643 F.Supp.3d 959
D. Alaska2022Background
- Transamerica (successor to Bankers United) issued a Last Survivor Flexible Premium Indexed Universal Life policy in 1993; plaintiffs paid a single $50,000 premium at issue.
- In 2021 Transamerica sent a lapse/grace-period notice requiring $21,683.12 by August 2 (extended to October 2) to keep the policy in force; plaintiffs (elderly) asked that coverage continue without additional premium.
- Transamerica replied on October 1, 2021, explaining its interpretation that the flexible policy required additional premiums to avoid termination and provided a copy of the policy.
- Plaintiffs sued for declaratory relief, breach of contract, breach of the covenant of good faith and fair dealing, and fraud/negligent/intentional misrepresentation, alleging Transamerica provided inconsistent copies of the policy and has not produced a certified operative copy.
- On Transamerica’s Rule 12(b)(6) motion, the court accepted plaintiffs’ well-pleaded allegations about a disputed operative policy copy, denied dismissal of Counts I–III, but dismissed the fraudulent/intentional misrepresentation claim without prejudice and granted leave to amend (deadline Dec. 19, 2022).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Declaratory judgment — must Transamerica maintain policy without more premium? | The $50,000 was the "maximum total premium" required; therefore coverage should continue without additional payments. | Policy language (per Transamerica) requires sufficient accumulation value/monthly deductions; additional premium was required to keep coverage. | Court found plaintiffs plausibly alleged an actual controversy and denied dismissal; court will not interpret disputed policy copy at pleading stage. |
| Breach of contract — did Transamerica breach by declaring lapse? | Payment created enforceable contract; lapse notice repudiated that contract causing damages. | Policy terms allow lapse absent further premium; thus no breach. | Court held plaintiffs pleaded existence of contract and breach sufficiently to survive 12(b)(6). |
| Bad faith / covenant of good faith and fair dealing — did Transamerica act unreasonably? | Transamerica repudiated coverage without reasonable basis and misrepresented policy terms; failed full investigation. | Denial based on policy terms and reasonable interpretation. | Court found plaintiffs alleged facts sufficient to plausibly state a bad-faith claim at this stage. |
| Fraudulent/intentional misrepresentation — did Transamerica knowingly misrepresent? | Transamerica knowingly provided a false policy copy and misrepresented coverage to induce reliance. | Transamerica’s October 1 letter reflects a reasoned, documentary-based interpretation; differences appear inadvertent. | Fraud/intentional misrepresentation dismissed for failing to plead scienter with particularity; negligent misrepresentation survives; plaintiff given leave to amend. |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (facial-plausibility pleading standard for Rule 12(b)(6)).
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plaintiffs must plead facts plausibly showing entitlement to relief).
- Bering Strait Sch. Dist. v. RLI Ins. Co., 873 P.2d 1292 (Alaska 1994) (reasonable-expectations principle in insurance contract interpretation).
- Downing v. Country Life Ins. Co., 473 P.3d 699 (Alaska 2020) (ambiguities in insurance contracts construed in favor of insured; sources to determine reasonable expectations).
- Hillman v. Nationwide Mut. Fire Ins. Co., 855 P.2d 1321 (Alaska 1993) (insurer’s refusal to honor a claim must be without reasonable basis to support bad-faith tort claim).