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Williams v. Nat'l Union Fire Insurance Co.

United States District Court, D. South Carolina, Greenville Division

March 31, 2015

Ralph Williams, Plaintiff,
v.
National Union Fire Insurance Company of Pittsburgh, PA, American International Group, Inc. d/b/a AIG Insurance Trust, for the Account of Healthextras, Healthextras, Inc., Catalyst Health Solutions, Inc., Catamaran Health Solutions, LLC, Healthextras, LLC, Alliant Insurance Services, Inc., Alliant Services Houston, Inc., and Virginia Surety Company, Inc., Defendants

For Ralph Williams, Plaintiff: William E Hopkins, Jr, LEAD ATTORNEY, Hopkins Law Firm, Pawleys Island, SC; Aaron Craig Hemmings, PRO HAC VICE, Hemmings and Stevens, Raleigh, NC; Joseph H Aughtman, PRO HAC VICE, Aughtman Law Firm, Montgomery, AL; Kenneth Jay Grunfeld, PRO HAC VICE, Golomb and Honik PC, Philadelphia, PA.

For National Union Fire Insurance Company of Pittsburgh PA, doing business as National Union Fire Insurance Company, American International Group Inc, AIG, Defendants: Peter Harris Dworjanyn, R Scott Wallinger, Jr, LEAD ATTORNEYS, Collins and Lacy, Columbia, SC; Theodore R Scarborough, LEAD ATTORNEY, PRO HAC VICE, Sidley Austin, Chicago, IL; Christopher M Assise, PRO HAC VICE, Sidley Austin, Chicago, IL.

For HealthExtras Inc, Defendant: Benjamin Rush Smith, III, LEAD ATTORNEY, Nelson Mullins Riley and Scarborough, Columbia, SC; Patrick J Murphy, PRO HAC VICE, Quarles and Brady, Milwaukee, WI; Peter Harris Dworjanyn, Collins and Lacy, Columbia, SC.

For HealthExtras LLC, Defendant: Benjamin Rush Smith, III, LEAD ATTORNEY, Nelson Mullins Riley and Scarborough, Columbia, SC; John ¶ Riordan, LEAD ATTORNEY, Kurt Matthew Rozelsky, Smith Moore Leatherwood, Greenville, SC; Daly DE Temchine, PRO HAC VICE, Epstein Becker and Green, Washington, DC; Maxine H Neuhauser, Epstein Becker and Green, Newark, NJ; Peter Harris Dworjanyn, Collins and Lacy, Columbia, SC.

For Catamaran Health Solutions LLC, formerly known as Catalyst Health Solutions Inc, Defendant: Benjamin Rush Smith, III, LEAD ATTORNEY, Nelson Mullins Riley and Scarborough, Columbia, SC; Sarah B Nielsen, LEAD ATTORNEY, Nelson Mullins Riley and Scarborough (Cola), Columbia, SC; Patrick J Murphy, PRO HAC VICE, Quarles and Brady, Milwaukee, WI; Paul L Langer, PRO HAC VICE, Quarles and Brady, Chicago, IL; Peter Harris Dworjanyn, Collins and Lacy, Columbia, SC.

For Alliant Insurance Services Inc, formerly known as Driver Alliant Insurance Services Inc, Alliant Services Houston Inc, formerly known as JLT Services Corporation, Defendants: Felicia Sampson Preston, James Lynn Werner, LEAD ATTORNEYS, Parker Poe Adams and Bernstein, Columbia, SC; Melanie L Black Dubis, PRO HAC VICE, Parker Poe Adams and Bernstein, Raleigh, NC; Peter Harris Dworjanyn, Collins and Lacy, Columbia, SC.

For Alliant Insurance Services Houston LLC, formerly known as Capital Risk LLC, formerly known as Jardine Lloyd Thompson LLC, Defendant: Felicia Sampson Preston, James Lynn Werner, LEAD ATTORNEYS, Parker Poe Adams and Bernstein, Columbia, SC; Melanie L Black Dubis, PRO HAC VICE, Parker Poe Adams and Bernstein, Raleigh, NC.

For Virginia Surety Company Inc, Defendant: Phoebe Norton Coddington, LEAD ATTORNEY, Winston and Strawn (Clt), Charlotte, NC; Kelly A Librera, John M Aerni, Harvey Kurzweil, PRO HAC VICE, Winston and Strawn, New York, NY; Neil R Marder, PRO HAC VICE, Winston and Strawn, Los Angeles, CA; Peter Harris Dworjanyn, Collins and Lacy, Columbia, SC.

OPINION AND ORDER

Bruce Howe Hendricks, United States District Judge.

This matter is before the Court on the defendants' motions to dismiss (ECF Nos. 66, 67, 68, 69) and motion to stay the action pending a ruling on the motions to dismiss (ECF No. 73). For the reasons set forth below, the motions are denied.

BACKGROUND

The following facts are drawn from the plaintiff's amended class action complaint (the " complaint" ), which is the operative complaint in this action. This case involves allegations that the defendants engaged in the fraudulent advertising, marketing, and sale of " group" disability insurance (" the Policy" ) to South Carolina residents who were not members of any group for which such an insurance product was authorized, and thus the policies were illegal. The plaintiff, Ralph Williams (" the plaintiff" or " Williams" ), purchased one of the policies. Williams never made a claim against the policy and is seeking to represent a class of purchasers in a similar position. Indeed, the proposed class specifically excludes any policy holder who actually made a claim against the Policy. The plaintiff further alleges that the defendants knew that the products they were selling were illegal and that the coverage promised by the policies was illusory because there was no intention to pay claims under that purported coverage. The plaintiff also claims that the premium for the disability insurance coverage was unilaterally increased on at least two occasions without the required regulatory approval.

The Alleged Scheme

The plaintiff claims that the defendants sent advertising materials to people through a partnership with major credit card companies and banks. The defendants' advertisements featured the late Superman actor, Christopher Reaves, who became a quadriplegic after falling from a horse in 1995. The plaintiff alleges that his acceptance letter included a photograph of Christopher Reeve and a message purportedly from him that stated " [b]ecause lives can change in an instant, as mine did, you should have the additional security for yourself and your family that HealthExtras can provide."

The original marketing flyers offered a One Million Dollar ($1,000,000.00) disability insurance product, called " HealthExtras," " for as little as Nine Dollars and Ninety-Five cents ($9.25)[1] per month or Fourteen Dollars and Fifty cents ($14.50) per month depending on whether the individual added his or her spouse." (Compl. ¶ 44(d).) The plaintiff claims that, in reality, the insurance he was sold was effectively worthless because of a series of harsh and confusing exclusions that conflicted with what was represented in the marketing materials. For example, although marketing materials contained claims such as,

" This program provides valuable protection in the event you become permanently totally disabled due to an accident" and
" You're covered with a $1,000,000 tax-free cash payment if you are permanently disabled as a result of an accident"

( Compl. ¶ 106), benefits would only be provided if the insured suffered a very limited number of catastrophic injuries. These limited injuries included,

a. loss of both hands or feet; or
b. loss of one hand and one foot; or
c. loss of speech or hearing in ...

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