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Kerns v. Northwestern Mutual Life Insurance Co.

May 26, 2010

J. GARY KERNS, PLAINTIFF,
v.
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Garland E. Burrell, Jr. United States District Judge

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT*fn1

Defendant The Northwestern Mutual Life Insurance Company's ("Northwestern") moves for summary judgment on Plaintiff's breach of contract and breach of the implied covenant of faith and fair dealing claims, and on Plaintiff's request for punitive damages. Plaintiff alleges in his Complaint that Northwestern breached the parties' contract when it declined to award Plaintiff lifetime disability benefits under Plaintiff's insurance policy. Specifically, Plaintiff challenges Northwestern's determination that Plaintiff's degenerative disc disorder was caused by a "sickness" rather than by a combination of a sickness and two "accidents." Plaintiff alleges Northwestern made this determination in bad faith and therefore breached the implied covenant of good faith and fair dealing. Plaintiff alleges these breaches were "malicious[]" and entitle Plaintiff to receive punitive damages. For the following reasons, Northwestern's motion is granted in part and denied in part.

I. Background

Plaintiff has two disability income policies with Northwestern: Policy D023812 ("Policy 1") and Policy D013647 ("Policy 2") (collectively, the "Policies"). (Statement of Undisputed Facts ("SUF") ¶¶ 1-3.) Under both Policies, the "maximum benefit period" available to an insured depends on whether the disability resulted from "accidental bodily injuries" or "sickness." (Id. ¶ 4.) If the disability resulted from accidental bodily injury, the insured may collect benefits for life. (Id.) If the disability resulted from sickness, the insured may collect benefits for twenty-four months for a disability beginning after age sixty-three; otherwise, the insured may collect benefits until the "first policy anniversary" after the insured's sixty-fifth birthday. (Id.) Each Policy states:

Concurrent Disabilities. If disability results from more than one cause, the monthly disability benefit shall be the maximum payable for any one of the causes.

(Suhr Decl. Ex. A, NW-00021, Ex. B, NY-00010; SUF ¶ 8.)

On October 3, 2006, Plaintiff requested disability benefits from Northwestern, claiming that as of February 2006, he was disabled from his occupation as an insurance agent due to neck and back pain. (SUF ¶¶ 9-10.) Plaintiff alleges this pain was caused by two sporting-event related incidents in 1987 and 2001. (Id. ¶ 11.) In the first incident, Plaintiff sustained a sprained neck and concussion when he was knocked down while refereeing a college football game in 1987. (Id. ¶ 12.) In the second incident, Plaintiff was hit on the side of his head by a foul ball while a spectator at a minor league baseball game in 2001. (Id. ¶ 13.)

After receiving Plaintiff's claim, "Northwestern [] began administering the claim under the total disability benefit provisions of both policies." (Id. ¶ 14.) Northwestern paid Plaintiff disability benefits under Policy 1 until August 20, 2008, and under Policy 2 until August 1, 2009. (Id. ¶¶ 16, 20.) It is undisputed that Northwestern has paid all benefits owed under the Policies if Plaintiff's disability was caused by "sickness" only. (Id. ¶¶ 17, 21.)

On November 14, 2006, Northwestern acknowledged receipt of Plaintiff's request for continuance of disability benefits and requested further information to evaluate whether the disability was the result of an accident or sickness, which Plaintiff provided. (SUF ¶¶ 27-28, 43.) The information Plaintiff submitted was reviewed by Dr. Henry Alba, a medical consultant for Northwestern; he "opined that the symptoms in February 2006 appeared to be the result of a chronic and progressive cervical disc disease and not the result of the 1987 and 2001 incidents." (Id. ¶¶ 43, 50.) On May 16, 2007, Northwestern "wrote to [P]laintiff and explained in detail its claim determination that the disability was the result of sickness, rather than an accident." (Id. ¶ 51.)

II. Legal Standard

The movant for summary judgment bears the initial burden of demonstrating the absence of a genuine issue of material fact for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). If the movant satisfies its burden, "the non-moving party must set forth, by affidavit or as otherwise provided in Rule 56 [of the Federal Rules of Civil Procedure], specific facts showing that there is a genuine issue for trial." T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987) (quotations and citation omitted) (emphasis omitted). "All reasonable inferences must be drawn in favor of the non-moving party." Bryan v. McPherson, 590 F.3d 767, 772 (9th Cir. 2009).

III. Discussion

A. Breach of Contract

Northwestern argues it is entitled to summary judgment on Plaintiff's breach of contract claim "since Plaintiff cannot establish entitlement to benefits . . . " (Mot. 10:13-14.) Specifically, Northwestern argues Plaintiff's breach of contract claim fails because "there was no sudden precipitating 'accident' that caused his disability." (Id. 11:3-7.) Plaintiff responds he ...


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