Court Opinion

ID: 4650948
Source: CourtListenerOpinion
Date Created: 2021-01-13 01:00:35.559914+00
Date Added: 2024-06-11T08:01:36.045152
License: Public Domain

Case: 20-30225     Document: 00515703807         Page: 1     Date Filed: 01/12/2021

              United States Court of Appeals
                   for the Fifth Circuit
                                                                        United States Court of Appeals
                                                                                 Fifth Circuit

                                                                               FILED
                                                                        January 12, 2021
                                  No. 20-30225                            Lyle W. Cayce
                                                                               Clerk

   William Edward Brown,

                                                           Plaintiff—Appellant,

                                       versus

   Phoenix Life Insurance Company,

                                                           Defendant—Appellee.

                  Appeal from the United States District Court
                      for the Middle District of Louisiana
                            USDC No. 3:18-CV-478

   Before Haynes, Higginson, and Oldham, Circuit Judges.
   Stephen A. Higginson, Circuit Judge:*
          This case concerns a contract dispute involving a life insurance policy
   purchased by Plaintiff-Appellant William Edward Brown from Defendant-
   Appellee Phoenix Life Insurance Company. Brown appeals the district
   court’s dismissal of his Second Amended Complaint with prejudice pursuant

          *
            Pursuant to 5th Circuit Rule 47.5, the court has determined that this
   opinion should not be published and is not precedent except under the limited
   circumstances set forth in 5th Circuit Rule 47.5.4.
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                                         No. 20-30225

   to Federal Rule of Civil Procedure 12(b)(6). We AFFIRM in part,
   REVERSE in part, and REMAND for further proceedings. 1
                             I. Factual Background
           As alleged in Brown’s Second Amended Complaint, in December
   1986 Phoenix 2 sold Brown a “universal life insurance policy” (“the Policy”)
   with a $150,000 death benefit and a $1,200 annual premium. At the time of
   the sale, an insurance agent working for Phoenix allegedly represented to
   Brown that the Policy charged higher premiums, which—in addition to
   covering the immediate costs of the insurance—would be used to create and
   build an investment fund that would earn interest and be available to pay
   premiums later in life in order to provide “coverage for life.” The agent
   described the investment fund model as differentiating the Policy from term
   life insurance.
           To help demonstrate how the Policy would function, the agent
   provided Brown with a “Sales Illustration.” 3 The Sales Illustration shows
   two different projections of the investment fund’s accumulated value over
   time, with the variable inputs being the cost of insurance and the interest rate,
   and with an assumption of a steady $1,200 annual premium payment. One of
   the projections is based on a “guaranteed” interest rate of 4.5% along with a
   guaranteed cost of insurance. The other projection is based on an “assumed”

           1
           Judge Haynes concurs in the opinion and judgment except as to Count Three. She
   would certify that question to the Louisiana Supreme Court.
           2
             Phoenix assumed responsibility for the insurance policy at issue; the original
   parties to the transaction were Brown and Home Life Financial Assurance Corporation,
   Phoenix’s predecessor-in-interest. For simplicity, we refer only to Phoenix when
   describing the involvement of either Home Life or Phoenix.
           3
              While Brown did not attach the Sales Illustration to his Second Amended
   Complaint, Phoenix attached it to its motion to dismiss and the magistrate judge held that
   it could be considered because it was incorporated by reference into the complaint.

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   interest rate of 9.75% and the “current” cost of insurance. The projection
   based on the assumed 9.75% interest rate shows the value of the investment
   fund steadily growing through the end of year 30, where the table ends. The
   projection based on the guaranteed 4.5% interest rate shows that the value of
   the fund initially grows before it begins to decrease and eventually reaches
   zero in year 19. Accompanying the table is a note that reads: “[A]dditional
   premium will be required in month 7 of year 19 or policy will lapse, based on
   guaranteed factors.”
            The Sales Illustration also contains handwritten notes which allegedly
   “reflect what [Phoenix’s] agent told Brown at the time of the sale.” These
   markings include a note that states “can reduce premiums w/ cash value
   interest.” Brown alleges that this note “records [Phoenix’s] agent’s
   representation that the investment fund (cash value) will be sufficient to
   reduce premiums in the future.” Other notes state: “1200[,] 150 k,” “50
   whole + 100 term,” and “5 yrs[,] 50 k.” Brown alleges that the “1200” note
   records the agent’s representation “that the annual premium will remain
   level at $1,200 per year” because the investment fund will pay additional or
   increased premiums later in life. He also alleges that the “50 whole” and “5
   yrs[,] 50k” reflect the agent’s representations that $50,000 of the $150,000
   death benefit is whole life insurance which would be “paid up” after five
   years.
            To finalize the purchase, Brown completed an “Application for
   Insurance,” which described the “planned” monthly premium to be $100
   and stated that the Policy would take effect “when the [P]olicy is delivered
   to the owner and the full first premium is paid.” Brown paid the full first
   premium; however, he alleges that Phoenix failed to deliver the Policy.
            In the decades following the purchase of the Policy, Brown continued
   to make $100 monthly premium payments. He also repeatedly reached out

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   to Phoenix to request a written copy of the original Policy. In total, he alleges
   that he made six written requests (along with multiple phone inquiries) for
   the Policy. For example, in a November 23, 1988 letter, Brown wrote: “This
   is my third request to [Phoenix] headquarters for my insurance policy. . . . I
   have not been able to obtain the policy from the agent or the company. Please
   send me the policy immediately.” In August 2006, in response to another of
   Brown’s requests for a copy of the Policy, Phoenix sent Brown a “Lost Policy
   Certificate.”
          On January 12, 2009, Brown sent another letter to Phoenix that stated:
   “Please send a copy of the agreement that authorizes Phoenix to increase the
   premiums and a copy of the premium schedule for past and future years. . . .
   As your files will show, I have never received a copy of the policy. All I have
   is a Lost Policy Certificate.”
          Phoenix responded in a letter dated February 6, 2009. The letter
   states that Brown’s Policy “is a type of Universal Life Insurance . . . [that] is
   a combination of permanent insurance and an investment fund that provides
   coverage for the insured’s entire life.” It describes that the value of the
   investment fund “is determined by the accumulated premiums and interest
   earned, less the cost of insurance (at the insured’s attained age), and
   administrative costs.” The letter also states that the interest rate was 9.75%
   at the time the Policy was issued in December 1986, but that the current
   interest rate is 4.5% and the guaranteed interest rate is also 4.5%. It then
   advises: “It is important for you to remember that your policy is a premium
   paying contract and has reached a point where it required more than $100.00
   monthly to support the death benefit. UL polices are flexible premium
   policies . . . and depend on prevailing interest rates to keep the accumulation
   account large enough to support the death benefit.”

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          On August 3, 2015, Brown sent Phoenix another letter requesting,
   among other things, the policy provisions and standards Phoenix uses to
   determine premium increases, and the projected premiums for Brown’s
   Policy over the next 10 years. Brown also noted, again, that he had never
   received the original Policy from Phoenix.
          Phoenix replied in a letter dated August 17, 2015. The letter encloses
   an attachment, which is described as a “representative copy of the contract
   form” that shows the “current benefits and features” of Brown’s Policy. The
   letter notes that the attachment is not “an exact duplicate of the original
   policy.” Brown alleges that the document does not disclose “the amount of
   additional premiums or the reduction of the investment fund to zero.”
          Three years later, in response to Brown’s further inquiries about
   possible premium increases on his Policy, Phoenix sent Brown an email
   (dated January 8, 2018), which contained an attachment showing a schedule
   of future premiums due on Brown’s Policy. The schedule shows that in order
   to maintain the Policy—due to the increasing cost of insurance as Brown
   ages—Brown would need to pay additional premiums beyond the original
   $100 monthly payment. According to the schedule, in 2018 an immediate
   payment of $2,500 plus $100 monthly payments would be required to
   maintain the policy. Starting in 2019, an annual premium contribution of
   $11,321.04 would be required. Brown alleges that based on this schedule,
   “Phoenix required almost $140,000 in additional premiums to keep the
   $150,000 policy in force to age 85.” He further alleges that these increased
   premiums violate Phoenix’s “promise [that] the investment fund provides
   coverage for Brown’s entire life with the $1,200 annual premium.”
          Separately in 2018, a Phoenix representative informed Brown that
   there is no delivery receipt for the Policy in Phoenix’s files.

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            On February 12, 2018, Brown filed suit in Louisiana state court
   asserting a variety of contract law claims. Phoenix removed to federal court,
   asserting diversity jurisdiction. Upon Phoenix’s motion, the district court
   dismissed Brown’s First Amended Complaint for failure to state a claim but
   granted Brown leave to amend. Brown filed his Second Amended Complaint
   on April 25, 2019.
            In his Second Amended Complaint, Brown’s asserts ten different
   claims for relief, including breach of contract, bad faith breach of contract,
   failure to deliver the Policy, estoppel, and annulment and/or rescission of the
   contract. Brown’s various claims appear to be premised on one of two
   alternative theories. Under one theory, the original written insurance Policy
   included terms that guaranteed that the Policy could be maintained so long
   as Brown made annual premium payments totaling $1,200 and therefore
   Phoenix breached the Policy by charging additional premiums beyond that
   amount, causing the Policy to lapse. Under the alternative theory, despite
   representing that the Policy only required $1,200 in annual premiums,
   Phoenix deceptively included terms in the Policy allowing it to charge
   additional premiums that would deplete the investment account and cause
   the Policy to lapse, and then failed to deliver the Policy or otherwise disclose
   those terms, thereby causing Brown to detrimentally rely on Phoenix’s
   representations.
            Phoenix again moved to dismiss under Federal Rule of Procedure
   12(b)(6), and the motion was referred to a magistrate judge. The magistrate
   judge issued a report recommending that the district court dismiss all ten of
   Brown’s claims with prejudice. Brown timely filed objections to the
   magistrate judge’s report, to which Phoenix responded. The district court
   issued     a   one-page   decision    accepting    the    magistrate    judge’s
   recommendation, granting Phoenix’s motion, and dismissing Brown’s
   Second Amended Complaint with prejudice.

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          Brown filed a timely notice of appeal.
                           II. Standard of Review
          “We review de novo the district court’s grant of a motion to dismiss
   for failure to state a claim under Rule 12(b)(6).” Leal v. McHugh, 731 F.3d
   405, 410 (5th Cir. 2013) (citation omitted). In reviewing the motion, we
   “must consider the complaint in its entirety,” as well as “documents
   incorporated into the complaint by reference.” Tellabs, Inc. v. Makor Issues &
   Rights, Ltd., 551 U.S. 308, 322 (2007); accord Basic Capital Mgmt., Inc. v.
   Dynex Capital, Inc., 976 F.3d 585, 589 (5th Cir. 2020). All well-pleaded facts
   are accepted as true, Tellabs, 551 U.S. at 322, and are construed “in the light
   most favorable to the nonmoving party, ‘as a motion to dismiss under
   12(b)(6) is viewed with disfavor and is rarely granted,’” Leal, 731 F.3d at 410
   (quoting Turner v. Pleasant, 663 F.3d 770, 775 (5th Cir. 2011)). “Dismissal is
   appropriate only if the complaint fails to plead ‘enough facts to state a claim
   to relief that is plausible on its face.’” Id. (quoting Bell Atl. Corp. v. Twombly,
   550 U.S. 544, 570 (2007)). “Yet, the complaint must allege enough facts to
   move the claim ‘across the line from conceivable to plausible.’” Id. (quoting
   Twombly, 550 U.S. at 570).
                                 III. Discussion
          In a typical contract interpretation dispute, the parties agree on what
   the contract says but disagree about what it means. In other words, the parties
   produce the same contract containing the same language but offer up
   competing interpretations of that language. Phoenix argues that this is the
   situation we confront here.
          In doing so, Phoenix defends a key assertion made by the magistrate
   judge in her opinion: construing Brown’s complaint as treating the
   “representative copy of the contract from” as an accurate copy of the
   original, written Policy. The magistrate judge describes that Brown’s

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   complaint quotes from the August 17, 2015 letter and that “[t]he enclosed
   insurance policy is mentioned in nearly every paragraph of the amended
   complaint.” The magistrate judge then refers to that “enclosed insurance
   policy” (i.e., the “representative copy of the contract form”) as the “written
   policy” throughout the rest of her opinion. And she describes Brown’s
   complaint as alleging that Phoenix failed to deliver the Policy to him until
   August 17, 2015—the date the letter with the enclosed “representative copy
   of the contract form” was delivered to Brown.
          Brown argues that the magistrate judge erroneously interpreted his
   complaint and failed to view the alleged facts in the light most favorable to
   him. He claims that his complaint alleges that Phoenix never delivered a copy
   of the original Policy and that the “representative copy of the contract form”
   is not an accurate, complete copy of the terms of the original Policy.
          We agree. While the magistrate judge permissibly considered the
   documents as incorporated by reference into the pleadings, she erred by
   construing Brown’s Second Amended Complaint as equating the
   “representative copy of the contract form” with Brown’s use of the term
   “written policy” elsewhere in the complaint. In the paragraph of the
   complaint in which the “representative copy of the contract form” is first
   mentioned, Brown makes clear that he is directly quoting Phoenix—Phoenix
   describes the attachment to the August 17, 2015 letter as a “representative
   copy,” not Brown. And in the only other two paragraphs of the complaint in
   which the “representative copy of the contract form” is mentioned,
   Brown—just as we do here—places the term in quotations, attributing the
   language choice to Phoenix. Nowhere does Brown allege that the
   “representative copy of the contract form” accurately represents the terms
   of the original written Policy, or that his widespread use of the term “written
   policy” should be taken as a reference to the “representative copy of the
   contract form.” Furthermore, reading Brown’s complaint as alleging that

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   Phoenix finally delivered a copy of the Policy to Brown on August 17, 2015
   conflicts with his allegations that Phoenix never delivered the Policy. Taken
   on its face, especially when construed in the light most favorable to Brown,
   the Second Amended Complaint does not treat the “representative copy of
   the contract form” as an accurate representation or copy of the original
   written Policy. 4
           Thus, contrary to Phoenix’s assertions and the magistrate judge’s
   ruling, we do not have a written and undisputed copy of the terms of the
   original Policy in front of us for purposes of evaluating Phoenix’s motion to
   dismiss. Instead, we have Brown’s allegations describing the terms of the
   original written Policy. On this front, Brown’s pro se complaint is not a model
   of artful pleading. Nonetheless, we construe Brown’s Second Amended
   Complaint as alleging two alternative factual possibilities and theories of
   liability, both stemming from the alleged premise that Phoenix has denied
   him the opportunity to review the actual contents of the original written
   Policy by failing to deliver it to him (or to anyone else). The first theory is
   that the original written Policy does in fact guarantee that Brown’s life
   insurance could be maintained so long as Brown made $1,200 in annual
   premium payments, and that therefore Phoenix breached the Policy by
   charging him additional premiums. The second theory is that Phoenix
   represented that the Policy contained such a guarantee, but then deceptively

           4
               Indeed, in Brown’s Objections to the magistrate judge’s Report and
   Recommendations, he strenuously objected to the magistrate judge’s decision to construe
   the “representative copy of the contract form” as an accurate copy of the original written
   Policy. He then moved to further amend his complaint to add an allegation explicitly
   denying that the “representative copy of the contract form” constituted an accurate copy
   of the original Policy. The district court adopted the Report and Recommendation without
   addressing Brown’s Objections and the magistrate judge denied the motion to amend as
   moot.

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   included terms in the Policy that allowed it to charge additional premiums
   (causing the Policy to lapse), resulting in Brown’s detrimental reliance.
           As to the first theory, Brown alleges in various parts of his complaint
   that he entered into a written contract with Phoenix for a life insurance policy
   that covered his entire life and guaranteed a $150,000 death benefit so long
   as he paid a $1,200 annual premium. For example, in the section of his
   complaint seeking specific performance of the contract, Brown alleges that
   “[t]he contract of insurance contains the following enforceable terms: . . .
   [t]he contract of insurance remains in force as long as the $1200 annual or
   $100 monthly premiums are paid.” Of course, having never seen the original
   written Policy himself, his allegations are based on evidence extrinsic to the
   Policy, such as the alleged representations of Phoenix’s agent, the notes on
   the Sales Illustration, and Brown’s interpretation of other documents
   provided by Phoenix, such as the February 2009 letter. While these extrinsic
   representations do not alter the clear terms of the contract as set out in the
   original written Policy, see Peterson v. Schimek, 729 So.2d 1024, 1031 (La.
   1999), they may constitute evidence of the contents of the original instrument
   if the original is unavailable, La. Code Evid. art. 1004; La. Rev. Stat.
   § 13:3740; see also Swaggart v. Doe, 216 So.3d 1118, 1126 (La. Ct. App. 2017). 5
           As to the second theory, the Second Amended Complaint also
   contains several allegations that Phoenix included “undisclosed” terms in
   the original Policy which permitted it to charge additional premiums that
   would deplete the investment fund and cause the Policy to lapse, despite
   Phoenix’s alleged representations to the contrary.

           5
            In Louisiana, insurance contracts must be in writing. La. Maint. Servs., Inc. v.
   Certain Underwriters at Lloyd’s of London, 616 So.2d 1250, 1252 (La. 1993) (citing La. Rev.
   Stat. § 22:867 (formerly codified at § 22:628)).

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          Either the terms of the original written Policy permit the contested
   additional premiums, or they do not. It may turn out that Phoenix will be able
   to prove that the “representative copy of the contract form” is an accurate
   representation of the original Policy, despite Brown’s allegations in the
   Second Amended Complaint. But the dispute over what the original Policy
   says (as opposed to what it means) is a dispute of fact that cannot be resolved
   at the motion to dismiss stage.
          Just because there is a dispute of fact, however, does not mean that
   Brown has properly stated legal claims. We therefore take each of Brown’s
   ten claims in turn and assess whether he has properly stated claims for relief.
          A. Count One
          As his first count, Brown alleges that:
          Phoenix breached the written policy by charging additional
          premiums that depleted the investment fund to zero at age 75,
          rendered the written policy unaffordable, uneconomic, and
          worthless, and caused the written policy to lapse in violation of
          the representations, purpose, and cause of the written policy of
          universal life insurance to provide “an investment fund that
          provides coverage for [Brown’s] entire life.”

          Under Louisiana law, “[t]he essential elements of a breach of contract
   claim are (1) the obligor’s undertaking an obligation to perform, (2) the
   obligor failed to perform the obligation (the breach), and (3) the failure to
   perform resulted in damages to the obligee.” Favrot v. Favrot, 68 So.3d 1099,
   1108-09 (La. Ct. App. 2011).
          Brown has pleaded plausible facts establishing all three elements of a
   breach of contract claim under Louisiana law. As discussed above, Brown has
   alleged (as his first theory of liability) that the terms of the Policy established
   Phoenix’s obligation to provide life insurance with a $150,000 death benefit

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   for Brown’s entire life as long as he paid a $1,200 annual premium. Brown
   further alleges that Phoenix breached that obligation by charging him an
   additional $2,500 in 2018 and by planning to charge him a $11,321.04 annual
   premium starting in 2019, and that these increased premiums caused the
   policy to lapse and Brown to lose coverage.
          The magistrate judge held that Brown failed to state a claim under
   Count One because his “allegations . . . are contradicted by the written terms
   of the policy, which controls.” She then describes the terms as laid out in the
   “representative copy of the contract form” which purportedly governs. As
   explained, Brown’s complaint does not allege that the “representative copy
   of the contract from” is the “written policy,” and thus its terms do not
   govern for purposes of Phoenix’s motion to dismiss. Phoenix’s arguments on
   appeal also turn on the contention that the “representative copy of the
   contract form” constitutes the Policy and thus are similarly unavailing at this
   juncture.
          We therefore REVERSE the district court’s dismissal of Count One.
          B. Count Two
          In his Count Two, Brown alleges that “Phoenix breached the written
   policy by charging additional premiums that violated the ‘guaranteed factors’
   limits on additional premiums” as set forth in the Sales Illustration. This
   allegation fails to state a claim for two reasons.
          First, Brown does not allege that the Sales Illustration was attached to
   or incorporated into the original written Policy. Therefore, terms expressed
   in the Sales Illustration are not considered terms of the Policy. La. Rev.
   Stat. § 22:867(A) (“No agreement in conflict with, modifying, or
   extending the coverage of any contract of insurance shall be valid unless it is
   in writing and physically made a part of the policy . . . .”).

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          Second, to the extent that Brown is alleging that the terms contained
   in the Sales Illustration constitute evidence of similar terms in the original
   written Policy, Brown does not describe what the “guaranteed factors” are
   that Phoenix purportedly violated. Looking at the Sales Illustration, its
   reference to “guaranteed factors” appears to encompass a “guaranteed
   interest rate” of 4.5% and a “guaranteed cost of insurance.” Brown does not
   allege that the investment fund in his Policy was subject to an interest rate
   less than 4.5%. Nor does he allege what the “guaranteed cost of insurance”
   amounted to, or that the costs exceeded this guarantee. 6
          Therefore, we AFFIRM the district court’s dismissal of Count Two.
          C. Count Three
          In Count Three, Brown claims (based on his second, alternative
   theory of liability) that any provisions in the original Policy that would
   authorize additional premiums are unenforceable under Louisiana law
   “because the written policy was not delivered or mailed to Brown . . . and the
   alleged provisions were not otherwise disclosed to Brown.”
          In support of this claim, Brown cites to this court’s decision
   interpreting Louisiana law in In re Matter of Complaint of Settoon Towing,
   L.L.C., 720 F.3d 268 (5th Cir. 2013). He focuses on one sentence in the
   opinion, which states that: “[U]nder Louisiana law an insurer cannot take
   advantage of favorable policy terms where it delayed delivery of the policy
   after the insured payed the premium.” Id. at 282 (citing La. Maint. Servs.,
   Inc. v. Certain Underwriters at Lloyd’s of London, 616 So.2d 1250, 1253 (La.

          6
              Brown also does not describe whether the “cost of insurance” is something
   different than the premium charged for his insurance coverage. Presumably, the “cost of
   insurance” is the projected cost to Phoenix of providing coverage to Brown, which is
   separate from what it charges Brown for that coverage (in the form of a premium).

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   1993)). Brown argues that this statement constitutes a holding that in
   Louisiana, “an undelivered policy is enforceable for the benefit of the
   insured . . . but the insurance company cannot take advantage of favorable
   policy terms.”
          However, when read in context, this court’s statement in Settoon did
   not create a blanket rule that all terms favorable to the insurer are
   unenforceable when delivery of a policy is delayed; rather, this court merely
   reiterated a narrower rule that is well established in Louisiana law: that
   “[i]nsurance policy exclusions are not valid unless clearly communicated to
   the insured.” La. Maint. Servs., Inc., 616 So.2d at 1253 (emphasis added).
          At issue in Settoon was whether an insurer could rely on a coverage
   exclusion related to liability for pollution when it had delayed delivery of the
   insurance policy to the insured. Settoon, 720 F.3d at 282. To answer that
   question, this court looked to the Louisiana Supreme Court’s decision in
   Louisiana Maintenance Services, Inc. v. Certain Underwrites at Lloyd’s of
   London, 616 So.2d 1250 (La. 1993). There, the Court considered whether an
   insurer could rely on a policy exclusion to deny coverage when it had failed
   to deliver the policy to the insured in violation of Louisiana Revised Statute
   § 22:873 (formerly codified at § 22:634). La. Maint. Servs., 616 So.3d at 1252-
   53. Notably, § 22:873 does not specify a remedy; it states only that “every
   policy shall be delivered to the insured . . . within a reasonable period of time
   after its issuance.” La. Rev. Stat. § 22:873(A). In determining that the
   insurer could not rely on the policy exclusion due to its failure to deliver the
   policy, the Court cited Louisiana case law emphasizing the requirement that
   insurance policy exclusions must be clearly communicated to the insured and
   the importance of the insured’s notice of such provisions. La. Maint. Servs.,
   616 So.2d at 1252-53 (citing Spain v. Travelers Ins. Co., 332 So.2d 827 (La.
   1976)). Relying on that discussion and holding, this court in Settoon held that
   “Louisiana Maintenance Services indicates delayed delivery in violation of

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   § 22:873(A) is enough to prevent [the insurer] from relying on the pollution
   exclusion . . . .” Settoon, 720 F.3d at 282.
          Brown cites no case law—and we are aware of none—where
   § 22:873(A) (or Settoon, for that matter) has been applied to prohibit an
   insurer’s reliance on other policy provisions that are not coverage exclusions,
   such as a provision requiring an insured to pay premiums in exchange for
   continued coverage, while enforcing terms favorable to the insured. We
   therefore decline to adopt Brown’s expansive reading of Louisiana law.
          The district court’s dismissal of Count Three is AFFIRMED.
          D. Count Four
          In Count Four, Brown alleges that Phoenix committed a “bad faith
   breach of [the] written policy” by charging additional premiums that reduced
   the investment fund to zero at age 75 after Phoenix represented to Brown that
   the investment fund provided coverage for Brown’s entire life.
          Under Louisiana law, “[b]ad faith is an intentional and malicious
   failure to perform” a conventional obligation. Volentine v. Raeford Farms of
   La., LLC, 201 So.3d 325, 338 (La. Ct. App. 2016). “The term bad faith means
   more than mere bad judgment or negligence and it implies the conscious
   doing of a wrong for dishonest or morally questionable motives.” Id. “An
   obligor in bad faith is liable for all the damages, foreseeable or not, that are a
   direct consequence of his failure to perform,” whereas “[a]n obligor in good
   faith is liable only for the damages that were foreseeable at the time the
   contract was made.” Id. In sum, to hold a defendant liable for bad faith breach
   of a contract, a plaintiff must show that (1) the defendant consciously
   breached the contract (2) for dishonest or morally questionable motives. See
   id.

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          As discussed above with respect to Count One, Brown has
   satisfactorily alleged that Phoenix breached the written Policy by charging
   unauthorized, additional premiums. But Brown has not pleaded sufficient
   facts alleging that Phoenix consciously breached its obligations in bad faith.
   Brown only makes conclusory allegations that Phoenix perpetrated “an
   intentional sham and scam.” This does not suffice. Ashcroft v. Iqbal, 556 U.S.
   662, 678 (2009) (“Threadbare recitals of the elements of a cause of action,
   supported by mere conclusory statements, do not suffice.”) (quoting Bell Atl.
   Corp. v. Twombly, 550 U.S. 544, 570 (2007)); accord Firefighters’ Ret. Sys. v.
   Grant Thornton, L.L.P., 894 F.3d 665, 669 (5th Cir. 2018).
          The district court’s dismissal of Count Four is AFFIRMED.
          E. Count Five
          Brown asserts another claim for bad faith breach of the Policy in Count
   Five. However, this claim for relief is premised on his second theory of the
   case, in which Phoenix is alleged to have deceptively included “terms in the
   written policy that allegedly authorized [Phoenix] to increase premiums high
   enough to reduce the investment fund to zero by age 75” despite
   “representing to Brown that the higher premiums would create and build an
   investment fund to provide coverage for his entire life.”
          If, as alternatively alleged, Phoenix included terms that permitted it to
   charge the contested additional premiums, then it cannot be held liable for
   bad faith breach of contract because it has not breached the contract. As
   described above with respect to Count Four, bad faith breach requires the
   failure to perform. Volentine, 201 So.3d at 338.
          The district court’s dismissal of Count Five is AFFIRMED.

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                                         No. 20-30225

           F. Count Six
           In Count Six, Brown claims that Phoenix’s failures to deliver the
   Policy “violated Louisiana law,” “breached an express or implied provision
   in the written policy,” and breached “Phoenix’s policies.”
           In his briefing, Brown disputes two aspects of the magistrate judge’s
   opinion recommending dismissal of his claim in Count Six. First, he argues
   that the magistrate judge erred in construing his Second Amended Complaint
   as admitting that Phoenix performed its obligation to deliver the Policy on
   August 17, 2015. Second, Brown contests the magistrate judge’s finding that
   Brown failed to allege any damages that flowed from the non-delivery (or late
   delivery, in the magistrate judge’s telling) of the Policy. He argues that “the
   failure to deliver the policy caused [him] to buy the wrong policy and pay the
   higher premiums.” He also argues that he suffered emotional distress and
   “loss of peace of mind” when he discovered in 2018 that the investment fund
   associated with his Policy had been depleted and that the Policy would be
   rendered “worthless.”
           As already discussed, we agree with Brown that his complaint is
   properly understood to allege that Phoenix has never delivered the Policy.
   But we disagree that the magistrate judge erred by concluding that Brown did
   not properly allege damages that flowed from the non-delivery of the Policy.
   Regardless of what he now asserts in his briefing before this court, no
   allegations of damages resulting from non-delivery of the Policy is found in
   his Second Amended Complaint with respect to Count Six. 7 See Favrot, 68

           7
              Brown also does not describe how non-delivery of the Policy breached the Policy
   or other Phoenix “policies.” In his First Amended Complaint, he alleged that Phoenix’s
   failure to deliver the Policy violated the terms of the Application for Insurance and argued
   the Policy was therefore a nullity. But Brown does not repeat that claim in his Second
   Amended Complaint nor in his appellate briefing.

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   So.3d at 1108-09 (La. Ct. App. 2011) (describing that a breach of contract
   claim requires showing damages resulted from the breach). Nor does Count
   Six tie the damages complained of elsewhere in his Second Amended
   Complaint to the wrongs alleged in Count Six. Finally, Brown does not
   otherwise describe how non-delivery of the Policy violated “Louisiana law”
   in a way that states a claim for relief and affords a remedy. 8
             The district court’s dismissal of Count Six is AFFIRMED.
             G. Count Seven
             In Count Seven, Brown claims that Phoenix should be estopped from
   “charging additional premiums to reduce the investment fund to zero”
   because he detrimentally relied on multiple alleged misrepresentations and
   omissions by Phoenix regarding the terms of the Policy. These alleged
   misrepresentations and omissions include: (1) the failure to deliver the
   Policy,       (2)   oral    misrepresentations         by     Phoenix’s       agent,     (3)
   misrepresentations in the Sales Illustration, (4) the general failure to disclose
   to Brown that additional premiums would be charged, and (5) specific failures
   to disclose that additional premiums would be charged in the monthly
   premium notices, annual reports, and in the Lost Policy Certificate sent to
   Brown.
             To establish detrimental reliance or promissory estoppel in Louisiana,
   a plaintiff must show “(1) a representation by conduct or word; (2) justifiable
   reliance; and (3) a change in position to one’s detriment because of the
   reliance.” Luther v. IOM Co., 130 So.3d 817, 825 (La. 2013). Moreover, the

             8
             As discussed above with respect to Count Three, Phoenix’s alleged failure to
   deliver the Policy states a violation of Louisiana Revised Statute § 22:873(A). But Brown
   does not identify or discuss that statute with respect to Count Six, nor does he explain what
   remedies are available here for its violation.

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                                      No. 20-30225

   plaintiff must “reasonably” rely on the promise, which is typically a fact-
   bound determination. Drs. Bethea, Moustakas & Weaver LLC v. St. Paul
   Guardian Ins. Co., 376 F.3d 399, 403 (5th Cir. 2004) (citing Babkow v. Morris
   Bart, P.L.C., 726 So.2d 423, 427 (La. Ct. App. 1998)). “However, Louisiana
   law recognizes certain situations where a plaintiff’s reliance on a promise is
   unreasonable as a matter of law.” Id. (citing Gray v. McCormick, 663 So.2d
   480, 486 (La. Ct. App. 1995)).
          Reliance may be unreasonable as a matter of law “when a plaintiff
   relies on oral representations despite the law’s insistence on certain
   formalities.” Id. at 405 (citing Gray, 663 So.2d at 486). In Gray v. McCormick,
   the Louisiana Court of Appeal held that a party’s reliance on an oral promise
   to donate land was unreasonable as a matter of law because transfers of such
   property require “adherence to formal, written requirements provided by
   law” which the parties did not adhere to in forming their agreement. 663
   So.2d at 486. More specifically, the Louisiana Supreme Court has held that
   “[a]bsent fraud, or at least affirmative misrepresentations as to the necessity
   of a writing, . . . it is almost always the case that it will be unreasonable to rely
   on an oral promise where the law requires such a promise to be in writing to
   be enforceable.” Morris v. Friedman, 663 So.2d 19, 26 n.14 (La. 1995)
   (internal citation omitted).
          In Louisiana, insurance contracts must be in writing. La. Maint. Servs.,
   616 So.2d at 1252 (citing La. Rev. Stat. § 22:867 (formerly codified at
   § 22:628)). Therefore, to the extent Brown claims he justifiably relied on oral
   representations made by Phoenix’s agent, that reliance was unreasonable as
   a matter of law. Likewise, Brown alleges that the handwritten notes on the
   Sales Illustration reflect the oral representations of Phoenix’s agent. Thus, it
   was also unreasonable to rely on these notes.

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                                     No. 20-30225

          As to the Sales Illustration itself (not including the handwritten
   notes), Brown claims that it omitted that additional premiums would deplete
   the investment fund to zero. But the Sales Illustration made no such omission
   or misrepresentation. On the contrary, the Sales Illustration explicitly stated
   that the investment fund would have a balance of zero in year 19 of the Policy
   if it earned only the guaranteed interest rate of 4.5%.
          So too with the annual reports, which contain month-to-month detail.
   The notices show that Brown made steady $100 monthly premium
   payments. But they also show the cost of insurance was increasing as Brown
   aged and that the investment funds were being used to cover the difference
   between his $100 monthly contributions and the rising cost of insurance.
   They also reflect that the rate of growth of the investment fund was
   insufficient to keep up with the growing cost of insurance, so long as Brown
   continued to make only $100 monthly payments. Therefore, the annual
   reports do not contain a misrepresentation.
          Brown’s allegations with respect to the “monthly premium
   notices”—copies of which are not attached to the Second Amended
   Complaint or Phoenix’s motion—are the same as his allegations involving
   the annual reports. He alleges the notices only reported his $100 monthly
   premium payments and did not disclose that “additional premiums were or
   would be charged in amounts to deplete the investment funds to zero.” As
   with the annual reports, Brown has not explained how the monthly notices
   made a misrepresentation insofar as they accurately represented that Brown
   made monthly premium payments of $100. And if, unlike the annual reports,
   the monthly notices did not include detail about the rising costs of insurance
   or draws on the investment fund, Brown has not explained how that omission
   could induce his justifiable and detrimental reliance—especially in light of
   the fact that Phoenix did provide this allegedly absent detail in the annual
   reports. Cf. Bethea, 376 F.3d at 405 (explaining that reliance is unreasonable

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                                       No. 20-30225

   as a matter of law “when a plaintiff relies on a representation that is clearly
   not intended to bind the defendant or induce the plaintiff into reliance”
   (citing Miller v. Loyola Univ. of New Orleans, 829 So.2d 1057, 1062 (La. Ct.
   App. 2002))). The same is true with respect to the Lost Policy Certificate.
   See id.
             Finally, failure to deliver the Policy is not a misrepresentation in and
   of itself. Nor is Phoenix’s alleged general failure to disclose that additional
   premiums may be necessary.
             The district court’s dismissal of Count Seven is AFFIRMED.
             H. Count Eight
             In Count Eight, Brown seeks specific performance of the Policy and
   alleges the specific enforceable terms of the contract. As described above,
   these allegations track Brown’s first theory of liability that the original
   written terms of the Policy guaranteed, among other things, that the Policy
   would be maintained so long as Brown made $1,200 in annual premium
   payments.
             Count Eight therefore rises and falls with Count One, where Brown
   alleges breach of these terms. See Dore Energy Corp. v. Prospective Inv. &
   Trading Co., 570 F.3d 219, 230 (5th Cir. 2009) (“Under Louisiana law,
   ‘specific performance is the preferred remedy for breach of contract.’”
   (quoting J. Weingarten, Inc. v. Northgate Mall, Inc., 404 So.2d 896, 897 (La.
   1981))).
             We therefore REVERSE the district court’s dismissal of Count
   Eight.
             I. Count Nine
             In Count Nine, Browns seeks, in the alternative, a declaration that the
   Policy is an “absolute nullity” under Louisiana Civil Code Article 2030

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                                     No. 20-30225

   because Phoenix failed to deliver the Policy in violation of Louisiana Revised
   Statute § 22:873(A). He requests restitution in the form of all premiums paid.
          Brown asserted a virtually identical claim for relief in his First
   Amended Complaint, which was dismissed by the district court. And, as the
   magistrate judge noted below, Brown made no specific argument with respect
   to Count Nine in his opposition to Phoenix’s motion to dismiss.
          Regardless, the district court below did not err in dismissing Count
   Nine. Article 2030 states that “[a] contract is absolutely null when it violates
   a rule of public order, as when the object of a contract is illicit or immoral.”
   La. Civ. Code art. 2030. Brown cites no authority holding that
   § 22:873(A) is a rule of public order such that its violation renders a contract
   null. And as discussed above with respect to Count Three, while courts have
   declined to enforce insurance policy exclusions when an insurer fails to
   deliver a policy in violation of § 22:873(A), those same courts have not
   declared the relevant contracts null; rather, they enforced other provisions of
   the contract. See, e.g., Settoon, 720 F.3d at 280-82.
          The district court’s dismissal of Count Nine is AFFIRMED.
          J. Count Ten
          In Count Ten, Brown alternatively seeks rescission of the contract for
   error or fraud, alleging that Phoenix fraudulently represented (and/or Brown
   erroneously believed) that the Policy would provide coverage for his entire
   life and could be sustained with $1,200 annual premiums.
          “Consent to a contract may be vitiated by error, fraud, or duress.”
   Osborne v. McKenzie, 962 So.2d 501, 503 (La. Ct. App. 2007) (citing La.
   Civ. Code. art. 1948). When that occurs, rescission of the contract is a
   potential remedy. Id. However, the action for rescission or annulment must
   be brought within five years of discovering the alleged error or fraud. Id.

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                                      No. 20-30225

   (citing La. Civ. Code. art 2032); see also Clark v. Constellation Brands,
   Inc., 348 F. App’x 19, 21 (5th Cir. 2009) (per curiam) (unpublished opinion).
          Here, we agree with the district court that Brown’s action for rescis-
   sion fails. Assuming arguendo that Brown has alleged fraud or error that could
   give rise to the remedy of rescission, he has not sought this remedy within
   the applicable five-year window. That the Policy might require additional
   premiums to be paid in order to sustain the Policy was apparent from at least
   the time Brown received the February 6, 2009 letter from Phoenix.
          In that letter, Phoenix described that the value of the investment fund
   “is determined by the accumulated premiums and interest earned, less the
   cost of insurance (at the insured’s attained age), and administrative costs.”
   After describing that the investment fund was currently earning an interest
   rate of only 4.5%, the letter starkly stated: “It is important for you to remem-
   ber that your policy is a premium paying contract and has reached a point
   where it required more than $100.00 monthly to support the death benefit.
   UL polices are flexible premium policies . . . and depend on prevailing inter-
   est rates to keep the accumulation account large enough to support the death
   benefit.”
          In short, the 2009 letter alerted Brown to the alleged error or fraud by
   directly stating that the Policy would require additional premiums in order to
   be sustained. Because Brown did not bring this action until nine years later,
   his claim for rescission is too late.
          The district court’s dismissal of Count Ten is AFFIRMED.
          K. Brown’s Motion to Supplement
          Brown also appeals the magistrate judge’s decision denying his mo-
   tion to supplement the Second Amended Complaint. Brown filed his motion
   in response to the magistrate judge’s Report and Recommendation, before it

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                                         No. 20-30225

   was adopted by the district court. While the motion was pending, the district
   court issued its decision granting Phoenix’s motion to dismiss and dismissing
   all of Brown’s claims with prejudice. The magistrate judge then denied
   Brown’s motion as moot in light of the district court’s decision.
           Because, as explained above, we reverse the district court’s decision
   to dismiss Counts One and Eight, Brown should be given leave to refile his
   motion to supplement.
                                   IV. Conclusion
           The district court’s decision granting Phoenix’s motion to dismiss is
   AFFIRMED in part and REVERSED in part. The dismissal of Counts
   Two through Seven and Counts Nine and Ten is AFFIRMED. The dismis-
   sal of Counts One and Eight is REVERSED and this case is REMANDED
   for further proceedings consistent with this opinion. 9

           9
             We recognize, as well, that further proceedings may yield more information about
   the actual, original Policy that was issued to Brown, and that such information could lead
   to additional claims. We offer no opinion on any such claims.

                                              24