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Williams v. Farmers New World Life Insurance Co.

United States District Court, E.D. Wisconsin

May 22, 2018



          WILLIAM E. DUFFIN U.S. Magistrate Judge


         Tajah M. Williams took out a life insurance policy with Farmers New World Life Insurance Company (Farmers) on October 27, 2016. She died two months later, on December 26, 2016. (ECF No. 1-1, ¶¶ 2-3.) Joyce M. Williams, Tajah's mother, was the beneficiary of that policy. She gave notice of Tajah's death to Farmers. (ECF No. 1-1, ¶ 4.)

         Farmers denied coverage for the benefits under the policy after obtaining medical records from an emergency room visit three months before Tajah took out the policy which stated that Tajah's “social history is significant for frequent marijuana use (daily).” Farmers contends it would not have issued the policy had that fact been disclosed. (ECF No. 1-1, ¶¶ 8, 11, 18.)

         Joyce Williams filed an action in state court on December 18, 2017, alleging bad faith on the part of Farmers and seeking recovery under the policy. (ECF No. 1-1.) Farmers removed the action to this court based on the diversity of the parties. (ECF No. 1.) It answered the complaint on March 14, 2018. (ECF No. 4.) Among other things, Farmers alleged rescission as an affirmative defense, citing Wis.Stat. § 631.11.

         Ms. Williams has moved for partial judgment on the pleadings. (ECF No. 9.) She “seeks a determination that Defendant's Policy No. 002383592 issued on the life of Tajah M. Williams is valid and thus calls for full payment of the $150, 000 benefit of that policy to beneficiary and Plaintiff Joyce M. Williams, plus Wis.Stat. § 628.46 interest.” (ECF No. 10 at 1.) She contends that Farmers “conceded in its Answer that it entered into a life insurance policy on the life of Tajah Williams, premiums for which were paid in full and that the policy was in full force and effect as of the date of Tajah's death on December 26, 2016.” (ECF No. 10 at 2-3.) She argues that Farmers did not plead its rescission affirmative defense (with its misrepresentation requirement) with the specificity required by Wis.Stat. § 802.03(2), which procedural rule she says applies rather than Rule 9 of the Federal Rules of Civil Procedure. (ECF No. 10 at 6-9.) She also argues that Farmers failed to adequately plead its rescission affirmative defense because, under Wisconsin law, an insurer must satisfy each element of the statute by clear and convincing evidence. (ECF No. 10 at 10 (discussing Pum v. Wis. Physicians Serv. Ins. Corp., 2007 WI.App. 10, 298 Wis.2d 497, 727 N.W.2d 346)). Moreover, she argues Farmers could not prove the affirmative defense because it is based on medical records Farmers obtained after Tajah's death, a practice prohibited by the regulations of the Wisconsin Insurance Commissioner. (ECF No. 10 at 11-12.)

         In response, Farmers argues that a federal court sitting in diversity applies federal, not state, procedural rules, including federal pleading requirements. (ECF No. 11 at 2.) Thus, the fact that Wisconsin state law has heightened pleading requirements does not have any applicability here. It argues that its Answer, including its affirmative defenses, sufficiently pleads facts to support its rescission defense-specifically, that the insured misrepresented her health on her insurance policy application regarding her use of marijuana and that such misrepresentation was material to Farmers's decision to issue the policy. (ECF No. 11 at 9-10.)

         Applicable Law

          Procedurally, Williams's motion is more properly regarded, at least in part, as a motion to strike an affirmative defense under Rule 12(f). Although presented as a motion for judgment on the pleadings under Rule 12(c), judgment in Williams's favor would be appropriate only if the court first struck Farmers's rescission affirmative defense.[1] And, of course, affirmative defenses “are pleadings, and as such, leave to amend is freely granted as justice requires.” Heller Fin., Inc. v. Midwhey Powder Co., 883 F.2d 1286, 1294 (7th Cir. 1989) (citing Fed.R.Civ.P. 15(a)). Thus, even if presently deficient, Farmers ordinarily would be afforded the opportunity to amend (if amendment could cure any defect) before judgment in the plaintiff's favor would be appropriate. Thus, the court turns to the question of whether it is appropriate to strike Farmers's rescission affirmative defense.

         Courts have applied a three-part inquiry to assess the sufficiency of an affirmative defense:

(1) the matter must be properly pleaded as an affirmative defense; (2) the matter must be adequately pleaded under the requirements of Federal Rules of Civil Procedure 8 and 9; and (3) the matter must withstand a Rule 12(b)(6) challenge -- in other words, if it is impossible for defendants to prove a set of facts in support of the affirmative defense that would defeat the complaint, the matter must be stricken as legally insufficient.

Sayad v. Dura Pharm., Inc., 200 F.R.D. 419, 421 (N.D. Ill. 2001) (quoting Renalds v. S.R.G. Restaurant Group, 119 F.Supp.2d 800, 802 (N.D. Ill. 2000); citing Heller Fin., Inc. v. Midwhey Powder Co., 883 F.2d 1286, 1294 (7th Cir. 1989)). “[M]otions to strike are strongly disfavored and rarely granted.” Check v. ShopKo Stores Operating Co. LLC, No. 17-C-1755, 2018 U.S. Dist. LEXIS 79856, at *2 (E.D. Wis. May 11, 2018) (citing Williams v. Jader Fuel Co., Inc., 944 F.2d 1388, 1400 (7th Cir. 1991)). If the affirmative defense is properly struck, the court would then consider whether Williams is entitled to judgment in her favor.

         The court reviews a motion under Rule 12(c) by employing the same standard applicable to a motion to dismiss under Rule 12(b)(6). Buchanan-Moore v. Cty. of Milwaukee, 570 F.3d 824, 827 (7th Cir. 2009). Consequently, the court considers the facts in the light most favorable to the non-movant. Id. Judgment in Williams's ...

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