Smith ex rel. Situated v. Cont'l Cas. Co.

MAYBELLE Z. SMITH, On behalf of Themselves and All Others Similarly Situated Plaintiffs, v. CONTINENTAL CASUALTY COMPANY, d/b/a CNA INSURANCE, Defendant.

Case No. 1:16cv616

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF OHIO WESTERN DIVISION

September 29, 2017

Judge Michael R. Barrett

OPINION AND ORDER

This matter is before the Court on Defendant's Motion to Dismiss (Doc. 11). Plaintiffs have filed a response (Doc. 12) and Defendant has filed a reply (Doc. 15).

I. BACKGROUND

For purposes of this motion, the facts alleged in Plaintiffs' Complaint are accepted as true. Plaintiffs Maybelle Smith and Mary Agnus Fleming bring this action on behalf of themselves and others similarly situated.

In the late 1980s, Plaintiffs each separately purchased long-term care policies from Defendant. (Doc. 1, PageID 3 at ¶¶ 7, 12). In July 2015, Plaintiff Smith could no longer live independently and moved into a retirement community in Cincinnati, Ohio. (Id. at ¶ 9). Similarly, in December 2012, Plaintiff could no longer live independently and moved into an assisted living unit in Palm Harbor, Florida. (Id. at ¶ 14).

Plaintiffs' long-term care policies state in relevant part as follows:

We will pay You the Convalescent Care Benefit for each day You require Convalescent Care in a Convalescent Care Facility. Benefits begin after the Elimination Period and are payable up to the Maximum Benefit Period for Convalescent Care. In order for Convalescent Care benefits to be payable Your confinement must meet fully all of the conditions listed below:

(a) within thirty days following discharge from Hospital confinement of at least three consecutive days, You are admitted to a Convalescent Care Facility as a result of the same injury or Sickness which caused Your Hospital confinement...

(Doc. 12-1, PageID 148; Doc. 12-2, PageID 167).¹

Both Plaintiffs, having paid their annual premiums each year since their respective effective dates, filed claims under their long-term care policies. (Id. at ¶¶ 10, 15). Both were denied covered based upon the 3-day hospital confinement language. (Id.).

In 1993, Ohio Revised Code § 3923.44 went into effect. (Id. at ¶ 31). Relevant to this case, the statute provides that "no long-term care insurance policy shall do any of the following...[c]ondition eligibility for any institutional benefits on a requirement of prior hospitalization." Ohio Rev. Code § 3923.44(E)(1)(a). The Florida legislature passed a similar law prior to 1998, which provides that "[a] long-term care insurance policy may not be delivered or issued for delivery in this state if the policy [c]onditions eligibility for any benefits on a prior hospitalization requirement..." Florida Statue Section § 627.9407(5).

Relying on these and other similar state statutes, Plaintiffs argue Defendant is prohibited by law from denying coverage based upon the 3-day hospitalization requirement. Accordingly, they bring the following claims: 1) breach of contract; 2) declaratory judgment; 3) bad faith; 4)state unfair claims settlement practices act; 5) unjust enrichment; and 6) punitive damages. Defendant moves to dismiss the Complaint in its entirety.

II. STANDARD

When reviewing a Rule 12(b)(6) motion to dismiss for failure to state a claim, this Court must "construe the complaint in the light most favorable to the plaintiff, accept its allegations as true, and draw all reasonable inferences in favor of the plaintiff." Bassett v. Nat'l Collegiate Athletic Ass'n, 528 F.3d 426, 430 (6th Cir. 2008) (internal quotations omitted). To properly state a claim, a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). "[T]o survive a motion to dismiss, a complaint must contain (1) 'enough facts to state a claim to relief that is plausible,' (2) more than 'a formulaic recitation of a cause of action's elements,' and (3) allegations that suggest a 'right to relief above a speculative level.'" Tackett v. M&G Polymers, USA, LLC, 561 F.3d 478, 488 (6th Cir. 2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007)). "A claim has facial plausibility when 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, 556 U.S. 662, 678 (2009).

III. ANALYSIS

Defendants argue that the state laws cited and relied upon by Plaintiffs went into effect well after the effective dates of the policies and thus, do not apply to the policies at issue. Because Plaintiffs did not meet the 3-day hospitalization requirement, Defendant asserts their claims were properly denied.

Plaintiffs concede they did not meet the 3-day hospitalization requirement. They counter, however, that the respective state laws do apply because each time Plaintiffs paid their annualpremiums they effectively renewed their contracts with Defendant. Accordingly, because the new contracts were issued after the effective dates of the state laws, Plaintiffs argue the 3-day hospitalization requirement is illegal, and cannot form the basis for the denial of a claim. Both parties cite to Ohio law in support of their arguments related to Plaintiff Smith's claims and to Florida law in support of their arguments related to Plaintiff Fleming's claims.²

The policies issued to Plaintiffs provided they were guaranteed renewable for life as long as the premiums were paid each year. (Doc. 12-1, PageID 144). Defendant was further prohibited from making changes to the policies without Plaintiffs' consent. (Id.). However, "[Defendant] c[ould] change the premium rate for the policy, but only if [Defendant] g[a]ve [Plaintiffs] 30 days prior written notice and [Defendants] change[d] the premium rate for everyone who ha[d] this policy form in [Plaintiffs'] rating group in [Plaintiffs'] state[s]." (Id.). Because the respective state laws compel different results, each Plaintiff's policy is addressed separately.

A. Plaintiff Smith

Generally, statutes are prospective in nature, unless the legislature expressly makes the same retroactive. See e.g. Ohio Rev. Code § 1.48. The Ohio Administrative Code answers the question of whether Ohio Rev. Code § 3923.44 is retroactive; plainly, it is not. OAC § 3901-4-01(C) ("Applicability. Except as otherwise specifically provided, this rule applies to all long-term care insurance policies...delivered or issued for delivery in this state on or after theeffective date by insurers...") (emphasis added).³ Accordingly, the law is not retroactive, as it expressly states that it is applicable to policies on or after the effective date of the statute.

Having determined Ohio Rev. Code § 3923.44 is not retroactive, both parties agree the issue before the Court is a narrow one; that is, whether the annual policy renewals constitute one single continuing contract, or result in separate and distinct contracts. Under Ohio law, "statutes pertaining to a policy of insurance and its coverage, which are enacted after the policy's issuance are incorporated into any renewal of such policy if the renewal represents a new contract of insurance separate from the initial policy." Benson v. Rosler, 19 Ohio St.3d 41, 44 (1985). The renewal of an insurance policy generally represents a new contract, but such a determination depends on the language of the instrument itself. Francis v. McClandish, 4th Dist. Case No. 98CA21, 1999 WL 266680, *7 (Ohio App., Apr. 19, 1999).

In Benson, the Ohio Supreme Court held that the policies at issue were term policies rather than continuing policies because they were written for specific periods of six months, and were renewable for additional terms at the option of the insuring company. Id. Plaintiff Smith argues the court's holding in Benson and its progeny support her position that the policy was renewed annually. She argues there is language in the policy pertaining to the policy term, renewal of coverage, subsequent premiums, and superseding laws and thus, Ohio Rev. Code § 3923.44 applies. The Court disagrees for several reasons, and will address each of Plaintiff's arguments in turn.

To begin, "[p]olicies written for specific periods may be construed as term policies rather than continuing policies." Francis, 1999 WL 266680 at *8. In Francis, the court found each renewal constituted a new insurance contract because the declarations page described the policyperiod as running from January 10, 1995 to August 30, 1995. Id. Thus, the court reasoned that particular policy was effective for that particular period of time and no other. Id. Similarly, in Barry v. The Cincinnati Ins. Cos., the policy period had a specific start date and end date - August 11, 1998 to August 11, 2001. 10th Dist. No. 01AP-1437, 2002 WL 31087264, *4 (Ohio App. Sept. 19, 2002); See also Dixon v. Prof. Staff Mgmt., 10th Dis. No. 01AP-1332, 2002 WL 2005689 (Ohio App. Sept. 3, 2002) (finding the policy period began and ended at midnight on May 21 for twelve months). Here, the policy term has an effective start date of February 25, 1988, but not an end date. (Doc. 12-1, PageID 146). Rather, the policy term is "annual." (Id.). Accordingly, the cases cited by Plaintiff are distinguishable.

Related to Plaintiff's argument with respect to policy terms, she also highlights specific language in the premium rider - specifically, that the "rider takes effect...and ends at the same time as the policy to which it is attached" - for the proposition that the policy does indeed have an end date. (Doc 12-1, PageID 151). However, a plain reading of the policy indicates that the policy ends only if Plaintiff declines to pay her premium. Otherwise, the policy remains in effect. Thus, unlike in Barry, Francis, and Dixon, Plaintiff's policy does not have a specific end date that would oblige the Court to find the existence of separate and distinct contracts.

Next, Plaintiff argues the renewal language in the policy makes it clear each annual policy term...