Woods v. Am. Gen. Life Ins. Co.

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KATIE WOODS, as Independent Administrator of the Estate of JOHN WOODS, deceased, Plaintiff, v. AMERICAN GENERAL LIFE INSURANCE COMPANY, a Delaware Corporation, Defendant.

No. 22-cv-03839

United States District Court, N.D. Illinois, Eastern Division

May 1, 2023

MEMORANDUM OPINION AND ORDER

MARVIN E. ASPEN, UNITED STATES DISTRICT JUDGE

Defendant American General Life Insurance Company (“American General”) moves to dismiss Plaintiff Katie Woods' Complaint under Federal Rule of Civil Procedure 12(b)(6). (Defendant's Rule 12(b)(6) Motion to Dismiss (“Mot to Dismiss”) (Dkt. No. 17).) For the following reasons we grant the motion but give Plaintiff leave to amend her Complaint.

FACTUAL BACKGROUND

We take the following facts from the Complaint, “documents attached to the [C]omplaint, documents that are critical to the [C]omplaint and referred to in it, [] information that is subject to proper judicial notice[,]” and any additional facts set forth in Plaintiff's opposition “so long as those facts are consistent with the pleadings.” Phillips v. Prudential Ins. Co. of Am., 714 F.3d 1017, 1019-20 (7th Cir. 2013) (quotation marks omitted). We have accepted as true all well-pleaded factual allegations and drawn all reasonable inferences in Plaintiff's favor. O 'Brien v. Vill. of Lincolnshire, 955 F.3d 616, 621 (7th Cir. 2020). But if “an exhibit attached to or referenced by the” Complaint contradicts Plaintiff's allegations, “the exhibit takes precedence.” Phillips, 714 F.3d at 1020.

Plaintiff Katie Woods is the widow and estate administrator of John Woods, a deceased individual who is the named insured on a policy issued by Defendant American General. (Complaint for Declaratory Relief (“Compl.”) (Dkt. No. 1-2) ¶¶ 6-7.) The policy in question is an Accidental Injury Policy with an effective date of November 6, 2013. (Id. ¶ 11; id. Ex. A (“Policy”).) It requires American General to pay an “Accidental Death Benefit” of $250,000 if the Insured Person (Mr. Woods) dies as the result of an “Accidental Injury.” (Compl. ¶ 17; Policy at 5.) The Policy defines “Accidental Injury” as “bodily injury to an Insured Person as the result of an Accident, after coverage under this Policy takes effect and while this Policy is in force, which results in care within 72 hours after the injury is sustained.” (Policy at 4.) “Accident” or “Accidental” is defined as:

[A]n unforeseen event which results in an Accidental Injury to an Insured Person and meets all of the following requirements: (1) It is the direct cause of a loss, and is independent of Sickness or bodily infirmity, including any physical condition. (2) It is definite as to time and place. (3) It happens involuntarily, or entails unforeseen consequences if it is the result of an intentional act. (4) It is sustained on or after the Insured Person's Effective Date of coverage under this Policy and while this Policy is in force. (5) It directly produces at the time objective findings of an injury which is more than simply a gradual deterioration or progressive degeneration.

(Id.) The Policy states that American General will pay the Accidental Death Benefit “(a) if the Insured Person's loss occurs within 90 days following the Accidental Injury that causes that loss; and (b) subject to all Policy definitions, provisions and exclusions.” (Id.)

Two additional provisions of the Policy are relevant to American General's motion. The first is a provision governing the submission of proof of loss (the “Proof of Loss Provision”). It states:

You must provide to Us, at Your expense, written proof of loss determined to be satisfactory to Us within 90 days from the date of loss. If it is not reasonably possible for You to provide such written proof of loss within the stated time, Your claim will not be affected if You provide such written proof of loss as soon as is reasonably possible. However, unless You are legally incapacitated, You must provide such written proof of loss no later than 15 months from the date of loss. You must provide to Us any authorizations necessary to obtain medical or other records to verify Your loss.

(Id. at 8 (emphasis added).) The second relevant provision limits the time period during which the insured may bring a legal action to recover a benefit owed under the Policy (the “Legal Actions Provision”). It provides:

No legal action may be brought to recover any benefit provided by this Policy until 60 days after the date We receive written proof of loss. No action may be brought after 3 years from the date written proof of loss must have been provided to Us.

(Id. at 9 (emphasis added).)

On November 24, 2013, shortly after the Policy became effective, Mr. Woods' tracheostomy tube became dislodged while he was receiving medical care, and he went into cardiac arrest and died. (Compl. ¶ 1.) Two days later, Plaintiff sent American General notice of a claim for the Accidental Death Benefit under the Policy. (Id. ¶ 22.) On May 8, 2014, American General mailed Plaintiff a premium refund check. (Id. ¶ 23.) American General did not pay the Accidental Death Benefit. (Id.)

More than five years passed with no further communication between Plaintiff and American General. (See id. ¶¶ 23-24.) During this time, Plaintiff filed a medical malpractice action against Kindred Hospital in the Circuit Court of Cook County, Illinois (Case No. 2015 IL 012014) (the “Malpractice Suit”). (Id. ¶ 2; Dkt. No. 18-6.) In the Malpractice Suit, Plaintiff alleged that the hospital's negligence was the proximate cause of her husband's death. (Dkt. No. 18-6 ¶¶ 5-6.)

The Malpractice Suit was settled in 2019 after significant litigation and negotiation. (Compl. ¶ 2.)

On August 19, 2019, Plaintiff sent a letter to American General explaining the resolution of the Malpractice Suit and demanding payment of the Accidental Death Benefit. (Id. ¶ 24.) In the letter, Plaintiff asserted that the resolution of the Malpractice Suit “firmly established” that Mr. Woods had suffered an “Accidental Injury” within the meaning of the Policy. (Id.) American General responded to Plaintiff's letter on September 16, 2019. (Id. ¶ 26.) The company requested an amended death certificate or certified letter from a medical examiner showing that the cause of Mr. Woods' death was not natural before it could make a determination regarding coverage. (Id.; Dkt. No. 18-3 (“Sept. 16 Letter”).) The response reads, in pertinent part:

According to our records, in March, 2014 we were advised of the Insured's death after a premium notice letter was mailed to the address on record. A premium refund check was mailed out May 8, 2014 to Katie Woods. The death certificate received indicates the insured's cause of death was due to Pneumonia and Chronic Obstructive Lung Disease with the manner listed as natural. In order for the Company to review the policy for any Accidental Benefits due, we would need an amended death certificate or certified letter from a Medical Examiner showing the cause of death to be from another manner other than natural. Please submit the requested information for further review. We have enclosed a self-addressed envelope for your convenience.

(Sept. 16 Letter.) In the letter, American General did not raise any Policy defenses, represent that the loss was covered, or offer to settle the claim. (Id.)

On April 2, 2021, Plaintiff sent American General a second letter explaining that Mr. Woods' death was an “Accident” and therefore covered by the Policy. (Compl. ¶ 28; Dkt. No. 18-4.) Plaintiff attached an expert report that had been prepared in connection with the Malpractice Suit, a copy of the expert's deposition testimony, and a court order approving the settlement of the Malpractice Suit. (Compl. ¶ 24; Dkt. Nos. 18-4 to 18-6.)

On July 23, 2021, American General sent Plaintiff a letter denying coverage for the claim on the grounds that Mr. Woods' death did not meet the Policy's definition of “Accidental Injury.” (Compl. ¶ 30; Dkt. No. 18-7.) American General did not raise any other Policy defenses in this letter. (See Dkt. No. 18-7.) Plaintiff alleges that this was the first time that American General represented that it would not provide coverage for Mr. Woods' death. (Compl. ¶ 32.)

PROCEDURAL BACKGROUND

Plaintiff initially filed this suit in the Circuit Court of Cook County, Illinois, asserting claims for declaratory judgment, breach of contract, unjust enrichment, and bad faith pursuant to 215 Ill. Comp. Stat. 5/155 (“Section 155”) based on American General's failure to pay the Accidental Death Benefit. (See Compl.) American General timely removed the suit to this Court pursuant to 28 U.S.C. §§ 1332, 1441, and 1446. (Dkt. No. 1.)^[1] American General now moves to dismiss the Complaint pursuant to Rule 12(b)(6). (See Mot. to Dismiss.)

LEGAL STANDARD

At the Rule 12(b)(6) stage, “we test the sufficiency of the complaint, not the merits of the case.” Gociman v Loyola Univ. of Chi., 41 F.4th 873, 885 (7th Cir. 2022). “We construe the complaint in the light most favorable to [the] plaintiff, accept all well-pleaded facts as true and draw reasonable inferences in [the] plaintiff's favor.” Taha v. Int'lBhd. of Teamsters, 947 F.3d 464, 469 (7th Cir. 2020). To survive a Rule 12(b)(6) motion, the complaint must assert a facially plausible claim and provide fair notice of the claim's basis to the defendant. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); BellAtl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); Adams v. City of Indianapolis, 742 F.3d 720, 728-29 (7th Cir. 2014). A claim is facially plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. Although a facially plausible complaint need...