Plaintiff Sat on His Rights

Victory Against Insurers Is Not Always Available

Barry Zalma

Jul 16, 2024

Transcript

FACTS

Azam Ahmed claimed that Defendants Wellfleet Insurance, Wellfleet New York Insurance Company, and CIGNA Management, Inc. refused to cover medically necessary procedures in contravention of his health-insurance policy. Ahmed’s breach-of-contract and insurance-law claims came years too late, and his attempt to recharacterize his contract claim as one for fraud or unjust enrichment failed.

BACKGROUND

In August 2016, Azam Ahmed enrolled in New York University’s student health-insurance plan. The plan was issued by what is now Wellfleet New York Insurance Company and administered by what is now Wellfleet Insurance (together, “Wellfleet”).

Years earlier, Ahmed had been diagnosed with a congenital birth defect, resulting in skeletal abnormalities and symptoms like headaches and joint pain. He also suffered from facial asymmetry, as well as issues with chewing, articulation, breathing, and jaw locking.

In May 2017, Ahmed had surgery to address his symptoms. His preauthorization request was approved by Wellfleet via a third-party vendor that had been hired by Wellfleet to perform medical-necessity reviews. The surgery, though partially successful, did not fully resolve his symptoms, and seven months later, Ahmed’s surgeons determined that a second surgery was necessary to further remedy his skeletal deformity and ongoing pain and breathing problems. Ahmed sent a preauthorization request for the second surgery to Wellfleet, which was reviewed by CIGNA Management, Inc. (Cigna) who rejected the request.

Ahmed also alleged that Cigna was unjustly enriched by receiving from Wellfleet a portion of the insurance premiums paid by Ahmed while intentionally and systematically denying coverage of medically necessary services and procedures in contravention of the insurance contract under which he was due benefits. Ahmed also sought to represent a class of others whose preauthorization requests were denied.

Wellfleet and Cigna moved to dismiss.

DISCUSSION

Ahmed brings claims for breach of contract, violation of N.Y. Insurance Law § 4226, fraud, and unjust enrichment. But the first two claims come too late, and Ahmed’s factual allegations are a poor fit for the latter two.
Ahmed’s breach-of-contract and insurance-law claims are time-barred.

Ahmed sues Wellfleet for both breach of contract and violation of N.Y. Insurance law § 4226. Both claims are time-barred. Ahmed’s contract claim is time-barred because the policy imposes a three-year time limit, meaning that Ahmed brought it two years too late.

FRAUD CLAIMS

Just as with the contract claim, Ahmed fails to plausibly allege fraudulent concealment. He had Wellfleet’s reasons for the denial, and the policy that serves as the basis for his claim. More than three years have passed since all of that. So, like Ahmed’s contract claim, his § 4226 claim must be dismissed as untimely.

Ahmed’s Fraud Claims Must Be Dismissed.

A fraud claim will not lie if it arises out of the same facts as plaintiff’s breach of contract claim.

First, Ahmed fails to identify any duties that are “separate” from the duty of performance. Ahmed appears to argue that the “special facts” doctrine imposed a duty on Defendants to disclose their intention to breach the contract. But this argument fails for multiple reasons. To start, the doctrine usually applies in the context of business negotiations where parties are entering a contract.

Second, even if it does, Ahmed does not identify any fact that Defendants failed to disclose.

Ahmed’s Unjust-Enrichment Claim Must Be Dismissed.

Finally, Ahmed’s unjust enrichment claim against Cigna must also be dismissed. Cigna argues that this claim must be dismissed because, among other reasons, it concerns the subject matter of a valid and enforceable contract.

The existence of a contract precludes Ahmed’s unjust-enrichment claim.

Here, by contrast, the dispute derives from conduct “in contravention of the insurance contract by a party that was acting as a subcontractor to the counterparty to the contract. The dispute arises from the actual breach of contract that Cigna allegedly facilitated.

Ahmed’s fraud claim is defective because intention to breach is not the kind of fact required to be disclosed under the special facts doctrine. In addition, Ahmed fails to allege that he had any relationship with Cigna prior to the denials, making it unclear whether the special-facts doctrine even applies.

Ahmed initially brought this case thinking that Defendants used an algorithm to deny his preauthorization request. His claims are either untimely or are a poor fit for the doctrine he tries to cram them into. As such, Defendants’ motions to dismiss were granted with prejudice. Defendants’ motion to strike the class allegations was denied as moot.

ZALMA OPINION

Waiting more than three years to sue was fatal to almost all of Ahmed’s claims. His attempt to avoid the limitation of action by claiming fraud was imaginative but unsuccessful because none of the elements of the tort of fraud applied.