Dubuisson v. National Union Fire Insurance of Pittsburgh, P.A.

MANETTE DUBUISSON, and ALICE LACKS, Individually and On Behalf of All Others Similarly Situated, Plaintiffs, v. NATIONAL UNION FIRE INSURANCE OF PITTSBURGH, P.A., AMERICAN INTERNATIONAL GROUP, INC., CATAMARAN HEALTH SOLUTIONS, LLC, F/K/A CATALYST HEALTH SOLUTIONS, INC., F/K/A HEALTHEXTRAS, INC., ALLIANT SERVICES HOUSTON, INC., F/K/A JLT SERVICES CORPORATION, STONEBRIDGE LIFE INSURANCE COMPANY, F/K/A J.C. PENNEY LIFEINSURANCE COMPANY, TRANSAMERICA FINANCIAL LIFE INSURANCE COMPANY, FEDERAL INSURANCE COMPANY, A MEMBER OF THE CHUBB GROUP OF INSURANCE COMPANIES, and VIRGINIA SURETY COMPANY, INC., Defendants.

No. 15 Civ. 2259 (PGG)

United States District Court, S.D. New York

July 26, 2021

MEMORANDUM OPINION & ORDER

PAUL G. GARDEPHE, UNITED STATES DISTRICT JUDGE

This is a putative class action brought by Plaintiffs who purchased accident disability and medical expense insurance coverage provided by Defendants National Union Fire Insurance Company American International Group, Inc., Catamaran Health Solutions, LLC, Stonebridge Life Insurance Company Transamerica Financial Life Insurance Company, Federal Insurance Company, Alliant Services, and Virginia Surety Company, Inc. through the “HealthExtras Program.” The Complaint pleads (1) quasi-contract claims; (2) violations of New York General Business Law (“GBL†) §§ 349-350; and (3) fraud, fraud in the inducement, and aiding and abetting fraud. Plaintiffs seek the recovery of all premiums and fees they paid to Defendants in connection with the insurance coverage they purchased.

On September 19, 2016, this Court granted Defendants' first motion to dismiss, finding that Plaintiffs lack standing. (Dkt. No. 141) On April 12, 2018, the Second Circuit vacated and remanded, ruling that Plaintiffs have standing. (Dkt Nos. 151, 152)

Defendants Stonebridge Life Insurance Company and Transamerica Financial Life Insurance Company (collectively “Stonebridge”) have again moved to dismiss pursuant to Fed.R.Civ.P. 12(b)(6). (Dkt. No. 166) For the reasons stated below, the motion will be granted.

BACKGROUND^[1]

I. FACTS

A. Parties

Plaintiffs Alice Lacks and Manette DuBuisson reside in Brooklyn.^[2] (Cmplt. (Dkt. No. 1) ¶¶ 6-7)

Defendant Stonebridge Life Insurance Company is a Vermont corporation, and Defendant Transamerica Financial Life Insurance Company is a New York corporation.^[3] (Id. ¶¶ 12-13) Both entities are subsidiaries of Transamerica Life & Protection, and both are licensed as insurance companies and/or underwriters in New York and the United States. (Id.)

B. The HealthExtras Program

In 1997, HealthExtras, Inc. (now known as “Catamaran Health Solutions, LLC, ” hereinafter “HealthExtras”) created an insurance program (the “HealthExtras Program”) that offered accidental disability and medical expense insurance coverage. (Id. ¶¶ 10, 33) The HealthExtras Program offered “(1) $1, 000, 000 or $1, 500, 000 accidental permanent and total disability insurance coverage; and (2) $2, 500 emergency accident and sickness medical expense insurance coverage.” (Id. ¶ 33)

HealthExtras entered into marketing agreements with VISA- and MasterCard-issuing banks, including Citibank, Capital One, and Chase, with American Express, and with companies that offer branded credit cards, such as J.C. Penney, Sears and Conoco Phillips. (Id. ¶ 36) HealthExtras' marketing partners sent solicitations for the HealthExtras Program with cardholders' monthly credit card statements. (Id. ¶ 39) For example, American Express sent its cardholders a solicitation (the “American Express Solicitation”) stating: “Financial Security. You're covered with $1.5 Million if an accident leaves you permanently disabled.” (Id. ¶ 40) This solicitation went on to state that

[t]he American Express Accidental Disability Plan provides you with $1.5 million in one lump sum if you are permanently disabled as the result of an accident and can't return to work. For only $9.95 a month, you can help guarantee your financial security now and into the future. . . . With the American Express Accidental Disability Plan you can prevent a personal tragedy from becoming a financial tragedy. Enroll now, and for only $9.95 a month, you can rest assured that you are protected.

(Id.)

The American Express Solicitation includes images of the actor Christopher Reeve using a tracheotomy tube. HealthExtras had hired Reeve to endorse the HealthExtras program. (Id. ¶ 33) The solicitation warns that,

[i]n an instant, an accident can change your life. Now, it doesn't have to bankrupt you; Modern medicine can save your life - don't let it bankrupt your family; and Most people don't think about disability coverage until it's too late. Please don't put this off.

(Id. ¶ 40) Plaintiffs allege that HealthExtras' other marketing partners sent solicitations to their cardholders “that were very similar to, if not identical to, the American Express Solicitation.” (Id. ¶ 41) HealthExtras also solicited consumers via telephone and direct mail. (Id. ¶ 42)

Customers who expressed interest in the HealthExtras Program were sent letters containing the following representations:

• Enclosed please find the HealthExtras program description you requested. Because lives change in an instant, like Christopher Reeve's, HealthExtras was created to provide families with financial security should the unthinkable happen.

• $1, 000, 000 [or $1, 500, 000] cash payment if you are permanently disabled due to an accident. And as a HealthExtras member, you have two tax-free options: a $1, 000, 000 lump sum cash payment or a $250, 000 cash payment plus $5, 000 per month for 20 years.

• $2, 500 a year in reimbursements for coinsurance and deductibles for healthcare expenses when you are traveling.

(Id. ¶ 43) (alterations in Cmplt.) Plaintiffs allege that HealthExtras - “in concert and conspiracy” with the other Defendants, including Stonebridge - sent New York residents direct mail solicitations with the following misleading statements:

• This program provides valuable protection in the event you become permanently totally disabled due to an accident.

• This HealthExtras Benefit Program provides you with a $1, 000, 000 [or $1, 500, 000] tax free cash payment if you're permanently disabled due to an accident.

• If an accident leaves you the primary member permanently disabled, you will receive a lump sum payment of $1, 000, 000 [or $1, 500, 000].

• After 12 months of continuing and permanent disability caused by an accident including the inability to work the primary member will receive a payment of $1, 000, 000 [or $1, 500, 000].

• You're covered with a $1, 000, 000 [or $1, 500, 000] tax free cash payment if you are permanently disabled as a result of an accident.

(Id. ¶ 44) (alterations in Cmplt.)

Because HealthExtras is not a licensed insurer or broker, it contracted with insurance companies to underwrite and issue the HealthExtras Program policies, with Stonebridge and other Defendants underwriting and issuing the disability insurance coverage. (Id. ¶¶ 48, 59)

The Complaint alleges that Defendants “knew that HealthExtras was not a licensed insurance broker or insurer and could not legally solicit, sell, issue or underwrite the Disability Coverage and Medical Expense Coverage under the . . . HealthExtras Program[, ]” and “were [also] aware of the identity and roles of HealthExtras' Marketing Partners, including . . . American Express, CitiBank, Chase, Capital One and other issuers of credit cards.” (Id. ¶¶ 53, 59) According to Plaintiffs, Defendants also “knew . . . at all times [that] there was no intent to pay claims on coverage under . . . the HealthExtras Program without a claimant first bringing suit.” (Id. ¶ 61)

According to the Complaint, HealthExtras

(1) prepar[ed] all of the materials necessary to promote the HealthExtras Program, (2) sen[t] HealthExtras Program marketing and advertising materials, which were reviewed and approved by the HealthExtras Program's insurers, brokers and Marketing Partners, to the Marketing Partners for transmission to the Marketing Partners' customers, (3) process[ed] enrollment forms and change of address forms received from members of the HealthExtras Program, (4) sen[t] HealthExtras Program marketing and advertising materials (including plan summaries, benefit plan descriptions and certificates of insurance), which were reviewed and approved by the insurers and brokers, to members of the HealthExtras Program, (5) process[ed] payments for premiums and fees received from members of the HealthExtras Program, (6) operat[ed] a call center to handle customer service calls, conforming all communications regarding benefits to scripts reviewed and approved by the insurers and Marketing Partners, and (7) sen[t], upon request, claims forms to members of the HealthExtras Program on behalf of the insurers and any claims processors designated by the insurers.

(Id. ¶ 54)

According to Plaintiffs, Stonebridge and the other Defendants “had the right to, and did, review and approve all written materials related to the HealthExtras Program, as well as communications relating to the HealthExtras Program and the coverage under the underlying Policies . . . .” (Id. ¶ 55)

C. Alleged Violations of New York Insurance Law

Plaintiffs contend that the insurance policies issued in connection with the HealthExtras Program violate New York insurance laws and regulations, rendering the policies “illegal, against public policy and void ab initio under New York law.” (Id. ¶ 3)

According to Plaintiffs, the HealthExtras Program's disability and medical insurance coverage was provided under (1) “group and/or blanket accident disability insurance policies[, ]” and (2) “group and/or blanket emergency accident and sickness medical expense policies” issued by the defendant insure...