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March 18, 2004.


The opinion of the court was delivered by: MARILYN PATEL, Chief Judge, District

MEMORANDUM AND ORDER Motion to Strike Motion to Dismiss Motion for Summary Judgment
Plaintiff Richard Helus brings this action against defendant Equitable Life Assurance Society ("Equitable") and Does 1 to 20, alleging that Equitable breached its disability income insurance contract with him and acted in bad faith by declaring he was not disabled and threatening to stop benefit payments even though he could not resume the duties of his prior occupation. Plaintiff amended his complaint on June 27, 2003. Now before the court is defendant's motion for summary judgment, motion to dismiss and motion to strike. After having considered the parties' arguments and submissions, and for the reasons set forth below, the court rules as follows.


  Equitable issued a disability income insurance policy to Helus that was effective July 2, 1990. At the time the policy was issued, Helus was the owner and president of his own construction company, Helus Construction. In July 1992, the company suffered a severe blow when the owner of a $4.5 million project Page 2 refused to pay Helus Construction for its work as a general contractor. Helus was forced to fire all his employees and could not pay his sub-contractors, which resulted in extended litigation and Helus's eventual bankruptcy. On December 21, 1992, Helus submitted a claim for benefits to Equitable for a disability he described as "[s]tress and depression due to ongoing non payments of projects. Unable to handle the pressures." Helus claimed that he became disabled on July 1, 1992. As part of his disability claim, Helus submitted an attending physician's report with a diagnosis of "major depression, single episode, severe, without psychotic features." The psychiatrist, Dr. William Blakey, stated that Helus was "totally disabled by virtue of his depression," which was "primarily . . . the result of work stress and business difficulties." Blakely estimated that Helus would be "totally disabled for 3-6 months probably." Equitable began paying benefits to Helus in November 1993, in the amount of $9100 per month.

  During the time he claimed a disability, Helus worked in several volunteer and paid positions. In 1994 and 1995, Helus was a temporary construction manager for T.D. Service Financial Corporation, advising his employer on several projects. From 1991 to 1998, Helus worked for the San Bernardino County Sheriff's Department ("SBSD") as a Level I Reserve Officer. In addition to volunteering in search and rescue, Helus began working as a paid landscape engineer for the SBSD in November or December of 1996. He became a full-time paid training specialist for SBSD in 1997, leaving in 1998 when he moved to Northern California. In 1999, Helus worked as a part-time volunteer for the Clearlake Oaks Fire Department ("COFD") for six months. Helus moved to Reno, Nevada in 2000 and began working as a project manager for Reno Construction on August 1. He quit three months later. He then became a quality control manager for Frontier Contracting on November 13, 2000 but quit in April after five months. Most recently, Helus returned to California and worked as a "quality control manager, project manager and/or safety manager" for All Cities Enterprises for a few months until he was fired in March 2002.*fn2

  Equitable sent a field investigator to meet with Helus in November 1999. Helus reported that he had worked for SBSD as a training specialist and had also volunteered with COFD. Def.'s Exh. 17, at 5. The next month, the investigator interviewed the Fire Chief of COFD, James Burton, about Helus's activities as a volunteer. According to the investigator's report, Burton stated that Helus performed all the normal duties of a volunteer, such as fighting fires and lifting patients, but COFD "got rid of him" because he Page 3 had personality conflicts with other people at COFD and had difficulty accepting orders. Def.'s Exh. 18, at 2. The investigator also obtained a medical report from COFD, in which Helus affirmed under penalty of perjury that he did not have a psychiatric disorder or any other nervous disorder, and that he was not taking any medications. Def.'s Exh. 19, at 1.

  Concerned about the information from these interviews, Equitable sent Helus in July 2000 to a psychologist, Milton E. Harris, and a psychiatrist, Emily Keram, for Independent Medical Examinations ("IMEs"). Dr. Harris conducted a psychometric evaluation, including a multiphasic personality test, and reported the results to Dr. Keram. In her report to Equitable, Dr. Keram stated: "Helus's psychiatric symptoms currently limit his occupational function. Specific limiting symptoms include his level of anger, irritability and frustration intolerance, his impairment in concentration and memory, and his sleep disorder with resulting anergia. These symptoms put him at significant risk for re-development of a major depressive episode if he were forced to return to the workplace at the current time." Def.'s Exh. 21, at 11. According to Dr. Keram, "Helus's personality traits also render him vulnerable to developing serious psychiatric symptoms when faced with anxiety provoking situations in which he might experience failure or loss of control." Id. Dr. Keram concluded that "Helus will require up to an additional eighteen to twenty-four months of treatment before he will successfully return to full-time occupational functioning." Id. at 12.

  David Lovejoy, a medical consultant for Equitable, discussed the results of the examinations with both Dr. Keram and Dr. Harris. In his telephone log of the conversation with Dr. Keram on September 25, 2000, Lovejoy prepared at least two versions for Dr. Keram's signature. In one, he wrote: "Dr. Keram indicated that she felt strongly about the insured's risk of future disability (Dr. Keram indicated that she was aware of the differences between current disability and risk of disability) and self-harm if he were forced to make an immediate return to work with an abrupt discontinuation of benefits. Dr. Keram felt that 18 to 24 months of psychotherapy would be optimal to strengthen deficient coping mechanisms and make an adequate transition back to the workforce." Plf.'s Exh. E at 1. Dr. Keram signed this version. Id. In a second version, Lovejoy replaced the second sentence with the following: "However, she stated that with eight months of further therapy, the insured should be able to strengthen deficient coping mechanisms and make an adequate transition back into the work force." Def.'s Exh. 23, at 1. Dr. Keram returned the log Page 4 without a signature, but circled "eight months" and noted: "I recommended 18-24 months of tint, but felt that I could not object to the ins. co. offering a settlement of 8 mos of payment." Id.*fn3

  According to a telephone log, Helus was informed by Equitable on September 27, 2000 that Dr. Harris and Dr. Keram "did not find him to be disabled — no axis I diagnosis." Pl.'s Exh. Z, at 1. The claims handler recorded that she "offered the insured 8 months of disability payments per IME dr." Id. On October 25, 2000, Equitable wrote Helus that "we have two independent medical evaluations that were performed and each of them indicated that you are not currently disabled." Def.'s Exh. 25, at 1. Equitable offered Helus eight more months of benefits, an offer "made to be of service to you." Id. On January 1, 2001, Equitable transferred administration of Helus's claim from UnumProvident Corporation to Disability Management Services. Davis Dec., Exh. 2 ¶ 3. Equitable informed Helus on May 15, 2001 that he would receive an additional month of benefits "as a gesture of good will" while Equitable reviewed his current medical records "to determine if there has been any change in your medical condition that may justify the continued payment of benefits." Def.'s Exh. 28, at 1. Concluding that "[b]ased on the information in our file, which includes all of the information relied upon by Equitable in coming to its original decision, we lack evidence to support payment of total disability benefits," Equitable paid Helus his last month of benefits on June 22, 2001. Def.'s Exh. 29, at 2.


 I. Amendments to Pleadings

  Leave to amend pleadings is required except when the amendments are made "as a matter of course" or by consent of the other party. Fed.R.Civ.P. 15(a). When the deadline set by a pretrial scheduling order has passed, leave to amend is granted only when there is "good cause." Fed. R. Civ. P. 16(b). The "good cause" inquiry "primarily considers the diligence of the party seeking the amendment," but "the existence or degree of prejudice to the party opposing the modification" may also be considered. Johnson v. Mammoth Recreations. Inc., 975 F.2d 604, 609 (9th Cir. 1992).

 II. Summary Judgment

  Summary judgment is proper when the pleadings, discovery and affidavits show that there is "no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Page 5 Fed.R.Civ.P. 56(c). Material facts are those which may affect the outcome of the case. Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 248 (1986). A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. Id. The moving party for summary judgment bears the burden of identifying those portions of the pleadings, discovery and affidavits that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Cattrett, 477 U.S. 317, 323 (1986). On an issue for which the opposing party will have the burden of proof at trial, the moving party need only point out "that there is an absence of evidence to support the nonmoving party's case." Id.

  Once the moving party meets its initial burden, the nonmoving party must go beyond the pleadings and, by its own affidavits or discovery, "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). Mere allegations or denials do not defeat a moving party's allegations. Id.; see also Gasaway v. Northwestern Mut. Life Ins. Co., 26 F.3d 957, 960 (9th Cir. 1994). Inferences to be drawn from the facts must be viewed in the light most favorable to the party opposing the motion. Masson v. New Yorker Magazine, 501 U.S. 496. 520 (1991).


  The court first addresses whether Helus should be given leave to amend his complaint, and then reviews whether summary judgment should be granted on Helus's claims for breach of contract, breach of the covenant of ...

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