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Wiseblood v. Mutual of Omaha Insurance Co.

United States District Court, E.D. California

July 18, 2019



         In this insurance coverage case, defendant moves to dismiss plaintiff's complaint based on the language of the policy at issue. For the reasons set out below, the court GRANTS defendant's motion.

         I. BACKGROUND

         In 2011, plaintiff Joy Wiseblood purchased a “Long-Term Disability Income Insurance Policy” (the “Policy”) from defendant Mutual of Omaha Insurance Company. Opp'n, ECF No. 14, at 7[1]. Plaintiff's policy has a “Benefit Period” of 67, meaning that the policy provides total disability benefits to the insured until she turns 67 years old. See Mot., ECF No. II, at 11; Compl. Ex. A, ECF No. 1-1, at 39; Opp'n, Ex. 1 (“Policy) at 28 (“Benefit Period To Age 67”)[2]. The policy also includes a “Mental or Nervous Disorder Limitation, ” which states: “Benefits payable for Mental or Nervous Disorders are limited to a lifetime maximum of 24 months.” Policy at 11.

         In 2015, defendant sent plaintiff an addendum to her existing policy, entitled Rider ONV1M (the “Rider”). Opp'n at 7-8; Id., Ex. 3 at 32. According to defendant, this Rider was sent in an effort to comply with California Insurance Code section 10144.55, enacted through Assembly Bill 402, Chapter 550, which required short-term disability income insurance, that is policies with a duration of two years or less, to provide coverage for disability caused by severe mental illness for the same duration as all other disabilities. See Mot. at 14 (citing Cal. Ins. Code § 10144.55). The Rider included a cover letter stating: “[i]n compliance with AB 402 Chapter 550, we have added Rider ONV1M to your coverage ID #890416-89. The rider . . . [i]s a state required rider and may not affect you . . . . Please read the enclosed rider carefully and attach it to your coverage.” Id. at 15; Ex. 3 at 32. The Rider was entitled “Severe Mental Illness Benefits Rider” and stated:

This rider is made a part of your policy or certificate to which it is attached. It is subject to all parts of your policy or certificate not in conflict with this rider. In the event of a conflict between this rider and any other provisions of your policy or certificate, this rider will control. If your disability income insurance policy or certificate and/or any rider attached to it: (a) has a benefit period of 24 months or less; and (b) limits benefits payable for mental or nervous disorders to a lifetime maximum of 24 months or less; the following changes are made:
1. Any such mental or nervous disorder lifetime maximum benefit limitation will not be applied to benefits payable for a severe mental illness.
2. We will pay benefits for disability caused by a severe mental illness on the same basis as any other covered sickness.

Opp'n, Ex. 2 (“Rider”) at 30.

         In June 2016, plaintiff filed a claim for disability benefits with defendant, based on a diagnosis of major depressive disorder and anxiety, which prevented her from performing her job. Opp'n at 9. Defendant paid the claim for two years but stopped in May 2018, based on the 24-month limitation on claims for mental or nervous disorders. Id. at 10. Plaintiff contacted defendant and explained she believed the Rider overrode the 24-month limitation in the policy. Id. Defendant refused to continue paying her benefits, arguing the Rider only applied to policies with benefit periods of 24 months or less, whereas plaintiff's policy has a benefit period of 67 years. See id.; Mot. at 12. On October 12, 2018, plaintiff filed a complaint against defendant in Sacramento County Superior Court in which she pleaded claims for declaratory relief, breach of contract, breach of the insurers' duty of good faith and fair dealing, and violation of California Business & Professions Code section 17200. Compl. at 6-9. Defendant removed the action to federal court on the basis of diversity jurisdiction. Notice of Removal, ECF No.1, at 3. Defendant now moves to dismiss plaintiff's complaint for failure to state a claim on which relief may be granted, arguing all of plaintiff's claims fail as a matter of law. See generally Mot. Plaintiff opposes, ECF No. 14, and defendant has responded, ECF No. 18. The court held a hearing on March 8, 2019, and resolves the motion here.


         A party may move to dismiss for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). The court may grant the motion only if the complaint lacks a “cognizable legal theory” or if its factual allegations do not support a cognizable legal theory. Hartmann v. Cal. Dep't of Corr. & Rehab., 707 F.3d 1114, 1122 (9th Cir. 2013). A complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief, ” Fed.R.Civ.P. 8(a)(2), though it need not include “detailed factual allegations, ” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). But “sufficient factual matter” must make the claim at least plausible. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Conclusory or formulaic recitations of elements do not alone suffice. Id. (citing Twombly, 550 U.S. at 555). In a Rule 12(b)(6) analysis, the court must accept well-pled factual allegations as true and construe the complaint in plaintiff's favor. Id. (citing Twombly, 550 U.S. at 555); Erickson v. Pardus, 551 U.S. 89, 93-94 (2007) (citations omitted).

         If a plaintiff requests leave to amend a claim subject to dismissal, the federal rules mandate that the court “freely give leave when justice so requires.” Fed.R.Civ.P. 15(a)(2). Before granting leave, a court considers any potential bad faith, delay, or futility regarding the proposed amendment, and the potential prejudice to the opposing party. Foman v. Davis, 371 U.S. 178, 182 (1962); see also Smith v. Pac. Prop. Dev. Co., 358 F.3d 1097, 1101 (9th Cir. 2004) (citation omitted).


         A. General Rules ...

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