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Palumbo v. Nationwide Life Insurance Co.

United States District Court, D. Connecticut

January 9, 2017

LAURA L. PALUMBO, individually and as Trustee of the William J. Palumbo Irrevocable Insurance Trust Agreement, dated November 111994, and; WILLIAM J. PALUMBO, individually and as Grantor of the William J. Palumbo Irrevocable Insurance Trust Agreement, dated November 111994, Plaintiffs,
v.
NATIONWIDE LIFE INSURANCE COMPANY, Defendant.

          MEMORANDUM OF DECISION ON DEFENDANT'S MOTION TO DISMISS

          WARREN W. EGINTON SENIOR UNITED STATES DISTRICT JUDGE

         Plaintiffs Laura L. Palumbo and William J. Palumbo bring this diversity action against defendant Nationwide Life Insurance Company to recover damages sustained as a result of allegedly false representations regarding the cost of insurance charges and the cost of insurance rates under variable life insurance policies numbered 1190193880 and 1190371850. Plaintiffs allege fraud, violation of the Connecticut Unfair Trade Practices Act (“CUTPA”), violation of the Connecticut Unfair Insurance Practices Act (“CUIPA”), breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment. In addition, plaintiffs seek declaratory relief as to their rights under the policies. Defendant has moved to dismiss the complaint in its entirety. For the following reasons, defendant's motion will be denied.

         BACKGROUND

         Plaintiffs allege that the life insurance policies purchased from defendant by the Palumbo Trust in 1994 and 1996 contain false representations and omissions of material facts regarding the cost of insurance charges and cost of insurance rates under the policies.

         The policies provide that any changes in the cost of insurance charges deducted from the policies will be based on changes in future expectations for such factors as investment earnings, mortality, persistency, expenses, and taxes. The policies also provide that "[c]urrent cost of insurance rates will be determined by [Nationwide] based on our expectations as to future mortality costs and expenses."

         Since the inception of the policies, defendant has increased the amount of the cost of insurance charges deducted from the policies for reasons wholly unrelated to changes in future expectations for such factors as investment earnings, mortality, persistency, expenses and taxes, contrary to the clear and explicit terms of the policies. Defendant has failed to determine and apply to the policies current cost of insurance rates based on its expectations as to future mortality costs and expenses, contrary to the clear and explicit terms of the policies.

         Defendant's repeated increases in charges was designed solely to increase the profits of defendant at plaintiffs' expense.

         DISCUSSION

         The function of a motion to dismiss is "merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof." Ryder Energy Distribution v. Merrill Lynch Commodities, Inc., 748 F.2d 774, 779 (2d Cir. 1984). When deciding a motion to dismiss, the Court must accept all well-pleaded allegations as true and draw all reasonable inferences in favor of the pleader. Hishon v. King, 467 U.S. 69, 73 (1984). The complaint must contain the grounds upon which the claim rests through factual allegations sufficient “to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007). A plaintiff is obliged to amplify a claim with some factual allegations in those contexts where such amplification is needed to render the claim plausible. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

         Plausibility of Plaintiffs' Claims

         Defendant argues that “plaintiffs' allegations are limited to the notion that Nationwide was obligated to apply the same cost of insurance charges to the Policies every year, without any increases.” The Court disagrees. Plaintiffs do not allege that Nationwide was prohibited from adjusting the amounts of cost of insurance charges. Rather, plaintiffs assert that under the contracts, changes in the cost of insurance charges must be based on changes in future expectations for such factors as investment earnings, mortality, persistency, expenses, and taxes. Further, plaintiffs proffer that defendant increased the amount of the cost of insurance for wholly unrelated reasons, contrary to the clear and explicit terms of the policies. Plaintiffs' claims will not be dismissed on general plausibility grounds.

         Statute of Limitations

         Defendant argues that plaintiffs were made aware of these allegedly impermissible increases in charges under both policies no later than 1997, rendering any claims time-barred. However, plaintiffs allege that defendant impermissibly increased the cost of insurance charges at issue up to the filing of the instant lawsuit. “When the wrong sued upon consists of a continuing course of conduct, the statute does not begin to run until that course of conduct is completed.” Handler v. Remington Arms Co., 144 Conn. 316, 321 (1957). Moreover, plaintiffs point out that they were not privy to defendant's formulas for calculating the cost of insurance charges, so they lacked notice of defendant's misdeeds. Indeed, plaintiffs contend that defendant fraudulently concealed the existence of the instant causes of action, preventing their accrual until plaintiffs' discovery in September 2014. See Conn. Gen. Stat. §52-595.

         Defendant responds by reiterating that “any such purported breach or fraudulent conduct was disclosed to Plaintiffs year after year since 1997, ” so defendant could not have intentionally concealed facts from plaintiffs. This argument is not persuasive, as knowledge of the specific amount of cost of insurance charges or knowledge that charges were increasing is not the same as knowledge of fraudulent calculation by defendant (i.e., knowledge that charges were not based on the factors set ...


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