Phan v. Transamerica Premier Life Insurance Company

Background

Phan acquired a life-insurance policy in 1998. After Phan missed a premium payment in 2018, the policy lapsed, and her application for reinstatement was denied. Phan filed this lawsuit in June 2020.

In May 2023, the defendant, which the order refers to as Transamerica Life Insurance Company (TLIC), told Phan that it had administratively restored the policy as if it had never lapsed, but required payment of $59,285.90 in past-due premiums to keep the policy in force. After further communications, Phan declined to pay the past-due premiums, and the restored policy lapsed on July 21, 2023.

TLIC sought permission to add two counterclaims. The proposed counterclaims requested declaratory relief—an order defining the parties’ legal rights—concerning whether Phan had to pay the past-due premiums and whether the renewed policy had lapsed because she did not pay them.

Legal standards

Federal Rule of Civil Procedure 13(e) permits a court to allow a supplemental pleading asserting a counterclaim that matured or was acquired after an earlier pleading was served. Because the deadline to amend pleadings had passed and the court’s scheduling order was in place, the court first applied Federal Rule of Civil Procedure 16(b)(4), which requires good cause to modify the schedule. The court focused primarily on the moving party’s diligence. If good cause exists, the court then considers whether the proposed pleading is proper under Rule 15, including bad faith, undue delay, prejudice, and futility.

Court’s analysis

The court found that TLIC’s counterclaims did not become ripe—that is, ready for judicial consideration—until Phan actually refused to pay the past-due premiums and the policy lapsed on July 21, 2023. Earlier evidence showed that TLIC knew Phan’s litigation position and her predicted response, but that information did not itself create a ripe counterclaim.

The court found good cause under Rule 16 because TLIC moved only one month after the counterclaims became ripe. Although fact discovery had closed, the court determined that any additional discovery would likely be limited because the counterclaims concerned the same policy involved in Phan’s complaint. The court also noted that the deadlines for dispositive motions and trial had not yet arrived and that preventing TLIC from asserting the counterclaims could significantly prejudice TLIC.

The court then concluded that the proposed supplemental pleading was proper under Rule 13(e). It rejected Phan’s arguments that TLIC acted in bad faith or delayed unduly, because the counterclaims were not ripe earlier. It also found that the likely prejudice to Phan was minimal. Finally, the court determined that the proposed counterclaims were not futile because they sought different relief from TLIC’s offset argument in its answer.

Disposition

The court GRANTED TLIC’s Motion for Leave to File a Supplemental Pleading. TLIC was ordered to file the supplemental pleading by September 19, 2023. The order did not resolve the merits of the proposed counterclaims.