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Graham v. Standard Insurance Co.

United States District Court, N.D. California

July 20, 2016

KENT GRAHAM, Plaintiff,




         This breach of contract action involves a group life insurance policy (“Policy”) issued by Defendant Standard Insurance Company (“Standard”) that covered Plaintiff's wife, Normalee Tilman, when she was an employee of San Mateo County. Plaintiff Kent Graham was the beneficiary on the policy. After Mrs. Tilman contracted pancreatic cancer she was forced to retire. Ultimately, she died of pancreatic cancer. Although Mrs. Tilman apparently attempted to “port” her insurance, that is, convert her group life insurance into an individual life insurance policy when she retired, Standard denied her request for portability on the basis that Mrs. Tilman had failed to timely submit her portability paperwork. Plaintiff alleges, however, that Mrs. Tilman relied on her employer to submit the paperwork, consistent with Standard's portability procedures, and that she submitted the required paperwork within the required period. In the Complaint, Plaintiff asserts claims for breach of contract and breach of the covenant of good faith and fair dealing against Standard. The action was initially filed in the Superior Court of the County of San Francisco and was subsequently removed to federal court on the basis of diversity jurisdiction. See Docket No. 1.

         Presently before the Court is Standard's Motion to Dismiss, or in the Alternative, Motion for More Definite Statement (“Motion”). The Court finds that the Motion is suitable for determination without oral argument and therefore vacates the hearing set for August 5, 2016 at 2:00 p.m. For the reasons stated below, the Motion is DENIED.[1]


         A. The Complaint

         According to the Complaint, Plaintiff's deceased wife, Mrs. Tilman, was a former employee of the County of San Mateo Correctional Services Department and was insured under a group life insurance policy purchased through her employer and issued by Standard. Complaint ¶ 6, 11. All of her premiums on the Policy were paid by and through the County of San Mateo (“County”). Id. ¶ 7. In addition, the Complaint alleges that “[u]nder the control and direction of Standard, the County administers the Policy.” Id. ¶ 8. Plaintiff was the beneficiary on the Policy. Id. ¶ 9.

         Plaintiff alleges that Mrs. Tilman was forced to retired from her job with the County when she was diagnosed with Stage Four Pancreatic Cancer and that she eventually died from that disease. Id. ¶¶ 11-12. According to the Complaint, “[a]t all times relevant, Mrs. Tilman sought to protect her family, Plaintiff and her daughter, by continuing her life insurance benefits” and Standard was “on notice of Mrs. Tilman's terminal Pancreatic Cancer and her desire to maintain her life insurance policy with Standard.” Id. ¶¶ 17-18. The Complaint further alleges, “Mrs. Tilman elected to continue her life insurance policy coverage with Standard, consistent with the portability requirements in said life insurance policy. Id. Upon her retirement, Mrs. Tilman timely submitted all relevant paperwork regarding the portability of her life insurance coverage, to the County of San Mateo, for submission to Standard.” Id. ¶ 18. Mrs. Tilman allegedly delivered her portability paperwork to the County (rather than directly to Standard) because “[w]ith regard to Standard's portability practices, the County of San Mateo directed insureds to deliver claim-related and or portability-related paperwork to the County of San Mateo, as administrators, for submission to Standard.” Id. ¶ 19. Plaintiff further alleges that Mrs. Tilman “had no knowledge or control over the County of San Mateo's actions in the administration of Standard's policies.” Id. . ¶ 21.

         Although Mrs. Tilman “timely completed her Group Life Portability Insurance paperwork and timely delivered said forms to the County of San Mateo [ ] for submission to Standard, ” she subsequently discovered that “premiums for the continuation of her life insurance policy were not being taken out of her retirement check by the County of San Mateo, as they should have been under Standard's portability procedures.” Id. ¶¶ 21-22. She then received another set of portability forms from the County. Id. ¶ 23. The County requested that Mrs. Tilman complete the forms and return them to the County, “as administrator for Standard.” According to the Complaint, “[t]he County stated to Mrs Tilman that it would submit all the paperwork again to Standard” and told Mrs. Tilman that it would “explain to Standard that Mrs. Tilman had timely submitted all relevant portability forms.” Id. ¶ 23. Mrs. Tilman completed the forms and returned them to the County for submission to Standard. Id. ¶ 24. Standard denied her request for portability, however, on the basis that she had not timely submitted her portability insurance paperwork. Id. ¶ 27. Plaintiff appealed the decision but Standard denied the appeal. Id. . ¶ 30.

         Based on these allegations, Plaintiff asserts claims for: 1) breach of contract; and 2) breach of the implied covenant of good faith and fair dealing.

         B. The Policy [2]

         The County is given responsibility for administering various aspects of the group life insurance Policy. See, e.g., Policy, “Life Insurance, ” Section C(2) (providing that decreases in insurance other than those resulting from a change in classification become effective “on the first day of the pay period following the date the Policyholder or your Employer receives your written request for the decrease”); “Benefit Payment and Beneficiary Provision, ” Section (B)(3) (providing that a beneficiary may be designated based on a writing delivered to “the Employer, ” or a verification of receipt of an electronic or telephonic designation by “the Employer”); “Policyholder Provisions, ” Section I (“[t]he Policyholder or Employer will furnish on our forms all information reasonably necessary to administer the Group Policy”). Nonetheless, the Policy expressly disavows any agency relationship between Standard and the employer, stating that “[i]ndividuals selected by the Policyholder or by an Employer to secure coverage under the Group Policy or to perform their administrative function under it, represent and act on behalf of the person selecting them, and do not represent or act on behalf of Standard Insurance Company.” Id., “Policyholder Provisions, ” Section J; see also id., “Clerical Error and Misstatement, ” Section B (“[the Policyholder and your Employer act on their own behalf as your agent, and not as our agent”).

         The Policy provides that “Life Insurance ends automatically” no later “[t]he last day of the pay period in which [the Member's] employment terminates.” Id., “Life Insurance, ” Section G. However, Members whose employment terminates “may be eligible to purchase portable group insurance coverage” allowing the Member to purchase life insurance without “submitting Evidence of Insurability.” Id., “Portability of Insurance, ” Section A. To obtain such coverage, the Member must “apply in writing and pay the first premium directly to us at our Home Office within 31 days after the date your employment terminates.”[3] Id., Section A(4). The Portability of Insurance provision further provides that the portable insurance “become effective the day after [the Member's] employment with [her] Employer terminates, if [she applies] within 31 days after the date [her] employment terminates.” Id., Section C.

         C. The Motion

         1. ...

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