Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-04316/USCOURTS-cand-3_05-cv-04316-0/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 28:1132 E.R.I.S.A.

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

LOREEN ZELLER, 

Plaintiff,

 v.

LIBERTY LIFE ASSURANCE COMPANY OF

BOSTON, 

Defendant. _______________ /

No. C 05-4316 SI

ORDER DENYING MOTION TO

DISMISS PLAINTIFF’S SECOND CAUSE

OF ACTION

On December 22, 2005, defendant Liberty Life Assurance Company of Boston filed a motion

to dismiss plaintiff’s Second Cause of Action. The Court deems this matter appropriate for submission

without oral argument pursuant to Civil Local Rule 7-1(b). Having carefully considered the papers

submitted, the Court hereby DENIES defendant’s motion for the reasons set forth below. The hearing

set for February 24, 2006 is hereby VACATED.

BACKGROUND 

Plaintiff Loreen Zeller was employed as a chemist by the University of California (“UC”). As

an employee of UC, she was covered by UC’s group disability income insurance policy (“Policy”),

issued by defendant Liberty Life Assurance Company of Boston. The policy provided that should

Zeller become disabled she would be paid approximately $3,800 per month until she was able to return

to work or until she turned 65 in August 2023.

Case 3:05-cv-04316-SI Document 16 Filed 02/23/06 Page 1 of 6
United States District Court

For the Northern District of California

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1

 As this is a motion to dismiss pursuant to Rule 12(b)(6), the facts cited by the plaintiff are

presumed true. See Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987).

2

The complaint alleges that in 2003, as the result of an illness, Zeller became disabled.1

Defendant paid long term disability benefits to Zeller under the Policy through September 14, 2005.

At that time, despite no change in Zeller’s medical condition, defendant terminated benefits to Zeller.

Compl. at ¶ 8. On October 24, 2005, Zeller filed a complaint against defendant, based on the premature

termination of her disability benefits. She alleged bad faith in terminating her benefits, intentional

infliction of emotional distress, and breach of contract. Defendant now moves to dismiss the second

cause of action, intentional infliction of emotional distress.

LEGAL STANDARD

Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss a complaint if it

fails to state a claim upon which relief can be granted. A motion to dismiss will only be granted if “it

appears beyond doubt that the plaintiff can prove no set of facts in support of its claim which would

entitle it to relief.” See Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Fidelity Financial Corp. v.

Federal Home Loan Bank of San Francisco, 792 F.2d 1432, 1435 (9th Cir. 1986). The Court must

assume that the plaintiff’s allegations are true and must draw all reasonable inferences in the plaintiff’s

favor. See Usher, 828 F.2d at 561. Even if the face of the complaint suggests that the chance of

recovery is remote, the Court must allow the plaintiff to develop the case at this stage of the

proceedings. See United States v. City of Redwood City, 640 F.2d 963, 966 (9th Cir. 1981).

If the Court dismisses the complaint, it must then decide whether to grant leave to amend. The

Ninth Circuit has “repeatedly held that a district court should grant leave to amend even if no request

to amend the pleading was made, unless it determines that the pleading could not possibly be cured by

the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (citations and internal

quotation marks omitted).

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United States District Court

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DISCUSSION

An intentional infliction of emotional distress tort claim must include the following four

elements: “(1) extreme and outrageous conduct by the defendant; (2) the defendant’s intention of

causing or reckless disregard of the probability of causing emotional distress; (3) the plaintiff’s suffering

severe or extreme emotional distress; (4) and actual and proximate causation of the emotional distress

by the defendant’s outrageous conduct.” Pardi v. Kaiser Permanente Hosp., Inc., 389 F.3d 840, 852

(9th Cir. 2004) (quoting Cervantez v. J.C. Penney Co., 24 Cal. 3d 579, 593(Cal. 1979)); Fletcher v.

Western National Life Ins. Co., 10 Cal. App. 3d 376, 394 (Cal. Ct. App. 1970).

Defendant argues that plaintiff has failed to allege either that defendant’s conduct was extreme

or outrageous, or that plaintiff’s emotional distress was severe or extreme. The Court disagrees and

finds that at the pleading stage, the current allegations are adequate to state a claim.

1. Extreme and outrageous conduct

Plaintiff alleges that defendant’s conduct was extreme and outrageous because defendant: (1)

shopped for a medical consultant who would arbitrarily reject all previous opinions by plaintiff’s

previous health care providers; (2) used the defendant-friendly medical consultant to alter plaintiff’s

rights under the Policy although there was no change in plaintiff’s condition; and (3) intentionally

deprived plaintiff of her financial security in order to coerce plaintiff to settle for less money than what

she is entitled to under the Policy. Compl. at ¶¶ 14-15.

In order for conduct to be considered outrageous in the intentional infliction of emotional

distress context, “[c]onduct [] must be so extreme as to exceed all bounds of that usually tolerated in a

civilized community.” Cervantez v. J. C. Penney Co., 24 Cal. 3d 579, 593 (Cal. 1979). This standard

sets a very high bar; a California court emphasized this point when it stated, “it is not enough that the

defendant has acted with an intent which is tortious or even criminal, or that he has intended to inflict

emotional distress, or even that his conduct has been characterized by ‘malice’ or a degree of

aggravation which would entitle the plaintiff to punitive damages for another tort.” Pardi v. Kaiser

Permanente Hosp., Inc., 389 F.3d 840, 852 (9th Cir. 2004) (internal quotation marks and cites omitted).

However, this “rule is of course easy to state but only can be applied with certainty in light of the

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holdings in decided cases which have determined that the questioned conduct before them was or was

not outrageous.” Soto v. Royal Globe Ins. Co., 184 Cal. App. 3d 420 (Cal. Ct. App. 1986).

Two California Courts have found that a plaintiff could bring an action for intensional infliction

of emotional distress based upon wrongful termination of disability benefits: Little v. Stuyvesant Life

Insurance Company, 67 Cal. App. 3d 451 (Cal. Ct. App. 1977), and Fletcher v. Western National Life

Insurance Company, 10 Cal. App. 3d 376 (Cal. Ct. App. 1970). Little involved a draftsman who was

collecting disability benefits from a policy sponsored by a trade association. In order to receive benefits

for life, plaintiff had to show that she had certain severe medical conditions, and there was

overwhelming evidence that plaintiff was in fact totally disabled. Little, 67 Cal. App. 3d at 456.

However defendant terminated plaintiff’s benefits when one doctor opined, without adequate

information, that plaintiff was not totally disabled. Id. at 459. The court reasoned that this behavior

could be outrageous given that “defendant purposely ignored the great bulk of the medical information

it had and withheld that information from the physicians it selected to examine plaintiff and that it

sought only to justify its predetermined course of discontinuing disability benefit payments justly due

plaintiff under the policy.” Id. at 462.

In Fletcher, plaintiff filed a claim for benefits under his disability insurance after he was severely

injured. Fletcher, 10 Cal. App. 3d 376, 386. Defendant insurance company decided to wrongly classify

this claim as a sickness rather than an injury to minimize plaintiff’s claim. Id. at 388. Then to further

harm the plaintiff, defendant:

without probable cause for believing that plaintiff had made an intentional material

misrepresentation or that his disability was due to anything other than his injury []

embarked upon a concerted course of conduct to induce plaintiff to surrender his

insurance policy or enter into a disadvantageous “settlement” of a nonexistent dispute

by means of false and threatening letters and the employment of economic pressure

based upon his disabled and, therefore impecunious, condition.

Id. at 392. This conduct as a whole, defendant conceded, was outrageous conduct in the context of an

intentional infliction of emotional distress claim. Id. at 394.

These cases are consistent with the observation of California courts that the “major motivation

for obtaining disability insurance [in contrast to car insurance] is to provide funds during periods when

the ordinary source of the insured’s income -- [her] earnings -- has stopped. The purchase of such

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2

 See Paulson v. State Farm Mut. Auto. Ins. Co., 867 F. Supp. 911, 914 (C.D. Cal. 1994)

(involving automobile insurance claim for minor injuries); Coleman v. Republic Indemnity Ins. Co., 132

Cal. App. 4th 403, 418 (Cal. Ct. App. 2005) (involving automobile insurance claim for minor injuries);

Zakeosian v. Provident Life & Accident Insurance Company, 1998 U.S. Dist. LEXIS 7201 (E.D. Pa.

1998) (involving disability insurance in which plaintiff refused to sign an authorization for the release

of the records of his treating psychiatrist, which was necessary in order to continue receiving benefits);

Magee v. Paul Revere Life Insurance Company, 954 F. Supp. 582, 586 (E.D. N.Y. 1997) (involving

disability insurance in NY, a jurisdiction where the courts are “extremely strict in applying these

principles,” from Restatement of Torts, Second and every claim for intentional infliction of emotional

distress, that the court reviewed, failed because the conduct alleged was not sufficiently outrageous);

Phelps v. Provident Life & Accident Ins. Co., 60 F. Supp. 2d 1014 (C.D. Cal. 1999) (involving disability

insurance, intentional infliction of emotional distress claim dismissed on summary judgment because

there was no showing that “defendant purposely ignored the great bulk of the medical information”as

plaintiff pleaded); Crenshaw v. Mony Life Ins. Co., 2004 U.S. Dist. LEXIS 9883 (D. Cal. 2004)

(involving disability insurance, intentional infliction of emotional distress claim dismissed on summary

judgment because no showing that plaintiff suffered any severe emotional distress).

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insurance provides peace of mind and security in the event the insured is unable to work.” Egan v.

Mutual of Omaha Ins. Co., 24 Cal. 3d 809, 819 (Cal. 1979). Further, “[s]usceptibility of the plaintiff

to emotional distress and a defendant’s awareness thereof, have often been mentioned as significant in

determining liability.” Fletcher, 10 Cal. App. 3d at 398. It is in this context, not the context of other

types of insurance policies, that plaintiff’s allegations must be evaluated.

Defendant argues that its conduct is not outrageous because courts have held that conduct

proscribed in California Insurance Code § 790.03 in itself does not constitute the type of outrageous

conduct that would support an intentional infliction of emotional distress cause of action. Lee v.

Travelers Companies, 205 Cal. App. 3d 691, 694-695 (Cal. Ct. App. 1988). Defendant reasons that

since its alleged outrageous conduct is the same as some activities proscribed by California Insurance

Code § 790.03, then the conduct is not outrageous as a matter of law. Cal. Ins. Code § 790.03. None

of the cases defendant cites, however, sufficiently parallel the disability claim situation here, either

factually or procedurally.2

Applying Little and Fletcher here, plaintiff has properly alleged outrageous conduct in

paragraphs 11, 14 and 15 of the complaint. In those paragraphs plaintiff states that the defendant acted

on one opinion that supported termination of disability benefits and ignored or rejected the many other

opinions and information that supported continuing disability benefits. It is a reasonable inference that

defendant acted in this way to “justify its predetermined course of discontinuing disability benefit

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payments justly due plaintiff.” Little, 67 Cal. App. 3d at 462. Furthermore plaintiff alleges in paragraph

15 that defendant’s had a corporate plan to wrongfully deny benefits, force needless lawsuits and spawn

disadvantageous settlements. After construing all inferences in plaintiff’s favor, and recognizing that

this preliminary evaluation is on the pleadings only, Court finds plaintiff has sufficiently alleged

extreme or outrageous conduct.

2. Severe or extreme emotional distress

Plaintiff alleges that defendant’s actions are causing plaintiff “great emotional and financial

distress, not only by rendering her unable to pay her bills in timely fashion, but because the actions of

the defendants have aggravated the financial stress and loss of security attendant to her already existing

disability and thereby her ability to recover from her illness.” Compl. at ¶ 17. Further, plaintiff also

alleges that she is suffering stress from being forced to consider litigation to settle her claim. Id. at ¶

15.

Defendant argues that plaintiff’s conclusory allegations are insufficient. However, although

plaintiff’s allegations of emotional distress are minimal, given the early stage of the proceedings the

Court believes that they are sufficient. See Fletcher, supra, 10 Cal.App.3d at 396-398.

CONCLUSION

For the foregoing reasons and for good cause shown, the Court hereby DENIES defendant’s

motion to dismiss the second cause of action. (Docket #4.) 

IT IS SO ORDERED.

Dated: February 23, 2006 

 SUSAN ILLSTON

United States District Judge

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