Kenneth Graham v. Stonebridge Life Insurance Co.
16-1161
| 8th Cir. | Aug 23, 2017Background
- Graham bought HealthExtras group accidental disability coverage in 2001, paid premiums through 2014, and filed a class action on October 6, 2014 alleging the group was not a qualifying insurable group under Arkansas law.
- He sued marketing organizations and insurers (including Stonebridge and Virginia Surety) for unjust enrichment, conversion, civil conspiracy, and (later amended) breach of contract, claiming policies were void ab initio for failure to comply with Arkansas group-insurance statutes and registration requirements.
- Defendants argued the Arkansas savings statute (Ark. Code Ann. § 23–79–118) made the policies enforceable and that class members had no concrete injury because many never filed claims; Stonebridge also pointed to prior litigation where Graham had filed a disability claim.
- The district court held the Arkansas savings statute applied (so policies were not void ab initio) and, alternatively, dismissed Graham’s non-contract claims as time-barred; it also dismissed the breach claim for failure to state a claim when policy termination rights were shown.
- On appeal the Eighth Circuit concluded Graham had Article III standing (both to challenge voidness and to seek premium restitution if coverage was illusory), held unjust-enrichment and conspiracy claims were time-barred because accrual occurred well before 2011 (and tolling failed), and affirmed dismissal of the breach claim because the policies permitted termination on notice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Article III standing | Graham: policies void ab initio → economic injury; alternatively overpayment/illusory coverage → restitutionable harm | Stonebridge: policies enforceable under Arkansas savings statute; absent claims, no concrete injury | Court: Graham has standing on both theories; merits of voidness not resolved at standing stage |
| Applicability of Arkansas savings statute (policy voidness) | Graham: policies violated Arkansas group-insurance statutes and registration requirements → void ab initio | Defendants: Ark. § 23–79–118 preserves enforceability despite noncompliance | District court applied savings statute; Eighth Circuit treated policy-validity as a merits question and did not resolve it for standing |
| Statute of limitations for unjust enrichment and civil conspiracy | Graham: ongoing scheme and concealment tolled limitations | Defendants: claims accrued long before 2011; Arkansas rejects continuing-tort tolling; any concealment did not prevent discovery | Held: claims accrued earlier (claim activity and public records put Graham on notice by 2006); tolling fails → claims time-barred |
| Breach of contract (policy termination) | Graham: termination was wrongful breach | Stonebridge: policy grants right to terminate on notice (sample policies show 30-day termination) | Held: breach claim fails as a matter of law because the contract permits termination on notice; claim dismissed |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility standard for pleading)
- Chalmers v. Toyota Motor Sales, USA, Inc., 935 S.W.2d 258 (Ark. 1996) (Arkansas rejects continuing-tort tolling outside narrow medical contexts)
- Varner v. Peterson Farms, 371 F.3d 1011 (8th Cir. 2004) (civil conspiracy borrows limitations period of underlying claim)
- Quality Optical of Jonesboro, Inc. v. Trusty Optical, L.L.C., 225 S.W.3d 369 (Ark. 2006) (limitations period runs when injury occurs, not when discovered)
- Carlsen v. GameStop, Inc., 833 F.3d 903 (8th Cir. 2016) (economic-overpayment theory supports standing)
- Am. Farm Bureau Fed'n v. U.S. Envtl. Prot. Agency, 836 F.3d 963 (8th Cir. 2016) (standing inquiry assumes plaintiffs would prevail on the merits for purposes of injury-in-fact analysis)
- Duit Constr. Co. v. Bennett, 796 F.3d 938 (8th Cir. 2015) (standing elements summarized)