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Jeffrey C. Seifts, et al v. Consumer Health Solutions LLC

September 30, 2011


The opinion of the court was delivered by: Richard J. Holwell, District Judge:


Defendant TIG Premier Insurance Company ("TIG") moves under Rules 12(b)(6) and 12(c) of the Federal Rules of Civil Procedure to dismiss in its entirety the amended complaint ("AC") filed by plaintiff Jeffrey C. Seifts ("Seifts") and others similarly situated (collectively, the "plaintiffs"). In the alternative, TIG moves for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. In the amended complaint, plaintiffs allege nine separate causes of action against TIG-including breach of contract, unjust enrichment, conversion, and fraud-based on the plaintiffs' alleged participation in a group health care plan into which they paid premiums, but from which they received no benefits. Plaintiffs have not opposed the motion. For the reasons stated below, defendant's motion for summary judgment is granted as to the third, fifth, sixth, thirteenth, and fourteenth causes of action; and defendant's motion to dismiss is granted as to the second, fourth, eighth, and ninth causes of action.


The following facts are drawn from plaintiffs' amended complaint.

Seifts was the owner of a for-profit association known as Consumer Advocates Group, Ltd. ("CAG"). (AC ¶ 3.) In late summer 2004, Seifts, on behalf of CAG, contacted defendant FleetCare Group LLC ("FleetCare") to inquire about setting up a group health care plan that he could offer to members of CAG. (AC ¶ 50.) In August of 2004, Seifts began initial negotiations with defendants Bart Posey and Obed Kirkpatrick, both of whom were agents of FleetCare. (AC ¶¶ 53-54.) After several telephone conversations, Kirkpatrick and Posey informed Seifts that FleetCare could accommodate CAG's insurance needs and proposed a program (later known as the FleetCare CU 1000P Medical Program, or "the Plan"), which "would combine a fully insured cash indemnity plan with a hospital-only component." (AC ¶¶ 54-56.) Kirkpatrick and Posey told Seifts that the Plan was underwritten by Central United Insurance Company ("Central United") and the administration of the Plan would be handled by the Affinity Group, a company operating out of North Carolina. (AC ¶¶ 55, 60.)

On or about September 23, 2004, Seifts and his associate, Dennis Raynola, met in Nashville, Tennessee with Posey and Kirkpatrick to discuss the material terms of the Plan, including PPO pricing, membership identification cards, and third party administration protocol and implementations. (AC ¶¶ 59-60.) At this meeting the parties reached an oral agreement. (AC ¶ 60.) A final agreement was reached on October 15, 2004, after which CAG members began to enroll in the Plan using Central United application forms. (AC ¶¶ 61, 63.) The Plan's effective start date was November 1, 2004. (AC ¶ 67.)

As part of this agreement, CAG tendered six checks made payable to FleetCare: a check in the amount of $33,606.93 dated October 27, 2004, a check in the amount of $1,321.77 dated October 27, 2004, a check in the amount of $32,108.68 dated December 1, 2004, a check in the amount of $30,574.34 dated December 28, 2004, a check in the amount of $31,210.01 dated February 4, 2005, and a check in the amount of $33,441.45 dated March 7, 2005. (AC ¶ 67.) FleetCare deposited all of the checks into an account at Prime Trust Bank in Nashville Tennessee. (AC ¶ 67.)

On or around November 1, 2004, some of the plaintiffs received word that the underwriting carrier, Central United, had been "rolled over," and that the new underwriting carrier would be TIG. (AC ¶ 69.) It is not clear in the amended complaint from where this information came. When Seifts learned of the alleged "roll over," he contacted Posey and Kirkpatrick, who assured him that "nothing changed" with respect to the healthcare plan program and benefit coverage for the Plan participants. (AC ¶ 71.) Posey and Kirkpatrick, however, did inform Seifts that the Plan now would be administered by defendant Consumer Health Solutions LLC ("CHS"), and not the Affinity Group. (See AC ¶ 71.)

CHS was wholly owned by defendant William Worthy ("Worthy"). (AC ¶ 16.) Plaintiffs at the time believed that Worthy also had an ownership interest in TIG, but he in fact did not. (AC ¶¶ 69, 70.) However, Worthy's employee, defendant Jollene Priester, allegedly was a duly authorized agent for TIG in a number of states, although not in New York nor in any other state in which participants in the CAG Plan resided. (See AC ¶ 32, 37). According to the complaint, she "endorse[d] and witness[ed]" the plaintiffs' applications. (Id. ¶ 33.) In addition, on January 1, 2005, a company called CHS Admin LLC, who also is a defendant in this action, executed an "administrative service agreement" with TIG, pursuant to which CHS Admin LLC would serve as TIG's "non-exclusive agent for the purpose of issuance, delivery and administration of policies or contracts of insurance." (AC ¶ 36.) Worthy signed the agreement as "President" of CHS Admin LLC. (Id.)

On November 17, 2004, Worthy, Posey, and Kirkpatrick met with Seifts and his staff to clarify the material terms of the Plan. (AC ¶ 72.). Defendants explained to the staff that CHS would be the new third party administrator for all claims submitted by Plan participants. (AC ¶¶ 16, 22, 71). The defendants indicated that the Preferred Provider Organization networks available to the Plan participants were Multiplan, PHCS, and Beechstreet. (AC ¶ 73.) The defendants also delivered new healthcare identification cards (AC ¶ 75.)

In the subsequent months, however, a number of healthcare providers refused to accept the Plan participants' healthcare cards and, as a result, some participants were denied medical services. (AC ¶¶ 76, 78.) Furthermore, eligible claims submitted to CHS by Plan participants were not paid or were paid in error. (AC ¶¶ 76.) Seifts informed Posey and Worthy about these problems, but CAG members' claims continued to be ignored. (AC ¶¶ 81-82.) After several months of inquiries, it became clear to plaintiffs that defendants were not going to pay these claims. (AC ¶ 86.) Plaintiffs subsequently brought this action, contending that the defendants intended to deny them healthcare benefits and to "convert premiums and Plan proceeds for [defendants'] own collective and individual use." (AC ¶ 92.) TIG now moves to dismiss the claims against it, or, in the alternative, for summary judgment.


I.Legal Standard

"The standard for granting a Rule 12(c) motion for judgment on the pleadings is identical to that of a Rule 12(b)(6) motion for failure to state a claim." Patel v. Contemporary Classics of Beverly Hills, 259 F.3d 123, 126 (2d Cir. 2001). On a motion to dismiss under Rule 12(b)(6) the Court accepts as true all factual allegations in the complaint and draws all reasonable inferences in the plaintiff's favor. In re DDAVP Direct Purchaser Antitrust Litigation, 585 F.3d 677, 692 (2d Cir. 2009). The complaint's allegations, however, must allege "enough facts to state a claim to relief that is plausible on its face." Starr v. Sony BMG Music Entertainment, 592 F.3d 314, 321 (2d Cir. 2010) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "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." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). Thus the Court is "not bound to accept as true a legal conclusion couched as a factual allegation" and "threadbare recitals of the elements ...

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