This is a breach of contract action by an insured against his insurance company. Before the court is defendants' pre-answer motion to dismiss. CPLR § 3211 [a] [7]. Plaintiff has cross moved for leave to amend his complaint. Defendants oppose this relief, arguing that (among other things) the claim he seeks to assert is time barred. CPLR § 3211 [a] [5].

Background

Provident Life and Casualty Insurance Company ["Provident Casualty"] issued two disability insurance policies to plaintiff. One policy was issued on May 24, 1984 [Policy No. 36-334-53379]. The other was issued on May 1, 1976 [Policy No. 36-PC-00019714]. Plaintiff [*2]claims he paid all the premiums for these policies as they came due and that the policies (collectively) provide for monthly disability payments to him for the remainder of his life, should he become totally disabled before attaining age 55. It is undisputed that plaintiff began collecting disability payments in March 1983. Those payments were terminated by defendant(s) on March 4, 1999.

Plaintiff claims the termination of his benefits was part of a scheme by defendant(s) to reduce their costs by denying valid claims. He further contends that defendant(s) used doctors who were paid and instructed to prepare reports unfavorable to him and favorable to the defendant(s) claims. He alleges further that this was part of a larger enterprise to terminate his benefits (and the benefits of other insureds like him). Thus, plaintiff contends that what happened to him is part of a larger practice to defraud other consumers like him. He asserts that defendants have refused to issue premium statements that would permit him to continue his coverage under these policies, and that his policies were cancelled through no default or other inaction by him.

Plaintiff has asserted five (5) causes of action against each and every one of the defendants. His 1st cause of action is for breach of contract and ensuing damages of $504,000, continuing at the rate of $7,000 per month. His 2nd cause of action is also for breach of contract, but based on the alternative theory that even if he did not sustain a "total" disability, he sustained a "residual" disability and is still entitled to disability payments. Plaintiff's 3rd cause of action is for consequential damages, including "loss of his home and his way of life, as well as extreme emotional distress." His 4th cause of action is for deceptive business practices within the meaning of GBL § 349 and he seeks actual damages, plus attorney's fees. Plaintiff's 5th cause of action is for damages arising from defendants' repudiation of their contract with him. Finally, plaintiff seeks punitive damages in an unspecified amount.

Plaintiff has now cross moved to add a 6th cause of action based upon these same facts, and new ones, alleging that defendants have violated the Racketeering Influenced Corruption Organizations Act ("RICO"). He claims that defendants are involved in an enterprise involving an elaborate network of "employer sponsored plans, employers, physicians who conduct so-called independent' medical examinations on behalf of UnumProvident, brokers, agent and producers." He claims further that the enterprise shares a common objective, which is to maximize profits through fraudulent means. Finally, plaintiff claims he received phone calls from the defendants, in which fraudulent conversations took place, and that he also received letters by mail with similarly fraudulent statements.

Defendant Provident Life and Casualty Insurance Company ["Provident Casualty"] seeks dismissal of the 3rd, 4th and 5th causes of action. The remaining defendants (i.e. Provident Life and Accident Insurance Company, Provident Companies, Inc., and UnumProvident Corporation, etc.) [collectively "other defendants"] seek dismissal of the entire complaint against them.

Applicable Law

In determining whether a complaint is sufficient so as to withstand a motion to dismiss pursuant to CPLR § 3211 "the sole criterion is whether the pleading states a cause of action, and if from its four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law." Guggenheimer v. Ginzburg, 43 NY2d 268 (1977). The facts as alleged must be accepted by the court as [*3]true, for purposes of such a motion, and are to be accorded every favorable inference. Morone v. Morone, 50 NY2d 481 (1980); Beattie v. Brown & Wood, 243 AD2d 395 (1st dept. 1997). Moreover, where the basis for the motion to dismiss is the purported failure to state a cause of action (CPLR § 3211 [a] [7]), the court's attention "should be focused on whether the plaintiff has a cause of action rather than on whether he has properly stated one." Rovello v. Orofino Realty Co., 40 NY2d 633, 634 (1976). Although bare conclusions will not suffice, affidavits and other evidence may be freely relied upon to preserve inartfully pleaded but potentially meritorious claims. Rovello v. Orofino Realty Co., supra.

With respect to plaintiff's proposed 6th cause of action, as a general matter, leave to amend should be freely granted. CPLR § 3025 (a). Nonetheless, the court should examine the legally sufficiency of the merits of the proposed amendment. If it is totally devoid of merit and legally insufficient, leave to amend should be denied. Heller v. Louis Provenzano, Inc., 303 AD2d 20, 26 (1st dept. 2003). Where, as here, the defendants contend that the proposed amended complaint asserts a time barred complaint (CPLR § 3211 [a] [5]), the court must further consider whether the claim sought to be asserted is within the relevant statutes of limitations.

Whether plaintiff's cross motion to assert a RICO claim against the defendants should be granted rests on whether his factual claims support such a cause of action and the claim is otherwise time barred. The statute of limitations for a RICO claim is four (4) years. It does not accrue however "until a plaintiff both knows, or should have known, of the injury to business or property, and that the predicate act causing injury is part of a pattern of racketeering activity." Niagara Mohawk Power Corp. v. Freed, 265 AD2d 938, 940 (4th dept. 1999).

Although, defendants urge the court to deny plaintiff's motion to amend his complaint because his RICO action is time barred, it is impossible for the court to make such a factual determination at the present time. Niagara Mohawk Power Corp. v. Freed, supra at 940. Though plaintiff acknowledges he learned of the termination of his benefits in 1999, it was not until he learned of a certain federal court case in 2002 that he discovered the "pattern of racketeering activity" alleged. Hangarter v. The Paul Revere Life Insurance Company, 236 FSupp 1069 (N.D. Cal 2002) reversed ^[FN1] in part 373 F3rd 998 (9th Cir 2004). In Hangarter, the plaintiff successfully proved that an insurance company related to Provident Casualty ^[FN2] had acted in bad faith in denying him disability benefits. While this state does not recognize the tort of "bad faith,"^[FN3] plaintiff's factual claims set forth a convincing argument why he should be permitted to add a [*4]RICO cause of action, and why he may not have discovered a "pattern" until 2002 with the Hangarter case.

Alternatively, defendants argue that plaintiff's factual allegations do not support a Civil RICO cause of action because he has not described his claims in sufficient detail. The RICO statutes were enacted to make it unlawful for someone to earn income from a pattern of racketeering activity to be used to: (1) acquire an interest in, establish or operate an enterprise involved in interstate commerce; (2) acquire or maintain an interest in such enterprise through a pattern of racketeering activity; (3) conduct or participate in the conducting of such enterprise through racketeering activity; and (4) conspire to do any of the foregoing acts. Simpson Electric Corp. v. Leucadia, Inc., 72 NY2d 450 (1988). Thus, the elements of a Civil RICO cause of action are: [1] conduct [2] of an enterprise [3] through a pattern [4] of racketeering activity. 18 USCA §§ 1961, 1962, 1964; Podraza v. Carriero, 212 AD2d 331, lv dism 86 NY2d 885 (1995).

In order to establish a "pattern" there must be at least two (2) racketeering activities within a ten (10) year period. Simpson Electric Corp. v. Leucadia, supra; Podraza v. Carriero, supra. The definition of "racketeering" includes any one of a number of predicate offenses, including wire and mail fraud. An "enterprise," is a continuing operation and is closely connected to the "pattern" requirement. Simpson Electric Corp. v. Leucadia, supra; see also, US v. Bortnovsky, 879 F2d 30 (CA 2nd 1989) (liberal construction of what facts establish pattern or enterprise).

Although defendants oppose plaintiff's cross motion to amend his complaint, arguing the proposed pleadings are threadbare, the argument is rejected. Leave to amend is freely granted by the courts, and issues about the provability of a claim are not before the court, but remain to be decided another day. CPLR § 3025 (a). This is particularly so, when many of the facts constituting the claim rest with the party seeking to oppose it. Niagra Mohawk Power Corp. v. Freed, supra.

Plaintiff presents facts that state a colorable RICO claim, that would otherwise withstand a motion to dismiss. Defendants, on the other hand have not made a preliminary showing that his claims are flatly contradicted by indisputable documentary evidence, and therefore, not entitled to consideration. Biondi v. Beekman Hill House Apt. Co., 257 AD2d 76, 80-81 aff'd 94 NY2d 659 (2000). Therefore, plaintiff's motion for leave to amend his complaint to assert a new (6th cause of action) is hereby granted. Plaintiff shall serve the amended complaint, in the form proposed, on the defendants, within ten (10) days from the date of this decision/order.

B. Motion to dismiss the 3rd cause of action

Defendant Property Casualty seeks dismissal of plaintiff's 3rd cause of action for consequential damages. It claims that because New York does not recognize an independent tort cause of action ("bad faith") for an insurer's alleged failure to perform its contractual obligations under an insurance policy there is no right to consequential damages. Rocanova v. Equitable Life Assurance Society, 83 NY2d 603 (1994); New York University v. Continental Insurance Co., 87NY2d 308 (1995).

Property Casualty relies primarily on federal case law for this argument. See: Manning v. Utilities Mut. Ins. Co., 2004 WL 235256 (SDNY 2004); Brown v. Paul Revere Life Ins. Co., (SDNY 2001); Continental Information Systems Corp. v. Federal Insurance Co., 2003 WL [*5]145561 (SDNY 2003). The Appellate Division, First Department, however, permits the recovery of consequential damages for an insurer's breach of its obligations under the insurance policy because "[a]lthough the policy limits define the amount for which the insurer may be held responsible in performing the contract, they do not define the amount for which it may be liable upon a breach." Acquista v. New York Life Insurance, 285 AD2d 73 (1st dept. 2001). Given the binding Appellate precedent in this department, defendants argument must be rejected.

Defendants' further argument, however, that even if plaintiff can recover for consequential damages, he cannot recover for "extreme emotional distress", is persuasive. The First Department ruling in Acquista must be read consistently with the Court of Appeals ruling in Rocanova which rejects "bad faith" insurance torts in New York State. Acquista only clarifies that consequential damages are available under a contract theory. Thus, plaintiff cannot recover damages generally reserved for torts (e.g. emotional distress) as consequential contract damages. Wehringer v. Standard Security Home Insurance, 57 NY2d 757 (1982); Rocanova v. Equitable Life Assurance Society, supra; New York University v. Continental Insurance Co., supra; Acquista v. New York Life Insurance; supra. Consequently, defendants' motion to dismiss the 3rd cause of action is granted only to the extent that plaintiff seeks damages for emotional distress. That damage claim is severed and dismissed. Otherwise, the 3rd cause of action withstands defendants' motion to dismiss.

C. Motion to dismiss the 4th cause of action

Plaintiff contends that defendant has engaged in deceptive business practices in violation of The Consumer Protection Act (GBL § 349). The elements of a cause of action for deceptive practices are that: 1) the defendant made misrepresentations or omissions that were likely to mislead a reasonable consumer in the plaintiff's circumstances, 2) that the plaintiff was deceived by those misrepresentations or omissions, and 3) that as a result the plaintiff suffered injury. Solomon v. Bell Atlantic Corp., 9 AD3d 49 (1st dept. 2004).

In order to assert a cause of action under GBL § 349 the plaintiff must allege that the challenged act or practice was consumer oriented; that it was misleading in a material way and the plaintiff suffered injury as a result of the deceptive act. Stutman v. Chemical Bank, 95 NY2d 24 (2000). Plaintiff's allegations, which the court accepts as true, meet this legal standard. Plaintiff's claims are not limited to him alone, but he claims that his experience is exemplary of what other consumers (e.g. the insurance buying public at large) has encountered. NYU v. Continental Insurance, supra; Fulton v. Allstate Insurance Co., 14 AD3d 380 (1st dept. 2005). Whether he can prove his reliance on false statements, and the rest of his claims remains to be decided at another time. Small v. Lorrilard Tobacco Co., 252 AD2d 1 (1st dept. 1998) aff'd 94 NY2d 43 (1999).

D. Motion to dismiss the 5th cause of action

Defendants argue that even if plaintiff prevails in this action, his potential recovery is limited to the benefits accrued from March 4, 1999 (the date the benefits were terminated) through the date of commencement of this action only. They argue further that plaintiff's policies were not terminated, but only placed on a "temporary waiver of premium status" which is why they have not sent any notices that premiums were due. Thus, they argue once this litigation is completed, he can seek a benefit determination under the policies for ongoing payments.

None of these arguments have any bearing on whether plaintiff has stated a cause of [*6]action for repudiation. The court finds that he has. His factual claim, that he was notified his file was closed, and told he would receive no further benefits, states a cause of action, since an insured may recover future benefits if the insurer has repudiated the entire policy. Wurm v. Commercial Ins. Co., 308 AD2d 325 (1st dept. 2003).

E. Punitive damages

Plaintiff has asserted a claim for punitive damages for his breach of contract, deceptive business practices (GBL § 349), and RICO claims. "Punitive damages are not recoverable for an ordinary breach of contract as their purpose is not to remedy private wrongs but to vindicate public rights." Rocanova v. Equitable Life Assur. Socy., supra at 613. The First Department case of Acquista does not open this door or command a different result, as plaintiff urges. Acquista v. New York Life Insurance, supra at 80. Therefore, plaintiff's claim for punitive damages on his contract causes of action is severed and dismissed.

Plaintiff can however assert his claim for punitive damages on his RICO and deceptive business practices causes of action. Whether he can prove "egregious conduct" to warrant such an award at a later date is not germane to whether he has sufficiently stated a cause of action to withstand dismissal of this claim. Therefore, the remaining punitive damages claim stands.

F. Other defendants' motion to dismiss

The defendants other than Provident Life and Casualty seek the dismissal of the entire complaint. These remaining defendants maintain that except for being named defendants, the plaintiff has made no specific factual claims against any one of them, therefore the complaint should be dismissed for failure to state a cause of action against them. They maintain, while not admitting any kind of liability, that it was Provident Life and Casualty that issued the policies, and that they (the remaining defendants) have no contractual liability to plaintiff.

The plaintiff has alleged sufficient facts to withstand these defendants' motion to dismiss. Defendants' argument, that UnumProvident did not even exist when plaintiff secured the subject policies, is not proof that flatly contradicts plaintiff's claims, that UnumProvident may be liable to him for damages. UnumProvident is apparently either a holding company or the parent of the other defendants, including Provident Casualty. Thus, at this stage of the case, any relief dismissing these defendants is premature, and their motion for such relief is denied.

Plaintiff's motion to amend his complaint is granted.

Defendant Provident Casualty's motion to dismiss the 3rd, 4th, 5th and punitive damages causes of action is granted only to the extent that plaintiff's 3rd cause of action claiming damages for his emotional distress is severed and dismissed as to this defendant (and all the other defendants as well). The 3rd, 4th and 5th causes of action remain otherwise intact.

Plaintiff's claim for punitive damages on his contract causes of action is severed and dismissed. Otherwise his claim for punitive damages on his deceptive practices and RICO causes of action remain intact. [*7]

The remaining defendants' motion to dismiss the entire complaint as to them is denied, and the only causes of action severed and dismissed as to them are those that were severed and dismissed as to defendant Provident Casualty.

Ten (10) days from the date of this decision/order. Defendants' answer and reply, if any, shall be as per the CPLR.

This case is hereby scheduled for a preliminary conference on April 20, 2006 at 9:30 a.m., in Part 10, 80 Centre Street, Room 122.

Any relief not expressly addressed herein has nonetheless considered by the court and is denied.

This shall constitute the decision and order of the Court.

Dated: New York, New YorkSo Ordered

February 14, 2006

__________________________

HON. JUDITH J. GISCHE, J.S.C.