Margery Newman v. Metropolitan Life Insurance Company

At age 56, Margery Newman purchased

a long-term care insurance plan from the Metropolitan

Life Insurance Company (“MetLife”). She opted for one of

MetLife’s non-standard options for paying her insurance premiums;

MetLife called the method she selected “Reduced-Pay

at 65.” When Newman was 67 years old, she was startled to

2 No. 17-1844

discover that MetLife that year more than doubled her insurance

premium. MetLife insists that the increase is consistent

with Newman’s insurance policy, including its Reduced-Payat-

65 feature. Newman was unpersuaded and brought this action

to vindicate her position. The district court dismissed for

failure to state a claim. We conclude, however, that Newman

is entitled to relief on her contract claim and that dismissal of

the remaining claims was premature. We therefore reverse

and remand for further proceedings.

I

Two documents lie at the heart of this case. The first is Met-

Life’s “Long-Term Care Facts” brochure, which Newman reviewed

before purchasing her insurance plan. The brochure

describes long-term care generally and catalogs MetLife’s

non-standard payment options. Newman learned of MetLife’s

Reduced-Pay option from the brochure. The full description

reads as follows:

Reduced-Pay at 65 Option:

By paying more than the regular premium amount

you would pay each year up to the Policy Anniversary

on or after your 65th birthday, you pay half the

amount of your pre-age 65 premiums thereafter.

At the foot of the same page, MetLife instructs the reader that

the brochure is only a general overview of MetLife’s insurance

plans, and that the policy governs the terms of the agreement.

Equipped with this information, Newman purchased a

long-term care insurance plan from MetLife and selected the

Reduced-Pay option. Roughly a week later, she received the

policy—the second critical document. The policy is 29 pages

long. It includes just one reference to the Reduced-Pay option:

No. 17-1844 3

In addition, you have selected the following flexible

premium payment option: Reduced Pay at 65

Semi-Annual Premium Amount:

Before Policy Anniversary at age 65 $3231.93

On or after Policy Anniversary at age 65 $1615.97

Elsewhere, the policy reserves MetLife’s right to change

premiums. On the first page, MetLife announces that

“PREMIUM RATES ARE SUBJECT TO CHANGE.” The

same paragraph continues with the statement that “[a]ny

such change in premium rates will apply to all policies in the

same class as Yours in the state where this policy was issued.”

In a section titled “Premiums,” MetLife “reserve[s] the right

to change premium rates on a class basis.” Similar language

is included in the “5% Automatic Compound Inflation Protection

Rider.” The policy defines more than 30 terms, but the

word “class” is not among them. And the appended “Contingent

Benefits Upon Lapse Rider,” which provides coverage

options in the event of a “Substantial Premium Increase,” includes

a table illustrating that that term’s meaning varies with

the policyholder’s age at the time the policy was issued. The

table accounts for policyholders who were issued their policy

at ages up to “90 and over.” Newman had the opportunity to

review the policy for 30 days and return it for a full refund if

she was dissatisfied.

From the outset, Newman paid the elevated premium associated

with her “Reduced-Pay” option. When she reached

age 65, her premium was cut in half. After Newman turned

67, however, MetLife doubled the premium. MetLife represents

that this increase was imposed on a class-wide basis,

which it said at oral argument means all long-term care policyholders,

including Reduced-Pay policyholders over the age

4 No. 17-1844

of 65. MetLife defends the increase by noting that Newman

still pays half the premium of a Reduced-Pay policyholder

who has not yet reached age 65, and far less than she would if

she had not purchased the Reduced-Pay option. Nevertheless,

at age 67, Newman’s semi-annual premium jumped to

$3,851.80, greater than it has been at any other point during

the life of the plan.

Newman filed a four-count complaint on behalf of herself

and a proposed class. She has alleged that raising her postanniversary

premium is a breach of the policy, violates the

Illinois Consumer Fraud and Deceptive Business Practices

Act, and renders MetLife’s representations and practices

fraudulent. The district court granted MetLife’s motion to

dismiss for failure to state a claim. In its view, the contract

unambiguously permitted MetLife to raise Newman’s

premium, even after she reached age 65. This meant also that

she had no claim for deceptive or unfair business practices or

common-law fraud, because MetLife did nothing wrong.

Newman’s appeal from that decision is now before us.

II

We consider de novo the district court’s grant of a motion

to dismiss pursuant to Federal Rule of Civil Procedure

12(b)(6). Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732, 736

(7th Cir. 2014). A complaint survives a motion to dismiss if it

states a claim that is plausible on its face. Id. The common-law

and statutory fraud claims must be pleaded with the detail

required under Rule 9(b)’s heightened standard. Id. The parties

agree that Illinois law governs this case.

No. 17-1844 5

A

Illinois normally treats insurance policies the same as any

other contract. Parties are held to the unambiguous terms of

their agreement. Hobbs v. Hartford Ins. Co. of the Midwest,

214 Ill. 2d 11, 17 (2005). Ambiguous insurance contracts, however,

are construed in favor of the insured. Id. at 30–31. A policy

is ambiguous if it is subject to more than one reasonable

interpretation. Thompson v. Gordon, 241 Ill. 2d 428, 443 (2011).

Importantly, an insured cannot manufacture ambiguity by

taking portions of a policy in isolation; the policy (like any

contract) must be read as a whole. Id. at 441.

Little in Newman’s policy elucidates the terms of the Reduced-

Pay option. It offers one illustration with two numbers:

Newman’s “before policy anniversary” premium; and her “on

and after policy anniversary” premium. The first amount is

twice the second. Newman deduced from this example that

upon reaching her 65th birthday, her premium would drop to

half of what it was the day before. MetLife agrees that this is

what the policy says. The disagreement arises at the next level

of detail. MetLife takes the position that the only guarantee is

that from the policy anniversary following Newman’s 65th

birthday onward, Newman’s premium will be half that of a

Reduced-Pay policyholder who has not yet reached age 65.

Newman reads the policy differently. She understands it to fix

her post-65 premium at half the amount of her pre-65 premium.

Our independent review of the policy satisfies us that

Newman has offered one reasonable interpretation of its language.

The illustration, which was unexplained, reproduces

the cost of her personal premiums. It gives no indication

whether these are the same premiums that all Reduced-Pay

6 No. 17-1844

policyholders were paying, and would pay, or if they were

particular to Newman. A reasonable reader easily could

think, however, that “on and after” the policy anniversary following

age 65, the policy holder (here, Newman) will pay half

of what she personally was paying prior to that anniversary

date. Since the person’s 65th birthday converts the pre-anniversary

premium into a historical fact, a premium set at half

that number likewise becomes fixed. In other words, if N is

set in stone, so too is half of N.

MetLife responds that even if the portion of the policy referring

to the Reduced-Pay option might be understood as we

just explained, that reading is supportable only if that passage

is divorced from the rest of the policy—an impermissible step.

While it is true that the Reduced-Pay excerpt cannot be read

alone, in this case the remainder of the contract does not win

the day for MetLife.

Four times in the policy MetLife reserves its right to

change premiums. Three of those instances reserve MetLife’s

right to do so on “a class basis” or for a “class as Yours.” These

passages do not resolve the ambiguity, because the word

“class” is undefined. It might mean age, in which case class

membership is independent of payment arrangements. But it

might refer to the payment arrangement, so that everyone in

the Reduced-Pay group comprises a single class and the effect

of class membership is defined by the terms of the Reduced-

Pay option.

Newman believes that it is the latter, and thus that the Reduced-

Pay customers have purchased the right not to be

treated in the same way as ordinary policyholders. The policy’s

inclusion of the Reduced-Pay illustration, terse as it may

be, supports her interpretation. Including language about

No. 17-1844 7

class-wide changes does not alert her that she is part of a class

that is broader than her Reduced-Pay group. Absent some

clarification, Newman had no reason to question her understanding

that she had removed herself from the class of typical

policyholders—those who had not purchased a frozen

premium after age 65. Even MetLife’s reservation of the right

to change premiums for all policies in a “class as Yours” does

not help matters. Newman knew that her premium, and those

of others whom she might regard as classmates, might increase

before she turned 65. But the only “class” to which she

thought she belonged was one that exchanged an increased

(and perhaps variable) premium pre-65 for the right to have a

stable and lower premium after 65. The baseline for a person

in this class was the premium she paid pre-65; nothing in the

policy tipped her off that the baseline was instead whatever

people of her age were ordinarily charged, no matter how often

or when that number changed or what payment arrangement

was in place.

The fourth suggestion that premiums might change appears

in the Lapse Rider. Though the rider countenances the

possibility of a “Substantial Premium Increase,” its illustrative

table shows that the definition depends on the policyholder’s

age at the time of issuance. The rider accounted for

policyholders who purchased their long-term care policy at

ages greater than 65. How, then, could the rider speak to the

specifics of the Reduced-Pay option, which could be issued

only to people who had not yet reached their 65th birthday?

A reasonable person selecting the Reduced-Pay option could

conclude that the rider was beside the point.

8 No. 17-1844

In short, none of the four references in the policy to Met-

Life’s right to change premiums sufficed to disabuse a reasonable

person of the understanding that purchasing the Reduced-

Pay option took her out of the class of policyholders

who were at risk of having their premium increased after their

post-age-65 anniversary. The policy is thus at least ambiguous,

because it can be read reasonably to fix such a person’s

premium, if she had opted for the Reduced-Pay option. That

means that Newman prevails on the liability phase of her contract

claim.

B

Newman separately alleges that MetLife violated the

Illinois Consumer Fraud and Deceptive Business Practices

Act (“ICFA”). The ICFA provides a remedy for consumers

who have been victimized by deceptive or unfair business

practices. 815 ILCS 505/2; Batson v. Live Nation Entm’t, Inc.,

746 F.3d 827, 830 (7th Cir. 2014). Newman accuses MetLife of

both. We assess these allegations mindful of the fact that the

ICFA is a mandate to provide consumers with the greatest

possible relief. Miller v. William Chevrolet/GEO, Inc., 326 Ill.

App. 3d 642, 654–55 (2001).

A deceptive-practice claim under the ICFA has five elements:

“(1) the defendant undertook a deceptive act or practice;

(2) the defendant intended that the plaintiff rely on the

deception; (3) the deception occurred in the course of trade

and commerce; (4) actual damage to the plaintiff occurred;

and (5) the damage complained of was proximately caused by

the deception.” Davis v. G.N. Mortg. Corp., 396 F.3d 869, 883

(7th Cir. 2005). MetLife argues that Newman’s allegations do

not satisfy the first two elements—deception and intent.

No. 17-1844 9

An allegedly deceptive act must be viewed “in light of all

the information available to plaintiffs.” Phillips v. DePaul Univ.,

2014 IL App (1st) 122817, ¶ 44 (emphasis in original). We must

therefore consult both the brochure and the policy. Deception

does not exist if a consumer has been alerted to the possibility

of the complained-of result. Davis, 396 F.3d at 884. In MetLife’s

view, the brochure was not deceptive because it is consistent

with what happened: after Newman reached age 65, her premium

became half that of a policyholder who is not yet 65

years old. And even if the brochure was misleading, MetLife

adds, the policy resolved any confusion.

MetLife’s reading of the brochure is far from the only one

that is possible—indeed, we find it strained. The Reduced-Pay

option assures that after the anniversary date following the

policyholder’s 65th birthday, the holder will pay “half the

amount of your pre-age 65 premiums thereafter” (emphasis

added). This rationally can be read as an individualized reduction,

tied to the consumer’s personal baseline. The brochure

never says that Newman’s premium is linked to those

of general policyholders. And for the reasons already discussed,

MetLife’s insistence that the policy clarified matters is

unpersuasive.

This case is quite different from one in which the consumer

is warned about the undesirable result and simply misconstrues

the material offered by the insurance company. See,

e.g., Toulon v. Continental Casualty Co., 877 F.3d 725 (7th Cir.

2017). MetLife’s brochure did not warn Newman about the

possibility of a premium increase after her post-age 65 anniversary

date, and as we already have held, her reading of the

policy is reasonable.

10 No. 17-1844

Turning to intent, Newman must show that MetLife intended

for her (and those in her position) to rely on the brochure.

Cuculich v. Thomson Consumer Elec., Inc., 317 Ill. App. 3d

709, 716 (2000). Noting the printed caveat that the brochure

was a general overview, MetLife argues that it did not intend

that she rely on that document. The actual terms, it stresses,

were in the policy. It cites Commonwealth Insurance Co. v. Stone

Container Corp., 351 F.3d 774 (7th Cir. 2003), where we ruled

that an insurance provider did not intend that consumers rely

on its policy summary. Id. at 779. The summary included a

disclaimer that the policy governed the actual terms of the

agreement. And that policy provided extensive details about

coverage. Id. at 777–79. MetLife argues that this case is the

same. But unlike the insurance provider in Commonwealth Insurance,

MetLife never described the Reduced-Pay plan anywhere

outside the brochure. Newman could have parsed

every word in the insurance policy and never found information

that would have corrected her impression of the Reduced-

Pay option. MetLife must have intended for consumers

to rely on its brochure: it was the only place that described the

Reduced-Pay option.

Nothing we have said conflicts with the U.S. Supreme

Court’s instruction in the analogous context of ERISA plans

that summary plan descriptions are not part of the ERISA plan

itself. See CIGNA Corp. v. Amara, 563 U.S. 421, 436 (2011).

Newman is not relying on the brochure to supply the terms

of her policy; she relies on it only as evidence of deception and

the subsequent unfairness of MetLife’s rate increase. In any

event, there is reason to pause before transposing every detail

of ERISA to ordinary insurance contracts. In CIGNA Corp.,

CIGNA had sent its employees a newsletter and plan

summary, as required under ERISA. The summary

No. 17-1844 11

inaccurately characterized upcoming changes in the pension

plan. Id. at 426; see also Amara v. CIGNA Corp., 775 F.3d 510,

515 (2d Cir. 2014). Eleven months later, CIGNA distributed the

actual plan, which filled in the details. CIGNA Corp., 563 U.S.

at 426–28. The Supreme Court ruled that only a violation of

the plan’s terms, as opposed to the summary’s description of

those terms, could support a lawsuit. Id. at 436–38.

The Court’s decision was faithful to language in the statute

that distinguishes between information about the plan from

the plan itself. 29 U.S.C. § 1022(a); CIGNA Corp., 563 U.S. at

436. ERISA divides responsibilities for drafting the terms of

the plan and drafting the plan summary. The plan’s sponsor

(the employer) is responsible for the plan, while the plan’s administrator

(a trustee-like fiduciary) drafts the summary.

§§ 1021(a), 1102; CIGNA Corp., 563 U.S. at 437. Nothing in the

statute conveys an intent to allow plan administrators indirectly

to set the terms of the plan. CIGNA Corp., 563 U.S. at

437. And the Court recognized that ERISA both requires plan

summaries and establishes their purpose, which is to describe

the plan “in a manner calculated to be understood by the average

plan participant … .” § 1022(a); CIGNA Corp., 563 U.S.

at 437. If plan summaries were binding, plan administrators

would be forced to write summaries with a level of detail illsuited

for their purpose.

Beyond the statutory distinction, Newman is in a different

position from that of an ERISA beneficiary. Unlike an ERISA

beneficiary, Newman is shopping on the open market. Met-

Life uses its brochure to compete for business. Pre-purchase,

it is all a potential customer has to rely on. An employer, in

contrast, is providing and describing an employment benefit.

MetLife’s situation is thus materially different from that of an

12 No. 17-1844

employer offering an ERISA plan. Our decision here thus

comfortably coexists with CIGNA Corp.

Returning to the Reduced-Pay policy, we must next consider

whether Newman has adequately pleaded that Met-

Life’s practices were unfair (as opposed to deceptive). Unfairness

under the ICFA depends on three factors: “(1) whether

the practice offends public policy; (2) whether it is immoral,

unethical, oppressive, or unscrupulous; [or] (3) whether it

causes substantial injury to consumers.” Robinson v. Toyota

Motor Credit Corp., 201 Ill. 2d 403, 417–18 (2002). A significant

showing that any of the three factors is met is enough; so too

are facts that, to a lesser degree, satisfy all three. Id. at 418.

Newman has alleged that MetLife engaged in a bait-andswitch

strategy, which (if proven) would offend Illinois’s public

policy. The State has twice condemned the very practice

Newman describes. See 215 ILCS 5/149(1) (forbidding insurance

companies from misrepresenting the terms of their policies);

ILL. ADMIN. CODE tit. 50, § 2012.122(b)(4) (forbidding

misrepresentation in marketing of long-term care insurance

policies). MetLife does not dispute the applicability of the

statute or the administrative code. It simply reiterates its position

that there is no violation because the brochure did not

misrepresent the policy. But we already have shown how both

the brochure and the policy can be understood in the way

Newman read them.

The second factor also supports Newman’s complaint.

Whether a practice is immoral, unethical, oppressive, or unscrupulous

depends on whether it has left the consumer with

little choice but to submit to it. See Cohen v. Am. Sec. Ins. Co.,

735 F.3d 601, 610 (7th Cir. 2013). MetLife argues that once it

No. 17-1844 13

raised the premium, Newman had three options: accept reduced

benefits, get a new plan, or let the policy lapse and rely

on the contingent coverage rider she purchased. Each of those

options fails to recognize the fact that by abandoning her Reduced-

Pay plan, Newman would forfeit eight years of sunk

costs. Every dollar she spent pre-age 65 that exceeded what

she would have been paying under the normal long-term care

plan was an investment that could bear fruit only if she stayed

with the policy. Any of MetLife’s proposed alternatives would

cost her that entire investment.

Newman also alleged substantial injury. MetLife induced

her to pay a premium for eight years at a rate greater than she

would otherwise have paid. She did so to reap benefits later

in life. The injury lies in the difference between her elevated

pre-age-65 premium and the standard premium, as well as

the elevated premiums she has had to pay (so far) for over two

years. Newman’s complaint alleges facts that plausibly show

that MetLife’s policy was both deceptive and unfair.

C

Finally, Newman asserts that MetLife’s representations

about the Reduced-Pay option in its brochure and policy constitute

common-law fraudulent misrepresentation and fraudulent

concealment. The elements of misrepresentation largely

overlap with a deceptive-practices claim under the ICFA. The

plaintiff must allege:

(1) a false statement of material fact; (2) known or

believed to be false by the person making it; (3) an

intent to induce the plaintiff to act; (4) action by the

plaintiff in justifiable reliance on the truth of the

14 No. 17-1844

statement; and (5) damage to the plaintiff resulting

from such reliance.

Doe v. Dilling, 228 Ill. 2d 324, 342–43 ( 2008). Our discussion of

the ICFA claims subsumes the first, third, and fifth elements,

and so we need say no more about them. The second element

is not seriously at issue. In Illinois, a defendant knowingly

misrepresents a fact if it makes a statement “with a reckless

disregard for its truth or falsity.” Gerill Corp. v. Jack L. Hargrove

Builders, Inc., 128 Ill. 2d 179, 193 (1989); see also Wigod v. Wells

Fargo Bank, N.A., 673 F.3d 547, 569 (7th Cir. 2012) (finding the

elements of fraudulent misrepresentation satisfied because a

bank offered, but refused to honor, a permanent mortgage

modification). MetLife portrayed its policy as one that offered

a fixed premium after age 65. Newman has alleged that it did

so in bad faith, intending not to honor that representation. She

also asserts that MetLife disseminated information about the

Reduced-Pay option with at least reckless disregard for the

truth.

Newman had to provide enough in her complaint to make

a plausible case for reasonable reliance. Davis, 396 F.3d at 882.

Reliance is not justifiable if a consumer has reason and opportunity

to question the truth of the alleged misrepresentation.

Id. For example, reliance on a loan agent’s account of the terms

of a loan agreement is unjustified when the consumer also has

documentation of the terms of the loan and those documents

conflict with the oral statement. Id. at 882–83. But it is reasonable

to rely on a misrepresentation if nothing impugns its veracity.

See Miller, 326 Ill. App. 3d at 651–52. Newman’s reliance

on the brochure was reasonable—it was the only information

available to her before she made her purchase. When

No. 17-1844 15

she received the policy, she looked at that too. The 30-day refund

provision gave her an opportunity to review the terms

of the policy and clarify any resulting confusion. But she

found nothing in the policy to undermine her understanding

of it. Indeed, she had no reason to doubt her interpretation

until the company raised her premium roughly a decade later.

Finally, Newman’s complaint alleges fraudulent concealment.

For this claim, Newman must adequately plead that

MetLife concealed material information while under a duty to

disclose. Connick v. Suzuki Motor Co., 174 Ill. 2d 482, 500 (1996).

Such a duty may arise when a defendant makes a statement

“that it passes off as the whole truth while omitting material

facts that render the statement a misleading ‘half-truth.’”

Crichton v. Golden Rule Ins. Co., 576 F.3d 392, 397–98 (7th Cir.

2009). In Crichton, the insured did not meet this standard because

the communications from the insurance provider never

purported to explain all the underwriting factors that might

affect premiums. Id. at 398. Newman’s fraudulent concealment

claim, in contrast, stands on the policy and the brochure.

Together, she contends, they were the “whole truth.” The brochure

told Newman that her rate would be fixed. Though it

also instructed policyholders to look to the policy, the policy

did not reveal how MetLife intended to treat Reduced-Pay

policyholders. Newman thus alleges that she reasonably believed

that her post-anniversary rate was fixed. That was

enough, under the pleading rules that prevail in federal court.

III

Newman asserts that MetLife lured her into a policy by

promising a trade of short-term expense for long-term stability.

She took the deal and spent nine years investing in a plan,

only to have MetLife pull the rug out from under her. Neither

16 No. 17-1844

MetLife’s brochure nor the terms of the policy forecast this

possibility. These allegations were enough to entitle her to

prevail on the liability phase of her contract claim, and they

are enough to permit her to go forward on her other theories.

We therefore REVERSE the district court’s grant of MetLife’s

motion to dismiss and REMAND for further proceedings.