Johnson v. State Farm Life Ins. Co.

695 F. Supp.2d 201

Lorraine JOHNSON, Individually and as Administratrix of the Estate of Terry Johnson, Plaintiff, v. STATE FARM LIFE INSURANCE COMPANY, Defendant.

Civil Action No. 09-207.

United States District Court, W.D. Pennsylvania.

February 8, 2010.

Noah Geary, Washington, PA, for Plaintiff.

Daniel L. Rivetti, Mark A. Martini, Robb Leonard Mulvihill LLP, Pittsburgh, PA, for Defendant.

ORDER

TERRENCE F. McVERRY, District Judge.

AND NOW, this 8th day of February, 2010, after the plaintiff, Lorraine Johnson, filed an action in the above-captioned case, and after a Motion to Dismiss was filed by defendant, State Farm Life Insurance Co., and after a Report and Recommendation was filed by the United States Magistrate Judge granting the parties until February 1, 2010, to file written objections thereto, and no objections having been filed, and upon independent review of the record, and upon consideration of the Magistrate Judge's Report and Recommendation, which is adopted as the opinion of this Court,

IT IS HEREBY ORDERED that the motion to dismiss under Rule 12(b) (1) is DENIED. IT IS FURTHER ORDERED that the motion filed pursuant to Rule 12(b)(6) is GRANTED with respect to Johnson's claims for breach of fiduciary duty (Count II), fraud (Count III), common law bad faith (Count IV), breach of Unfair Trade Practice and Consumer Protection Law (Count VII), breach of duty of good faith and fair dealing (Count VIII), violations of the Unfair Insurance Practices Act (Count IX), and violations of Pennsylvania's bad faith statute (Count X), and DENIED as to plaintiff's claims for violating the Pennsylvania Viatical Settlements Act (Count I), conversion (Count V), and breach of contract (Count VI). With respect to damages, however, IT IS ORDERED that the motion is GRANTED as to Johnson's claim for attorney fees under the Pennsylvania Viatical Settlements Act and claim for punitive damages for breach of contract.

REPORT AND RECOMMENDATION

AMY REYNOLDS HAY, United States Chief Magistrate Judge.

I. RECOMMENDATION

Plaintiff, Lorraine Johnson ("Johnson"), individually and as the Administratrix of the Estate of Terry Johnson, filed this diversity action bringing a myriad of claims against defendant stemming from the purchase of a life insurance policy issued to plaintiffs late husband, Terry Johnson. Defendant, State Farm Life Insurance Co. ("State Farm"), has filed a motion to dismiss under Fed.R.Civ.P. 12(b)(1) claiming that this Court is without subject matter jurisdiction and that the Complaint should nevertheless be dismissed pursuant to Fed.R.Civ.P. 12(b)(6) as Johnson has failed to state a claim Dkt. 9.

For the reasons that follow, it is respectfully recommended that the motion to dismiss under Rule 12(b)(1) be denied; that the motion filed pursuant to Rule 12(b)(6) be granted with respect to Johnson's claims for breach of fiduciary duty (Count II), fraud (Count III), common law bad faith (Count IV), breach of Unfair Trade Practice and Consumer Protection Law (Count VII), breach of duty of good faith and fair dealing (Count VIII), violations of the Unfair Insurance Practices Act (Count IX), and violations of Pennsylvania's bad faith statute (Count X). It is further recommended that the 12(b)(6) motion be denied as to her claims for violating the Pennsylvania Viatical Settlements Act (Count I), conversion (Count V), and breach of contract (Count VI), except with respect to damages. In that regard, the motion should be granted as to Johnson's claim for attorney fees under the Pennsylvania Viatical Settlements Act and claim for punitive damages for breach of contract.

II. REPORT

A. Factual and Procedural Background

According to the Complaint and the exhibits attached thereto, State Farm issued a $10,000.00 Whole Life policy ("the Policy") to Terry Johnson on October 11, 1989, in which Johnson was listed as the beneficiary. Complaint, Exh. A; ¶ 26. On February 19, 2007, the Policy was purchased by Robert Confer, an agent of State Farm, for $100.00. Complaint ¶ ¶ 4, 17. Five days later, on February 24, 2007, Mr. Johnson passed away while being housed in the Fayette County Prison, having turned himself in to the Pennsylvania State Police on February 22nd for violating a restraining order obtained against him by Johnson. Complaint ¶ ¶ 8, 9, 12. When Johnson called to make a claim against the Policy, she was informed that Mr. Confer had purchased the Policy— information which Mr. Confer had apparently already conveyed to Johnson on February 23, 2007, when Johnson "happened to telephone Confer." Complaint ¶ ¶ 22-3, 29.

As evidenced by a letter attached to the Complaint from State Farm to Johnson's counsel dated April 27, 2007, Mr. Johnson went to Mr. Confer's office on February 10, 2007, to cancel the Policy indicating that he did not want Johnson to receive the proceeds. Complaint, Exh. A. Although Mr. Confer talked Mr. Johnson into maintaining the Policy by suggesting that he change the beneficiary, Mr. Johnson apparently came back again on February 14, 2007, to reinstate Johnson as the beneficiary. It was on February 19, 2007, when Mr. Johnson again visited Mr. Confer's office to cancel the Policy that Mr. Confer, who had apparently known Mr. Johnson for many years and was aware that he was using drugs, suggested that he buy the Policy because he did not want to see Mr. Johnson lose coverage. Complaint, Exh. A; ¶ ¶ 30. The letter also indicates that the total estimated proceeds of the Policy are $10,712.27, and that Mr. Confer would pay for Mr. Johnson's burial expenses in the amount of $7,618.00.¹ Complaint, Exh. A.

Johnson nevertheless responded by demanding that the entire proceeds of the Policy be released to her without condition. Complaint ¶ 33. Although it appears undisputed that State Farm tendered the full proceeds of the Policy to Johnson along with interest, Johnson complains that it was conditioned on release of all claims against State Farm.² Complaint ¶ ¶ 33, 34; Exhs. B, C.

Johnson filed the instant Complaint on February 18, 2009, bringing claims against State Farm for violations of the Pennsylvania Viatical Settlements Act ("PVSA"), 40 P.S. § 621.1, et seq. (Count I); breach of fiduciary duty (Count II); fraud (Count III); common law bad faith (Count IV); conversion (Count V); breach of contract (Count VI); breach of Unfair Trade Practice and Consumer Protection Law, 73 P.S. § 201, et seq. ("UTPCPL") (Count VII); breach of duty of good faith and fair dealing (Count VIII); violations of the Unfair Insurance Practices Act, 40 Pa.C.S.A. § 1171.5, et seq. ("UIPA") (Count IX); and violations of Pennsylvania's bad faith statute, 42 Pa.C.S.A. § 8371 (Count X). Johnson seeks compensatory damages, punitive damages with interest, attorney fees and costs.

B. Standard of Review

The United States Supreme Court has recently held that a complaint is properly dismissed under Fed.R.Civ.P. 12(b)(6) where it does not allege "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (rejecting the long-adhered to 12(b)(6) standard set forth in Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). In assessing the sufficiency of the complaint, the Court must accept as true all allegations in the complaint and all reasonable factual inferences must be viewed in the light most favorable to the plaintiff. Angelastro v. Prudential-Bache Securities, Inc., 764 F.2d 939, 944 (3d Cir.1985). The Court, however, need not accept inferences drawn by the plaintiff if they are unsupported by the facts as set forth in the complaint. See California Public Employees' Retirement System v. The Chubb Corp., 394 F.3d 126, 143 (3d Cir.2004), citing Morse v. Lower Merion School District, 132 F.3d 902, 906 (3d Cir.1997). Nor must the Court accept legal conclusions set forth as factual allegations. Bell Atlantic Corp. v. Twombly, 550 U.S. at 555, 127 S.Ct. 1955, citing Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986). "Factual allegations must be enough to raise a right to relief above the speculative level." Id. The question is not whether the plaintiff will prevail in the end but, rather, is whether the plaintiff is entitled to offer evidence in support of his or her claims. See Oatway v. American International Group, Inc., 325 F.3d 184, 187 (3d Cir. 2003).

Similarly, where, as here, a 12(b)(1) motion presents a facial challenge to the court's jurisdiction, or one which is based on the legal sufficiency of the claim as opposed to a jurisdictional fact, the allegations in the complaint are also to be accepted as true. Under these circumstances, "dismissal is proper only when the claim `clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction or ... is wholly insubstantial and frivolous....'" Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1408-09 (3d Cir.1991), quoting Bell v. Hood, 327 U.S. 678, 682, 66 S.Ct. 773, 90 L.Ed. 939 (1946). See Gould Electronics Inc. v. United States, 220 F.3d 169, 178 (3d Cir.2000).

C. Discussion

1. Subject Matter Jurisdiction

State Farm initially argues that the Complaint should be dismissed because the Court is without subject matter jurisdiction since, based on a reasonable reading of the Complaint, the amount in controversy does not exceed the jurisdictional minimum of $75,000.00.

Federal courts have diversity jurisdiction where there is complete diversity among the parties and the amount in controversy meets the jurisdictional minimum of $75,000.00, exclusive of interest and costs. 28 U.S.C. § 1332(a). See Spectacor Management Group v. Brown, 131 F.3d 120, 122 (3d Cir.1997). Whether the claims as alleged satisfy the amount in controversy requirement is determined from the face of the complaint. Id. The standard by which that determination is made has been articulated by the Supreme Court as...