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FCE Benefit Administrators, Inc. v. Independence Holding Co.

United States District Court, N.D. Texas, Dallas Division

October 17, 2019

FCE BENEFIT ADMINISTRATORS, INC.
v.
INDEPENDENCE HOLDING COMPANY, et al.

          MEMORANDUM OPINION AND ORDER

          KAREN GREN SCHOLER UNITED STATES DISTRICT JUDGE

         This Order addresses Defendants Independence Holding Company ("IHC"), Madison National Life Insurance Company, Inc. ("MNL"), Standard Security Life Insurance Company of New York ("SSL"), and IHC Carrier Solutions, Inc.'s ("IHC Carrier") (collectively, "Defendants") Motion to Dismiss Plaintiffs First Amended Complaint ("FAC") [ECF No. 42]. For the following reasons, the Court grants in part and denies in part the Motion.

         I. BACKGROUND

         In February 2011, Plaintiff FCE Benefit Administrators, Inc. ("Plaintiff) entered into an agreement with SSL and MNL, under which Plaintiff offered SSL's and MNL's insurance benefits programs to its clients. FAC ¶ 9. In November 2014, Defendants approached Plaintiff, and requested that Plaintiff enter into revised contracts with SSL and MNL. Id. ¶ 10. Plaintiff claims it agreed to the changes, largely due to Defendants' assurances of a continuing business relationship. See Id. ¶¶ 10, 13-14. Accordingly, Plaintiff entered into contracts with MNL ("MNL Agreement") and SSL ("SSL Agreement") (collectively, "Agreements") on December 18, 2014, and March 3, 2015, respectively. Id. ¶¶ 15, 19. Those Agreements are substantively the same, and were executed for the stated purpose of growing the policies of the insurance produced, managed, and administered by Plaintiff and underwritten by MNL and SSL. Id. ¶¶ 15, 20. In exchange, Defendants would compensate Plaintiff "[f]or the Contract Years" 2012 to 2016 at "forty percent (40%) of all Net Profit. .. earned on the limited medical, major medical and dental business within the FCE Business." Id. Ex. A at 2; id. Ex. B at 2. "Net Profit" is calculated as follows:

c. The Net Profit or Net Loss of each Contract Year shall be calculated in accordance with the following formula, it being understood that INCOME shall be the amount identified in subparagraph 1. below, and OUTGO shall be the sum of the amounts identified in subparagraphs 2., 3., 4., 5., and 6. below:
INCOME
1. Gross earned Premium received by [MNL and SSL] for losses occurring during the Contract Year under consideration, reduced by the rebates paid as determined by [MNL's and SSL's] actuaries, in accordance with the regulations promulgated under the Patient Protection and Affordable Care Act (and related amendments and regulations) ("PPACA").
OUTGO
2. Losses incurred and paid plus reserves for losses incurred and not yet paid as established by [MNL and SSL] for losses occurring during the Contract Year under consideration ("Outgo 2");
3. An additional 20% reserve margin will apply to the best estimate reserves in all calculations ("Outgo 3");
4. Carrier fees, commissions, excess reinsurance fees (see Exhibit C), risk adjusters, administration expenses, actuarial fees, PPACA taxes, fees and expenses, medical loss ratio rebates under PPACA calculation in accordance with Paragraph 5 and related expenses payable by MNL for the Business, as defined by MNL and used in pricing for the Business ("Outgo 4");
5. Federal and state: premium taxes, licenses, fees and assessments during the Contract Year ("Outgo 5").
The amount by which INCOME exceeds OUTGO is the Net Profit. The amount by which OUTGO exceeds INCOME is the Net Loss.

Id. Ex. A at 2; id. Ex. B at 2. On December 18, 2014, Plaintiff entered into a separate contract with MNL and SSL-the Amended and Restated Administrative Services Agreement ("ASA"). Defs. App. 84. The ASA contains the following arbitration provision:

18. ARBITRATION (a) In the event of any dispute between the parties which arises under [the ASA], . . shall be settled by arbitration in accordance with the rules for commercial arbitration of the American Arbitration Association (or a similar organization) in effect at the time ...

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