Dickman v. New York Life Insurance Company et al

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WO
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA
Curtis A Dickman,
Plaintiff,
v.
New York Life Insurance Company, et al.,
Defendants.
No. CV-25-00138-PHX-DWL
ORDER
In 1992, Plaintiff Curtis A. Dickman, M.D. (“Plaintiff”) applied for a disability
income policy (the “Policy”) issued by Defendants New York Life Insurance Company
and New York Life Insurance and Annuity Corporation (collectively, “New York Life”).
Plaintiff selected a benefit term payable up to “age 65.”
Plaintiff subsequently suffered orthopedic and neurological injuries that prevented
him from working as a neurosurgeon. As a result, Plaintiff successfully applied to The
Paul Revere Life Insurance Company (“Paul Revere”) and Unum Life Insurance Company
of America (“Unum”), as administrators on behalf of New York Life, for disability income
benefits. However, Paul Revere and Unum later informed Plaintiff that the payments
would stop on June 1, 2024, the Policy’s anniversary date, as opposed to August 4, 2024,
Plaintiff’s 65th birthday.
In this putative class action, Plaintiff asserts various contract and tort claims against
New York Life, Unum, and Paul Revere (collectively, “Defendants”). (Doc. 1.) Now
pending before the Court is Defendants’ motion to dismiss for failure to state a claim. (Doc.
Case 2:25-cv-00138-DWL Document 23 Filed 10/30/25 Page 1 of 31

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10.) For the reasons that follow, the motion is granted in part and denied in part and
Plaintiff is granted leave to amend.
BACKGROUND
I. Factual Allegations
The following facts, presumed true, are derived from the complaint. (Doc. 1.)
A. The Parties
Plaintiff is an Arizona citizen and a “neurosurgeon who exclusively practiced
neurosurgery in a private practice.” (Id. ¶¶ 5, 27.)
Defendant New York Life Insurance Company is “incorporated under the laws of
New York with its principal place of business in New York” and “marketed, advertised,
wrote, and/or administered disability insurance to or for consumers, either directly or
through its wholly-owned and controlled subsidiaries.” (Id. ¶ 6.)
Defendant New York Life Insurance and Annuity Corporation is “incorporated
under the laws of Delaware with its principal place of business in New York” and “is a
direct, wholly-owned subsidiary of New York Life Insurance Company.” (Id. ¶ 7.) It also
“marketed, advertised, wrote, and/or administered disability insurance to or for
consumers.” (Id.)
Defendant Unum is “incorporated under the laws of Maine with its principal place
of business in Chattanooga, Tennessee” and “marketed, advertised, and/or administered
disability insurance to or for consumers.” (Id. ¶ 9.)
Defendant Paul Revere is “incorporated under the laws of Massachusetts with its
principal place of business in Worcester, Massachusetts” and “is a wholly-owned
subsidiary of Defendant Unum.” (Id. ¶ 8.) It also “marketed, advertised, and/or
administered disability insurance to or for consumers.” (Id.)
B. The Challenged Conduct
In 1992, Plaintiff searched for disability insurance. (Id. ¶ 28.) Plaintiff
“communicated with an agent for New York Life, who reinforced the New York Life
promotional materials’ message of monthly disability benefits through a certain age.” (Id.
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¶ 29.)
In or around May 1992, “Plaintiff applied for a premier disability income policy
with New York Life.” (Id. ¶ 31.) “The application, which was a standardized form
prepared by New York Life, specified the policy would be through a certain term, either
for two years, for five years, to age 65, to age 67, or for a lifetime. Plaintiff selected a
benefit term of to age 65.” (Id.) “Neither the New York Life promotional materials, the
New York Life application, nor the agent acting on behalf of New York Life suggested the
disability benefits would terminate by the policy anniversary date closest to an insured’s
65th birthday.” (Id. ¶ 32.)
Plaintiff then “received a premier disability income policy from New York Life with
a policy date of June 1, 1992, Policy Number H3215198.” (Id. ¶ 33.) The Policy cover
letter “stated the benefits were renewable to age 65, and conditionally renewable after 65.”
(Id. ¶ 34.) The letter “also explicitly stated that Plaintiff’s insurance application, in which
it was indicated that he would receive benefits to age 65, was part of the policy.” (Id.)
The Policy’s “data page also indicated the disability income benefits would be
payable up to age 65.” (Id. ¶ 35.) In addition, the Policy “had multiple riders,” and “[o]ne
rider, the cost of living benefit, provided a living adjustment table based on Plaintiff’s age
through 65” while “[a]nother rider, as to residual disability, provided that monthly income
benefits for a residual disability would be paid monthly until Plaintiff reached age 65.” (Id.
¶¶ 36, 37.)
Plaintiff “paid all of his monthly premiums on the Policy and renewed the Policy
annually.” (Id. ¶ 38.) Subsequently, “Plaintiff suffered serious orthopedic and
neurological injuries, which as of October 2014 prevented him from working as a
neurosurgeon. Unum and Paul Revere, as administrator on behalf of New York Life,
accepted Plaintiff’s disability claim and began paying disability income benefits under the
Policy.” (Id. ¶ 39.)
Plaintiff “was set to turn age 65 on August 4, 2024.” (Id. ¶ 40.) “In February 2024,
Unum and Paul Revere wrote Plaintiff to inform him that Defendants would be stopping
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payment of disability income benefits to Plaintiff under the Policy as of June 1, 2024, the
Policy’s anniversary date”—which was “two months prior to when Plaintiff was going to
reach the age of 65.” (Id. ¶¶ 41, 42.) “When the policy anniversary date of June 1, 2024
arrived, Defendants stopped making disability income benefit payments to Plaintiff.” (Id.
¶ 43.)
Plaintiff alleges that he “should have received benefits under the Policy at least
through his 65th birthday in August 2024, if not to June 1, 2025, the anniversary date of
the policy which incorporates his 65th birthday.” (Id. ¶ 44.) “As a result of Defendants’
wrongful conduct, Plaintiff has been denied benefits at least totaling approximately
$4,229.22 dollars for the time period between June 1, 2024 and August 4, 2024, if not
through his next policy anniversary of June 1, 2025 totaling approximately $24,556.70,
which is the first policy anniversary during which he actually would be age 65.” (Id. ¶ 46.)
C. The Policy1
The relevant provisions of the Policy are as follows. The two paragraphs on the first
page of the Policy provide that “New York Life Insurance Company will pay the benefits
of this policy in accordance with its provisions” and “10 day free examination period.
Please examine this policy. Within 10 days after delivery, the policy can be returned to the
Company or to the agent through whom it was purchased, with a written request for a full
refund of premium.” (Doc. 1-1 at 3.)
The second page of the Policy is entitled “BENEFITS.” (Id. at 4.) The “PRIMARY
PLAN” is described as including the following “BENEFIT TERM”: “BENEFITS ARE
PAYABLE UP TO AGE 65, OR IF THE DISABILITY BEGINS AT AGE 60, IT WILL
PAY UP TO AGE 65 OR 2 YEARS, WHICHEVER IS LONGER.” (Id.)
The third page of the Policy is a table of contents. (Id. at 5.) It identifies the
1 The Policy is attached as Exhibit A to the complaint. (Doc. 1-1.) Ordinarily, if a
district court considers evidence outside the pleadings when ruling on a motion to dismiss,
it must convert the motion into a motion for summary judgment and give the nonmovant
an opportunity to respond. United States v. Ritchie, 342 F.3d 903, 907 (9th Cir. 2003). A
district court may, however, consider “documents attached to the complaint” in ruling on
a motion to dismiss. Id. at 908.
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following nine sections: (1) Policy data; (2) Definitions; (3) Benefits; (4) Claims; (5)
Premiums; (6) Right to Renew Policy; (7) General Provisions; (8) Application; and (9)
Rides or Endorsements (If Any). (Id.) As for the second section (“Definitions”), the table
of contents also lists the 10 terms that are specifically defined in that section. (Id.) The
first term is “Age.” (Id.)
The fourth page of the Policy is the “Definitions” section. (Id. at 6.) As noted, the
first defined term is “Age,” which is defined as follows:
Age Reference to an age in this policy, such as “age 65”, means the policy
anniversary nearest to the birthday of the Insured on which he or she is that
age. For example, “Guaranteed Renewable to Age 65” means that the policy
can be renewed until the policy anniversary which is closest to the Insured’s
65th birthday.
(Id.)
A later page of the Policy is the “General Provisions” section. (Id. at 14.) Here, the
term “Entire Contract” is defined as follows:
Entire Contract The entire contract consists of this policy, any attached
riders or endorsements, and the attached copy of the application. Only the
Chairman, the President, the Secretary, or one of our Vice Presidents can
change the contract, and then only in writing. No change will be made in the
contract unless you agree to it in writing. No agent is authorized to change
this contract.
(Id.)
Attached to the Policy is a copy of Plaintiff’s application, which reflects that
Plaintiff selected a “PRIMARY PLAN” benefit term of “To Age 65.” (Id. at 28.)
II. Procedural History
On January 16, 2025, Plaintiff filed the complaint. (Doc. 1.) Count One is a claim
for breach of contract. Count Two is a claim for breach of the implied covenant of good
faith and fair dealing. Count Three is a claim for declaratory relief. Count Four is a claim
for reformation. Count Five is a claim for fraudulent inducement. Count Six is a claim for
negligent misrepresentation. Count Seven2 is a claim for “violation of consumer protection
2 The complaint uses the label “Count VI” to describe both the negligent
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laws.” Count Eight is a claim for “bad faith.”
On March 28, 2025, Defendants filed the pending motion to dismiss the complaint.
(Doc. 10.) The motion later became fully briefed. (Docs. 15, 16.)
On October 20, 2025, the Court issued a tentative ruling. (Doc. 20.)
On October 28, 2025, the Court heard oral argument. (Doc. 21.)
DISCUSSION
I. Legal Standard
A. Rule 12(b)(6)
Under Rule 12(b)(6), “to survive a motion to dismiss, a party must allege sufficient
factual matter, accepted as true, to state a claim to relief that is plausible on its face.” In re
Fitness Holdings Int’l, Inc., 714 F.3d 1141, 1144 (9th Cir. 2013) (internal quotation marks
omitted). “A claim has facial plausibility 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. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “[A]ll
well-pleaded allegations of material fact in the complaint are accepted as true and are
construed in the light most favorable to the non-moving party.” Id. at 1144-45 (citation
omitted). However, the court need not accept legal conclusions couched as factual
allegations. Iqbal, 556 U.S. at 678-80. Moreover, “[t]hreadbare recitals of the elements of
a cause of action, supported by mere conclusory statements, do not suffice.” Id. at 678.
The court also may dismiss due to “a lack of a cognizable legal theory.” Mollett v.
Netflix, Inc., 795 F.3d 1062, 1065 (9th Cir. 2015) (citation omitted).
B. Rule 9(b)
Defendants assert, and Plaintiff does not dispute, that Plaintiff’s claims for
fraudulent inducement, negligent misrepresentation, and under the Arizona Consumer
Fraud Act (“ACFA”) are subject to the heightened pleading requirements of Federal Rule
of Civil Procedure 9(b).3 See, e.g., AZG Enter. Inc. v. Honeywell Int’l Inc., 2025 WL
misrepresentation claim and the “violation of consumer protection laws” claim, but in
context it is clear that the latter was intended to be Count Seven.
3 During oral argument, Defendants asserted for the first time that two of Plaintiff’s
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2480943, *3 (D. Ariz. 2025) (“Plaintiff’s claim for fraud and/or fraudulent inducement
may survive, although it is subject to a Rule 9(b) analysis.”); Estrada v. Capella Univ.,
Inc., 2018 WL 1428155, *2 (D. Ariz. 2018) (“Claims for negligent misrepresentation must
meet the particularity requirements of Rule 9(b).”) (cleaned up); In re Banner Health Data
Breach Litig., 2017 WL 6763548, *6 (D. Ariz. 2017) (“Claims arising under the ACFA
pertain to fraud and are thus subject to the pleading requirements of Rule 9(b) of the Federal
Rules of Civil Procedure.”). See also Sweeney v. Darricarrere, 2009 WL 2132696, *12
n.109 (D. Ariz. 2009) (“Although the Ninth Circuit has suggested that negligent
misrepresentation may be a non-fraudulent averment, most district courts within the Ninth
Circuit have held that a [negligent misrepresentation claim is subject to the] heightened
pleading requirements of Rule 9(b).”) (cleaned up).
Rule 9(b) requires a plaintiff to “state with particularity the circumstances
constituting fraud or mistake.” Id. “To satisfy Rule 9(b), a pleading must identify ‘the
who, what, when, where, and how of the misconduct charged,’ as well as what is false or
misleading about the purportedly fraudulent statement, and why it is false.” United States
ex rel. Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 (9th Cir. 2011)
(cleaned up). See also Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393,
1401 (9th Cir. 1986) (under Rule 9(b), the plaintiff “must state the time, place, and specific
content of the false representations as well as the identities of the parties to the
misrepresentation”). “[T]he circumstances constituting the alleged fraud [must] be specific
enough to give defendants notice of the particular misconduct . . . so that they can defend
against the charge and not just deny that they have done anything wrong.” Vess v. Ciba-
Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (citations and internal quotation
marks omitted). However, “[a] plaintiff in a fraud-by-omission suit faces a slightly more
other claims (the breach-of-contract claim in Count One, at least in part, and the
reformation claim in Count Four) are also subject to Rule 9(b). These arguments are
forfeited. Perez-Guzman v. Lynch, 835 F.3d 1066, 1075 n.4 (9th Cir. 2016) (“[W]e treat
this argument as waived because [it] was raised for the first time at oral argument.”); Lopez
v. Bank of Am., N.A., 505 F. Supp. 3d 961, 972 n.2 (N.D. Cal. 2020) (“The Court ordinarily
declines to consider arguments made for the first time at a motion hearing.”).
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relaxed burden, due to the fraud-by-omission plaintiff’s inherent inability to specify the
time, place, and specific content of an omission in quite as precise a manner.” In re Banner
Health Data Breach Litig., 2017 WL 6763548 at *7 (citations omitted).
II. Breach of Contract (Count One)
A. The Parties’ Arguments
The complaint alleges that Defendants breached the Policy because Plaintiff’s
“agreement with Defendants provided for disability income benefit payments to be paid by
Defendants through the date on which [he] turned . . . age 65.” (Doc. 1 ¶ 61.)
Defendants argue that the “plain language of Plaintiff’s Policy conclusively
disproves [the Breach of Contract] allegations and, rather, establishes that Defendants have
fully complied with the Policy’s express terms.” (Doc. 10 at 5.) Defendants contend that
“all references to ‘age 65’ in the Policy, including those in the application, are subject to
the Policy’s clear and unambiguous definition of ‘Age.’” (Id., record citations omitted.)
Defendants further argue that “[b]ecause it is undisputed that Defendants paid Plaintiff
benefits through ‘the policy anniversary nearest to’ Plaintiff’s sixty-fifth birthday,
Defendants did not breach the Policy, but instead fully complied with its terms, and
Plaintiff’s breach of contract claim fails as a matter of law.” (Id. at 5-6.)
In response, Plaintiff argues that he “adequately alleges a breach of contract claim
because the Policy is ambiguous, thereby precluding a ruling on the pleadings alone.”
(Doc. 15 at 10.) Plaintiff contends the Policy “when properly read as a whole, at best is
internally contradictory and therefore ambiguous.” (Id.) In support, Plaintiff cites Sparks
v. Republic Nat’l Life Ins. Co., 647 P.2d 1127 (Ariz. 1982). (Id.) In the alternative, Plaintiff
argues that “the doctrine of reasonable expectations further precludes disposition of Count
I as a matter of law at this early pre-discovery stage.” (Id.) Plaintiff contends that
“Defendants repeatedly promised disability benefits to Plaintiff’s 65th birthday” and that
“based on those promises and related materials he reasonably believed the coverage he
applied for, received, and paid for was through his 65th birthday.” (Id. at 13.)
In reply, Defendants argue that “the term ‘age 65’ in the Policy, including references
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in the application, cover letter, data page, and riders, is modified by the Policy’s
undisputedly unambiguous definition of ‘Age’” and “appears exactly where one would
expect to find such a definition.” (Doc. 16 at 2, 4.) Defendants further argue, in response
to the reasonable expectations argument, that the Policy’s definition of age is “clear and
concise” and that “the reasonable expectations doctrine has no application here.” (Id. at
5.)
B. Analysis
1. Ambiguity
Under Arizona law,4 “[t]he interpretation of an insurance contract is a question of
law.” Sparks, 647 P.2d at 1132. An insurance policy is “read as a whole, so as to give a
reasonable and harmonious effect to all of its provisions.” Charbonneau v. Blue Cross of
Wash. & Alaska, 634 P.2d 972, 975 (Ariz. Ct. App. 1981). “Absent a specific definition,
terms in an insurance policy are construed according to their plain and ordinary meaning,
and the policy’s language should be examined from the viewpoint of one not trained in the
law or in the insurance business.” Equity Income Partners, LP v. Chicago Title Ins. Co.,
387 P.3d 1263, 1267 (Ariz. 2017) (cleaned up). “Where the language employed is unclear
and can be reasonably construed in more than one sense, an ambiguity is said to exist and
such ambiguity will be construed against the insurer.” Sparks, 647 P.2d at 1132. “If an
insurer desires to limit its liability under a policy, it should employ language which clearly
and distinctly communicates to the insured the nature of the limitation.” Id. at 1133.
The dispute turns on whether the term “Age” in the Policy is ambiguous, as Plaintiff
4 Defendants rely on Arizona law in support of their motion to dismiss. (Doc. 10.)
Plaintiff, in turn, asserts that “Defendants assume without analysis that Arizona law
governs Count I, not the laws of Defendants’ home states of New York or Massachusetts.”
(Doc. 15 at 10 n.3.) However, Plaintiff does not argue that Arizona law is inapplicable and
also cites Arizona authorities in support of his arguments regarding his contract claims.
Plaintiff also clarifies, with respect to his tort claims, that “as an Arizona resident, [he] is
only asserting his own claims under Arizona law.” (Id. at 8 n.1.) Under these
circumstances, the Court will assume that Arizona law applies. See generally Norcia v.
Samsung Telecomms. Am, LLC, 845 F.3d 1279, 1283-84 (9th Cir. 2017) (“Here, the parties
agree that California law governs the issue of contract formation.”); United States v.
Sineneng-Smith, 590 U.S. 371, 375-76 (2020) (discussing the principle of party
presentation).
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asserts,5 or unambiguously refers to the policy anniversary nearest to the birthday of the
insured, as Defendants assert. “While insurance contracts are construed most favorably to
the insured where the meaning of the language is doubtful, such rule is inapplicable when
the language is not doubtful and is defined within the contract itself.” Schwab v. State
Farm Fire & Cas. Co., 558 P.2d 942, 946 (Ariz. Ct. App. 1976) (cleaned up). The term
“Age” is defined within the Policy itself as the “policy anniversary nearest to the birthday
of the insured.” (Doc. 1-1 at 6.) That language is neither unclear nor doubtful. The term
“Age” under the Policy means one thing—the policy anniversary nearest to the birthday of
the insured.
Plaintiff nevertheless contends that an ambiguity must exist because the definition
of “Age” adopted in the Policy differs from the “common and ordinary” meaning of that
term. (Doc. 15 at 11.) But as discussed above, Arizona law holds that, “[a]bsent a specific
definition,” “terms in an insurance policy are construed according to their plain and
ordinary meaning.” Equity Income Partners, 387 P.3d at 1267 (emphasis added). Thus,
the rule of ambiguity identified by Plaintiff applies in Arizona only when, unlike here, the
term at issue is not “defined within the contract itself.” Schwab, 558 P.2d at 946.6
5 During oral argument, Plaintiff asserted that even if the term “Age” in the Policy is
not ambiguous, the phrase “Benefit Term” is ambiguous. This argument lacks merit. The
Policy defines “Benefit Term” as follows: “A period of time for which monthly income
benefits are payable for disability due to the same cause. It starts on the day after the
Elimination Period ends. It goes on until (1) the Insured is no longer disabled, or (2) the
end of the Maximum Benefit Term shown on the Data page, or (3) the death of the insured,
whichever occurs first.” (Doc. 1-1 at 6.) The “Data page” defines “BENEFIT TERM” as
follows: “BENEFITS ARE PAYABLE UP TO AGE 65, OR IF THE DISABILITY
BEGINS AT AGE 60, IT WILL PAY UP TO AGE 65 OR 2 YEARS, WHICHEVER IS
LONGER.” (Id. at 4.) Because, as discussed in the body of this order, the term “Age” is
not ambiguous in light of its clear, easily located definition, other phrases in the Policy are
not rendered ambiguous simply because they direct an insured to portions of the Policy that
refer to that defined, unambiguous term.
6 See also Sylvester v. FCCI Inc. Co., 373 F. Supp. 3d 857, 866 (E.D. Mich. 2019)
(explaining that under Michigan law, “[w]hether a vehicle is ‘uninsured’ as the term is
colloquially used is irrelevant where the term is defined within the contract” and citing
other cases applying Michigan law for the proposition that “[w]here a contract defines a
term, the contractual definition of the defined term controls over the common usage of the
term”); Provident Life & Acc. Ins. Co. v. Knott, 128 S.W.3d 211, 219 (Tex. 2003) (rejecting
the contention “that it is proper to disregard defined terms in a policy in favor of definitions
not expressed in the parties’ written agreements” and holding that “[w]hen terms are
defined in an insurance policy, those definitions control the interpretation of the policy”);
Valliere v. Allstate Ins. Co., 596 A.2d 636, 638 (Md. Ct. App. 1991) (“When a policy
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Nor does Sparks support Plaintiff’s position. There, the Arizona Supreme Court
concluded that an insurance policy was “ambiguous” and “fail[ed] to communicate the
nature of the limitations urged by defendants” because “the sections of the policy which an
insured would normally look to in order to ascertain what the policy does not cover are
silent on the limitations argued by defendants.” Sparks, 647 P.3d at 1133. The court
specifically highlighted that the policy’s “Definitions and Exceptions” section made no
mention of the limitation. Id. That flaw is not present here. The Policy’s definition of the
term “Age” is set forth on the fifth page of the Policy, under the bolded heading
“DEFINITIONS,” and is the first definition included on the page. (Doc. 1-1 at 6.) The
definition of the term “Age” falls exactly in the section of the Policy to which an insured
would normally look.
2. Reasonable Expectations
The absence of ambiguity does not end the analysis, because under the doctrine of
reasonable expectations, “Arizona courts will not enforce even unambiguous boilerplate
terms in standardized insurance contracts in a limited variety of situations.” Gordinier v.
Aetna Cas. & Sur. Co., 742 P.2d 277, 283 (Ariz. 1987). See generally Jean Braucher,
Cowboy Contracts: The Arizona Supreme Court’s Grand Tradition of Transactional
Fairness, 50 Ariz. L. Rev. 191, 214 (2008) (noting that “Arizona has embraced the
‘reasonable expectations’ doctrine concerning terms in non-negotiated standard form
contracts as a basis for non-enforcement of surprising terms” and emphasizing “how
expansive this doctrine is in Arizona”).
The “essential element” of the inquiry under the reasonable expectations doctrine is
defines a term in a manner which differs from the ordinary understanding of that term, the
policy definition controls.”); Nat. Auto. & Casualty Ins. Co. v. Contreras, 193 Cal. App.
3d 831, 837 (Cal. Ct. App. 1987) (“The policy of insurance must be intelligible to the
persons to whom it is sold. Where such persons are laymen, the level of intelligibility must
be so gauged and in this sense the language used must be ordinary language. That does
not preclude the explicit definition of policy terms (even in unusual ways), provided that
the language of the definition is intelligible and accessible (i.e., so located as to be easily
found) to the layman (or audience) to which the policy is sold.”); Woods v. Nationwide
Mut. Ins. Co., 246 S.E.2d 773, 777 (N.C. 1978) (“Where a policy defines a term, that
definition is to be used.”).
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whether the insurer “had ‘reason to believe’ that the [insured] would not have agreed to
[the term] if they had been aware of its presence in the policy.” State Farm Fire & Cas.
Ins. Co. v. Grabowski, 150 P.3d 275, 281 (Ariz. Ct. App. 2007). “The drafter’s reason to
believe that the signing party would not have assented to the term may be (1) shown by the
parties’ prior negotiations, (2) inferred from the circumstances of the transaction, (3)
inferred from the fact that the term is bizarre or oppressive, (4) inferred from the fact that
the term eviscerates the non-standard terms to which the parties explicitly agreed, or (5)
inferred if the term eliminates the dominant purpose of the transaction.” Id. at 280. See
also Castle v. Barrett-Jackson Auction Co., LLC, 276 P.3d 540, 543 (Ariz. Ct. App. 2012)
(same). Moreover, “an inference that the drafter knew the signing party would not have
agreed to the term may be reinforced if the signing party never had an opportunity to read
the term or if it is illegible or otherwise hidden from view.” Am. Fam. Mut. Ins. Co. v.
Verdugo, 2016 WL 9458582, *18 (D. Ariz. 2016) (citation and internal quotation marks
omitted). The reasonable expectations doctrine, however, “must be limited by something
more than the fervent hope usually engendered by loss.” Am. Fam. Mut. Ins. Co. v. White,
65 P.3d 449, 455 (Ariz. Ct. App. 2003) (cleaned up).
In Gordinier, the Arizona Supreme Court identified four “factual scenarios . . . [that]
illustrate some of the circumstances under which the reasonable expectations doctrine may
be applied.” Grabowski, 150 P.3d at 281 (emphasis omitted). Those scenarios are: “(1)
Where the contract terms, although not ambiguous to the court, cannot be understood by
the reasonably intelligent consumer who might check on his or her rights, the court will
interpret them in light of the objective, reasonable expectations of the average insured; (2)
Where the insured did not receive full and adequate notice of the term in question, and the
provision is either unusual or unexpected, or one that emasculates apparent coverage; (3)
Where some activity which can be reasonably attributed to the insurer would create an
objective impression of coverage in the mind of a reasonable insured; and (4) Where some
activity reasonably attributable to the insurer has induced a particular insured reasonably
to believe that he has coverage, although such coverage is expressly and unambiguously
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denied by the policy.” Gordinier, 742 P.2d at 283-84 (cleaned up). Plaintiff does not argue
that the first Gordinier scenario is implicated. (Doc. 15 at 13.) Instead, Plaintiff argues
that “[s]ituations (2), (3), and (4) all apply here.” (Id.) Plaintiff argues that “Defendants
repeatedly promised disability benefits to Plaintiff’s 65th birthday,” “that based on those
promises . . . he reasonably believed coverage . . . was through his 65th birthday,” and that
he “would not have purchased the policy, or would have paid less, had he known the truth.”
(Id.)
Under the second Gordinier scenario, an insured must demonstrate, among other
things, that he did not receive full and adequate notice of the term. “An insurer gives
adequate notice of a policy’s clear and unambiguous terms if it gives a copy of the policy
to the insured and takes reasonable steps to make sure any exclusions or limitations are
made apparent to the insured.” Certain Underwriters at Lloyds, London v. Payson
Premier, LLC, 2009 WL 1156705, *3 (Ariz. Ct. App. 2009). See also White, 65 P.3d at
456 (adequate notice where the “exclusion is not lengthy, confusing, complex, or buried in
the policy”). Plaintiff does not appear to dispute that Defendants sent him the Policy, nor
does Plaintiff assert that he failed to review the Policy. The Policy itself also indicates that
Plaintiff had a “10 day free examination period,” during which Defendants expressly
encouraged Plaintiff to “[p]lease examine this policy.” (Doc. 1-1 at 3.) Furthermore, as
discussed above, this case differs from Sparks in that the term in question was clearly
defined at the very beginning of the “Definitions” section of the Policy. (Id. at 6.) Given
this backdrop, this case does not fall within the second Gordinier scenario.
To implicate the third and fourth Gordinier scenarios, Plaintiff must allege activity
reasonably attributable to Defendants that (a) created an objective impression of coverage
in the mind of a reasonable insured or (b) induced Plaintiff to reasonably believe he had
coverage. “An activity is reasonably attributed to the insurer when an insured’s
expectations are induced by the insurer’s making of a promise. An expectation reasonably
attributable to the insurer does not exist[] where an agent of the insurer, or the insurer itself,
fails to make a promise outside of the insurance policy.” Team 44 Restaurants LLC v. Am.
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Ins. Co., 2022 WL 458494, *5 (D. Ariz. 2022) (citations omitted). The complaint alleges
that “[Plaintiff] was promised, applied for, and received a disability insurance policy that
promised disability benefits to age 65.” (Doc. 1 ¶ 3.) The complaint further alleges that
“New York Life promises its disability insurance offerings will provide cost effective
coverage to age 65.” (Id. ¶ 19.) The complaint also alleges that “[e]ach Defendant
promised disability income benefit payments through a certain specified date (e.g., age 65
or age 67), but the benefits provided are not as promised and not the same as those
represented and bargained for.” (Id. ¶ 116.)
Even though, as discussed in Part II.B.1 above, an ambiguity doesn’t arise under
Arizona law when an insurer clearly adopts a particular definition of a term in the
definitions section of an insurance policy (even if the chosen definition deviates from the
common and ordinary meaning of the term), that approach may still create a reasonable
expectations problem. Gregorio v. GEICO General Ins. Co., 815 F. Supp. 2d 1097, 1105
(D. Ariz. 2011) (“Arizona’s formulation of the reasonable expectations doctrine is
expansive. The doctrine can be applied to unambiguous contracts.”) (citations omitted).
Such is the case here. Plaintiff plausibly alleges that a reasonable consumer would perceive
advertisements for an insurance policy providing benefits “to age 65” as a promise of
benefits that will extend until the insured’s 65th birthday. Indeed, the Court cannot fathom
how a reasonable consumer could view such an advertisement as offering anything
different. It strains credulity that a reasonable consumer would view such an advertisement
and conclude that the promised benefits only extend until some date, which may fall
months before the insured’s 65th birthday, that is somehow tied to the policy renewal date.
Cf. Laurent v. PriceWaterhouseCoopers LLP, 963 F. Supp. 2d 310, 320-21 (S.D.N.Y.
2013) (“As a matter of ordinary usage, the query ‘what’s your age?’ should not be met with
the response, ‘the first time I went to work, as modified by an algorithm that I’ll now
describe’ . . . . Rather, the usual answer would take the form of a discrete chronological
age, such as ‘30.’”). Although Defendants7 were free to adopt that unusual definition of
7 During oral argument, Defendants asserted for the first time that because the
complaint does not properly attribute the conduct underlying Count One to Unum and Paul
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the term “Age” in the definitions section of the Policy, their decision to do so has no bearing
on how a reasonable consumer would perceive advertisements (which did not contain any
such definitional information) promising benefits “to age 65.” Cf. Averett v. Farmers Ins.
Co. of Ariz., 869 P.3d 505, 508 (Ariz. 1994) (reversing trial court’s grant of summary
judgment in favor of the insurer, even though the insurance policy’s household policy
exclusion unambiguously barred the insured’s claim, because “[w]e strongly suspect that
most consumers . . . would be surprised” that the exclusion would apply); Cawley v. Am.
Fin. Sec. Life Ins. Co., 2025 WL 641182, *3-4 (D. Ariz. 2025) (denying insurer’s motion
for summary judgment, even though “Plaintiffs do not dispute that all benefits under the
policy as written were paid out to them,” because it was “a debatable question” whether
“the average, reasonably informed policyholder would” believe the policy operated in that
manner).
The fundamental inquiry, to be clear, is not whether any of the Gordinier scenarios
are satisfied—instead, the “essential element” under the reasonable expectations doctrine
is whether Defendants had “reason to believe” Plaintiff would not have agreed to their
definition of the term “Age” had he been aware of it. Grabowski, 150 P.3d at 281.
Although Plaintiff’s showing on this point is not overwhelming, he has done enough at this
early stage of the case to avoid dismissal. “[T]he insurer’s reason to believe the insured
would not have agreed can be inferred from the circumstances of the transaction or terms
of the policy.” Cawley, 2025 WL 641182 at *6. Among other things, “[r]eason to believe
may be inferred from the fact that the term is bizarre.” Restatement (Second) of Contracts
§ 211, cmt.f. See also Grabowski, 150 P.3d at 281-82 (“We recognize that if the jury found
that the exclusion was bizarre or unexpected in nature, . . . it might have inferred that State
Farm had ‘reason to believe’ that the Hedges would not have agreed to the exclusion.”);
Angus Med. Co. v. Digital Equip. Corp., 840 P.2d 1024, 1031 (Ariz. Ct. App. 1992) (“[A]
term may be shown to be ‘unusual or unexpected’ . . . by virtue of its rarity.”). For
Revere, those Defendants should be entitled to dismissal of Count One even if New York
Life is not. This argument is forfeited due to Defendants’ failure to raise it in their motion
to dismiss.
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essentially the same reasons that a reasonable consumer could have perceived Defendants’
advertisements as promising benefits until the insured’s 65th birthday, a reasonable
factfinder could also conclude that Defendants’ contrary definition of the term “Age” in
the Policy was bizarre, unusual, and unexpected8—and, thus, that Defendants had reason
to believe Plaintiff would not have agreed to the Policy had he been aware of that definition.
In reaching this conclusion, the Court acknowledges that Defendants’ provision of
a 10-day review-and-cancellation period tends to undermine the “reason to believe”
inference. With that said, the Court is unaware of any authority (and Defendants could not
identify any authority during oral argument) suggesting that the provision of such a review-
and-cancellation period is dispositive. In a similar vein, although the definition of “Age”
adopted in the Policy did not dramatically or oppressively alter the scope of coverage in
the same manner as the challenged terms in other reasonable expectations cases—in
Plaintiff’s case, it only shaved off two months of coverage from a multi-year coverage
period, and as Defendants note in their reply, “[f]or many insureds, ‘the policy anniversary
date nearest to’ their sixty-fifth birthday will be after that birthday, so they will receive
benefits beyond their sixty-fifth birthday” (Doc. 16 at 2 n.2, emphasis omitted)—the Court
is unaware of any authority suggesting that this consideration is dispositive, particularly at
the motion-to-dismiss stage where all reasonable inferences must be resolved in Plaintiff’s
favor. Cf. Grabowski, 150 P.3d at 280 (when evaluating whether the drafter had “reason
to believe that the signing party would not have assented to the term,” “circumstantial
evidence is critical to such a determination”). An inquiry into whether an insurer had
“reason to believe” an insured would not have agreed to a term is typically a question of
fact and thus not typically suitable for resolution at this early stage. See generally Morgan
ex rel. Clark v. Am. Fam. Mut. Ins. Co., 563 F.3d 898, 902 (9th Cir. 2009) (“[Grabowski]
8 Because the record on this point is undeveloped, the Court “draw[s] on its judicial
experience and common sense,” Iqbal, 556 U.S. at 679, in concluding that it is plausible
that the Policy’s definition of the term “Age” is bizarre, unusual, and unexpected. At a
future stage of the case, on a different record, the analysis could be different. Indeed,
during oral argument, Plaintiff represented that he will be able to present evidence
establishing that this particular definition is unusual, while Defendants represented that
they will be able to present evidence showing that it is ubiquitous.
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indicates that Arizona’s intermediate court understands [the reasonable expectations]
inquiry might be a fact question for the jury in the absence of evidence that the insurance
company had reason to believe the policyholder would not have agreed to the exclusion.
Perhaps this inquiry is a question of law for the court absent evidence as to the parties’
expectations or beliefs, but precedent from Arizona courts is not explicit on this point.”);
Jacobson v. Am. Family Ins. Co., 2020 WL 919173, *2 (D. Ariz. 2020) (“[W]hile the actual
terms of the policy are undisputed, a jury should decide whether the policy should be
reformed to be consistent with Cathy Jacobson’s alleged reasonable expectations.”).
III. Counts Two (Breach Of Implied Covenant) and Eight (Bad Faith)
A. The Parties’ Arguments
Defendants argue that “[a]s an initial matter, Plaintiff’s claim for ‘bad faith’ is
redundant of, and co-extensive with, his claim for breach of the implied covenant of good
faith and fair dealing.” (Doc. 10 at 6.) Defendants further argue that “Arizona law is clear
that acting in accordance with the express terms of a contract cannot constitute a breach of
the implied covenant of good faith and fair dealing.” (Id.)
In response, Plaintiff argues that “the implied covenant goes beyond the four corners
of a contract” and “can be breached even though the company performs its express
covenants under the insurance contract.” (Doc. 15 at 14, citation omitted.) Plaintiff further
argues that “[i]t has consistently been held that an insurer can be held liable for bad faith
even when it does not violate any express provision of the insurance contract.” (Id.)
(citation omitted).
In reply, Defendants clarify that they “do not contend that there can be no breach of
the implied covenant of good faith and fair dealing or bad faith if the Defendants did not
breach an express provision of the Policy”—rather, their position is that “no breach of the
implied covenant of good faith and fair dealing or bad faith claim can survive where the
conduct allegedly giving rise to the purported claim . . . was expressly allowed by the
Policy.” (Doc. 16 at 6.) Defendants further argue that “Plaintiff fails to address this
argument” and “Plaintiff can allege no such facts as against Defendants, whose conduct
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was expressly permitted by the plain language of the Policy.” (Id. at 6-7.)
B. Analysis
The parties disagree over whether Plaintiff’s claims in Count Two (breach of the
implied covenant of good faith and fair dealing) and Count Eight (bad faith) are co-
extensive.
On the one hand, Defendants are correct that the two claims are co-extensive. “A
bad faith claim derives from the . . . duty of good faith and fair dealing.” Cavallo v.
Phoenix Health Plans, Inc., 518 P.3d 759, 764 (Ariz. 2022) (cleaned up). See also Equity
Income Partners LP v. Chicago Title Ins. Co., 2014 WL 12745025, *2 (D. Ariz. 2014)
(“Plaintiffs brought three claims for relief: breach of contract; breach of the duty of good
faith and fair dealing; and insurance bad faith. In Arizona, Plaintiffs’ second and third
claims are one and the same.”) (citation omitted); Biltmore Assocs., L.L.C. v. Twin City
Fire Ins. Co., 2006 WL 2091667, *1 n.2 (D. Ariz. 2006) (“[T]he breach of the duty of good
faith and fair dealing, and for bad faith . . . are two names for the same cause of action.”).
On the other hand, to the extent Defendants’ position is that such redundancy means one
of the claims is therefore subject to dismissal under Rule 12(b)(6), Defendants are—at least
outside the context of claims for declaratory relief, as discussed in more detail in Part IV
infra—mistaken. Astiana v. Hain Celestial Group, Inc., 783 F.3d 753, 762-63 (9th Cir.
2015) (“To the extent the district court concluded that the cause of action was nonsensical
because it was duplicative of or superfluous to Astiana’s other claims, this is not grounds
for dismissal.”) (citing Fed. R. Civ. P. 8(d)(2)).
Turning to the merits, the implied covenant of good faith and fair dealing requires
that “each of the parties . . . refrain from any action which would impair the benefits which
the other had the right to expect from the contract or the contractual relationship.”
Rawlings v. Apodaca, 726 P.2d 565, 570 (Ariz. 1986). See also Wagenseller v. Scottsdale
Mem’l Hosp., 710 P.2d 1025, 1038 (Ariz. 1985) (“The covenant requires that neither party
do anything that will injure the right of the other to receive the benefits of their
agreement.”). In the insurance context, “[t]he tort of bad faith arises when the insurance
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company intentionally denies, fails to process or pay a claim without a reasonable basis for
such action.” Noble v. Nat’l Am. Life Ins. Co., 624 P.2d 866, 868 (Ariz. 1981).
The parties agree that the implied covenant can be breached even when a company
performs its express covenants under an insurance contract. Rawlings, 726 P.2d at 573.
Defendants, however, assert that Counts Two and Eight must be dismissed because the
conduct at issue was expressly allowed by the Policy.
True, “[t]he general rule is that an implied covenant of good faith and fair dealing
cannot directly contradict an express contract term.” Bike Fashion Corp. v. Kramer, 46
P.3d 431, 434 (Ariz. Ct. App. 2002). See also Lee v. PHH Mortg., 2024 WL 4364139, *6
(D. Ariz. 2024) (“There is no breach of the implied covenant when a party abides by a
contract’s express terms.”). However, this general rule does not assist Defendants here
because, as discussed in Part II above, Plaintiff has plausibly alleged that Defendants’
challenged conduct was impermissible under the Policy in light of the reasonable
expectations doctrine. Cf. Wilson v. PartnerRe Ireland Ins. dac, 2025 WL 2606173, *7
(D. Ariz. 2025) (“Defendant argues that there can be no bad faith where the Policy provides
no coverage, and the Court’s grant of summary judgment on the breach of contract claim
should result in summary judgment here as well. This argument fails because the Court
has denied Defendant’s request for summary judgment on the contract claim.”). Nor does
Frink v. River Source Life Ins. Co., 2022 WL 1188087 (D. Ariz. 2022), which Defendants
cited during oral argument, compel a different conclusion—there, the plaintiff voluntarily
withdrew her claim for bad faith. Id. at *1.
Because Defendants only sought dismissal of Counts Two and Eight on two narrow
grounds—first, redundancy, and second, because the challenged conduct was permissible
under the Policy—and neither argument has merit, Counts Two and Eight are not subject
to dismissal at this early stage of the case.
IV. Count Three (Declaratory Judgment)
A. The Parties’ Arguments
Defendants argue that “Plaintiff’s declaratory relief claim duplicatively seeks a
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declaration about the very issues that an adjudication of Plaintiff’s breach of contract claim
would resolve” and thus “should be dismissed” because it would not “serve a useful
purpose.” (Doc. 10 at 7-8.)
In response, Plaintiff argues that Defendants are “mistaken that Plaintiff’s claim for
declaratory relief is ‘duplicative.’” (Doc. 15 at 14, record citation omitted). Plaintiff
further argues that his “breach of contract claim seeks money damages, but his declaratory
relief claim seeks a proper policy interpretation and seeks prospective class-wide relief in
the form of a prohibition on Defendants’ offending practices.” (Id. at 14-15.)
In reply, Defendants argue that “Plaintiff’s declaratory judgment claim does not, in
fact, seek any ‘prohibition’ or injunctive relief” but instead “seeks only ‘a declaration to
pay benefits,’ which is the precise relief sought through his breach of contract claim.”
(Doc. 16 at 7, record citation omitted).
B. Analysis
Plaintiff’s requested relief in his claim for declaratory relief is “a declaration that
Defendants has [sic] an obligation to pay disability income benefits until each insured
reaches the age specified (e.g., age 65 or age 67), not an earlier policy anniversary date at
which time the insured has not yet reached the specified age.” (Doc. 1 ¶ 75.)
In Paul Johnson Drywall Inc. v. Sterling Group LP, 2025 WL 553001 (D. Ariz.
2025), this Court addressed a similar situation. There, as here, a plaintiff asserted both a
breach-of-contract claim and a separate claim for declaratory relief that merely sought a
declaration adopting the plaintiff’s proposed (and disputed) interpretation of the contract
at issue. Id. at *44. The Court concluded that the claim for declaratory relief in Paul
Johnson Drywall was subject to dismissal for an array of reasons, two of which are
applicable here. First, the claim was “not a proper cause of action, at least where, as here,
it simply seeks a declaration concerning some of the merits issues being raised in other
causes of action.” Id. See also Staren v. Clarivate Analytics (US), LLC, 2025 WL 40767,
*5 (D. Ariz. 2025) (“[T]he validity of [certain contractual provisions] is intertwined with
the merits of Plaintiff’s [contract-based claims] in Counts One and Two of the complaint.
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Those considerations counsel against issuing independent declaratory relief as to the
narrow issues raised in Count Three.”); Schultz v. BAC Home Loans Servicing, LP, 2011
WL 3684481, *4 (D. Ariz. 2011) (“To the extent that the Plaintiff’s complaint seeks to
raise an independent cause of action for declaratory relief [to resolve the construction or
validity of a written contract], that claim also fails. Declaratory relief is a remedy for
underlying causes of action . . . not a separate cause of action.”). “Second, and more
broadly, a federal court need not entertain a request for declaratory relief where, as here,
the requested declaration would not resolve the entire case or controversy as to any plaintiff
but would merely determine a collateral legal issue governing certain aspects of their
pending or future suits.” Paul Johnson Drywall, 2025 WL 553001 at *44 (cleaned up).
See also Madrid v. Concho Elementary Sch. Dist. No. 6 of Apache Cnty., 439 F. App’x
566, 567 (9th Cir. 2011) (“[T]he Declaratory Judgment Act authorizes, but does not
mandate, relief. . . . [B]ecause Madrid’s claim under the Declaratory Judgment Act
requested only contract-related relief, the district court was within its discretion to read that
claim as part of Madrid’s breach of contract claim and to deny injunctive and declaratory
relief.”). Accordingly, Count Three is dismissed.
V. Count Four (Reformation)
A. The Parties’ Arguments
Defendants argue that “none of the limited circumstances permitting reformation of
a contract exists in this case.” (Doc. 10 at 12.) Specifically, Defendants contend that
“Plaintiff has not established and cannot establish either a mutual mistake or a unilateral
mistake accompanied by fraud or inequitable conduct.” (Id.) As for mutual mistake,
Defendants argue that “there was no mutual mistake, as evidenced by the Policy’s clear
and unambiguous terms.” (Id.) As for unilateral mistake, Defendants argue that “[a]t most
. . . Plaintiff made a unilateral mistake,” but such a mistake “must be accompanied by fraud
or inequitable conduct” and “Plaintiff cannot establish either ground.” (Id.)
In response, Plaintiff argues that “[b]oth instances [of mutual and unilateral mistake]
are alleged here.” (Doc. 15 at 15.) Plaintiff argues that “Defendants’ own materials . . .
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raise[] a genuine issue of material fact as to mutual mistake” and that “[t]he Complaint also
details the plausible basis for Plaintiff’s unilateral mistake and Defendants’ fraud and
inequitable conduct.” (Id.) Plaintiff further argues that “the circumstances of a mutual or
unilateral mistake is fact-intensive and not suitable for disposition on the pleadings.” (Id.)
In reply, Defendants argue that Plaintiff cannot establish mutual mistake because
“[t]he Policy provided the precise benefits that Defendants intended.” (Doc. 16 at 10.)
Defendants further argue that Plaintiff cannot establish unilateral mistake because
“Plaintiff has not adequately alleged the facts that must accompany a purported unilateral
mistake in order to justify reformation.” (Id. at 11.)
B. Analysis
Reformation “is the remedy9 designed to correct a written instrument which fails to
express the terms agreed upon by the parties; it is not intended to enforce the terms of an
agreement the parties never made.” Isaak v. Mass. Indem. Life Ins. Co., 623 P.2d 11, 14
(Ariz. 1981). To seek reformation on the basis of mutual mistake, “the mistake must be
established by clear, convincing and satisfactory evidence that a definite intention on which
the minds of the parties had met preexisted the written instrument and that the mistake
occurred in its execution.” City of Scottsdale v. Burke, 504 P.2d 552, 555 (Ariz. Ct. App.
1972) (cleaned up). “In the absence of mutual mistake, to reform an instrument because
of the unilateral mistake of one party, there must be fraud or inequitable conduct by the
other party. . . . Inequitable conduct which would justify reformation when there is
unilateral mistake takes the form of knowledge on the part of one party of the other’s
mistake.” Isaak, 623 P.2d at 14.
…
9 During oral argument, Defendants asserted that because reformation is a remedy
rather than a standalone cause of action, Count Four should be dismissed on that basis.
This marks yet another argument that is forfeited because it was raised for the first time at
oral argument. In their motion to dismiss, Defendants only sought the dismissal of Count
Four on the ground that “none of the limited circumstances permitting reformation of a
contract exists in this case,” i.e., because the factual allegations in the complaint are
insufficient to “establish either a mutual mistake or a unilateral mistake accompanied by
fraud or inequitable conduct.” (Doc. 10 at 12.) The analysis here is limited to that
argument.
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1. Mutual Mistake
To grant reformation based on mutual mistake, a court “must be presented with clear
and convincing evidence that (1) a mutual mistake was made by the parties in drafting the
instrument, and (2) that the minds of the parties had met on a definite intention before the
instrument was drafted.” Phil Bramsen Distrib., Inc. v. Mastroni, 726 P.2d 610, 614 (Ariz.
Ct. App. 1986) (citation omitted). A mutual mistake exists, for example, when the parties
“clearly intended” for a contract to contain a particular provision but, due to “the error of
the scrivener,” the agreed-to provision was not included in the contract. Id. Similarly, “if
a seller intends to sell and a buyer intends to buy land other than that described in a deed,
a case of mutual mistake is presented.” Hill-Shafer P’ship v. Chilson Family Trust, 799
P.2d 810, 814 (Ariz. 1990) (emphasis omitted). Put simply, “[a] mutual mistake exists
where there has been a meeting of the minds of the parties, and an agreement is actually
entered into, but the agreement in its written form does not express what was really
intended by the parties.” Id. (emphasis omitted).
Whatever this case may be, it is not a mutual mistake case. Everything in the
complaint suggests that Defendants intended for the term “Age” to have the meaning
ascribed to it in the “Definitions” section of the Policy. There is no allegation, for example,
that the parties engaged in negotiations during which they both agreed that the term “Age”
would mean the insured’s birthday, only for a scrivener to make an error during the drafting
process that somehow resulted in a different definition of the term “Age” being inserted
into the Policy.
Notwithstanding this, Plaintiff cites Ashton, which observes that “[p]roof of mutual
mistake involves, to a great extent, evidence of subjective facts.” State v. Ashton Co., 422
P.2d 727, 730 (Ariz. Ct. App. 1967). The subjective nature of the mutual mistake doctrine,
however, cannot make up for a complaint lacking the sort of factual allegations necessary
to plausibly establish the elements of a mutual mistake claim. Although the allegations in
the complaint may plausibly suggest that Plaintiff and Defendants “had different
understandings of the same material provision of the agreement,” this sort of “alleged
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mutual misunderstanding is not a mutual mistake.” Hartford v. Industrial Comm’n of Ariz.,
870 P.2d 1202, 1207 (Ariz. Ct. App. 1994).
2. Unilateral Mistake
A unilateral mistake is “one where only one party to an agreement is mistaken as to
the subject matter or the agreement’s expression.” Connelly v. Connelly, 2016 WL
7156437, *3 (Ariz. Ct. App. 2016). To grant reformation based on a unilateral mistake,
“there must be fraud or inequitable conduct by the other party.” Isaak, 623 P.2d at 14.
As discussed in Part II above, the complaint plausibly alleges that Defendants had
“reason to know” Plaintiff would not agree to the Policy if he was aware of how the Policy
defined the term “Age.” The complaint also plausibly alleges—albeit without using the
magic word “mistake,” the absence of which Defendants emphasized during oral
argument—that Plaintiff was, in fact, operating under a misunderstanding of this feature of
the Policy. (Doc. 1 ¶ 92 [“Plaintiff . . . would not have entered [the Policy] . . . had [he]
known the truth.”].)
Meanwhile, one way of showing inequitable conduct, for purposes of raising a claim
of unilateral mistake, is by showing that “the other party knew of and unfairly took
advantage of the other party’s error.” Hartford, 870 P.2d at 1207. Therefore, if having
“reason to know” of Plaintiff’s mistake is the same thing as knowing of, and unfairly taking
advantage of, that mistake, Plaintiff has also plausibly alleged a claim of unilateral mistake.
Unfortunately, the parties’ motion papers do not address whether having “reason to
know” of an insured’s mistake is tantamount to knowing of, and unfairly taking advantage
of, that mistake. Nor was the Court able to find, through its own research, any Arizona
authorities addressing that precise question. Even so, many courts have concluded, albeit
in different contexts, that having “reason to know” of a particular fact is functionally
equivalent to having actual knowledge of that fact. Freeman United Coal Min. Co. v. Fed.
Mine Safety & Health Review Comm’n, 108 F.3d 358, 363 (D.C. Cir. 1997) (upholding
agency’s determination that the term “knowingly” means “knowing or having reason to
know,” noting that many courts have “found that ‘knowingly’ encompasses more than
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actual knowledge,” and concluding that the agency’s definition of “knowledge” to “include
both actual and constructive knowledge of a violative condition . . . falls well within the
range of interpretations given to the term ‘knowingly’ in other contexts”). But see
Broadway Nat. Bank v. G & L Athletic Supplies, Inc., 691 P.2d 400, 405 (Kan. Ct. App.
1984) (“[A]ctual knowledge does not encompass ‘reason to know’ within its meaning.”).
At any rate, it was Defendants’ burden to establish why Count Four is subject to
dismissal under Rule 12(b)(6). See, e.g., Cohen v. Bd. of Trs. of Univ. of D.C., 819 F.3d
476, 481 (D.C. Cir. 2016) (citing treatise for the proposition that “[a]ll federal courts are in
agreement that the burden is on the moving party to prove that no legally cognizable claim
for relief exists”); Bangura v. Hansen, 434 F.3d 487, 498 (6th Cir. 2006) (“[O]n a 12(b)(6)
motion, the moving party bears the burden of demonstrating that the plaintiff failed to state
a claim.”); Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005) (“In a Rule 12(b)(6)
motion, the . . . defendant bears the burden of showing that no claim has been presented.”)
(cleaned up). On this record, Defendants have not met that burden, at least with respect to
Plaintiff’s unilateral mistake theory.
VI. Fraud-Based Claims: Counts Five (Fraudulent Inducement), Six (Negligent
Misrepresentation), and Seven (Violation Of Consumer Protection Laws)
A. Count Five (Fraudulent Inducement)
1. The Parties’ Arguments
Defendants argue that Plaintiff’s fraudulent inducement claim should be dismissed
for two reasons: (1) the claim is not pleaded “with the specificity required by Rule 9(b)”;
and (2) Plaintiff is not “able to satisfy the reliance element” of the claim. (Doc. 10 at 8.)
As for the Rule 9(b) argument, Defendants argue that “Plaintiff improperly lumps all
‘Defendants’ together” and thus “Plaintiff has failed to plead sufficient information for
Defendants to ascertain whom among them is being alleged to have misrepresented the
Policy’s terms, what the substantive purported misrepresentation was, and when, where,
and how it was made to Plaintiff.” (Id. at 9.) As for the reliance argument, Defendants
argue that “the Policy contains a ‘10 day free examination period,’” which is “designed to
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provide a remedy for any alleged misunderstandings,” so “Plaintiff could not have relied
upon the alleged misrepresentations and omissions made in connection with the
application.” (Id. at 10-12.)
In response, Plaintiff disputes both points. (Doc. 15 at 7.) As for Rule 9(b), Plaintiff
argues that the allegations in the complaint are “more than sufficient to put Defendants on
notice of the who, what, where, why, and how, and therefore easily satisfy Rule 9(b).” (Id.
at 9.) As for the reliance argument, Plaintiff argues that “aside from being a fact question,
whether a reasonable consumer might not have relied on Defendants’ misrepresentations
and omissions in light of the period-of-review clause is simply immaterial, and certainly
not dispositive as a matter of law.” (Id. at 8-9.)
In reply, Defendants reiterate their argument that Plaintiff’s allegations
“impermissibly lump[] Defendants together in violation of Rule 9(b)” and “are insufficient
to allege any of Plaintiff’s fraud-based claims.” (Doc. 16 at 8-9.) Defendants further argue
that Plaintiff’s ability to review the policy for 10 days before accepting it means “he cannot
plausibly allege that he relied upon any alleged misrepresentations.” (Id. at 10.)
2. Analysis
Under Arizona law, a fraudulent inducement claim requires “(1) a representation;
(2) its falsity; (3) its materiality; (4) the speaker’s knowledge of its falsity or ignorance of
its truth; (5) the speaker’s intent that it be acted upon by the recipient in the manner
reasonably contemplated; (6) the hearer’s ignorance of its falsity; (7) the hearer’s reliance
on its truth; (8) the hearer’s right to rely on it; [and] (9) the hearer’s consequent and
proximate injury.” Duncan v. Pub. Storage, Inc., 507 P.3d 509, 514-15 (Ariz. Ct. App.
2022).
Rule 9(b) requires that the circumstances constituting fraud be stated with
particularity. See also Van Go LLC v. Potts, 2016 WL 4974968, *3 (D. Ariz. 2016)
(“Where a plaintiff alleges fraud or misrepresentation, Rule 9(b) imposes heightened
pleading requirements. While malice, intent, knowledge, and other conditions of mind
may be alleged generally, the circumstances constituting fraud must be pled with
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particularity.”). A plaintiff must “set forth what is false or misleading about a statement,
and why it is false.” Vess, 317 F.3d at 1106 (cleaned up). In addition, “Rule 9(b) does not
allow a complaint to merely lump multiple defendants together but require[s] plaintiffs to
differentiate their allegations when suing more than one defendant . . . and inform each
defendant separately of the allegations surrounding his alleged participation in the fraud.”
Swartz v. KPMG LLP, 476 F.3d 756, 764-65 (9th Cir. 2007) (citation and internal quotation
marks omitted).
Plaintiff has failed to satisfy the pleading requirements of Rule 9(b) with respect to
his fraudulent inducement claim. Although Plaintiff asserts that the complaint provides the
requisite who, what, when, where, and how of the fraud, that is simply not the case.
With respect to the “who,” the complaint repeatably lumps Defendants together,
failing to inform each Defendant of the allegations surrounding its specific alleged
participation. The complaint alleges “Defendants affirmatively misrepresented facts about
their disability insurance benefits and terms of policies” (Doc. 1 ¶ 89, emphasis added),
“Defendants omitted material facts” (id. ¶ 90), “Defendants’ conduct induced” (id. ¶ 92),
and “Defendants actively concealed their misrepresentations” (id. ¶ 97, emphasis added).
At no point does Plaintiff adequately differentiate his allegations against each Defendant
or identify which Defendant made each challenged representation. Plaintiff’s response
brief asserts that the “who” arises from the fact that “New York Life markets disability
insurance, which Paul Revere administers, at the direction of Unum.” (Doc. 15 at 9, record
citations omitted.) However, the complaint fails to “identify the role of each defendant in
the alleged fraudulent scheme.” Swartz, 476 F.3d at 765 (cleaned up).
Nor are the problems limited to the “who” question. The complaint alleges that
“Defendants affirmatively misrepresented material facts about their disability insurance
benefits and terms of policies with Plaintiff and other putative Class members, including
but not limited to whether payments would be made until each insured reached a certain
age (e.g., age 65 or age 67), not some other earlier date.” (Doc. 1 ¶ 89.) The complaint
further alleges that “Defendants made these misrepresentations, or omitted material
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information, in its promotional materials and representations, and policy-related
materials.” (Id. ¶ 91.) The complaint goes on to allege that “Defendants’ conduct induced
customers to pay premiums for benefits that Defendants had no intention of paying.” (Id.
¶ 92.) These allegations fail to specify “what,” exactly, in the promotional materials was
misrepresented or the specific content of each alleged misrepresentation. These allegations
also fail to adequately specify “when” and “where” the misrepresentations appeared—
Defendants presumably issued many different “promotional materials” between the four of
them, but the complaint does not identify which particular promotional materials contained
the challenged misrepresentations.
This conclusion is not altered by the fact that Plaintiff also appears to be accusing
Defendants of misleading him through omissions. The fraudulent inducement claim
includes an allegation that “Defendants omitted material facts including, inter alia, that the
disability income benefit payments available under the policies would not run through
insureds’ birth dates, as represented in the promotional materials and policy-related
materials, but would run through some earlier date only.” (Id. ¶ 90.) Elsewhere, the
complaint alleges that “[e]ach Defendant . . . omitted material information in its
communications with or disclosures to Plaintiff.” (Id. ¶ 118.) Even under Rule 9(b)’s
relaxed standard for fraud-by-omission claims, the complaint remains deficient. Plaintiff
again lumps Defendants together for purposes of his omission allegations. Nor does the
complaint specify which promotional materials and policy-related materials contained the
omissions or what passages in those unspecified materials contained the omissions.10
B. Count Six (Negligent Misrepresentation)
1. The Parties’ Arguments
The parties’ arguments regarding Plaintiff’s negligent misrepresentation claim are
identical to their arguments regarding Plaintiff’s fraudulent inducement claim.
10 Given this determination, it is unnecessary to address Defendants’ alternative
dismissal arguments related to reliance. With that said, reasonableness of reliance
“generally is a question of fact for the jury.” Pluto Props., LLC v. Hendricks & Partners,
Inc., 2009 WL 3644803, *3 (Ariz. Ct. App. 2009).
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2. Analysis
Arizona recognizes the tort of negligent misrepresentation as defined in the
Restatement (Second) of Torts § 552(1) (1977), which provides:
One who, in the course of his business, profession or employment, or in any
other transaction in which he has a pecuniary interest, supplies false
information for the guidance of others in their business transactions, is
subject to liability for pecuniary loss caused to them by their justifiable
reliance upon the information, if he fails to exercise reasonable care or
competence in obtaining or communicating the information.
Haisch v. Allstate Ins. Co., 5 P.3d 940, 944 (Ariz. Ct. App. 2000). “The elements of
negligent misrepresentation are: (1) the defendant provided false information in a business
transaction; (2) the defendant intended for the plaintiff to rely on the incorrect information
or knew that it reasonably would rely; (3) the defendant failed to exercise reasonable care
in obtaining or communicating the information; (4) the plaintiff justifiably relied on the
incorrect information; and (5) resulting damage.” KB Home Tucson, Inc. v. Charter Oak
Fire Ins. Co., 340 P.3d 405, 412 n.7 (Ariz. Ct. App. 2014).
Plaintiff’s negligent misrepresentation claim is deficient under Rule 9(b) for the
same reasons as Plaintiff’s fraudulent inducement claim. This outcome, again, makes it
unnecessary to reach Defendants’ alternative arguments regarding reliance.
C. Count Seven (Violation Of Consumer Protection Laws)
1. The Parties’ Arguments
The parties’ arguments regarding Plaintiff’s ACFA claim are identical to their
arguments regarding Plaintiff’s fraudulent inducement and negligent misrepresentation
claims.
2. Analysis
Under the ACFA, it is unlawful for any person to use or employ “any deception,
deceptive or unfair act or practice, fraud, false pretense, false promise, misrepresentation,
or concealment, suppression or omission of any material fact with intent that others rely on
such concealment, suppression or omission, in connection with the sale or advertisement
of any merchandise.” A.R.S. § 44-1522(A). The elements of an ACFA claim are “(1) a
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false promise or misrepresentation made in connection with the sale or advertisement of
‘merchandise,’ and (2) consequent and proximate injury resulting from the
misrepresentation.” Watts v. Medicis Pharm. Corp., 365 P.3d 944, 953 (Ariz. 2016).11
As with his other fraud-based claims, Plaintiff fails to plead his ACFA claim with
the level of particularity required by Rule 9(b).
VII. Leave To Amend
In their motion to dismiss, Defendants argue that “Plaintiff’s Complaint should be
dismissed in its entirety, with prejudice” because “granting leave to amend would be
futile.” (Doc. 10 at 14.) In response, Plaintiff “respectfully requests an opportunity to
amend the Complaint, which he has not yet done.” (Doc. 15 at 15.)
“Rule 15 advises the court that ‘leave [to amend] shall be freely given when justice
so requires.’” Eminence Cap., LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003).
“This policy is ‘to be applied with extreme liberality.’” Id. (citation omitted). Thus, the
Court shouldn’t deny leave to amend unless “the amendment: (1) prejudices the opposing
party; (2) is sought in bad faith; (3) produces an undue delay in litigation; or (4) is futile.”
AmerisourceBergen Corp. v. Dialysist W., Inc., 465 F.3d 946, 951 (9th Cir. 2006).
It does not appear to the Court that amendment would be futile (which is
Defendants’ only proffered basis for opposing the amendment request). Thus, Plaintiff’s
amendment request is granted.
…
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11 It should be noted that the complaint cites 54 different consumer protection laws
from various states and territories. (Doc. 1 ¶ 114.) However, Plaintiff acknowledges that,
as “an Arizona resident, [Plaintiff] is only asserting his own claims under Arizona law.”
(Doc. 15 at 8 n.1.)
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Accordingly,
IT IS ORDERED that:
1. Defendants’ motion to dismiss (Doc. 10) is granted in part and denied in
part. Counts Three, Five, Six, and Seven of the complaint are dismissed.
2. Plaintiff may file a First Amended Complaint (“FAC”) within 14 days of the
issuance of this order. Any changes shall be limited to attempting to rectify the deficiencies
identified in this order. Plaintiff shall, consistent with LRCiv 15.1, attach a redlined
version of the pleading as an exhibit.
Dated this 30th day of October, 2025.
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