Davis v. Assurity Life Insurance Company

IN THE UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF TENNESSEE

CHATTANOOGA DIVISION

ERIC SHAWN DAVIS, )

)

Plaintiff, )

)

) Case No. 1:19-cv-00299-JPM-SKL

v. )

)

ASSURITY LIFE INSURANCE )

COMPANY, )

)

Defendant. )

ORDER GRANTING DEFENDANT’S MOTION TO DISMISS

Before the Court is Defendant Assurity Life Insurance Company’s ( “Defendant” or

“Assurity”) Motion to Dismiss, filed on January 17, 2020. (ECF No. 10.) Assurity moves the

Court pursuant to Federal Rule of Civil Procedure 12(b)(6) to dismiss Plaintiff Eric Shawn Davis’s

(“Plaintiff” or “Davis”) Complaint. (See id.) The Complaint alleges that Assurity breached its

contract with Davis by refusing to pay benefits under an insurance policy. (ECF No. 1 ¶ 31.)

Assurity argues that the Complaint should be dismissed with prejudice because (1) Davis’s

insurance policy lapsed more than a year before Davis first submitted a claim for benefits; (2)

Davis’s claim is time-barred by the terms of the insurance policy; and (3) Davis’s claim is “barred

as a matter of public policy under the doctrines of laches and estoppel.” (ECF No. 10 at PageID

40.)

Plaintiff filed his Response on February 7, 2020. (ECF No. 17.) Plaintiff asserts that

insurance policy claims “cannot be denied based solely on the fact the proof of loss was provided

late under the policy terms” and that the insurer must also have been prejudiced by the claim’s

tardiness. (Id. at PageID 74 (citing Am. Guarantee & Liab. Ins. Co. v. Norfolk S. Ry. Co., 278 F.

Supp. 3d 1025, 1049 (E.D. Tenn. 2017).) Plaintiff argues that “[t]here is a question of fact as to

whether Defendant was prejudiced by the delayed filing of Plaintiff’s claim” because Assurity has

“received abundant evidence from the time period in question to allow it to conduct a full

investigation.” (Id. at PageID 73–74.) Plaintiff also argues that the doctrines of laches and

estoppel are inapplicable because “no evidence has been lost.” (Id. at PageID 75.)

Defendant filed its Reply on February 14, 2020. (ECF No. 19.) Defendant argues that the

fact that Plaintiff did not submit a claim until after his insurance policy had lapsed, which

Plaintiff’s Response does not dispute, is dispositive. (Id. at PageID 82.) Even if that fact were not

dispositive, Assurity argues that “[r]equiring contract adherence in this case would not lead to an

unduly harsh result,” because Davis waited at least nine years to submit his claim and that period

of delay is so unreasonable that “public policy weighs strongly in favor of dismissal.” (Id. at

PageID 86.) Assurity also continues to assert the doctrines of laches and estoppel, arguing that

Plaintiff’s delay in submitting his claim “forever foreclosed” Assurity’s ability to make an accurate

disability determination based on “a wide variety of time-sensitive, contemporaneous evidence.”

(Id. at PageID 83.)

For the reasons set forth below, Defendant’s Motion to Dismiss is GRANTED.

I. BACKGROUND

This action arises out of Defendant Assurity’s denial of an insurance claim submitted by

Plaintiff Davis on July 21, 2017. (Compl., ECF No. 1 ¶¶ 13, 15.) Davis purchased an insurance

policy (“Policy”) from Assurity on January 4, 2000 and the Policy remained in force through

March 3, 2016. (Id. ¶ 3.) Davis alleges that on July 11, 2005, he was injured when he was struck

by a muffler and that he developed cognitive impairments, sleep apnea, and insomnia as a result

of his injuries. (Id. ¶¶ 9–10.) On July 21, 2017, twelve years after the initial injury, Davis

submitted his first claim under the Policy, claiming a disability that began January 8, 2008. (Id.

¶¶ 13–14 (“Since January 8, 2008, Plaintiff has been unable to perform the essential duties of a

financial advisor.”).)

The Policy was an agreement that Assurity would pay benefits to Davis if he became totally

disabled while the Policy was in effect, met the Policy’s provisions and provided the necessary

proof and notice. (Compl., Ex. 1, ECF No. 1-1, p. 3 of 18.) Relevant to the instant case, the

Policy’s terms stated: (1) that the Policy would lapse within 31 days of any failure to make

payments; (2) that any notice of a claim should be submitted within 20 days of Davis’s becoming

totally disabled; and (3) that after 90 consecutive days of total disability (“Elimination Period”),

Davis should submit Proof of Loss within 120 days or, at the absolute latest, within 12 months

after the Elimination Period. (Id. at pp. 10 of 18, 13 of 18.)

Assurity denied Davis’s July 21, 2017 claim on August 10, 2017. (Compl., ¶ 15.) Davis

alleges that he continued to submit additional evidence, but that Assurity reaffirmed its denial on

October 24, 2017. (Id. ¶ 16.) Davis appealed the denial on October 24, 2018. (Id. ¶ 17.) Davis

asserts that he submitted the opinions of his treating providers Joseph Reid, PA and Dr. Brian Way

in support of his appeal. (Id. ¶ 18.) Davis alleges that Dr. Reid treated him since 2009 and Dr.

Way treated him since 2012. (Id.) Davis also asserts that he submitted in support of his appeal an

October 20, 2017 Independent Medical Examination (“IME”) and a September 29, 2017

neuropsychological examination that both found cognitive deficiencies. (Id. ¶ 19.) Assurity

reaffirmed its denial on January 21, 2019. (Id. ¶ 21.)

Plaintiff filed this action on October 25, 2019. (Id.) On January 17, 2020, Defendant filed

the instant Motion to Dismiss. (ECF No. 10.) Plaintiff filed his Response on February 7, 2020.

(ECF No. 17.) Defendant filed its Reply on February 14, 2020. (ECF No. 19.)

II. LEGAL STANDARD

Federal Rule of Civil Procedure 12(b)(6) allows dismissal of a complaint that “fail[s] to

state a claim upon which relief can be granted.” A Rule 12(b)(6) motion permits the “defendant

to test whether, as a matter of law, the plaintiff is entitled to legal relief even if everything alleged

in the complaint is true.” Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993) (citing Nishiyama

v. Dickson Cnty., 814 F.2d 277, 279 (6th Cir. 1987)). A motion to dismiss only tests whether the

plaintiff has pled a cognizable claim and allows the court to dismiss meritless cases which would

waste judicial resources and result in unnecessary discovery. Brown v. City of Memphis, 440 F.

Supp. 2d 868, 872 (W.D. Tenn. 2006).

When evaluating a motion to dismiss for failure to state a claim, the Court must determine

whether the complaint alleges “sufficient factual matter, accepted as true, to ‘state a claim to relief

that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp.

v. Twombly, 550 U.S. 544, 570 (2007)). If a court decides that the claim is not plausible, the case

may be dismissed at the pleading stage. Iqbal, 556 U.S. at 679. “[A] formulaic recitation of the

elements of a cause of action will not do.” Twombly, 550 U.S. at 555. The “[f]actual allegations

must be enough to raise a right to relief above [a] speculative level.” Ass’n of Cleveland Fire

Fighters v. City of Cleveland, 502 F.3d 545, 548 (6th Cir. 2007) (quoting Twombly, 550 U.S. at

555). A claim is plausible on its face if “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 678 (citing Twombly, 550 U.S. at 556). A complaint need not contain detailed factual

allegations. Twombly, 550 U.S. at 570. A plaintiff without facts who is “armed with nothing

more than conclusions,” however, cannot “unlock the doors of discovery.” Iqbal, 556 U.S. at 678-

79; Green v. Mut. of Omaha Ins. Co., No. 10-2487, 2011 WL 112735, at *3 (W.D. Tenn. Jan. 13,

2011), aff’d, 481 F. App’x 252 (6th Cir. 2012).

Assessing the facial sufficiency of a complaint ordinarily must be undertaken without

resort to matters outside the pleadings. Wysocki v. Int’l Bus. Mach. Corp., 607 F.3d 1102, 1104

(6th Cir. 2010). “[D]ocuments attached to the pleadings become part of the pleadings and may be

considered on a motion to dismiss.” Commercial Money Ctr., Inc. v. Illinois Union Ins. Co., 508

F.3d 327, 335 (6th Cir. 2007) (citing Fed. R. Civ. P. 10(c)); see also Koubriti v. Convertino, 593

F.3d 459, 463 n.1 (6th Cir. 2010). Even if a document is not attached to a complaint or answer,

“when a document is referred to in the pleadings and is integral to the claims, it may be considered

without converting a motion to dismiss into one for summary judgment.” Commercial Money

Ctr., 508 F.3d at 335–36. When evaluating a motion to dismiss, the Court may also take judicial

notice of pertinent matters of public record, including bankruptcy filings. Signature Combs, Inc.

v. United States, 253 F. Supp. 2d 1028, 1040 n.5 (W.D. Tenn. 2003).

III. ANALYSIS

A. Plaintiff’s Failure to Comply with the Policy’s Notice and Proof of Loss Provisions

Prejudiced Defendant

Assurity argues that Plaintiff’s claim is time-barred under the Policy’s terms, both because

it was submitted over a year after the Policy lapsed and because it was submitted over nine years

after Davis allegedly became totally disabled. (ECF No. 10-1 at PageID 46–49.) “Insurance

contracts are ‘subject to the same rules of construction as contracts generally,’ and in the absence

of fraud or mistake, the contractual terms ‘should be given their plain and ordinary meaning[.]”

Clark v. Sputniks, LLC, 368 S.W.3d 431, 441 (Tenn. 2012) (quoting U.S. Bank v. Tenn. Farmers

Mut. Ins. Co., 277 S.W.3d 381, 386 (Tenn. 2009)). “If the contractual language is clear and

unambiguous, the literal meaning of the contract controls the dispute.” West v. Shelby County

Healthcare Corp., 459 S.W.3d 33, 42 (Tenn. 2014) (quoting Maggart v. Almany Realtors, Inc.,

259 S.W.3d 700, 704 (Tenn. 2008)). The Policy states that “Assurity agrees to pay this Policy’s

benefits to [Davis] if [Davis] become[s] Totally Disabled while this Policy is in effect; the Policy’s

provisions are met; and [Davis] gives [Assurity] all the proof and notice [Assurity] requires.”

(Compl., Ex. 1, ECF No. 1-1, p. 3 of 18.) The Policy therefore makes the payment of benefits

contingent on Davis’s compliance with its terms.

First, the Policy’s terms state that if Davis fails to pay his premiums, the Policy lapses after

a 31-day grace period. (Id. at p. 10 of 18.) Davis admits that he stopped paying his premiums on

or before March 3, 2016. (Compl., ECF No. 1 ¶ 6.) The Policy therefore lapsed 31 days later, by

April 3, 2016 at the latest. Davis filed his claim with Assurity for the first time on July 21, 2017,

over a year after the Policy had lapsed. (Id. ¶ 13.) Davis was no longer entitled to payment of

benefits under the Policy at the time he filed his first claim. 4 Steven Plitt et al., Couch on Ins. §

58:22 (3d ed. 2020) (“The interest of the beneficiary under a life policy is dependent upon the

policy remaining in force. Therefore, the interest ceases to exist when the policy has lapsed[.]”).

Second, the Policy required Davis to notify Assurity of his claim within 20 days after first

becoming totally disabled. (Compl., Ex. 1, ECF No. 1-1, p. 13 of 18.) Davis’s initial injury

occurred on July 11, 2005 and he claims that his disability began January 8, 2008. (Compl., ECF

No. 1 ¶¶ 9, 13–14.) Even assuming Davis had no claim until January 8, 2008, the Policy required

Davis to notify Assurity of that claim by January 28, 2008. Davis waited over nine years from that

date to file his claim and does not assert that he gave Assurity notice in some other form prior to

that date. In doing so, Davis failed to comply with the Policy’s clear and unambiguous

requirements regarding notice.

Third, the Policy required Davis to submit Proof of Loss to Assurity within 120 days after

the Elimination Period, defined by the Policy as 90 consecutive days of total disability. (Compl.,

Ex. 1, ECF No. 1-1, pp. 9 of 18, 13 of 18.) If the 120-day deadline cannot be met, the Policy

required Davis to submit Proof of Loss within 12 months after the Elimination Period. (Id. at p.

13 of 18.) Because Davis asserts that he became totally disabled as of January 28, 2008, the

Elimination Period ended April 7, 2008. (Compl., ¶ 13–14.) The Policy required Davis to submit

Proof of Loss to Assurity by August 5, 2008 or, at the latest, by April 7, 2009. The first action of

Davis’s that could be considered a submission of Proof of Loss is his filing of the claim on July

21, 2017, nearly nine years later. Again, by waiting over nine years to submit Proof of Loss, Davis

failed to comply with the Policy’s clear and unambiguous requirements regarding Proof of Loss.

Under Tennessee law, late notice or proof will not defeat coverage unless the insured also

proves the insurer was not prejudiced by the delay. Alcazar v. Hayes, 982 S.W.2d 845, 856 (Tenn.

1998). “[O]nce it is determined that the insured has failed to provide timely notice in accordance

with the insurance policy, it is presumed that the insurer has been prejudiced by the breach.” Id.

“The insured may rebut this presumption by proffering competent evidence establishing that the

insurer was not prejudiced by the insured’s delay.” Am. Just. Ins. Reciprocal v. Hutchison, 15

S.W.3d 811, 818 (Tenn. 2000); see also Talley v. State Farm Fire & Cas. Co., 223 F.3d 323, 328

(6th Cir. 2000) (“The weight of Tennessee law seems to indicate a clear trend towards a showing

of prejudice.”). Because Davis failed to provide timely notice in accordance with the Policy, it is

presumed that Assurity has been prejudiced by Davis’s breach. The Court must consider whether

Davis has proffered competent evidence that Assurity was not prejudiced.

“According to Alcazar, factors to consider when assessing prejudice are: (1) availability of

witnesses; (2) ability to discover other information; (3) existence of official reports concerning the

occurrence; (4) the preparation and preservation of demonstrative and illustrative evidence; and

(5) the ability of experts to reconstruct the occurrence.” U.S. Fire Ins. Co. v. Vanderbilt Univ.,

267 F.3d 465, 475 (6th Cir. 2001) (citing Alcazar, 982 S.W.2d at 856); see also 13A Plitt et al.,

Couch on Ins. § 193:75 (“Prejudice to a compensation carrier sufficient to avoid coverage has been

found where late notice of an accident prevented the insurer from having an opportunity to

investigate the accident.”). The Court in Alcazar also stated that it was “less sympathetic to the

insured” where “the insured bears sole responsibility for breaching a term of the contract that was

intended to preserve fairness to the insurer.” Alcazar, 982 S.W.2d at 856.

Davis argues that Assurity is not prejudiced by his untimely provision of notice and proof

because Assurity has “received abundant evidence from the time period in question to allow it to

conduct a full investigation,” including medical records and sworn statements from Davis’s

longtime treatment providers that his disability existed prior to the lapse of the Policy. (ECF No.

17 at PageID 74.) Davis asserts that “[t]he information contained in the medical records has not

and will not change with the passage of time.” (Id.) Lastly, Davis argues that because Assurity

has not asserted that it attempted to investigate whether Davis was disabled, it cannot claim to be

prejudiced by an inability to adequately investigate. (Cf. id. at PageID 74–75.)

Assurity argues that the period of delay in the present action is unreasonable. (ECF No.

19 at PageID 86.) Assurity also argues that Davis has failed to meet his burden because he has not

produced for the record any of the historical medical records he claims meet his burden. (Id. at

PageID 87 n. 2.) Assurity asserts that “an accurate disability determination required a wide variety

of time-sensitive, contemporaneous evidence that Plaintiff’s delay has forever foreclosed,

including” physical condition and functional capacity examinations, questioning of witnesses, and

documentation regarding Davis’s business and personal activities, all at or from the time at which

Davis became totally disabled. (Id. at PageID 83–84.)

The “abundant evidence” Davis asserts that he has provided Assurity is insufficient to rebut

the presumption of prejudice. Davis states that he submitted to Assurity “the opinions of his

treating providers Joseph Reid, PA and Dr. Brian Way.” (Compl., ECF No. 1 ¶ 18.) But Davis

also admits that Dr. Way has only treated him since 2012, and Mr. Reid since 2009. (Id.) Neither

provider treated him at the time of the initial injury in 2005 or at the time Davis became totally

disabled in 2008. Additionally, Davis states that he submitted “an Independent Medical

Examination from October 20, 2017, and a neuropsychological examination from September 29,

2017.” (Id. ¶ 19.) Those examinations were conducted over twelve years after the initial injury,

over nine years after Davis became totally disabled and over a year after the Policy lapsed. The

Policy also gave Assurity the right to have Davis examined by a physician as part of its

investigation into a claim. (Compl., Ex. 1, ECF No. 1-1 at p. 14 of 18.) By waiting over nine

years to provide notice of his claim, Davis prevented Assurity from collecting medical evidence

contemporaneous with the alleged onset of Davis’s disability. See, e.g. U.S. Fire Ins. Co. v.

Vanderbilt Univ., 267 F.3d at 475–76 (finding the plaintiff’s evidence insufficient to rebut the

presumption of prejudice in part because the defendant demonstrated that [] evidence no longer

existed by the time the insurer received notice of the claim).

Davis also asserts that witnesses are available who can provide Assurity information

regarding his injury and the onset of his disability. (Compl., ECF No. 1 ¶¶ 18, 20.) Specifically,

Davis asserts that in addition to treating Davis since 2009, Mr. Reid has “known him personally

since before his injury in 2005.” (Id. ¶ 18.) Davis also asserts that he “included in his appeal

letters from former employees of his who witnessed his cognitive decline following his injury.”

(Id.) The mere availability of these witnesses is insufficient to demonstrate Assurity was not

prejudiced. Assurity cannot adequately question witnesses regarding events that occurred nine to

twelve years prior to its receiving notice of Davis’s claim. See, e.g. Brown v. Ogle, 46 S.W.3d

721, 725 (Tenn. Ct. App. 2000) (“During the almost twelve years this suit has been pending…

memories have dulled…”); see also U.S. Fire Ins. Co. v. Vanderbilt Univ., 267 F.3d at 476 (finding

the plaintiff’s evidence insufficient to rebut the presumption of prejudice in part because of

reliability problems related to the remaining living witnesses).

In summary, the Court finds that Davis provided Assurity with untimely notice and proof

of his claim and has failed to proffer competent evidence to rebut the presumption of prejudice.

Taking all the facts in the Complaint as true, Davis is not entitled to legal relief. Mayer, 988 F.2d

at 638.

B. Plaintiff’s Claim is Barred Under the Doctrines of Laches and Estoppel.

Assurity argues that Davis’s claim is barred under the doctrines of laches and estoppel.

(ECF No. 10-1 at PageID 49–50.) Assurity argues that “[c]ontemporaneous and complete

evidence and information related to [Davis’s] injuries, or his ability to perform the duties of his

occupation, have been obscured, destroyed or lost” and that it is “impossible now for Assurity to

investigate, assess, and evaluate the facts and circumstances of Plaintiff’s alleged condition and

his ability [] to satisfy the terms of the Policy.” (Id. at PageID 50.) Assurity further argues that

allowing Davis to pursue his claim would unduly prejudice Assurity and that “[t]his sort of

prejudice is exactly why insurance companies limit the time period in which an insured may submit

a claim.” (Id.) Davis argues in his Response that the doctrine of laches is applied only in limited

circumstances, that no evidence has been lost, and that the “risk of failure of memory is minimal

as memories can be easily refreshed by the written records.” (ECF No. 17 at PageID 75–76.)

“To successfully invoke the doctrine of laches, a defendant must show ‘an inexcusably

long delay in commencing the action which causes prejudice to the other party,’ and mere delay

will not suffice.” Baptist Physician Hosp. Org., Inc. v. Humana Military Healthcare Serv., Inc.,

481 F.3d 337, 353 (6th Cir. 2007) (citing Patton v. Bearden, 8 F.3d 343, 347 (6th Cir. 1993) &

M.J. Jansen v. Clatyon, 816 S.W.2d 49, 51 (Tenn. Ct. App. 1991)). “In the cases applying the

defense of laches, the courts frequently cite… the loss of evidence as the sort of prejudice that,

coupled with an unreasonable delay, amount to laches.” M.J. Jansen, 816 S.W.2d at 52 (holding

that laches applied where the plaintiff waited one year to hire a lawyer). The Tennessee Supreme

Court has also held that “when the original transaction has become obscured by time and the

evidence lost, [it is] good public policy to allow claims and titles long acquiesced to remain in

repose.” John P. Saad & Sons, Inc. v. Nashville Thermal Transfer Corp., 715 S.W.2d 41, 46 – 47

(Tenn. 1986) (holding that laches applied where the plaintiff waited four years to provide written

notice under the contract).

In the present case, Davis waited over nine years to provide Assurity notice of his disability.

In doing so, evidence was irrevocably lost regarding his medical condition and ability to conduct

personal and business activities at the time he claims to have become totally disabled. Assurity

argues in its Reply that “[g]iven that Plaintiff continued to operate and receive income from his

business while allegedly totally disabled (Compl., ¶ 11–12), an accurate disability determination

required a wide variety of time-sensitive, contemporaneous evidence that Plaintiff’s delay has

forever foreclosed.” (ECF No. 19 at PageID 83.) Assurity is correct. The opinions of treatment

providers who Davis admits did not treat him at the time of the initial injury or at the time he

claims to have become permanently disabled are insufficient evidence of his claim. (Compl., ECF

No. 1 ¶ 18.) Independent Medical Examinations conducted over nine years after Davis became

totally disabled are insufficient evidence that Davis in fact became totally disabled as defined by

the Policy in 2008. (Id. ¶ 20.) It was impossible for Assurity, at the time it first received notice of

Davis’s claim in 2017, to obtain accurate evidence regarding Davis’s medical condition from the

time of the injury or the time of total disability. Davis’s lengthy and unexcused1 delay in providing

Assurity notice and proof of his claim unfairly prejudiced Assurity.

In summary, the Court finds that the doctrine of laches applies and bars Plaintiff’s

Complaint.

IV. CONCLUSION

For each of the reasons set forth above, Defendant’s Motion to Dismiss is GRANTED.

SO ORDERED, this 30th day of September, 2020.

/s/ Jon P. McCalla

JON P. McCALLA

UNITED STATES DISTRICT JUDGE

1 Nowhere in Davis’s Complaint or Response to Defendant’s Motion to Dismiss does Davis provide an explanation

or excuse for his failure to comply with the Policy’s terms regarding notice and proof.