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Wells Fargo Bank Northwest, N.A., As Trustee of the Hvbff Life v. American General Life Insurance Co

May 19, 2011


The opinion of the court was delivered by: Lois H. Goodman United States Magistrate Judge


Presently before the Court is an application for leave to amend the Complaint, brought by Plaintiff, Wells Fargo Bank Northwest, NA, as trustee for HVBFF Life Receivables Eurotrust, ("HVBFF") [Docket Entry No. 57]. HVBFF seeks to assert additional factual allegations, as well as five new causes of action for negligent representation, violation of New York General Business Law § 349, promissory estoppel, equitable estoppel and unjust enrichment, and also seeks to revise its prayer for relief to request consequential, punitive and exemplary damages, as well as attorneys' fees and interest. HVBFF's Brief in Support of Motion for Leave to Amend (hereinafter "HVBFF Brief") at 2 [Docket Entry No. 57]. HVBFF states that all parties except Defendant American General Life Insurance Company ("American General") have consented to the proposed Amended Complaint (hereinafter, the "Amended Complaint"), attached to the Declaration of David King as Exhibit A. [Docket Entry No. 58-1]. American General opposes the application, arguing that HVBFF's proposed amendments are futile because each fails to state a claim for which relief can be granted as a matter of law. American General's Brief in Opposition to the Motion for Leave to Amend (hereinafter "AmerGen Opp Brief") [Docket Entry No. 62.]. HVBFF submitted a reply brief, providing further support for its proposed amendments. HVBFF's Brief in Further Support of Motion for Leave to File an Amended Complaint (hereinafter "HVBFF Reply") [Docket Entry No. 63].

The Court has considered the application based on the papers submitted, without oral argument, pursuant to Fed. R. Civ. P. 78. For the reasons set forth below, HVBFF's request for leave to amend is GRANTED in part and DENIED in part.

I. Relevant Facts*fn1

On or about February 26, 2006, American General issued a life insurance policy for Ms. Valeria Schwarz ("the Policy") with a standard death benefit of $4.5 million. Amended Complaint ¶ 8. Ms. Schwarz, a New York resident, was over 80 years old at the time of issuance. Amended Complaint ¶¶ 8, 66. The Policy included a provision which expressly barred the insurer from contesting the validity of the policy more than two years after issuance. Amended Complaint ¶ 9. According to the proposed Amended Complaint, both New York and New Jersey law impose the same prohibition on contesting the validity of a policy more than two years after issuance. Amended Complaint ¶ 9. The contestability period for this Policy lapsed onor about February 28, 2008. Amended Complaint ¶ 10.

Third Party Defendant The Valeria Schwarz Irrevocable Life Insurance Trust ("the Trust") was established by Ms. Schwarz to own the American General Policy. Amended Complaint ¶ 11. On or about May 21, 2008, the Trust elected to sell the Policy to Third Party Defendant Legacy Benefits Corporation ("LBC"), an experienced life settlement provider. Amended Complaint ¶ 11.

After the purchase agreement was executed, LBC requested a verification of coverage from American General to facilitate the transaction between LBC and the Trust. Amended Complaint ¶ 12. HVBFF contends that "American General was required by law to advise whether it was pursuing or intended to purse an investigation regarding the validity of the American General Policy:

(2) The insurer shall respond to a request for verification of coverage submitted by a viatical settlement provider not later than 30 calendar days after the date the request is received. The request for verification of coverage shall be made on a form approved by the commissioner. The insurer shall complete and issue the verification of coverage or indicate in which respects it is unable to respond. In its response, the insurer shall indicate whether, based on the medical evidence and documents provided, the insurer intends to pursue an investigation at that time regarding the validity of the insurance contract.

N.J. Stat. § 1713:3013-9a.(2) (2010) (emphasis added); cf. N.Y. Ins. Law § 7813(b) (2010)." Amended Complaint ¶ 12 (emphasis in original).

In response to LBC's request, on or about May 28, 2008, American General provided a "Verification Of Coverage Form," in which it represented that the Policy was "not currently contestable. American General also represented that the policy was in-force, assignable and transferable." Amended Complaint ¶ 13. The verification did not disclose any intent to investigate the validity of the Policy at a later date, and HVBFF asserts that American General was in fact barred from later contesting the validity under the terms of the Policy and under applicable state law. Amended Complaint ¶ 13.

In May 2008, LBC entered into negotiations to sell the Policy to HVBFF. Amended Complaint ¶ 14. As part of the negotiations, LBC provided HVBFF with the verification form American General had given to LBC. Amended Complaint ¶ 14. HVBFF states that it relied on the representations American General made in the verification. Amended Complaint ¶ 15. The sale to HVBFF was finalized in June 2008, and American General confirmed the change of ownership and beneficiary on June 26, 2008. Amended Complaint ¶¶ 16-17. On the same day, LBC advised HVBFF that American General had confirmed in a telephone conference that the information contained in the earlier Verification of Coverage remained unchanged in all material respects. Amended Complaint ¶ 18.

Following its purchase of the Policy, HVBFF paid all premiums as they came due. Amended Complaint ¶ 19. On January 20, 2009, HVBFF paid an advance premium payment in the amount of $351,000, for the Policy period beginning February 26, 2009. Amended Complaint ¶ 20. American General accepted those payments without protest. Amended Complaint ¶ 19. Indeed, at no point until April 2009, when HVBFF sought to collect the benefits under the Policy, did American General in any way challenge its validity or HVBFF's status as owner or beneficiary. Amended Complaint ¶ 21.

Ms. Schwarz died on February 12, 2009. Amended Complaint ¶ 22. Soon thereafter, HVBFF provided American General with notice of Ms. Schwarz's death and requested a refund of the advance premium payment. Amended Complaint ¶ 23. Although American General acknowledged receipt of the documents establishing Ms. Schwarz' death and HVBFF's request for a refund of the advanced payment, and despite several requests, American General did not make the requested refund. Amended Complaint ¶ 24-27.

As a result, on or about September 15, 2009, HVBFF filed the instant action, seeking payment of the benefits alleged to be due under the Policy, along with a return of the pre-paid premiums. HVBFF Brief at 4. HVBFF now seeks to add various new causes of action to the Complaint, along with additional damages claims. HVBFF Brief at 2.

II. Standard of Review

Under Rule 15(a)(1) of the Federal Rules of Civil Procedure, a party may amend its pleading once as a matter of course within a specified limited time. Id. After such time has passed, a party must seek the written consent of the opposing party or leave of the court. Fed. R. Civ. P. 15(a)(2). Under Rule 15(a)(2), leave should be freely given, and the Third Circuit has taken a liberal approach to allowing amendments under this rule so that claims may be decided on the merits and not on any technicality. Fed. R. Civ. P. 15(a)(2); WHY ASAP, LLC v. Compact Power, 461 F. Supp.2d 308, 311 (D.N.J. 2006), citing Dole v. Arco Chemical Co., 921 F.2d 484, 487 (3d Cir. 1990). Absent "undue delay, bad faith, dilatory motive, unfair prejudice, or futility of amendment," the court should grant leave to amend. WHY ASAP, 461 F. Supp.2d at 311, citing Grayson v. Mayview State Hosp., 293 F.3d 103, 108 (3d Cir. 2002).

An amendment is futile when it fails to state a claim upon which relief may be granted. See In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1434 (3d Cir. 1997). The standard of review for futility is therefore the same as that for a motion to dismiss under Fed. R. Civ. P. 12(b)(6). See id.; Massarsky v. General Motors Corp., 706 F.2d 111, 125 (3d Cir. 1983). When faced with a motion to dismiss for failure to state a claim, the court conducts a two step analysis. Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). First, the factual elements are separated from the legal elements of the claim. Fowler, 578 F.3d at 210-11. The court must accept the factual elements alleged in the well-pleaded complaint as true, but may disregard any legal conclusions. Id., 578 F.3d at 210-11; Travelers Indem. Co., v Dammann & Co., Inc., 592 F.Supp.2d 752, 764 (D.N.J. 2008).

Second, the court must determine if the facts alleged are sufficient to show a "plausible claim for relief." Fowler, 578 F.3d at 210, quoting Ashcroft v. Iqbal, 129 S.Ct. 1937, 1955 (2009). A plausible claim is one which "allows the Court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Fowler, 578 F.3d at 210-11, quoting Iqbal, 129 S.Ct. at 1948. This is not to say that a plaintiff's claim should be dismissed if it seems unlikely to prevail on the merits, as the court's purpose is to determine whether the complaint provides enough facts "to raise a reasonable expectation that discovery will reveal evidence of the necessary element[s]." Hobson v. St. Luke's Hospital and Health Network, 735 F.Supp.2d 206, 211 (E.D. Pa. 2010), quoting Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008). "Ultimately, this two-part analysis is 'context-specific' and requires the court to draw on 'its judicial experience and common sense' to determine if the facts pled in the complaint have 'nudged [plaintiff's] claims' over the line from '[merely] conceivable or [possible] to plausible.'" Hobson, 735 F.Supp.2d at 211 (E.D. Pa. 2010), quoting Fowler, 578F.3d at 211.

III. Analysis

HVBFF seeks to add five new causes of action and to revise its prayer for relief to include additional damages theories.*fn2 American General opposes the proposed amendments, arguing they are futile. The Court addresses each proposed new count in turn, as well ...

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