BECKLEY – A federal judge granted a motion to dismiss in a lawsuit against CitiFinancial alleging it ended life insurance coverage prematurely.

District Judge Irene C. Berger said in the lawsuit, the policy includes a clear term permitting the company — American Health — to “cancel this Certificate by giving the Debtor(s) written notice 30 days prior to the effective date of cancellation,” according to the Oct. 5 memorandum opinion and order.

The plaintiffs’ allegations that American Health cancelled the insurance without cause do not support a claim for breach of contract, Berger wrote. Therefore, the motion to dismiss should be granted with respect to the claim for breach of contract.

The court finds that the plaintiffs’ allegations do not state a claim for fraud.

“The quoted sales materials do not address the question of whether and under what conditions the insurance could be cancelled, and the application signed prior to entering into the loan and insurance agreement did contain disclosure of the cancellation policy,” Berger wrote. “The plaintiffs have not pled the circumstances of any promise that the insurance would remain in effect for the life of the loan with the particularity required by Rule 9(b). Therefore, the motion to dismiss should be granted as to any fraud claim.”

Berger said that no allegations appear to state a claim for a Truth in Lending Act violation either, and that the motion to dismiss must be granted as to any claim pursuant to TILA.

“Wherefore, after thorough review and careful consideration, the court orders that the defendants’ motion to dismiss complaint…be granted and that the plaintiffs’ complaint …be dismissed,” the order states.

Alan Johnston and Janet Johnston filed the lawsuit against CitiFinancial and American Health & Life Insurance Company earlier this year in Wyoming Circuit Court. The lawsuit was removed to federal court on June 12.

On May 1, 2007, CitiFinancial entered into a loan agreement with the plaintiffs that included a life insurance agreement guaranteeing loan payments for the associated loan.

American Life provided coverage and underwriting. The Johnstons paid premiums built into their loan and purchase agreement.

Later, the defendants “simply decided they didn’t want to offer coverage anymore,” according to the complaint.

“This decision was unilateral at no fault of the plaintiffs and was not among any explanation given as to how or why coverage could end prematurely,” the complaint states.

The Johnstons were seeking compensatory damages. They were represented by Timothy P. Lupardus.

U.S. District Court for the Southern District of West Virginia case number: 5:17-cv-03249




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