United States District Court, N.D. California
ORDER DENYING MOTION TO DISMISS Re: Dkt. No.
11
JOSEPH
C. SPERO CHIEF MAGISTRATE JUDGE
I.
INTRODUCTION
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]
II.
BACKGROUND
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.
...