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Kimberly Shepard v. United Healthcare Insurance

February 18, 2011


The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge


Through the present action, Plaintiff Kimberly Shepard ("Plaintiff") alleges that Defendant United Healthcare Insurance Company ("Defendant") wrongfully, and in bad faith, denied authorization for Plaintiff to be placed in a residential treatment center ("RTC") for anorexia nervosa. Plaintiff now moves for partial summary judgment of her claim for breach of the implied covenant of good faith and fair dealing. Defendant has also moved for summary judgment, or in the alternative, summary adjudication, of Plaintiff's claims for breach of good faith and fair dealing, punitive damages, attorney's fees, and injunctive relief.

Both motions are brought pursuant to Federal Rule of Civil Procedure 56.*fn1 For the reasons set forth below, Plaintiff's motion is denied, and Defendant's motion is granted in part and denied in part.*fn2


Plaintiff alleges breach of contract and breach of good faith and fair dealing arising out of her mental health insurance policy ("the policy") with Defendant, which she obtained through her employment as a registered nurse with UC Davis Medical Center. Plaintiff has a history of suffering from anorexia nervosa, but had been stable for several years until March 2008 when she began to relapse after a miscarriage.

Plaintiff's eating disorder consisted of severe calorie restriction and compulsive over-exercising. In August 2008, she was diagnosed with anorexia nervosa and sought treatment from the Summit Intensive Outpatient Program in Sacramento ("Summit"). The Summit was designed for eating disorders where patients attend three days a week for three hours at a time.

Plaintiff was discharged from Summit after two weeks when her doctors determined she needed a higher level of care. (Pl.'s Undisp. Facts Nos. 38-39). Upon discharge, Summit recommended that Plaintiff continue in a day treatment or residential treatment care ("RTC") program. Plaintiff's psychiatrist, Dr. Murrer, also recommended a higher level of care like RTC or a partial hospitalization program ("PHP"), but at that time, Plaintiff refused to attend either of these programs.

In September 2008, Plaintiff was placed on disability leave from work by Dr. Murrer due to the severity of her eating disorder. Plaintiff continued to refuse a higher level of care for anorexia until January 2009, when her husband purportedly stated that he would seek a divorce and take their son if she did not receive treatment in an RTC program. Soon thereafter, Plaintiff researched residential treatment facilities and chose Monte Nido in Malibu, California because it specialized in anorexia and exercise addictions, and was the closest available center to Sacramento that accepted her insurance. Plaintiff added herself to the waiting list for admission to Monte Nido around this time.

Monte Nido did not contact Defendant to obtain authorization for Plaintiff's admission until February 26, 2009, due to Defendant's policy that it will only consider a request for authorization for residential treatment the day of, or shortly before, admission. (Pl.'s Undisp. Facts Nos. 78, 79). An agent for Defendant entered case notes into the company's "Linx" program based on his conversation with Monte Nido's assistant clinical director, Karen Lewis.

(Pl.'s Undisp. Facts Nos. 79, 81, 91). Those notes indicated that Dr. Libus, a psychiatrist working part time for Defendant, determined that Plaintiff did not meet the criteria for RTC, but did meet the criteria for a PHP (Def.'s Undisp. Facts No. 24). Dr. Libus therefore recommended that Plaintiff's request for admission to Monte Nido be denied.

The parties dispute whether Dr. Libus relied solely on the Linx case notes or if she additionally sought input from Dr. Schneider, the Medical Director at Monte Nido (Pl.'s Resp. to Def.'s Undisp. Facts No. 26; Def.'s Opp'n. to Pl.'s Undisp. Facts No. 109) before making her recommendation. Both parties do agree, however, that Dr. Schneider at this point had not yet examined Plaintiff and had no access to her medical records other than a "medical clearance form." (Pl.'s Undisp. Facts Nos. 113-115). There is no consensus on whether Dr. Libus at this point granted authorization for admission to a PHP at a facility close to her home (Pl.'s Resp. to Def.'s Undisp. Facts No. 36).

Upon receipt of Defendant's denial letter, Monte Nido requested an urgent appeal. The appeal was assigned to Dr. Ross, a psychiatrist under contract with an external review board, Prest & Associates, which provides outside medical reviews for Defendant. Parties dispute whether Prest & Associates is an "independent agency." (Pl.'s Resp. to Def.'s Undisp. Facts No. 42). Dr. Ross's review was based on information contained in the Linx case notes, with Dr. Libus's additions, and his own conversation with Dr. Schneider, who still had not examined Plaintiff. (Pl.'s Undisp. Facts Nos. 113, 145, 150).

Based on this review, Dr. Ross agreed with Dr. Libus that Plaintiff did not meet the level of care guidelines provided by Defendant for residential treatment and that she did meet the criteria for partial hospital mental health treatment. Before finalizing its denial of Plaintiff's appeal, Defendant's Assistant Medical Director, Dr. Brown, reviewed Dr. Ross's report along with the updated Linx case notes and approved the final decision.

Throughout the process for both Plaintiff's request for authorization and appeal, Drs. Libus, Ross, and Brown only relied on previous reviewing physicians' notes, the initial case notes based on a conversation with Monte Nido's clinical director, and a conversation with Dr. Schneider who had not yet examined Plaintiff. (Pl.'s Undisp. Facts Nos. 81, 91, 107, 109, 110, 145, 166). At no time did any of Defendant's reviewing doctors request or have access to information about Plaintiff's treatment or past medical records, or contact any of Plaintiff's treating physicians. (Pl.'s Undisp. Facts Nos. 82, 83, 147, 148).

Plaintiff learned of the denial for authorization to be admitted to Monte Nido a day before she was scheduled to leave for the facility. She decided to pursue treatment anyway, and Plaintiff's family subsequently paid for two months of treatment at Monte Nido out-of-pocket. Plaintiff filed the instant suit on March 27, 2009, and on April 2, 2009, sought a Temporary ...

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