Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_08-cv-02016/USCOURTS-caed-2_08-cv-02016-2/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Petition for Removal

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28 This matter is deemed suitable for decision without oral *

argument. E.D. Cal. R. 230(g).

1

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

J. GARY KERNS, )

)

Plaintiff, ) 2:08-cv-02016-GEB-KJM

)

v. ) ORDER GRANTING IN PART AND

) DENYING IN PART DEFENDANT’S

THE NORTHWESTERN MUTUAL LIFE ) MOTION FOR SUMMARY JUDGMENT*

INSURANCE COMPANY, )

)

Defendant. )

)

Defendant The Northwestern Mutual Life Insurance Company’s

(“Northwestern”) moves for summary judgment on Plaintiff’s breach of

contract and breach of the implied covenant of faith and fair dealing

claims, and on Plaintiff’s request for punitive damages. Plaintiff

alleges in his Complaint that Northwestern breached the parties’

contract when it declined to award Plaintiff lifetime disability

benefits under Plaintiff’s insurance policy. Specifically, Plaintiff

challenges Northwestern’s determination that Plaintiff’s degenerative

disc disorder was caused by a “sickness” rather than by a combination

of a sickness and two “accidents.” Plaintiff alleges Northwestern

made this determination in bad faith and therefore breached the

implied covenant of good faith and fair dealing. Plaintiff alleges

these breaches were “malicious[]” and entitle Plaintiff to receive

punitive damages. For the following reasons, Northwestern’s motion is

granted in part and denied in part.

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I. Background

Plaintiff has two disability income policies with 

Northwestern: Policy D023812 (“Policy 1”) and Policy D013647 (“Policy

2”) (collectively, the “Policies”). (Statement of Undisputed Facts

(“SUF”) ¶¶ 1-3.) Under both Policies, the “maximum benefit period”

available to an insured depends on whether the disability resulted

from “accidental bodily injuries” or “sickness.” (Id. ¶ 4.) If the

disability resulted from accidental bodily injury, the insured may

collect benefits for life. (Id.) If the disability resulted from

sickness, the insured may collect benefits for twenty-four months for

a disability beginning after age sixty-three; otherwise, the insured

may collect benefits until the “first policy anniversary” after the

insured’s sixty-fifth birthday. (Id.) Each Policy states:

Concurrent Disabilities. If disability results

from more than one cause, the monthly disability

benefit shall be the maximum payable for any one of

the causes.

(Suhr Decl. Ex. A, NW-00021, Ex. B, NY-00010; SUF ¶ 8.)

On October 3, 2006, Plaintiff requested disability benefits 

from Northwestern, claiming that as of February 2006, he was disabled

from his occupation as an insurance agent due to neck and back pain. 

(SUF ¶¶ 9-10.) Plaintiff alleges this pain was caused by two

sporting-event related incidents in 1987 and 2001. (Id. ¶ 11.) In

the first incident, Plaintiff sustained a sprained neck and concussion

when he was knocked down while refereeing a college football game in

1987. (Id. ¶ 12.) In the second incident, Plaintiff was hit on the

side of his head by a foul ball while a spectator at a minor league

baseball game in 2001. (Id. ¶ 13.)

//

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After receiving Plaintiff’s claim, “Northwestern [] began 

administering the claim under the total disability benefit provisions

of both policies.” (Id. ¶ 14.) Northwestern paid Plaintiff

disability benefits under Policy 1 until August 20, 2008, and under

Policy 2 until August 1, 2009. (Id. ¶¶ 16, 20.) It is undisputed

that Northwestern has paid all benefits owed under the Policies if

Plaintiff’s disability was caused by “sickness” only. (Id. ¶¶ 17,

21.)

On November 14, 2006, Northwestern acknowledged receipt of 

Plaintiff’s request for continuance of disability benefits and

requested further information to evaluate whether the disability was

the result of an accident or sickness, which Plaintiff provided. (SUF

¶¶ 27-28, 43.) The information Plaintiff submitted was reviewed by

Dr. Henry Alba, a medical consultant for Northwestern; he “opined that

the symptoms in February 2006 appeared to be the result of a chronic

and progressive cervical disc disease and not the result of the 1987

and 2001 incidents.” (Id. ¶¶ 43, 50.) On May 16, 2007, Northwestern

“wrote to [P]laintiff and explained in detail its claim determination

that the disability was the result of sickness, rather than an

accident.” (Id. ¶ 51.)

II. Legal Standard

The movant for summary judgment bears the initial burden of

demonstrating the absence of a genuine issue of material fact for

trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). If the

movant satisfies its burden, “the non-moving party must set forth, by

affidavit or as otherwise provided in Rule 56 [of the Federal Rules of

Civil Procedure], specific facts showing that there is a genuine issue

for trial.” T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors

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Ass’n, 809 F.2d 626, 630 (9th Cir. 1987) (quotations and citation

omitted) (emphasis omitted). “All reasonable inferences must be drawn

in favor of the non-moving party.” Bryan v. McPherson, 590 F.3d 767,

772 (9th Cir. 2009).

III. Discussion

A. Breach of Contract

Northwestern argues it is entitled to summary judgment on

Plaintiff’s breach of contract claim “since Plaintiff cannot establish

entitlement to benefits . . . ” (Mot. 10:13-14.) Specifically,

Northwestern argues Plaintiff’s breach of contract claim fails because

“there was no sudden precipitating ‘accident’ that caused his

disability.” (Id. 11:3-7.) Plaintiff responds he “suffered

accidental bodily injuries to his neck and head in both 1987 and

2001.” (Opp’n 8:20-22.)

The Policies provide benefits for a disability “resulting 

from accidental bodily injuries incurred . . . while this policy is in

force.” (Suhr Decl. Ex. A, B.) “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.” Waller v. Truck Ins.

Exchange, Inc., 11 Cal. 4th 1, 18 (1995). Neither Policy contains a

definition of “accidental bodily injuries”; nor does either Policy

require that the onset of the disability occur within a stated time

period after the accident.

No all inclusive definition of the word ‘accident’

can be given. It has been defined as a casualtysomething out of the usual course of events and

which happens suddenly and unexpectedly and without

design of the person injured. It includes any

event which takes place without the foresight or

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expectation of the person acted upon or affected by

the event.

Geddes v. Smith, Inc. v. St. Paul Mercury Indemnity Co., 51 Cal. 2d

558, 563 (1959); see also Bilezikjian v. Unum Life Ins. Co. of Am., --

F. Supp. 2d ---, 2010 WL 444729, at *18 (C.D. Cal. 2010) (A common

sense appraisal of the phrase ‘accidental bodily injury,’ . . .

connotes an injury produced by a sudden event.”). Here, it is

undisputed that Plaintiff sustained a sprained neck and concussion

when he was knocked down while refereeing a college football game and

that Plaintiff was hit on the side of his head by a foul ball while a

spectator at a minor league baseball game. (Id. ¶ 12-13.) It is not

disputed that these incidents are “accidents.” Whether these 

accidents are contributing “causes” of Plaintiff’s disability is

disputed. 

Plaintiff argues he is entitled to “lifetime benefits

payable for permanent disability caused by a combination of sickness

and accidental bodily injury” because “his disability was caused by

both a sickness (degenerative disc disease) and accidental bodily

injuries (1987 football incident and 2001 baseball incident).” (Opp’n

7:13-14, 19-21 (emphasis in original).) Northwestern counters this 

argument contradicts Plaintiff’s pleadings, arguing since Plaintiff

only alleged in his Complaint that his disability “was the result of

an accident,” he cannot now allege that his disability was the result

of more than one cause. (Reply 2:14-22.)

Northwestern relies on California Evidence Code Section 623

as its support for this pleading argument, which states: “Whenever a

party has, by his own statement or conduct, intentionally or

deliberately led another to believe a particular thing to be true and

to act upon such belief, he is not in any litigation arising out of

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such statement or conduct, permitted to contradict it.” However,

Northwestern has not shown that this California Evidence Code section

applies to Plaintiff’s federal complaint.

Plaintiff relies on the following language in each policy as

support for his position that his disability determination can be

based on concurrent causes:

Concurrent Disabilities. If disability results

from more than one cause, the monthly disability

benefit shall be the maximum payable for any one of

the causes.

(Id.) Northwestern counters this language addresses situations in

which the insured has “concurrent disabilities (i.e., disabilities

occurring at the same time),” and not situations in which the

insured’s sole injury has two causes. (Reply 2:23-17.) However, this

provision concerns a “disability result[ing] from more than one

cause.”

Plaintiff argues his disability was a “result” of both

sickness and the 1987 and 2001 accidents. Plaintiff cites the

declaration of Doctor LeRoi Gardner, Jr. as support for his position. 

Dr. Gardner declares:

Specifically, it is my opinion, based on my review

of the Northwestern Mutual Life Insurance Company

claims file, including all of the medical records

contained therein, and other records I have reviewed

that plaintiff J. Gary Kerns is permanently disabled

due to his condition of chronic headache and neck

pain. Further, it is my opinion that the traumatic

bodily injuries that J. Gary Kerns sustained on

September 19, 1987 and July 28, 2001 were and are

substantial factors causing the permanent disability

that Mr. Kerns suffers.

(Gardner Decl. ¶ 4.) Further, Plaintiff attached to Dr. Gardner’s

declaration a written report containing Dr. Gardner’s opinions

concerning Plaintiff’s injuries and the information Dr. Gardner

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Plaintiff has also presented four letters attached to his 2

attorney’s declaration, each from a treating physician, to which

Northwestern makes a hearsay objection. The objection is sustained.

7

considered in forming these opinions. (Gardner Decl. Ex. A.) Dr.

Gardner discusses in his report Plaintiff’s claim file and concludes,

“it is my expert medical opinion Mr. Kerns is permanently disabled and

that the accidents substantially contributed to his disability.” 

(Id.) Plaintiff’s evidence is sufficient to create a genuine issue of

material fact as to whether Plaintiff’s two accidents were a “cause”

of his disability. Therefore, Northwestern’s motion for summary 2

judgment on Plaintiff’s breach of contract claim is denied.

B. Breach of the Implied Covenant of Good Faith and Fair Dealing

Northwestern also seeks summary judgment on Plaintiff’s 

breach of the implied covenant of good faith and fair dealing claim,

arguing “even if there were an underlying breach of contract, the

existence of a genuine issue regarding coverage precludes finding

breach of the implied covenant.” (Mot. 13:3-4.) 

“[A] court can conclude as a matter of law that an insurer’s 

denial of a claim is not unreasonable, even if the court concludes the

claim is payable under the policy terms, so long as there existed a

genuine issue as [to] the insurer’s liability.” Franceschi, 852 F.2d

at 1220 (holding that the “district court properly granted summary

judgment in favor of [insurer] on [insured’s] claims that [the

insurer] . . . breached the implied covenant of good faith and fair

dealing”); see also Bilezikjian, -- F. Supp. 2d ---, 2010 WL 444729,

at *21 (stating because of “a good faith dispute over coverage, [the]

claim for breach of the implied covenant of good faith and fair

dealing fails as a matter of law”).

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//

Plaintiff argues in support of this claim:

Northwestern consciously ignored the language in

the policies regarding concurrent causes of

disability. Instead, Northwestern always took the

position that the disability had to be due to

either an accidental bodily injury or sickness, and

not a combination thereof. This was true even

after the undersigned presented the written

opinions of four treating physicians that the 1987

and 2001 accidental bodily injury incidents

substantially contributed to Kerns’ disability.

(Opp’n 9:16-21.) Plaintiff further argues: 

[T]here is nothing in the claims file to suggest

that Dr. Alba, apparently the only physician who

has reviewed this claim for Northwestern, was ever

asked to give an opinion on the key issue in this

case, that is, whether a combination of sickness

and accidental bodily injury combined to cause

Kerns’ disability condition.

(Id. 9:26-10:2.) However, Plaintiff has not presented evidence

showing that Northwestern’s “interpretation of the [policy] was

arbitrary or unreasonable.” Franceschi v. Am. Motorists Ins. Co., 852

F.2d 1217, 1220 (9th Cir. 1988). Nor has Plaintiff presented evidence

showing that Northwestern ignored Plaintiff’s medical records or his

treating doctors’ correspondence, that Northwestern deliberately

sought only information to support its determination that sickness

caused Plaintiff’s disability. It is undisputed that Northwestern

reviewed all of Plaintiff’s healthcare providers’ opinions and

records. It is also undisputed that Northwestern requested and

obtained medical information from health care providers it believed

would have medical records regarding Plaintiff’s medical care

following the 1987 and 2001 incidents. (SUF ¶ 29.) It is further

undisputed that Northwestern determined Plaintiff’s disability was

caused by sickness and that it paid all benefits owed pursuant to that

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determination. (Id. ¶¶ 17, 21.) Therefore, since there existed a

“genuinely arguable issue” as to Northwestern’s liability,

Northwestern’s motion for summary judgment on Plaintiff’s breach of

the implied covenant of good faith and fair dealing claim is granted. 

Franceschi, 852 F.3d at 1220.

C. Punitive Damages

Finally, Northwestern seeks summary judgment on Plaintiff’s 

request for punitive damages, arguing “there was nothing malicious,

oppressive or fraudulent in the handling of [P]laintiff’s claim.” 

(Mot. 17:14-15.) Plaintiff counters that he is entitled to punitive

damages since “Northwestern has deliberately chosen to ignore the

language in its own policy and framed the causation issue as being

either due to accident or due to sickness to favor its own position

over that of its insured.” (Opp’n 10:24-16.)

Punitive damages are available if “the insured proves by 

clear and convincing evidence that the insurance company itself

engaged in conduct that is oppressive, fraudulent, or malicious.” 

Amadeo v. Principal Mut. Life Ins. Co., 290 F.3d 1152, 1164 (9th Cir.

2002); see also Silberg v. California Life Ins. Co., 11 Cal. 3d 452,

462 (1974) (“In order to justify an award of exemplary damages, the 

defendant must be guilty of oppression, fraud or malice.”) 

Plaintiff has not countered Northwestern’s evidence with 

evidence showing that Northwestern acted with oppression, fraud, or

malice in its claim determination; nor has Plaintiff presented

evidence sufficient to permit a reasonable inference that Northwestern

deliberately misinterpreted the Policies to “favor its own position.” 

Therefore, Northwestern’s motion for summary judgment on the punitive

damages portion of Plaintiff’s complaint is granted. See Franceschi,

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852 F.2d at 1220 (“For the same reasons that [Plaintiff’s breach of

the implied covenant of good faith and fair dealing] claims were

properly dismissed, punitive damages are not recoverable.”).

IV. Conclusion

For the stated reasons, Northwestern’s motion for summary 

judgment on Plaintiff’s breach of contract claim is DENIED and its 

motion for summary judgment on Plaintiff’s breach of the implied

covenant of good faith and fair dealing claim and on Plaintiff’s

request for punitive damages is GRANTED.

Dated: May 26, 2010

 

GARLAND E. BURRELL, JR.

United States District Judge

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