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Ezell v. Lexington Insurance Co.

United States District Court, D. Massachusetts

December 20, 2017

NORMA EZELL, LEONARD WHITLEY, and ERICA BIDDINGS, on behalf of themselves and all others similarly situated, Plaintiffs,
v.
LEXINGTON INSURANCE COMPANY; AMERICAN INTERNATIONAL GROUP, INC.; AIG ASSURANCE COMPANY; AIG PROPERTY CASUALTY COMPANY; AIG SPECIALTY INSURANCE COMPANY; AMERICAN GENERAL LIFE INSURANCE COMPANY; NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURG, P.A.; AGC LIFE INSURANCE COMPANY; AMERICAN GENERAL ANNUITY SERVICE CORPORATION; and AIG DOMESTIC CLAIMS, INC., Defendants.

          MEMORANDUM & ORDER

          Nathaniel M. Gorton United States District Judge.

         Plaintiffs Norma Ezell (“Ezell”), Leonard M. Whitley, Jr. (“Whitley”) and Erica Biddings (“Biddings”) (collectively “plaintiffs”) bring this putative class action against ten insurance companies and subsidiaries (collectively “defendants”) alleging that certain commissions charged in connection with annuity payments are unlawful. Pending before this Court is defendants' motion to dismiss. For the reasons that follow, the motion to dismiss will be allowed.

         I. Background

         Plaintiffs' putative class action arises from a number of structured settlements of personal injury, wrongful death and workers' compensation claims against non-parties insured by Lexington Insurance Company (“Lexington”). The structured settlements provided that the claimants would receive a portion of their settlement payments over time according to a fixed schedule (rather than in a lump sum). The structured settlement portions of those settlements were ultimately funded through the purchase of annuities from a separate life insurance company. Plaintiffs allege that defendants fraudulently deducted 4% from the cash portion of the settlement that the settling parties had agreed would fund the annuity payments.

         A. The Parties

         1. Named Plaintiffs

         The putative class action is brought by three named plaintiffs, Norma Ezell, Leonard Whitley and Erica Biddings on behalf of themselves and similarly situated settling parties.

         Plaintiffs Norma Ezell (“Ezell”) and Leonard M. Whitley, Jr. (“Whitley”) are both residents of Aberdeen, Mississippi. Ezell and Whitley entered into a settlement agreement in April, 2003 with Community Eldercare Services and CLC of West Point, LLC, to resolve wrongful death claims arising from the death of their aunt, Odessa Ware. Lexington was the insurer of the nursing home. Ezell and Whitely each brought claims individually and in their capacity as heirs to the estate of their aunt. Ezell also sued as Administratrix of the estate.

         Plaintiff Erica Biddings (“Biddings”) resides in Southwest Ranches, Florida. In August, 2009, Biddings settled wrongful death and personal injury claims brought individually and as a personal representative of the estate of her husband, Roddy Major, against Bull Motors LLC, doing business as Maroone Ford. Lexington was the liability insurer of Maroone Ford and was obligated to pay any claim made or judgment obtained against them covered by its policy with Bull Motors.

         2. Defendants

         Plaintiffs name ten affiliated insurance companies in their complaint: (1) Lexington, (2) American International Group, Inc. (“AIG Parent”), (3) AIG Assurance Company, (4) AIG Property Casualty Company, (5) AIG Specialty Insurance Company, (6) AGL, (7) National Union Fire Insurance Company of Pittsburgh, Pa. (“NUFIC”), (8) AGC Life Insurance Company, (9) American General Annuity Services Corporation (“AGASC”) and (10) AIG Domestic Claims, Inc.

         In their complaint, plaintiffs state that nine defendants are subsidiaries of AIG Parent. Throughout their complaint, plaintiffs refer to defendants collectively as “AIG”. In their motion to dismiss, defendants clarify the relationship of the insurers. They state that Lexington, AIG Assurance Company, AIG Property Casualty Company, AIG Specialty Insurance Company and AGASC are AIG's property and casualty (“P&C”) insurance companies. Defendants contend that the complaint does not allege that any of AIG's P&C companies, other than Lexington, had any interaction with the defendants. Defendants note that AGL, AGC Life Insurance Company and AGASC are AIG's life insurance companies.

         B. Settlements

         Ezell and Whitley settled claims against Community Eldercare Services and CLC of West Point, which were insured by Lexington, in April, 2003. The terms of the settlement of Ezell and Whitley included a lump sum payment and a payment of $200, 000 to be annuitized to provide periodic payments beginning in June, 2003. Under that payment structure, Ezell and Whitley were each allocated one half of the $200, 000, or $100, 000. The annuity to fund future payments was issued by American General Life Insurance Company (“AGL”).

         Ezell and Whitely allege they were unaware that the amount listed in the settlement agreement, $200, 000, included a commission that would be paid by defendants to someone working on behalf of defendants to settle the claim. They contend that defendants did not inform them that 4% of the annuity premium would be paid to an AIG Approved Broker, Jim Beatty.

         Biddings entered into a settlement agreement in August, 2009, resolving wrongful death and personal injury claims against Bull Motors LLC, which was insured by Lexington. Like the settlement of Ezell and Whitley, Biddings's settlement agreement with Lexington provided for a cash payment and a set of periodic payments with a then “present value” of $1, 642, 000. Lexington funded three separate annuities issued by three life insurance companies who are unaffiliated with defendants and not named in this action: Allstate Life Insurance Company, Hartford Life Insurance Company and New York Life Insurance Company.

         Biddings alleges that she was unaware that 4% of the $1, 642, 000 annuity premium would be paid to AIG Approved Broker Douglas “Chuck” Smith. The complaint states that Biddings did not know that the amount to be annuitized included a commission that would be paid to someone working on behalf of defendants to settle the claims brought against Lexington in its capacity as liability insurer to Bull Motors.

         C. Procedural History

         Plaintiffs commenced this action on January 3, 2017. On March 31, 2017, defendants jointly moved to dismiss the complaint in its entirety.

         II. Motion to Dismiss

         A. Legal Standard

         To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). In considering the merits of a motion to dismiss, the Court may look only to the facts alleged in the pleadings, documents attached as exhibits or incorporated by reference in the complaint and matters of which judicial notice can be taken. Nollet v. Justices of Trial Court of Mass., 83 F.Supp.2d 204, 208 (D. Mass. 2000), aff'd, 248 F.3d 1127 (1st Cir. 2000). Furthermore, the Court must accept all factual allegations in the complaint as true and draw all reasonable inferences in the plaintiff's favor. Langadinos v. Am. Airlines, Inc., 199 F.3d 68, 69 (1st Cir. 2000). Although a court must accept as true all of the factual allegations contained in a complaint, that doctrine is not applicable to legal conclusions. Ashcroft v. Iqbal, 556 U.S. 662 (2009).

         B. Application

         1. Standing

         As a preliminary matter, defendants assert that plaintiffs have failed to allege any ascertainable injury to establish standing, requiring dismissal of all of plaintiffs' claims. Defendants contend that plaintiffs have received all of the payments that they are entitled to under the terms of their settlement agreements. Because plaintiffs have received ...


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