Carrier v . American Bankers Life CV-05-430-JD 04/21/06 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Lori Carrier and Valerie Whitman v. Civil N o . 05-cv-430-JD Opinion N o .

American Bankers Life Assurance Company of Florida

O R D E R

Lori Carrier and Valerie Whitman filed a putative class

action in state court, alleging that American Bankers Life

Assurance Company of Florida breached its insurance contracts

with them and other members of the putative class by failing to

refund the unearned portion of insurance premiums that had been

prepaid for credit insurance as part of their vehicle financing.

American Bankers removed the case to this court and moves to

dismiss the complaint. The plaintiffs oppose the motion to

dismiss except that they agree that their separate claim for

breach of the implied covenant of good faith and fair dealing

should be included in their breach of contract claim so that

Count II should be dismissed. After filing the motion to

dismiss, American Bankers filed a motion to certify a question to

the New Hampshire Supreme Court, which will also be addressed in

this order. Standard of Review

In considering a motion to dismiss, pursuant to Federal Rule

of Civil Procedure 12(b)(6), the court accepts the facts alleged

in the complaint as true and draws all reasonable inferences in

favor of the plaintiff. Edes v . Verizon Comms.,

(1st Cir. 2005). The court must determine whether the

complaint, construed in the proper light, “alleges facts

sufficient to make out a cognizable claim.” Carroll v . Xerox

Corp.,

3 1 , 241 (1st Cir. 2002). “The standard for

granting a motion to dismiss is an exacting one: ‘a complaint

should not be dismissed for failure to state a claim unless it

appears beyond doubt that the plaintiff can prove no set of facts

in support of [her] claim which would entitle [her] to relief.’”

McLaughlin v . Boston Harbor Cruise Lines, Inc.,

7 , 50

(1st Cir. 2005) (quoting Conley v . Gibson,

1 , 46

(1957)).

American Bankers filed copies of its insurance policies with

its motion to dismiss, explaining that the policies are integral

to the plaintiffs’ claims. Ordinarily, the court cannot consider

documents outside the complaint when deciding a motion to

dismiss. See Watterson v . Page,

, 3-4 (1st Cir. 1993).

Nevertheless, “it is well-established that in reviewing the

complaint, [the court] ‘may properly consider the relevant

entirety of a document integral to or explicitly relied upon in

2 the complaint, even though not attached to the complaint, without

converting the motion into one for summary judgment.’” Clorox

C o . P.R. v . Proctor & Gamble Commercial Co.,

4 , 32 (1st

Cir. 2000) (quoting Shaw v . Digital Equip. Corp.,

(1st Cir. 1996)). In this case, the insurance policies are

sufficiently integral to the complaint that they may be

considered for purposes of the motion to dismiss.

Background

The plaintiffs allege that American Bankers sells credit

life and disability insurance which pays a loan if the insured

debtor dies or is disabled and unable to make payments before the

loan is paid in full. When the plaintiffs purchased vehicles on

credit, the dealerships arranged financing that included the

American Bankers’s credit insurance. The plaintiffs paid a

single premium up front for the insurance as part of the

financing arrangement.

The plaintiffs then both paid their loans in full early,

before the end of the full financing period. As a result, their

insurance coverage also terminated early, leaving part of the

premium paid to American Bankers, the part that paid for coverage

that would have been provided for the full term, unearned. Under

the applicable policy provision, “[a]ny unearned premium will b e :

(1) credited to the insured’s account, if financed, or paid to

3 the insured; and (2) computed by the formula on file and approved

by the Insurance Commissioner.” American Bankers did not refund

the unearned part of the premium to the plaintiffs.

Discussion

The plaintiffs allege in Count I that American Bankers

breached its contract of insurance with them by failing to refund the unearned part of the premium they each paid. In Count IV,

the plaintiffs seek a declaratory judgment that American Bankers

is obligated to refund the unearned premium to them and an

injunction to require American Bankers to implement and maintain

a system to assure prompt refunds. The complaint does not

include Count I I I , and the plaintiffs have agreed to dismiss

Count I I . American Bankers moves to dismiss all of the claims.

In conjunction with its motion to dismiss, American Bankers seeks

to have a question of statutory interpretation certified to the

New Hampshire Supreme Court. That issue will be addressed first.

I. Certification

The New Hampshire Supreme Court provides for certification

by this court of “questions of law of this State which may be

determinative of the cause then pending in the certifying court

and as to which it appears to the certifying court there is no

controlling precedent in the decisions of this court.” N.H.

4 Supr. C t . R. 3 4 . “Absent controlling state-law precedent, a

federal court sitting in diversity has the discretion to certify

a state-law question to the state’s highest court.” Nieves v .

Univ. of P.R.,

7 0 , 274 (1st Cir. 1993). Certification is

inappropriate, however, if “the course the state courts would

take is reasonably clear.” Fischer v . Bar Harbor Banking & T r .

Co.,

, 8 (1st Cir. 1988). Therefore, the court must

first “undertake [its] own prediction of state law” to determine

whether the state law is reasonably clear. Nieves, 7 F.3d at

275.

American Bankers moves to certify the following question to

the New Hampshire Supreme Court: When a retail installment contract that finances a motor vehicle purchase is paid in full prior to its maturity, is the insurer that issued credit insurance on the loan (the premium for which was financed as part of such retail installment contract) required under RSA 361-A:7, IV-a to remit a refund of the unearned premium before it receives written notice of the prepayment from the holder of the loan?

Carrier and Whitman object to the motion to certify on the

grounds that the course the New Hampshire Supreme Court would

take is reasonably clear, particularly in light of decisions on

the same issue by New Hampshire trial courts. Carrier and

Whitman also object to American Bankers’s decision to proceed in

federal court and then raise an issue of state law.

As is more fully explained below, RSA 361-A:7, IV-a on its

face imposes no obligation on the insurer of an installment

5 contract loan, making the proposed question meaningless. In

addition, the plaintiffs’ claim is breach of contract not a claim

that American Bankers failed to honor a statutory obligation

under RSA 361-A:7, IV-a. Even if RSA 361-A:7, IV-a were

construed, contrary to its plain meaning, to condition the

insurer’s statutory refund obligation on notice from the holder

of the loan, that provision would merely provide a baseline of

statutory protection that would not prevent American Bankers from

providing greater protection or additional promises to its

insureds under the terms of its policy as long as the policy

otherwise complies with statutory requirements. See, e.g.,

Wegner v . Prudential Prop. & Cas. Ins. Co.,

0 7 , 109

(2002).

Therefore, the question American Bankers poses is not

appropriate for certification because it is not determinative of

the issue raised in this case. See, e.g., Stenberg v . Carhart,

1 4 , 944-45 (2000). Further, even if the question did

present a determinative issue, the decisions in Gibson v .

Universal Underwriters Life Ins. Co., N o . 04-C-414 (N.H. Superior

C t . October 2 9 , 2004) and Amoche v . Guarantee T r . Life Ins. Co.,

N o . 04-C-674 (N.H. Superior C t . Mar. 2 4 , 2005), that were

provided by the plaintiffs, persuade this court that the course

the New Hampshire Supreme Court would take in construing RSA 361-

A : 7 , IV-a, in this context, is reasonably clear.

6 In addition, the plaintiffs filed this state law action in

state court. American Bankers removed the action to federal

court and then raised an issue of state law and state statutory

construction. Having chosen the federal forum, absent unusual

circumstances, American Bankers must accept the federal court’s

reasonable interpretation of state law “rather than seeking

extensions via the certification process.” Manchester Sch. Dist.

v . Crisman,

, 14 (1st Cir. 2002).

II. Motion to Dismiss

American Bankers moves to dismiss the breach of contract

claim on the ground that the plaintiffs failed to allege that

American Bankers received written notice of the early termination

of their loans. American Bankers contends such notice is a

condition precedent to its obligation to refund unearned

premiums. It moves to dismiss the claim for declaratory and

injunctive relief on the grounds that the plaintiffs have an

adequate remedy at law and have not alleged irreparable harm.

American Bankers also contends that the declaratory judgment

claim is merely duplicative of the breach of contract claim.

A. Breach of Contract

Although the policies do not include a notice requirement

pertaining to the refund obligation, American Bankers asserts

7 that the New Hampshire statute requiring a retail installment

contract holder to provide written notice to the insurer when the

contract is paid in full before maturity is an implied condition

that must be satisfied before it is obligated to refund unearned

premiums. See RSA 361-A:7, IV-a. By asserting that its policy

includes an implied condition precedent based on that statute,

American Bankers raises issues as to the meaning of the policy

language and the statutory framework.

1 . Interpretation of the policy.

“The interpretation of insurance policy language, like any

contract language, is ultimately an issue of law for the court to

decide." D’Amour v . Amica Mut. Ins. Co.,

3 4 , 536 (N.H.

2005) (internal quotation marks omitted). The court “construe[s]

the language of an insurance policy as would a reasonable person

in the position of the insured based on a more than casual

reading of the policy as a whole.”

In interpreting policy

language, the court is bound by its reasonable meaning and is not

free to rewrite policy provisions. Catholic Med. Ctr. v . Exec.

Risk Indem., Inc.,

(2005).

Ordinarily, when policy provisions are ambiguous, the

ambiguity is resolved in favor of the insured. Kelly v .

Prudential Prop. & Cas. Ins. Co.,

4 2 , 643 (2002)

(citing Trombly v . Blue Cross/Blue Shield,

6 4 , 770

8 (1980)). “Where the insurer does not choose the language because

that language is prescribed by statute, this rule does not

apply.” Matarese v . N.H. Mun. Ass’n,

(2002).

In that case, the court examines the intent of the legislature to

determine the meaning of the statutory language used in the

policy.

American Bankers asserts that RSA 408-A:8, II prescribed the

language used in the refund provision so that the legislature’s

intent, which American Bankers asserts is expressed in RSA 361-

A : 7 , IV-a, controls the meaning of that provision. The refund

provision in the American Bankers’s policy states:

Refunds: Any unearned premium will b e : 1 . credited to the insured’s account, financed, or paid to the insured; and 2.computed by the formula on file and approved by the Insurance Commissioner. RSA 408-A:8, II provides:

Each individual policy, group certificate or notice of proposed insurance shall provide that in the event of termination of the insurance prior to the scheduled maturity date of the indebtedness, any refund of an amount paid by the debtor for insurance shall be paid or credited promptly to the person entitled thereto within 30 days from the termination of the insurance; provided, however, that the commissioner shall prescribe a minimum refund and no refund which would be less that such minimum need be made.

Although RSA 408-A:8, II clearly requires credit insurance

policies to include a provision for a refund, the American

Bankers’s refund provision did not borrow any language from the

statute. Further, the statute does not include a notice

9 provision or reference RSA 361-A:7, IV-a, providing no basis to assume that RSA 361-A:7, IV-a expresses legislative intent that is pertinent to RSA 408-A:8, II. 1 Therefore, the policy language is construed under the ordinary rules of construction. Under the policy, the term of insurance ends when the debt is repaid and “[a]ny unearned premium will be . . . credited to the insured’s account, if financed, or paid to the insured.” Although the policy imposes no notice requirement or condition for a refund, American Bankers argues that the notice required by RSA 361-A:7, IV-a is an implied condition precedent to its refund obligation. That theory is based on American Bankers’s assertion that its policies were amended to conform to New Hampshire law, including the requirement of a refund of unearned premiums, and that state law applies to insurance contracts.

Under New Hampshire law, however, “conditions precedent are not favored, and [the court] will not so construe such conditions unless required by the plain language of the agreement.” Holden Eng’g & Surveying, Inc. v . Pembroke Rd. Realty Tr.,

(1993). In the absence of an express notice requirement in the refund provision, no such condition may be inferred.2

1 Chapter 408-A is titled “Credit Life and Accident Health Insurance,” while Chapter 361-A pertains to retail installment sales of motor vehicles. Neither chapter cross-references the other. 2 In contrast, the policy expressly conditions its promise to pay insurance benefits on receipt of proof of death or

10 Therefore, on its face, the policy does not condition payment of

the refund on notice to the insured.3

American Bankers also argues that the statutory provisions

pertinent to installment sales and credit insurance are

necessarily incorporated into its policies, despite the lack of

any specific reference to those statutes. C f . Forbes Farm P’ship

v . Farm Family Mut. Ins. Co.,

0 0 , 202-03 (2001)

(discussing policy with specific statutory reference). The court

will consider the effect of the statutory framework without

deciding whether the policy incorporated those statutes.

disability: “We will pay the benefit to the beneficiary: 1 . when we receive proof of an insured’s death . . . .” and “We will pay the monthly benefit to the beneficiary: 1 . when we receive proof [of specified disability].” 3 American Bankers cites cases from other courts that it represents “involved the same allegations and plaintiff’s counsel as in this case” and “substantially similar allegations as this case” and ruled against those claims. Reply at 5 . Contrary to that representation, however, the holdings in the cited cases did not involve breach of contract claims. Instead, the plaintiffs in those cases brought claims under the Racketeer Influenced and Corrupt Organizations Act, which were dismissed due to a failure to allege or present evidence of fraud. See Richards v . Combined Ins. C o . of Am,

4 7 , 249 (7th Cir. 1995); Hoban v . USLife Credit Life Ins. Co.,

(N.D. Ill. 1995); Sousa v . N . Cent. Life Ins. Co.,

3 , 57 (D.R.I. 1995). Because the plaintiffs do not allege RICO claims here, the discussions of the refund provisions in the context of RICO fraud in those cases are inapposite here.

11 2 . Statutory construction.

“In construing a statute, the court “examine[s] the language

of the statute, and, where possible, [ ] ascribe[s] the plain and

ordinary meanings to the words used.” Foote v . Manchester Sch.

Dist.,

(2005). The court “interpret[s]

statutes in the context of the overall statutory scheme and not

in isolation.”

When the language of a statute is clear, it

is not subject to modification, and the court “will neither

consider what the legislature might have said nor add words that

it did not see fit to include.” Verizon New Eng., Inc. v . City

of Rochester,

(2004); accord Banfield v .

Allstate Ins. Co.,

9 1 , 496 (2005).

RSA 361-A:7, IV-a provides that “[i]f a retail installment

contract is paid in full prior to maturity, then no later than 30

days after payment in full, the holder of the contract shall

provide written notice of such payment to any insurance company

that has issued an insurance contract the premium of which was

financed as part of such retail installment contract.” As such,

the statute requires the “holder of the contract” to provide

notice to the insurer. “The ‘holder’ of a retail installment

contract means the retail seller of the motor vehicle under or

subject to the contract or . . . the sales finance company or

other assignee.” RSA 361-A:1, V I .

The statute plainly requires the seller to provide notice of

12 an early payoff to the insurer with specified information,

including a statement “that pursuant to RSA 361-A a refund by the

insurer of any unused prepaid premium is due the buyer upon

receipt of the notice.” American Bankers interprets that

statement to provide a statutorily imposed condition precedent

for its obligation to refund unearned premiums to insured buyers.

The statute requires notice by the seller to the insurer of its

obligation to refund unearned premiums to the buyer, which

obligation arises, at the latest, when the insurer receives

notice of payment in full from the seller. The statutory notice

requirement is an obligation owed by the seller to the insurer

and does not impose any obligations on the insured buyer or

restrict or limit any obligations owed by the insurer to the

insured buyer.

New Hampshire law requires all credit insurance policies,

such as the American Bankers policy at issue here, to “provide

that in the event of termination of the insurance prior to the

scheduled maturity date of the indebtedness, any refund of an

amount paid by the insured debtor for insurance shall be paid or

credited promptly to the person entitled thereto within 30 days

from the termination of the insurance.” RSA 408-A:8, I I . The

statute does not require notice by the debtor as a condition of

the statutorily required payment. In addition, under New

Hampshire law, all credit insurance policies, such as the

13 American Bankers policy at issue here, are required to provide,

among other things, “a description of the amount, term and

coverage including any exceptions, limitations or restrictions

. . . .” RSA 408-A:6, I I . Therefore, to the extent American

Bankers intended to include a notice requirement as a condition

of its promise to refund unearned premiums, it was arguably

required to provide a description of that requirement in the

policy, which it failed to d o .

Given the statutory framework, RSA 361-A:7, IV does not

condition the insurer’s obligation to pay a refund to its insured

on receipt of notice from the seller. American Bankers’s policy

language pertaining to the refund cannot reasonably be

interpreted to require notice, either from the insured or the

seller, as a condition precedent to the insurer’s obligation to

refund unearned premiums to its insured. Although a notice

requirement in the policy might have been advisable, American

Bankers chose not to include such a provision, and the court is

not free either to construe the language in the insurer’s favor

or to rewrite the policy to include a notice condition.

III. Declaratory and Injunctive Relief

In the complaint, the plaintiffs allege that they seek “a

declaration that if a credit-insured loan is paid off prior to

the scheduled expiration date of the single premium credit

14 insurance coverage, then American Bankers is obligated to refunds

[sic] the unearned premium to the insured.” Comp. ¶ 6 5 . They

also seek “an injunction requiring American Bankers to implement

and maintain controls designed to reasonably assure the prompt

refund of unearned premiums on early loan payoffs as required by

American Bankers’ contracts.”

¶ 6 6 . American Bankers moves

to dismiss those claims asserting that the plaintiffs have an

adequate remedy at law, that they failed to allege the necessary

elements for an injunction, and that the declaratory judgment

claim duplicates the breach of contract claim.

Because the plaintiffs filed their action in state court,

their request for a declaratory judgment is brought pursuant to

RSA 491:22.4 Under RSA 491:22, “[a]ny person claiming a present

legal or equitable right or title may maintain a petition against

any person claiming adversely to such right or title to determine

the question as between the parties, and the court's judgment or

decree thereon shall be conclusive. The existence of an adequate

remedy at law or in equity shall not preclude any person from

obtaining such declaratory relief.” Therefore, an adequate legal

remedy does not require dismissal of the declaratory judgment

claim. Further, a declaratory judgment provides a different

remedy than breach of contract and is therefore not duplicative

4 The plaintiffs do not state the legal basis for their declaratory judgment claim in the complaint.

15 of a breach of contract claim.

The plaintiffs alleged a claim for injunctive relief under

New Hampshire law that provides “[a]n injunction will issue if

there is an immediate danger of irreparable harm to the party

seeking injunctive relief, and there is no adequate remedy at

law.”5 UniFirst Corp. v . City of Nashua,

1 , 14 (1987)

(internal quotation marks omitted). Further, “[i]njunctive

relief is one of the peculiar and extraordinary powers of equity,

. . . normally to be exercised only when warranted by imminent

danger of great and irreparable damage.” N.H. Donuts, Inc. v .

Skipitaris,

7 4 , 779 (1987) (internal quotation marks

and citations omitted). A claim for monetary damages obviates

the need for an injunction. See Murphy v . McQuade Realty, Inc.,

1 4 , 532 (1982).

American Bankers is correct that the plaintiffs have not

5 The parties address the injunction claim under New Hampshire law, which raises a potential choice of law question under Erie R. C o . v . Tompkins,

4 , 78 (1938). See, e.g., Charlesbank Equity Fund II v . Blinds to G o , Inc.,

(1st Cir. 2004) (noting but not deciding Erie issue); Mid-America Pipeline C o . v . Lario Enter., Inc.,

(10th Cir. 1991) (“We apply the law of the forum state in determining whether to grant mandatory injunctive relief in diversity cases.”). It is not necessary to determine whether state or federal law provides the governing law for injunctive relief in this case as the federal standard is not materially different from the state standard for purposes of the present motion. See, e.g., Matrix Group Ltd., Inc. v . Rawlings Sporting Goods Co., Inc.,

9 , 33 (1st Cir. 2004); Rosario-Urdaz v . Rivera-Hernandez,

(1st Cir. 2003); Donoghue v . IBC USA Inc.,

(1st Cir. 1995).

16 alleged any facts to support their injunction claim. Further,

their claim for damages suggests that an injunction is not

necessary. Therefore, the claim for injunctive relief is

dismissed.

Conclusion

For the foregoing reasons, the defendant’s motion to dismiss (document n o . 4 ) is granted as to the claim for injunctive relief

and is otherwise denied. The defendant’s motion to certify a

question (document n o . 16) is denied.

SO ORDERED.

>eph A. DiClerico, Jr. _ Ni__beph United States District Judge April 2 1 , 2006

cc: Dustin T . Brown, Esquire Frank Burt, Esquire Jason Lance Crawford, Esquire J. Clay Fuller, Esquire Wilbur A . Glahn, I I I , Esquire Ferrokh Jhabvala, Esquire Edward K. O’Brien, Esquire

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