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Advance Trust & Life Escrow Services, LTA v. Protective Life Insurance Co.

United States District Court, N.D. Alabama, Southern Division

September 20, 2019

ADVANCE TRUST & LIFE ESCROW SERVICES, LTA, as securities intermediary for LIFE PARTNERS POSITION HOLDER TRUST, on behalf of itself and others similarly situated, Plaintiff,
v.
PROTECTIVE LIFE INSURANCE COMPANY, Defendant.

          MEMORANDUM OPINION

          KARON OWEN BOWDRE CHIEF UNITED STATES DISTRICT JUDGE.

         This matter comes before the court on “Defendant’s Motion for Judgment on the Pleadings, ” in which Defendant Protective Life Insurance Company moves to dismiss Plaintiff Advance Trust & Life Escrow Services’ entire complaint-which involves life insurance policies issued in 1986, 1998, 1999, and 2005-as time barred, either by Alabama’s applicable statute of limitations or its common-law rule of repose. (Docs. 25 & 26). This Memorandum Opinion also addresses “Plaintiff’s Motion for Leave to File an Amended Complaint Pursuant to Fed.R.Civ.P. 15, ” in which Plaintiff Advance Trust seeks to “clarify and reinforce what [Defendant] apparently disputes.” (Doc. 32).

         Upon receiving Defendant Protective Life’s motion for judgment on the pleadings, the court ordered Advance Trust to show cause why the court should not dismiss its complaint as untimely, (doc. 29); Advance Trust responded on November 19, 2018, (doc. 31), and simultaneously filed a motion for leave to amend its complaint, (doc. 32). With leave of the court, Defendant Protective Life filed briefs opposing Advance Trust’s response to the motion for judgment on the pleadings and Advance Trust’s motion to file an amended complaint. (Docs. 42 & 44). And Advance Trust filed a reply in support of its motion to amend. (Doc. 45).

         With the two motions fully briefed, the court considers the issues ripe for review. For the reasons stated below, the court will DENY Defendant’s motion for judgment on the pleadings and will GRANT Plaintiff’s motion for leave to amend its complaint, if Plaintiff still wishes to amend in view of this Memorandum Opinion.

         I. Factual Background

         Defendant Protective Life Insurance Company offers standardized “universal life” policies with “flexible premiums, ” which serve as both life insurance and investment vehicles. Through a chain of assignments, Advance Trust ultimately came to own Protective Life flexible premium policies issued in the years 1986, 1998, 1999, and 2005.

         For the purposes of Advance Trust’s complaint, these policies contain identical operative language as to how Protective Life should calculate premiums. The policies require the insured to pay minimum premiums designed to cover “cost of insurance” charges and certain other specified expenses. COI charges represent the insurer’s mortality risk, also known as the “mortality charge” or the “pure cost of protection.” (Doc. 1 at ¶ 2). As flexible premium policies, the policies allow the insured to pay in excess of the required minimum premiums, with the surplus payment added to the investment portion of the product, or to the “policy value.” Protective Life deducts the COI charges directly from the insured’s policy value every month, so each COI deduction constitutes a transfer of funds from the insured to the insurer.

         The amount of the COI deduction “is determined at the end of each policy month.” (Doc. 1-1 at 15). Determining the monthly cost of insurance involves determining the “COI rate, ” which “is based on the sex, attained age, and rate class of the Insured and on the policy year.” (Doc. 1-1 at 16). The policies include COI Rate Tables that forecast increased COI rates as the insured ages. (Doc. 1-1 at 24). But the policies also provide that “[m]onthly cost of insurance rates will be determined by [Protective Life], based on [its] expectations as to future mortality experience”[1] and that “[a]ny change in the monthly cost of insurance rates will be on a uniform basis for insureds of the same class.” (Doc. 1-1 at 16) (emphasis added).

         While monthly COI rates invariably increase as the insured ages and the pure cost of protection commensurately rises, Advance Trust alleges the policies obligate Protective Life to adjust the Rate Table, which determines how much the COI rate should increase, as expectations of future mortality experience change. Advance Trust claims Protective Life has failed to “periodically review the COI rates to confirm that they correctly capture the insurer’s projected mortality costs” and to reduce the COI Rate Tables when expectations as to future mortality experience decline. (Doc. 1 at ¶ 3).

         Protective Life appears to have based the COI Rate Tables in the policies at issue on the “1980 CSO Mortality Table, ” an industry-standard mortality table insurers commonly used at the time of policy issuance to calculate appropriate COI rates. The American Academy of Actuaries has released at least two updated mortality tables since 1980-one in 2001 and one in 2015- each one showing improved life expectancy rates compared to the preceding table. (Doc. 1 at ¶ 6). But since issuing these policies, Protective Life has never altered the Rate Tables, meaning the premiums increase according to the same schedule as initially set out at issuance.

         Advance Trust filed this lawsuit individually and on behalf of other policyholders on August 13, 2018, alleging one count of breach of contract. The complaint alleges that Protective Life breached the contract “by deducting COI charges calculated from COI rates not based on its expectations as to future mortality experience.” (Doc. 1 at ¶ 37). Advance Trust specifically identifies the alleged overcharges as stemming from Protective Life failing to reduce COI rates based on improved mortality, in breach of its contractual duty. (Id.). Advance Trust also alleges that Protective Life breached the policies by using factors other than expectations as to future mortality to calculate COI rates. (Doc. 1 at ¶ 38).

         Protective Life filed an answer and then filed the motion for judgment on the pleadings now before this court. (Docs. 16 and 25). Advance Trust filed a response, as well as a motion to amend its complaint. (Doc. 31–32). The parties have fully briefed the motions, and the issue is now ripe for this court’s review.

         II. Standards of Review

         Defendant filed a motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c), and Plaintiff filed a motion for leave to amend its complaint pursuant to Federal Rule of Civil Procedure 15(a). The court articulates the proper standard for each in turn.

         A. Motion for Judgment on the Pleadings Standard

         Rule 12(c) of the Federal Rules of Civil Procedure allows a party to move for judgment on the pleadings after the pleadings are closed, but early enough not to delay trial. SeeFed. R. Civ. P. 12(c). A judgment on the pleadings is appropriate “when there are no material facts in dispute, and judgment may be rendered by considering the substance of the pleadings and any judicially noticed facts.” Horsley v. Rivera, 292 F.3d 695, 700 (11th Cir. 2002). To determine whether the movant is entitled to a judgment on the pleadings, the court should “accept as true all material facts alleged in the non-moving party’s pleading, and . . . view those facts in the light most favorable to the non-moving party.” Perez v. Wells Fargo N.A., 774 F.3d 1329, 1335 (11th Cir. 2014) (emphasis added).

         The court analyzes a Rule 12(c) motion for judgment on the pleadings the same way as a Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted. See Dial v. City of Bessemer, No. 2:14-cv-01297-RDP, 2016 WL 3054728, at *3 (N.D. Ala. May 31, 2016) (“A Rule 12(c) motion for judgment on the pleadings is analyzed the same as a Rule 12(b)(6) motion to dismiss.”). So, “to survive a motion for judgment on the pleadings, ‘a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.’” Losey v. Warden, 521 F.App'x 717, 719 (11th Cir. 2013) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “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.” Iqbal, 556 U.S. at 678.

         B. Motion for Leave to Amend Complaint Standard

         “[A] plaintiff's motion to amend is ‘committed to the sound discretion of the district court, ’ but that discretion ‘is strictly circumscribed’ by Rule15(a)(2) of the Federal Rules of Civil Procedure, which instructs that leave to amend should be ‘freely give[n] when justice so requires.’” City of Miami v. Wells Fargo & Co., 801 F.3d 1258, 1267 (11th Cir. 2015), cert. granted sub nom. Wells Fargo & Co. v. City of Miami, Fla., 136 S.Ct. 2545 (2016) (quoting Gramegna v. Johnson, 846 F.2d 675, 678 (11th Cir. 1988)). “Despite the rule that leave to amend should be given freely, the court may deny leave to amend on numerous grounds, including the futility of the amendment.” Patel v. Georgia Dep't BHDD, 485 Fed.Appx. 982, 982 (11th Cir. 2012) (citing Maynard v. Bd. of Regents of Div. of Univs. of Florida Dept. of Educ. ex rel. Univ. of S. Florida, 342 F.3d 1281, 1287 (11th Cir. 2003)). “Futility justifies the denial of leave to amend where the complaint, as amended, would still be subject to dismissal.” Patel, 485 Fed.Appx. at 982 (citing Burger King Corp. v. Weaver, 169 F.3d 1310, 1320 (11th Cir. 1999)).

         III. ...


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