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Lichtenstein v. Reassure America Life Insurance Co.

March 23, 2009


The opinion of the court was delivered by: Dora L. Irizarry, U.S. District Judge


Pro se plaintiff Joseph Lichtenstein, a former jeweler, suffers from a knee condition and sought to collect benefits on two disability insurance policies. The insurers denied his claims, and he filed the above captioned actions against them and their claims investigators, alleging breach of contract, common-law fraud, wire and mail fraud, and violations of the Racketeer Influenced Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1968. In his amended complaint in case number 07-cv-1653, he names as defendants Reassure America Life Insurance, alternatively named as Life Reassurance Corporation of America ("Life Reassure"), Disability Management Services ("DMS"), which investigates policy claims for Life Reassure, and Robert D. Hoffman, a DMS employee who investigated plaintiff's Life Reassure policy claim. Collectively, the 07-cv-1653 defendants are referred to herein as the "Life Reassure Defendants." In his amended complaint in case number 07-cv-1680, Lichtenstein names as defendants the Massachusetts Mutual Life Insurance Co. ("Mass Mutual") and two of its employees, Susan Rentz and Sheila Sacco, who reviewed and denied his Mass Mutual policy claim. Collectively, these defendants are referred to herein as the "Mass Mutual Defendants."

The two sets of defendants moved separately to dismiss the non-contract causes of action for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6). The plaintiff did not file responses to the motions, which are deemed unopposed.*fn1 The two complaints present similar facts and virtually identical legal issues. Accordingly, pursuant to the local rules of this district, the court designates the two cases as related and considers the motions in tandem.*fn2 For reasons set forth below, the partial motions to dismiss are granted.

I. Factual Background

The following facts are based on allegations from plaintiffs' two amended complaints with all plausible inferences drawn in his favor.

Plaintiff was a production manager and a partner in Hazel Jewelry Mfg., a jewelry-making concern. His primary duties included designing, shaping, cleaning, and plating jewelry, rolling gold, and producing boxes for jewelry. In May 1990, he purchased disability insurance policy no. h 428701 from Mutual Benefit Life of Newark, New Jersey. In the event of the insured's disability, the policy would provide monthly payments of $4,080 for life with annual adjustments for inflation. This policy was later assumed by Life Reassure. In September 1992, plaintiff purchased disability insurance policy no. 9473357 from Mass Mutual. This policy provides disability benefits in the amount of $2,188 per month, and would also make upward adjustments for inflation.

In May 2001, he began to experience pain in his knees, which were later diagnosed with meniscus tears. The condition caused intermittent bouts of severe and uncontrollable pain that rendered him incapable of standing for long periods of time, moving heavy boxes and equipment, carrying chemical solutions, climbing ladders, and operating a kick press. His inability to complete these tasks consistently caused him to leave the partnership because his two partners, who are also his brothers, "did not want to continue payment[s]" to him due to his "limited capacity." (Pl.'s Am. Compl. ¶ 21, 07-cv-1653); see also (Pl.'s Am. Compl. ¶¶ 19 & 36, 07-cv-1680). After his employment with the firm was terminated, he sought to collect on the two disability insurance policies. His claims were denied by both insurers.

A. The Claim against the Reassure Defendants

Hoffman, the DMS employee who investigated plaintiff's claim on the Life Reassure policy, found plaintiff's debilitating knee condition to be intermittent. On August 14 and 21, 2002, he allegedly called and told plaintiff that, unless he underwent knee surgery, the claim would be denied. Plaintiff refused to undergo surgery and says Hoffman's statement was a knowing misrepresentation. By letter dated November 26, 2002, Hoffman denied plaintiff's claim. Thus, began a long running dispute between plaintiff and the Life Reassure Defendants over his entitlement to benefits. Plaintiff contends that defendants' subsequent letters to him were attempts to deceive and cheat him out of his policy coverage.

At the heart of this dispute appears to be a difference in the interpretation of the policy coverage language. Plaintiff did not attach a copy of the insurance agreement to his amended complaint, but both he and Hoffman, at least according to one of Hoffman's letters recounted in the amended complaint, appear to agree on the general wording of the coverage provision in the policy. The policy would pay disability benefits in the event that the insured becomes "totally disabled." (Pl.'s Compl. ¶ 22, 07-cv-1653). "Total disability" occurs when "the insured is not able to engage in his or her former occupation."*fn3 (Id.).

The two sides appear to differ over whether plaintiff can still engage in his former occupation. DMS and Hoffman denied the coverage claim on the grounds that plaintiff's condition was treatable and that plaintiff still had at least partial ability to do his past job. Plaintiff disputes this interpretation of the contract, which he says cannot possibly mean that an insured must be "a total vegetable" or "100% disabled to collect" and would be deemed ineligible if he retained just "one percent of the ability to work." (Id.). Instead, he argues that the policy's definition of total disability - as the inability to engage in former occupation - effectively "modifies the term total disability to mean a partial disability." (Id. at ¶ 42). This is because a partial disability can prevent an insured from continuing with a prior job.

Plaintiff argues that, in his case, his entitlement to collect on the policy is determined by his inability to continue with his former occupation. When the pain in his knees intermittently flared up, it was so severe that he could not perform certain tasks of his job. In turn, this occasional disability prevented him from performing his employment functions on demand and led to the "total termination of his employment." (Id. at ¶ 54). He explains that his jewelry-making partnership was formed out of fear that the partners would compete against one another if they were to split. Once he became partly disabled, however, the threat of his becoming a competitor diminished and his partners no longer wished for him to stay in the partnership. He reasons that, since it was beyond his control to force his partners to keep him in the partnership, his departure due to his knee condition was "as if [he] was fired because of partial disability." (Id. at ¶ 53). Extending this reasoning a bit further, he asserts that "even [a] one percent disability of my former occupation was technically enough for me to lose my job at Hazel Mfg." (Id.). In addition to his knee problems, plaintiff also indicates that he took a leave from his job in the summer of 2001 due to "lack of production" at the business. (Id. at ¶ 58).

He vigorously disputes DMS and Hoffman's position that he needed to be totally disabled to collect benefits, and says their denial letters dated November 26, 2002, April 15, October 9, and November 13, 2003 are all examples of fraud. In each, Hoffman denied his claim for lack of total disability and refused, in plaintiff's words, to "honor" the modification of the meaning of total disability as is defined in the policy. ( ¶ 74). He calls Hoffman's denials the "total disability trick". (Id. at ¶ 73).

Hoffman's April 15, 2003 denial letter to plaintiff and the latter's vigorous rebuttal in the rambling amended complaint provide a good cross section of what plaintiff considers to be misrepresentations aimed at deceiving him. In this letter, Hoffman wrote that: (1) the insurance policy did not provide for partial benefits in the event of a partial disability; (2) recognized plaintiff's difficulty in operating the kick press but found no evidence that this prevented him from continuing with his prior occupation; and (3) recalled being told by one of plaintiff's partners that plaintiff's termination due to tardiness and poor attendance and family frictions. Hoffman also cited plaintiff's treating physician, who described plaintiff's condition as treatable and occupation as sedentary, as well as a consulting physician, who found plaintiff to be walking with a normal gait. Hoffman also referenced plaintiff's own description of his job responsibilities in 1990, which was said to be 85% administrative and 15% supervisory. Finally, Hoffman noted the findings of an ergonomic mechanical consultant, who reported that the kick press could be replaced by an alternative press controlled by electronic buttons.

Plaintiff counters that each of those points are "fraudulent[,] lies[,] omissions and half truths" designed to trick him into forgoing his claim. ( ¶ 72). He calls Hoffman's initial point another attempt at the "total disability trick." Though the insurance agreement may not pay partial benefits for partial disability, he reasons that it must still pay him full benefits because he is unable to continue at his job due to a partial disability. Plaintiff attributed his tardiness and poor attendance in 2001 to his knee problems. The family frictions that his brother spoke of was tension in the family-run partnership stemming from his lack of production due to his knee condition. That his knee condition is somehow treatable has no bearing on his entitlement to receive benefits, plaintiff argues, because the policy does not explicitly require his submission to treatment as a condition for paying benefits and cannot otherwise force him to undergo surgery. That his treating physician described his job as sedentary is not meaningful because the doctor never visited his workplace and never saw the demands placed upon him. The consulting doctor's findings were based on an incomplete record assembled by Hoffman, who excluded two reports by plaintiff's treating physician describing his intermittent pain. Instead, Hoffman included a surveillance video tape showing plaintiff walking normally at a time when he was not experiencing his knee pain. His job description circa 1990 does not preclude the fact that supervisory tasks could involve extensive periods of standing. Furthermore, he reasons, since "nowhere in the policy does it state[] that job descriptions can't change", he would still be covered for disability insurance if he were "a jeweler one day and an electrician the next." (Id. at ¶ 66). Finally, he says the alternative palm-button operated press is unsafe and could chop off a finger. Its use would place him in a predicament: either he should lose insurance benefits or lose a finger.

Plaintiff states that Hoffman ought to have known the untruthfulness of the points made in the letter because he had already received plaintiff's rebuttals. Plaintiff avers that DMS and Hoffman were paid more by Life Reassure to deny claims that they investigate, which motivates them to deceive claimants. Alternatively, he avers that DMS and Hoffman routinely denied claims and prolonged investigations to inflate the fees they charged to Life Reassure and "milk" the insurer. ( ¶ 76 & 85). He claims that such practices are common in the insurance industry and "highly true in []his case because so many points were lied about." (Id. at ¶ 76).

Plaintiff contends that discovery will uncover the evidence of the scope of the "malicious actions", which are currently in the exclusive possession of the defendants. He claims that "in all probability that there are very good chances [sic.] that others have been lied to[,] cheated and taken for a ride as Plaintiff was." ( ¶ 80). He filed the Life Reassure action on April 20, 2007. In addition to breaching the insurance agreement, he accuses Life Reassure, DMS and Hoffman of using interstate mail and wires to commit fraud and racketeering. He asks for punitive damages and treble damages under RICO.

B. The Claim against the Mass Mutual Defendants

On September 11, 2002, plaintiff's claim for disability benefits on his Mass Mutual policy was denied in a letter by Rentz. Subsequent denial letters were sent on October 8, 2002, January 3, 2003, October 8, 2003 and July 15, 2004.

The dispute in this case, like that with the Life Reassure Defendants, turns on the interpretation of the insurance agreement. According to plaintiff, the terms of the Mass Mutual policy indicate that "total disability" occurs when "'the insured is not able to perform the substantial and material duties of the regular occupation.'" (Pl.'s Am. Compl., 07-cv-1680, at ¶ 20). Again, he interprets this clause to mean that the insured does not "have to be completely disabled (a vegetable) to be considered totally disabled", and concludes that he is eligible for coverage because his intermittent knee pain prevents him from performing certain tasks, which are material duties of his job. (Id.; see also ¶ 47). Mass Mutual emphasized in correspondence with him that, under the policy, the insured's loss of income must be due to a disability which limited him from performing the substantial and material duties of his occupation, not simply his particular job. Its examiners, Rentz and Sacco, repeatedly pointed to his ability to do some work and the fact that he was bought out of the partnership by his brothers as reasons for denying his claim. Plaintiff considers the defendants' denials based on his residual capacity to work to be both meaningless and in bad faith.

Rentz listed Mass Mutual's main points in the denial letter dated January 9, 2003. In this letter, she wrote that the plaintiff's condition was not very restricting and cited a report by Mass Mutual's medical consultant who found plaintiff to be taking only over-the-counter analgesics but no prescription pain medicine. She pointed out that plaintiff had left work under mutual agreement with his brothers/business partners, of his own volition, not at the direction of a doctor, and spent August 2001 rebuilding his family home. Finally, she noted that he had professed belief in his ability to work against his brothers in the future.

Plaintiff considers all of these points to be deliberate mischaracterizations or outright deception. He asserts that Rentz must have withheld portions of his treating physician's report from Mass Mutual's medical consultant because he was prescribed prescription-strength Aleve.

He contends that he left the partnership because of his knee condition, and did not need a doctor's directive to rest his knee in the summer of 2001 because it is what "human beings do when their legs ach [sic.]" (Pl.'s Am. Compl., 07-cv-1680, at ¶ 35). His knee condition also forced him to cease working on his house. He faults Rentz for deliberately mischaracterizing his interview with a Mass Mutual investigator, Tom Moynihan. Moynihan reported the plaintiff as saying that he had "the right to return to work in the future if he could perform his share of the work in the production area or possibly become a competitor against his brothers." (Id. at ¶ 38). Based on this statement, plaintiff argues that he never actually said he would be able to work in the future under his existing condition.

Plaintiff continued to press for his benefits with Rentz's successor Sacco, without success. He accuses both of deliberately withholding information to mislead Mass Mutual's medical consultant and mischaracterizing reports and interviews. He alleges that Mass Mutual had an agreement with Rentz and Sacco to pay them more if they "successfully" denied a claim and "probably paid" Rentz and Sacco extra to deny his claim or that the employee defendants were motivated to split the gains from the denial of his benefits with Mass Mutual. (Id. at ¶¶ 23, 61 & 82). He calls this a common practice by insurance companies to pay examiners more for "better results," and accuses Mass Mutual of encouraging fraudulent denials. (Id. at ¶ 23).

He filed the action against the Mass Mutual Defendants on April 13, 2007. In addition to the breach of contract and fraud claims, he also asserts that Mass Mutual, Rentz, and Sacco are each a person conducting the affairs of an association-in-fact enterprise comprised of the three and other Mass Mutual employees through a pattern of racketeering activity such as kickbacks, deliberate omissions to ...

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