Nielsen v. Madison National Life Insurance Company, No. 2:2016cv04016 - Document 56 (D. Ariz. 2018)
Court Description: ORDER denying 45 Motion for Summary Judgment of Defendant Madison National Life Insurance Company. Signed by Judge G Murray Snow on 7/19/18. (EJA)
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Nielsen v. Madison National Life Insurance Company 1 Doc. 56 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Martha Nielsen, No. CV-16-04016-PHX-GMS Plaintiff, 10 ORDER 11 v. 12 Madison National Life Insurance Company, 13 Defendant. 14 15 Pending before the Court is the Motion for Summary Judgment of Defendant 16 Madison National Life Insurance Company (“Madison National”). (Doc. 45). For the 17 following reasons, the Court denies the Motion. 18 BACKGROUND 19 In 2007, Plaintiff Martha Nielsen worked as an elementary school principal for 20 Millard Public Schools in Omaha, Nebraska. Defendant Madison National provided a 21 long-term disability insurance policy to Plaintiff and other district employees. The 22 insurance policy, in relevant part, states that Madison National will provide benefits in 23 the event an insured is determined to be totally disabled. (Doc. 46, Ex. 2, p. 20). The 24 policy defines “total disability” as (1) when the insured “cannot perform each of the 25 substantial and material duties of [her] regular occupation” and (2) when, after 24 months 26 of the payment of benefits, “[the insured] cannot perform each of the substantial and 27 material duties of any gainful occupation for which [the insured is] reasonably fitted by 28 training, education[,] or experience.” Id. at p. 19. Upon request, the insured must provide Dockets.Justia.com 1 Madison National with “proof of continued total disability.” Id. at p. 20. 2 Ms. Nielsen fell and broke her leg on May 24, 2007. Id. at Ex. 3. She filed a claim 3 for disability benefits with Madison National on July 30, 2007. Id. Madison National 4 approved her claim on September 24, 2007. Id. at Ex. 6. Although Ms. Nielsen’s doctor, 5 Samuel Phillips, had initially predicted a fast recovery, Ms. Nielsen did not improve as 6 expected. Id. at Exs. 4, 7–10. In August 2008, Dr. Phillips opined that Ms. Nielsen would 7 likely qualify for permanent disability. Id. at Ex. 11. As provided for in the insurance 8 policy, after 24 months of benefits, the inquiry switches from whether the insured can 9 perform the duties of her regular occupation to whether the insured can perform the 10 duties of any gainful occupation. Thus, Madison National commissioned an independent 11 medical examinations (“IME”) to assess Ms. Nielsen’s capacities. In June 2009, 12 Dr. Joseph Bocklage submitted a report opining that Ms. Nielsen likely could not work in 13 even a sedentary occupation and that she had reached maximum medical improvement. 14 Id. at Ex. 14. In November 2009, Dr. Anil Agarwal examined Ms. Nielsen and stated that 15 she had functional limitations, but would be able to work in a sedentary or light duty 16 capacity. Id. at Ex. 16. The reports of Dr. Bocklage and Dr. Agarwal were sent to a 17 Vocational Expert (“VE”) to determine whether Ms. Nielsen could be employed in any 18 gainful occupation with her medical restrictions. The VE identified a number of 19 alternative positions in which Ms. Nielsen could work. Id. at Ex. 18. But, Madison 20 National determined that none of those jobs had a rate of pay high enough to be 21 considered “gainful employment,” and thus continued to pay benefits. Id. at Ex. 15. 22 In March 2016, Madison National received reports from Ms. Nielsen’s doctors 23 that a new treatment had significantly reduced her pain. Id. at Ex. 30. Ms. Nielsen had 24 moved to Arizona and begun seeing new doctors at Arizona Pain Specialists, PLLC. Id. 25 at Ex. 27. Dr. Tory McJunkin and Dr. Jacob Amrani implanted a spinal cord stimulator in 26 Ms. Nielson. Id. A trial implant was placed on December 30, 2015, and a permanent 27 implant was placed on January 4, 2016. Id. Over a dozen appointments after the trial 28 implant was placed, Ms. Nielsen reported that her pain was relieved by 40 to 60 percent. -2- 1 Id. After receiving the doctor’s records reporting a significant pain reduction, Madison 2 National scheduled for Ms. Nielsen to undergo a new IME. Madison National hired a 3 vendor to locate a physician, and the vendor identified Dr. Scott Krasner. Ms. Nielsen 4 and Dr. Krasner met for the IME. Dr. Krasner’s report states that Ms. Nielsen has some 5 functional limitations but that he believes she would be able to perform some work. Id. at 6 Ex. 29. Dr. Krasner’s report also stated that he had witnessed Ms. Nielsen driving herself 7 to the appointment and moving around outside her car with no abnormal gait or use of a 8 cane. Id. Ms. Nielsen disagrees with Dr. Krasner’s representations and also states that his 9 examination of her was significantly shorter than he reported. (Doc. 52, Ex. 1). Once 10 Madison National received Dr. Krasner’s report, it was forwarded to a VE. The VE 11 identified multiple jobs which an individual with Ms. Nielsen’s training and functional 12 limitations could perform. (Doc. 46, Ex. 34). This time, Madison National concluded that 13 the rate of pay was high enough that Ms. Nielsen’s work at such an employer would 14 constitute gainful employment. Madison National terminated Ms. Nielsen’s disability 15 benefits on May 10, 2016. Id. at Ex. 36. In subsequent appointments with her physicians, 16 beginning on May 16, 2016, Ms. Nielsen reported that her statements of 50 percent pain 17 relief were inaccurate and that the minimal improvement of her pain did not improve her 18 activities of daily living. Id. at Ex. 27. She believes that her initial reports of pain relief 19 were due to a honeymoon period that later waned. (Doc. 52, Ex. 1). 20 21 Ms. Nielsen sued, alleging breach of contract and breach of the duty of good faith and fair dealing. Madison National moves for summary judgment on both grounds. 22 23 DISCUSSION I. Legal Standard 24 Summary judgment is appropriate if the evidence, viewed in the light most 25 favorable to the nonmoving party, demonstrates “that there is no genuine dispute as to 26 any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. 27 P. 56(a). Substantive law determines which facts are material and “[o]nly disputes over 28 facts that might affect the outcome of the suit under the governing law will properly -3- 1 preclude the entry of summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 2 248 (1986). “A fact issue is genuine ‘if the evidence is such that a reasonable jury could 3 return a verdict for the nonmoving party.’” Villiarimo v. Aloha Island Air, Inc., 281 F.3d 4 1054, 1061 (9th Cir. 2002) (quoting Anderson, 477 U.S. at 248). When the nonmoving 5 party “bear[s] the burden of proof at trial as to an element essential to its case, and that 6 party fails to make a showing sufficient to establish a genuine dispute of fact with respect 7 to the existence of that element, then summary judgment is appropriate.” Cal. 8 Architectural Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th 9 Cir. 1987) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986)). 10 II. Analysis 11 A. 12 A plaintiff must show that an enforceable contract exists, that it was breached, and 13 that the plaintiff suffered damages to sustain a breach of contract claim. Graham v. 14 Asbury, 540 P.2d 656, 657 (Ariz. 1975). Plaintiff’s contract for insurance provides that 15 Defendant must pay her disability benefits as long as “[she] cannot perform each of the 16 substantial and material duties of any gainful occupation for which [she is] reasonably 17 fitted by training, education[,] or experience.” (Doc. 46, Ex. 2, p. 19). Defendant argues 18 that Plaintiff has failed to meet her burden under Celotex to produce evidence sufficient 19 to establish a genuine dispute of material fact. Defendant asserts that Plaintiff must put 20 forward expert evidence of her functional capacity and expert evidence of her vocational 21 options given her functional capacity. Breach of Contract 22 Nevertheless, Plaintiff has made a showing sufficient to establish a genuine 23 dispute of material fact. Although Plaintiff was initially disabled due to breaking her leg, 24 she also has diagnoses relating to chronic pain syndromes. Plaintiff provided notice to 25 Defendant that three of her treating physicians––Dr. Phillips, Dr. McJunkin, and 26 Dr. Amrani––would testify about her pain and its effects. Plaintiff herself can testify 27 about the severity of her pain. 28 /// -4- 1 Defendant’s expert, Dr. Krasner, did a consultative examination of Plaintiff and 2 opined as to her functional capacities. He assessed that Plaintiff can lift up to 40 pounds, 3 stand or walk up to 15 minutes at a time, sit without any restrictions, and may bend on 4 occasion. Defendant’s vocational expert provided occupations that Plaintiff, with an 5 educational background, could perform in a sedentary capacity. If the jury believes 6 Plaintiff and her treating physicians, then a jury could find that Plaintiff cannot do any 7 gainful occupation and that Defendant breached the contract. Plaintiff has also raised 8 questions of fact about the veracity of Dr. Krasner’s report. Plaintiff asserts that she used 9 her cane while ambulating around her car and that Dr. Krasner’s evaluation of her was 10 very minimal and short. Dr. Krasner, by contrast, reported that he observed her 11 ambulating without her cane and that his examination of her lasted 50 minutes. Plaintiff 12 also alleges that she reported these concerns to Defendant after receiving a copy of the 13 report. Plaintiff has put forward evidence that creates genuine disputes of material fact for 14 the jury to resolve. 15 B. 16 In Arizona, “there is a legal duty implied in an insurance contract that the 17 insurance company must act in good faith in dealing with its insured on a claim, and a 18 violation of that duty of good faith is a tort.” Noble v. Nat’l American Life Ins. Co., 624 19 P.2d 866, 868 (Ariz. 1981). Where an insurer “intentionally and unreasonably denies or 20 delays” payment of a claim, the insurer has breached the duty of good faith. Rawlings v. 21 Apodaca, 726 P.2d 565, 572 (Ariz. 1986). A plaintiff must show (1) “the absence of a 22 reasonable basis for denying benefits of the policy” and (2) “the defendant’s knowledge 23 or reckless disregard of the lack of a reasonable basis for denying the claim.” Noble, 624 24 P.2d at 868. Thus, the “initial inquiry consists of an objective finding, i.e., whether the 25 insurer acted unreasonably, [and] the second inquiry focuses on the insurer’s conduct and 26 whether the insurer knew that its conduct was unreasonable or acted with such reckless 27 disregard that such knowledge could be imputed to it.” Deese v. State Farm Mut. Auto. 28 Ins. Co., 838 P.2d 1265, 1268 (Ariz. 1992). A plaintiff “may simultaneously bring an Breach of Duty of Good Faith and Fair Dealing -5- 1 action for both breach of contract and for bad faith, and need not prevail on the contract 2 claim in order to prevail on the bad faith claim.” Id. at 1270. 3 Plaintiff retained an expert on insurance bad faith practices, Mary Fuller. 4 Ms. Fuller’s expert report opines that Defendant failed to follow industry standards in its 5 processing of the review of Plaintiff’s benefits. (Doc. 52, Ex. 17). Ms. Fuller stated that 6 Defendant’s actions showed a focus on terminating benefits and a failure to fully 7 investigate the insured’s claims. Defendant argues that Ms. Fuller’s analysis is 8 unfounded. But to the extent that Defendant’s motion seeks to double as a Daubert 9 motion, Defendant has, at least in its motion, failed to meet its burden that Ms. Fuller is 10 not a qualified expert. Ms. Fuller has years of experience in the insurance field, and 11 Defendant provides no explanation as to why Ms. Fuller cannot discuss industry 12 standards. Defendant’s expert, Vicki Roberts, submitted a report stating that Defendants 13 did comply with industry standards. (Doc. 54, Ex. A). Given Ms. Fuller’s opinion on 14 industry standards, reasonable jurors could believe that Defendant acted unreasonably 15 and knew it by failing to speak with Plaintiff’s treating physicians and not following up 16 after receiving complaints about the independent medical examination. The disputes as to 17 whether Defendant acted reasonably and with a reckless disregard are questions for the 18 jury to resolve. 19 Plaintiff’s Response to the Motion for Summary Judgment moves for the Court to 20 enter judgment on the bad faith claim for Plaintiff. (Doc. 51). For all the reasons stated 21 above, the Court denies this request. Defendants have evidence that a jury could believe 22 demonstrates that they acted in good faith in denying Plaintiff’s claim. 23 CONCLUSION 24 Disputes of fact exist as to whether Defendant breached the insurance contract and 25 its duty of good faith. Plaintiff has doctors who can testify about her condition and pain. 26 Both parties have experts who disagree as to whether Defendant acted reasonably in 27 evaluating Plaintiff’s claim. 28 /// -6- 1 2 3 IT IS THEREFORE ORDERED that the Motion for Summary Judgment of Defendant Madison National Life Insurance Company (Doc. 45) is DENIED. Dated this 19th day of July, 2018. 4 5 6 Honorable G. Murray Snow United States District Judge 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -7-
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