NAC is correct that this “claim” is no more than a restatement
of Ernst’s contract claim in count I, which alleges that Ernst is
a third-party beneficiary of Theron Murray’s annuity contract.
12
A
necessary part of Ernst’s contract claim is that NAC “waived its
own procedures on the method of changing a purported irrevocable
beneficiary designation on an annuity when it accepted the August
5, 2014 Beneficiary Change Request Form without a signature from
the alleged irrevocable beneficiary.”
(Doc. 5 at 8, ¶ 39.)
Thus,
Ernst has failed to demonstrate the existence of a separate cause
of action for “waiver.”
Every
case
Ernst
cites
in
support
of
his
waiver
claim
indicates that the doctrine is available to defend against another
cause of action.
It is invoked by either the second beneficiary
– i.e., the beneficiary the insured chose later, using a defective
procedure - or the insurer, always to defend against the first
beneficiary’s charge that the insurer failed to adhere to its own
change-of-beneficiary procedures.
The courts consistently reason
that because the procedures exist for the insurer’s benefit and
not for the benefit of the first beneficiary, the first beneficiary
cannot use the procedures to deprive the second beneficiary of the
proceeds.
This is consistent with Federal Rule of Civil Procedure
8(c)(1), which lists waiver as an affirmative defense to a claim.
In six of the cases Ernst cites in favor of his waiver claim,
it was the second beneficiary who invoked the waiver doctrine.
In
these
in
cases,
interpleaders.
the
insurers
were
merely
stakeholders
(Doc. 20 at 16-17 (citing Widows Fund of Sudan
Temple v. Umphlett, 246 N.C. 555, 99 S.E.2d 791 (1957); Reid v.
13
Durboraw, 272 F. 99 (4th Cir. 1921); Schwerdtfeger v. Am. United
Life Ins. Co., 165 F.2d 928, 929 (6th Cir. 1948); Provident Indem.
Life Ins. Co. v. Durbin, 541 F. Supp. 4 (E.D. Pa. 1981); Murphy v.
Gibson, 465 So. 2d 373 (Ala. 1985); Rasmussen v. Mut. Life Ins.
Co. of N.Y., 70 N.D. 295, 293 N.W. 805, 806 (1940)).)
In each
case, the insurer asked the court to determine who between two
beneficiaries was entitled to proceeds.
The second beneficiary
invoked waiver doctrine, arguing that the first beneficiary should
not
be
allowed
to
upset
the
insured’s
last
known
intent
by
appealing to a provision that existed only for the insurer’s
benefit.
E.g., Umphlett, 246 N.C. at 560, 99 S.E.2d at 794 (“[A]n
insurer waives compliance with policy provisions inserted for its
benefit by interpleading the original and substituted beneficiary
and payment of the sum owing into court.” (citations omitted));
see also Murphy v. Gibson, 465 So. 2d 373, 377 (Ala. 1985) (“[W]hen
the insurer interpleads the proceeds of a life insurance policy
and chooses not to take sides between claimants, the insurer waives
strict compliance with the policy requirements by the insured.”).
The other two cases Ernst cites involve insurers invoking waiver
doctrine as a defense to the first beneficiaries’ causes of action.
(Doc. 20 at 17 (citing Blount v. Life Ins. Co. of Ga., 139 Ga.
App. 238, 238, 228 S.E.2d 140, 141 (1976); Wooten v. Grand United
Order of Odd Fellows, 176 N.C. 52, 96 S.E. 654 (1918)).)
case is waiver an affirmative claim for relief.
14
In no
Ernst
argues
that
his
claim
for
estoppel,
however,
constitutes a separate claim for equitable estoppel (Doc. 20 at
18), although his complaint does not use that term (Doc. 5 at 1216, ¶¶ 62-77).
While this claim could proceed as a separate cause
of action, it fails because, as NAC argues, there is no factual
allegation to make an inference of detrimental reliance plausible.
(Doc. 16 at 12 (citing State Highway Comm’n v. Thornton, 271 N.C.
227, 240, 156 S.E.2d 248, 258 (1967)).)
A
claim
of
equitable
estoppel
under
North
Carolina
law
requires proof of the following as related to the party estopped:
“(1) Conduct which amounts to a false representation or concealment
of material facts, or at least, which is reasonably calculated to
convey the impression that the facts are otherwise than, and
inconsistent with, those which the party afterwards attempts to
assert; (2) intention or expectation that such conduct shall be
acted upon by the other party, or conduct which at least is
calculated to induce a reasonably prudent person to believe such
conduct was intended or expected to be relied and acted upon; (3)
knowledge, actual or constructive, of the real facts.”
Peek v.
Wachovia Bank & Tr. Co., 242 N.C. 1, 11-12, 86 S.E.2d 745, 753
(1955).
As to the party claiming estoppel, the following must be
shown: “(1) lack of knowledge and the means of knowledge of the
truth as to the facts in question; (2) reliance upon the conduct
of the party sought to be estopped; and (3) action based thereon
15
of such a character as to change his position prejudicially.”
at 12, 86 S.E.2d at 753.
hold
that
the
party
Id.
Thus, North Carolina courts uniformly
invoking
equitable
estoppel
must
have
detrimentally and reasonably relied on the conduct or silence of
the party to be estopped.
Id.
Ernst’s complaint does not allege
that he relied on NAC’s conduct.
Instead, as noted above, it
alleges only that Murray reasonably relied on NAC’s amendatory
endorsement listing Ernst as the beneficiary.
¶ 74.)
(Doc. 5 at 15,
Ernst alleges that Murray’s reliance led him to abstain
from taking additional steps to ensure that Ernst became the
beneficiary.
(Id. at 13-14, ¶ 67.)
Ernst relies on Pearce v. American Defender Life Insurance
Co., which allowed a beneficiary to maintain a UDTPA action against
an insurer for misrepresentations the insurer made to the insured.
(Doc. 20 at 18.)
(1986).
See 316 N.C. 461, 472, 343 S.E.2d 174, 181
As NAC notes, however, Pearce did not address a question
of equitable estoppel.
(Doc. 21 at 9.)
Because Ernst fails to
allege that he reasonably and detrimentally relied on NAC’s alleged
misrepresentations, his equitable estoppel claim will be dismissed
as well.
3.
Negligent Misrepresentation
Claim (Count IV)
–
Gross
Negligence
Count IV alleges that NAC was grossly negligent in providing
Ernst
untrue
information
about
16
the
annuity
in
the
company’s
August 16, 2014 endorsement letter and in poorly administering the
contract.
NAC moves to dismiss on several grounds.
NAC argues that it owed Ernst no duty, fiduciary or otherwise,
independent from its contractual duty in the annuity and that Ernst
simply seeks “to couch his breach of contract claim as a tort.”
(Doc. 16 at 13-14.)
In response, Ernst relies on Jefferson-Pilot
Life Insurance Co. v. Spencer, in which the North Carolina Supreme
Court, under similar circumstances, held that an insurer owes a
beneficiary the duty not to provide false information to the
insured, so that the insured can intelligently designate his
beneficiary.
336 N.C. 49, 54, 442 S.E.2d 316, 318–19 (1994).
NAC
responds that this rule applies only to misrepresentations the
insurer made to the insured, not to the beneficiary, and that Ernst
alleges only that NAC had a duty to provide him (as opposed to his
grandfather) accurate information, taking the case outside of
Spencer’s holding.
NAC
(Doc. 21 at 10.)
overlooks
paragraph
67
of
Ernst’s
complaint.
That
paragraph, which is incorporated by reference into count IV,
alleges that had Theron Murray known that NAC’s August 5, 2014
beneficiary
beneficiary,
form
was
Theron
ineffective
Murray,
as
to
insured,
designate
“could
Ernst
have
as
taken
appropriate steps to make sure that the designated beneficiary was
Ernst.”
(Doc. 5 at 14, ¶ 67.)
Read in the light most favorable
to Ernst, these allegations support the reasonable inference that
17
NAC owed Ernst a duty not to misrepresent to Murray who was
designated the proper beneficiary.
See Ibarra, 120 F.3d at 474.
In addition, Ernst alleges that he is the proper beneficiary to
the annuity (Doc. 5 at 16, ¶ 81) and that NAC administered the
annuity for Murray, as owner (id. at 3, ¶ 13).
such facts supported a claim by a beneficiary.
Spencer found that
See 336 N.C. at
54, 442 S.E.2d at 318-19 (“The insurer is under a duty to the
[beneficiary] not to provide false information to the insured.”).
Ernst therefore pleads facts adequate to state a misrepresentation
claim similar to that in Spencer. 5
As with Ernst’s equitable claims, count IV is pled in the
alternative.
While Ernst may not be able to recover on both his
breach of contract claim and on a tort theory, Rule 8 permits Ernst
to plead the two claims in the alternative.
Therefore, NAC’s
motion to dismiss count IV will be denied.
C.
Jackson’s Motion to Dismiss
1.
Jackson
Interpleader
moves
to
dismiss
NAC’s
claim
for
interpleader
pursuant to Federal Rule of Civil Procedure 22 on the ground that
5
To the extent count IV alleges ordinary or gross negligence based on
claims handling or the existence of a fiduciary duty, the claim fails
as a matter of law. See Johnson v. Household Life Ins. Co., No. 5:11CV-301-BR, 2012 WL 5336959, at *9 (E.D.N.C. Oct. 26, 2012) (dismissing
a beneficiary’s breach of fiduciary duty claim on grounds that she could
not base a claim on a fiduciary duty allegedly owed another person and
that there is no authority that an insurer owes such a duty to a
beneficiary of life insurance policy).
18
NAC is not in possession of the funds at issue but already
disbursed them.
“The purpose of an interpleader action is to protect the
stakeholder against excessive litigation when there are multiple
claims to a single stake.”
CMFG Life Ins. Co. v. Schell, No. GJH-
13-3032, 2014 WL 7365802, at *2 (D. Md. Dec. 22, 2014) (citing
State Farm Fir & Cas. Co. v. Tashire, 386 U.S. 523, 534 (1967)).
Interpleaders can be brought under 28 U.S.C. § 1335 and under
Federal Rule of Civil Procedure 22.
only under the latter.
NAC brings its interpleader
Importantly to this case, to invoke Rule
22, a defendant must be exposed to “double or multiple liability”
or the potential for such liability.
Fed. R. Civ. P. 22(a)(1),
(2).
In a typical interpleader, the movant – called the stakeholder
- admits liability, deposits the funds at issue with the court,
and withdraws from the proceedings.
It is then left to the
claimants to litigate who is entitled to the funds.
Here, instead
of depositing the disputed funds and leaving it to Jackson and
Ernst to decide who is entitled to them, NAC asks the court to
require Jackson to relinquish the funds NAC has already dispersed
to her.
Presumably, NAC would then ask to withdraw from the case
and leave it to Jackson and Ernst to determine who is entitled to
the annuity proceeds.
The problem with this theory is that NAC is not being asked
19
to choose between competing claimants such that it is at risk of
being exposed to multiple liability.
It already made its decision
and voluntarily paid Jackson without a lawsuit or the threat of
one. This does not constitute liability. NAC nevertheless assumes
that
its
initial,
“liability.”
claims
on
pre-litigation
payment
to
Jackson
was
a
(E.g., Doc. 25 at 6 (“[B]oth Ernst and Jackson made
the
fund,
and
attached
exhibits
supporting
these
allegation [sic], and neither has disclaimed any interest in
it.”).)
The only threat of liability NAC faces is from Ernst.
If
he were to succeed on his claim, NAC would not face double
liability – it simply would have paid Jackson in error and would
be left to seek recovery from Jackson.
See Libby, McNeill & Libby
v. City Nat’l Bank, 592 F.2d 504, 507–08 (9th Cir. 1978) (holding
that to succeed on an interpleader, the stakeholder must show that
at
least
question).
two
parties
have
made
claims
against
the
fund
in
While it is true that a stakeholder may use an
interpleader before one or more of the potential claims have been
asserted,
interpleader
in
that
circumstance
still
requires
“threat of future litigation” by the competing claimants.
a
6247
Atlas Corp. v. Marine Ins. Co., No. 2A/C, 155 F.R.D. 454, 463
(S.D.N.Y. 1994); see A/S Krediit Pank v. Chase Manhattan Bank, 155
F. Supp. 30, 34 (S.D.N.Y. 1957) (same).
NAC cites no case in which
a party was allowed to interplead without actual litigation or a
threat of it by both claimants.
20
Another way of framing NAC’s problem is that its motion
essentially comes too late.
As another court has noted, “The
crucial difference between this case and an interpleader action is
that in an interpleader action the stakeholder has not yet paid
either of the claimants.
Here the money has already been paid
out.
is
[The
stakeholder]
interpleader action.”
therefore
too
late
to
file
an
Taylor v. Kemper Fin. Servs. Co., No. 98 C
0929, 1999 WL 782027, at *4 (N.D. Ill. Sept. 27, 1999) (citing
Chase Manhattan Bank, N.A. v. Flexwatt Corp., 139 F.R.D. 573, 574
(D. Mass. 1991)); see also Lincoln Nat’l Life Ins. Co. v. Barton,
250
F.R.D.
388,
389-90
(S.D.
Ill.
2008)
(finding
Rule
22
interpleader inappropriate where the insurer had already paid the
proceeds and was no longer a stakeholder).
Jackson’s motion to dismiss NAC’s interpleader will therefore
be granted, and the interpleader will be dismissed with prejudice.
2.
Unjust Enrichment (Cross-claim Count II)
Finally, Jackson moves to dismiss NAC’s cross-claim against
her for unjust enrichment on the ground that NAC paid her pursuant
to its contractual obligations, which precludes the possibility of
any equitable claim.
NAC argues that should it be found to have
paid Jackson by mistake – i.e., that the annuity contract did not
require payment – then it would be inequitable for Jackson to be
permitted to keep the annuity proceeds when she had no contractual
entitlement to them.
21
Under North Carolina law, “unjust enrichment ‘is a claim in
quasi contract or contract implied in law’ which arises when a
party ‘confers a benefit upon another which is not required by a
contract either express or implied [in fact] or a legal duty [and]
the recipient thereof is . . . unjustly enriched and [is] required
to make restitution therefor.’”
M Series Rebuild, LLC v. Town of
Mount Pleasant, 222 N.C. App. 59, 67, 730 S.E.2d 254, 260
(2012)
(quoting D.W.H. Painting Co. v. D.W. Ward Constr. Co., 174 N.C.
App. 327, 334, 620 S.E.2d 887, 892 (2005)) (citations and quotation
marks omitted) (alterations in original).
Unjust enrichment is
demonstrated where a plaintiff “conferred a benefit on another,
the other party consciously accepted the benefit, and the benefit
was not conferred gratuitously.”
Madison River Mgmt. Co. v. Bus.
Mgmt. Software Corp., 351 F. Supp. 2d 436, 446 (M.D.N.C. 2005)
(citing Se. Shelter Corp. v. BTU, Inc., 154 N.C. App. 321, 330,
572 S.E.2d 200, 206 (2002).
Here, NAC contends that if it was not contractually bound to
pay Jackson as a beneficiary, as she claimed, then it conferred a
non-gratuitous benefit on her which she accepted and should be
required to return.
Jackson’s argument that this claim cannot
proceed because she is a third-party beneficiary of the annuity
contract, an express agreement, see Whitfield v. Gilchrist, 348
N.C. 39, 42, 497 S.E.2d 412, 415 (1998) (stating that the related
theory of quantum meruit “is not an appropriate remedy when there
22
is an actual agreement between the parties”), misses the point.
NAC’s claim, asserted in the alternative, is predicated on the
contingency that the factfinder may conclude that there was no
contractual obligation to pay her.
Insofar as Jackson has failed
to cite a case holding that she should be entitled to keep the
annuity proceeds should it ultimately be determined that Ernst is
the legal beneficiary under the annuity, Jackson’s motion to
dismiss will be denied.
III. CONCLUSION
For the reasons stated,
IT IS ORDERED that NAC’s motion to dismiss (Doc. 15) is
GRANTED as to count II (misrepresentation – unfair claims handling
practices) and count III (estoppel/waiver) of the complaint, which
will be DISMISSED WITH PREJUDICE, and DENIED as to count IV
(negligent misrepresentation – gross negligence) to the extent
noted herein.
IT IS FURTHER ORDERED that Jackson’s motion to dismiss (Doc.
22) is GRANTED as to count I of the counter-claim against Ernst
and cross-claim against Jackson (interpleader), which will be
DISMISSED
WITH
PREJUDICE,
and
DENIED
as
to
count
II
(unjust
enrichment).
/s/
Thomas D. Schroeder
United States District Judge
March 27, 2017
23
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