United States District Court, N.D. California, San Jose Division
ORDER DENYING MOTION FOR SUMMARY JUDGMENT RE: DKT.
J. DAVILA UNITED STATES DISTRICT JUDGE.
dispute arises from two car accidents involving Plaintiffs
Gina and David Armas. Defendant USAA Casualty Insurance
Company provided Plaintiffs with automobile insurance
coverage. In connection with the accidents, Plaintiffs
submitted insurance claims under their Under Insured Motorist
(“UIM”) coverage, Medical Payments coverage, and
Extended Benefits coverage. After Defendant allegedly failed
to pay Plaintiffs the benefits due under their policy- or
delayed paying benefits due, Plaintiffs sued for breach of
contract and breach of the implied covenant of good faith and
fair dealing, and seek punitive damages. Defendant moved for
summary judgment. Having considered the parties' papers
and having heard oral arguments, the Court denies the motion.
car insurance policy went into effect in November 2012. Dkt.
No. 37-3 (Lolong Ex. 19) at 22-65 (the “Policy”).
On December 27, 2012, Plaintiffs were rear ended while
stopped at a red light in Merced, California (the “2012
Accident”). Following the 2012 Accident, both
Plaintiffs complained of neck and back pain. Over the course
of the next year, Gina Armas submitted medical bills for $18,
918.71 to Defendant under their Medical Payments coverage.
paid $2, 630.73 of those bills. David Armas submitted $11,
033.35 in medical bills, of which Defendant paid $3, 428.00.
In April of 2014, Gina Armas underwent shoulder surgery that
was performed by Dr. Gregg Satow. Following the shoulder
surgery, Gina Armas, on the advice of Dr. Satow, took time
off of her job to recover. On July 26, 2014, Plaintiffs were
again rear ended while stopped at a red light (the
January 2015, Plaintiffs settled the 2012 Accident with the
underlying tortfeasor, whose insurance policy carried a limit
of $30, 000 per accident. Gina Armas received $15, 000, David
Armas received $10, 000, and a third party received the
remaining $5, 000. Plaintiffs advised Defendant of the
settlement and, pursuant to the Policy, issued a demand for
arbitration concerning their UIM coverage. Defendant deposed
Dr. Satow during the runup to the arbitration. Defendant
retained Dr. Eldan Eichbaum as a medical expert. He reviewed
Gina Armas's records and issued an initial report on
February 16, 2016. In that report, he concluded that her pain
arose from conditions that were present before the 2012
Accident. He further opined that surgery was not indicated at
that time and would not be indicated due to the 2012
Accident. He issued supplemental reports based on her records
on April 28, 2016, November 5, 2016, and December 27, 2016.
He conducted an independent medical examination of Gina Armas
on March 20, 2017, and then issued a report. In all of these
reports, he concluded that his original opinions did not
change. But, during his deposition on April 28, 2017, he
testified that Gina's Armas's treatments were
reasonable and medically necessary. The parties agree that
this was a change in his opinion. Based on this apparent
change, Defendant paid Gina Armas the maximum under her UIM
coverage: $285, 000, i.e., the maximum of $300, 000
less the $15, 000 paid by the underlying tortfeasor.
Defendant and David Armas reached a settlement as to his UIM
Plaintiffs and Defendant prepared to arbitrate the UIM
coverage, Plaintiffs submitted to Defendant medical bills
allegedly related to the 2014 Accident: Gina Armas for $10,
370.00 and David Armas for $8, 444.00. Defendant paid $3,
463.75 under Gina Armas's Medical Payments coverage and
$4, 916.83 under David Armas's Medical Payments coverage.
In April of 2015, Gina Armas underwent a second shoulder
surgery. As with the previous surgery, Dr. Satow recommended
she take time off from her job. A year later, she underwent
neck surgery, which was performed by Dr. Serena Hu. Following
that surgery, she took time off from her job. In 2016,
Defendant provided Plaintiffs with forms to submit claims
under their Extended Benefits coverage for wages lost during
Gina Armas's time taken off work. Plaintiffs submitted
one claim related to the 2012 Accident (the “031
Application”) covering her post-surgery work
restriction beginning in April 2014, and two claims related
to the 2014 Accident (the “035 Application”)
covering two post-surgery work restrictions starting in April
2015 and April 2016. With these Applications, Plaintiffs
submitted notes from Dr. Satow. After receiving the Extended
Benefit forms, the claims adjuster working on the 031
Application left Plaintiffs a voicemail in which she
erroneously stated that the Policy only covered wages lost
within one year of the subject accident, when it actually
covered wages lost within two years of the accident. Under
the adjuster's misrepresentation, the 031 Application
would not be covered. Defendant did not respond to the 035
Application. On June 14, 2017, Plaintiffs' counsel
contacted Defendant to follow up on the claims. Defendant
responded to counsel with an email that stated no Extended
Benefits forms had been submitted in connection with the 2014
accident. Later, on August 23, 2017, Defendant sent
Plaintiffs' counsel another letter stating that the 035
Application did not contain information connecting the lost
wages to an automobile accident. That same correspondence
represented that Defendant had not received the 031
Application. Defendant does not consider the August 23, 2017
letter to be a denial of claims.
shall grant summary judgment motion where the moving party
shows that no genuine dispute as to any material fact exists
and that it is entitled to judgment as a matter of law.
Fed.R.Civ.P. 56(a). Where the moving party will not bear the
ultimate burden of persuasion at trial, it has both the
initial burden of production and the ultimate burden of
persuasion on the motion. Friedman v. Live Nation Merch.,
Inc., 833 F.3d 1180, 1188 (9th Cir. 2016). The moving
party may discharge its initial burden of production by
“either produc[ing] evidence negating an essential
element of the nonmoving party's claim . . . or show[ing]
that the nonmoving party does not have enough evidence of an
essential element to carry its ultimate burden of persuasion
at trial.” Nissan Fire & Marine Ins. Co. v.
Fritz Cos., 210 F.3d 1099, 1103 (9th Cir. 2000). If the
moving party carries that burden, then “the nonmoving
party must produce evidence to support its claim or
defense.” Friedman, 833 F.3d at 1188
(quotation and citation omitted). But, if the moving party
cannot carry the initial burden, then the nonmoving party
need not produce any evidence to defeat the motion.
Nissan Fire & Marine, 210 F.3d at 1102-03. For
the moving party to carry its ultimate burden of persuasion,
it must convince the deciding court that “there is no
genuine issue of material fact.” Friedman, 833
F.3d at 1188.
dispute is genuine only if there is sufficient evidence for a
reasonable trier of fact to resolve the issue in the
nonmovant's favor, and a fact is material only if it
might affect the outcome of the case.” LivePerson,
Inc. v. 7.ai, Inc., 2018 WL 5849025, at *3 (N.D.
Cal. Nov. 7, 2018) (citing Fresno Motors, LLC v. Mercedes
Benz USA, LLC, 771 F.3d 1119, 1125 (9th Cir. 2014)). A
court must draw all reasonable inferences in the light most
favorable to the nonmoving party. Id. (citing
Johnson v. Rancho Santiago Cmty. Coll. Dist., 623
F.3d 1011, 1018 (9th Cir. 2010)).
Breach of Contract
claim that Defendant breached the Policy as to Gina
Armas's UIM coverage, both Plaintiffs' Medical
Payments coverage, and Gina Armas's Extended Benefits
coverage. “While insurance contracts have special
features, they are still contracts to which the ordinary
rules of contractual interpretation apply.” Baldwin
v. AAA N. Cal., Nev. & Utah Ins. Exch., 1 Cal.App.
5th 545, 549-50 (2016), as modified (July 13, 2016).
“The elements of a breach of contract action under
California law are: (1) the existence of a contract, (2)
plaintiff's performance or excuse for nonperformance, (3)
defendant's breach, and (4) damages to plaintiff as a
result of the breach.” Moss v. Infinity Ins.
Co., 2015 WL 7351395, at *3 (N.D. Cal. Nov. 20, 2015).
“Unreasonable delay in paying policy benefits or paying
less than the amount due is actionable withholding of
benefits which may constitute a breach of contract . . .
.” Intergulf Dev. LLC v. Superior Court, 183
Cal.App.4th 16, 20 (2010) (citing Wilson v. 21st Century
Ins. Co., 42 Cal.4th 713, 723 (2007)). “What is a
reasonable time is a question of fact.” Palmquist
v. Palmquist, 212 Cal.App. 2d 322, 331 (1963); see
also Mattson v. United Servs. Auto. Ass'n, 2019 WL
2330087, at *8 (S.D. Cal. May 31, 2019).
contends that it did not breach the Policy in connection with
Gina Armas's UIM coverage because it paid her the maximum
benefit. Dkt. 52-2 at 18, 19 (Pls.' Facts 21, 23). It
argues that it relied on Dr. Eichbaum's reports in
withholding UIM payments to Gina Armas until he changed his
opinion during his deposition, at which point it promptly
paid her. However, Gina Armas and Defendant agreed to
arbitrate her UIM coverage on January 28, 2015, and Defendant
did not settle until May of 2017. Plaintiffs argue that this
delay is not justifiable. Opp'n at 7-8, 22, 24
have presented sufficient evidence to raise a genuine issue
of material fact as to whether Defendant's delay in
paying her UIM benefits was reasonable. In November 2016,
Defendant's litigation manager wrote a report finding
that Gina Armas's neck pain had worsened. Dkt. No. 52-2
at 31-32 (Pls.' Fact 14). This finding contradicted the
conclusions (but not necessarily the substance as discussed
below) of Dr. Eichbaum's reports. When Dr. Eichbaum
changed his opinion during the deposition, he testified that
her neck pain had not subsided. Eichbaum Dep. at 16:1-21,
22:19-24:13; see Dkt. 52-2 at 31, 33 (Pls.'
Facts 10, 22). Plaintiffs' have therefore raised a
triable question as to whether it was reasonable for
Defendants to continue to withhold payment for months after
finding that her neck pain had worsened.
Medical Payments Coverage
claim that Defendant breached the Policy by refusing to pay
for, or agreeing to pay only a portion of the cost of medical
payments allegedly resulting from the two accidents. For the
2012 Accident, Gina Armas submitted $18, 918.71 in charges,
of which Defendant paid only $2, 630.73, and David Armas
submitted $11, 033.35 in charges, of which Defendant paid
only $3, 428.00 Dkt. 52-2 at 29 (Pls.' Fact 3). For the
2014 Accident, Gina Armas submitted $10, 370.00 in charges,