Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Dickman v. Banner Life Insurance Co.

United States District Court, D. Maryland

December 21, 2016

RICHARD DICKMAN et al.
v.
BANNER LIFE INSURANCE COMPANY et al.

          MEMORANDUM

          William M. Nickerson Senior United States District Judge.

         Before the Court is a Motion to Dismiss and to Strike filed by Defendants Banner Life Insurance Company (Banner) and Legal & General America, Inc. (LGA), ECF No. 38, as well as a Motion to Dismiss, or in the Alternative, to Strike, filed by Defendant Legal & General Group PLC (LG Group), ECF No. 39. Plaintiffs filed a consolidated opposition to these motions, ECF No. 42, and Defendants filed replies. ECF No. 50 (Banner's and LGA's) and ECF No. 52 (LG Group's). The motions are now fully briefed. Upon a review of the parties' submissions and the applicable case law, the Court determines that no hearing is necessary, Local Rule 105.6, and that LG Group's motion will be granted and the motion of Banner and LGA will be granted in part and denied in part.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         This case relates to certain universal life insurance policies issued by Defendant Banner and purchased by Plaintiffs Richard J. Dickman and Kent Alderson. Banner is a for-profit life insurer organized under Maryland law with its principle place of business in Frederick, Maryland. Banner is wholly owned by Defendant LGA, a financial holding company organized under Delaware law with its principle place of business also in Frederick, Maryland. LGA is wholly owned and controlled by Defendant LG Group, [1] which is organized under the laws of the United Kingdom and has its principle place of business in London.

         Under the terms of the policies at issue, the policyholders were required to pay a minimum premium to keep the policy in force for a guaranteed period of 20 years. The policyholder could elect to pay more than the minimum required premium and any amount over the minimum premium would be held by the insurance company and invested for the benefit of the policyholder. At the end of the guaranteed 20 year period, those funds could be used to further extend insurance coverage, be received by the policyholder if the insurance contract is surrendered or, in the event of the insured's death, be paid out to the beneficiary as an additional benefit above the stated death benefit.

         Plaintiffs Dickman and Alderson are both residents of Virginia and purchased their universal life policies in 2002. The policies each provided a death benefit of $300, 000. Mr. Dickman's monthly guaranteed premium was $345.71 but he paid an excess premium of $450 each month to accrue a higher cash value in order to ensure coverage past the 20 year guarantee period. Mr. Alderson's monthly guaranteed premium was $110.16[2] but he paid an excess premium of $200 each month. At least after the initial premium payments, those payments were made by electronic fund transfers from Plaintiffs' bank accounts.

         With each premium paid, Banner extracted an expense fee and a Cost of Insurance (COI) fee. For example, on August 27, 2015, Mr. Dickman paid his $450 excess premium and was charged $18.50 in expenses and $285.58 in COI. The remaining $145.92 was added to the policy's cash value. As of August 27, 2015, Mr. Dickman's policy had a total cash value of $26, 345.93, which resulted from the years of excess premiums paid and the returns on the investment of those excess premiums. Similarly, on August 5, 2015, Mr. Alderson paid his $200 excess premium and was charged $11.00 in expense charges and $88.86 for COI. The remaining $100.14 was added to the policy's cash value. As of that date, his policy had a total cash value of $24, 100.26.

         In October 2015, Banner dramatically increased the COI charged for both policies and it is that sudden increase that gave rise to this action. Mr. Dickman's COI jumped from $285 to $1, 859.72 per month. Mr. Alderson's COI increased from approximately $93.00 to $667.14 per month. Because of this increase, the monthly premiums would no longer cover the COI and difference began to be taken from the accumulated cash values of the Plaintiffs' policies. Because these new inflated COIs will completely drain the cash value in the policies, there will be insufficient reserves to fund the policies beyond the 20 year guarantee period. Thus, Plaintiffs will receive no additional benefit from their years of paying excess premiums.

         On August 19, 2015, shortly before this increase in the COI went into effect, Banner sent a letter to its policyholders stating that the monthly deduction from policy account values for COI and policy fees would be increasing. Compl., Exs. 5, 6. That letter, however, did not specify how much it would increase or how the increase would be calculated. After Plaintiff Dickman learned of the dramatic nature of the increase, his insurance agent, who happens also to be his son, sent an email to Banner on October 21, 2015. In response to the email, Banner sent a letter to Dickman's agent representing that the increase was the result of reevaluated assumptions regarding “the number and timing of death claims (mortality), how long people would keep their policies (persistency), how well investments would perform (income) and the cost to administer policies.” Compl., Ex. 7 at 2. The letter further stated that unless Mr. Dickman instructed otherwise, the premium withdrawn by electronic fund transfer would be reduced to the minimum premium, since remitting an excess premium would not extend coverage beyond the 20 year guarantee period. In the alternative, the letter suggested that Mr. Dickman could surrender the policy for its cash value immediately prior to the COI change. Mr. Dickman elected to surrender his policy. Mr. Alderson did not inquire about the COI increase and did not receive a similar letter. Banner continued to withdraw by electric fund transfer the $200 excess premium for Mr. Alderson's policy, even though Banner understood that Mr. Alderson would receive no benefit from that excess payment.

         Plaintiffs contend that the reason presented by Banner for the exorbitant increase in the COI is specious. The real reason for the increase, as alleged by Plaintiffs, was a scheme through which Banner's cash was funneled to its corporate parent, LGA, and ultimately to LGA's parent, LG Group. The Complaint goes into considerable detail about the nature and specifics of this scheme but, summarized, the alleged scheme was as follows.

         Essentially, LG Group needed cash because it was in a distressed financial condition and Banner had significant cash on its books. LG Group wanted that cash and set up an intricate web of wholly-owned subsidiaries to which “extraordinary dividend” payments could be made that would ultimately find their way upstream to LG Group. Because the insurance industry is a highly regulated industry, these dividends would only be permitted if Banner held sufficient cash reserves. To create the appearance of sufficient cash reserves to justify the extraordinary dividends, Defendants created a web of wholly-owned captive reinsurers, many of which were incorporated either in states with less stringent insurance regulations than Maryland's or simply off-shore. Banner then offloaded its liabilities, i.e., its insurance policies, to these captive reinsurers in exchange for phantom or grossly inflated assets so that Banner would appear to have sufficient reserves to permit the distribution of dividends.

         Based upon these allegations, Plaintiffs bring the following causes of action: Breach of Contract (Count I); Unjust Enrichment (Count II); Conversion (Count III); and Fraud (Count IV).[3] Defendant Banner has moved to dismiss Counts II, III, and IV, but makes no arguments for dismissal of the breach of contract claim. Defendant LGA has moved to dismiss all four counts, as does Defendant LG Group. Defendant LG Group also moves to dismiss for the additional reason that this Court lacks personal jurisdiction over it. All Defendants also move to strike Plaintiffs' allegations related to the reinsurance and improper dividends.

         II. LEGAL STANDARD

         A complaint must be dismissed if it does not allege “enough facts to state a claim to relief plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Under the plausibility standard, a complaint must contain “more than labels and conclusions” or a “formulaic recitation of the elements of a cause of action.” Id. at 555. Rather, the complaint must be supported by factual allegations, “taken as true, ” that “raise a right to relief above the speculative level.” Id. at 555-56. The Supreme Court has explained that “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice” to plead a claim. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

         The plausibility standard requires that the pleader show more than a sheer possibility of success, although it does not impose a “probability requirement.” Twombly, 550 U.S. at 556. Instead, “[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 663. Thus, a court must “draw on its judicial experience and common sense” to determine whether the pleader has stated a plausible claim for relief. Id. at 664; see also Brockington v. Boykins, 637 F.3d 503, 505-06 (4th Cir. 2011). This Court has held that the Twombly/Iqbal “plausibility standard” also applies to the pleading of jurisdictional facts. Haley Paint Co. v. E.I. Dupont de Nemours & Co., 775 F.Supp.2d 790, 798-99 (D. Md. 2011).

         III. DISCUSSION

         A. Personal Jurisdiction Over LG Group

         In its motion to dismiss, LG Group represents that it has no meaningful contacts with Maryland other than its indirect ownership of LGA and Banner. It is incorporated in the United Kingdom; it is governed by a board of directors which usually meets in the United Kingdom;[4] all of its executive directors and all but one of its non-executive directors live and have their primary place of work in the United Kingdom; its business is conducted under the supervision and oversight of its executive officers, all of whom currently live and have their primary place of work in the United Kingdom. Furthermore, LG Group conducts no business in Maryland other than its normal dealings with its indirect subsidiaries here, it is not licensed to do business in Maryland, it has no employees who live or have their primary place of work here, and it has no office or business facility here, business address or telephone listing here, and no bank account here.

         In response to Plaintiffs' suggestion in their Complaint that this Court has personal jurisdiction over LG Group “due to [its] continuous transactions with the in-state Defendants that gave rise to this claim, ” Compl. ¶ 16, LG Group relates the following regarding its relationships with LGA and Banner. LG Group and LGA are governed by separate boards of directors and only one director of the five directors on LGA's board is also a member of LG Group's board. Banner's board has seven directors, none of whom are also on LG Group's board. LG Group, LGA, and Banner each maintains separate books and records and have separate financial and bank accounts. While LG Group does set financial goals and targets for its indirect subsidiaries, including LGA and Banner, which includes targets for dividends to be paid to their respective shareholders, those dividend payments are ultimately approved by the boards of the entities that make them. LG Group also provides overall strategic direction and guidance and, from time to time, technical services and advice to its subsidiaries, including LGA and Banner. In addition, certain major decisions and expenditures by, or events involving, LG Group's subsidiaries either are reported to LG Group by the subsidiaries, or approval is obtained from LG Group before they are executed. LG Group does not control, dictate, or oversee the day-to-day business operations or decisions of its subsidiaries.

         Based upon these facts, LG Group contends that this Court has neither general jurisdiction nor specific jurisdiction over it. There is no question that there is no general jurisdiction over LG Group. General jurisdiction, which permits a defendant to be haled into court to answer for any claim, is only established in this Court if a defendant's affiliations with Maryland are “so continuous and systematic as to render [it] essentially at home” here. Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011). LG Group certainly is not “essentially at home” in Maryland.

         Under specific jurisdiction, however, the “commission of certain ‘single or occasional acts' in a State may be sufficient to render a corporation answerable in that State with respect to those acts.” Goodyear, 564 U.S. at 923 (quoting International Shoe v. Washington, 326 U.S. 310, 318 (1945)). For a court to exercise specific jurisdiction over a defendant, “the defendant's suit-related conduct must create a substantial connection with the forum State.” Walden v. Fiore, 134 S.Ct. 1115, 1121 (2014). The Supreme Court has found relevant two aspects of this necessary relationship with the forum State. “First, the relationship must arise out of contacts that the ‘defendant himself' creates with the forum State.” Id. (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)). “Second, our ‘minimum contacts' analysis looks to the defendant's contacts with the forum State itself, not the defendant's contacts with persons who reside there.” Id. (citing International Shoe, 326 U.S. at 319). Citing the representations referenced above, LG Group argues that it has engaged in no conduct in Maryland, related or unrelated to the subject of this suit.

         Once the defendant challenges personal jurisdiction, the plaintiff “bears the burden of demonstrating personal jurisdiction at every stage following such a challenge.” Grayson v. Anderson, 816 F.3d 262, 267 (4th Cir. 2016). In their opposition, which Plaintiffs caption as an opposition to LG Group's motion as well as the motion filed by LGA and Banner, Plaintiffs make no argument, whatsoever, as to whether there is personal jurisdiction over LG Group. Notably, in their discussion of the applicable legal standards, they completely omit any discussion of the standard for a motion to dismiss for lack of personal jurisdiction under Rule 12(b)(2). In arguing the merits of their breach of contract claim, Plaintiffs make passing reference to ‚Äúpierc[ing] ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.