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AlaFile E-Notice
To: BUTLER THOMAS JULIAN
69-CV-2015-900077.00
NOTICE OF ELECTRONIC FILING
IN THE CIRCUIT COURT OF BARBOUR COUNTY, ALABAMA
The following complaint was FILED on 12/9/2016 1:42:50 PM
MOSES ERKINS V. USAA LIFE INSURANCE COMPANY
69-CV-2015-900077.00
Notice Date: 12/9/2016 1:42:50 PM
DAVID NIX
CIRCUIT COURT CLERK
BARBOUR COUNTY, ALABAMA
ROOM 201
EUFAULA, AL, 36027
334-687-1500
303 EAST BROAD STREET
IN THE CIRCUIT COURT OF BARBOUR COUNTY, ALABAMA EUFAULA DIVISON
MOSES ERKINS, ) ) Plaintiff, ) ) Civil Action No.: CV-2015-900077 v. ) ) USAA LIFE INSURANCE COMPANY, ) JURY TRIAL DEMANDED ) Defendant. ) ________________________________________________________________________
FIRST AMENDED COMPLAINT ________________________________________________________________________
COMES NOW the Plaintiff, MOSES ERKINS, by and through the undersigned
counsel, on his own behalf and as a representative of a class of persons similarly situated,
and for their causes of action against the Defendant, amend the Complaint to state and
allege as follows:
PARTIES
1. The Plaintiff is an adult resident of Barbour County, Alabama.
2. Defendant USAA Life Insurance Company (“USAA Life”) is, and at all
times herein referenced, was a corporation duly organized and existing under and by virtue
of the laws of the State of Texas and regularly transacts business in the State of Alabama
and in Barbour County, Alabama.
3. Venue and jurisdiction are proper in this Court because Plaintiff resides in
Barbour County, Alabama, Defendant does business in Barbour County, Alabama, and a
substantial part of the acts, omissions, events or wrongful conduct giving rise to this lawsuit
occurred in Barbour County, Alabama.
ELECTRONICALLY FILED12/9/2016 1:42 PM
69-CV-2015-900077.00CIRCUIT COURT OF
BARBOUR COUNTY, ALABAMADAVID NIX, CLERK
DOCUMENT 12
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CLASS ALLEGATIONS
4. This action is brought by the Plaintiff individually and on behalf of all others
similarly situated pursuant to Rule 23 of the Alabama Rules of Civil Procedure. Plaintiff
proposes a class (the “Class”) for those harmed by Defendant’s breach of contract
consisting of:
All past and present policyholders of Level Term Life Insurance policies issued and serviced by USAA Life, which were in effect at any time during the relevant time period, who reside in the United States.
5. Plaintiff maintains the right to create additional classes or subclasses, if
necessary, and to revise this definition to maintain a cohesive class that does not require
individual inquiry to determine liability. Plaintiff does not bring any claim pursuant to any
federal law; nor does Plaintiff bring any claim which would give rise to federal jurisdiction.
6. Excluded from the proposed class are Defendant, any entity in which any
Defendant has a controlling interest, any agents, employees, actuaries, officers and/or
directors of the Defendant, any entities currently in bankruptcy, any entity whose
obligations have been discharged in bankruptcy, and any federal governmental agency,
entity, or judicial officer.
7. The members of the Class (the “Class Members”) consist of thousands of
past and present policyholders of life insurance and is thus so numerous that joinder is
impracticable. The identities and addresses of the Class Members can be readily
ascertained from business records maintained by USAA Life.
8. This action is appropriate as a class action pursuant to Rule 23(b)(2) of the
Alabama Rules of Civil Procedure. Plaintiff seeks injunctive relief and corresponding
DOCUMENT 12
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declaratory and incidental monetary relief for the Class Members. Defendant acted in a
manner generally applicable to all Class Members by wrongfully increasing in a formulaic
manner the premium charges on all Level Term Policies (the “Policies”) issued to the Class
Members.
9. Defendant’s actions to wrongfully increase the premium charges on the
Policies, if not enjoined, will subject Class Members to enormous continuing future harm
and will cause irreparable injuries to Class Members who are compelled to surrender
valuable life insurance policies with no economically viable option for alternative life
insurance. Although Class Members will sustain damage in the form of increased premium
charges, the adverse financial impact of Defendant’s unlawful actions is continuing and,
unless enjoined, will cause exponentially higher damages to Class Members in future years.
Thus, injunctive and other equitable and declaratory relief are primary goals in this
litigation; Plaintiff would bring suit to obtain injunctive and declaratory relief even in the
absence of available monetary remedies and injunctive and declaratory relief are
reasonable, necessary, and appropriate when Plaintiff prevails.
10. The monetary relief sought on behalf of the Class Members to remedy
Defendant’s wrongful conduct flows directly from Defendant’s liability to the Class
Members as a whole and can be objectively determined. The increased premium charges
can be mathematically quantified and do not depend on any subjective assumptions or
idiosyncrasies that are peculiar to individual Class Members.
11. This action also is appropriate as a class action pursuant to Rule 23(b)(3) of
the Alabama Rules of Civil Procedure.
DOCUMENT 12
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EXISTENCE AND PREDOMINANCE OF
COMMON QUESTIONS OF LAW AND FACT
12. There are questions of law and fact common to the Class Members. The
common questions of law and fact predominate over any questions affecting only
individual members of the class. Those common questions include, but are not limited to,
the following:
a. Whether Defendant’s actions to increase premium charges on the
Policies violated the terms of the Policies;
b. Whether Defendant breached its contracts with Plaintiff and Class
Members;
c. Whether Defendant breached its obligations of good faith and fair
dealing owed to Plaintiff and Class Members;
d. Whether Defendant failed to follow actuarial guidelines and procedures;
e. Whether Defendant’s Policies generated cash values for which certain
policyholders who surrendered their Policies were not compensated;
f. Whether Plaintiff and Class Members are entitled to specific
performance, injunctive relief or other equitable relief against
Defendant; and
g. Whether Plaintiff and Class Members are entitled to receive incidental
monetary relief or, alternatively, damages as a result of the unlawful
conduct by Defendant alleged herein.
DOCUMENT 12
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TYPICALITY AND NUMEROSITY
13. The claims asserted by Plaintiff are typical of the claims of the other Class
Members. The total number of members of the putative class exceeds one-thousand
(1,000) members.
ADEQUATE REPRESENTATION
14. Plaintiff will fairly and adequately protect the interest of the Class Members
and have no interest antagonistic to those of the other Class Members. Plaintiff has retained
attorneys who are knowledgeable and experienced in life insurance matters, as well as class
and complex litigation, and are financially able to represent the class.
SUPERIORITY
15. A class action is superior to other available methods for the fair and efficient
adjudication of this controversy for at least the following reasons:
a. Given the age of the Class Members, many of whom are elderly and
have limited resources, the complexity of issues involved in this action
and the expense of litigating the claims, few, if any, Class Members
could afford to seek legal redress individually for the wrongs that
Defendant committed against them, and absent Class Members have no
substantial interest in individually controlling the prosecution of
individual actions;
b. When Defendant’s liability has been adjudicated, claims of all Class
Members can be determined by the Court;
DOCUMENT 12
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c. This action will cause an orderly and expeditious administration of the
Class claims and foster economies of time, effort and expense, and
ensure uniformity of decisions;
d. Without a class action, many Class Members would continue to suffer
injury, and Defendant’s violations of law will continue without redress
while Defendant continues to reap and retain the substantial proceeds of
their wrongful conduct; and
e. This action does not present any undue difficulties that would impede
its management by the Court as a class action.
FACTUAL ALLEGATIONS
16. The insurance policies at issue in this action are a type known as a “Level
Term Life Insurance” policy (the “Policies”). These Policies are typically marketed, sold
and purchased on the premise that premium payments will remain at a fixed rate for the
“Level Benefit Period.” The premium amount of the policy is determined at the inception
of each Policy. In its uniform written representations made to the Class Members, the
Defendant stated that “[a]lthough not guaranteed beyond the Level Benefit Period, the
premium is planned to remain the same for the duration of the contract.” The duration of
the contract is the time from the effective date (i.e. the date the policy was purchased) until
the “Final Expiration Date” (i.e. the policy anniversary date following the insured’s 90th
birthday or after the policy has been in place for 50 years, whichever occurs first). The
amount of insurance (i.e. death benefit) also remains the same during the Level Benefit
Period. After the expiration of the Level Benefit Period, the amount of insurance decreases
annually. Thus, in planning the premium “to remain the same for the duration of the
DOCUMENT 12
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contract,” the Defendant factored the cost of insurance and its expectations as to future
mortality, expense and investment experience for the full duration of the contract. Upon
information and belief, the Policies were also originally designed and the premiums
planned based on the assumption that no cash value accumulation would occur while the
Policies were in force.
17. Plaintiff purchased from Defendant a Level Term Life Insurance Policy on
or about July 20, 1997 (Contract No. A403736405). Plaintiff is designated as the “owner”
of the policy, as well as the “insured.” Plaintiff’s initial amount of insurance is
$250,000.00. The Level Benefit Period is twenty years and is set to expire on July 20, 2017,
after which time the death benefit will reduce annually until the Final Expiration Date. The
Final Expiration Date of Plaintiff’s policy is July 20, 2032.
18. The standard and relevant terms of the policy sold to the Plaintiff are
identical to the Policies sold to each of the members of the proposed Class. Those terms
include a section titled Schedule of Premiums. There, the Policies explain that there is a
Schedule of Current Premiums and that “[t]he Current Premium is the amount we expect
to charge you annually, but is subject to change after the first five years based on actual
experience.” (Exhibit “A” at pg. 7). Also included in the Policies is a section titled
Adjustment of Current Premiums. (Id.) There, the Policies explain that “…[a] change in
premiums will be subject to the following conditions: …[a]ny change in premium will
be based upon [Defendant’s] expectations as to future mortality, expense and
investment experience. . . .” and “any change in the premiums . . . will also apply
uniformly to all other policies issued by [Defendant] on the same plan, amount of
insurance, and class of risk.” (Id.)
DOCUMENT 12
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19. Thus, the clear and unambiguous terms of the Policies specifically provide
that any increase in the premium amount charged by Defendant is exclusively based upon
(i) expectations of future mortality, (ii) expense and (iii) investment experience.
20. While there are maximum guaranteed annual premiums beyond the amount
of the Current Premiums set forth in the Policies, the Policies were priced and sold by
Defendant with Current Premiums set substantially less than the maximum guaranteed
premium and, with the Defendant’s stated expectation that the Current Premiums were
planned to remain the same for the full duration of the contracts. Otherwise, the Policies
would be prohibitively expensive and could not be marketed as they were.
21. Although the Defendant voluntarily disclosed to the Plaintiff and Putative
Class that the Current Premiums were planned to remain the same for the duration of the
contract, Defendant did not fully disclose the calculation of the premium charges to Class
Members. In other words, the Class Members do not know or see the actual cost of
insurance incurred by Defendant. Nor does the Defendant disclose its expectations as to
future mortality, expense and investment experience.
22. In light of the express language of the Policy, and the natural and reasonable
interpretation of the Policy in conjunction with the provisions regarding the premium
adjustments, the premium increase must be based on (i) expectations of future mortality,
(ii) expense and (iii) investment experience. Accordingly, the only legitimate basis upon
which the Defendant can increase premiums is if Defendant’s expectations of future
changes in mortality experience, expense experience, or Defendant’s investment
performance change from those expectations used in the original pricing of the Policies
DOCUMENT 12
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when the Current Premiums were planned to remain unchanged for the duration of the
contracts.
23. Upon information and belief, Defendant incurs very low expenses
compared to other similar insurance companies and there has not been any increase to the
cost of insurance under the Policies significant enough to justify the premium increases.
24. Also upon information and belief, Defendant maintains a very stable and
predictable investment portfolio and there has not been any change to Defendant’s
investment experience significant enough to justify the premium increases.
25. Thus, any significant premium increase for the Policies initiated by
Defendant must only be because of a material change in the future expectations of mortality
experience of the Policies. However, at the time the Defendant made the determination to
increase premiums, Defendant had not experienced, and did not anticipate, a significant
increase in mortality, if any increase at all.
26. Upon information and belief, Defendant evaluated the Policies to determine
whether the Policies were still meeting their objectives for purposes of pricing and market
competition. Defendant determined that the Policies were not generating enough profit for
Defendant and Defendant desired additional profit from the Policies. Also upon
information and belief, the Defendant also discovered that the original pricing of the
Policies created the possibility of some cash value accumulation within the Policies.
27. Under the terms of the Policies, Defendant’s options for increasing the
profitability of the Policies were limited. The only possible way for Defendant to make the
Policies more profitable would be to increase premiums. This would increase profit through
increased premium income and, if Policyholders elected to surrender their policies rather
DOCUMENT 12
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than pay the increased premiums, decrease expenses. Additionally, upon any surrender of
a Policy, the reserves attributable to that Policy would revert back to the Defendant who
would realize it as profit because no benefit would be owed on the cancelled Policy.
28. Upon information and belief, Defendant made a deliberate decision to
increase the profit that Defendant received from the Policies by increasing premiums on
all Policies. Improving profitability, however, is not a proper basis for a premium increase
under the terms of the Policies. Also upon information and belief, in addition to increasing
profitability, the Defendant’s decision to increase premiums was also predicated, in part,
to eliminate the possibility of any cash value accumulation.
29. Upon information and belief, Defendant currently plans to significantly
increase the premiums due from Plaintiff as soon as the Level Benefit Period expires in
2017, and a similar increase has been applied, or will be applied, to all the Policies (i.e. in
the first year after the Level Benefit Period). Defendant’s premium increase is contrary to
the express terms of the Policies and constitutes a material breach of the Policies because
it is not legitimately based upon (i) expectations of future mortality, (ii) expense and/or
(iii) investment experience.
30. Plaintiff believes that there may have been other premium increases
affecting Class Members that occurred that were also not related to (i) expectations of
future mortality, (ii) expense and/or (iii) investment experience.
31. Defendant made the decision(s) to increase premiums despite the fact that
the express terms of the Policies do not allow premium increases for non-expense, non-
mortality, or non-investment related reasons.
DOCUMENT 12
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32. The premium increase(s) has never been rescinded by Defendant and
remains in effect on all Policies.
33. Prior to implementing the premium increase(s), Defendant knew or should
have known that the illegitimacy of the premium increase(s) would not be discoverable
and/or perceptible to the Plaintiff or the Class Members.
34. Defendant intentionally concealed the true reason for the premium
increase(s) from the Class Members by making the determination not to inform the Plaintiff
and Class members that the premium increase(s) was motivated solely to increase profit
for Defendant, and was not related to (i) expectations of future mortality, (ii) expense
and/or (iii) investment experience.
35. Defendant has never given notice to the Plaintiff or the Class Members that
the premium increase(s) was purely motivated by profit.
36. Pursuant to the terms of the Policies, Class Members continued to make
premium payments after Defendant increased the premiums on the Policies, and were
operating under a mistake of fact as to the allocation of their premiums by Defendant.
37. The Policy was designed, drafted and approved by Defendant.
38. After implementing the improper premium increase(s), Defendant has
continued to service the Policies, and has accepted and withheld the increased premium
payments remitted by the Class Members.
39. After implementing the improper premium increase(s), Defendant has
failed and refused to change its premium collection practices, and continues to accept and
retain the wrongfully inflated premium payments from the Class Members.
DOCUMENT 12
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40. The decision to improperly increase the premiums on the Policies was
made by Defendant’s officers and senior executives, and Defendant’s conduct described
herein was undertaken by its corporate officers, directors, employees, agents and others.
Upon information and belief, Defendant had advance knowledge of the actions and
unlawful conduct of these individuals, and coordinated, orchestrated, ratified, authorized,
and approved the actions and unlawful conduct.
41. Defendant attempted and/or did conceal the facts and nature of the wrongful
conduct that gives rise to the claims asserted herein and the claims of the absent Class
Members, and Defendant is thus estopped from denying the timeliness of such claims.
FIRST CAUSE OF ACTION
Breach of Contract
Plaintiff Moses Erkins, on his own behalf and as a representative of the Class,
states and alleges as follows:
42. To the extent they are not inconsistent, the Plaintiff incorporates and re-
alleges each and every allegation as though fully set forth herein.
43. Defendant agreed to provide certain life insurance to Plaintiff and the
putative Class Members through the Policies and agreed to charge the Plaintiff and the
putative Class Members for such life insurance in accordance with the terms of the Policies.
44. The Plaintiff and the members of the class agreed to make payment to
Defendant in the manner of premium payments for the above-referenced insurance in
accordance with the terms of the Policies, and to only pay premium increases on the
Policies based on (i) expectations of future mortality, (ii) expense and/or (iii) investment
experience according to the terms of the Policies.
DOCUMENT 12
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45. The Plaintiff and the Class Members have fully performed their obligations
under the Policies, and any failures by the Plaintiff and/or the Class Members to pay
increased premiums under the Policies are specifically permissible pursuant to the terms of
the Policies.
46. Defendant failed to perform and materially breached the Policies by
implementing premium increases for reasons unrelated to (i) expectations of future
mortality, (ii) expense and/or (iii) investment experience, and charging such increases
contrary to the express terms of the Policies, which limit increases in premiums to (i)
expectations of future mortality, (ii) expense and/or (iii) investment experience.
47. The Defendant also breached the contracts by breaching the implied
covenant of good faith and fair dealing when, during the performance of the contract,
Defendant unfairly and in bad faith adjusted the premiums in a manner that was
inconsistent with the Defendant’s stated objective to not do so for the full duration of the
contracts.
48. As a direct and proximate result of the Defendant’s breach of the Policies,
the Plaintiff and putative Class Members have suffered pecuniary damages, damages under
the Policies, plus interest, and other economic, non-economic, general, special, incidental
and consequential damages for a total amount currently unknown but which will be shown
at the time of trial.
SECOND CAUSE OF ACTION
For Declaratory Relief
Plaintiff Moses Erkins, on his own behalf and as a representative of the Class,
states and alleges as follows:
DOCUMENT 12
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49. To the extent they are not inconsistent, the Plaintiff incorporates and re-
alleges each and every allegation as though fully set forth herein.
50. An actual controversy has arisen and now exists between Plaintiff and the
members of the Class, on the one hand, and Defendant, on the other hand, concerning the
respective rights and duties of the parties under the Policies.
51. Defendant contends that it has lawfully and appropriately increased the
premiums of the Policies, appropriately collected or will collect the increased premiums,
and that it is permitted to continue to collect these increased premiums in the future for the
duration of the Policies. On the other hand, Plaintiff and members of the Class maintain
that Defendant has breached the policies by inappropriately and unlawfully increasing the
premiums.
52. Under these circumstances, the parties’ desire a declaration as to their
respective rights under the Policies and the Plaintiff requests this Court declare that the
premium increases at issue are unlawful and in material breach of the Policies so that future
controversies under the Policies may be avoided.
WHEREFORE, Plaintiff, on behalf of himself and the Class Members, pray for
judgment providing:
A. Injunctive relief to preliminarily and permanently enjoin Defendant,
its representatives, and all others acting with it or on its behalf from increasing the
premiums of the Policies for reasons other than (i) expectations of future mortality,
(ii) expense and/or (iii) investment experience as required by the terms of the
Policies, and requiring premiums to be returned to the levels that existed prior to
the unlawful increases imposed by Defendant.
DOCUMENT 12
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B. Injunctive relief requiring Defendant, its representatives, and all
others acting with it or on its behalf to reinstate any policyholder whose Policy was
cancelled or surrendered as a result of the wrongful increase in premiums on the
Policies.
C. Incidental or other monetary relief in the form of repayments to
Plaintiff and other Class Members of all overcharges resulting from the wrongful
premium increase complained of herein.
D. Alternatively, general damages, consequential damages, and other
incidental damages in a sum to be determined at the time of trial.
E. Restitutionary relief requiring Defendant to disgorge and divest all
money received from Class Members as a result of, or caused by, the artificial and
sham increase in premiums on the Policies.
F. A declaration that the premium increase is a material breach of the
Policies and that Defendant must only increase premiums as explicitly set forth in
the Policies.
G. Attorneys’ fees expended and incurred in recovery of benefits and
enforcement of the terms of the Policies against Defendant in a sum to be
determined at the time of trial.
H. Cost of suit incurred herein.
I. An award of prejudgment and post-judgment interest.
J. Such other and further relief as deemed appropriate by this Court.
PLAINTIFF DEMANDS A TRIAL BY STRUCK JURY.
DOCUMENT 12
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Dated this 9th day of December, 2016.
/s/ P. Michael Yancey
Robert G. Methvin, Jr. (MET009) James M. Terrell (TER015) P. Michael Yancey (YAN006) Rodney E. Miller (MIL126) Attorneys for Plaintiff OF COUNSEL: MCCALLUM, METHVIN & TERRELL, P.C. 2201 Arlington Avenue South Birmingham, AL 35205 Telephone: (205) 939-0199 Facsimile: (205) 939-0399 E-mail: [email protected] [email protected] [email protected] [email protected] Joel Smith, Jr., Esq. (SMI192) Courtney Potthoff, Esq. (POT010) WILLIAMS, POTTOFF, WILLIAMS & SMITH, LLC
125 South Orange Avenue Post Office Box 880 Eufaula, Alabama 36702-0880 Telephone: (334) 687-5834 E-mail: [email protected] [email protected]
CERTIFICATE OF SERVICE
I certify that on December 9, 2016, I electronically filed the foregoing document
with the Clerk of Court using Alafile which will send a notice of electronic filing to: Michael D. Mulvaney Thomas J. Butler MAYNARD, COOPER & GALE, P.C.
1901 Sixth Avenue North 2400 Regions Harbert Plaza Birmingham, AL 35203
/s/ P. Michael Yancey OF COUNSEL
DOCUMENT 12
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