Leporace v. New York Life & Annuity

RALPH LEPORACE

v.NEW YORK LIFE & ANNUITY, et al.

CIVIL ACTION NO. 11-2000

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

Dated: December 21, 2011

MEMORANDUM GRANTING DEFENDANTS' MOTION

TO DISMISS CLAIMS FOR DISABILITY COVERAGE PURSUANT TO RULE 12(b)(6)

Baylson, J.

In this suit over a disability policy, Defendants have filed a Motion to Dismiss the Amended Complaint (ECF No. 6) pursuant to Federal Rule of Civil Procedure 12(b)(6), asserting that Plaintiff's claims are barred by the applicable statute of limitations. For the reasons set forth below, the Court will GRANT the Motion in part.

I. Factual Background

On March 27, 1995, Plaintiff Ralph Leporace ("Plaintiff") purchased a disability insurance policy (the "Policy") from Defendants. Am. Compl. ¶ 6. According to Plaintiff's Amended Complaint, in February of 1996, Plaintiff suffered a traumatic event and as a result experienced emotional and mental instability. Am. Compl. ¶ 9. On June 25, 1997, Plaintiff submitted a claim for monthly disability benefits under the Policy and Defendants found him eligible for disability benefits. Am. Compl. ¶ 11. For approximately the next eight years, July 21, 1997 through May 31, 2005, Plaintiff was paid monthly benefits under the Policy. Am. Compl. ¶ 11. In May 2005, Defendants stopped paying Plaintiff's monthly benefits, claiming that Plaintiff no longer fit the definition of disabled under the policy. Am. Compl. ¶ 12.

Plaintiff did not make an inter-company appeal of the May 31, 2005 decision that determined him to be ineligible under the policy "because it was not an unreasoned decision." Am. Compl. ¶ 15. However, almost five years later, on March 4, 2010, Plaintiff requested reinstatement of the benefit and submitted a supporting psychiatric report. Am. Compl. ¶ 15. On October 26, 2010, Defendants advised Plaintiff that "they [would] not be able to approve the payment of benefits for the period of May 31, 2005 through May 24, 2010." Am. Compl. ¶ 17.¹ Plaintiff also asserts that Defendants have failed to honor Plaintiff's request for benefits after May 24, 2010. Am. Compl. ¶ 18.

The insurance policy has been in effect since 1995 (Am. Compl. ¶ 13), and Plaintiff contends that he has at all times been qualified for and entitled to the benefits of the policy. Am Compl. ¶ 14.

On March 23, 2011, Plaintiff filed this civil action against Defendants for breach of contract (Count I), declaratory judgment under the Declaratory Judgments Act, 42 Pa. Cons. Stat. § 7531, et seq. (Count II), and bad faith under the Pennsylvania Bad Faith Insurance Statute, 42 Pa. Cons. Stat. § 8371 (Count III).² Currently pending before the Court is Defendants' Motion to Dismiss the Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) or forsummary judgment pursuant to Rule 12(d).³

II. Legal Standards

A. Jurisdiction

This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332. See Am. Compl. ¶¶ 1-5.

B. Motion to Dismiss for Failure to State a Claim

Under the notice pleading requirements of Federal Rule of Civil Procedure 8(a)(2), a complaint must contain only "a short and plain statement of the claim showing that the pleader is entitled to relief." To survive a motion to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6), the complaint must plead sufficient factual allegations, that, taken as a whole, state a facially plausible claim to relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A complaint satisfies the threshold of facial plausibility if "the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (citing Twombly, 550 U.S. at 556). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements," are insufficient to establish plausible allegations to survive the motion. Id. at 1949 (citing Twombly, 550 U.S. at 555).

In analyzing the complaint, the court must "'accept all factual allegations as true, construethe complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief.'" Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009) (quoting Phillips v. Cnty. of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008)). However, the court may disregard any legal conclusions in the complaint. Id. at 210-11 (citing Iqbal, at 1949).

Generally, the district court may consider only the facts alleged in the complaint and its attachments on a motion to dismiss. Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994). The court may also take into consideration "an undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on the document." Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993).

III. The Parties' Contentions

Defendants contend that Plaintiff's claims accrued on May 31, 2005 when Defendant stopped paying Plaintiff's monthly disability benefits. Defs. Br. at 7, 9. Defendants argue that Plaintiff's breach of contract and declaratory judgment claims are therefore barred by the four-year statute of limitations under Pennsylvania law, and that Plaintiff's bad faith claim is likewise barred by the applicable two-year statute of limitations under Pennsylvania law. Defs. Br. at 3, 7.

Plaintiff counters that the statute of limitations is determined by the language of the policy itself, specifically the paragraphs entitled "Proof of Disability or Loss" and "Legal Actions," which read as follows:

Proof of Disability or Loss This policy provides for periodic payment for a continuing disability. You must give us written proof of disability within 90 days after theend of each period for which a benefit is payable. For any other loss, written proof must be given within 90 days after such loss occurs . . . .

Legal actions with respect to any claim under this policy. no legal action may be taken against us during the 60 days after receipt of the written proof, or after 3 years from the date proof is required to be given.

Pl. Ex. A at 9.⁴ Relying on Hofkin v. Provident Life & Accident Ins. Co., 81 F.3d 365 (3d Cir. 1996), Plaintiff asserts that the applicable statute of limitations is three years, that the limitations period does not begin to run until proof of loss is submitted, and that proof of loss is not yet due in this case because Plaintiff has been continuously disabled for the entire relevant time period. Pl. Arg. Memo. at 8 (ECF No. 15).⁵

In response, Defendants contend that Plaintiff's reliance on Hofkin is misplaced because the case at bar is not about the "Legal Actions" or "Proof of Loss" clauses in the policy. Defs. Memo. in Reply at 3 (ECF No. 19). Defendants contend that the statute of limitations periods under Pennsylvania law still apply and bar Plaintiff's claims.⁶

IV. Discussion

A. Statute of Limitations Under Pennsylvania Law

In a contract case, the cause of action accrues when there is an existing right to sue based on a breach of the contract. Cooper v. Sirota, 37 Fed. App'x 46, 48 (3d Cir. 2002); see S.T. Hudson Eng'rs, Inc. v. Camden Hotel Dev. Assocs., 747 A.2d 931, 934 (Pa. Super. Ct. 2000). Further, in a breach of contract claim arising from denial of an insurance claim, as is the case here, the claim accrues when the insured first knows that the benefits have been terminated. See Romeo v. UnumProvident Corp., No. 07-1211, 2008 WL 375161, at *3 (E.D. Pa. 2008); Caruso v. Life Ins. Co. of N. Am., No. 00-2329, 2000 WL 876581, at *2 (E.D. Pa. 2000) (beginning limitations period with respect to a suit for benefits under an ERISA long-term disability planwhen the insured "first kn[ew] that the benefits ha[d] been infringed or removed") (quoting Gluck v. Unisys Corp., 960 F.2d 1168, 1181 (3d Cir. 1992)).

In Pennsylvania, the statute of limitations for contract actions and declaratory judgment is four years. 42 Pa. Cons. Stat. § 5525(8); Simon Wrecking Co., Inc. v. AIU Ins. Co., 350 F. Supp. 2d 624, 639-40 (E.D. Pa. 2004) (citing Algrant v. Evergreen Valley Nurseries Ltd. Partnership, 126 F.3d 178, 184-85 (3d Cir. 1997) (holding that "when plaintiffs' claims are barred by a statute of limitations applicable to a concurrent legal remedy, then a court will withhold declaratory judgment relief in an independent suit essentially predicated upon the same cause of action")). Additionally, under Pennsylvania law, statutory bad faith claims by an insured against an insurer are subject to the two-year tort statute of limitations for tort action. See Sikirica v. Nationwide Ins. Co., 416 F.3d 214, 223-24 (3d Cir. 2005).

Other judges of this court have applied these statutes of limitations to facts similar to those at hand and found the plaintiff's claims time-barred. See, e.g. Romeo, 2008 WL 375161. In Romeo, plaintiff Jacqueline Romeo ("Romeo") purchased disability insurance from UnumProvident Corporation ("Unum") in 1992. After a motor vehicle accident in August 1994, Romeo began receiving benefits under the policy. On March 3, 2001, Romeo received a letter from Unum stating "no further benefits are due under your claim for disability benefits" because "we find that you are not disabled from [your occupation]." Unum invited Romeo to submit additional information for further support of her claim or to send a written request for appellate review. Romeo appealed the decision and sent in additional medical information. On July 6, 2001, Unum denied her appeal.

In early 2004, Romeo sent in additional medical information, and, as a result, her claimwas reopened effective December 18, 2003. At this point, Unum determined that she was entitled to disability insurance benefits from March 18, 2004. Romeo filed suit in the Philadelphia Count Court of Common Pleas...