Gutowitz v. Transamerica Life Ins. Co.

• Citation: 126 F.Supp.3d 1128
• Decision Date: 14 August 2015
• Docket Number: Case No. CV 14–06656 MMM (JPRx)
• Parties: Erwin J. Gutowitz; and Howard Gutowitz, as representative of Erwin J. Gutowitz, Plaintiffs, v. Transamerica Life Insurance Company, Defendant.
• Court: U.S. District Court — Central District of California

126 F.Supp.3d 1128

Erwin J. Gutowitz; and Howard Gutowitz, as representative of Erwin J. Gutowitz, Plaintiffs,

v.Transamerica Life Insurance Company, Defendant.

Case No. CV 14–06656 MMM (JPRx)

United States District Court, C.D. California.

Signed August 14, 2015

Barry P. Goldberg, Barry Goldberg Law Offices APLC, Woodland Hills, CA, Eric W. Berry, Berry Law PLLC, New York, NY, for Plaintiffs.

Becky J. Belke, Margaret Levy, Manatt Phelps and Phillips LLP, Los Angeles, CA, Jeffrey J. Wolf, The Wolf Law Firm PC, Southlake, TX, for Defendant.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

MARGARET M. MORROW, UNITED STATES DISTRICT JUDGE

Plaintiffs Erwin J. Gutowitz and Howard Gutowitz, as representative of Erwin J. Gutowitz ("plaintiffs"), filed this action on August 25, 2014, against Transamerica Life Insurance Company ("Transamerica").¹ On April 24, 2015, Transamerica filed a motion for summary judgment.² Plaintiffs oppose the motion.³

I. FACTUAL AND PROCEDURAL BACKGROUND

A. The Life Insurance Policy

In 1991, Erwin Gutowitz applied for a Transamerica long-term care policy.⁴ Based on his application, Transamerica issued Policy No. 889530043, with an effective date of August 16, 1991.⁵ As relevant here, the policy includes a Daily Nursing Home Benefit as well as a Home Health Care Benefit.⁶ The policy requires that, to qualify for nursing home benefits, the insured present a physician certification stating that such treatment is medically appropriate. Charges must be incurred while the policy is in force, and the "care or services must be provided in a Nursing Home."⁷ The policy does not mandate that the insured obtain "prior approval of Nursing Home care."⁸ Furthermore, "care received at a nursing facility which is not in full compliance with the definition of a Nursing Home will still meet the [policy requirements], but only if [Transamerica's] Personal Care Advisor pre-certifies that the facility substantially complies."⁹

The policy defines a Nursing Home as:

"A facility, or that part of one, which: (1) is operating under a license issued by the appropriate licensing agency: (2) is engaged in providing, in addition to room and board accommodations, nursing care and related services on a continuing inpatient basis to 6 or more individuals; (3) provides, on a formal prearranged basis, a Nurse who is on duty or on call at all times; (4) has a planned program of policies and procedures developed with the advice of, and periodically reviewed by, at least one Physician; and (5) maintains a clinical record of each patient. It may be a distinct part of a hospital or other institution.

"It is NOT a place that is primarily used for rest; for the care and treatment of mental diseases or disorders, drug addiction, or alcoholism; for day care or for educational care; or a retirement home or community living center."¹⁰

The policy also provides a "Home Health Care Benefit."¹¹ Home Health Care is defined as "[s]ervices provided by or through a Home Health Care Agency and while [the insured is] not confined to a hospital or nursing home."¹² A Home Health Care Agency is

"[a]n entity which provides care and services at [the insured's] home or other residence; is primarily engaged in providing residential health care services under policies and procedures established by a group of professionals, including at least one Physician and one Nurse,¹³ and: (1) is licensed by state law as a Home Health Care Agency; or (2) is accredited as a Home Health Care Agency or as a provider of Home Health Care services by the National League of Nursing, American Public Health Association or Joint Commission on Accreditation of Hospitals."¹⁴

The "General Exclusions and Limitations" section of the policy describes "[l]osses not [c]overed," as "treatment resulting from mental, nervous, psychotic or psychoneurotic deficiencies or disorders without demonstrable organic disease."¹⁵ The policy makes clear, however, that it "WILL cover qualifying stays or care resulting from significant destruction of brain tissue

with resultant loss of brain function, including, but not limited to, progressive degenerative, and dementing illnesses, including, but not limited to, Alzheimer's disease. If a particular disease can only be determined with an autopsy, a clinical diagnosis will be accepted."¹⁶

B. Gutowitz's Receive Nursing Home Benefits Claim

On November 22, 2013, Howard Gutowitz sent Transamerica a partially completed claim form seeking benefits under the policy for his father, Erwin Gutowitz; the claim form did not identify the facility Gutowitz was going to enter.¹⁷ On December 13, 2013, Gutowitz moved into Apartment No. 235 at Aegis Living of Ventura ("Aegis").¹⁸ Aegis is a licensed Residential Care Facility for the Elderly ("RCFE").¹⁹ It is not licensed as a nursing home.²⁰ Because Aegis is an RCFE, people living there are "residents" of a "community." They have their own apartments with private bathrooms, closets, refrigerators, and locking doors.²¹ The facility is not licensed to, nor does it, provide 24–hour skilled nursing care.²² Nonetheless, although coverage is "not guaranteed," there is typically an on duty nurse present during the day shift.²³ There is also a nurse on call 24 hours a day.²⁴

Aegis provides special care for persons with dementia. Its consumer disclosure statement states:

"Dementia special care will be provided in a designated area of the community. Services available specifically to residents with dementia [ ] include individualized activity programming, specialized training to staff, minimizing the use of psychotropic medication, a physical environment geared to the needs of residents with dementia, snacks and hydration, and expanded family communication and partnership."²⁵

Gutowitz does not currently reside in the dementia special care unit but in the facility's general "assisted living" unit.²⁶

C. Transmerica's Investigation and Denial of Nursing Home Benefits

As noted, the claim form submitted to Transamerica on Gutowitz's behalf did not identify the care provider or the benefit claimed.²⁷ After Transamerica determined that Gutowitz was considering Aegis as a possible care provider, it obtained a copy of Aegis' license to determine whether Aegis satisfied the policy's Nursing Home definition.²⁸ Based on its review of Aegis' license, Transamerica determined that Aegis was not a Nursing Home as defined in the policy; it advised plaintiffs of this in a letter, which also provided a list of covered nursing facilities.²⁹

On March 4, 2014, Gutowitz' doctor, Scott Tushla, and Anitra Sommer, Aegis' marketing director, faxed letters to Transmerica urging that Gutowitz be permitted to remain at Aegis.³⁰ Dr. Tushla stated that Gutowitz was "doing very well and is very happy at his current facility," and specifically advised against moving him elsewhere.³¹ Sommer stated that, "in contrast to a nursing home, [Aegis was] specialized in providing the high level of socialization Alzheimer's patients such as [ ] Gutowitz require [ ]."³² On March 18, 2014, Transamerica denied coverage on the basis that Aegis was not a covered Nursing Home. The denial letter explained that in contrast to nursing homes that are licensed to "provide nursing care and related services on a continuing inpatient basis," as required by the policy definition, a RCFE is prohibited from providing such care by California law.³³

On March 27, 2014, Gutowitz inquired whether Transamerica would cover Aegis' expenses under the Home Health Care Benefit.³⁴ On April 10, 2014, Transamerica advised that it would pay this type of benefits so long as the services were provided by a Home Health Care Agency as defined in the policy.³⁵ On April 30, 2014, Transamerica received a letter from one of Gutowitz's lawyers, Barry Goldberg; Goldberg asserted that the Nursing Home Benefit covered Aegis' expenses because Aegis was a Nursing Home as defined in the policy.³⁶ On May 20, 2014, Transamerica agreed to reconsider Gutowitz's request for Nursing Home Benefits.³⁷ It engaged an independent care coordination firm, CareScout, to conduct an evaluation as to whether Aegis met the policy's Nursing Home definition.³⁸

In July 2014, CareScout reported the results of its investigation. It had sent a questionnaire to Aegis, and received responses indicating that Aegis was an "assisted living facility/unit"; that it was not a nursing home; that it did not have a facility "for patients who require nursing care on a continuing inpatient basis"; that it was not "licensed to engage primarily in providing nursing care and related services"; and that it provided no "continuous nursing care services."³⁹ Based on CareScout's report, Transamerica informed plaintiffs on July 21, 2014, that it had determined Aegis was not a Nursing Home as defined in the policy.⁴⁰ Transamerica nonetheless agreed to coverage under the Home Health Care Benefit.⁴¹ As of April 21, 2015, Transamerica has paid $37,125.69 in Home Health Care Benefits for the period Gutowitz has resided at Aegis.⁴²

D. Gutowitz's Claims

Plaintiffs seek a declaration that Gutowitz's stay at Aegis is covered under the policy's Nursing Home Benefit and that he is eligible to receive Alzheimer's care benefits under the policy. He also alleges claims for breach of contract; breach of the implied covenant of good faith and fair dealing; and bad faith denial of insurance benefits.⁴³

II. DISCUSSION

A. Standard Governing Motions for Summary Judgment

A motion for summary judgment must be granted when "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." FED. R. CIV. PROC. 56. A party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and of identifying those portions of the pleadings and discovery responses that demonstrate the absence of a...