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Black v. The Church Pension Group Services Corporation

United States District Court, N.D. California, San Jose Division

April 30, 2015

CATHERINE BLACK, Plaintiff,
v.
THE CHURCH PENSION GROUP SERVICES CORPORATION b/d/a THE EPISCOPAL CHURCH MEIDCAL TRUST, et. al., Defendants.

ORDER GRANTING MOTION TO DISMISS (Re: Docket No. 10)

PAUL S. GREWAL, Magistrate Judge.

There is a general rule in California that tort remedies are not available for breach of the implied covenant of good faith and fair dealing.[1] But California courts have long recognized one exception-"cases involving insurance policies."[2] No court, however, has addressed whether a plaintiff also may bring a claim for tortious breach of the implied covenant against a self-funded group health plan or the plan's third-party health claims administrator. Until now.

Plaintiff Catherine Black receives health benefits under an employment benefit plan that is funded and administrated by Defendant Church Pension Group Services Corporation, doing business as The Episcopal Church Medical Trust.[3] Defendant Cigna Behavioral Health, Inc. is the administrator for the plan.[4] Claiming that Defendants unreasonably denied her claim for benefits under the plan and engaged in other wrongful conduct, Black seeks, among other things, tort damages for Defendants' alleged breach of the implied duty of good faith and fair dealing.[5]

Defendants move to dismiss Black's tortious breach claim, contending that under California law such a claim "can be brought only against an insurance company based on the bad faith breach of the terms of an insurance policy."[6] Because Black has not alleged facts that provide a legal basis for this claim under California law, the court GRANTS Defendants' motion.

I.

Fed. R. Civ. P. 12(b)(6) provides that the plaintiff must allege "enough facts to state a claim to relief that is plausible on its face."[7] A plaintiff must allege facts that add up to "more than a sheer possibility" that the defendant acted unlawfully.[8] While a "heightened fact pleading of specifics" is not required, the plaintiff must still allege facts sufficient to "raise a right to relief above the speculative level."[9]

"A pleading that offers labels and conclusions' or a formulaic recitation of the elements of a cause of action will not do.'"[10] "Nor does a complaint suffice if it tenders naked assertion[s]' devoid of further factual enhancement.'"[11] In reviewing a Rule 12(b)(6) motion, a court must accept as true all facts alleged in the complaint and draw all reasonable inferences in favor of the plaintiff.[12] A court is not required to accept as true "allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences."[13]

Because this case is before the court on diversity jurisdiction, California law applies.[14] Under California law, "it is well established that a covenant of good faith and fair dealing is implicit in every contract."[15] "[This] covenant is implied as a supplement to the express contractual covenants, to prevent a contracting party from engaging in conduct that frustrates the other party's rights to the benefits of the agreement."[16] "Because this covenant "essentially is a contract term that aims to effectuate the contractual intentions of the parties, compensation for its breach has almost always been limited to contract rather than tort remedies."[17] However, "[a]n exception to this general rule has developed in the context of insurance contracts where, for a variety of policy reasons, courts have held that breach of the implied covenant will provide the basis for an action in tort."[18]

Catherine Black is "a 38-year-old woman with a 26-year history of severe mental illnesses, which include an eating disorder, major depression, an anxiety disorder, post-traumatic stress disorder and self-harming behaviors that include numerous suicide attempts."[19]

Black has "group health insurance coverage as a benefit of her employment with the Protestant Episcopal Church of the United States of America through an Empire BlueCross BlueShield PPO 80/60 Plan."[20] Black's "health insurance coverage was funded through the Medical Trust, which sponsors and administrates the [p]lan."[21] Cigna is "the third party health claims administrator for the [p]lan."[22]

Black was admitted to Avalon Hills Residential Eating Disorders Program, a residential treatment center in South Miami, Florida in October 2013.[23] Cigna initially authorized payment for Black's treatment at Avalon but after less than a month denied authorization for any additional treatment.[24] Black remained in treatment at Avalon Hills through April 2014.[25]

Contending that the Medical Trust and Cigna improperly denied Black's claim for benefits under the plan, Black filed this suit against the Medical Trust and Cigna for breach of contract, breach of the implied covenant of good faith and fair dealing and negligence in the Santa Clara County Superior Court.[26] Defendants removed the action to this court on the basis of diversity jurisdiction.[27]

Defendants now move to dismiss Black's second claim for relief for breach of the implied covenant of ...


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