Massachusetts Mutual Life Insurance Company v. Hudson

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IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
FAYETTEVILLE DIVISION
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY 	PLAINTIFF
V. 	CASE NO. 5:25-CV-5023
JAMES HUDSON 	DEFENDANT
OPINION AND ORDER
Now before the Court is Plaintiff Massachusetts Mutual Life Insurance Company’s
(“MassMutual”) 	partial 	Motion 	to 	Dismiss 	(Doc. 	39) 	Defendant 	James 	Hudson’s
counterclaims under Federal Rule of Civil Procedure 12(b)(6). MassMutual asserts that
Mr. Hudson has failed to state plausible claims for bad faith and statutory damages under
Arkansas law. Mr. Hudson filed a Response in Opposition (Doc. 42), and the time for
seeking leave to file a reply has passed. For the reasons that follow, MassMutual’s Motion
(Doc. 39) is GRANTED IN PART AND DENIED IN PART.
This case arises out of Mr. Hudson’s long-term disability insurance policy with
MassMutual (the “Policy”). MassMutual issued the Policy on February 9, 2023, and on
April 4, 2024, Mr. Hudson submitted a claim for benefits under the Policy claiming total
disability due to an essential tremor. (Doc. 2, ¶¶ 21, 33). On October 2, 2024, MassMutual
notified Mr. Hudson that it was rescinding the Policy because Mr. Hudson had made
material or fraudulent misrepresentations in his application. Id. ¶ 27. MassMutual
attempted to refund Mr. Hudson’s premium payments and refused to pay the $3,300 per
month in disability benefits owed under the Policy. Id. ¶¶ 27–38, 10; Doc. 38, ¶ 55.
MassMutual 	alleges 	that 	Mr. 	Hudson 	made 	material 	or 	fraudulent
misrepresentations in his application by denying that he had been diagnosed with or
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treated for “[a] disorder or impairment of the muscles, bones, joints, nerves, spine, neck
or back.” (Doc. 2, ¶ 13). This was a misrepresentation, MassMutual says, because Mr.
Hudson had been receiving treatment for back pain from chiropractor Jason Collins since
2018. Id. ¶ 23.
Mr. Hudson says he made no misrepresentation—he told MassMutual about his
chiropractic visits during his Client Medical Interview. (Doc. 38, ¶¶ 12, 17). MassMutual
acknowledges as much: “In the underwriting process, MassMutual received information
regarding 	Hudson’s 	possible 	chiropractic 	treatment 	for 	back 	pain 	and 	cervical
radiculopathy in 2018. . . . Hudson responded that he did not recall having chiropractic
treatment in 2018 for back pain and cervical radiculopathy, and further represented that
he had never been treated for back pain.” (Doc. 2, ¶ 17). Mr. Hudson says that the purpose
of his visits was “minimizing the risks of any injuries that might develop during his job as
a dentist.” (Doc. 38, ¶ 17). He asserts that, consistent with his understanding of these
visits as preventative, he “was not advised by Dr. Collins during any of his visits that Dr.
Collins diagnosed him with any medical conditions,” nor did Mr. Hudson ever report to Dr.
Collins “that he was diagnosed with any medical conditions.” (Doc. 38, ¶ 7).
On 	February 	15, 	2023, 	MassMutual 	issued 	an 	“Amendment 	to 	Pending
Application” which stated, “I have never been diagnosed or treated for any back
symptoms.” (Doc. 2-1, p. 58). Mr. Hudson refuses to admit or deny that he signed the
Amendment because MassMutual has refused to provide him a signed copy to review
and the Amendment that appears in the record is unsigned. Id.; Doc. 38, ¶ 18.
Mr. Hudson’s chiropractic records, reviewed by MassMutual after Mr. Hudson’s
claim was filed in April 2024, reveal that he visited Dr. Collins thirteen times over a period
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of about four and a half years. During that time, Mr. Hudson complained at various points
of “symptoms of cervical spine lordosis,” “neck and back pain,” lower back pain,” and
“stiffness and clicking in his neck.” (Doc. 2, ¶ 23). MassMutual represents that on April
19, 2021, Dr. Collins “diagnosed Hudson with low back pain,” and “continued to diagnose
Hudson with low back pain” thereafter. Id. Mr. Hudson denies this characterization of his
medical records, instead quoting them directly. On each occasion dating back to July
2019, Dr. Collins’s notes state “New problems” followed by a brief description, e.g., “LB
pain/sore,” “Tightness in neck and back.” (Doc. 38, ¶ 23). It is not clear why MassMutual
identifies April 19, 2021, as the appointment during which Dr. Collins diagnosed Mr.
Hudson with low back pain; he had complained of the same at earlier appointments. (Doc.
2, ¶ 23).
In March 2024, Mr. Hudson was diagnosed with “essential tremor,” a “neurological
condition . . . unrelated to any transient aches or pains in the neck, or back” which he
claims rendered him totally disabled within the meaning of the Policy. (Doc. 38, ¶ 26). On
April 4, 2024, Mr. Hudson submitted a claim for benefits under the Policy. Id. ¶ 21. His
claim prompted MassMutual to obtain Mr. Hudson’s chiropractic records, summarized
above, which, MassMutual says, “revealed misrepresentations in the Application and
Amendment,” namely that Mr. Hudson had been diagnosed with and/or treated for back
pain by Dr. Collins. (Doc. 2, ¶ 23). MassMutual asserts that Mr. Hudson’s “medical history
rendered him ineligible for the Policy as it was issued,” so six months later on October 2,
2024, MassMutual notified Mr. Hudson “that it was rescinding the Policy due to material
and/or fraudulent misrepresentations in the Application.” (Doc. 2, ¶ 27). MassMutual also
attempted to refund Mr. Hudson’s premium payments. Id. ¶ 27–29. MassMutual filed this
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lawsuit against Mr. Hudson seeking a declaratory judgment that the Policy is void and
rescinded. Id. ¶ 50.
Mr. Hudson alleges that MassMutual acted in bad faith because it had “actual
knowledge of [his] medical history” and “failed to conduct a reasonable investigation
during the underwriting process,” so it had no reasonable basis on which to assert that it
could 	rescind 	the 	Policy, 	deny 	Mr. 	Hudson’s 	claim, 	or 	accuse 	him 	of 	material
misrepresentation. (Doc. 38, ¶¶ 35, 41(a), 44).
He also asserts that after he filed his claim, MassMutual told him that it was allowed
to “rescind the Policy if it would not have issued the current Policy ‘as it was issued,’ . . .
had it known of [Mr. Hudson]’s alleged misrepresentations.” (Doc. 38, ¶ 38). This, Mr.
Hudson asserts, was an intentional misstatement of Arkansas law. Id. ¶ 41(d). Under
Arkansas law, an insurer can rescind a policy within the first three years “only upon receipt
of information concerning the insured's state of health, and a finding thereon that the
insured failed to disclose or misrepresented material information contained on the
application.” Ark. Admin. Code 054.00.52-9(B). “Material information is that information
concerning the insured's physical condition or past treatment which would [have], if
disclosed, resulted in refusal to accept that insured or others treated for the same
condition or in substantially the same condition as the insured.” Id. (emphasis added). Mr.
Hudson asserts that “[e]ven if Plaintiff obtained and reviewed the chiropractic medical
records before the issuance of the Policy, it would have still issued the Policy,” so
MassMutual’s assertion that it could rescind the Policy relied on its misstatement of
Arkansas law. (Doc. 38, ¶ 42).
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To date, MassMutual has not paid Mr. Hudson any of the benefits which he is
purportedly entitled to under the Policy.
II. LEGAL STANDARD
Under Federal Rule of Civil Procedure 12(b)(6), the Court should dismiss a claim
if it is not supported by “sufficient factual matter, accepted as true, to state a claim to relief
that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation modified).
A claim is plausible when the plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged. Id. at
678. A claim is subject to dismissal if the facts fail to “raise a right to relief above the
speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The Court must
accept all factual allegations as true and view them in the light most favorable to the
plaintiff, but it need not accept as true any “legal conclusion couched as a factual
allegation.” Twombly, 550 U.S. at 555.
III. DISCUSSION
At issue here, Mr. Hudson has counterclaimed against MassMutual for bad faith in
violation of Arkansas common law and for statutory damages under Arkansas Code § 23-
79-208(a)(1). MassMutual asks the Court to dismiss both these claims under Rule
12(b)(6).
A. Bad Faith
To state a claim for bad faith under Arkansas law, the plaintiff must allege facts that
show the insurance company engaged in “affirmative misconduct” that was “dishonest,
malicious, or oppressive” in nature “in an attempt to avoid its liability under an insurance
policy.” Aetna Cas. & Sur. Co. v. Broadway Arms Corp., 281 Ark. 128, 133 (1983). “The
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tort of bad faith does not arise from a mere denial of a claim; there must be affirmative
misconduct.” State Auto Prop. & Cas. Ins. Co. v. Swaim, 338 Ark. 49, 56 (1999). Examples
of affirmative misconduct constituting bad faith include lying to a claimant that there was
no insurance coverage and altering insurance records to falsely claim that coverage had
lapsed. See S. Farm Bureau Cas. Ins. Co. v. Allen, 326 Ark. 1023, 1028–29 (1996); Emps.
Equitable Life Ins. Co. v. Williams, 282 Ark. 29, 32–33 (1984).
Here, Mr. Hudson has plausibly alleged a claim for bad faith. He asserts that
MassMutual knew about his chiropractic care and is now lying by accusing him of making
fraudulent or material misrepresentations to avoid liability under the Policy. Moreover, Mr.
Hudson 	alleges 	that 	MassMutual’s 	representative 	affirmatively 	misstated 	the 	legal
standard for recission. Mr. Hudson says MassMutual told him it could rescind the Policy
because it would not have issued the Policy as it was issued had it known about his
condition. But that is not what the law requires. In its own complaint, MassMutual cites
the relevant provision which permits recession based on conditions that, “if disclosed,
[would have] resulted in refusal to accept that insured or others treated for the same
condition or in substantially the same condition as the insured.” (Doc. 2, ¶ 31). Mr. Hudson
alleges that MassMutual would still have accepted him as an insured if it had viewed his
full chiropractic records during the underwriting process. And the Court considers it
entirely plausible that MassMutual insures people who see a chiropractor for back pain,
perhaps with coverage exclusions. One could reasonably infer from the facts alleged that
this misstatement of the law was intentional, dishonest, and made in an attempt to avoid
liability under the Policy.
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Insurers who lie about coverage to avoid liability may be liable for bad faith.
Likewise, insurers who lie about their right to rescind a policy to avoid liability, as Mr.
Hudson alleges, may be liable for bad faith. Plaintiff’s Motion to Dismiss is DENIED as to
Mr. Hudson’s Amended Second Counterclaim.
B. Statutory Penalty
MassMutual also asserts that Mr. Hudson cannot maintain his claim for statutory
damages under Arkansas Code § 23-79-208 as a separate cause of action. Section
208(a)(1) provides that when an insurance company liable for a loss “fail[s] to pay the
loss[ ] within the time specified in the policy after demand is made,” the company “shall
be liable to pay the holder of the policy . . . , in addition to the amount of the loss, twelve
percent (12%) damages upon the amount of the loss, together with all reasonable
attorney’s fees for the prosecution and collection of the loss.” As this Court has previously
held:
The statutory penalty and attorneys’ fees under Arkansas Code § 23-79-
208 are remedies, not separate causes of action. See Gafford v. Allstate
Ins. Co., 2015 Ark. 110, at 6 (2015) (describing the attorneys' fees in § 23-
79-208 	as 	a 	“statutory 	remedy”). 	Much 	like 	punitive 	damages, 	it 	is
unnecessary to allege the statutory remedies under § 23-79-208 as a
separate cause of action.
George's Inc. v. Lloyd's of London Syndicate 4000 Issuing Certificate No. CPP1877167,
2020 WL 6829959, at *9 (W.D. Ark. Nov. 20, 2020).
Mr. Hudson asserts that this interpretation is “contrary to both case law and the
plain statutory language.” (Doc. 42, p. 20). Mr. Hudson cites no case law. And while the
Court agrees that “[t]he statute unambiguously creates liability ‘in addition to the amount
of the loss’ when an insurer fails to timely pay a covered claim,” this additional liability is
not a distinct cause of action separate and apart from the underlying breach of contract.
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Id. It is, as the statute says, “in addition to the amount of the loss.” Ark. Code Ann. § 23-
79-208(a)(1).
Mr. Hudson may well be entitled to recover the 12% penalty and attorneys’ fees
authorized under § 23-79-208 in addition to damages for breach of contract should he
prevail on that claim. But that does not make the statutory penalty a separate cause of
action. 12% 	of 	nothing 	is 	nothing. 	Mr. 	Hudson’s Amended Third 	Counterclaim 	is
DISMISSED WITHOUT PREJUDICE.
IV. CONCLUSION
For these reasons, MassMutual’s Motion to Dismiss (Doc. 39) is GRANTED AND
PART AND DENIED IN PART. Mr. Hudson’s Amended Third Counterclaim is DISMISSED
WITHOUT PREJUDICE.
IT IS SO ORDERED on this 23 rd day of January, 2026.
___________________________________
TIMOTHY L. BROOKS
CHIEF UNITED STATES DISTRICT JUDGE
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