UNITED STATES DISTRICT COURT FOR THE 

DISTRICT OF NEW HAMPSHIRE

Gloria Carter and Roy Farr

v. Civil No. 05-cv-399-JD

Opinion No. 2006 DNH 093

North Central Life Insurance Company

O R D E R

Gloria Carter and Roy Farr filed a putative consumer class

action, alleging that North Central Life Insurance Company

breached its insurance contracts with them and other members of

the putative class by failing to refund the unearned portion of

insurance premiums that had been prepaid as part of their car

financing. Carter and Farr also filed a preliminary motion for

class certification. North Central moves to dismiss the

plaintiffs’ claims and to exclude certain individuals from the

putative class. Carter and Farr oppose North Central’s motions.

I. Motion to Dismiss

North Central contends no breach has occurred, making the

plaintiffs’ claims unripe and depriving them of standing to

proceed. In support of those theories, North Central argues that

it was not obligated to refund the unearned portions of the

plaintiffs’ insurance premiums because the plaintiffs did not

provide notice of their prepayments and because the dispute about

the refunds has not been resolved. North Central also asserts

Case 1:05-cv-00399-JD Document 45 Filed 08/17/06 Page 1 of 11
1North Central introduces the condition precedent argument

as follows: “The Court need review this section of North

Central’s brief only if it rejects all of North Central’s four

previous arguments.” Mem. at 17.

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that the claims should be dismissed because the plaintiffs

breached their obligation of good faith and fair dealing by

failing to give North Central notice before filing suit. As a

fallback position, North Central argues that the combined effect

of New Hampshire Revised Statutes Annotated (“RSA”) §§ 361-A:7,

IV-a, 408-A:8, and 402:81 requires notice to the insurer as a

condition precedent to the obligation to refund unearned premiums

to the insured.1 Carter and Farr object to the motion to

dismiss.

In considering a motion to dismiss, pursuant to Federal Rule

of Civil Procedure 12(b)(6), the court accepts the facts alleged

in the complaint as true and draws all reasonable inferences in

favor of the plaintiff. Edes v. Verizon Comms., 417 F.3d 133,

137 (1st Cir. 2005). The court must determine whether the

complaint, construed in the proper light, “alleges facts

sufficient to make out a cognizable claim.” Carroll v. Xerox

Corp., 294 F.3d 231, 241 (1st Cir. 2002). “The standard for

granting a motion to dismiss is an exacting one: ‘a complaint

should not be dismissed for failure to state a claim unless it

appears beyond doubt that the plaintiff can prove no set of facts

in support of [her] claim which would entitle [her] to relief.’”

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McLaughlin v. Boston Harbor Cruise Lines, Inc., 419 F.3d 47, 50

(1st Cir. 2005) (quoting Conley v. Gibson, 355 U.S. 41, 46

(1957)). Because the court “may properly consider the relevant

entirety of a document integral to or explicitly relied upon in

the complaint, even though not attached to the complaint, without

converting the motion into one for summary judgment,” the

insurance documents submitted by the parties will also be

reviewed for purposes of deciding the motion. Clorox Co. P.R. v.

Proctor & Gamble Commercial Co., 228 F.3d 24, 32 (1st Cir. 2000);

see also Carrier v. Am. Bankers Life Assurance Co., 2006 WL

1049721, at *1 (D.N.H. Apr. 21, 2006).

A. Contractual Preconditions

It is undisputed that North Central’s insurance policies at

issue in this case do not expressly require an insured to notify

North Central when prepayment is made and a refund is due. North

Central argues that two provisions in its policies impose 

obligations on its insureds that have not been fulfilled by the

plaintiffs here, making the plaintiffs’ breach of contract claim

premature. One provision pertains to payment of interest on

refunds, and the other requires written proof of loss before an

insured may bring suit to recover under the policy. The

plaintiffs contend that neither provision affects their breach of

contract claim.

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“The interpretation of insurance policy language, like any

contract language, is ultimately an issue of law for the court to

decide.” D’Amour v. Amica Mut. Ins. Co., 891 A.2d 534, 536 (N.H.

2005) (internal quotation marks omitted). The court “construe[s]

the language of an insurance policy as would a reasonable person

in the position of the insured based on a more than casual

reading of the policy as a whole.” Id. In interpreting policy

language, the court is bound by its reasonable meaning and is not

free to rewrite policy provisions. Catholic Med. Ctr. v. Exec.

Risk Indem., Inc., 151 N.H. 699, 702 (2005). 

1. Bona fide dispute.

The refund provisions in the applicable policy certificates

state: “Any refund not paid within 30 days will earn interest at

10 percent beginning on the 31st day, except in a bona fide

dispute, or where the final premium is subject to audit, or other

adjustment of premium.” The applicable group policies state: 

“Any refund not paid within 30 days will earn interest at 10% per

annum beginning on the 31st day. In the event the amount is in

bona fide dispute, or where the final premium is subject to audit

or other adjustment, the amount of the refund shall not become

due until the dispute is resolved and the audit or other

adjustment of premium is completed and the final amount of

premium is determined.” North Central asserts that this suit and

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any suit about a refund constitutes a dispute about the amount of

a refund within the meaning of that provision. Based on that

interpretation, North Central contends that the plaintiffs cannot

bring suit to recover their refunds until the “bona fide dispute”

raised in this action is resolved.

North Central’s interpretation of the “bona fide dispute”

provision does not comport with the standard of what a reasonable

person would conclude the provision means after more than a

casual reading. That provision expressly applies to a dispute

about the amount that is due as a refund. This case does not

involve a dispute, bona fide or otherwise, about the amount of

the refund that is due. The plaintiffs allege that North Central

failed to pay any refund in breach of the policy provision that

promises to make a refund of the unearned part of a prepaid

premium if the insurance is terminated before the final

termination date. 

2. Legal action.

The second policy provision North Central invokes states as

follows: “No action at law or in equity shall be brought to

recover on this policy prior to the expiration of 60 days after

written proof of loss has been furnished in accordance with the

requirements of this policy.” North Central interprets that

provision to require its insureds to provide written notice of

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any claim, including the breach of contract claim alleged here,

before bringing suit. The plaintiffs disagree.

Written notice is required before an action is brought “to

recover on this policy.” The plaintiffs argue that their suit is

not to recover on the policy, that is to obtain the insurance

benefits provided under the policy, but instead is to recover the

unearned part of their prepaid premiums. The plaintiffs also

point out that they have not suffered a “loss” that is covered by

North Central’s policies.

The policies support the plaintiff’s interpretation of the

“legal action” provision. The policies define “proof of loss” as

follows: “Written proof of loss must be furnished to the Company

at its office in case of claim for loss for which this policy or

any certificates issued hereunder provides any periodic payment

contingent upon continuing loss within 90 days after the

termination of the period for which the Company is liable.”

(Emphasis added.) The “Payment of Claims” provision states: 

“Subject to due written proof of loss, all accrued benefits for

loss for which this policy provides periodic payment will be paid

monthly to the Creditor to reduce or extinguish this indebtedness

and any balance remaining unpaid upon the termination of

liability will be paid immediately to the Creditor upon receipt

of due written proof.” (Emphasis added.) Based on those

provisions, read together, the policy unambiguously precludes

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legal action to recover a benefit provided under the terms of the

policy until sixty days after written proof of a covered loss is

provided to the company. That is not the claim that the

plaintiffs allege here.

 Because the applicable policies do not provide preconditions

to the plaintiffs’ breach of contract claim alleged here, the

provisions cited by the defendants do not make the claim unripe

or deprive the plaintiffs of standing to proceed. Similarly,

those provisions do not bar the plaintiffs’ breach of contract

claim in the absence of written notice to North Central.

B. Implied Covenant of Good Faith and Fair Dealing

North Central contends that the court should read a notice

requirement into its policies as part of the insureds’ implied

obligation of good faith and fair dealing. That request would

stretch contract interpretation far beyond its permissible scope

in this case. The implied covenant of good faith and fair

dealing in the performance of a contract imposes limits on “a

promise subject to such a degree of discretion that its practical

benefit could seemingly be withheld.” Centronics Corp. v.

Genicom Corp., 132 N.H. 133, 144 (1989). That is not the

situation presented here. Further, contrary to North Central’s

request, the court is not free rewrite the policies to add a

notice requirement that North Central chose not to include. 

Catholic Med. Ctr., 151 N.H. at 702. 

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2In particular, North Central appears to misunderstand RSA

361-A:7 and that part of the Carrier decision which interprets

the statutory scheme.

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C. Statutory Notice Requirements

As a last resort, North Central argues that the combined

effect of three New Hampshire statutes relieves it of any

obligation to pay a refund unless or until it received some

notice that the plaintiffs had prepaid their loans. The effect

of the first two statutes, RSA 361-A:7 and 408-A:8, was

thoroughly discussed in the court’s decision in Carrier v. Am.

Bankers Life Assurance Co., 2006 WL 1049721 (D.N.H. Apr. 21,

2006), and will not be repeated here. North Central’s efforts to

change that outcome for purposes of this case are not

persuasive.2

North Central also contends that a third statute, RSA

402:81, I, when added to the other two, relieves it of any refund

obligation absent notice of prepayment. RSA 402:81, I, however,

pertains to refunds due upon cancellation of insurance policies

by either the insurer or the insured. In this case, the

insurance policies terminated automatically upon prepayment of

the loans. Because the policies were not cancelled by either

party, RSA 402:81 has no bearing on the claim alleged here.

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II. Motion to Exclude Certain Individuals from Purported Class

The plaintiffs filed a preliminary motion to certify a class

shortly after they filed their initial complaint in this case. 

They asked, however, that the court “take the question of class

certification under advisement pending preliminary discovery and

briefing.” The motion was intended only to prevent any issue of

mootness should North Central offer judgment to individual

plaintiffs before a class was certified. The defendants have

filed no response to the motion. Therefore, a class has not been

certified in this case, and no substantive motion to certify a

class is pending.

Nevertheless, North Central moves to exclude from “the

purposed nationwide class” any individuals who “signed

arbitration agreements with third parties (such as lenders,

finance companies, and motor vehicle dealerships) in connection

with the motor vehicle loans at issue.” Motion at 2. North

Central asserts in its motion: “some of those [third-party]

arbitration agreements encompass the claim asserted in the

Complaint on behalf of those class members against North Central;

as a non-signatory, North Central may rely on arbitration

agreements signed by class members in order to compel arbitration

of the covered claims.” Id. 

The plaintiffs oppose the motion. They point out that the

class they proposed in the amended complaint already excludes any

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individuals who signed North Central insurance policies with

arbitration clauses. The plaintiffs contend that North Central’s

effort to incorporate arbitration clauses from third-party

agreements into its policies should be denied based on the

integration clause in North Central’s policies, because the

policies did not include such restrictions as required under New

Hampshire insurance law, because efforts to restrict the class at

this precertification stage are premature, because North Central

provided no evidence to support its theory, and because North

Central cannot enforce a third-party arbitration clause. In

response, North Central filed a reply raising a complex choice of

law question.

North Central’s motion is premature. At this stage, there

is no substantive motion for class certification before the

court. As a non-signatory to the alleged third-party arbitration

agreements, North Central would have to show that any such

agreements require arbitration of the breach of contract claim

the plaintiffs allege here. North Central has not made that

showing. The choice of law question may or may not need to be

addressed and, if so, will need further briefing. Therefore, the

motion is denied without prejudice to raise the same issues at an

appropriate time.

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Conclusion

For the foregoing reasons, the defendant’s motion to dismiss

(document no. 23) is denied. The defendant’s motion to exclude

(document no. 25) is denied without prejudice. The plaintiff’s

motions to file a surreply to the motion to exclude (document no.

40) and motion to strike the defendant’s response (document no.

42) are terminated. The plaintiffs’ preliminary motion to

certify the class (document no. 3) is terminated pursuant to the

provision in the parties’ discovery plan for filing a class

certification motion.

SO ORDERED.

____________________________

Joseph A. DiClerico, Jr.

United States District Judge

August 17, 2006

cc: Lee E. Bains, Jr., Esquire

James E. Butler, Jr., Esquire

Thomas J. Butler, Esquire

Christopher Cole, Esquire

Kate S. Cook, Esquire

Lorrie L. Hargrove, Esquire

Robert R. Lucic, Esquire

Michael D. Mulvaney, Esquire

Edward K. O’Brien, Esquire

Joel O. Wooten, Jr., Esquire

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