Carrier v . American Bankers Life CV-05-430-JD 04/21/06 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Lori Carrier and Valerie Whitman v. Civil N o . 05-cv-430-JD Opinion N o . 2006 DNH 048 American Bankers Life Assurance Company of Florida
O R D E R
Lori Carrier and Valerie Whitman filed a putative class
action in state court, alleging that American Bankers Life
Assurance Company of Florida breached its insurance contracts
with them and other members of the putative class by failing to
refund the unearned portion of insurance premiums that had been
prepaid for credit insurance as part of their vehicle financing.
American Bankers removed the case to this court and moves to
dismiss the complaint. The plaintiffs oppose the motion to
dismiss except that they agree that their separate claim for
breach of the implied covenant of good faith and fair dealing
should be included in their breach of contract claim so that
Count II should be dismissed. After filing the motion to
dismiss, American Bankers filed a motion to certify a question to
the New Hampshire Supreme Court, which will also be addressed in
this order. Standard of Review
In considering a motion to dismiss, pursuant to Federal Rule
of Civil Procedure 12(b)(6), the court accepts the facts alleged
in the complaint as true and draws all reasonable inferences in
favor of the plaintiff. Edes v . Verizon Comms., 417 F.3d 133,
137 (1st Cir. 2005). The court must determine whether the
complaint, construed in the proper light, “alleges facts
sufficient to make out a cognizable claim.” Carroll v . Xerox
Corp., 294 F.3d 2 3 1 , 241 (1st Cir. 2002). “The standard for
granting a motion to dismiss is an exacting one: ‘a complaint
should not be dismissed for failure to state a claim unless it
appears beyond doubt that the plaintiff can prove no set of facts
in support of [her] claim which would entitle [her] to relief.’”
McLaughlin v . Boston Harbor Cruise Lines, Inc., 419 F.3d 4 7 , 50
(1st Cir. 2005) (quoting Conley v . Gibson, 355 U.S. 4 1 , 46
(1957)).
American Bankers filed copies of its insurance policies with
its motion to dismiss, explaining that the policies are integral
to the plaintiffs’ claims. Ordinarily, the court cannot consider
documents outside the complaint when deciding a motion to
dismiss. See Watterson v . Page, 987 F.2d 1 , 3-4 (1st Cir. 1993).
Nevertheless, “it is well-established that in reviewing the
complaint, [the court] ‘may properly consider the relevant
entirety of a document integral to or explicitly relied upon in
2 the complaint, even though not attached to the complaint, without
converting the motion into one for summary judgment.’” Clorox
C o . P.R. v . Proctor & Gamble Commercial Co., 228 F.3d 2 4 , 32 (1st
Cir. 2000) (quoting Shaw v . Digital Equip. Corp., 82 F.3d 1194,
1220 (1st Cir. 1996)). In this case, the insurance policies are
sufficiently integral to the complaint that they may be
considered for purposes of the motion to dismiss.
Background
The plaintiffs allege that American Bankers sells credit
life and disability insurance which pays a loan if the insured
debtor dies or is disabled and unable to make payments before the
loan is paid in full. When the plaintiffs purchased vehicles on
credit, the dealerships arranged financing that included the
American Bankers’s credit insurance. The plaintiffs paid a
single premium up front for the insurance as part of the
financing arrangement.
The plaintiffs then both paid their loans in full early,
before the end of the full financing period. As a result, their
insurance coverage also terminated early, leaving part of the
premium paid to American Bankers, the part that paid for coverage
that would have been provided for the full term, unearned. Under
the applicable policy provision, “[a]ny unearned premium will b e :
(1) credited to the insured’s account, if financed, or paid to
3 the insured; and (2) computed by the formula on file and approved
by the Insurance Commissioner.” American Bankers did not refund
the unearned part of the premium to the plaintiffs.
Discussion
The plaintiffs allege in Count I that American Bankers
breached its contract of insurance with them by failing to refund the unearned part of the premium they each paid. In Count IV,
the plaintiffs seek a declaratory judgment that American Bankers
is obligated to refund the unearned premium to them and an
injunction to require American Bankers to implement and maintain
a system to assure prompt refunds. The complaint does not
include Count I I I , and the plaintiffs have agreed to dismiss
Count I I . American Bankers moves to dismiss all of the claims.
In conjunction with its motion to dismiss, American Bankers seeks
to have a question of statutory interpretation certified to the
New Hampshire Supreme Court. That issue will be addressed first.
I. Certification
The New Hampshire Supreme Court provides for certification
by this court of “questions of law of this State which may be
determinative of the cause then pending in the certifying court
and as to which it appears to the certifying court there is no
controlling precedent in the decisions of this court.” N.H.
4 Supr. C t . R. 3 4 . “Absent controlling state-law precedent, a
federal court sitting in diversity has the discretion to certify
a state-law question to the state’s highest court.” Nieves v .
Univ. of P.R., 7 F.3d 2 7 0 , 274 (1st Cir. 1993). Certification is
inappropriate, however, if “the course the state courts would
take is reasonably clear.” Fischer v . Bar Harbor Banking & T r .
Co., 857 F.2d 4 , 8 (1st Cir. 1988). Therefore, the court must
first “undertake [its] own prediction of state law” to determine
whether the state law is reasonably clear. Nieves, 7 F.3d at
275.
American Bankers moves to certify the following question to
the New Hampshire Supreme Court: When a retail installment contract that finances a motor vehicle purchase is paid in full prior to its maturity, is the insurer that issued credit insurance on the loan (the premium for which was financed as part of such retail installment contract) required under RSA 361-A:7, IV-a to remit a refund of the unearned premium before it receives written notice of the prepayment from the holder of the loan?
Carrier and Whitman object to the motion to certify on the
grounds that the course the New Hampshire Supreme Court would
take is reasonably clear, particularly in light of decisions on
the same issue by New Hampshire trial courts. Carrier and
Whitman also object to American Bankers’s decision to proceed in
federal court and then raise an issue of state law.
As is more fully explained below, RSA 361-A:7, IV-a on its
face imposes no obligation on the insurer of an installment
5 contract loan, making the proposed question meaningless. In
addition, the plaintiffs’ claim is breach of contract not a claim
that American Bankers failed to honor a statutory obligation
under RSA 361-A:7, IV-a. Even if RSA 361-A:7, IV-a were
construed, contrary to its plain meaning, to condition the
insurer’s statutory refund obligation on notice from the holder
of the loan, that provision would merely provide a baseline of
statutory protection that would not prevent American Bankers from
providing greater protection or additional promises to its
insureds under the terms of its policy as long as the policy
otherwise complies with statutory requirements. See, e.g.,
Wegner v . Prudential Prop. & Cas. Ins. Co., 148 N.H. 1 0 7 , 109
(2002).
Therefore, the question American Bankers poses is not
appropriate for certification because it is not determinative of
the issue raised in this case. See, e.g., Stenberg v . Carhart,
530 U.S. 9 1 4 , 944-45 (2000). Further, even if the question did
present a determinative issue, the decisions in Gibson v .
Universal Underwriters Life Ins. Co., N o . 04-C-414 (N.H. Superior
C t . October 2 9 , 2004) and Amoche v . Guarantee T r . Life Ins. Co.,
N o . 04-C-674 (N.H. Superior C t . Mar. 2 4 , 2005), that were
provided by the plaintiffs, persuade this court that the course
the New Hampshire Supreme Court would take in construing RSA 361-
A : 7 , IV-a, in this context, is reasonably clear.
6 In addition, the plaintiffs filed this state law action in
state court. American Bankers removed the action to federal
court and then raised an issue of state law and state statutory
construction. Having chosen the federal forum, absent unusual
circumstances, American Bankers must accept the federal court’s
reasonable interpretation of state law “rather than seeking
extensions via the certification process.” Manchester Sch. Dist.
v . Crisman, 306 F.3d 1 , 14 (1st Cir. 2002).
II. Motion to Dismiss
American Bankers moves to dismiss the breach of contract
claim on the ground that the plaintiffs failed to allege that
American Bankers received written notice of the early termination
of their loans. American Bankers contends such notice is a
condition precedent to its obligation to refund unearned
premiums. It moves to dismiss the claim for declaratory and
injunctive relief on the grounds that the plaintiffs have an
adequate remedy at law and have not alleged irreparable harm.
American Bankers also contends that the declaratory judgment
claim is merely duplicative of the breach of contract claim.
A. Breach of Contract
Although the policies do not include a notice requirement
pertaining to the refund obligation, American Bankers asserts
7 that the New Hampshire statute requiring a retail installment
contract holder to provide written notice to the insurer when the
contract is paid in full before maturity is an implied condition
that must be satisfied before it is obligated to refund unearned
premiums. See RSA 361-A:7, IV-a. By asserting that its policy
includes an implied condition precedent based on that statute,
American Bankers raises issues as to the meaning of the policy
language and the statutory framework.
1 . Interpretation of the policy.
“The interpretation of insurance policy language, like any
contract language, is ultimately an issue of law for the court to
decide." D’Amour v . Amica Mut. Ins. Co., 891 A.2d 5 3 4 , 536 (N.H.
2005) (internal quotation marks omitted). The court “construe[s]
the language of an insurance policy as would a reasonable person
in the position of the insured based on a more than casual
reading of the policy as a whole.” Id. In interpreting policy
language, the court is bound by its reasonable meaning and is not
free to rewrite policy provisions. Catholic Med. Ctr. v . Exec.
Risk Indem., Inc., 151 N.H. 699, 702 (2005).
Ordinarily, when policy provisions are ambiguous, the
ambiguity is resolved in favor of the insured. Kelly v .
Prudential Prop. & Cas. Ins. Co., 147 N.H. 6 4 2 , 643 (2002)
(citing Trombly v . Blue Cross/Blue Shield, 120 N.H. 7 6 4 , 770
8 (1980)). “Where the insurer does not choose the language because
that language is prescribed by statute, this rule does not
apply.” Matarese v . N.H. Mun. Ass’n, 147 N.H. 396, 401 (2002).
In that case, the court examines the intent of the legislature to
determine the meaning of the statutory language used in the
policy. Id.
American Bankers asserts that RSA 408-A:8, II prescribed the
language used in the refund provision so that the legislature’s
intent, which American Bankers asserts is expressed in RSA 361-
A : 7 , IV-a, controls the meaning of that provision. The refund
provision in the American Bankers’s policy states:
Refunds: Any unearned premium will b e : 1 . credited to the insured’s account, financed, or paid to the insured; and 2.computed by the formula on file and approved by the Insurance Commissioner. RSA 408-A:8, II provides:
Each individual policy, group certificate or notice of proposed insurance shall provide that in the event of termination of the insurance prior to the scheduled maturity date of the indebtedness, any refund of an amount paid by the debtor for insurance shall be paid or credited promptly to the person entitled thereto within 30 days from the termination of the insurance; provided, however, that the commissioner shall prescribe a minimum refund and no refund which would be less that such minimum need be made.
Although RSA 408-A:8, II clearly requires credit insurance
policies to include a provision for a refund, the American
Bankers’s refund provision did not borrow any language from the
statute. Further, the statute does not include a notice
9 provision or reference RSA 361-A:7, IV-a, providing no basis to assume that RSA 361-A:7, IV-a expresses legislative intent that is pertinent to RSA 408-A:8, II. 1 Therefore, the policy language is construed under the ordinary rules of construction. Under the policy, the term of insurance ends when the debt is repaid and “[a]ny unearned premium will be . . . credited to the insured’s account, if financed, or paid to the insured.” Although the policy imposes no notice requirement or condition for a refund, American Bankers argues that the notice required by RSA 361-A:7, IV-a is an implied condition precedent to its refund obligation. That theory is based on American Bankers’s assertion that its policies were amended to conform to New Hampshire law, including the requirement of a refund of unearned premiums, and that state law applies to insurance contracts.
Under New Hampshire law, however, “conditions precedent are not favored, and [the court] will not so construe such conditions unless required by the plain language of the agreement.” Holden Eng’g & Surveying, Inc. v . Pembroke Rd. Realty Tr., 137 N.H. 393, 396 (1993). In the absence of an express notice requirement in the refund provision, no such condition may be inferred.2
1 Chapter 408-A is titled “Credit Life and Accident Health Insurance,” while Chapter 361-A pertains to retail installment sales of motor vehicles. Neither chapter cross-references the other. 2 In contrast, the policy expressly conditions its promise to pay insurance benefits on receipt of proof of death or
10 Therefore, on its face, the policy does not condition payment of
the refund on notice to the insured.3
American Bankers also argues that the statutory provisions
pertinent to installment sales and credit insurance are
necessarily incorporated into its policies, despite the lack of
any specific reference to those statutes. C f . Forbes Farm P’ship
v . Farm Family Mut. Ins. Co., 146 N.H. 2 0 0 , 202-03 (2001)
(discussing policy with specific statutory reference). The court
will consider the effect of the statutory framework without
deciding whether the policy incorporated those statutes.
disability: “We will pay the benefit to the beneficiary: 1 . when we receive proof of an insured’s death . . . .” and “We will pay the monthly benefit to the beneficiary: 1 . when we receive proof [of specified disability].” 3 American Bankers cites cases from other courts that it represents “involved the same allegations and plaintiff’s counsel as in this case” and “substantially similar allegations as this case” and ruled against those claims. Reply at 5 . Contrary to that representation, however, the holdings in the cited cases did not involve breach of contract claims. Instead, the plaintiffs in those cases brought claims under the Racketeer Influenced and Corrupt Organizations Act, which were dismissed due to a failure to allege or present evidence of fraud. See Richards v . Combined Ins. C o . of Am, 55 F.3d 2 4 7 , 249 (7th Cir. 1995); Hoban v . USLife Credit Life Ins. Co., 163 F.R.D. 509, 515-16 (N.D. Ill. 1995); Sousa v . N . Cent. Life Ins. Co., 910 F. Supp. 5 3 , 57 (D.R.I. 1995). Because the plaintiffs do not allege RICO claims here, the discussions of the refund provisions in the context of RICO fraud in those cases are inapposite here.
11 2 . Statutory construction.
“In construing a statute, the court “examine[s] the language
of the statute, and, where possible, [ ] ascribe[s] the plain and
ordinary meanings to the words used.” Foote v . Manchester Sch.
Dist., 152 N.H. 599, 601 (2005). The court “interpret[s]
statutes in the context of the overall statutory scheme and not
in isolation.” Id. When the language of a statute is clear, it
is not subject to modification, and the court “will neither
consider what the legislature might have said nor add words that
it did not see fit to include.” Verizon New Eng., Inc. v . City
of Rochester, 151 N.H. 263, 266 (2004); accord Banfield v .
Allstate Ins. Co., 152 N.H. 4 9 1 , 496 (2005).
RSA 361-A:7, IV-a provides that “[i]f a retail installment
contract is paid in full prior to maturity, then no later than 30
days after payment in full, the holder of the contract shall
provide written notice of such payment to any insurance company
that has issued an insurance contract the premium of which was
financed as part of such retail installment contract.” As such,
the statute requires the “holder of the contract” to provide
notice to the insurer. “The ‘holder’ of a retail installment
contract means the retail seller of the motor vehicle under or
subject to the contract or . . . the sales finance company or
other assignee.” RSA 361-A:1, V I .
The statute plainly requires the seller to provide notice of
12 an early payoff to the insurer with specified information,
including a statement “that pursuant to RSA 361-A a refund by the
insurer of any unused prepaid premium is due the buyer upon
receipt of the notice.” American Bankers interprets that
statement to provide a statutorily imposed condition precedent
for its obligation to refund unearned premiums to insured buyers.
The statute requires notice by the seller to the insurer of its
obligation to refund unearned premiums to the buyer, which
obligation arises, at the latest, when the insurer receives
notice of payment in full from the seller. The statutory notice
requirement is an obligation owed by the seller to the insurer
and does not impose any obligations on the insured buyer or
restrict or limit any obligations owed by the insurer to the
insured buyer.
New Hampshire law requires all credit insurance policies,
such as the American Bankers policy at issue here, to “provide
that in the event of termination of the insurance prior to the
scheduled maturity date of the indebtedness, any refund of an
amount paid by the insured debtor for insurance shall be paid or
credited promptly to the person entitled thereto within 30 days
from the termination of the insurance.” RSA 408-A:8, I I . The
statute does not require notice by the debtor as a condition of
the statutorily required payment. In addition, under New
Hampshire law, all credit insurance policies, such as the
13 American Bankers policy at issue here, are required to provide,
among other things, “a description of the amount, term and
coverage including any exceptions, limitations or restrictions
. . . .” RSA 408-A:6, I I . Therefore, to the extent American
Bankers intended to include a notice requirement as a condition
of its promise to refund unearned premiums, it was arguably
required to provide a description of that requirement in the
policy, which it failed to d o .
Given the statutory framework, RSA 361-A:7, IV does not
condition the insurer’s obligation to pay a refund to its insured
on receipt of notice from the seller. American Bankers’s policy
language pertaining to the refund cannot reasonably be
interpreted to require notice, either from the insured or the
seller, as a condition precedent to the insurer’s obligation to
refund unearned premiums to its insured. Although a notice
requirement in the policy might have been advisable, American
Bankers chose not to include such a provision, and the court is
not free either to construe the language in the insurer’s favor
or to rewrite the policy to include a notice condition.
III. Declaratory and Injunctive Relief
In the complaint, the plaintiffs allege that they seek “a
declaration that if a credit-insured loan is paid off prior to
the scheduled expiration date of the single premium credit
14 insurance coverage, then American Bankers is obligated to refunds
[sic] the unearned premium to the insured.” Comp. ¶ 6 5 . They
also seek “an injunction requiring American Bankers to implement
and maintain controls designed to reasonably assure the prompt
refund of unearned premiums on early loan payoffs as required by
American Bankers’ contracts.” Id. ¶ 6 6 . American Bankers moves
to dismiss those claims asserting that the plaintiffs have an
adequate remedy at law, that they failed to allege the necessary
elements for an injunction, and that the declaratory judgment
claim duplicates the breach of contract claim.
Because the plaintiffs filed their action in state court,
their request for a declaratory judgment is brought pursuant to
RSA 491:22.4 Under RSA 491:22, “[a]ny person claiming a present
legal or equitable right or title may maintain a petition against
any person claiming adversely to such right or title to determine
the question as between the parties, and the court's judgment or
decree thereon shall be conclusive. The existence of an adequate
remedy at law or in equity shall not preclude any person from
obtaining such declaratory relief.” Therefore, an adequate legal
remedy does not require dismissal of the declaratory judgment
claim. Further, a declaratory judgment provides a different
remedy than breach of contract and is therefore not duplicative
4 The plaintiffs do not state the legal basis for their declaratory judgment claim in the complaint.
15 of a breach of contract claim.
The plaintiffs alleged a claim for injunctive relief under
New Hampshire law that provides “[a]n injunction will issue if
there is an immediate danger of irreparable harm to the party
seeking injunctive relief, and there is no adequate remedy at
law.”5 UniFirst Corp. v . City of Nashua, 130 N.H. 1 1 , 14 (1987)
(internal quotation marks omitted). Further, “[i]njunctive
relief is one of the peculiar and extraordinary powers of equity,
. . . normally to be exercised only when warranted by imminent
danger of great and irreparable damage.” N.H. Donuts, Inc. v .
Skipitaris, 129 N.H. 7 7 4 , 779 (1987) (internal quotation marks
and citations omitted). A claim for monetary damages obviates
the need for an injunction. See Murphy v . McQuade Realty, Inc.,
122 N.H. 3 1 4 , 532 (1982).
American Bankers is correct that the plaintiffs have not
5 The parties address the injunction claim under New Hampshire law, which raises a potential choice of law question under Erie R. C o . v . Tompkins, 304 U.S. 6 4 , 78 (1938). See, e.g., Charlesbank Equity Fund II v . Blinds to G o , Inc., 370 F.3d 151, 158 (1st Cir. 2004) (noting but not deciding Erie issue); Mid-America Pipeline C o . v . Lario Enter., Inc., 942 F.2d 1519 1523 (10th Cir. 1991) (“We apply the law of the forum state in determining whether to grant mandatory injunctive relief in diversity cases.”). It is not necessary to determine whether state or federal law provides the governing law for injunctive relief in this case as the federal standard is not materially different from the state standard for purposes of the present motion. See, e.g., Matrix Group Ltd., Inc. v . Rawlings Sporting Goods Co., Inc., 378 F.3d 2 9 , 33 (1st Cir. 2004); Rosario-Urdaz v . Rivera-Hernandez, 350 F.3d 219, 222 (1st Cir. 2003); Donoghue v . IBC USA Inc., 70 F.3d 206, 219 (1st Cir. 1995).
16 alleged any facts to support their injunction claim. Further,
their claim for damages suggests that an injunction is not
necessary. Therefore, the claim for injunctive relief is
dismissed.
Conclusion
For the foregoing reasons, the defendant’s motion to dismiss (document n o . 4 ) is granted as to the claim for injunctive relief
and is otherwise denied. The defendant’s motion to certify a
question (document n o . 16) is denied.
SO ORDERED.
>eph A. DiClerico, Jr. _ Ni__beph United States District Judge April 2 1 , 2006
cc: Dustin T . Brown, Esquire Frank Burt, Esquire Jason Lance Crawford, Esquire J. Clay Fuller, Esquire Wilbur A . Glahn, I I I , Esquire Ferrokh Jhabvala, Esquire Edward K. O’Brien, Esquire