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