Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—SDWVa: Employer May Amend Cross-Claim to Assert West Virginia Unfair Trade Practices Act Claims Against Insurer, (Feb 12, 2013)

By Tobias J. Gillett, J.D., LLM.

An employer may amend its cross-claim to assert West Virginia Unfair Trade Practices Act claims against a life insurance company in an action brought by the surviving spouse of a former employee, even though the spouse’s action sought recovery under a Supplemental Life Coverage while the cross-claim sought recovery under Basic Life Coverage and Accidental Death and Disability (AD&D) Coverage, and despite the fact that the employer brought the motion to amend fifteen months after it had paid the spouse for benefits under the policy, the federal district court in Charleston has ruled (Akers v. Minnesota Life Insurance Co., February 7, 2013, Copenhaver, J.).

Walter Akers was an employee of Alpha Natural Resources, Inc. Akers possessed life insurance coverage through Minnesota Life Insurance Co. as part of Alpha’s employee benefits plan. On December 31, 2010, Alpha switched to a new insurance provider and terminated the life insurance policy.

On January 25, 2011, Akers died. Minnesota Life concluded that it was not obligated to extend a conversion privilege, by which an individual could extend his or her coverage, to Alpha’s employees, and therefore denied a claim for benefits by Akers’s wife. Believing this decision to be erroneous, Alpha paid his wife the full amount of the benefits under the Basic Life Coverage and Accidental Death and Disability (AD&D) Coverage, in exchange for an agreement that Akers’s wife would pay Alpha any funds that might be recovered from Minnesota Life under those policies.

Akers’s wife filed suit against Minnesota Life, seeking payment under the Supplement Life Coverage, and later added Alpha as a defendant. The court bifurcated the case so that the issue of Akers’s coverage would be decided first, and other issues decided after that issue was resolved. Alpha filed an answer, a counter-claim, and a cross-claim. Following discovery, Alpha moved to amend its cross-claim to assert, among other claims, violations of the West Virginia Unfair Trade Practices Act.

Minnesota Life opposed the motion to amend, asserting that (1) Akers’s wife sought recovery only under the Supplemental Life Coverage, not under the Basic Life Coverage or the AD&D Coverage as Alpha did; (2) Alpha’s motion was untimely because it occurred fifteen months after Alpha had paid the benefits to Akers’s wife and after the court had bifurcated the insurance issue; and (3) the motion should be held in abeyance until after resolution of the coverage issue.

The court concluded that it should give Alpha leave to amend pursuant to Federal Rule of Civil Procedure 15(a). Minnesota Life would not be prejudiced by the amendment, because it knew “of the events giving rise to the amendment.” Moreover, Alpha had filed the motion only two weeks after receiving Minnesota Life’s discovery responses. Although Akers’s wife only sought recovery under the Supplemental Life Coverage, Alpha’s original cross claim addressed the Basic Life Coverage and the AD&D Coverage, and its current motion merely sought to “develop an already-asserted entitlement to those funds.”

In addition, Alpha’s motion was not in bad faith. Far from finding bad faith in Alpha’s fifteen-month delay between paying Akers’s wife and asserting its claims in the motion to amend, the court found good faith in “the claims’ basis on recent discovery and the commendable diligence with which Alpha thereafter filed the motion.”

Furthermore, the amendment would not be futile, despite a possible preemption issue under ERISA raised by Minnesota Life. Minnesota Life’s argument was “too cursory to be considered properly before the court at this time,” and a footnote indicated that Minnesota Life would be “satisfied to have the issue addressed during the second stage of the bifurcated litigation.” Moreover, “[t]he bifurcation order itself in no way suggests that the amendment would be futile.”

Therefore, the court granted Alpha’s motion to amend, but noted it would be subject to the bifurcation order holding other issues in abeyance until resolution of the coverage issue.

The case is Civil Action No. 2:12-cv-0667.

Attorneys: Brett Justice Preston (Preston & Salango) for Judy Akers. Edward P. Tiffey (Tiffey Law Practice) for Minnesota Life Insurance Co. Arie M. Spitz (Dinsmore & Shohl) for Alpha Natural Resources, LLC.

Companies: Minnesota Life Insurance Co.; Alpha Natural Resources, LLC

Cases: StateUnfairTradePractices WestVirginiaNews