627 F.Supp.3d 480
D. Md.2022Background
- In 1999 Creston Tate and the 1999 Tate Family Irrevocable Trust bought three American General universal life policies (face values: $10M each) for estate planning; the Trust paid roughly $37 million in premiums over time.
- Each policy expressly lists a Maturity Date (Sept. 25, 2028) and contains language saying death benefits are payable if the last surviving contingent insured dies prior to maturity; separately the policy definition of “Last Surviving Contingent Insured” says death benefits are payable upon death of the last survivor without referencing the Maturity Date.
- In 2019 American General sent letters indicating earlier maturities and that no Maturity Extension Rider had been purchased; in April 2020 it confirmed the Sept. 25, 2028 Maturity Date but refused to guarantee lifetime coverage.
- Plaintiffs sued in 2021 asserting breach of contract; breach of the covenant of good faith; negligent and fraudulent misrepresentation; unjust enrichment; declaratory relief; reformation; and rescission.
- American General moved to dismiss; the court granted the motion as to Counts II (good faith), III (negligent misrep.), and IV (fraudulent misrep.), and denied dismissal as to Counts I (breach), V (unjust enrichment), VI (declaratory relief), VII (reformation), and VIII (rescission).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of coverage / contract interpretation and anticipatory breach | Policies were marketed and intended to be permanent life coverage; American General’s 2019/2020 letters repudiated that promise — anticipatory breach | Policies explicitly terminate at the stated Maturity Date (Sept. 25, 2028); no duty beyond maturity | Claim survives at pleading stage: ambiguous provisions and letters plausibly state an anticipatory breach; denial of dismissal as to breach (Count I) |
| Breach of implied covenant of good faith and fair dealing | American General manipulated maturity dates and intended to deprive Plaintiffs of contract benefits | No separate independent cause of action; any bad-faith conduct is subsumed by contract claim | Dismissed as an independent count (Count II); plaintiffs may pursue bad-faith allegations within breach claim |
| Negligent and fraudulent misrepresentation (statute of limitations) | Sales representations induced purchase; plaintiffs only discovered the misrepresentations in 2019 | Policies themselves (prominently stating Maturity Date) placed plaintiffs on inquiry notice in 1999, so tort claims are time-barred | Dismissed as time-barred under Maryland’s 3-year statute (Counts III & IV) because inquiry notice accrued on receipt of the policies |
| Unjust enrichment; declaratory and equitable relief (reformation/rescission) | In the alternative to contract relief, unjust enrichment is warranted; equitable reformation/rescission are appropriate if policies were the product of mistake or misrepresentation; declaratory relief needed to clarify coverage | Existence of written policies bars quasi-contract and equity where adequate legal remedies exist; declaratory claim is duplicative of breach claim | Unjust enrichment may proceed as an alternative due to disputed contract terms (Count V denied dismissal); declaratory relief permitted (Count VI denied dismissal); reformation and rescission pleaded plausibly and survive (Counts VII & VIII denied dismissal) |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard: plausibility required)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility / more than labels and conclusions)
- Calomiris v. Woods, 353 Md. 425 (1999) (contract interpretation and ambiguity are questions for the court)
- Credible Behavioral Health, Inc. v. Johnson, 466 Md. 380 (2019) (contracts construed in context of entire agreement and circumstances)
- Poffenberger v. Risser, 290 Md. 631 (1982) (discovery rule / accrual when claimant knew or should have known)
- Estate of Adams v. Continental Ins. Co., 233 Md. App. 1 (2017) (discusses inquiry notice and discovery rule in Maryland)
- Hill v. Cross Country Settlements, LLC, 402 Md. 281 (2007) (elements of unjust enrichment)
- Volvo Constr. Equip. N.A., Inc. v. CLM Equip. Co., Inc., 386 F.3d 581 (4th Cir. 2004) (factors for deciding appropriateness of declaratory relief)
- Transamerica Premier Life Ins. Co. v. Selman & Co., LLC, 401 F. Supp. 3d 576 (D. Md. 2019) (anticipatory breach standard and discussion of unjust enrichment as alternative)
- Eastern Shore Markets v. JD Assoc., 213 F.3d 175 (4th Cir. 2000) (implied covenant of good faith limited; does not create independent cause of action)