Lowenberg v. Illinois Mutual Life Insurance Company

Background

Frank Lowenberg alleged that he purchased a medical insurance policy from Illinois Mutual Health in 1972 while residing in Michigan, later moved to California, and kept the policy in effect by paying premiums for nearly fifty years. The policy included a provision titled “Guaranteed Renewable for Life of Insured.” Illinois Mutual notified him in April 2021 that it would discontinue the policy because the pool of insureds had decreased to thirty people. Michigan approved the discontinuation, while Lowenberg alleged that the California Department of Insurance had not.

Lowenberg claimed that the policy did not permit Illinois Mutual to cancel it. His complaint asserted claims for breach of contract, breach of the implied covenant of good faith and fair dealing, bad-faith failure to investigate a claim, intentional and negligent misrepresentation, intentional and negligent infliction of emotional distress, and declaratory relief under California law.

Primary Jurisdiction

The court denied the motion to dismiss under the primary jurisdiction doctrine. That doctrine can allow a court to defer to an administrative agency when the agency’s expertise and involvement would promote efficiency. The court found no indication that the California Department of Insurance was actively investigating Lowenberg’s claims, so deferring to the agency would not promote efficiency or consistent application of regulatory law.

Contract and Fair-Dealing Claims

The court held that Lowenberg plausibly stated a breach-of-contract claim. The policy said it “may be renewed during the life of the Insured by the payment of the premium,” and that each renewal would continue the policy for the period covered by the premium. Although the policy did not use the word “non-cancelable,” the court found that both parties’ interpretations were reasonable: Illinois Mutual argued that “guaranteed renewable” did not mean non-cancelable, while Lowenberg argued that the provision required renewal as long as he was alive and paid the premiums. Because the language was ambiguous, the court could not conclude at the dismissal stage that Lowenberg failed to state a contract claim.

The court also found that Lowenberg plausibly stated a claim for breach of the implied covenant of good faith and fair dealing. He alleged that he had performed his obligations for nearly fifty years, depended on the promised ability to renew the policy, and that Illinois Mutual abandoned that promise because the policy was no longer profitable.

Dismissed Claims

The court granted the motion to dismiss the bad-faith failure-to-investigate claim because Lowenberg did not allege that he had submitted claims for covered benefits or was waiting for payment on properly submitted claims.

The court also granted the motion to dismiss the intentional and negligent misrepresentation claims. Because fraud-based claims must be pleaded with particularity, Lowenberg needed to identify, among other things, who made the alleged representations and why that person knew, or lacked reasonable grounds to believe, that the representations were false. The complaint did not provide those details.

The court granted the motion to dismiss the intentional-infliction-of-emotional-distress claim because the alleged conduct did not rise to the level of extreme and outrageous conduct required under California law. It also granted the motion to dismiss the negligent-infliction-of-emotional-distress claim because Lowenberg did not allege a duty of care beyond the contractual obligations or injuries beyond economic harm. The court dismissed each of these claims with leave to amend because it could not say that amendment would be futile.

Disposition

The court granted in part and denied in part Illinois Mutual’s motion to dismiss. The motion was granted as to the bad-faith investigation, intentional misrepresentation, negligent misrepresentation, intentional infliction of emotional distress, and negligent infliction of emotional distress claims, with leave to amend. The motion was denied as to the breach-of-contract, breach-of-the-implied-covenant, and declaratory-relief claims.

The court also granted in part and denied in part Illinois Mutual’s request for judicial notice. It treated the policy as part of the complaint under the incorporation-by-reference doctrine but declined to do the same for three letters. The clerk was ordered to strike docket entry 44, and the court set a telephonic case-management conference.