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Marks v. United States Life Insurance Company In The City of New York

United States District Court, E.D. California

July 11, 2014

STEVEN MARKS, Plaintiff,
v.
UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK, a New York corporation, Defendant.

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS

JOHN A. MENDEZ, District Judge.

This matter is before the Court on Defendant United States Life Insurance Company in the City of New York's ("U.S. Life") Motion to Dismiss (Doc. #5) Plaintiff Steven Mark's ("Plaintiff") Complaint (Doc. #1-1).[1] Plaintiff opposed the motion ("Opposition") (Doc. #7), and U.S. Life filed a reply (Doc. #8).

I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND

The Complaint alleges two causes of action: (1) Breach of Contract and (2) Breach of the Duty of Good Faith and Fair Dealing. Plaintiff filed the Complaint in the Sacramento County Superior Court, and U.S. Life removed it to this Court.

In 2011, Plaintiff entered into a "Hospital Accident Indemnity Insurance Policy" ("the Policy") (Comp. Exh. 1) with U.S. Life. In 2012, Plaintiff was hospitalized as the result of two strokes. He submitted a claim to U.S. Life for benefits under the Policy as a result of the hospitalization. U.S. Life denied coverage.

II. OPINION

A. Discussion

U.S. Life contends the Complaint should be dismissed because the clear language of the Policy demonstrates that Plaintiff's hospitalization was not covered by its terms. MTD at 3-4. Therefore, U.S. Life argues, there was no breach of the agreement or of the duty of good faith and fair dealing.

1. Breach of Contract

The elements of a breach of contract are "(1) the existence of the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff." Oasis W. Realty, LLC v. Goldman , 51 Cal.4th 811, 821 (2011). The issue here is whether U.S. Life's refusal to cover Plaintiff's hospitalization constituted a breach of the Policy. Each party offers their own interpretation of the Policy's coverage provisions.

Interpretation of an insurance policy is a question of law. Waller v. Truck Ins. Exch., Inc. , 11 Cal.4th 1, 18 (1995). "The rules governing policy interpretation require [the Court] to look first to the language of the contract in order to ascertain its plain meaning or the meaning a layperson would ordinarily attach to it." Id . (citing Cal. Civ. Code § 1638).

The Policy states that U.S. Life will pay benefits if "an insured person visits or is confined to a hospital due to an injury caused by an accident." The Policy specifically defines "accident" as a "sudden, unforeseen and unexpected event that occurs without the intent of the Insured Person." It further defines "injury" as "bodily harm or damage due to an accident that is not contributed to by disease, illness, infection, bodily infirmity or any other abnormal physical condition."

U.S. Life contends the strokes that caused Plaintiff to be hospitalized did not constitute "an injury caused by an accident" as understood by the clear language of the Policy. MTD at pp. 4-6. U.S. Life argues a stroke is by definition bodily harm that is contributed to by "disease, illness, infection, bodily infirmity, or any other abnormal physical condition."

In his Opposition, Plaintiff cites a series of cases involving interpretation of the word "accident."[2] Opp. at pp. 5-11. Many courts have dealt with defining "accident" for the purposes of determining the extent of insurance coverage. See Khatchatrian v. Cont'l Cas. Co. , 332 F.3d 1227, 1228-29 (9th Cir. 2003); Sawyer v. Hartford Life & Acc. Ins. Co., 10-CV-1293-MMA BLM, 2012 WL 353775 (S.D. Cal. 2012); Schar v. Hartford Life Ins. Co. , 242 F.Supp.2d 708, 715-16 (N.D. Cal. 2003). The Ninth Circuit has found that, generally, there must be some sort of external event causing injury in order to meet the definition of accident. Khatchatrian, at 1228-29. Plaintiff's response to U.S. Life's discussion of Khatchatrian is that it is not binding precedent. Opp. at p. 13.

Plaintiff contends that this Court should find, instead, that the California Supreme Court decision in Geddes & Smith, Inc. v. St. Paul-Mercury Indemnity Company , 51 Cal.2d 558, 566 (1959) ("Geddes"), is binding on a federal court applying California law. Plaintiff argues that the Ninth Circuit's opinion in Khatchatrian "fails to apply the definition of accident' articulated by the California Supreme Court [in Geddes]." Opp. at p. 13. Plaintiff's argument is without merit.

In Khatchatrian, the court specifically cites to Geddes and discusses the California Supreme Court's definition of accident and the reasoning behind it. Khatchatrian , 332 F.3d at 1228-29. In addition, the Khatchatrian court applies a "Geddes & Smith analysis" explicitly finding that "the opinion in Geddes & Smith itself would support a conclusion that the stroke was not an accident.'" Id.

Therefore, it is not improper for this Court to rely on the Ninth Circuit's ruling in Khatchatrian, as it not only relies on the California Supreme Court's opinion in Geddes, but conducts a thorough review of how California courts have addressed the issue in the over forty years since Geddes. Khatchatrian , 332 F.3d at 1228-29. Moreover, the Policy includes its own definition of accident, one that is in accord with the interpretations in both Geddes and Khatchatrian.

Despite the subtle nuances of the term "accident, " the Policy here also requires that the hospitalization be for an "injury" in order to be covered under its terms. U.S. Life argues in its motion that the hospitalization was not due to "bodily harm or damage due to an accident that is not contributed to by disease, illness, infection, bodily infirmity or any other abnormal physical condition." Therefore, U.S. Life contends Plaintiff's claim must fail.

In his Opposition, Plaintiff completely fails to address this argument. As currently pleaded, the Complaint does not address this issue either. Rather, it relies on allegations that Plaintiff was hospitalized as the result of an accident, without discussing the "injury" underlying the hospitalization. See Comp. ¶¶ 6, 9. Therefore, Plaintiff has failed to state a claim against U.S. Life upon which relief can be granted. Accordingly, the Court GRANTS U.S. Life's Motion to Dismiss the breach of contract claim. It is clear to the Court that amendment would be futile; therefore, the Complaint is dismissed with prejudice. See Sawyer, 2012 WL 353775, at *5; Schar , 242 F.Supp.2d at 715-16.

2. Duty of Good Faith and Fair Dealing

"California law is clear, that without a breach of the insurance contract, there can be no breach of the implied covenant of good faith and fair dealing." Manzarek v. St. Paul Fire & Marine Ins. Co. , 519 F.3d 1025, 1034 (9th Cir. 2008) (citing Waller , 11 Cal.4th at 35-36). Because the Court has dismissed the claim for breach of contract with prejudice, the claim for breach of the duty of good faith and fair dealing must also be dismissed. Accordingly, the Court GRANTS U.S. Life's motion as to the second cause of action without leave to amend.

III. ORDER

For the reasons set forth above, the Court GRANTS U.S. Life's Motion to Dismiss Plaintiff's Complaint WITH PREJUDICE.

IT IS SO ORDERED.


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