Dao v. Liberty Life Assurance Company of Boston, No. 3:2014cv04749 - Document 80 (N.D. Cal. 2015)
Court Description: ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR RECONSIDERATION 70 74 (Illston, Susan) (Filed on 10/8/2015)
Download PDF
<![CDATA[
1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 HONG-NGOC T. DAO, Case No. 14-cv-04749-SI Plaintiff, 8 v. 9 10 United States District Court Northern District of California 11 LIBERTY LIFE ASSURANCE COMPANY OF BOSTON, ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S MOTION FOR RECONSIDERATION Re: Dkt. No. 70 Defendant. 12 13 Plaintiff’s motion for reconsideration of the Court’s order dismissing her breach of 14 contract claim is scheduled for a hearing on October 9, 2015. Pursuant to Civil Local Rule 7-1(b), 15 the Court determines that the matter is appropriate for resolution without oral argument. For the 16 reasons set forth below, the Court GRANTS in part and DENIES in part plaintiff’s motion for 17 reconsideration. 18 consistent with this order. No later than October 13, 2015, plaintiff shall file an amended complaint 19 20 BACKGROUND 21 Plaintiff worked for the University of California, Office of the President as a Research 22 Policy Manager. Dkt. No. 1 at ¶ 13. In or about November 2011, she purchased disability income 23 insurance through a group policy issued by defendant. Id. On or around July 6, 2013, plaintiff 24 alleges she became disabled by “severe chronic vestibular migraine with auras.” Id. at ¶ 20. 25 Among other symptoms, she experiences severe headaches, nausea and vomiting, dizziness, 26 motion intolerance, vertigo, photosensitivity, sound sensitivity, loss of balance, neck pain, spatial 27 disorientation, anxiety, and depression. Id. 28 On October 3, 2013, plaintiff submitted a claim for disability benefits to defendant. Id. at 1 ¶ 21. Defendant approved and paid plaintiff short-term disability benefits through August 5, 2014. 2 Id. at ¶ 23. On August 5, 2014, defendant denied plaintiff’s long term disability claim. Dkt. No. 1 3 at ¶ 72. Defendant reinstated plaintiff’s benefits on October 14, 2014. Dkt. No. 40 ¶¶ 5-6. On 4 March 30, 2015, defendant stated it would reduce plaintiff’s disability payment by the amount of 5 Social Security disability income that she receives, and would require her to repay any 6 overpayment provided by defendant. Dkt. No. 40 at ¶¶ 21-22. 7 The Court previously granted defendant’s motion to dismiss the breach of contract claim. 8 Dkt. No. 61. By the present motion, made pursuant to Local Rule 7-9 and Federal Rule of Civil 9 Procedure 59(e), plaintiff moves for reconsideration. See Dkt. No. 70; Dkt. No. 61. 10 DISCUSSION United States District Court Northern District of California 11 12 Plaintiff’s motion for reconsideration asserts that the Court erred by: (1) finding that 13 defendant’s retroactive payment of plaintiff’s disability benefits precludes plaintiff from alleging 14 any damages related to the breach of contract1; (2) finding that plaintiff cannot seek emotional 15 distress damages in her breach of contract claim; and (3) failing to consider plaintiff’s argument 16 that defendant’s Social Security offset is illegal and unenforceable. Dkt. No. 70-1 at 2.2 17 18 I. Breach of Contract Damages. 19 A plaintiff must allege damages in order to state a claim for breach of contract. Hood v. 20 Hartford Life & Acc. Ins. Co., No. 07-cv-01634, 2009 WL 453115, at *3 (E.D. Cal. Feb. 23, 21 2009). Although defendant reinstated and retroactively paid plaintiff’s disability benefits, plaintiff 22 argues that she may pursue a breach of contract claim because she has alleged that defendant 23 1 24 25 26 27 Defendant objects that several of plaintiff's arguments on reconsideration were not specifically raised in her opposition to the motion to dismiss the breach of contract claim. For example, plaintiff did not specifically identify certain consequential damages in her opposition to the motion to dismiss that she now seeks to pursue on reconsideration. Plaintiff did, however, generally allege “other consequential loss” in her complaints. See, e.g., Dkt. 1 at ¶ 102. In the interest of permitting plaintiff to seek contract damages to which she may be entitled, the Court exercises its discretion and considers plaintiff’s contentions on reconsideration. 2 28 All page citations to the record reference the ECF-generated page number at the top of the documents. 2 1 terminated her benefits (for some period of time) and she suffered damages in the form of 2 consequential damages, emotional distress damages, and interest. Dkt. No. 70-1 at 3-6. 3 A. 5 Plaintiff argues that she may seek consequential damages in the form of her attorneys’ 6 fees, medical expenses, and living expenses. Dkt. No. 70-1 at 4. The measure of damages in a 7 breach of contract claim “is the amount which will compensate the party aggrieved for all the 8 detriment proximately caused thereby, or which, in the ordinary course of things, would be likely 9 to result therefrom.” Cal. Civ. Code § 3300. Consequential damages “are recoverable if the 10 special or particular circumstances from which they arise were actually communicated to or 11 United States District Court Northern District of California 4 known by the breaching party (a subjective test) or were matters of which the breaching party 12 should have been aware at the time of contracting (an objective test).” Lewis Jorge Constr. Mgmt. 13 Inc. v. Pomona Unified Sch. Dist., 34 Cal.4th 960, 968-69 (Cal. 2004). Consequential Damages. 14 The Court concludes that plaintiff cannot seek attorneys’ fees as consequential damages. 15 Under California Code of Civil Procedure § 1021, parties seeking to enforce insurance contracts 16 must pay their own legal fees unless they have contracted otherwise. Cal. Civ. Code § 1021. See 17 Justice H. Walter Croskey et al., California Practice Guide: Insurance Litigation § 13:29 (The 18 Rutter Group 2015) (“Few insurance policies contain such provisions. Thus, the insured generally 19 cannot recover fees in a breach of contract action for policy benefits.” (emphasis in original)). 20 Plaintiff has not alleged that her insurance policy provides for attorneys’ fees, and thus there is no 21 basis for a request for attorneys’ fees as damages. 22 Plaintiff also argues that “she suffered other consequential damages, including the need to 23 take out private loans to cover medical and other daily expenses which would have been 24 financially provided for had [d]efendant honored its contract.” Dkt. No. 70-1 at 4. She claims that 25 her medical and living expenses were foreseeable because “the very purpose of disability 26 insurance[] is to provide a financial safety net in the event that [p]laintiff becomes unable to work 27 for a living.” Id. However, plaintiff does not explain how her medical and living expenses were 28 proximately caused by defendant’s failure to timely pay her disability benefits, as presumably 3 1 plaintiff would have incurred medical and living expenses regardless of whether her benefits were 2 terminated. However, if plaintiff incurred expenses in connection with taking out a private loan, 3 such as loan fees, those expenses could constitute consequential damages if proximately caused by 4 defendant’s termination of her benefits. Thus, plaintiff is granted leave to amend her complaint to 5 allege consequential damages, if any, stemming from taking out the private loan. 6 B. 8 In its order dismissing the breach of contract claim, the Court found that “while plaintiff 9 may seek tort damages pursuant to her claim for breach of the implied covenant of good faith and 10 fair dealing, plaintiff may not seek tort damages, including emotional distress damages, in her 11 United States District Court Northern District of California 7 breach of contract claim.” Dkt. No. 61 at 2. Plaintiff argues that the Court did not address 12 plaintiff’s argument that there is an exception allowing for emotional distress damages in claims 13 for breach of disability insurance contracts under California law. Emotional Distress Damages. 14 The California Supreme Court has held that “damages for mental suffering and emotional 15 distress are generally not compensable in contract actions.” Applied Equip., 7 Cal.4th at 516. 16 However, there is a narrow exception to this rule: “damages for emotional distress may be 17 recovered for breach of a contract that directly affects the comfort, happiness or personal welfare 18 of the nonbreaching party, or that involves a subject matter affecting the self-esteem or tender 19 feelings of that party (e.g., contracts to care for family heirlooms, etc.).” Justice H. Walter 20 Croskey et al., California Practice Guide: Insurance Litigation § 13:20 (The Rutter Group 2015) 21 (emphasis in original); see also Erlich v. Menezes, 21 Cal.4th 543, 559 (Cal. 1999) (“[W]hen the 22 express object of the contract is the mental and emotional well-being of one of the contracting 23 parties, the breach of the contract may give rise to damages for mental suffering or emotional 24 distress.”). 25 Disability insurance contracts may meet this exception because withholding disability 26 benefits “involves a high risk of anxiety to the insured, likely known to the insurer at the time of 27 contracting.” Justice H. Walter Croskey et al., California Practice Guide: Insurance Litigation 28 § 13:24 (citing Crisci v. Security Ins. Co. of New Haven, Conn. 66 Cal.2d 425, 434 (1967)). In 4 1 addition, “a major motivation for obtaining disability insurance is to provide funds during periods 2 when the ordinary source of the insured’s income - his earnings - has stopped. The purchase of 3 such insurance provides peace of mind and security in the event the insured is unable to work.” 4 Egan v. Mutual of Omaha Ins. Co., 24 Cal.3d 809, 819 (Cal. 1979). Based upon this authority, the 5 Court concludes that plaintiff may amend her complaint to seek damages for emotional distress. 6 C. 8 Plaintiff contends that she may seek unpaid interest under her breach of contract claim 9 pursuant to California Insurance Code § 10111.2 and California Civil Code § 3287(a). Under 10 Insurance Code § 10111.2, a plaintiff is entitled to interest when an insurer (1) received all 11 United States District Court Northern District of California 7 information needed to determine whether liability exists, (2) found that liability exists, and (3) 12 failed to pay benefits within thirty calendar days of receiving the information. Cal. Ins. Code 13 § 10111.2(c). Interest begins to accrue on the thirty-first calendar day at a rate of ten percent per 14 year. Id. 15 entitled to recover damages certain, or capable of being made certain by calculation, and the right 16 to recover which is vested in the person upon a particular day, is entitled also to recover interest 17 thereon from that day[.]” Cal. Civ. Code § 3287(a). Interest California Civil Code § 3287(a) also creates a right to interest: “A person who is 18 Defendant argues that these statutes provide “statutory penalties that can be applied only 19 after a court finds that benefits are owed,” and therefore “cannot be a basis for a finding of breach 20 of contract.” Dkt. No. 71 at 12-13 (citing Onder v. Allstate Insurance Company, No. 02-cv-213, 21 2002 WL 1354826 (S.D. Cal. June 12, 2002) (granting summary judgment on the plaintiffs’ 22 breach of contract claim because the “[p]laintiffs cannot use [Cal. Civ. Code] section 3287, which 23 pertains to damages, to show that there is a genuine issue of material fact with respect to the 24 breach of contract claim itself.”). 25 The Court finds that as a pleading matter, plaintiff may seek interest under her breach of 26 contract claim. 27 insurance policy and thus the court did not analyze California Insurance Code § 10111.2. Further, 28 Onder was decided on summary judgment, and the court held that the defendant had not breached Onder is distinguishable because, inter alia, it did not involve a disability 5 1 the insurance policy. Here, plaintiff alleges that defendant breached the insurance policy, and 2 wishes to seek interest as one component of contract damages. The Court grants plaintiff leave to 3 amend her complaint and seek interest under her breach of contract claim. 4 5 II. Social Security Offset. 6 In the Court’s previous order, the Court denied defendant's motion to dismiss plaintiff’s 7 claim for declaratory relief related to the Policy’s inclusion of an offset for Social Security 8 payments. The Court held that the parties’ arguments regarding the legality of that provision 9 should be resolved on a fuller factual record and not on the pleadings. Plaintiff’s motion for reconsideration asserts for the first time that defendant’s enforcement 11 United States District Court Northern District of California 10 of the Social Security offset provision constitutes a breach of contract. The Court finds that this is 12 an improper attempt by plaintiff to assert an entirely new theory in support of its breach of 13 contract claim on reconsideration. To the extent plaintiff seeks to amend her breach of contract 14 claim based upon the Social Security offset provision, that request is DENIED. 3 15 CONCLUSION 16 17 For the foregoing reasons, plaintiff’s motion for reconsideration is GRANTED in part. 18 The Court grants plaintiff leave to reassert her breach of contract claim and to seek damages 19 consistent with this order. The amended complaint shall be filed no later than October 13, 2015. 20 21 IT IS SO ORDERED. 22 23 Dated: October 8, 2015 ______________________________________ SUSAN ILLSTON United States District Judge 24 25 26 27 3 28 In light of this disposition of the Social Security offset issue, defendant's objection, motion to strike and motion to file surreply (Dkt. No. 74) is DENIED as moot. 6
]]>
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You
should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google
Privacy Policy and
Terms of Service apply.
