Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-4_20-cv-00004/USCOURTS-azd-4_20-cv-00004-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 29:1132 E.R.I.S.A.-Employee Benefits

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Flavio Carrillo,

Plaintiff,

v.

Humana Health Plan Incorporated, formerly

known as Humana Health Plan of Arizona

Incorporated; Continental General Insurance

Company, formerly doing business as Kanawha

Insurance Company, 

Defendants. ______________________________________

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CV 20-0004-TUC-JGZ (LAB)

REPORT AND

RECOMMENDATION

 Pending before the court is a motion to dismiss pursuant to Fed.R.Civ.P 12(b)(6), filed

on May 4, 2020, by the defendant Continental General Insurance Company. (Doc. 26)

The case has been referred to Magistrate Judge Bowman for report and recommendation

pursuant to the Local Rules of Practice. LRCiv 72.1. The Magistrate Judge recommends that

the District Court, after its independent review of the record, deny the motion. Carrillo alleges

a legally cognizable theory of relief and includes factual allegations sufficient to support that

theory.

The plaintiff in this action, Flavio Carrillo, asserts that he purchased a long-term

disability insurance policy administered by Kanawha Insurance Company and Humana. (Doc.

8, ¶ 10) Carrillo subsequently suffered a stroke and became totally disabled. (Doc. 8, ¶¶ 11-12)

Carrillo did not, however, receive the benefits that he expected. (Doc. 8, ¶¶ 16-23) The claim

analyst for Kanawha Insurance Company/Humana wrote Carrillo explaining that while his

monthly benefit was $5,998.20, he would be receiving only $2,593.20 because his Social

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Security Disability benefits would be subtracted from his monthly benefit. (Doc. 8, ¶ 16) Later,

Carrillo was informed that his monthly benefit would be only $730 because while he “did elect

a $5,000.00 benefit . . . the maximum monthly benefit allowable to you under the policy is

$3,000.” (Doc. 8, ¶ 19) 

In the pending action, Carrillo claims he is entitled to declaratory relief establishing that

he is entitled under ERISA to all documents relevant to his claim for benefits. (Doc. 8, ¶¶ 31-

47, 58-59) He names as defendants Humana Health Plan Incorporated and Continental General

Insurance Company. (Doc. 8) He alleges in the Amended Complaint that “Defendant

Continental General Insurance Company is now an entity which has, on information and belief,

merged with Kanawha Insurance Company (‘Kanawha’).” (Doc. 8, ¶ 4) 

Carrillo’s original complaint named Kanawha as a defendant, but Carrillo was informed

by the Arizona Corporation Commission (ACC) that the company was “inactive” and that the

ACC would not accept service on its behalf. (Doc. 28, p. 2) He was further informed that

Kanawha merged with Continental General Insurance Company (CGI) and the ACC would

accept service on CGI. Id.

In the pending motion to dismiss, the defendant Continental General Insurance Company

(CGI) “moves to dismiss the claims against it pursuant to Federal Rule of Civil Procedure

12(b)(6) because Plaintiff Flavio Carrillo does not allege any actionable facts against CGI and,

in any event, CGI is not a proper defendant to this ERISA action.” (Doc. 26) Carrillo filed a

response on May 14, 2020. (Doc. 28) CGI filed a reply on May 21, 2020. (Doc. 29)

Discussion

“A Rule 12(b)(6) motion tests the legal sufficiency of the claim.” Cook v. Brewer, 637

F.3d 1002, 1004 (9th Cir. 2011). The claim must allege a legally cognizable theory of relief and

include factual allegations sufficient to support that theory. Hinds Investments, L.P. v. Angioli,

654 F.3d 846, 850 (9th Cir. 2011). 

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 The Amended Complaint caption states that CGI was “formerly doing business as

Kanawha Insurance Company,” but “the contents of the caption usually are not considered a

part of the pleader’s statement of the claim. . . .” (Doc. 8, p. 1); 5A Fed. Prac. & Proc. Civ. §

1321 (4th ed.) 

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“[O]n a motion to dismiss, the court presumes that the facts alleged by the plaintiff are

true.” Brown v. Elec. Arts, Inc., 724 F.3d 1235, 1247 (9th Cir. 2013). The court need not,

however, “assume the truth of legal conclusions cast in the form of factual allegations.” Id. at

1248.

To survive the motion to dismiss, “[f]actual allegations must be enough to raise a right

to relief above the speculative level . . . on the assumption that all the allegations in the

complaint are true even if doubtful in fact.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555,

127 S.Ct. 1955, 1965 (2007) (internal punctuation omitted). “[A] well-pleaded complaint may

proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that

a recovery is very remote and unlikely.” Id. at 556, 1965 (internal punctuation omitted). 

The defendant CGI argues first that Carrillo “alleges no facts against CGI to support any

cause of action.” (Doc. 26, p. 2) The Amended Complaint, according to CGI, “contains exactly

one allegation against CGI: that it is now an entity which has, on information and belief, merged

with Kanawha Insurance Company.” (Doc. 26, p. 3) (punctuation modified) CGI concludes

that, “The 10-page Amended Complaint does not contain a single allegation that CGI actually

did anything in relation to Plaintiff or his [Long Term Disability] claim.” (Doc. 26, p. 3) The

court is not persuaded.

Carrillo alleges that Kanawha and Humana administer the ERISA plan, which is not

paying him the benefits to which he is entitled. (Doc. 8, ¶¶ 7, 10) He further alleges that CGI

merged1

 with Kanawha. (Doc. 8, ¶ 4) The Amended Complaint therefore implicitly alleges that

CGI is legally responsible for Kanawha’s failure to administer the plan properly. And whatever

duties are owed to Carrillo by Kanawha, or were owed assuming it is now “inactive,” are now

owed to him by CGI. (Doc. 8, ¶ 8)

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Carrillo’s use of the term “merged” is somewhat nebulous. He does not explicitly say

that there was a transfer of assets or liabilities from Kanawha to CGI, but that is not dispositive.

His allegations raise his right to relief above a speculative level assuming all his allegations are

true, as the court must on a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6). See also

Komaiko v. Baker Techs., Inc., 2020 WL 1915884, at *11 (N.D. Cal. 2020) (“[A] successor

generally does not assume liability for its predecessor’s liabilities unless . . . the transaction

amounts to a consolidation or merger of the successor and the predecessor (de facto merger).”);

see, e.g., First Source Fin. USA, Inc. v. nBank, N.A., 2008 WL 11389169, at *5 (D. Nev. 2008)

(Motion to amend pleading to include merged banking institutions was granted where the

movant’s allegation of liability was considered sufficient to survive a Rule 12(b)(6) challenge.).

CGI further argues that the claims against it must be dismissed because it is not a proper

defendant. “A proper defendant,” according to CGI, “is an entity with (1) authority to resolve

benefit claims or (2) responsibility to pay benefit claims.” (Doc. 26, p. 3) But that is exactly

what the Amended Complaint alleges. Kanawha was authorized to resolve Carrillo’s claim for

benefits, and CGI is now responsible for Kanawha’s alleged failure to do so properly.

CGI notes that the defendant Humana has admitted that it is the claim administrator and

asserts that Humana has all the documents to which Carrillo could possibly be entitled. (Doc.

29, p. 4) After discovery, that may turn out to be true. But on a motion to dismiss pursuant to

Rule 12(b)(6), this court must limit its enquiry to the four corners of the complaint and the

documents that it incorporates. Van Buskirk v. Cable News Network, Inc., 284 F.3d 977, 980

(9th Cir. 2002).

RECOMMENDATION:

The Magistrate Judge recommends that the District Court, after its independent review

of the record, enter an order 

DENYING the motion to dismiss pursuant to Fed.R.Civ.P 12(b)(6), filed on May 4,

2020, by the defendant Continental General Insurance Company. (Doc. 26)

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 Pursuant to 28 U.S.C. §636 (b), any party may serve and file written objections within

14 days of being served with a copy of this report and recommendation. If objections are not

timely filed, the party’s right to de novo review may be waived. The Local Rules permit the

filing of a response to an objection. They do not permit the filing of a reply to a response

without the permission of the District Court.

DATED this 8th day of June, 2020.

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