Peter Paluch v. Cuna Mutual Group ( 2024 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-1804-22
PETER PALUCH,
Plaintiff-Appellant,
v.
CUNA MUTUAL GROUP,
CMFG LIFE INSURANCE
COMPANY, and NOVA
CREDIT UNION,
Defendants-Respondents.
__________________________
Submitted October 1, 2024 – Decided October 24, 2024
Before Judges Smith and Vanek.
On appeal from the Superior Court of New Jersey,
Law Division, Bergen County, Docket No. L-5441-20.
Schenck, Price, Smith & King LLP, attorneys for
appellant (Eric A. Inglis, on the briefs).
Faegre Drinker Biddle & Reath LLP, attorneys for
respondents (Kate L. Villanueva and Jamie M.
Campisi, on the brief).
PER CURIAM
Plaintiff Peter Paluch appeals from a January 6, 2023 Law Division
order granting summary judgment to defendants—CMFG Life Insurance
Company (CMFG), CUNA Mutual Group (CUNA), and Nova Credit Union
(Nova)—and dismissing his complaint with prejudice. Based on our thorough
review of the record and prevailing law, we affirm in part and reverse and
remand in part.
I.
In reviewing the trial court's order granting summary judgment to
defendants, we glean the following salient facts from the motion record,
viewed in the light most favorable to plaintiff as the non-moving party. On
March 9, 2010, plaintiff and his wife, Lesia, 1 each submitted applications
through CUNA to obtain a CMFG long-term care insurance policy (the
policy). Both plaintiff and Lesia chose to pay their policy premiums quarterly
through automatic withdrawals from the couple's jointly held Nova bank
account on the twenty-sixth day of the payment month. Doing so afforded
plaintiff and Lesia six percent discounts on their premium payments.
Plaintiff's discounted quarterly policy premium payment was $1,236.46, and
Lesia's was $1,055.14.
1
Because plaintiff and his wife share a surname, we refer to Lesia by her first
name, and intend no disrespect in doing so.
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The policy contained a provision explaining coverage remained in effect
"as long as [the insured] pay[s] [their] premium on time." In the event of non-
payment, coverage under the policy would terminate at 12:01 a.m. on the
sixty-sixth day after the default date.
The policy contained procedures for reinstatement in the event of
termination due to non-payment. Section 7.8 titled "REINSTATEMENT DUE
TO UNINTENTIONAL LAPSE," states that coverage would be reinstated if
the policyholder provided "adequate proof" they were chronically ill at the
time of the lapse. Absent such proof, a policyholder could request
discretionary reinstatement within five months of the policy termination, to be
considered by CMFG upon payment of any past-due premiums.
One of plaintiff's quarterly premium payments was due on October 1,
2017. The transaction could not be completed because there were insufficient
funds in plaintiff's account.
In an October 30, 2017 letter, CMFG notified plaintiff his "premium
payment in the amount of $1,236.46 [was] returned due to insufficient funds."
CMFG placed the policy on "direct quarterly billing," which removed the six
percent discount. The letter further advised plaintiff would be receiving an
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invoice in the mail for the full quarterly premium amount of $1,420.61. 2
Plaintiff was also directed to call CMFG as soon as possible if he wished to
opt back into automatic withdrawal with the accompanying discount.
On October 31, Lesia called CMFG. The parties disagree as to what was
discussed during the call. Plaintiff maintains that Lesia called CMFG on
behalf of both herself and plaintiff to ask CMFG to reprocess the quarterly
premium withdrawals for each of their policies since they had placed sufficient
funds in their bank account. Plaintiff alleges he "was close by during the call
and heard [Lesia's] side of the conversation and an occasional audible response
from the person on the other end of the line." Plaintiff states he heard Lesia
receive "personal assurance" that both policies would remain in "full force and
effect."
Contemporaneous notes documented within CMFG's customer
management system indicate Lesia only asked to have her own policy placed
back on automatic withdrawal since she had sufficient funds in her account to
2
Defendants contend there was no increase in plaintiff's policy premium but,
rather, the $1,420.61 bill reflected the $1,236.46 quarterly payment , without
the six percent automatic withdrawal discount. However, if the six percent
discount was removed from the full quarterly payment, the new payment
amount would be $1,335.38. Neither the parties nor the trial court addresses
the mathematical calculation.
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cover the cost. CMFG's notes do not evidence plaintiff's account was
discussed during that call, and plaintiff's customer management profile does
not have a corresponding entry related to his account.
On November 5, CMFG mailed plaintiff an invoice for $1,420.61, the
full amount of the premium payment due on October 1. The invoice included a
"lapse notice" which alerted plaintiff his coverage would be "terminated due to
non-payment of [the] required premium" if full payment was not made by the
expiration of the sixty-five-day grace period. Plaintiff and Lesia certified they
called CMFG again in the weeks after the October 31 phone call and were told
the policy issues were rectified.
After the sixty-five-day grace period expired, CMFG terminated
plaintiff's coverage. Plaintiff was not aware his policy was terminated until
the next premium payment was due for Lesia's policy.
On February 6, 2018, plaintiff called CMFG and asked that his policy be
reinstated. A few days later, CMFG sent plaintiff a letter advising his policy
could be considered for reinstatement if he completed an application, provided
medical records for the past three years, and paid the outstanding balance due
on his account, which at that point totaled $2,841.22.
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On February 19, plaintiff responded in writing and expressed "concerns
as to [CMFG's] operational procedures and breach of [their] agreement."
Plaintiff alleged in the letter that Lesia called to reinstate his policy and
attached a completed reinstatement form, but did not include his medical
records because "[t]here ha[d] been no change in [his] medical condition ."
Plaintiff requested again that both his policy and Lesia's "should be set up for
direct withdrawals from [his] . . . account at $1,055.14 for [Lesia] and
$1,236.46 for [plaintiff], to be deducted on the last business day of the billing
quarter."
On April 24, 2018, CMFG sent plaintiff another letter reiterating he
could be considered for reinstatement if he completed an application, provided
his medical records for the past three years, and paid the outstanding balance
due on his account, which then totaled $4,261.83. On May 10, plaintiff replied
to that letter by completing the application CMFG sent him, noting on the
document that he had "periodic medical exams" and enclosing a "visit
summary" from a recent medical examination. In an accompanying letter,
plaintiff stated he "trust[s] that [CMFG] will address this issue . . . and adhere
to [the] previous payment agreement; a quarterly premium of $1,236.46
debited quarterly from [the] account." Plaintiff further explained that both his
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and Lesia's "policies should be set up for direct withdrawal from [the]
account," and provided the account number and routing number again. No
payment accompanied the letter.
Once more, CMFG responded in a letter reiterating plaintiff could be
considered for reinstatement if he completed another application, provided
medical records for the past three years, and paid the outstanding balance due
on his account, which had mounted to $7,103.05.
A few months later, CMFG sent a letter to plaintiff offering to reinstate
the policy upon receipt of his outstanding premiums, without requiring
additional medical information or records.3 Plaintiff did not respond to that
letter and, instead, filed a five-count complaint alleging: (1) breach of contract,
(2) violation of the covenant of good faith and fair dealing, (3) common law
fraud, (4) rescission of a contract, and (5) violation of the New Jersey
Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -228.
The trial court granted summary judgment to defendants in an oral
decision, finding the fraud claims had not been pleaded with sufficient
particularity and dismissing the remainder of the claims because "plaintiff had
3
The parties did not include this letter in their appendices.
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an obligation to pay premiums and did not." A memorializing order was
entered the same day. This appeal follows.
II.
We review a trial court's grant or denial of a motion for summary
judgment de novo, applying the same standard used by the trial court. See
Samolyk v. Berthe, 251 N.J. 73, 77 (2022). We are tasked with determining
"whether the competent evidential materials presented, when viewed in the
light most favorable to the non-moving party, are sufficient to permit a rational
factfinder to resolve the alleged disputed issue in favor of the non-moving
party." C.V. v. Waterford Twp. Bd. of Educ., 255 N.J. 289, 305 (2023)
(internal quotation marks omitted) (quoting Samolyk, 251 N.J. at 78).
"To decide whether a genuine issue of material fact exists, the trial court
must 'draw[] all legitimate inferences from the facts in favor of the non -
moving party.'" Friedman v. Martinez, 242 N.J. 449, 472 (2020) (alteration in
original) (quoting Globe Motor Co. v. Igdalev, 225 N.J. 469, 480 (2016)).
"The court's function is not 'to weigh the evidence and determine the truth of
the matter but to determine whether there is a genuine issue for trial.'" Rios v.
Meda Pharm., Inc., 247 N.J. 1, 13 (2021) (quoting Brill v. Guardian Life Ins.
Co. of Am., 142 N.J. 520, 540 (1995)).
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III.
We turn first to plaintiff's argument that the trial court erred in granting
summary judgment and dismissing the common law fraud and CFA claims,
based on the failure to plead them with the required specificity. On this issue,
we affirm.
"To prevail on a CFA claim, a plaintiff must establish three elements: '1)
unlawful conduct by defendant; 2) an ascertainable loss by plaintiff; and 3) a
causal relationship between the unlawful conduct and the ascertainable loss.'"
Zaman v. Felton, 219 N.J. 199, 222 (2014) (quoting Bosland v. Warnock
Dodge, Inc., 197 N.J. 543, 557 (2009)). The sale of insurance policies is
covered by the CFA. Lemelledo v. Benefit Mgmt. Corp., 150 N.J. 255, 265
(1997). Under the CFA, an unlawful practice is defined as:
The act, use or employment by any person of any
commercial practice that is unconscionable or abusive,
deception, fraud, false pretense, false promise,
misrepresentation, or the knowing, concealment,
suppression, or omission of any material fact with
intent that others rely upon such concealment,
suppression or omission, in connection with the sale
or advertisement of any merchandise or real estate, or
with the subsequent performance of such person as
aforesaid, whether or not any person has in fact been
misled, deceived or damaged . . . .
[N.J.S.A. 56:8-2.]
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The elements of a common law fraud claim are: (1) a representation or
omission of a material fact; (2) made with knowledge of its falsity; (3) made
with the intention that the representation or omission be relied upon; (4)
reasonable reliance on the representation or omission; and (5) damages.
DepoLink Ct. Reporting & Litig. Support Servs. v. Rochman, 430 N.J. Super.
325, 336 (App. Div. 2013). When a plaintiff alleges fraud—under the CFA or
the common law—the heightened pleading requirement under Rule 4:5-8(a)
mandates that "all allegations of misrepresentation, fraud, mistake, breach of
trust, willful default or undue influence, particulars of the wrong, with dates
and items if necessary, shall be stated insofar as practicable. Malice, intent,
knowledge, and other condition of mind of a person may be alleged generally."
Hoffman v. Hampshire Labs, Inc., 405 N.J. Super. 105, 112 (App. Div. 2009).
Plaintiff's allegations that he and Lesia were assured by a representative
of CMFG that both of their policies were reinstated does not meet this
heightened pleading standard. Aside from plaintiff's sweeping assertion that
"CMFG dropped [his coverage] on purpose to limit its exposure to an
insurance product that is widely viewed in the insurance industry as a losing
proposition for carriers," plaintiff does not proffer any specifics as to what
representation or omission a CMFG representative made to him with
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knowledge of its falsity, as required to sustain a claim for common law fraud
under DepoLink, 430 N.J. Super. at 336. Plaintiff's assertion mirrors the
argument in Hoffman, which this court rejected as insufficient to meet the
heightened pleading standards under Rule 4:5-8(a). 405 N.J. Super. at 114.
Summary judgment also was appropriate because plaintiff failed to provide
proofs substantiating his broad allegation in opposition to defendants' motion.
Although defendants also contend plaintiff's fraud claims are barred
under the economic loss doctrine, this issue was not argued to the trial court.
Since we affirm the trial court's order on other grounds, we decline to address
this argument.
IV.
Our de novo review leads us to reverse and remand to the trial court for
further proceedings on plaintiff's breach of contract claim. To establish
liability for breach of contract, a plaintiff must prove by a preponderance of
the evidence
[F]irst, that "[t]he parties entered into a contract
containing certain terms"; second, that "plaintiff did
what the contract required [them] to do"; third, that
"defendant[s] did not do what the contract required
[them] to do[,]" defined as a "breach of the contract";
and fourth, that "defendant[s'] breach, or failure to do
what the contract required, caused a loss to the
plaintiff."
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[Globe, 225 N.J. at 482 (first, third, fourth, and fifth
alterations in original) (quoting Model Jury Charge
(Civil), 4.10A, "The Contract Claim—Generally"
(approved May 1998)).]
"The plain language of the contract is the cornerstone of the interpretive
inquiry; 'when the intent of the parties is plain and the language is clear and
unambiguous, a court must enforce the agreement as written, unless doing so
would lead to an absurd result.'" Barila v. Bd. of Educ. of Cliffside Park, 241
N.J. 595, 616 (2020) (quoting Quinn v. Quinn, 225 N.J. 34, 45 (2016)).
Viewing the facts in plaintiff's favor, as we must, plaintiff complied with
the contractual terms when he asked, through Lesia's telephone conversation
with CMFG, that his policy be reinstated within the sixty-five-day grace period
and the discounted quarterly premium be withdrawn from his bank account.
CMFG failed to adhere to its promise to plaintiff and, as a result, breached its
agreement to reinstate. In light of this material factual dispute, the trial court
improvidently granted summary judgment.
Although the trial court found plaintiff did not perform his obligations
under the contract as required to succeed on a claim for breach of contract by
failing to pay the outstanding premium, a fact-finder may determine the lack of
payment in this case is justified. Viewing the facts in the light most favorable
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to plaintiff, if CMFG failed to deduct the discounted quarterly premium in the
amount of $1,236.46 from plaintiff's bank account as promised during the
October 31 telephone call, CMFG may be found in breach. Although plaintiff
may still owe the discounted quarterly payments that have accrued to date, his
failure to pay the higher amount demanded by CMFG may be excused.
We, therefore, reverse and remand to the trial court for appropriate
proceedings to resolve the factual issue at the heart of this dispute.
V.
Since we reverse the summary judgment granted on plaintiff's breach of
contract claim, we address plaintiff's claim for breach of the duty of good faith
and fair dealing implied in the contract. Based on our review, we affirm the
trial court's dismissal on summary judgment.
Under our decisional law, "[a] covenant of good faith and fair dealing is
implied in every contract . . . ." Wilson v. Amerada Hess Corp., 168 N.J. 236,
244 (2001) (citing Sons of Thunder, Inc. v. Borden, Inc., 148 N.J. 396, 420
(1997)). "Proof of 'bad motive or intention' is vital to an action for breach of
the covenant." Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr.
Assocs., 182 N.J. 210, 225 (2005) (quoting Wilson, 168 N.J. at 251). To
succeed, the party claiming a breach of the covenant of good faith and fair
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dealing "must provide evidence sufficient to support a conclusion that the
party alleged to have acted in bad faith has engaged in some conduct that
denied the benefit of the bargain originally intended by the parties." Wilson,
168 N.J. at 251 (internal quotation marks omitted) (quoting 23 Williston on
Contracts § 63:22 (Lord ed., 2002)). "'[A]n allegation of bad faith or unfair
dealing should not be permitted to be advanced in the abstract and absent an
improper motive.'" Wade v. Kessler Inst., 172 N.J. 327, 341 (2002) (quoting
Wilson, 168 N.J. at 251).
Plaintiff advances the unsupported argument CMFG had a bad motive or
intention because it "saw an opportunity to eliminate a potential long-term care
liability to an older male and it took advantage of that opportunity by failing to
act on [plaintiff's] request to restore the [p]olicy." The record contains only
sweeping accusations and legal conclusions on this issue which are insufficient
to defeat summary judgment.
We discern nothing in the record to suggest that summary judgment was
improvidently granted to CUNA and Nova. Plaintiff's merits brief also does
not address count four, rescission of contract that was the product of fraud.
Thus, we consider the issue abandoned pursuant to Sklodowsky v. Lushis, 417
N.J. Super. 648, 657 (App. Div. 2011).
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Affirmed in part, reversed and remanded in part. We do not retain
jurisdiction.
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