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Dao v. Liberty Life Assurance Co. of Boston

United States District Court, N.D. California

July 5, 2016

HONG-NGOC T. DAO, Plaintiff,


          SUSAN ILLSTON United States District Judge.

         On July 1, 2016, the Court held a hearing on the parties' cross-motions for partial summary judgment and plaintiff's motion for a determination of the validity of policy provisions and motion to compel. For the reasons set forth below, the Court GRANTS in part and DENIES in part defendant's motion for partial summary judgment, DENIES plaintiff's motion for partial summary judgment, and DENIES plaintiff's motion for a determination of the validity of policy provisions and motion to compel.


         I. Plaintiff's claim for benefits

         On October 26, 2014, plaintiff Hong-Ngoc T. Dao filed this lawsuit against defendant Liberty Life Assurance Company of Boston ("Liberty"). Plaintiff has a contract with Liberty for supplemental disability insurance. The second amended complaint alleges, among other things, that Liberty breached this contract by improperly and unreasonably denying plaintiff's claim for long-term disability benefits, and by wrongfully refusing to pay the requested benefits.

         Liberty issued a Group Disability Income Policy of the University of California, Policy No. GD3-860-037972-03/GF3-860-037972-01 ("the Policy"), which provides group disability insurance benefits to eligible employees of the University of California("UC") through its Short Term Disability Insurance Plan and Supplemental Disability Insurance Plan. Dkt. No. 185-6, Ex. 1. The Policy provides up to 12 months of short term disability ("STD") benefits, followed by long term disability coverage ("LTD") under the Supplemental Disability Insurance Plan. For STD coverage, the "Covered Person" must be totally disabled from performing his or her "own occupation." Id. For LTD coverage, the "Covered Person" must be totally disabled from performing "any occupation." Id. at P00011.

         Plaintiff was first enrolled in the Supplemental Disability Insurance Plan in 2005, when she began work at the University of California at UCSF. Dkt. No. 185-6, Ex. 2 (Dao depo. at 119-46.[1] Plaintiff had a one year break in service in approximately 2008, after which she accepted a job at UC Berkeley in 2009, and then she moved to her most recent position as a Research Policy Manager at the University of California Office of the President (UCOP) in November 2011.

         According to the declaration of Corie Gillham, Short Term Disability Case Manager II for Liberty, in July 2013 plaintiff reported experiencing increased migraines and stress and stopped working. Gillham Decl. ¶ 4. Plaintiff submitted a claim for STD benefits on September 30, 2013, and provided the names and contact information for two treating physicians, Dr. Heublein (primary care) and Dr. Kitt (neurologist). Id. Liberty claims it requested information from both doctors and that it received some but not all of the requested information from Dr. Heublein and did not receive any information from Dr. Kitt. Plaintiff claims that the evidence shows that Liberty never requested any information from Dr. Kitt until July 2014. Liberty states that based on the information provided by Dr. Heublein, Liberty initially approved plaintiff’s STD claim on October 8, 2013, and issued payments commencing August 5, 2013.

         During the fall of 2013, Dr. Heublein extended plaintiff’s return to work several times, and in early 2014, Dr. Heublein released plaintiff to return to work 20 hours a week as of February 10, 2014. Plaintiff worked part time from February to April 2014, working mostly from home, and was therefore eligible for partial disability benefits.

         On January 29, 2014, Liberty sent plaintiff a letter stating that her STD benefits would end on August 5, 2014, and that Liberty would begin to evaluate an LTD claim while also continuing to process her STD claim. Between January and July of 2014, Liberty requested that plaintiff and her physicians provide information in support of her claims for benefits. Liberty asserts that plaintiff and her physicians failed to provide the requested information, and in a letter dated August 5, 2014, Liberty denied plaintiff's claim for LTD benefits.

         The parties dispute whether Liberty acted reasonably with regard to its investigation of plaintiff’s claims for STD and LTD benefits. Plaintiff contends that Liberty failed to conduct a proper investigation and instead “papered the file” to support a denial of LTD benefits. Plaintiff alleges, inter alia, that Liberty’s claim file notes do not support various assertions made by Liberty about efforts that it made to contact plaintiff and her physicians, that Liberty backdated a request for medical information, that Liberty repeatedly requested information that was irrelevant to its LTD evaluation, and that Liberty put plaintiff under five days of covert surveillance in order to find some reason to deny her claim.[2] Plaintiff also claims that her physicians provided sufficient evidence of her disability prior to Liberty’s denial of her LTD claim in August 2014. Plaintiff’s primary care physician, Dr. Heublein, stated in July 2014 that plaintiff suffered from chronic migraine headaches with nausea, vertigo and photophobia, and that her symptoms made it difficult for her to perform activities of daily living. Another physician, Dr. James, stated in July 2014 that plaintiff had been diagnosed with Major Depressive Disorder, Post Traumatic Stress Disorder, and Chronic Migraines with aura.

         According to Liberty, plaintiff repeatedly failed to respond to letters, phone calls, and requests for information, plaintiff never completed the STD claim forms, and she only returned some of the LTD claim forms for the first time in July 2014. Liberty denies that it backdated any letters and states that the date on the letters at issue was a typographical error. Liberty also asserts that it conducted surveillance on plaintiff based on her failure to respond to requests for information, and that Liberty contacted all of plaintiff’s physicians as soon as plaintiff informed Liberty about her treatment from these physicians and provided contact information for the physicians. Liberty also claims that despite repeatedly requesting current medical information from plaintiff’s medical providers, the physicians either did not respond or provided information that was either incomplete or not recent.

         Plaintiff's attorney sent a letter dated October 1, 2014, to Liberty. Dkt. No. 185-5, Ex. 1. Plaintiff characterizes this letter as a pre-litigation settlement demand, while Liberty characterizes this letter as an appeal of the denial of LTD benefits. The letter stated, inter alia, that plaintiff had authorized her counsel to settle all claims she has against Liberty for $6, 000, 000, and set forth the facts in support of plaintiff's claim for LTD benefits. Liberty Technical Claims Team Manager Trisha Brewster has submitted a declaration stating "Because Plaintiff was challenging the denial and claimed continued disability, and Liberty Life had now received some records and information on her psychological treatment from Dr. James and Plaintiff's neurologist had contacted Liberty Life agreeing to provide the records requested, I interpreted the letter as an appeal and made the decision to reopen the claim and approve benefits at that time." Dkt. No. 185-5 ¶ 6.

         On October 14, 2014, Ms. Brewster wrote to plaintiff's counsel and informed him that Liberty was re-opening plaintiff's claim to conduct additional investigation, and advised that LTD benefits were being reinstated retroactive to August 5, 2014 with the understanding that additional records would be provided. Id., Ex. 2. Liberty issued a check to plaintiff on October 14, 2014 for $8, 411.68 for the period from August 5, 2014 to October 4, 2014.

         Plaintiff filed this lawsuit on October 26, 2014.

         From October 29, 2014 through March 30, 2015, Liberty issued plaintiff monthly checks for $4, 205.84.

         On November 28, 2014, the Social Security Administration awarded plaintiff Social Security disability benefits. Dkt. No. 185-1, Ex. 2. The award letter stated that plaintiff was found to be disabled under Social Security's rules on July 5, 2013, and that plaintiff would receive a retroactive award of $22, 264.00 for the period from January 2014 through December 2014, and that she would then receive monthly benefits. Id. Plaintiff's initial Social Security benefit amount was $2, 024.30 per month. Id.

         In March 2015, Liberty learned that plaintiff had received an award of Social Security disability benefits. On March 30, 2015, Liberty sent a letter to plaintiff's attorney stating that pursuant to terms of the Policy regarding "Benefits from Other Income, " Liberty "will begin reducing [plaintiff's] disability benefit from Liberty to offset for her Social Security benefits and we will calculate the overpayment due." Id. Ex. 3. That letter also cited the Policy's provision regarding "Right of Recovery, " and stated "We ask that you set aside any retroactive payment received to repay this obligation. Once we have calculated the amount due, we will notify you." Id.

         On April 9, 2015, Liberty sent plaintiff's counsel another letter stating that based upon plaintiff's Social Security award, "we have reduced [plaintiff's] LTD monthly benefit from $4205.84 to $3864.17, to reflect her Social Security award." Id. Ex. 4. The letter also stated Liberty had calculated the amount of the overpayment that plaintiff was required to repay Liberty as $15, 964.93. Id. Between April 2015 and July 2015, plaintiff received the lowered LTD monthly benefit of $3, 864.17.

         In another letter dated July 27, 2015, Liberty informed plaintiff that Liberty had not received repayment of the overpayment, and that "If we do not receive repayment for the overpayment due by August 10, 2015, we will begin reducing [plaintiff's] Supplemental Disability benefits to recover the overpayment." Id. Ex. 5. In a letter dated August 18, 2015, Liberty informed plaintiff's attorney that "Liberty Life will withhold [plaintiff's] monthly disability benefit payment in the amount of $3864.17 beginning with the next payment scheduled to release on August 29, 2015. . . . Please note that, although the scheduled repayments will absorb [plaintiff's] entire benefit payment for a period of time, once she has fully repaid Liberty Life, she will again receive disability payments, provided she continue[s] to be eligible under her contract." Id. Ex. 6. From August 2015 through December 2015, Liberty ceased paying plaintiff LTD benefits in order to recover the alleged overpayment. In January 2016, Liberty resumed making monthly LTD payments of $3, 864.17 to plaintiff, and plaintiff continues to receive monthly LTD benefits from Liberty.

         II. The Policy

         The Policy includes in the SCHEDULE OF BENEFITS an explanation of how benefits are calculated, which includes the deduction of Benefits from Other Income and instruction to see SECTION 4 for a discussion of Benefits from Other Income. Dkt. No. 185-6, Ex. 1, P0006, P0007. SECTION 4- DISABILITY INCOME BENEFITS states how benefits are obtained and calculated, including the offset of Other Income Benefits. Id., P00015-26. This offset is discussed for short term disability at P00015-20, and for long term disability at P00021-26. Under SHORT TERM/SUPPLEMENTAL DISABILITY COVERAGE, the Policy explains how to obtain and calculate benefits:

         Disability Benefit

When Liberty receives proof that a Covered Person is Totally Disabled due to Injury or Sickness and requires the regular attendance of a Physician, Liberty will pay the Covered Person a Weekly Benefit after the end of the Waiting Period. The benefit will be paid for the period of Total Disability if the Covered Person gives to Liberty proof of continued:
1. Total Disability; and
2. regular attendance of a Physician,
The proof must be given upon Liberty's request and at the Covered Person's expense.
For the purpose of determining Total Disability, the Injury must occur and the Covered Person's Total Disability must begin while the Employee is insured for this coverage; and Total Disability which is the result of the Covered Person's Sickness must begin while the Employee is insured for this coverage. In addition, a loss of a license for any reason does not, in itself, constitute Total Disability.
The Weekly Benefit will not:
1. exceed the Covered Person's Amount of Insurance; or
2. be paid for longer than the Maximum Benefit Period.
The Amount of Insurance and the Maximum Benefit Period are shown in the ...

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