Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_07-cv-01281/USCOURTS-azd-2_07-cv-01281-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 42:1983 Civil Rights Act

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Gloria A. Rowe by her Guardian ad Litem

Fred Rowe, and Fred Rowe, 

Plaintiffs, 

vs.

Bankers Life and Casualty Company;

Falicia M. Soller; and John Does 1 through

2, 

Defendants. 

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No. CV 07-1281-PHX-MHM

ORDER

This is an insurance bad faith cause of action. Plaintiffs originally filed this case in

Maricopa County Superior Court. Defendant timely removed the case to this Court.

Plaintiffs have included four causes of action in their complaint, including the following: (1)

breach of the duty of good faith and fair dealing by Bankers Life and Casualty Company

(“Bankers”); (2) negligence and malpractice against Defendant Soller; (3) common law fraud

as to Defendants Bankers and Soller; and (4) constructive fraud as to Defendants Bankers

and Soller. Plaintiffs also seek punitive damages. 

Presently pending before the Court is Plaintiffs’ Motion for Partial Summary

Judgment (Doc. 17). In their Motion for Partial Summary Judgment, Plaintiffs seek requiring

that Bankers pay benefits under the policy for at least 24 consecutive months as a matter of

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law. Plaintiffs also seek to have the Court find that the “restoration of benefits” provision

is an unenforceable exclusion or limitation of coverage. The Motion is fully briefed. After

recently granting Plaintiffs’ Motion for Reconsideration and hearing oral argument on the

Motion for Partial Summary Judgment, the Court hereby issues the following Order. 

FACTUAL BACKGROUND

Plaintiffs Fred and Gloria Rowe bought an insurance policy from Bankers Life and

Casualty Company (“Bankers”) for Mrs. Rowe in 2003. Mrs. Rowe was 77 years of age at

the time. Leading up to the purchase of the policy, Bankers’ sales representative, Defendant

Falicia Soller met with Plaintiffs Fred and Gloria Rowe on at least three occasions in 2003.

The policy the Rowes purchased provided the following: 

• It is “GUARANTEED RENEWABLE,” i.e., the policy “may be renewed for

each Family Member on any renewal date as long as such Family Member

lives.”

• For a Maximum Daily Benefit amount of $150.00 for nursing home and

assisted living facility care and a Maximum Weekly Benefit amount of $1,050

for Home Health Care and Adult Day Care, and promises to pay a “Maximum

Benefit for Any One Period of Expense” of $27,000.

• For an Elimination Period of 20 Days of Service and defined “Elimination

Period” to mean “the number of days a Family Member must receive services

included under Part I or Part II Covered Expenses before benefits are payable.

• Benefits for care of “the following covered conditions: Alzheimer’s Disease,

Parkinson’s Disease, Senile Dementia or other nervous or mental disorders of

organic origin.” 

• “Any One Period of Expense” begins when a Family Member first incurs a

charge for covered expenses and ends on the earlier of when (1) “after six

consecutive months during which the Family Member has not required any

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treatment or services for those conditions which causes the prior One Period

of Expense, or (2) the Maximum Benefit has been exhausted.” 

• A “RESTORATION OF POLICY BENEFITS” provision stated that “[t]his

policy’s Maximum Benefit for Any One Period of Expense will be fully

restored when a Family Member has not required treatment or services covered

under this policy for six consecutive months for the same cause or causes for

which a previous period of expense began.” 

• A “CONFORMITY WITH STATE STATUTES” provision stated that “[a]ny

provision of this policy which . . . is in conflict with the laws of the state in

which You live . . . is amended to conform to the minimum requirements of

such laws.”

Shortly after the sale, Mrs. Rowe received a Bankers folder with Policy Form GRN325. In December 2004, Mrs. Rowe suffered from confusion and inability to perform some

basic tasks of daily living. Her doctor diagnosed her with Alzheimer’s. Mrs. Rowe became

totally unable to care for herself in December 2005. At that time, Visiting Angels, a home

health care provider, began providing home health care to Mrs. Rowe. Since that time, Mrs.

Rowe has become incapacitated. Mr. Rowe now acts as Mrs. Rowe’s guardian, handling her

personal affairs, and is named Guardian ad Litem for purposes of this lawsuit. 

Mr. Rowe presented Mrs. Rowe’s claim to Bankers using a four-page claim form he

received from Bankers, along with a cover page referring to benefits under “long term care”

coverage. The claim form gave instructions on how to “file a claim” and referred to “two

different claim forms for LONG TERM CARE.” On January 16, 2006, Mrs. Rowe’s

physician, R. Christian Allen, M.D., completed Bankers’ Physician’s Claim Form,

confirming Mrs. Rowe’s condition as Alzheimer’s. Dr. Allen recommended home health

care six hours per day, seven days per week indefinitely. 

Mrs. Rowe has received numerous correspondences from Bankers referring to her

“long term care policy.” In late October 2006, the Rowes received a notice from Bankers

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 The maximum benefit amount increased by 5% each year as a result of Plaintiffs

paying an added premium amount. 

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that their benefits would soon terminate. Mr. Rowe wrote to Bankers to inquire as to how

their coverage could be ending when the claim started less than a year before. Bankers’ Vice

President, K. Smith, responded by stating that Mrs. Rowe’s policy was not for long term

care. Two days later, Mrs. Rowe received a letter from Bankers referring to “your LONG

TERM CARE insurance.” Two weeks after that, Mrs. Rowe received a letter from Bankers

again referring to “you LONG TERM CARE policy.” This letter informed Mrs. Rowe that

she had received $29,767.50 for her claims, which, the letter informed, was the maximum

the policy would pay. Three weeks later, Mrs. Rowe received another letter form Bankers,

dated December 27, 2006, that again told her that she had received the maximum benefit

under “your LONG TERM CARE insurance.” Additional bills were submitted to Bankers

for Mrs. Rowe’s home health care for the month of December 2006, but Bankers denied the

claims with three additional letters in January 2007, referring to “your LONG TERM CARE

insurance” having paid a maximum benefit of $29,767.50.

Bankers has conveyed to the Rowes in numerous correspondences that “lifetime

maximum benefit amounts” were “unlimited” and the policy promises to pay for multiple

“periods of expense,” each period of expense ending when the maximum benefit amount of

$27,0001

 had been paid. Bankers has not paid benefits for a new period of expense,

apparently in reliance on a “restoration of benefits” provision in the policy, which states that

the “Maximum Benefit for Any One Period of Expense” will be fully restored when the

insured “has not required treatment or services covered under this Policy for six consecutive

months for the same cause or causes for which a previous Period of Expense began.” 

LEGAL STANDARD

Summary judgment is properly granted when no genuine and disputed issues of

material fact remain, and when, viewing the evidence most favorably to the non-moving

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party, the movant is clearly entitled to prevail as a matter of law. Fed.R.Civ.P. 56; Celotex

Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Eisenberg v. Ins. Co. of N. Am., 815 F.2d

1285, 1288-89 (9th Cir.1987).

Initially, the moving party bears the burden of showing that there is no material factual

in dispute. Therefore, the court must regard as true the opposing party's evidence, if

supported by affidavits or other evidentiary material. Celotex, 477 U.S. at 324; Eisenberg,

815 F.2d at 1289. The court must draw all reasonable inferences in favor of the party against

whom summary judgment is sought. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475

U.S. 574, 587 (1986); Intel Corp. v. Hartford Accident & Indem. Co., 952 F.2d 1551, 1558

(9th Cir. 1991).

The burden then shifts to the non-movant to establish the existence of material fact.

Celotex, 477 U.S. at 323. The non-movant “must do more than simply show that there is

some metaphysical doubt as to the material facts” by “com[ing] forward with ‘specific facts

showing that there is a genuine issue for trial.’” Matsushita, 475 U.S. at 586-87 (quoting

Fed.R.Civ.P. 56(e)). 

A dispute about a fact is “genuine” if the evidence is such that a reasonable jury could

return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

248 (1986). The non-movant's bare assertions, standing alone, are insufficient to create a

material issue of fact and defeat a motion for summary judgment. Id. at 247-48.

DISCUSSION

I. PAYMENT OF BENEFITS 

In their Motion for Partial Summary Judgment, Plaintiffs assert that Bankers marketed

and sold them a long term care policy. Plaintiffs argue that the policy meets the statutory

requirements for long term care and therefore, under the Arizona Revised Statute, Plaintiffs

are entitled to at least twenty-four months of coverage. Plaintiff contends that insurance

policies are defined under the Arizona statutory scheme not by their title, or any descriptive

names on the policy itself, but instead, by the type of benefits promised. 

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In opposition, Defendants assert that the GR-N325 policy sold to Plaintiffs states that

it is a “limited benefit, short term, convalescent care insurance policy,” and therefore it does

not fall within the definition of “long term care.” Defendants also claim the policy is for

“health coverage,” excluding it from the statutory definition of long term care insurance

because the statute expressly excludes “basic medicare supplement coverage, basic hospital

expense coverage, basic medical and surgical expense coverage, major medical expense

coverage, . . . specified disease coverage, . . . or limited benefit health coverage . . . .” A.R.S.

§ 20-1691. Defendants assert that within the context of insurance, the term “coverage” is not

solely determined by the type of benefit provided but is determined by “other factors as well

including the length and duration of said benefits.” Response at p. 4. However, Defendants

provide no authority for this assertion. 

Defendants claim the Arizona Department of Insurance (“AZ DOI”) approved the GRN325 policy as a short-term care insurance. See Response at pp. 2, 4, and 12. However, a

review of the document the AZ DOI sent approving Defendants’ GR-N320 policy, makes

clear that the AZ DOI approved this policy as a long-term insurance. See Defendants’

(“Defs’”) Statement of Facts (“SOF”), Exh. E. On the form the AZ DOI used to approve

Bankers’ policy, it checked a box indicating that the policy was for “LTC/Home Health

Care.” Id. It appears that “LTC” means long term care. During oral argument, Defendants

claimed the box “LTC/Home Health Care” was a multi-purpose box and that the “home

health care” part of the box description includes short-term care. However, either way,

approval of an insurance policy form by the DOI is not determinative of whether policy

language complies with applicable statutes. See Fleming v. United Services Auto. Assn., 330

Or. 62, 996 P.2d 501, 504 (2000). 

Questions of policy interpretation are for the court to decide. Benevides v. Arizona

Property & Cas. Ins. Guar. Fund, 184 Ariz. 610, 911 P.2d 616, 619 (Ariz.App. 1995); Blue

Ridge Ins. Co. v. Stanevich, 142 F.3d 1145 (9th Cir. 1998). The Arizona Supreme Court

decision St. Paul Fire & Marine Ins. Co. v. Gilmore, sets forth that “[u]nder the operation of

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our statutes governing insurance, the type of policy is determined by the type of coverage

provided, not by the label affixed by the insurer . . . . The statutes are part of every insurance

policy and mandate that policies providing specific types of coverage meet specific

requirements.” 168 Ariz. 159, 812 P.3d 977, 983 (1991). 

“A long term care policy shall provide coverage for at least twenty-four consecutive

months for each person covered.” Arizona Revised Statute § 20-1691.03(c). Arizona

Revised Statute Section 20-1691 ¶ 8 defines “long-term care insurance” as a policy that

provides the following coverage: 

an individual or group insurance policy . . . advertised, marketed, offered or

designed to provide coverage for each covered person on an expense-incurred,

indemnity, prepaid or other basis for one or more necessary or medically

necessary diagnostic, preventative, therapeutic, rehabilitative, maintenance,

personal or custodial care services provided in a setting other than an acute

care setting of a hospital . . . . Long-term care insurance also includes a policy

. . . that provides for payment of benefits based on cognitive impairment or

loss of functional capacity. Long-term care insurance does not include any

insurance policy that is offered primarily to provide basic medicare

supplement coverage, basic hospital expense coverage, basic medical and

surgical expense coverage, major medical expense coverage, disability income

or related asset protection coverage, hospital confinement indemnity coverage,

accident only coverage, specified disease coverage, specified accident

coverage or limited benefit health coverage or riders to the insurance policy or

a life insurance policy that accelerates the death benefit for terminal illness,

medical conditions requiring extraordinary medical intervention or permanent

institutional confinement, that provides the option of a lump sum payment for

those benefits and in which the benefits or the eligibility for the benefits is not

conditioned on the receipt of long-term care.

In contrast, the Arizona Revised Statute defines “limited benefit coverage” for

purposes of the insurance statutes and indicates the following: 

For the purposes of this title, “limited benefit coverage” means an insurance

policy that is designed, advertised and marketed to supplement major medical

insurance and that includes accident only, dental only, vision only, disability

income only, fixed or hospital indemnity, specified disease insurance, credit

insurance or Taft-Hartley trusts.

A.R.S. § 20-1137(b). 

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The insurance policy Defendants sold to Plaintiffs covers nursing home care, assisted

living facility care, home health care, hospice care, and adult day care. See Plaintiffs’

Statement of Facts (“PSOF”), Exh. 2, at pp. 6-9. The coverage is not merely to cover health

care costs, as Defendants have asserted. Indeed, during her deposition, Defendant Soller

confirmed the benefits under GR-N325 include either home health care or nursing home care,

personal care benefits, custodial care, and even housecleaning. Dep. of Falicia Soller,

October 19, 2007, Pls’ Ex. 33 at pp. 54-56. Ms. Soller also stated that the GR-N325 policy

covers custodial care for someone with Alzheimer’s and therapeutic benefits, including

physical therapy or speech therapy. Id. These types of benefits also fall squarely within the

statutory Arizona Revised Statute’s definition of long-term care. They do not fit within the

definition of those things excluded from long term care under A.R.S. § 20-1691 as Defendant

asserts. 

As further evidence of the nature of the policy, Plaintiffs highlight that Bankers’

Assistant to the Office of the President of the Claim Department and former Customer

Service Manager, Vicki A. Bhatti, testified at her deposition on January 17, 2008, that as to

policy GR-N325, the policy at issue in the present case, “I know it’s a long-term care policy.”

Pls’ Supp. of New Evidence in Sup. of Pls’ Reply, at p. 2. 

During oral argument, Defendants asserted that it is inappropriate to use A.R.S. § 20-

1137(b) as the only exception to A.R.S. § 20-1691 ¶ 8 because A.R.S. § 20-1137(b) is called

“limited benefit coverage” rather than “limited benefit health coverage.” However,

Defendants concede that there is no definition under Title 20 of the Arizona Revised Statute

for “limited benefit health coverage.” The type of coverage listed in A.R.S. § 20-1137(b) are

health-related benefits, including such things as accident, dental, and vision coverage. Thus,

it seems irrelevant that the title does not include the word “health.” If the type of care

provided in the Rowe’s policy was intended to be excluded from the twenty-four month

requirement, it seemingly would be listed in A.R.S. § 20-1137(b). At any rate, the Rowe’s

policy states that any provision of the policy that conflicts with a state statute is amended to

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conform with state law. Thus, Defendants’ argument that the statute does not comport with

the Rowes’ policy is not compelling. 

Also during oral argument, Defendants contended that the Court should not get in the

heads of the legislature to determine their intent in passing A.R.S. § 20-1691. However,

upon closer review, such an understanding would not be a guessing game. The legislature’s

Committee Minutes make clear that the purpose of the 1989 amended statute was to mandate

a minimum of twenty-four months of benefits for all insurance policies that fall within the

definition of “long-term care insurance” at A.R.S. § 20-1691 ¶ 8. In particular, the comments

of Susan Gallinger, Director of the Arizona Department of Insurance at the time, in response

to questions by Senator Corpstein, convey that the mandate was to apply to all such policies,

and that no disclaimers or disclosures on policies would suffice to justify the sale of coverage

with lesser benefits. Defs’ Response (“Resp.”), Minutes of the Committee on CLIB, Jan. 25,

Doc. 118-3 at pp. 4-5. Thus, the Committee Minutes made clear what the legislature

intended in creating A.R.S. § 20-1691.03(c), which was to ensure that those who bought care

insurance, usually the elderly, would be ensured for at least twenty-four months. 

Following oral argument, Defendants filed a Supplemental Response Re: Legislative

History, in which they assert that the policy at issue is not a long term insurance policy

because an insurance policy only constitutes long term care if the policy “provide[s] the

defined benefits for a “long” time (i.e., 24 months under Arizona law).” Thus, Defendants

argue that the intent of the original long-term care legislation in Arizona, which was passed

in 1987, was to define a duration requirement to long term care and that no policy met the

definition unless it provided that length of benefits. That may have been the case with the

1987 legislation. However, in 1989 long-term care legislation in Arizona was significantly

altered, both in structure and in content, which resulted in the statutes governing the present

case. See Defs’ Resp., Minutes of the Committee on CLIB, January 25, 1989, Doc. 118-3

at p. 4. The effect of the changes between the 1987 legislation and the 1989 legislation was

to close “loopholes” in the protection of the elderly against abusive practice and inadequate

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coverage. Id. The “loophole” that was closed in the twenty-four month duration

requirement, done by separating the duration requirement out of the definition and into a

separate statute, seems to have been done to ensure that any care policy that otherwise met

the definition of long-term care be required to provide twenty-four months of benefits. See

id. Minutes of the Committee on CLIB – Susan Gallinger’s comments at pp. 4-5. This is

evidenced by the proposed change in the “compliance” and “applicability” section of the

Arizona Revised Statute. The old version of A.R.S. § 20-1691.06 contained language that

would have exempted from the requirements policies that were not “advertised, marketed or

offered” as long-term care insurance or nursing home insurance. With the 1989 changes, the

original language of that Section was struck and the new mandate for long-term care was

established. Thus, the change read as follows: 

A policy which is not advertised, marketed, or offered as long-term care

insurance or nursing home insurance need not meet the requirements of this

Act. A POLICY WHICH MEETS THE DEFINITION OF LONG-TERM

CARE INSURANCE, AS DEFINED BY SECTION 20-1691, ARIZONA

REVISED STATUTES, SHALL COMPLY WITH THE REQUIREMENTS

OF THIS ACT, UNLESS SPECIFICALLY EXCLUDED. 

Defs’ Resp., Exh. 2, (Doc. 118-3), at pp. 14-23 (strike-outs and all caps in original). 

As further evidence of the legislative intent to mandate twenty-four months of

coverage for any policy that meets the definition of long-term care, Senate Bill 1003,

enacting A.R.S. § 20-1691 into law, was passed with the stated purpose of increasing the

minimum coverage period from twelve to twenty-four months, and to have policies that meet

the definition of long-term care “transfer . . . to the section covering the policy limitations

to insure that any long-term care policy covers at least 24 months.” Defs’ Resp., Exh. 2

(Doc. 118-3), at p. 7. Thus, despite Defendants’ attempts to convey otherwise, the legislative

intent in enacting A.R.S. § 20-1691 is clear. The legislature intended that any policy that

meets the definition of long-term care is required to provide at least twenty-four months of

coverage. 

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On summary judgment, the moving party is entitled to judgment as a matter of law if

the court determines that the record before it contains “no genuine issue as to any material

fact.” Fed R. Civ. P. 56(c). In light of the type of care provided in the policy, the statutory

definition of long term care, and the statutory requirement that long term care provide at least

twenty-four consecutive months, the Court finds no genuine issue of material fact remaining

as to this issue. Accordingly, the Court grants Plaintiffs’ Motion for Partial Summary

Judgment on this issue. Bankers is required as a matter of law to provide Mrs. Rowe with

at least twenty-four months of coverage. 

II. RESTORATION OF POLICY BENEFITS 

Plaintiffs also seek summary judgment regarding the restoration of Policy Benefits

provision in their insurance policy. Plaintiffs assert that this is an impermissible exclusion

or limitation of coverage in violation of Arizona Department of Insurance Regulations. 

In opposition, Defendant asserts that the Restoration of Policy Benefits clause in the

policy serves to “restore” benefits when an insured has gone at least six months without

treatment after experiencing a covered condition, which Defendant contends is consistent

with a “convalescent care” policy. 

As found above, the policy Bankers sold to the Rowes was a long term care policy.

The Arizona Administrative Code requires that “[a] long-term care insurance policy . . .

containing any limitations or conditions for eligibility . . . shall describe the limitations . . .

in a separate paragraph of the policy . . . and shall label the paragraph ‘Limitations or

Conditions on Eligibility for Benefits.’” Ariz. Admin. Code R20-6-1004(B)(2). 

The Restoration of Policy Benefits states as follows: 

This policy’s Maximum Benefit for Any One Period of Expense will be fully

restored when a Family Member has not required treatment or services covered

under this policy for six consecutive months for the same cause or causes for

which a previous Period of Expense began. If this policy includes the Annual

Benefit Increase Option, as shown on the Schedule page, the amount restored

will include any accumulated benefit increases provided as of the policy’s last

anniversary. 

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Defendant marketed its policy, and solicited renewal premiums promising “unlimited”

and “lifetime” benefits, as well as coverage for chronic conditions such as Alzheimer’s, but

then used the “Restoration of Policy Benefits” provision of the policy to terminate benefits

for any chronic condition after approximately six months unless the insured were able to go

for the next six months without the need for care. After Plaintiff Fred Rowe called

Defendant to inquire as to why the “lifetime” benefits were being terminated, he received a

letter from the Company’s Vice President, K. Smith, on February 23, 2007, which explained

that: “[The] policy will qualify for restoration of benefits if you have not received treatment

for any covered service listed in the policy for six months in a row.” PSOF ¶ 40. This would

be virtually impossible when one suffers from a chronic condition, such as Alzheimer’s.

By writing the “Restoration of Policy Benefits” clause, Bankers has essentially

limiting the policy coverage to one six-month period for chronic conditions such as

Alzheimer’s. In so doing, Defendants have taken away a significant purpose for the policy.

Such an exclusion must meet the requirements of Arizona Administrative Code R20-6-

1004(B)(2), which states as follows: 

A long-term care insurance policy or certificate containing any limitations or

conditions for eligibility . . . shall describe the limitations or conditions . . . in

a separate paragraph of the policy . . . and shall label the paragraph

“Limitations or Conditions on Eligibility for Benefits.”

Bankers did not include this required language in its policy, specifically in the

“Restoration of Policy Benefits” clause, despite the limitation the “Restoration” clause

invokes. Thus, the “Restoration of Policy Benefits” clause is an inappropriate limitation on

benefits. No genuine issue of material fact remains with regard to this issue. Accordingly,

Plaintiffs’ Motion for Partial Summary Judgment is granted as to this issue. 

CONCLUSIONS

For the foregoing reasons, 

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IT IS ORDERED granting Plaintiffs’ Motion for Partial Summary Judgment (Doc.

17).

DATED this 27th day of June, 2008.

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