Morse v. Life Insurance Company of North America

UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

BRIAN MORSE, )

)

Plaintiff, )

v. )

) Civil Action Number

LIFE INSURANCE COMPANY OF ) 2:18-cv-01681-AKK

NORTH AMERICA, )

)

Defendant. )

)

MEMORANDUM OPINION AND ORDER

Brian Morse brings this action against Life Insurance Company of North

America (“LINA”) for breach of contract and bad faith, alleging that LINA

wrongfully refused to pay him long term disability benefits. Doc. 1. LINA has

moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), arguing that

Morse’s breach of contract claim is time barred by the limitations period included in

the insurance policy and that Michigan law does not recognize bad faith as a separate

and independent tort. See doc. 10. In light of the ambiguity of the contractual

provision LINA cites in support for its limitations argument, the motion to dismiss

the breach of contract claim is due to be denied. However, because LINA is correct

that Michigan does not recognize bad faith as a separate tort, that claim is due to be

dismissed.

I. STANDARD OF REVIEW

Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain “a

short and plain statement of the claim showing that the pleader is entitled to relief.”

“[T]he pleading standard Rule 8 announces does not require ‘detailed factual

allegations,’ but it demands more than an unadorned, the-defendant-unlawfully-

harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl.

Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Mere “labels and conclusions” or “a

formulaic recitation of the elements of a cause of action” are insufficient. Id.

(citations and internal quotation marks omitted). By contrast with Rule 8(a)’s fairly

liberal pleading standard, Federal Rule of Civil Procedure 9(b) requires a party to

“state with particularity the circumstances constituting fraud or mistake.”

Federal Rule of Civil Procedure 12(b)(6) permits dismissal when a complaint

fails to state a claim upon which relief can be granted. “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.” Id. (citations and internal quotation

marks omitted). A complaint states a facially plausible claim for relief “when the

plaintiff pleads factual content that allows the court to draw the reasonable inference

that the defendant is liable for the misconduct alleged.” Id. (citation omitted).

Ultimately, this inquiry is a “context-specific task that requires the reviewing court

to draw on its judicial experience and common sense.” Id. at 679.

However, a district court “must convert a motion to dismiss into a motion for

summary judgment if it considers materials outside the complaint.” Day v. Taylor,

400 F.3d 1272, 1275-76 (11th Cir. 2005) (citation omitted); see Fed. R. Civ. P. 12(d).

“[T]he district court may always consider exhibits attached to the complaint on a

12(b)(6) motion, because exhibits are part of the pleadings.” Basson v. Mortgage

Electronic Registration Sys., Inc., 741 F. App’x 770, 771-72 (11th Cir. 2018) (citing

Fed. R. Civ. P. 10(c) and Thaeter v. Palm Beach Cty. Sherriff’s Office, 449 F.3d

1242, 1352 (11th Cir. 2006)). Furthermore, “the court may consider a document

attached to a motion to dismiss without converting the motion into one for summary

judgment if the attached document is (1) central to the plaintiff’s claim and (2)

undisputed,” meaning “the authenticity of the document is not challenged.” Day, 400

F.3d at 1276 (citation omitted). In determining whether a document is “central to the

plaintiff’s claim,” the court may consider “whether the plaintiff would have to offer

the document to prove his case.” Lockwood v. Beasley, 221 F. App’x 873, 877 (11th

Cir. 2006).

Here, LINA has attached six exhibits to its motion to dismiss, including a copy

of the long-term disability policy at issue, Policy No. LK-980083, and six letters

from LINA addressed to Morse and Morse’s attorneys. See docs. 10-1, 10-2, 10-3,

10-4, 10-5, 10-6.1 The policy document and the letters dated September 4, 2013,

October 7, 2014, August 3, 2015, September 23, 2015, and September 21, 2017 were

also attached to and referenced in the Complaint and are, therefore, undisputed and

central to Morse’s claims. See docs. 1 at 2, 4-6, 9; 1-1; 1-5; 1-9; 1-12; 1-14; 1-22. In

ruling on this motion, the court did not consider LINA’s October 25, 2012 letter

informing Morse that it was terminating his benefits effective October 24, 2012. See

doc. 10-1 at 2. Although its authenticity is uncontested, this letter was not attached

to or referenced in the Complaint, and the court finds that Morse would not have to

offer it to prove his claims. See docs. 1; Lockwood, 221 F. App’x at 877.

Accordingly, the court has not converted the motion into a motion for summary

judgment. See Miranda v. Ocwen Loan Servicing, LLC, 148 F. Supp. 3d 1349, 1353

(S.D. Fla. 2015) (declining to convert a motion to dismiss where the court did not

consider a disputed document that was not central to the plaintiff’s claims).

II. BACKGROUND

This action arises from a group insurance policy for long-term disability

benefits issued by LINA to Morse’s former employer, Michigan State University

(MSU). See doc. 1 at 2. Under this policy (“the Policy”), eligible employees of MSU

can receive long-term disability benefits if they satisfy the Policy’s criteria for

1 Exhibit D to the motion to dismiss contains two letters from LINA, dated August 3, 2015 and

September 23, 2015. See doc. 10-4.

having a disability. See doc. 1-1 at 7-8. However, a policyholder’s disability benefits

terminate if and when LINA “determines he or she is not Disabled.” Id. at 23. The

Policy also provides for payment of additional benefits for Cost of Living

Adjustment (COLA) and the MSU 403b Retirement Plan. Id. at 8. Finally, the Policy

has a “Legal Action” provision which states:

No action at law or in equity may be brought to recover benefits under

the Policy less than 60 days after written proof of loss, or proof by any

other electronic/telephonic means authorized by the Insurance

Company, has been furnished as required by the Policy. No such action

shall be brought more than 3 years after the time satisfactory proof of

loss is required to be furnished.

Id. at 25.

While insured under the Policy, Morse was diagnosed with multiple

impairments that prevented him from continuing to work. Doc. 1 at 2-3. The Social

Security Administration subsequently determined that he qualified for Social

Security disability benefits with a disability onset date of October 27, 2010. Doc. 1

at 3. On April 25, 2011, Morse began receiving long-term disability benefits under

the Policy, which he continued to receive until October 24, 2012. Id. Following the

termination of his benefits, Morse submitted four different appeals with updated

medical information to LINA seeking to overturn its determination. Id. at 3-5. Morse

prevailed finally on his fourth appeal, when, by letter dated August 3, 2015, LINA

notified Morse’s attorneys that LINA had overturned its prior determination and that

Morse was “entitled to benefits payable under [the Policy] so long as [he] continue[s]

to meet the terms and conditions of the policy.” Docs. 1 at 5; 1-12 at 2. In light of its

decision, LINA subsequently issued a check payable to Morse for $1,305.00 in

disability income for October 25, 2012 through April 24, 2013. See docs. 1 at 5-6;

1-13 at 2. The approval lasted only for a brief period, and, roughly six weeks later,

LINA notified Morse that it had determined that he “no longer remained disabled as

defined by [the Policy]” and “no further benefits” were due beyond April 24, 2013.

Docs. 1 at 6; 1-14 at 2-3. Morse submitted two appeals to no avail, see doc. 1 at 8-

9, and LINA refused to accept his third appeal because Morse had purportedly “not

provided any additional new relevant medical documentation to refute [the] previous

determinations.” Id. at 10.

III. ANALYSIS

Morse alleges that LINA breached the insurance contract by failing to provide

all benefits owed to Morse for the October 24, 2012 through April 23, 2013 period,

and by denying any benefits beyond that period. Doc. 1 at 11. Morse also alleges

that LINA acted in bad faith by intentionally and unreasonably refusing to pay

Morse’s claim and delaying its review of his appeals. Doc. 1 at 12-13. The court

addresses LINA’s contentions in support of its motion to dismiss below.

A. Breach of Contract

LINA avers that the breach of contract claim is time-barred by the Policy’s

“Legal Action” provision, which purportedly imposes a three-year limit on legal

actions to recover benefits under the Policy. See doc. 1-1 at 25. Morse responds that

either Michigan’s or Alabama’s six-year statutes of limitations for breach of

contract, rather than the Policy, determines the limitations period for his claim. See

doc. 14 at 6-7; Mich. Comp. Laws § 600.5807(8); Ala. Code § 6-2-34(9). The

resolution of this issue hinges, in part, on which state’s law governs this dispute.

1. Whether Michigan or Alabama Law Governs

“A federal court in a diversity case is required to apply the laws, including

principles of conflict of laws, of the state in which the federal court sits.” Colonial

Life & Accident Ins. Co. v. Hartford Fire Ins. Co., 358 F.3d 1306, 1308 (11th Cir.

2004) (citation omitted). “In a contractual dispute, Alabama law . . . first look[s] to

the contract to determine whether the parties have specified a particular sovereign’s

law to govern.” Stovall v. Universal Const. Co., 893 So. 2d 1090, 1102 (Ala. 2004).

Absent “such a contractual specification,” the court follows “the principle of lex loci

contractus, applying the law of the state where the contract was formed.” Id. “That

state’s law then governs unless it is contrary to the forum state’s fundamental public

policy.” Id.

Here, it is undisputed that the Policy includes a choice-of-law provision,

stating in part, “This Policy . . . is issued in Michigan and shall be governed by its

laws.” Doc. 1-1 at 15. Although “in most instances” Alabama courts consider

“statutes of limitations . . . procedural matters” governed by the law of the forum,

Precision Gear Co. v. Cont’l Motors, Inc., 135 So. 3d 953, 957 (Ala. 2013), the issue

before the court is not merely which state’s statute of limitations applies, but the

“validity and construction” of the contractual limitations provision—a substantive

matter. See Macey v. Crum, 30 So. 2d 666, 669 (Ala. 1947) (holding that the “the

validity and construction of the contract” is a substantive matter governed by the lex

loci contractus). Moreover, where, as here, the parties have expressly “contracted

with reference to the laws” of Michigan, Cherry, Bekaert & Holland v. Brown, 582

So. 2d 502, 506 (Ala. 1991), the application of Michigan law to resolve this issue is

consistent with Alabama’s longstanding “recogni[tion of] the right of parties to an

agreement to choose a particular state’s laws to govern an agreement,” Polaris Sales,

Inc. v. Heritage Imports, Inc., 879 So. 2d 1129, 1133 (Ala. 2003). See also Harper

v. O’Charley’s, LLC, No. CV 16-0577-WS-M, 2017 WL 5598815, at *4 (S.D. Ala.

Nov. 20, 2017) (noting that “Alabama law generally requires courts . . . to honor the

parties’ expressed intentions as to which state’s law controls . . .” and applying the

statute of limitations for the state specified by the contractual choice-of-law

provision).

Furthermore, the application of Michigan law, which permits contractually

shortened limitations periods, see Rory v. Continental Ins. Co., 703 N.W.2d 23, 31

(Mich. 2005), is not “contrary to [a] fundamental public policy” of Alabama that

would otherwise compel the application of Alabama law. See Stovall, 893 So. 2d at

1102. “[I]n order for a policy to be considered fundamental it must be ‘a substantial

one’ and ‘may be embodied in a statute which makes one or more kinds of contracts

illegal or which is designed to protect a person against the oppressive use of superior

bargaining power.’” Cherry, Bekaert & Holland v. Brown, 582 So. 2d 502, 506-07

(Ala. 1991) (quoting the Restatement (Second) of Conflict of Laws § 187, cmt. (g)

(1971)). Although Alabama statutory law voids agreements to shorten limitations

periods to “less than that prescribed by law,” see Ala. Code § 6-2-15, “that fact is

not tantamount to saying that it would violate a fundamental public policy of

Alabama for private parties to contract around” the six-year statute of limitations for

breach of contract claims, see Harper, 2017 WL 5598815, at *4 (rejecting argument

that enforcing indemnity provisions beyond the statutory period of repose

contravened fundamental public policy). Indeed, that the Alabama Insurance Code

requires certain disability insurance policies to include a three-year “legal action”

limitations provision indicates that § 6-2-15 does not embody a “fundamental public

policy” of the state. See Ala. Code § 27-19-14 (1975).2 Finally, given that the

2 Alabama Code § 27-9-14 requires certain disability insurance policies to contain a nearly identical

provision to the one in the instant Policy, stating:

There shall be a provision as follows:

“Legal Actions: No action shall be brought to recover on this policy prior to the

expiration of 60 days after written proof of loss has been furnished in accordance

with the requirements of this policy. No such action shall be brought after the

expiration of three years after the time written proof of loss is required to be

furnished.”

However, this statutory provision does not apply to group policies like the one in this case. See id.

§ 27-19-1.

fundamental policy exception “is intended to be ‘narrow and . . . applied only in rare

circumstances,’” and given that this court is not aware of any Alabama court that has

recognized § 6-2-15 as a “fundamental public policy,” the court concludes that the

fundamental policy exception does not apply here. San Francisco Residence Club,

Inc. v. Baswell-Guthrie, 897 F. Supp. 2d 1122, 1172 (N.D. Ala. 2012) (quoting 16

Am. Jur. 2d Conflict of Laws § 18 (2012)). Accordingly, Michigan law governs this

issue.

2. Whether the Policy’s Limitations Provision is Enforceable

The court turns now to the parties’ respective contentions regarding the

Policy’s “Legal Action” provision. In particular, the court must decide whether the

provision determines the limitations period of the breach of contract claim.3 Under

Michigan law, “an unambiguous contractual provision providing for a shortened

period of limitations is to be enforced as written unless the provision would violate

law or public policy.” Rory v. Continental Ins. Co., 703 N.W.2d 23, 31 (Mich. 2005);

3 As an initial matter, Morse contends that the court must apply Michigan’s six-year statute of

limitations, Mich. Comp. Laws § 600.5807(8), rather than the Policy’s three-year “Legal Action”

provision. But, Michigan law permits contractually shortened limitations periods for three years

and, therefore, the three-year limit is not “less than that permitted by” Michigan law. See doc. 1-1

at 35; Rory v. Continental Ins. Co., 703 N.W.2d 23, 31 (Mich. 2005); Mich. Comp. Laws §

500.3422 (requiring disability insurance policies, including group policies, to include a three-year

limitations provision for legal actions). And, at least one other federal court has found that similar

contractual language did not compel the application of Michigan’s six-year statute of limitations

instead of an insurance policy’s three-year limitations provision. See Gipson v. Life Ins. Co. of N.

Am., 529 F. Supp. 224, 225 (E.D. Mich. 1981) (construing provision stating “No [legal] action

shall be brought after the expiration of three years (or the minimum time, if more than three years,

permitted by law in the state where the insured resides) . . .”). Therefore, Morse’s contention is

unavailing.

see Santino v. Provident and Accident Ins. Co., 276 F.3d 772, 776 (6th Cir. 2001)

(noting that “Michigan courts have held that insurance contracts may contain shorter

statutes of limitations”). A contractual provision may be ambiguous when two

provisions “irreconcilably conflict with each other,” Klapp v. United Ins. Group

Agency, Inc., 663 N.W.2d 447, 453 (Mich. 2003), or “when it is equally susceptible

to more than a single meaning,” Fluor Enterprises, Inc. v. Revenue Div., Dep’t of

Treasury, 730 N.W.2d 722, 726 n.3 (Mich. 2007) (citation omitted) (emphasis in

original). “If a policy contains ambiguous terms,” the court must “construe the policy

in favor of the insured and against the insurer.” Farm Bureau Mut. Ins. Co. v.

Buckallew, 246 Mich. App. 607, 612, 633 N.W.2d 473, 476 (2001). Furthermore,

“Michigan law is clear that ‘[t]he burden of demonstrating the validity of the

agreement is on the party seeking enforcement.’” Certified Restoration Dry

Cleaning Network, LLC v. Tenke Corp., 511 F.3d 535, 546 n.2 (6th Cir. 2007)

(quoting Coates v. Bastian Bros., Inc., 741 N.W.2d 539, 545 (Mich. Ct. App. 2007)).

The “Legal Action” provision of the Policy indicates that any legal action to

recover under the Policy must be brought within “3 years after the time satisfactory

proof of loss is required to be furnished.” Doc. 1-1 at 35. However, the provision

does not define when “satisfactory proof of loss is required to be furnished.” See id.

The Policy’s “Proof of Loss” provision states, in part:

Written proof of loss, or proof by any other electronic/telephonic means

authorized by the Insurance Company, must be given to the Insurance

Company within 90 days after the date of the loss for which a claim is

made. . . . Written proof, or proof by any other electronic/telephonic

means authorized by the Insurance Company, that the loss continues

must be furnished to the Insurance Company at intervals required by

us. Within 30 days of a request, written proof of continued Disability

and Appropriate Care by a Physician must be given to the Insurance

Company.

Id. at 34. Relying on the first sentence of the “Proof of Loss” provision, LINA

contends that “satisfactory proof of loss” was required to be furnished 90 days after

“the date of the loss for which a claim is made,” and that “the date of the loss” is the

alleged disability onset date, which, in this case, is October 27, 2010. See docs. 10

at 14; 1-1 at 34; 1 ¶¶ 8-9. Therefore, LINA contends Morse had a deadline of January

25, 2011 to provide “satisfactory proof of loss.” See docs. 10 at 14; 1-1 at 34.

However, these provisions are ambiguous and, thus, unenforceable for two

reasons. First, it is not clear that the 90-day requirement in the “Proof of Loss”

provision determines the deadline for furnishing “satisfactory proof of loss.” Indeed,

by stating that “proof . . . that the loss continues must be furnished to the Insurance

Company at intervals required by us,” the provision suggests that the deadline for

furnishing “satisfactory proof of loss” may be determined by undefined “intervals”

where, as here, the alleged loss is continuous. Furthermore, other provisions of the

Policy suggest that “satisfactory proof of loss” for an alleged continuing loss is not

governed by the 90-day requirement in the “Proof of Loss” provision. For instance,

the “Description of Benefits” states, in part, “The Employee . . . must provide the

Insurance Company . . . satisfactory proof of Disability before benefits will be paid.

. . . The Insurance Company will require continued proof of the Employee’s

Disability for benefits to continue.” Doc. 1-1 at 29. The court cannot ignore these

other provisions because “an insurance contract should be read as a whole and

meaning should be given to all terms.” See Royal Property Group, LLC v. Prime Ins.

Syndicate, Inc., 706 N.W.2d 426, 432 (Mich. Ct. App. 2005).

Second, assuming that LINA is correct that “satisfactory proof of loss” is

required “within 90 days of the date of the loss for which a claim is made,” the Policy

is ambiguous because it does not define or otherwise explain how to determine “the

date of the loss.” If, as LINA contends, “the date of the loss” means the alleged

disability onset date for a claim, this would potentially yield absurd results. As

Morse acknowledges, where the insured’s claim involves a “continued Disability,”

such an interpretation would essentially immunize LINA from contractual liability

for any actions taken three years and ninety days after the alleged disability onset

date. See doc. 14 at 6. In this case, for example, it would mean that Morse would be

held to a filing deadline of January 25, 2014, even though he successfully appealed

and, on August 3, 2015, LINA granted him benefits for October 25, 2012 to April

24, 2013. Such a reading would perhaps incentivize LINA to string along its insured

through the appeals process and then to claim subsequently that the insured’s claims

are time barred because she failed to file suit within three years and 90 days of her

alleged onset date. Therefore, because “contracts must be construed consistent with

common sense and in a manner that avoids absurd results,” the court cannot conclude

that “the date of the loss” constitutes the alleged disability onset date. Kellogg Co.

v. Sabhlok, 471 F.3d 629, 636 (6th Cir. 2006) (citing Parrish v. Paul Revere Life Ins.

Co., 302 N.W.2d 332, 333 (Mich. Ct. App. 1981)).

The court’s finding that the Policy’s limitations provision is ambiguous is

consistent with other courts’ interpretations of similar language in disability

insurance policies. For instance, in Hess v. Metro Life Insurance Company, the

Eastern District of Michigan declined to enforce an ambiguous limitations provision

against a plaintiff seeking to recover long-term disability benefits under ERISA. No.

13-CV-10696, 2013 WL 12149279, *1-2 (E.D. Mich. Oct. 21, 2013). The

defendant’s policy required “legal action on a claim” to be brought before “3 years

after the date . . . Proof is required.” Id. at *1. Similar to the instant Policy, the

policy’s “Proof” provision further required, in part, that the claimant “give . . . Proof

not later than 90 days after the date of the loss,” but that “delay will not cause a claim

to be denied or reduced if such . . . Proof [is] given as soon as is reasonably possible.”

Id. at *2 (emphasis added). Rejecting the defendant’s contention that “loss” meant

“the first day of disability,” the court found that “the plan language . . . is unclear

and ambiguous,” noting that “critical terms” like “loss” were “not clearly defined,”

and that the policy’s statement that delays will be excused if proof is provided “as

soon as is reasonably possible” made the deadline for proof ambiguous. Id. at *2-3.

Additionally, in Wernimont v. Prudential Insurance Company of America, the

Western District of Michigan, applying Michigan law to the plaintiff’s ERISA claim,

declined to enforce a disability insurance policy’s limitations provision that also

prohibited legal action to recover under the policy “more than three years after the

end of the time within which proof of loss is required.” No. 1:13-CV-937, 2015 WL

328603, *4 (W.D. Mich. Jan. 26, 2015). Critically, the policy stated that, for long-

term disability coverage, two “time limits must be met:

(1) Initial proof of loss must be furnished within 90 days after the end

of the first month following the Elimination Period.

(2) Proof for each later month of continuing loss must be furnished

within 90 days after the end of that month.”

Id. at *2. The court held that where the insured’s loss was “continuing,” and he had

“purportedly not yet reached the ‘last month’ of his loss,” the Policy was “unclear

as to when the time limit ends.” Id. at *4.

By contrast, the cases that LINA cites involved policies that are

distinguishable from the Policy here. See docs. 10, 16. First, LINA cites

Andrzejewski v. Metropolitan Life Ins. Co., in which the Eastern District of Michigan

enforced a policy’s three-year limitations provision that unambiguously defined the

point at which a claim accrued. No. 06-11242, 2006 WL 2943300, *2 (E.D. Mich.

Oct. 13, 2006). The defendant’s policy provided that accrual occurred at “the time

written proof of loss is required to be given,” but, unlike the instant Policy, explained

that, “Written proof of loss must be sent to [the insurer] within 90 days after the end

of a period for which [the insured] claim[s] benefits. . . .” Id. (emphasis added).

Similarly, in Tate v. Paul Revere Life Insurance Company, which LINA also cites,

the Eastern District of Michigan enforced a limitations provision that was

unambiguous. No. 05-70438, 2005 WL 1861933, *4 (E.D. Mich. Aug. 3, 2005). The

policy prohibited legal action “after 3 years from the date written proof of loss is

required” and, like in Andrzejewski, unambiguously defined the deadline for “written

proof of loss”: “Written proof of loss must be sent to [the insurer] within 90 days

after the end of each period for which [the insured is] claiming benefits.” Id. at *3

(emphasis added). Finally, LINA cites three other cases that enforced three-year

limitations provisions in disability insurance policies under Michigan law. See

Santino v. Provident Life and Acc. Ins. Co., 276 F.3d 772, 776 (6th Cir. 2001);

Gipson v. Life Ins. Co. of N. Am., 529 F. Supp. 224, 225 (E.D. Mich. 1981);

Poniewierski v. Unum Life Assur. Co. of Am., No. CIV. 05-72431, 2006 WL

2385045, at *4 (E.D. Mich. Aug. 17, 2006). However, these cases are not instructive

on this issue because they do not explain how the policies defined the deadline for

the “proof of loss” that triggered the policies’ limitations provisions. See id.

Therefore, in light of these authorities and the Policy’s ambiguous language,

LINA has failed to show that the limitations provision is enforceable and that it bars

Morse’s breach of contract claim. As such, the motion to dismiss is due to be denied,

and it is unnecessary for the court to address Morse’s contention that LINA is

equitably estopped from enforcing the provision.

B. Bad Faith

LINA also contends that Morse’s bad faith claim fails because Michigan law

does not recognize actions in tort for bad faith refusal to pay or settle an insurance

claim. Morse tersely responds by asserting, without citing any authority, that he

“rightfully brought a claim” for bad faith. Doc. 14 at 8. Michigan law disagrees with

Morse.

1. Whether Michigan or Alabama Law Governs

In order to determine which state’s law governs the bad faith claim, the court

must first “characterize the legal issue and determine whether it sounds in torts [or]

contracts . . .” See Grupo Televisa, S.A. v. Telemundo Commc'ns Grp., Inc., 485 F.3d

1233, 1240 (11th Cir. 2007). “In making this determination, this court is bound to

decide the way it appears the Alabama Supreme Court would decide.” Ferris v.

Jennings, 851 F. Supp. 418, 421 (M.D. Ala. 1993) (citing Shapiro v. Associated

Intern. Ins. Co., 899 F.2d 1116, 1118 (11th Cir. 1990)). The Alabama Supreme

Court has repeatedly indicated that a bad faith claim premised on an insurer’s refusal

to pay an insurance claim sounds in tort, not contract. See, e.g., State Farm Fire &

Cas. Co. v. Brechbill, 144 So. 3d 248, 257 (Ala. 2013) (“[T]here is

only one tort of bad-faith refusal to pay a claim . . .”) (emphasis omitted); ALFA

Mut. Ins. Co. v. Smith, 540 So. 2d 691, 692 (Ala. 1988) (holding that Alabama Code

§ 6-2-38(l), the two-year statute of limitations for “[a]ll actions for any injury . . .

not arising from contract and not . . . enumerated,” governs bad faith claims). For

tort claims, Alabama applies the doctrine of lex loci delicti, which provides that the

law of the state where the injury occurred governs the injured party’s substantive

rights. Ex parte U.S. Bank Nat’l Ass’n, 148 So. 3d 1060, 1069 (Ala. 2014) (citation

and quotation marks omitted).

LINA contends that the place of injury for Morse’s bad faith claim was

Michigan because Morse received LINA’s initial and subsequent denials of benefits

at his residence in Michigan and allegedly suffered financial hardship in Michigan.

See doc. 10 at 12-13. Morse does not dispute this contention, which the Complaint

and attached exhibits seem to corroborate. See doc. 14; docs. 1 at 1 (alleging that

Morse is a Michigan citizen); 1-2 at 2 (addressing November 2011 Social Security

Administration letter to Morse in Michigan). Indeed, LINA sent the letter concluding

that “no further benefits were due” beyond April 24, 2013 to Morse at a Michigan

address, and Morse’s attorney subsequently confirmed that this letter was “sent

directly to [Morse].” Docs. 1-14 at 2; 1-16 at 2. Therefore, the injury occurred in

Michigan and Michigan law governs Morse’s bad faith claim. See Ex parte U.S.

Bank Nat’l Ass’n, 148 So. 3d at 1069.

2. Whether the Bad Faith Claim is Cognizable Under Michigan Law

As LINA notes, “Michigan courts—and federal courts applying Michigan

law—have long held that breach of a contract, even if done in bad faith, does not

give rise to a separate and independent tort.” Home Owners Ins. Co. v. ADT LLC,

109 F. Supp. 3d 1000, 1008 (E.D. Mich. 2015). In other words, “[a]n alleged bad-

faith breach of an insurance contract does not state an independent tort claim.” Casey

v. Auto Owners Ins. Co., 729 N.W.2d 277, 286 (Mich. Ct. App. 2006) (citing Kewin

v. Massachusetts Mut. Life Ins. Co. 295 N.W.2d 50, 55 (Mich. 1980)). Rather,

“Michigan law recognizes a tort claim only when a plaintiff’s complaint alleges ‘the

breach of duties existing independent of and apart from’ the contract of insurance.”

Soc’y of St. Vincent De Paul in Archdiocese of Detroit v. Mt. Hawley Ins. Co., 49 F.

Supp. 2d 1011, 1019-20 (E.D. Mich. 1999) (quoting Hearn v. Rickenbacker, 400

N.W.2d 90, 94 (Mich. 1987)). However, where, as here, a plaintiff asserting a bad

faith claim does not allege “that a relationship exists between it and Defendant

independent of and apart from their contractual relationship,” the plaintiff has failed

to state a claim on which relief can be given. See, e.g., id. at 1019-20 (dismissing

claim for “bad faith breach of insurance contract”); Lee v. Liberty Mut. Ins. Co., No.

11-14998, 2013 WL 6095479, *2-3 (E.D. Mich. Nov. 20, 2013) (same); Casey v.

Auto Owners Ins. Co., 729 N.W.2d 277, 401-02 (Mich. Ct. App. 2006) (denying

motion to amend complaint to add bad faith claims because “they fail to state an

action independent from [the] breach of contract claim.”). Therefore, Morse has

failed to state a claim for bad faith.

IV. CONCLUSION AND ORDER

For all these reasons, LINA’s motion to dismiss is GRANTED as to the bad

faith claim, and DENIED as to the breach of contract claim.

DONE the 2nd day of July, 2019.

ABDUL K. KALLON

UNITED STATES DISTRICT JUDGE

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