Unum Life Insurance Company of America v. Martin

Filing 22

OPINION and ORDER: Granting 13 Motion to Dismiss for Failure to State a Claim. Martin's IIED claim is dismissed. Unum's request for oral argument is denied as unnecessary. Signed on 8/1/13 by Chief Judge Ann L. Aiken. (ljb)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON

UNUM LIFE INSURANCE CO.
OF AMERICA,

Case No. 6:13-cv-00158-AA
OPINION AND ORDER

Plaintiff,
vs.
JACK E. MARTIN,
Defendant.
Robert B. Miller,
Kilmer, Voorhees & Laurick, P.C.
732 NW 19th Avenue
Portland, Oregon 97209
Attorney for plaintiff
William C. Carpenter, Jr.
474 Willamette Street, Suite 303
Eugene, Oregon 97401
Attorney for defendant
AIKEN, Chief Judge:
Plaintiff Unum Life Insurance Company of America (Unum)

PAGE 1 - OPINION AND ORDER

moves to dismiss defendant Jack Martin's (Martin) counterclaim
for intentional infliction of emotional distress
to Fed. R. Civ. P. 12(b) (6).

(IIED) pursuant

For the reasons set forth below,

Unum's motion is granted.
BACKGROUND

Martin participated in a group long-term disability
insurance plan (Policy), offered through Unum, with his employer
Benton County.

During the course of his employment, Martin

became unable to work and filed a disability claim with Unum.

On

June 18, 2000, Martin's claim was approved and he began receiving
benefits.

Under the Policy, any Social Security disability

income (SSDI) Martin or his family received from the Social
Security Administration (SSA) was deductible from Martin's
monthly benefits.

The Policy also permitted Unum to deduct from

Martin's monthly payments an estimated SSDI amount while the
SSA's final determination of Martin's eligibility was pending.
Martin subsequently applied for and was denied SSDI; he appealed
that decision.
On October 15, 2004, Martin signed a reimbursement agreement
(Agreement) with Unum that deferred the estimated SSDI deduction,
allowing Martin to continue to receive full monthly payments from
Unum until a final determination was made by the SSA.

Under this

Agreement, Martin was required to notify Unum within 48 hours of
receiving his SSDI eligibility confirmation; he was also required

PAGE 2 - OPINION AND ORDER

to repay Unum any overpayment 1 he acquired by receiving SSA
benefits.

At that time, Martin granted Unum full access to any

and all of his SSA information.
On March 29, 2011, Unum sent Martin a letter indicating that
he would receive his SSA Award Letter within sixty to riinety
days.

During a June 23, 2011 conference call, the SSA advised

Unum that an Award Letter was sent to Martin three months prior,
advising him that he was entitled to SSDI benefits.

Martin and

Unum were in contact on multiple occasions in the following
weeks, during which Martin notified Unum that he had not yet
received his SSA Award Letter.

Nevertheless, on June 27, 2011,

Unum sent Martin a demand letter requesting reimbursement of the
overpaid funds, as well as access to the SSDI benefit amounts of
his family members.
On July 7, 2011, the SSA sent Martin a letter confirming
that an Award Letter had not yet been sent.

Because Martin

signed a full SSA release, Unum had access to this information.
Shortly thereafter, Unum cut off all benefit payments to Martin,
without notice.

In response, Martin filed a complaint against

Unum with the Oregon Insurance Commission (OIC).
On August 5, 2011, Unum notified Martin that it would
attribute his monthly benefit payments to the amount he owed to

1

Any benefits Martin received from the SSA are considered
"overpayments" under the Policy.
PAGE 3 - OPINION AND ORDER

offset his SSDI award and again requested access to the SSDI
amounts his family members received.

On August 15, 2011, Unum

voluntarily entered into an agreement with the OIC, under which
Unum agreed to reinstate Martin's benefit payments until he
confirmed receipt of all retroactive SSDI.
On September 23, 2011, Martin received his SSA Award Letter
and provided a faxed copy to Unum.

On September 30, 2011, Unum

requested that Martin repay any overpaid funds.

On October 24,

2011, Unum began withholding Martin's benefit payments for the
second time and instead applied those amounts to offset his SSDI
award.
On January 2, 2012, Unum sent Martin another demand letter
addressing the overpayment.

Sometime that month, an Unum agent

contacted Martin's wife and demanded SSDI award information
regarding their adult children.

To date, Martin has not refunded

Unum any overpaid amounts.
On January 29, 2013, Unum filed a complaint in this Court
against Martin for breach of contract.
filed a counterclaim for IIED. 2

On April 5, 2013, Martin

On May 24, 2013, Unum moved to

dismiss Martin's IIED claim with prejudice.

2

Specifically, Martin alleges a claim for "outrageous
conduct and intentional infliction of emotional harm." Answer at
10. Because Oregon does not recognize IIED and outrageous
conduct as separate torts, Martin's counterclaim is construed as
a claim for IIED. Manusco v. Am. Family Mut. Ins. Co., 2009 WL
130259, *3 (D.Or. Jan. 16, 2009).
PAGE 4 - OPINION AND ORDER

STANDARD OF REVIEW
Where a counterclaim "fail[s] to state a claim upon which
relief can be granted," it must be dismissed.
12 (b) (6).

Fed. R. Civ. P.

To survive a Fed. R. Civ. P. 12 (b) (6) motion, the

counterclaim must have "a short and plain statement of the claim
showing that the pleader is entitled to relief."
v. Twombly, 55 U.S. 544, 555 (2007)

Bell Atlantic

(citation omitted).

When

ruling on a motion to dismiss, the court must accept as true the
factual allegations contained in the counterclaim and draw all
reasonable inferences in the counterclaimant's favor.

Karam v.

City of Burbank, 352 F.3d 1188, 1192 (9th Cir. 2003).

Thus, in

order to proceed, the counterclaim must contain "sufficient
allegations of underlying facts" to support its legal
conclusions.

Starr v. Bacca, 652 F.3d 1202, 1216 (9th Cir.

2011), cert. denied, 132 S.Ct. 2101 (2012).
DISCUSSION
Unum argues that Martin's IIED claim fails as a matter of
law because he did not and cannot allege facts sufficient to
evince the requisite extraordinary transgression of socially
tolerable conduct.
allege that:
distress;

To establish an IIED claim, Martin must

(1) Unum intended to inflict severe emotional

( 2) Unum's acts were the cause of Martin's severe

emotional distress; and (3) Unum's acts constituted an
extraordinary transgression of the bounds of socially tolerable

PAGE 5 - OPINION AND ORDER

conduct.

Logan v. W. Coast Benson Hotel, 981 F. Supp. 1301, 1322

(D. Or. 1997); House v. Hicks, 218 Or. App. 348, 358, 179 P.3d
736, rev. denied, 345 Or. 381, 195 P.3d 911 (2008)

(citation

omitted).
Courts play a "gatekeeper role in evaluating the viability
of an liED claim."

Id.

Determining "[w]hether conduct is an

extraordinary transgression is a fact-specific inquiry, to be
considered on a case-by-base basis, based on the totality of the
circumstances."

Id. at 358.

Although "the inquiry is fact-

specific, the question of whether the counterclaim defendant's
conduct exceeded the farthest reaches of socially tolerable
behavior is, initially, a question of law" for the court.
v. Kleinfelder W., Inc., 2012 WL 844200, at *14
2012)

Gordon

(D. Or. Mar. 12,

(citation and internal quotations omitted).
Conduct that is merely "rude, boorish, tyrannical, churlish

and mean" does not satisfy this standard.
Co., 301 Or. 117, 122, 719 P.2d 854

Patton v. J.C. Penney

(1986), abrogated on other

grounds by McGanty v. Staudenraus, 231 Or. 532, 901 P.2d 841
(1995).

Rather, "[t]he conduct must be so extreme in degree, as

to go beyond all possible bounds of decency, and to be regarded
as atrocious, and utterly intolerable in a civilized community."
Logan, 981 F. Supp. at 1322 (citations omitted).
As such, as a threshold matter, the Court must determine
whether Unum's alleged conduct is sufficiently "extreme and

PAGE 6 - OPINION AND ORDER

outrageous" to state an IIED claim.

Even accepting Martin's

allegations as true, Unum's demands for repayment prior to
Martin's SSDI award disbursement and requests for information
regarding the SSDI awards of his family members were not so
extreme as to go beyond all possible bounds of decency.

In fact,

for the past ten years, Unum provided disability benefits to
Martin and, further, Unum was entitled to recover any SSDI
amounts Martin or his family received under the express terms of
the Policy.

See Answer, Ex. 1 at 17-18.

Unum's pursuit of

repayment and cessation of Martin's benefits, despite having
access to information indicating that Martin had not yet received
his SSDI award, may have been unreasonable; yet, such conduct
cannot be categorized as "atrocious, and utterly intolerable in a
civilized community."

Logan,

981 F. Supp. at 1322; see also Hall

v. May Dep't Stores Co., 292 Or. 131, 135, 637 P.2d 126 (1981)
("[l]ack of foresight, indifference to possible distress, even
gross negligence is not enough to support [IIED] recovery").
Furthermore, under Oregon law, a disability insurer is not
in a fiduciary relationship with its insured.

See, e.g.,

Santilli v. State Farm Life Ins. Co., 278 Or. 53, 61, 562 P.2d
965 (1977).

Rather, it is well-established that the insurer-

insured relationship is an arms-length encounter.

See Strader v.

Grange Mut. Ins. Co., 179 Or. App. 329, 334, 39 P.3d 903 (2002);
Zenor v. Standard Ins. Co., 2002 WL 31466503, at *2 (D. Or. Apr.

PAGE 7 - OPINION AND ORDER

3, 2001).

Thus, recovery for emotional distress is typically not

allowed in breach of contract cases. 3

See Prudential Prop. &

Cas. Ins. Co. v. Lillard-Roberts, 2002 WL 31495830, at *17
Or. June 18, 2002)

(D.

(dismissing an insured's counterclaim for

outrageous conduct under analogous circumstances); Farris v. U.S.
Fid.

&

Guar. Co., 284 Or. 453, 464, 587 P.2d 1015 (1978).

In

other words, "dispute[s] over insurance coverage [are] an
ordinary occurrence which cannot be characterized in any sense as
outrageous."

Prudential Prop., 2002 WL 31495830, at *17.

Martin

is correct that, under certain limited circumstances not
implicated here, an insurer may be liable in tort; nevertheless,
"[a] difference of opinion as to the meaning and application of
the terms of a contract could rarely, if ever, amount to
outrageous conduct."

State Farm Mut. Auto. Ins. Co. v. Berg, 70

3

Martin argues that the "denial of benefits can trigger a
tort," especially where, as here, "the normal standards of the
conduct required for an IIED claim are lowered [due to the
parties' special] debtor-collector relationship." Def.'s Resp. to
Mot. Dismiss at 3-6. Martin's argument is unpersuasive for three
reasons.
First, while the relationship between the parties is a
factor to be considered, an IIED claim is not cognizable if the
conduct at issue is not extreme and outrageous as a matter of
law; regardless, based on the well-pleaded factual allegations in
Martin's counterclaim, there is no indication that a special
relationship existed in the case at bar.
Second, the cases that
Martin relies on in support of his assertion that the "denial of
benefits can trigger a tort" are approximately 30 years old and
from outside of this Circuit.
Id. at 3-4. Third, even assuming
these cases were relevant, they are factually distinguishable, as
are the other cases that Martin relies on throughout his brief.
See generally id.
PAGE 8 - OPINION AND ORDER

Or. App. 410, 418,

689 P.2d 959 (1984); see also Green v. State

Farm Fire & Cas. Co., 667 F.2d 22, 24

(9th Cir. 1982).

Because the parties' dispute over the terms of the Policy
and Agreement is an ordinary occurrence between an insurance
company and its insured, Unum's actions were not extreme and
outrageous enough to support an IIED claim.
Prop., 2002 WL 31495830, at *17.

See Prudential

In sum, the parties'

relationship was created by the Policy and Agreement, under which
Unum had a right to offset monthly benefit payments by Martin's
SSDI award; the fact that Unum sought to recoup these payments
after Martin was approved for SSDI but before he received that
award is, at most, a misinterpretation of the Policy and
Agreement and therefore not actionable.

Therefore, Unum's motion

is granted and Martin's IIED claim is dismissed.
Finally, Martin requests leave to file an amended complaint
in order to add factual allegations in support his IIED claim.
See Def.'s Resp. to Mot. Dismiss at 11-12.

Because motions may

not be combined with any response brief, Martin's request is
denied.

See LR 7-1(b).

Moreover, Martin's proposed amendments

are inadequate to state a claim for IIED and, for the reasons
discussed above, any further amendment would be likely futile.
See Forsyth v. Hamana, Inc., 114 F.3d 1467, 1482 (9th Cir. 1997)
(outlining factors considered in determining whether a motion to
amend should be granted); Bonin v. Claderon, 59 F.3d 815, 845

PAGE 9 - OPINION AND ORDER

.~.

(9th Cir. 1995)

("[f]utility of amendment can, by itself, justify

the denial of a motion for leave to amend").

Therefore, Martin's

request to file an amended complaint is denied.
CONCLUSION

For the foregoing reasons, Unum's motion to dismiss (doc.
13) is GRANTED.

Martin's IIED claim is DISMISSED.

request for oral argument is DENIED as unnecessary.
IT IS SO ORDERED.
Dated this

/ ' 'day of

~'

2013,

Ann Aiken
United States District Judge

PAGE 10 - OPINION AND ORDER

Unum's