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Campbell v. National Union Fire Ins. Co. of Pittsburgh

United States District Court, D. Columbia.

September 16, 2015


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          For RITA CAMPBELL, Plaintiff: Tracy Diana Rezvani, LEAD ATTORNEY, REZVANI VOLIN P.C., Washington, DC; Robert Olin Wilson, Rezvani Volin & Rotbert P.C., Washington, DC.


         For CATAMARAN HEALTH SOLUTIONS, LLC, formerly known as CATALYST HEALTH SOLUTIONS INC., formerly known as HEALTHEXTRAS, INC., Defendant: Scott McIntosh, LEAD ATTORNEY, QUARLES & BRADY LLP, Washington, DC; Patrick J. Murphy, PRO HAC VICE, QUARLES & BRADY LLP, Milwaukee, WI.


         For VIRGINIA SURETY COMPANY, INC., Defendant: Harvey Kurzweil, LEAD ATTORNEY, Winston & Strawn LLP, New York, NY; Neal R. Marder, LEAD ATTORNEY, WINSTON & STRAWN LLP, Los Angeles, CA; Thomas M. Buchanan, LEAD ATTORNEY, WINSTON & STRAWN LLP, Chicago, IL; Kelly A. Librera, PRO HAC VICE, WINSTON & STRAWN LLP, New York, NY.

         HEALTHEXTRAS, LLC, Defendant, Pro se, HEALTHEXTRAS, LLC.

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         RUDOLPH CONTRERAS, United States District Judge.

         Granting in Part and Denying in Part Defendants' Motions to Dismiss


         From 2000 through 2014, Plaintiff Rita Campbell was enrolled in the HealthExtras benefit program, which purported to provide her with group disability insurance coverage. Ms. Campbell now believes that the policy she paid for was illegal and worthless, and she has brought this putative class action on behalf of herself and similarly situated residents of the District of Columbia against seven companies that she believes contributed to and profited from the sale of illusory insurance policies. Ms. Campbell never submitted a claim for coverage and is no longer enrolled in the program, but she seeks to recover her premium payments and damages, alleging that Defendants sold her insurance coverage that they never intended to honor, charged her premiums in excess of her contractual obligation, and failed to provide truthful information about the program. In her five-count complaint, Ms. Campbell asserts numerous violations of the D.C. Consumer Protection Procedures Act (" CPPA" ), and she alleges that Defendants either breached their contractual obligations or, alternatively, that Defendants

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are liable for unjust enrichment, conversion, and money had and received. In their motions to dismiss, Defendants argue that Ms. Campbell lacks standing because her insurance policy was enforceable under D.C. law and she suffered no injury, that her claims are barred by the applicable statutes of limitations, and that in any event, she has failed to plead fraud with particularity and failed to state a claim for relief. Upon consideration of the motions to dismiss, and the memoranda in support thereof and opposition thereto, the Court will grant in part and deny in part the Defendants' motions to dismiss.


         This case marks one of at least eleven closely related actions filed across the country seeking to recover premium payments and damages in relation to the HealthExtras benefit program (" the program" ), which plaintiffs in each case allege was marketed and sold to them in violation of state law.[1] This particular action focuses on allegations that Defendants advertised and purported to sell disability insurance coverage through the HealthExtras benefit program to 3 D.C. residents while violating D.C. insurance laws and without any intent to provide the paid-for coverage.

         In 1999 or 2000, Ms. Campbell received marketing materials about the HealthExtras benefit program from Defendant HealthExtras, Inc., now known as Catamaran Health Solutions, LLC (" Catamaran" ).[2] See 1st Am. Compl. ¶ 53, ECF No. 29. Catamaran had paid the actor Christopher Reeve to serve as the face of its marketing campaign, and it reached potential customers by entering into agreements with credit card companies that allowed Catamaran to access cardholders' financial information and to send marketing flyers to selected cardholders along with their credit card statements. Id. ¶ ¶ 41, 47. Ms. Campbell expressed interest in the program, which included disability insurance packaged together with an out of area emergency accident and sickness medical expense benefit. Id. ¶ ¶ 56, 66. As a result, Catamaran

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mailed her a program description along with a letter advertising coverage in the form of a " $1,000,000 cash payment if you are permanently disabled due to an accident," and " $2,500 a year in reimbursements for coinsurance and deductibles for healthcare expenses when you are travelling." Id. ¶ 56.

         Ms. Campbell then enrolled in the program and agreed to pay premiums on a monthly or annual basis, with her premiums being charged to her credit card. Id. ¶ ¶ 60, 63. Catamaran's Member Services subsequently sent Ms. Campbell an enrollment letter commending her for " hav[ing] armed [her]self with one of the most exciting and affordable disability plans found anywhere in America today." Id. ¶ 61. The enrollment confirmation letter also bore Christopher Reeve's picture and attributed to him the statement that " [b]ecause lives can change in an instant, as mine did, you should have the additional security for yourself and your family that HealthExtras can provide." Id.

         Defendant Virginia Surety Company, Inc. (" Virginia Surety" ) served as the underwriter for Ms. Campbell's $2,500 medical expense benefit during the entire period of her enrollment. Id. ¶ 68. Defendant National Union Fire Insurance Company of Pittsburgh, PA (" National Union" ) replaced non-party Federal Insurance Company as the underwriter of her disability insurance policy effective January 1, 2005. Id. ¶ ¶ 47(i), 67. Ms. Campbell also alleges that Catamaran effectively acted as an underwriter for her disability insurance policy as of July 2000, when it agreed with " at least one insurer" that Catamaran would " pay disability benefits to any person who does not qualify as permanently disabled, but who is nonetheless unable to perform the material and substantial duties of such person's regular occupation." Id. ¶ 125.

         Because Catamaran was not a licensed insurance broker in the District of Columbia, the company paid " real licensed broker[s]," like Defendant Alliant Services Houston, Inc. (" Alliant Services" ), to use their names on correspondence and program documents. Id. ¶ 58. The Program Summary that Ms. Campbell received from Catamaran identified Alliant Services' corporate predecessor as the " Program Administrator," and her payment notices listed Alliant Services as the " Broker of Record." [3] Id. ¶ 9.

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          In 2004, Ms. Campbell received a " Description of Coverage" and " Accident Protection Plan Program Summary" for her disability policy series C11695DBG. Id. ¶ 70. The description of her policy contained " extremely restrictive, conflicting and confusing terms and exclusions which renders any disability insurance 'coverage' virtually worthless to consumers and is in sharp contrast to . . . representations made in the marketing material" she had previously received. Id. ¶ ¶ 70-75, 103-05. Specifically, Ms. Campbell asserts that the policy exclusions contradicted Defendants' marketing materials that had advertised " valuable protection," " a $1,000,000 tax-free cash payment if you are permanently disabled due to an accident," and a $1,000,000 payment " [a]fter 12 months of continuing and permanent disability caused by an accident--including the inability to work." Id. ¶ ¶ 103-05.

         The materials that Ms. Campbell received in 2004 also stated that " if any conflict should arise between the contents of this Description of Coverage and the Master Policy SRG 9540519 or if any point is not covered herein, the terms and conditions of the Master Policy will govern in all cases." Id. ¶ 70. But Ms. Campbell claims that " she has never been provided a copy of Master Policy SRG 9540519," and she suspects that " [w]hat little coverage escapes C11695DBG may be further trumped and negated by Master Policy SRG 9540519." Id. ¶ ¶ 71, 76. Ms. Campbell notes that " [a]lthough the coverage description disclosed some limitations on the policy . . . [no] Defendant[s] disclosed . . . [that] there was no intention to pay disability benefits that fell within the terms of coverage." Id. ¶ ¶ 81-82.

         In fact, Ms. Campbell claims, Catamaran, National Union, and Defendant American International Group, Inc. (" AIG" ) developed the policies in question " with no intent to pay ever [sic] disability claims and the specific intent to deny any disability claims made by victims of the HealthExtras Scheme." Id. ¶ 107. Public records show that an individual in California who was rendered a quadriplegic had his claim denied by National Union, and that another individual in South Carolina had his claim denied by National Union after he was rendered a paraplegic. Id. ¶ 111. " Upon information and belief," Ms. Campbell further asserts that " there are thousands of these unfair and unconscionable denials which are not in the public record." Id. ¶ 114.

         Although Ms. Campbell alleges that she was never provided with a copy of the governing Master Policy, on an unspecified date, she did receive the " Master Application for Blanket Accident Insurance Policy" for Master Policy 9540519.[4] Master Application, Pl.'s Ex. B at 2-3, ECF No. 29-2. The Master Application is printed on letterhead naming National Union and Defendant AIG, doing business as AIG Group Insurance Trust, (" AIG" or " the Trust" ). 1st Am. Compl. ¶ 77. The document describes a policy with an effective date of September 2004, names the Trust as the policyholder, and includes policy

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riders and endorsements that list the policyholder as " HealthExtras." Id. ¶ 77. From these facts, Ms. Campbell concludes that the Trust was created by National Union, AIG, and Catamaran. Id. " [U]pon information and belief," Ms. Campbell further alleges that the corporate defendants issued a Master Policy to themselves that they did not disclose to group members, and that they " are in fact the alter-ego of" the Trust. Id. at ¶ ¶ 73-74, 77.

         She asserts that the Trust is a " sham organization[]," that it does not constitute a " group that was or is eligible to purchase group disability insurance under District of Columbia law," and that the Trust was created so that Defendants could " avoid[] regulatory supervision and oversight." Id. ¶ ¶ 93, 95, 97. Defendants purported to sell group insurance so that they were able to issue a single, Master Policy to themselves. See id. ¶ ¶ 89, 93. Individual insureds were provided only with certificates of insurance that summarized their coverage terms and rights under the Master Policy, which Defendants did not provide. See id. ¶ 89. " Because there was no legitimate group, there was no one to look out for the interests of the persons paying for the purported disability coverage," and policy-holders had " no mechanism for learning, short of becoming disabled themselves and being denied coverage, that the purported insurance coverage they were being sold was illusory and worthless." Id. ¶ ¶ 45, 100.

         Specifically, Ms. Campbell alleges that Defendants issued her policy in violation of D.C. Code § 31-4712, which forbids the issuance of group accident and sickness insurance policies without prior approval from the Commissioner of the D.C. Department of Insurance, Securities and Banking (" DISB" ). Id. ¶ ¶ 90-95. She also claims that Defendants violated a number of DC insurance regulations, including those prohibiting solicitation by credit card and forbidding the use of insurance premiums to pay rebates. Id. ¶ ¶ 84-88.

         Ms. Campbell further alleges that Defendants' marketing materials for the program failed to disclose that less than 15% of the premiums that she paid for disability coverage actually went to the underwriter, National Union. Id. ¶ ¶ 79-80. As a consequence, she believes that " [r]oughly 80% of the insurance premiums paid to the HealthExtras [program] by the Plaintiff has been collected by [Catamaran] and has not paid for insurance coverage or paid for anything that would benefit the Plaintiff." Id. ¶ 80. Ms. Campbell also complains that Defendants' " direct mail advertisements did not disclose that the program was illegal, fraudulent and illusory, and that harsh exclusions limited almost all claims, or that there was no intent to pay disability claims under the policy." Id. ¶ 112.

         On at least two unspecified dates during the fourteen-year period that Ms. Campbell was enrolled in the program, her premiums were increased " without the approval of DISB," and she was charged an amount that exceeded her contractual obligation without her authorization. Id. ¶ ¶ 27, 65. On August 1, 2012, Catamaran transferred Ms. Campbell's disability policy to Defendant HealthExtras LLC,[5] which thereafter " service[d], administer[ed], collect[ed] and allocate[d] the premiums," id. ¶ 11, until the benefit program was terminated at the conclusion of 2014, Notice of Policy Terminations, Pl.'s Ex. A, ECF No. 43-1.

         Ms. Campbell asserts that " each Defendant received money and profited from the illegal" program. 1st Am. Compl. ¶ 117. Specifically, she alleges that Catamaran

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and HealthExtras LLC collected her premium payments, see id. ¶ 123, underwriters National Union and Virginia Surety and broker Alliant Services all received " nominal payments" to lend their names to the scheme, id. ¶ ¶ 131, 150, 157, and AIG, which developed and controlled the Trust named as the policyholder, " received a portion of the illegal insurance premiums paid by Plaintiff," id. ¶ 147.[6]

         In May 2014, a few months before her coverage was terminated, Ms. Campbell initiated this putative class action by filing a complaint on her own behalf and on behalf of similarly situated residents of D.C. who participated in the HealthExtras program. See generally Compl., ECF No. 1. After Defendants filed motions to dismiss the matter, Ms. Campbell rendered the motions moot by filing a first amended complaint in August 2014. See generally 1st Am. Compl.

         Count I of the amended complaint asserts a claim of unjust enrichment based primarily on the allegation that Defendants profited from the sale of " illegal and void" coverage that was worthless to purchasers. Id. ¶ ¶ 167-84. Count II alleges that Defendants breached the terms of their contracts and the duty of good faith and fair dealing by charging Ms. Campbell more than her contractual obligation and by selling HealthExtras policies while failing to reveal that they were " illegal and of little value." Id. ¶ ¶ 186-94. Count III is a claim of conversion premised on Defendants raising her premium and charging her more than her contractual obligation. Id. ¶ ¶ 196-200. Count IV asserts numerous violations of the CPPA, id. ¶ ¶ 202-27, and Count V is a claim of money had and received also based on the unauthorized premium increases, id. ¶ ¶ 229-33. As relief, Ms. Campbell seeks a declaration that the disability policy is illegal, an award of actual damages, treble damages, statutory damages, and punitive damages, an injunction prohibiting Defendants from engaging in unlawful activities in D.C., and attorneys' fees, costs, and expenses. Id. at 60. She also seeks " restitution in the form of disgorgement of all revenues, earnings, profits, compensation and benefits which District of Columbia residents have paid . . . ." Id. ¶ 184.

         Defendants now seek to dismiss all claims pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), arguing that Ms. Campbell lacks standing, that her claims are barred by the applicable statutes of limitations, that she has failed to plead fraud with particularity, and that she has failed to state a plausible claim for relief.


         A. Rule 12(b)(1)

         The D.C. Circuit has explained that a motion to dismiss for lack of standing constitutes a motion under Rule 12(b)(1) of the Federal Rules of Civil Procedure because " the defect of standing is a defect in subject matter jurisdiction." Haase v. Sessions, 835 F.2d 902, 906, 266 U.S. App.D.C. 325 (D.C. Cir. 1987). Federal courts are courts of limited jurisdiction, and the law presumes that " a

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cause lies outside this limited jurisdiction . . . ." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994); see also Gen. Motors Corp. v. E.P.A., 363 F.3d 442, 448, 361 U.S. App.D.C. 6 (D.C. Cir. 2004) (" As a court of limited jurisdiction, we begin, and end, with an examination of our jurisdiction." ). It is the plaintiff's burden to establish that the court has subject matter jurisdiction. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992).

          Because subject matter jurisdiction focuses on the Court's power to hear a claim, the Court must give the plaintiff's factual allegations closer scrutiny than would be required for a 12(b)(6) motion for failure to state a claim. See Grand Lodge of Fraternal Order of Police v. Ashcroft, 185 F.Supp.2d 9, 13-14 (D.D.C. 2001). Thus, the court is not limited to the allegations contained in the complaint. See Wilderness Soc'y v. Griles, 824 F.2d 4, 16 n.10, 262 U.S. App.D.C. 277 (D.C. Cir. 1987). Instead, " where necessary, the court may consider the complaint supplemented by undisputed facts evidenced in the record, or the complaint supplemented by undisputed facts plus the court's resolution of disputed facts." Herbert v. Nat'l Acad. of Scis., 974 F.2d 192, 197, 297 U.S. App.D.C. 406 (D.C. Cir. 1992) (citing Williamson v. Tucker, 645 F.2d 404, 413 (5th Cir. 1981)).

         B. Rule 12(b)(6)

          The Federal Rules of Civil Procedure require that a complaint contain " a short and plain statement of the claim" in order to give the defendant fair notice of the claim and the grounds upon which it rests. Fed.R.Civ.P. 8(a)(2); accord Erickson v. Pardus, 551 U.S. 89, 93, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (per curiam). A motion to dismiss under Rule 12(b)(6) does not test a plaintiff's ultimate likelihood of success on the merits; rather, it tests whether a plaintiff has properly stated a claim. See Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974), abrogated on other grounds by Harlow v. Fitzgerald, 457 U.S. 800, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982). A court considering such a motion presumes that the complaint's factual allegations are true and construes them liberally in the plaintiff's favor. See, e.g., United States v. Philip Morris, Inc., 116 F.Supp.2d 131, 135 (D.D.C. 2000). It is not necessary for the plaintiff to plead all elements of a prima facie case in the complaint. See Swierkiewicz v. Sorema N.A., 534 U.S. 506, 511-14, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002); Bryant v. Pepco, 730 F.Supp.2d 25, 28-29 (D.D.C. 2010).

         Nevertheless, " [t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell A. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). This means that a plaintiff's factual allegations " must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Twombly, 550 U.S. at 555-56 (citations omitted). " Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements," are therefore insufficient to withstand a motion to dismiss. Iqbal, 556 U.S. at 678. A court need not accept a plaintiff's legal conclusions as true, see id., nor must a court presume the veracity of the legal conclusions that are couched as factual allegations. See Twombly, 550 U.S. at 555. In deciding a motion to dismiss under Rule 12(b)(6), the Court may take judicial notice of facts litigated in a prior related case. See Oveissi v. Islamic Republic of Iran, 879 F.Supp.2d 44, 49-50 (D.D.C. 2012).

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          Where a claim of fraud or mistake is alleged, the " short and plain statement" requirement of Rule 8(a) is joined by the " particularized" pleading standards of Rule 9. Federal Rule of Civil Procedure 9(b) requires that, " [i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b). The complaint must therefore " state the time, place and content of the false misrepresentations, the fact misrepresented and what was retained or given up as a consequence of the fraud." Kowal v. MCI Commc'ns Corp., 16 F.3d 1271, 1278, 305 U.S. App.D.C. 60 (D.C. Cir. 1994) (quoting United States ex rel. Joseph v. Cannon, 642 F.2d 1373, 1385, 206 U.S. App.D.C. 405 (D.C. Cir. 1981)). Rule 9(b), in other words, " requires that the pleader provide the 'who, what, when, where, and how' with respect to the circumstances of the fraud." Anderson v. USAA Cas. Ins. Co., 221 F.R.D. 250, 253 (D.D.C. 2004) (quoting DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990)).

         IV. ANALYSIS[7]

         A. Motion to Dismiss Pursuant to Rule 12(b)(1)

         Defendants first argue that this matter must be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(1) because Ms. Campbell " fails to allege an injury-in-fact to support Article III standing." Catamaran's Mot. Dismiss at 1-2, ECF No. 36.[8] In short, Defendants claim that Ms. Campbell's suit is premised on the hypothesis " that if she had become disabled and submitted a covered claim for benefits, Defendants would have wronged her by denying it." Catamaran's Mem. Supp. Mot. Dismiss at 14, ECF No. 36-1. Defendants argue that such " speculative, counterfactual" claims are insufficient to establish standing. Id. In response, Ms. Campbell asserts that she has adequately alleged three injuries in fact sufficient to establish standing: (1) she paid premiums for insurance that she would not have purchased " had she known that Defendants had no present intention to pay claims covered by such insurance," (2) she was debited " premiums higher than contractually permitted for the insurance product," and (3) as to her CPPA claim, Defendants violated her statutory right " to truthful information from merchants about consumer goods and services that are or would be purchased, leased, or received in the District of Columbia." [9] Pl.'s Opp'n at 55-57, ECF No. 43 (internal quotation marks omitted). The Court considers each alleged injury in turn.

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          As Ms. Campbell readily acknowledges, to demonstrate standing, she must " have suffered an injury in fact . . . which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical." Id. at 53 (citing Food & Water Watch v. EPA, 5 F.Supp.3d 62, 73 (D.D.C. 2013)). Such a showing is part of " the irreducible constitutional minimum of standing," so to survive a motion to dismiss, a plaintiff must have produced at least " general factual allegations of injury resulting from the defendant's conduct." Defenders of Wildlife, 504 U.S. at 560, 561 (internal quotation marks and citations omitted).

          When assessing standing at this stage of litigation, the Court will " accept the well-pleaded factual allegations as true and draw all reasonable inferences from those allegations in the plaintiff's favor," but it will " not assume the truth of legal conclusions, nor . . . accept inferences that are unsupported by the facts set out in the complaint." Arpaio v. Obama, No. 14-5325, 797 F.3d 11, 2015 WL 4772774, at *6 (D.C. Cir. Aug. 14, 2015) (internal quotation marks and citations omitted). " [T]hreadbare recitals of the elements of standing, supported by mere conclusory statements, do not suffice," and " [t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim of standing that is plausible on its face." Id. (internal quotation marks and citations omitted). Additionally, " a plaintiff must demonstrate standing for each claim he seeks to press." DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 352, 126 S.Ct. 1854, 164 L.Ed.2d 589 (2006).

         Ms. Campbell's first alleged injury is premised on her having paid for an illusory insurance policy that Defendants did not intend to honor. Pl.'s Opp'n at 55; see also 1st Am. Compl. ΒΆ 82 (alleging that while " the coverage description disclosed some limitations on coverage under the policy, . . . [none of the] Defendant[s] disclosed . . . that there was no intention to pay disability benefits that fell within the terms of coverage." ). She argues that " because the HealthExtras Scheme was designed to deny all disability claims, through a list of undisclosed conflicts and exclusions maintained in a Master Policy the insureds are never shown, in reality the payment of premiums purchased only the contractual right to file a legal action against Defendants . . . not disability insurance." Pl.'s Opp'n at ...

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