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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF INDIANA

HAMMOND DIVISION

DOUGLAS R. WOOD, individually and as 

Personal Representative of the ESTATE OF 

STEPHEN RAY WOOD, and GREGORY S. 

WOOD, 

 

 Plaintiffs, 

 v. Case No. 1:15-CV-260-JVB 

UNITED OF OMAHA LIFE INSURANCE 

COMPANY and NORTHWESTERN 

MUTUAL LIFE INSURANCE COMPANY, 

 

 Defendants. 

OPINION AND ORDER

 This matter is before the Court on Defendant United of Omaha’s Motion to Dismiss 

(DE 15). For the following reasons, Count I of Plaintiffs’ complaint is dismissed with leave 

to amend. 

A. Background 

 Plaintiffs are the estate of Stephen Wood (“Wood”) and his sons. Defendants are 

United of Omaha (“Omaha”) and Northwestern Mutual (“Northwestern”), two life insurance 

companies with whom Wood did business. Plaintiffs are suing Defendants under Indiana 

state law for breach of contract and negligence, respectively. This Court has jurisdiction 

under 28 U.S.C. § 1332(a) because the parties have diverse citizenship and the amount in 

controversy exceeds $75,000. 

 The relevant allegations in Plaintiffs’ complaint are as follows. In early 2013, Wood 

purchased a life insurance policy from Omaha with a single premium payment of $400,000. 

(Compl. at 4 ¶12.) In December 2013, he discovered that although he intended his adult sons 
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and fiancée to be beneficiaries, only his fiancée was actually listed on the policy. (Compl. at 

4‒5 ¶15.) He arranged with a Northwestern insurance agent to have the necessary written 

request sent to Omaha in order to cancel his Omaha policy and transfer it to Northwestern. 

(Compl. at 6 ¶21.) The $400,000 surrender value of the Omaha policy would then be used to 

purchase two Northwestern policies providing benefits for his sons and his fiancée. (Compl. 

at 5 ¶16‒20.) 

 Shortly thereafter, on December 24, 2013, Wood died. (Compl. Ex. A at 2.) Omaha 

received Wood’s written request to transfer the policy on December 30. (Compl. at 6 ¶23.) 

Nonetheless, on January 14, 2014, Omaha paid Wood’s fiancée the full $400,000 amount of 

the policy. (Compl. at 6 ¶23.) 

 Plaintiffs are now suing both Northwestern and Omaha for the amount they would 

have received had Wood’s instructions been followed, as well as punitive damages. (Compl. 

at 8 ¶¶36, 38.) They allege that Omaha breached the policy agreement by not transferring the 

policy upon receiving the written request. (Count I, Compl. at 7.) They also allege that 

Northwestern was negligent in not taking sufficient action to ensure transfer of the policy. 

(Count II, Compl. at 8.) 

B. Legal Standard 

 The purpose of a Rule 12(b)(6) motion to dismiss for failure to state a claim is to test 

the pleading’s sufficiency, not to decide the merits. See Gibson v. Chicago, 910 F.2d 1510, 

1520 (7th Cir.1990). A complaint must contain “a short and plain statement of the claim 

showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). Additionally, “a 

complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief 

that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell 

Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A complaint is facially plausible if a 
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court can reasonably infer from factual content in the pleading that the defendant is liable for 

the alleged misconduct. Id. When a court reviews a motion to dismiss under Rule 12(b)(6), it 

views all well-pleaded allegations in the light most favorable to the plaintiff. Hecker v. Deere 

& Co., 556 F.3d 575, 580 (7th Cir.2009). 

C. Discussion 

 Omaha’s motion to dismiss raises two arguments: first, that the policy specified that 

any duties to Wood were extinguished upon his death, and second, that Plaintiffs failed to 

plead that Wood satisfied the requirements for a valid transfer request under the policy. For 

the following reasons, the Court rejects the first argument and accepts the second. 

(1) Omaha has not established that its alleged obligation to honor Wood’s transfer 

request ceased upon his death

 Omaha argues that under the policy’s terms, all duties to Wood were extinguished 

upon his death. The policy agreement informs the policyholder that “your rights of ownership 

end at your death,” including the right to receive payments. (Compl. Ex. B. at 13.) According 

to Omaha, this necessarily includes the right to cancel the agreement, because cancellation 

entails payment of the surrender value. Thus, Omaha argues, the transfer request became void 

when Wood died, even if the request was otherwise valid. 

 But Omaha’s proposed reading has unsettling results. This reading implies, for 

example, that even if Wood had gone to Omaha's headquarters to deliver all the documents 

needed for a policy transfer, and then died while driving home, his death would instantly 

extinguish Omaha's duty to complete the transfer. Under Indiana law, “a contract will not be 

interpreted literally if doing so would produce absurd results.” Beanstalk Grp., Inc. v. AM 

Gen. Corp., 283 F.3d 856, 860 (7th Cir. 2002). This principle does not preclude finding that 

parties bargained for an unusual result, if there is evidence to support such a finding. Id. But 
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at this stage of the proceedings, at which the Court is bound to view the facts in the light most 

favorable to Plaintiffs, the Court reads the policy agreement as simply limiting duties to 

Wood’s estate involving the ordinary payment of benefits under the policy, and not as 

posthumously voiding a duly-made transfer request. 

 Accordingly, the complaint is not subject to dismissal on this basis. 

(2) The complaint fails to state that conditions precedent have been satisfied

 The Omaha policy specified two requirements for cancellation: a written request from 

the policyholder, and return of the policy to Omaha. (Compl. Ex. B. at 9.) The complaint 

alleges that the written request was sent, but not that the policy itself was returned. 

Accordingly, Omaha argues that Plaintiffs have not stated a claim for breach of contract, 

because Plaintiffs have not alleged that the conditions were met for a valid cancellation 

request. 

 Under the Federal Rules, “it suffices to allege generally that all conditions precedent 

have occurred or been performed.” Fed. R. Civ. P. 9(c). But Rule 9(c) still requires a plaintiff 

to at least make this general allegation. Plaintiffs’ complaint does not allege either generally 

or specifically that the policy’s conditions for cancellation were satisfied. Accordingly, the 

complaint does not support an inference that Omaha breached the contract when it failed to 

cancel the policy. Count I of the complaint accordingly fails to state a claim against Omaha 

upon which relief can be granted. 

 The parties additionally dispute both the meaning of “return” under this provision of 

the policy and the degree of compliance with this provision that would be necessary to trigger 

Omaha’s obligation to cancel the policy. These disputes go to the question of which acts 

would have satisfied the policy’s requirements under Indiana law. As a general matter, 

Indiana courts require strict compliance with insurance policy provisions involving the 
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change or removal of a beneficiary. Cook v. Equitable Life Assur. Soc. of U. S., 428 N.E.2d 

110, 115 (Ind. Ct. App. 1981). But Indiana also recognizes substantial compliance when a 

policyholder has done all he can to comply. Bowers v. Kushnick, 774 N.E.2d 884, 887 (Ind. 

2002). Applying those rules to this case, even if Wood did not return the policy to Omaha, 

that failure would not necessarily void his request to transfer or cancel a policy. Rather, under 

Indiana law the transfer request might still be valid if Wood did everything in his power to 

make a valid request. 

 This question of the necessary degree of compliance has not been sufficiently 

developed for the Court to resolve it at this stage. First, as stated above, the complaint does 

not sufficiently allege compliance at all. Second, even if compliance had been alleged, there 

is not yet evidence in the record to establish Wood’s actual degree of compliance, so there is 

no way to measure it against the Indiana standard. 

D. Conclusion

 For the reasons above, pursuant to Rule 12(b)(6), the Court DISMISSES Count I of 

Plaintiffs’ complaint (DE 1). Pursuant to Rule 15(a)(2), the Court gives Plaintiffs leave to 

amend their complaint no later than June 17, 2016.

SO ORDERED on May 19, 2016. 

 S/ Joseph S. Van Bokkelen 

 JOSEPH S. VAN BOKKELEN 

 UNITED STATES DISTRICT JUDGE