United States District Court, D. Massachusetts
NORMA EZELL, LEONARD WHITLEY, and ERICA BIDDINGS, on behalf of themselves and all others similarly situated, Plaintiffs,
LEXINGTON INSURANCE COMPANY; AMERICAN INTERNATIONAL GROUP, INC.; AIG ASSURANCE COMPANY; AIG INSURANCE 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
Norma Ezell (“Ezell”), Leonard M. Whitley, Jr.
(“Whitley”) and Erica Biddings
“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 plaintiffs' amended complaint. For the reasons
that follow, the motion to dismiss will be allowed with
respect to both the civil RICO claim and fraudulent
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 100% of which the settling parties had agreed
would fund the annuity payments.
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.
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 capacities as
Administratrix of and heirs to the estate of their aunt.
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 it covered by its policy with Bull Motors.
name eleven affiliated insurance companies in their amended
complaint: (1) Lexington, (2) American International Group,
Inc. (“AIG Parent”), (3) AIG Assurance Company,
(4) AIG Insurance Company, (5) AIG Property Casualty Company,
(6) AIG Specialty Insurance Company, (7) American General
Life Insurance Company (“AGL”), (8) National
Union Fire Insurance Company of Pittsburgh, Pa.
(“NUFIC”), (9) AGC Life Insurance Company, (10)
American General Annuity Service Corporation
(“AGASC”) and (11) AIG Domestic Claims, Inc.
their amended complaint, plaintiffs state that nine
defendants are subsidiaries of AIG Parent. Throughout their
amended complaint, plaintiffs refer to defendants
collectively as “AIG” and refer to AIG Parent as
the umbrella company for all its subsidiaries. Defendants
clarify 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.
and Whitley settled claims against Community Eldercare
Services and CLC of West Point, which were insured by
Lexington, in April, 2003. The terms of their settlement
included a lump sum payment of $700, 000 and a payment of
$200, 000 to be annuitized to provide periodic payments
beginning in June, 2003. According to the amended complaint,
Ezell and Whitley were advised by Tom Senderhauf, a
representative of AIG, that a part of that settlement would
be paid in the form of an annuity. 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 AGL.
and Whitely allege they were unaware that the annuity portion
of the settlement, $200, 000, was subject to the payment of a
commission by defendants to someone working on
defendants' behalf to settle the claim. Plaintiffs
contend that Senderhauf represented to them that they would
receive the full $100, 000 and that defendants did not inform
them that 4% of the annuity premium would be paid to an
AIG-Approved Broker, Jim Beatty.
entered into a settlement agreement in August, 2009,
resolving wrongful death and personal injury claims against
Bull Motors LLC which was insured by Lexington. Consistent
with the settlement of Ezell and Whitley, Biddings's
settlement agreement provided for a cash payment and a series
of periodic payments with a “present value” of
$1, 642, 000. Lexington funded three separate annuities
issued by three life insurance companies which were not
affiliated with defendants and are not parties to this
action: Allstate Life Insurance Company, Hartford Life
Insurance Company and New York Life Insurance Company.
alleges that she was unaware that 4% of the $1, 642, 000
annuity premium would be paid to AIG-Approved Broker Douglas
Smith. The complaint states that Biddings did not know that
the amount to be annuitized included a commission to be paid
to someone working on behalf of defendants to settle the
claims brought against Lexington in its capacity as liability
insurer of Bull Motors.
commenced this action in January, 2017, and in March, 2017,
defendants jointly moved to dismiss the complaint in its
entirety. In an order entered on December 20, 2017, this
Court allowed defendants' motion to dismiss the original
complaint in its entirety without prejudice. This Court held
that plaintiffs failed to state a civil RICO claim because
they did not plead adequately that defendants and non-party
brokers associated together for a common illegal purpose to
establish the required association-in-fact enterprise. The
Court further held that plaintiffs failed to state a claim of
fraudulent misrepresentation because they did not
specifically allege ...