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Stanczyk v. The Prudential Insurance Co. of America

United States District Court, N.D. Iowa, Cedar Rapids Division

April 28, 2017

AMY STANCZYK, Plaintiff,
v.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, Defendant.

          MEMORANDUM OPINION AND ORDER

          C.J. WILLIAMS CHIEF UNITED STATES MAGISTRATE JUDGE.

         Table of Contents

         I. INTRODUCTION ..................................................................................... 2

         II. PROCEDURAL HISTORY .......................................................................... 3

         III. UNDISPUTED FACTS FROM PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT ............................................................................................ 4

         A. Plaintiff's Application for Long-Term Disability Insurance ................................ 5

         B. Plaintiff's Claim for Benefits .................................................................... 5

         C. Plaintiff's Work Hours ............................................................................ 6

         IV. STATEMENT OF FACTS FROM DEFENDANT'S MOTION FOR SUMMARY JUDGMENT ............................................................................................ 6

         A. Plaintiff's Employment ............................................................................ 6

         B. Plaintiff's Application for Long-Term Disability Insurance ................................ 7

         C. Plaintiff's Claim for Disability Benefits ........................................................ 8

         D. Defendant's Denial of Disability Benefits ..................................................... 9

         V. SUMMARY JUDGMENT STANDARDS ....................................................... 10

         VI. DISCUSSION .......................................................................................... 12

         A. Choice of Law ..................................................................................... 13

         B. Incontestability Clauses .......................................................................... 13

         C. Breach of Affirmative Warranty ............................................................... 16

         D. Application Date .................................................................................. 18

         E. Statute of Limitations ............................................................................. 20

         F. Doctrines of Waiver, Laches, and Equitable Estoppel ..................................... 25

         G. Which Policy Controls ........................................................................... 26

         H. Plaintiff's Exhibits ................................................................................ 27

         VII. CONCLUSION ........................................................................................ 28

         I. INTRODUCTION

         This matter is before the Court pursuant to plaintiff's Motion for Partial Summary Judgment. (Doc. 130). Plaintiff argues she is entitled to summary judgment on defendant's counterclaim alleging unjust enrichment because she was eligible for coverage. Alternatively, plaintiff argues she is entitled to summary judgment because: (1) defendant's incontestability clause bars defendant from asserting its counterclaim; (2) defendant's counterclaim is premised on a breach of an affirmative warranty that expired ten years ago; (3) the date of plaintiff's application for coverage is unknown; (4) defendant's counterclaim is barred by the statute of limitations; (5) and defendant's counterclaim is barred by the doctrines of waiver, laches, and equitable estoppel or estoppel by acquiescence. (Doc. 130).

         On April 13, 2017, the Court heard oral argument on plaintiff's motion. During that hearing, plaintiff for the first time asserted a new theory for summary judgment, alleging that the policy applicable to her did not require she work full time when she applied for coverage and that defendant relied on and attached the incorrect policy to its counterclaim.

         The Court addresses each of these arguments below, as well as the admissibility of exhibits plaintiff produced at the hearing in support of her new summary judgment theory.

         For the reasons that follow, the Court grants plaintiff's Motion for Partial Summary Judgment on the ground that defendant brought its counterclaim outside of the applicable statute of limitations, but denies her motion on all other grounds.

         II. PROCEDURAL HISTORY

         On August 14, 2015, plaintiff Amy Stanczyk commenced this lawsuit by filing a petition in the Iowa District Court for Linn County. (Doc. 3). The petition generally alleged that plaintiff was a Certified Public Accountant and had entered into a contract with defendant for disability insurance. The petition further alleged that she became disabled in 2006. In 2009, defendant approved plaintiff's disability claim and paid her disability benefits until August 2013, when it terminated plaintiff's benefits on the ground she was no longer disabled. In Count I, plaintiff alleged bad faith denial of insurance benefits. In Count II, plaintiff alleged “tortious breach of contract.” In Count III, plaintiff alleged breach of contract.

         On September 23, 2015, defendant removed the case to this Court based on diversity of citizenship. (Doc. 1). Defendant filed an answer denying plaintiff's claims. (Doc. 9). On February 1, 2017, with leave of the Court, defendant filed an amended answer and counterclaim, asserting plaintiff was never eligible for coverage and therefore owes defendant the benefits she received under the policy. (Doc. 124).

         On January 30, 2017, the parties consented to disposition of this case by a magistrate judge. (Doc. 119).

         Plaintiff filed the instant motion for partial summary judgment on February 24, 2017. (Doc. 130). Defendant had previously filed a motion for summary judgment. (Doc. 64). On April 20, 2017, the Court entered an order granting in part and denying in part defendant's motion for summary judgment. (Doc. 178). In summary, the Court dismissed Counts I and II of plaintiff's complaint, and barred her from seeking certain categories of damages. Some of the arguments made in the pleadings regarding defendant's motion for summary judgment overlapped with arguments made in the pleadings regarding plaintiff's motion for partial summary judgment. The Court has, therefore, addressed some of these issues already and will note where that has happened in this order.

         III. UNDISPUTED FACTS FROM PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT

         Based on the parties' respective filings, the Court finds that the facts set forth below, unless otherwise noted, are undisputed for purposes of plaintiff's motion for partial summary judgment.[1]

         A. Plaintiff's Application for Long-Term Disability Insurance

         Plaintiff applied online for a disability insurance policy offered by defendant while she was living and working in Wisconsin.[2] The exact date of application is a genuine issue of fact; one of defendant's witnesses testified in a deposition that plaintiff applied on July 7, 2004, but that date does not appear in plaintiff's claim file. The policy became effective on July 1, 2004. After issuance of the policy, plaintiff paid her premiums each month from her Wisconsin bank account. Plaintiff continued to work in Wisconsin until September 2006 when she stopped working to assist an ill family member.

         The policy provides: “You are full-time at the time you apply for the Coverage if you are regularly working 17½ hours or more per week.”[3]

         B. Plaintiff's Claim for Benefits

         Plaintiff claims she became disabled as of September 13, 2006. On February 14, 2007, plaintiff mailed a claim form from Wisconsin to defendant applying for disability benefits. Plaintiff was still living in Wisconsin when defendant awarded her benefits under the policy. Defendant began paying plaintiff disability benefits in April 2009 and those payments continued through July 2013.

         C. Plaintiff's Work Hours

         Plaintiff's Schedule C for the tax year 2006 reported $14, 431 in gross receipts. On January 31, 2008, plaintiff's attorney provided defendant a copy of plaintiff's 2006 tax return, including copy of this Schedule C. Plaintiff's hourly billing rate was $100 per hour. Plaintiff reported in 2007 that she had more than one client, but plaintiff's W-2 for 2006 showed only one client, Milwaukee County. From 2003 to 2006, plaintiff's contract with Milwaukee County was for $73, 000.

         IV.STATEMENT OF FACTS FROM DEFENDANT'S MOTION FOR ...


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