Insurance – Disability – Breach of Contract – Civil Practice – Statute of Limitations – Constructive Fraud

Lawley v. Liberty Mutual Group, Inc. (Lawyers Weekly No. 12-04-1009, 13 pp.) (Richard L. Voorhees, J.) 5:11-cv-00106; W.D.N.C.

Holding: If defendants breached their disability insurance contract with plaintiff, they did so when they denied her claim on March 28, 2003, not every time a monthly disability payment was due. Plaintiff’s June 27, 2011 complaint was not timely filed.

Defendants’ motion to dismiss is granted.

For installment contracts, the statute of limitations runs from the time each individual installment becomes due.

However, the “inception of the loss” in this case occurred when defendants denied plaintiff’s disability claim. Each subsequent monthly refusal to pay does not constitute a distinct and separate harm or unlawful act; rather, it represents continual ill effects from the original violation. The court is not aware of any N.C. holdings where a disability insurance policy is treated as an installment contract with each payment representing a separate and independent breach.

Because the court finds that plaintiff’s insurance policy is not an installment contract, plaintiff’s claim is barred by the three-year statute of limitations.

With regard to plaintiff’s constructive fraud claim, a fiduciary relationship arises only when one party places “special confidence in another person, to the extent that the party in whom such special confidence is placed is bound to act in the best interests of the party placing the confidence. Plaintiff has not adequately pleaded a confidential or fiduciary relationship.

Plaintiff fails to point to any language in the parties’ policy which would support her contention that a confidential or fiduciary relationship existed, and she neglects to reference the special confidence she placed in defendants. Allegations that a fiduciary relationship existed or that a relationship of trust and confidence existed are a legal conclusion, which is not entitled to an assumption of truth on a motion to dismiss.

Plaintiff has not sufficiently alleged that defendants owed her any duty other than the duty arising from the parties’ contractual relationship, and she has not pleaded that defendants used any form of dominion or control. Although the requirement of good faith and fair dealing applies to all parties to an insurance contract, the duty is not sufficient to create an implied fiduciary relationship. Plaintiff’s conclusory allegations that a confidential or fiduciary relationship exists are not enough to withstand defendants’ motion to dismiss.

Motion granted.