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March 30, 2001


The opinion of the court was delivered by: Breyer, District Judge.


In this breach of contract/bad faith lawsuit plaintiff contends that defendants breached plaintiffs health insurance contract by, among other things, failing to pay for cosmetic surgery to correct the effects of an earlier illness. Defendants now move for summary judgment. After carefully considering the papers submitted by the parties, and' having had the benefit of oral argument, defendants' motion for summary judgment is GRANTED in part and DENIED in part.


In June 1991 plaintiff was diagnosed with nephritis, a kidney condition which results in body swelling and weight gain from fluid retention. Plaintiff gained approximately 50 pounds as a result of the condition. She received medical treatment, including chemotherapy and home nursing care, until the Spring of 1992. She eventually lost all of the weight she had gained, but was left with excessive skin laxity and bulging consistent with fat deposits. She also suffered tissue damage, which caused a dramatic change in her anatomical shape so that she could no longer wear her normal clothing. She suffered extreme embarrassment because of the condition of her legs/thighs and wore long pants and skirts to conceal her disfigurement.

The cosmetic surgery

Plaintiffs physicians were concerned that she might have a recurrence of the disease. Accordingly, for the next few years she utilized "conservative" methods in an effort to regain her pre-disease shape and body contour. When her condition did not improve, and she felt surgery would not be a risk to her health, she consulted with a plastic surgeon, Dr. Maxwell. Dr. Maxwell performed an inner thigh lift and ultrasound assisted liposuction on her in August 1996. Plaintiff prepaid for the procedure and did not seek pre-certification from defendant Celtic Life Insurance Company ("Celtic"), her health insurer.

In April 1997, plaintiff submitted a claim to Celtic for payment of the anesthesiology fees related to the surgery. Celtic promptly denied the claim on the ground that her health insurance policy only covered cosmetic surgery to "correct a bodily injury or sickness." On May 1, 1997, plaintiff appealed the denial of her claim. Two weeks later, on May 14, 1997, Celtic upheld the initial claim denial on the grounds that the surgery was not performed (1) to correct a bodily injury or sickness, and (2) she did not seek precertification of the surgery.

Plaintiff subsequently filed a complaint with the California Department of Insurance on May 29, 1997. Her complaint explained that she had had trouble obtaining her receipts from her plastic surgeon who had gone on indefinite medical leave, but that she expected Celtic to shortly deny her claim for the surgeon's fee as it had done with the anesthesiology fee. In response to her Department of Insurance complaint, Celtic wrote plaintiff on August 11, 1997 with a further explanation of its denial and requested that plaintiff provide it with her medical records. She responded to Celtic's letter and advised that her physicians at Stanford (who treated her nephritis) and with whom she discussed her cosmetic surgery would confirm the damage to plaintiff's skin laxity and tissue movement. She also advised that she has photographs taken before and after her illness which demonstrate the damage caused by her illness.

On October 10, 1997, after receipt of plaintiffs medical records, Celtic forwarded plaintiffs appeal for an outside, independent medical review. On October 30, 1997, Celtic sent plaintiff a letter explaining that the outside medical review found that her surgery was not covered by her policy.

Other miscellaneous claims

On October 22, 1997, plaintiff appealed the denial of claims for physical therapy and acupuncture services. By letter dated Nov. 13, 1997, Celtic agreed to pay for the physical therapy, but with respect to the remaining items it stated that she had not indicated precisely what benefit issues relate to those items. Celtic said it would be happy to review those claims if plaintiff provided the relevant details. Plaintiff responded with further details by letter dated December 4, 1997.

On January 17, 1998, plaintiff wrote Celtic regarding her claim for acupuncture services. She then filed a complaint with the California Department of Insurance about payment for those services. Celtic responded to her by letter dated May 18, 1998. Plaintiff promptly responded with a letter of her own, dated June 2, 1998.

The request for a lower body lift pre-certification

On April 9, 1999, plaintiff faxed and mailed a letter to Celtic requesting preauthorization for a surgeon in Kansas to perform a lower body lift to correct the physical damage caused by her nephritis. She had received notice that her Celtic policy was due to expire on May 1, 1999 due to Celtic's withdrawal from the California market. Celtic's administrator received the mail copy on April 17, 1999. On May 3, 1999, Celtic's administrator denied the pre-authorization request on the ground that the policy expired on May 1, 1999.

The lawyers get involved

On August 30, 1999, plaintiffs attorney sent a demand letter to Celtic regarding all of plaintiffs claims. Celtic responded that plaintiff had completed all of her administrative procedures regarding the Dr. Maxwell surgery as of October 30, 1997. In an October 21, 1999 telephone conversation between Celtic and plaintiffs attorney, Celtic suggested that plaintiff submit a statement of medical necessity from her physician. Plaintiff did so on January 13, 2000. Celtic. forwarded the new information, along with the old, for an outside independent medical review. By letter dated March 13, 2000, Celtic again denied the claim for the surgery performed by Dr. Maxwell.

The present lawsuit

Plaintiff filed this lawsuit in April 2000 in state court. She makes claims for breach of contract, breach of the implied covenant, negligence, and emotional distress against Celtic and its plan administrator, Healthplan Services ("Healthplan"). Defendants removed the case to this Court in December 2000 after plaintiff's response to interrogatories revealed that the amount in controversy requirement was satisfied. Defendants now move for summary judgment.


I. Summary Judgment Standard

Summary judgment is proper when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R.Civ.P. 56(c). An issue is "genuine" only if there is a sufficient, evidentiary basis on which a reasonable fact finder could find for the nonmoving party, and a dispute is "material" only if it could affect the outcome of the suit under governing law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A principal purpose of the summary judgment procedure "is to isolate and dispose of factually unsupported claims." Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no `genuine issue for trial.'" Matsushita Etec. Ind. Co. v. Zenith Radio, 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

"In considering a motion for summary judgment, the court may not weigh the evidence or make credibility determinations, and is required to draw all reasonable inferences in a light most favorable to the non-moving party." Freeman v. Arpaio, 125 F.3d 732, 735 (9th Cir. 1997). An inference may be drawn in favor of the non-moving party, however, only if the inference is "rational" or "reasonable" under the governing substantive law. See Matsushita, 475 U.S. at 588, 106 S.Ct. 1348.

In determining whether to grant or deny summary judgment, it is not a court's task "to scour the record in search of a genuine issue of triable fact." Keenan v. Allan, 91 F.3d 1275, 1279 (9th Cir. 1996) (internal quotations omitted). Rather, a court is entitled to rely on the nonmoving party to identify with ...

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