Bjornstad v. Senior American Life Ins. Co.

• Decision Date: 02 March 2009
• Docket Number: No. CV-08-00248-PHX-GMS.,CV-08-00248-PHX-GMS.
• Citation: 599 F.Supp.2d 1165
• Parties: Patrice BJORNSTAD as trustee of the Thomas and Isis Davidson Family Trust, on behalf of Isis Davidson, Plaintiff, v. SENIOR AMERICAN LIFE INSURANCE COMPANY, a foreign corporation; Black Corporations I-X; White Partnerships I-X; John Does I-X; and Jane Does I-X, Defendants.
• Court: U.S. District Court — District of Arizona

599 F.Supp.2d 1165

Patrice BJORNSTAD as trustee of the Thomas and Isis Davidson Family Trust, on behalf of Isis Davidson, Plaintiff, v. SENIOR AMERICAN LIFE INSURANCE COMPANY, a foreign corporation; Black Corporations I-X; White Partnerships I-X; John Does I-X; and Jane Does I-X, Defendants.

No. CV-08-00248-PHX-GMS.

United States District Court, D. Arizona.

March 2, 2009.

Keith Randall Nelson, Rowley Chapman Barney & Buntrock Ltd., Shane D. Buntrock, Roberts Rowley Chapman Ltd., Mesa, AZ, for Plaintiff.

Christy Chism Brown, S. David Childers, Low & Childers PC, Phoenix, AZ, for Defendant.

ORDER

G. MURRAY SNOW, District Judge.

Pending before the Court is the Motion for Summary Judgment of Defendant Senior American Life Insurance Company (Dkt. # 25) and the Motion for Partial Summary Judgment of Plaintiff Patrice Bjornstad, as trustee of the Thomas and Isis Davidson Family Trust, on behalf of Isis Davidson (Dkt. # 26). For the following reasons, the Court denies Defendant's motion and grants Plaintiff's motion in part and denies it in part.

BACKGROUND

Effective March 20, 2002, Ms. Isis Davidson obtained a "Home Health Care Insurance Policy" ("the Policy") from Defendant. (Dkt. # 29 Ex. A at 1.) The Policy provides for payment of health care benefits (but not residency charges) to Ms. Davidson if she is unable to perform two or more activities of daily living or is afflicted with cognitive impairment. The parties agree that Ms. Davidson is currently unable to perform two or more activities of daily living and that Ms. Davidson has made all premium payments required for coverage under the Policy.

To be eligible for benefits under the Policy, however, Ms. Davidson must also be living in her "Home." "Home" is defined as "Your personal residence, whether it be in a private dwelling, or a home for the retired or aged. It does not include a hospital, sanitarium or Nursing Facility." (Id. at 5.) The term "Nursing Facility" appears in bold print in the Policy, which elsewhere provides that "important words and terms appear in bold print. They appear in bold print where they are defined." (Id.) Defendant agrees that, according to this language, bolded terms are to be defined in the Policy. (Dkt. # 29 Ex. R at 2.) The Policy, however, provides no definition of "Nursing Facility."

On October 15, 2002, Ms. Davidson, who has a medical history of mental deterioration,¹ began living at Merrill Gardens, an assisted living facility. While living there, Ms. Davidson received assisted living services. On April 9, 2006, Ms. Davidson fell and was hospitalized. Doctors determined that she would thereafter require continuous care. Ms. Davidson returned to Merrill Gardens on April 14, but she stayed only four more days.

On April 18, 2006, Ms. Davidson moved into Legacy Village in Mesa, where she continues to reside.² Legacy Village is a center for directed care that does not have an independent living section. According to its Executive Director, it is licensed to operate as an assisted living facility and "is not licensed to operate as a Nursing Facility." (Dkt. # 29 Ex. K at 1.) The Executive Director has further testified that "Legacy Village does not provide skilled nursing care to [Ms.] Davidson," "does not provide skilled nursing care to any of its residents," and "is not permitted to provide skilled nursing care to [Ms.] Davidson or any [of] its residents" under Arizona law. (Dkt. # 38 Ex. T at 1-2.)

Around the time Ms. Davidson moved into Legacy Village, Plaintiff contacted Defendant about receiving benefits under the Policy. The parties dispute exactly what transpired during that phone call, as well as the precise nature of the communications between them throughout 2006 and the first half of 2007. Plaintiff states that in the initial phone call a representative of Defendant advised her that Ms. Davidson would only be eligible for benefits if she lived in a home that she owned. (Dkt. # 29 Ex. B at 2 ¶ 11.) Defendant points out that its call log states that Plaintiff was advised that "care must be provided in [the] insured's personal residence," which does not necessarily mean a home that is owned, and that Defendant's call log for the day in question does not report the statement that Plaintiff claims was made. (Dkt. # 35 Ex. B at 7.)

Seeking coverage, Plaintiff made further phone calls to Defendant's customer service department throughout April and May of 2006. Although the reasons are not entirely clear from the record, the Policy was thereafter cancelled. The cancellation was backdated to April 14, the date Ms. Davidson left the hospital following her fall. Plaintiff characterizes the cancellation as being the result of Defendant's misrepresentations, a notion Defendant disputes, although neither party elaborates on the point further. Following further communication between the parties, Defendant reinstated the policy on October 13, 2006.

Plaintiff apparently continued to pursue coverage under the Policy, for in a letter dated November 27, 2006, one of Defendant's claims managers wrote to Plaintiff:

The invoices submitted from [Legacy Village] state a monthly "Rent" charge of $3,695.... Based on these invoices we are unable to determine what percentage of this charge is for Home Health Care versus the charge for room and board. In order to fully evaluate this claim for benefits we have requested additional documentation from [Legacy Village]....

Upon receipt of this documentation we will give this claim our prompt attention and advise you of our claim determination.

(Dkt. # 29 Ex. E at 1-2.) Plaintiff characterizes this letter as a de-facto denial based on the supposed inability to segregate residence and health care charges. Defendant views it simply as a request for further documentation.

In another letter, dated December 27, 2006, Defendant stated:

Mrs. Davidson entered [Legacy Village] at the "Basic Care" level which suggests a minimal amount of care required. As her care needs increase and she requires "Intermediate Care" and/or "Advanced Care" as indicated in the brochure from Legacy Village, she will not incur a charge for the increased level of care.

Mrs. Davidson's policy is a Home Health Care policy which will not pay benefits for charges for rest care, hotel or retirement expense or other expenses which are related to the insured's residence and not their health.

Based on the documentation submitted, we are unable to extend benefits for Home Health Care when the charges incurred are for the insured's residence.

(Dkt. # 29 Ex. F at 1.) Plaintiff views this as a denial under a new theory propounded by Defendant that all of Ms. Davidson's charges relate to residential costs and none relate to health care costs. Defendant disagrees, stating that the letter was simply "explaining that under the terms and conditions of eligibility of the policy [Defendant] was unable to extend benefits for charges incurred for the insured's residence rather than for her health." (Dkt. # 35 at 6.)

Defendant does agree, however, that it denied benefits on January 15, 2007, on the ground that Ms. Davidson's charges at Legacy Village were related to residence rather than health care. The letter denying benefits relies on precisely the same reasoning as the letter Defendant sent on December 27, 2006. (Dkt. # 29 Ex. G at 1.) In fact, the January 15 letter refers Plaintiff back to the December 27 letter.

Plaintiff continued to pursue benefits under the Policy, sending Defendant a breakdown of Ms. Davidson's health care and residential costs at Legacy Village. On May 11, 2007, Defendant wrote back to Plaintiff that "as [Legacy Village] is not an independent living facility, I fail to see how home health care is applicable" and that "Mrs. Davidson, by your admission, entered Legacy Village unable to perform at least three activities of daily living. Obviously, she was not then nor is she now capable of independent living in her own personal residence." (Dkt. # 29 Ex. I at 1.) Plaintiff describes this letter as a denial under the theory that Ms. Davidson was incapable of independent living in her personal residence. Defendant responds that "the letter simply points out that [Ms.] Davidson, at the time she entered [Legacy Village,] was not then, nor is she now, capable of independent living in her own personal residence," and that the letter does not actually deny coverage on that basis. (Dkt. # 35 at 6.)

The same letter also states that "the reinstated policy only covers loss due to sickness beginning more than ten days after the date of reinstatement.... Kindly keep this in mind when pursuing any claimed coverage." (Dkt. # 29 Ex. I at 2.) Plaintiff views this as Defendant's threat to preclude further claims by suggesting that the pre-existing condition limitation was reset as of the date the policy was reinstated. Defendant says that the letter "merely points out the provision regarding pre-existing conditions," and that the letter does not imply that further claims would be denied on that basis. (Dkt. # 35 at 7.)

Finally, on July 31, 2007, Defendant denied coverage under the reasoning that Legacy Village is a "nursing facility," and thus not a "home" as required by the Policy. (Dkt. # 29 Ex. J.) On January 28, 2008, Plaintiff filed the complaint underlying this action in Maricopa County Superior Court. (See Dkt. # 2.) Therein, Plaintiff made five claims against Defendant: count one, for a declaratory judgment that Ms. Davidson is entitled to receive Homemaker/Companion Care benefits under the policy; count two, breach of contract for failing to pay benefits; count three, a contract claim for breach of the implied covenant of good faith and fair dealing; count four, a tort claim for breach of the implied covenant of good faith and fair dealing; and count five, a claim for punitive damages. (Id. at 4-9.) Defendant removed the case to this Court on February 7, 2008. (Dkt. # 1.) The Court has diversity jurisdiction...