United States District Court, S.D. West Virginia, Beckley Division
MEMORANDUM OPINION AND ORDER
C. BERGER UNITED STATES DISTRICT JUDGE.
Court has reviewed the First Amended Class Action Complaint
(Document 5), Combined Insurance Company of America's
Motion to Dismiss (Document 9) and Memorandum in Support of
Motion to Dismiss (Document 10), Plaintiff Lucenda
Nicholes' Opposition to Defendant's Motion to Dismiss
First Amended Complaint (Document 16), and Combined Insurance
Company of America's Reply in Support of Motion to
Dismiss (Document 17), as well as all attached exhibits. In
addition, the Court has reviewed the Plaintiff's Motion
for Leave to File Second Amended Complaint and Memorandum of
Law in Support (Document 24), the attached proposed Second
Amended Class Action Complaint (Document 24-1), Combined
Insurance Company of America's Response in Opposition to
Plaintiff's Motion for Leave to File Second Amended
Complaint and Memorandum of Law in Support (Document 25), and
the Plaintiff's Reply to Defendant's Response in
Opposition to Plaintiff's Motion for Leave to File Second
Amended Class Action Complaint and Memorandum of Law in
Support (Document 26).
reasons stated herein, the Court finds that the motion to
amend should be granted, and the motion to dismiss should be
granted in part and denied in part.
Plaintiff's response to the motion to dismiss indicated
that she would seek to amend her complaint to clarify the
factual and legal basis of her claims if the motion to
dismiss were granted. The Court entered an order requiring
her to file a separate motion to amend if she wished to do
so. The Plaintiff filed a motion to amend, together with her
proposed second amended class action complaint. She argues
that she should be permitted to amend under the permissive
standard for amendments early in a case. The Defendant
opposes the motion to amend, arguing that it would be futile.
15(a)(2) of the Federal Rules of Civil Procedure encourages
Courts to freely grant motions for leave to amend pleadings
“when justice so requires.” Fed.R.Civ.P.
15(a)(2). “A district court may deny a motion to amend
when the amendment would be prejudicial to the opposing
party, the moving party has acted in bad faith, or the
amendment would be futile.” Equal Rights Ctr. v.
Niles Bolton Associates, 602 F.3d 597, 603 (4th Cir.
2010). “Motions to amend are typically granted in the
absence of an improper motive, such as undue delay, bad
faith, or repeated failure to cure a deficiency by amendments
previously allowed.” Harless v. CSX Hotels,
Inc., 389 F.3d 444, 447 (4th Cir. 2004).
Court finds that the filing of an amended complaint in this
case would not prejudice the Defendant, and that the amended
complaint was not offered in bad faith. Given the status
of the fully briefed motion to dismiss on the prior
complaint, and the futility arguments briefed in response to
the motion to amend, the Court will combine the futility
analysis with the arguments made relative to the motion to
dismiss to determine whether the amended complaint contains
any viable cause(s) of action. Thus, the factual allegations
below are drawn from the proposed second amended complaint.
Plaintiff, Lucenda Nicholes, alleges that “Combined
Insurance routinely and systematically sells policies to West
Virginia insurance consumers that, by law, are ineligible for
the insurance benefits for which they pay premiums under
these Combined Insurance policies because they are Medicaid
recipients” and fails to disclose the illusory nature
of the insurance. (Sec. Am. Compl. at ¶ 9.) She asserts
that sales agents are trained to “canvass poor and
minority neighborhoods” and use high-pressure sales
tactics. (Id. at ¶ 18.) Agents do not disclose
that benefits under the health and accident insurance
policies are unavailable to Medicaid recipients, and that any
insurance benefits would be denied or paid directly to
medical providers. Instead, they use prepared insurance
applications that indicate the applicant is not a Medicaid
recipient without raising the issue with the consumers.
Combined Insurance does not offer a refund of any premium
payments for Medicaid recipients.
Nicholes lives on Social Security of less than $800 per
month. She receives Medicaid. A Combined Insurance agent
visited her home in September 2013 to sell her an
“Accident & Sickness Protector” policy, which
she purchased by paying an initial premium of $54.17.
Subsequently, her bank account was debited $54.17 per month.
The agent “unilaterally filled out the entire
application…without obtaining material, relevant
information from the Plaintiff in order to accurately respond
to the questions asked in the application, including her
Medicaid status.” (Id. at ¶ 31.) He
marked, incorrectly, that she was not on Medicaid, and did
not inform her that her Medicaid status would render her
ineligible for policy benefits. The agent showed Ms. Nicholes
only the signature page of the application, as well as a
separate form authorizing automatic debit payments. The same
agent sold Ms. Nicholes another “Accident &
Sickness Protector” policy on or about November 25,
2014, using an electronic application he had previously
filled in. He again presented only the signature page of the
application to Ms. Nicholes. The agent sold Ms. Nicholes a
third policy, with the same sales methods, on March 17, 2015,
after leading her to believe her November 2014 policy had
lapsed. After the purchase of the March 2015 policy,
“Combined Insurance began debiting Plaintiff's bank
account twice every month in the amount of $54.17 to collect
the monthly premiums on both the March 2015 and the November
2014 policies.” (Id. at ¶ 41.) Ms.
Nicholes alleges that she became aware of the multiple debits
because they caused her account to be overdrawn. She began
calling Combined during the summer of 2015 to address the
double withdrawals on her account. During those
communications, a Combined employee asked about her Medicaid
status, but did not inform her that she could not receive
insurance benefits while on Medicaid. Ms. Nicholes obtained
counsel due to the account debits and overdraft fees in the
fall of 2015. She became aware that she was ineligible for
benefits because of her Medicaid status after her counsel
obtained documents from Combined in December 2015.
Plaintiff brings this case on behalf of herself and the
following proposed class:
(a) All West Virginia residents who purchased a Combined
Supplemental Insurance policy under which Medicaid recipients
are ineligible to receive payment of benefits under the
policy; and (b) The Supplemental Insurance policy was
purchased in the four years preceding the filing of this
lawsuit at which time the insured was covered by Medicaid
(Id. at ¶ 54.) She seeks relief under the
Insurance Trade Practices Act, the Consumer Protection Act,
and for mutual mistake and rescission. Ms. Nicholes seeks
class certification; a declaration that the described sale of
supplemental insurance to Medicaid recipients violates the
Insurance Practices Act and the Consumer Protection statute;
an injunction preventing Combined Insurance from selling to
Medicaid recipients; compensatory damages, actual damages,
and statutory damages; rescission of the insurance policies
and costs and attorneys' fees.