Mauger v. Metropolitan Life Insurance Company
3:21-cv-00190
| N.D. Ind. | Mar 7, 2022Background
- In 1974 Elmer Mauger purchased a life insurance policy from Metropolitan Life (MetLife). After divorcing in 1985 he requested cancellation and removal of the beneficiary and stopped paying premiums.
- Mauger alleges MetLife did not cancel the policy or pay the cash surrender value; instead MetLife issued policy loans against the cash value to pay premiums from 1985 through April 2019.
- In January 2017 Mauger first received a Notice of Automatic Premium Loan and informed MetLife he had cancelled the policy decades earlier; MetLife continued to issue loans and send collection communications despite his protests and counsel’s cease-contact notice.
- In August 2019 the policy lapsed and MetLife deducted the outstanding loan from the policy’s cash value, reported that repayment as a distribution to the IRS, and issued Mauger a 1099-R for $19,875.02 for 2019.
- Mauger sued in Indiana state court alleging breach of contract (failure to cancel/pay cash surrender value), insurance bad faith, and fraud; MetLife removed the case and moved to dismiss under Rule 12(b)(6).
- The district court denied dismissal of the breach claim (Count I), dismissed the bad-faith claim with prejudice (Count II), and dismissed the fraud claim without prejudice with leave to amend (Count III).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether breach claim is time-barred (statute of limitations) | Mauger: claim accrued when he discovered the automatic loan notice in Jan 2017, so within 20-year limitations | MetLife: claim accrued in 1985 when Mauger knew he received no cash surrender value, so barred by 20-year limit | Denied dismissal — court finds accrual date not resolvable on pleadings and leaves timeliness for later stages |
| Whether Indiana law permits insurance bad faith for failure to pay cash surrender value | Mauger: MetLife’s refusal to cancel, creation of loans, collection attempts and reporting to IRS show bad faith | MetLife: bad-faith tort is limited to claim-handling (denial/delay/pressure) — not routine contractual failures | Dismissed with prejudice — court predicts Indiana Supreme Court would not extend bad-faith tort to these contract-based facts |
| Whether fraud claim pleads necessary elements under Rule 9(b) | Mauger: alleges specific false representations that he took loans, owed money, collection attempts, and reporting to IRS | MetLife: complaint fails to plead reliance and intent; also impermissible repackaging of breach of contract without distinct damages | Dismissed without prejudice — Rule 9(b) particularity satisfied as to who/what/when/where/how, but fraud claim fails because it alleges the same damages as breach (no distinct injury); leave to amend granted |
| Leave to amend fraud claim | Mauger requests leave to amend if claim deficient | MetLife opposed dismissal but not futility | Granted — court allows amendment because amendment might cure deficiencies and no futility shown |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (complaint must state a plausible claim to survive dismissal)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (apply plausibility standard and accept well-pleaded facts)
- Erie Ins. Co. v. Hickman by Smith, 622 N.E.2d 515 (Ind. 1993) (recognizes insurer duty of good faith limited to claim-handling abuses)
- Monroe Guar. Ins. Co. v. Magewerks Corp., 829 N.E.2d 968 (Ind. 2005) (declines to extend Hickman duty beyond its identified contexts)
- Sidney Hillman Health Ctr. v. Abbott Lab’ys, 782 F.3d 922 (7th Cir. 2015) (statute-of-limitations defenses generally inappropriate on Rule 12(b)(6) unless complaint supplies all facts supporting the defense)
- Midwest Commerce Banking Co. v. Elkhart City Centre, 4 F.3d 521 (7th Cir. 1993) (Rule 9(b) requires who/what/when/where/how, not pleading all elements of fraud)
- Tobin v. Ruman, 819 N.E.2d 78 (Ind. Ct. App. 2004) (to plead fraud alongside breach, plaintiff must allege an independent tort and damages distinct from contract breach)
- Foman v. Davis, 371 U.S. 178 (1962) (leave to amend should be freely given absent prejudice or futility)