Hill v. State Farm Insurance Co.
181 F. Supp. 3d 980
| M.D. Fla. | 2016Background
- Plaintiff David Hill purchased two State Farm whole life policies (1967 and 1970) after speaking with a State Farm agent in Ohio who allegedly told him skipping premiums would have no negative consequences.
- Each written policy contained integration and anti-reliance clauses stating agents could not modify the contract and explaining premium due dates, a 31-day grace period, an Automatic Premium Loan (APL) option, and automatic conversion to extended term insurance if unpaid after credits/APL.
- Hill elected the APL option on each application. He alleges he paid all premiums through 2009, but State Farm applied APLs in late 2009/early 2010, charged large loans, converted the policies, and reported gross distributions to the IRS.
- Hill claims he received no notice or distributions, was audited, assessed back taxes and penalties, had his 2013 refund seized, and now suffers Social Security garnishment.
- Procedural posture: State Farm removed (diversity), moved to dismiss the Amended Complaint or to strike certain damages allegations. Court considered the written policies under incorporation-by-reference doctrine.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether fraudulent inducement claim survives where alleged oral misrepresentations conflicted with the written policies | Hill: agent told him nonpayment would cause no negative consequences; he relied on that statement when buying the policies | State Farm: written, integrated policies expressly set out consequences of nonpayment; Hill could not justifiably rely on contrary oral statements | Dismissed with prejudice — oral misrepresentations contradicted/covered by integrated written contracts; justifiable reliance fails (Counts I & II) |
| Whether breach of contract claims plausibly plead given policy terms and APL/conversion provisions | Hill: he paid all premiums through 2009; State Farm prematurely invoked APLs, charged loans, converted policies, and distributed benefits — breach and damages | State Farm: its actions were authorized because premiums were unpaid | Survived — taking plaintiff's allegation that premiums were paid through 2009 as true, claims for breach of contract are plausible (Counts III & IV) |
| Whether allegations about IRS actions/tax damages are immaterial and should be stricken | Hill: IRS consequences flowed naturally from State Farm’s alleged undisclosed reporting and breach | State Farm: IRS actions and plaintiff’s tax failures are unrelated and not recoverable | Denied — tax consequences plausibly flow from the alleged breach and non-notification; striking is inappropriate under Rule 12(f) |
| Whether court may consider the insurance policies on a 12(b)(6) motion | Hill: policies not attached to his complaint | State Farm: policies attached to motion; authenticity undisputed and policies are central to the claims | Court may consider the policies under incorporation-by-reference since they are central and undisputed |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (legal conclusions not entitled to assumption of truth for 12(b)(6) analysis)
- Alvarez v. Attorney Gen. for Fla., 679 F.3d 1257 (11th Cir. 2012) (pleading facts must be accepted as true on motion to dismiss)
- Am. Dental Ass’n v. Cigna Corp., 605 F.3d 1283 (11th Cir. 2010) (two-pronged Iqbal/Twombly pleading framework)
- Horsley v. Feldt, 304 F.3d 1125 (11th Cir. 2002) (incorporation-by-reference doctrine for documents central to claims and undisputed)
- AEM Farms, Inc. v. Woods, 81 Ohio St.3d 498 (1998) (oral statements inconsistent with a later written agreement do not justify fraud recovery)
- Hillcrest Pac. Corp. v. Yamamura, 727 So.2d 1053 (Fla. Dist. Ct. App. 1999) (no fraud recovery for oral misrepresentations adequately covered or contradicted by written contract)
- Lepera v. Fuson, 83 Ohio App.3d 17 (Ohio Ct. App.) (elements of fraudulent inducement under Ohio law)
- Siever v. BWGaskets, Inc., 669 F. Supp. 2d 1286 (M.D. Fla. 2009) (elements of fraudulent inducement under Florida law)
- MMK Grp., LLC v. SheShells Co., LLC, 591 F. Supp. 2d 944 (N.D. Ohio 2008) (elements of breach of contract under Ohio law)
- Bland v. Freightliner LLC, 206 F. Supp. 2d 1202 (M.D. Fla. 2002) (contract damages must arise naturally from the breach or be foreseeable)
- Thompson v. Kindred Nursing Centers E., LLC, 211 F. Supp. 2d 1345 (M.D. Fla. 2002) (motion to strike under Rule 12(f) is disfavored and reserved for matters with no possible relation to controversy)