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Newman v. Metropolitan Life Insurance Co.

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

March 9, 2017

Margery Newman, and all others similarly situated, Plaintiffs,
v.
Metropolitan Life Insurance Company, Defendant.

          MEMORANDUM OPINION & ORDER

          Honorable Thomas M. Durkin United States District Judge

         This case arises from a long-term care insurance policy that Plaintiff Margery Newman purchased from Defendant Metropolitan Life Insurance Company. In connection with the policy, Plaintiff purchased a premium-payment option titled the “Reduced-Pay at 65 Option.” As set forth more fully below, the option didn't function as Ms. Newman anticipated it would. She therefore sues on behalf of herself and others similarly situated for breach of contract, common law fraud and fraudulent concealment, and unfair and deceptive practices under the Illinois Consumer Fraud Act. This Court has jurisdiction under 28 U.S.C. § 1332 as modified by the Class Action Fairness Act. Defendant moves to dismiss the complaint. For the reasons set forth below, Defendant's motion is granted and the case is dismissed without prejudice.

         Standard

         A Rule 12(b)(6) motion challenges the sufficiency of the complaint. See, e.g., Ha linan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). A complaint must provide “a short and plain statement of the claim showing that the pleader is entitled to relief, ” Fed.R.Civ.P. 8(a)(2), sufficient to provide defendant with “fair notice” of the claim and the basis for it. Be l Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). This standard “demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). While “detailed factual allegations” are not required, “labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. The complaint must “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). “‘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.'” Mann v. Vogel, 707 F.3d 872, 877 (7th Cir. 2013) (quoting Iqbal, 556 U.S. at 678). In applying this standard, the Court accepts all well-pleaded facts as true and draws all reasonable inferences in favor of the non-moving party. Mann, 707 F.3d at 877.

         Background

         At the age of 56, Plaintiff applied for and purchased MET LIFE Long-Term Care Policy 04856-20065. R. 22 ¶ 15. She did so after reading a 12-page marketing brochure that covers a variety of topics, including likely expenses for common health conditions in people of advanced age, an explanation of what Medicare covers and does not cover, an array of plan benefits, benefit payment options, and optional plan features. R. 22-1 pp. 1-12. It says nothing of policy classes or the possibility of class-wide premium adjustments.

         A page titled “Premium Payment Options” lists “[four] premium payment options which help you pay off your policy sooner and/or ease financial obligations down the road, when you might be on a fixed income.” Id. at 9. One option offered is the “Reduced Pay at 65 Option, ” which allows an insured to “pay[ ] more than the regular premium amount you would pay each year up to the Policy Anniversary on or after your 65th birthday, [in order to] pay half the amount of your pre-age 65 premiums thereafter.” Id. ¶ 17. In a note at the bottom of the “Premium Payment Options” page, it reads: “This brochure is intended to provide a general overview, and highlight some of the provisions and optional benefits of MetLife's Individual Long-Term Care insurance policies. All rights and obligations will be governed by the actual policy language, if and when issued.” R. 22-1 at 9.

         Plaintiff opted to purchase a long-term care policy, including the Reduced Pay at 65 Option, based on the information contained in the brochure. Id. ¶ 16. She received the actual policy shortly thereafter. With respect to the Reduced Pay at 65 Option, the policy says only that “on and after Policy Anniversary at age 65, ” premiums will be reduced by half. Id. at 15. Plaintiff alleges that the statement in the brochure and seemingly consistent language in the policy caused her to reasonably expect that her premiums would be locked-in at a particular amount on the policy anniversary after she turned 65. R. 36 at 1.

         Also in the policy, however, in the very first clause on the very first page, there is a bold, all-caps header: “PREMIUM RATES ARE SUBJECT TO CHANGE.” R. 22-1 at 13. The header is followed by a plainly-written provision that reads, in relevant part, “[Defendant] may change the premium rates subject to applicable state Insurance Department approval. Any such change in premium rates will apply to all policies in the same class as yours where the policy was issued.” Id. A similarly-worded provision appears on page 14 of the policy in a section titled “Premiums, ” indicating that Defendant “reserve[s] the right to change premium rates on a class basis, ” id. at 30, a phrase which appears again, verbatim, in bold text in the 5% Automatic Compound Inflation Protection Rider (“Inflation Protection Rider”), an optional feature Plaintiff elected to purchase, id. at 37. Another rider, the “Contingent Benefits Upon Lapse Rider” (“Lapse Rider”), sets forth the parties' rights and obligations in the event of a “substantial premium increase” during the life of the policy. Id.

         At the conclusion of the policy, in a list titled “General Provisions, ” a clause titled, “The Contract, ” reads: “This policy, with any Riders, endorsements and written application attached, make up the entire contract.” Id. at 34. Bolded on the first page of the policy is the following advisory clause:

30-Day Right to Examine Policy. Please read this policy carefully. It is a legal contract between You and MetLife. If You are not satisfied for any reason, You may return this policy to Us or to the sales representative from whom You bought it within thirty (30) days from the date You receive it. If you return it within the thirty (30) day period, this policy will be void . . .

Id. at 13. Plaintiff did not exercise her right to void the policy. It became effective on September 1, 2004. R. 22 ¶ 15.

         For eight years, Plaintiff paid larger than regular premiums in anticipation of a 50% reduction in her premium at age 65. R. 22 ¶ 21. In September 2012, the policy anniversary after Plaintiff's 65th birthday, her premium was increased by 18% as part of a class-wide premium adjustment. R. 22-1 at 57. However, because the adjustment became effective once Plaintiff was already 65 years old, she paid only half of the adjusted amount, and did so without objection. Id. ¶ 23. Two years later, premiums were adjusted on a class basis again. Id. ¶ 24. This time, however, they more than doubled. Id. The result was that in 2015, when Plaintiff was 67 years old, her semi-annual premiums were higher than they were when she purchased the policy at age 56. Id. ¶¶ 24-25.

         According to Plaintiff, this class-wide premium adjustment breached the “Reduced Pay at 65 Option, ” which she understood entitled her to premiums “permanently fixed at 50% of her pre-age 65 premium.” Id. ¶ 26. In addition, or perhaps in the alternative, she claims that the marketing materials for the “Reduced Pay at 65 Option” were fraudulent, deceptive and unfair, and that they concealed that “MetLife would be unable fulfill its promise to lock-in Plaintiff's premium” after her 65th birthday. Id. ¶ 73. Defendant moves to dismiss Plaintiff's class suit arguing that under the plain and conspicuous language of the fully-integrated contract, Defendant was entitled to levy the class-wide premium increase and thus did not breach the contract by doing so. The Court addresses the parties' arguments below.

         Discussion

         I. Breach of Contract

         The rules of contract interpretation apply when considering the terms of an insurance policy. See United Nat'l Ins. Co. v. Fasteel, Inc., 550 F.Supp.2d 814, 821 (N.D. Ill. 2008) (citing Nat'l Fid. Life Ins. Co. v. Karaganis, 811 F.2d 357, 361-63 (7th Cir. 1987). “Under Illinois law, an insurance policy that contains no ambiguity is to be construed according to the plain and ordinary meaning of its terms, just as would any other contract.” Id. (citing Karaganis, 811 F.2d at 361). “Contracts are to be interpreted as a whole, giving meaning and effect to each provision.” Id. (internal quotation marks and citation omitted). To plead a cause of action for breach of contract, a plaintiff must allege (1) the existence of a valid and enforceable contract; (2) performance by the plaintiff; (3) breach of the contract by the defendant; and (4) resultant injury to the plaintiff. Gonzalzes v. Am. Exp. Credit Corp., 733 N.E.2d 345, 351 (Ill.App.Ct. 2000) (citation omitted). A defendant's failure to comply with a duty imposed by the contract gives rise to the breach. Id. (citation omitted). Only the third element of the claim-the defendant's alleged breach-is at issue here. In pleading her claim for breach, Plaintiff alleges simply that “MetLife breached its contract with Plaintiff by increasing Plaintiff's annual premiums 102% (to an amount greater than Plaintiff's pre-age 65 annual premiums) in March 2015, when Plaintiff was 67 years old.” R. 22 ¶ 39.

         The only contractual language regarding the Reduced Pay at 65 Option appears in the Schedule of Benefits. It reads as follows:

[Y]ou have selected the following flexible premium payment option: Reduced Pay at 65 Semi-Annual Premium Amount *:
Before Policy Anniversary at age 65: $3231.93
On and after Policy Anniversary at age 65: $1615.97
*If you pay premiums more frequently than annually, an additional cost has been ...

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