Stonebreaker v. Guardian Life Insurance Company of America et al

Filing 315

ORDER: The Motion for Summary Judgment (Doc. 256 ) filed by Defendant Guardian is GRANTED in part and DENIED in part. The Motion for Summary Judgment on Guardian's Lapse Defense (Doc. 267 ) filed by Plaintiff Pamela Stonebreaker is DENIED on the grounds that Guardian has not asserted a lapse defense to dispute coverage. Signed by Judge William Q. Hayes on 9/21/2012. (mdc)

I

1

2

FILED'

SEP 25 2012

CLERK,

u.s.

SOUTHERN DISTAl
EW

3
4

5

UNITED STATES DISTRICT COURT

6

SOUTHERN DISTRICT OF CALIFORNIA

7
8

PAMELA STONEBREAKER,

CASE NO. 11cv797 WQH (WVG)

9

ORDER

13

Plaintiff,
vs.
GUARDIAN LIFE INSURANCE
COMPANY OF AMERICA, a
corporation; WESTERN RESERVE LIFE
INSURANCE COMPANY OF OHIO, a
corporation; UNION SECURITY
INSURANCE COMPANY, a corporation;
DOES 1-100, inclusive.

14

Defendants.

10

11
12

15
16

WESTERN RESERVE LIFE
INSURANCE COMPANY OF OHIO, a
corporation,

17
18

19

Counterclaimant,
vs.
PAMELA STONEBREAKER,
Counterdefendant.

20
21

22

WESTERN RESERVE LIFE
INSURANCE COMPANY OF OHIO, a
corporation,
Third-party Plaintiff,

23
24

25
26
27

vs.
ROE ONE, as executor of the Estate of
Robert Stonebreaker; ROES 2-10,
inclusive;
Third-party Defendants.

28
-1-

llcv797 WQH (WVG)

1

2
3

UNION SECURITY INSURANCE
COMPANY, a corporation

4

5
6

Counterc1aimant,
vs.
PAMELASTONEBREAKER,~

individual.

7

8

9

Counterdefendant.
UNION SECURITY INSURANCE
COMPANY, a corporation
Cross-Claimant,

10

11
12

vs.
KRISTIN STONEBREAKER, a minor;
KELLI STONEBREAKER, a minor;

13
14

15

Cross-Defendant.
GUARDIAN LIFE INSURANCE
COMPANY OF AMERICA, a
corporation,

16
17

18

Counterclaimant,
vs.

PAMELA STONEBREAKER,

19

Counterdefendant.

20
21

22

GUARDIAN LIFE INSURANCE
COMPANY OF AMERICA, a
corporation,
Cross-Claimant,

23
24

25

26
27

vs.
KRISTIN STONEBREAKER, a minor;
KELLI STONEBREAKER, a minor;
RYAN STONEBREAKER, a minor,
Cross-Defendants.

28
-2-

Ilcv797 WQH (WVG)

1 fU\)1ES, Judge:
2

The matters before the Court are the Motion for Summary Judgment (ECF No. 256)

3 filed by Guardian Life Insurance Company ofAmerica ("Guardian") and the Motion for Partial
4 Summary Judgment on Guardian's Lapse Defense (ECF No. 267) filed by Pamela
5 Stonebreaker ("Plaintiff').

PROCEDURAL HISTORY

6
7

On April 15, 2011, Guardian removed the Complaint filed in the Superior Court of

8 California, County of San Diego against Defendant Guardian and two other insurance
9 companies, Union Security Insurance Company and Western Reserve Life Assurance
10 Company of Ohio. (ECF No.1). Plaintiff alleged in the Complaint that she was married to
11

Robert Stonebreaker who had purchased three life insurance policies from Guardian, with a

12 total of $2,000,000 in coverage. Id. at 7-10. Plaintiff alleged that Robert Stonebreaker died
13

on January 16, 2010, and that Guardian failed to pay the life insurance benefits to Plaintiff, the

14 primary beneficiary. Id. Plaintiff asserts claims for breach of contract and breach of the
15

implied covenant of good faith and fair dealing against Guardian. Id. at 10-14. On April 22,

16 2011, Guardian filed an answer. (ECF No. 16).
On April 22, 2011, Guardian filed a Counterclaim for Interpleader against Plaintiff and

17

18 filed a Cross-claim in Interpleader against Kristin Stonebreaker, Kelli Stonebreaker, and Ryan
19 Stonebreaker, minor children. (ECF Nos. 17, 18). Guardian alleged that Plaintiff is the
20 primary beneficiary to a life insurance policy owned by Robert Stonebreaker and that Kristin
21

Stonebreaker, Kelli Stonebreaker, and Ryan Stonebreaker are the secondary beneficiaries. Id.

22

Guardian alleged that it is willing and able to pay the proceeds ofthe life insurance policy, but

23

it cannot determine the identity ofthe proper beneficiary. Id. On October 5, 2011, Guardian

24

deposited $1,998,397.41 with the Clerk of the Court as "the benefits payable under a life

25

insurance policies issued by [Guardian] on the life of Robert Stonebreaker." (ECF No. 121

26

at 2).

27

On July 11,2011, a guardian ad litem was appointed to represent Kristin Stonebreaker,

28 Kelli Stonebreaker, and Ryan Stonebreaker, the minor children in this case. On November 23,
-3-

l1cv797 WQH (WVG)

1 2011, the guardian ad litem filed a "Notice ofNo Competing Claim and Non-opposition to the
2

Motion for Disbursement of Funds to PlaintiffStonebreaker." (ECF No. 151). The guardian

3

ad litem states "that she has not and is not making competing claims to the funds that

4

[Guardian], [Union Security], and [Western Reserve] have deposited with the Court .... [The

5 guardian ad litem] is unaware ofevidence sufficient to justity making a competing claim and
6

... believes that the Stonebreaker children have no right to claim the policy proceeds." Id. at

7 2.
8

On November 23,2011, Plaintiff filed a Motion for Release of Funds that Guardian

9

Deposited with the Court. (ECFNo. 152). On December 14,2011, Guardian filed a "Limited

10

Opposition" stating that Guardian opposed distribution ofthe funds "to the extent the motion

11

seeks an order releasing funds without setting aside a portion of the interpleaded funds for

12

reimbursement of the Guardian's attorney's fees and expenses in this matter." (ECF No. 187

13

at 4).

14

On February 23, 2012, the Court found that Guardian filed an appropriate interpleader

15

"on the grounds that: (1) Guardian filed a counterclaim in interpleader pursuant to Rule 22; (2)

16

Guardian has demonstrated that it claims no interest in the funds; and (3) there are multiple

17

possible claimants to the insurance benefits." (ECF No. 212 at 15). With regard to the

18

distribution ofthe interpleaded funds, the Court stated: "All potential claimants are entitled to

19 have an opportunity to make a claim to the interpleaded funds. In this case, the Estate of
20

Robert Stonebreaker has not appeared .... The Motion[] for Release ofFunds (ECF [No. 152])

21

filed by PlaintiffStonebreaker remain[s] pending." Id. at 15.

22

On April 10,2012, Elizabeth S. del Pozo, Special Administrator ofthe Estate ofRobert

23

Stonebreaker, responded to the Motion for Release of Funds Deposited by Guardian, taking

24

no position on the matter. (ECF No. 237). On April 30, 2012, the Guardian Ad Litem for

25

Kristin Stonebreaker, Kelli Stonebreaker, and Ryan Stonebreaker filed a response to the

26

Motion for Release of Funds Deposited by Guardian which states that she "continues to be

27

unaware of evidence sufficient to justity making a competing claim to the insurance policy

28

proceeds .... Accordingly, Cowett, as Guardian Ad Litem for the Stonebreaker Children, does
- 4-

llcv797 WQH (WVG)

1 not oppose Pamela Stonebreaker's Motion for Release of Funds, and is willing to accept
2 whatever decision is made by the Court on this motion." (ECF No. 246 at 2).
3

On May 7, 2012, Plaintiff filed a Reply contending that the funds should be

4 "immediately released" to Plaintiff. (ECF No. 251 at 3).
5

OnMay 11,2012, Guardian filed aMotion for Summary Judgment on Plaintiffs breach

6 of contract claim and breach of the implied covenant of good faith and fair dealing claim.
7 (ECF No. 256). On July 9, 2012, Plaintiff filed an Opposition. (ECF No. 263). On July 16,
8 2012, Guardian filed a Reply. (ECF No. 264).
9

On July 20,2012, Plaintiff filed aMotion for Partial Summary Judgment on Defendant

10 Guardian's Lapse Defense. (ECF No. 267). On August 6, 2012, Guardian filed an Opposition.
11

(ECF No. 279). On August 24,2012, Plaintiff filed a Reply. (ECF No. 292).

12

On August 2,2012, the Court granted the Motion for Release of Funds that Guardian

13

Deposited with the Court, finding that "Plaintiff is entitled to distribution of the funds

14 interpleaded by Guardian." (ECF No. 275 at 6). The Court stated: "Guardian may file a
15

motion for attorneys' fees incurred in interpleading the funds no later than 10 days from the

16 date of this Order." Id.
17

On August 13,2012, Guardian filed a Motion for Attorneys' Fees, requesting that the

18 Court award Guardian $464,994.00 in fees and $128,784.97 in costs. (ECF No. 288). On
19 August 31, 2012, Plaintiff filed an Opposition. (ECF No. 302). On September 10,2012,
20 Guardian filed a Reply. (ECF No. 308).
21

FACTS

22

On July 1, 2007, Robert Stonebreaker purchased three life insurance policies from

23

Guardian: a whole life policy (No. 5393228) which provided a death benefit of $250,000; a

24 term policy (No. 5405892) which provided a death benefit of$I,OOO,OOO; and a term policy
25

(No. 5405896) which provided a death benefit of$750,000. (ECF No. 292-1 at 2). Plaintiff

26 was the primary beneficiary and Kristin Stonebreaker, Kelli Stonebreaker and Ryan
27
28

Stonebreaker were the secondary beneficiaries.
In late 2009, Rod Crews ("Crews"), a financial representative of Guardian, called the

-5-

llcv797 WQH (WVG)

1 Stonebreakers' fmancial advisor, Aaron Wiegman ("Wiegman"), and informed him that the
2

Stonebreakers were behind on their premium payments and needed to make a payment to keep

3 the term policies in force. (ECFNo. 279-1 at 11; ECFNo. 263-5 at 21-22). OnDecember29,
4

2009, the Stonebreakers sent a check for a premium payment to Guardian, which Guardian

5 accepted. (ECF No. 279-1 at 12; ECF No.8).
6

On January 17,2010, Robert Stonebreaker died. (ECF No. 256-5 at 18).

7

On January 19,2010, Wiegman reported the death ofRobert Stonebreakerto Guardian

8 and, on behalf ofPlaintiff, made a claim for the death benefits ofthe three policies. (ECF No.
9 292-1 at 24).
10

On January 25, 2010, Barbara Werkheiser ("Werkheiser"), Guardian's chief claims

11

consultant, used funds from the cash value of the Robert Stonebreaker' s whole life policy to

12

pay the outstanding premiums due on the term life policies. (ECF No. 279-1 at 23; ECF No.

13

256-5 at 3).

14

On February 12, 2010, Guardian received a "Law Enforcement Inquiry" letter from the

15

San Diego County Sheriffs Department. (ECF No. 256-5 at 6). On February 16, 2010,

16

Werkheiser had a telephone conversation with the Sheriffs Department and was informed that

17 Robert Stonebreaker's death had been ruled a homicide. Id.
18

On February 26,2010, Werkheiser sent an email to Plaintiff s representative stating that

19 the "individual life claim is still outstanding." Id. at 10. Werkheiser stated that Guardian had
20

"been aware that the manner ofMr. Stonebreaker's passing is considered a homicide [and] ...

21

prior to releasing payment ofthis claim, [Guardian] will require a statement from the Sheriffs

22

Department (on their letterhead) indicating the named beneficiary is not a suspect in the

23

passing of our insured." Id. Werkheiser attached claim forms to this email.ld.

24

On April 1, 2010, Guardian contacted the Sheriffs Department to see if Plaintiff had

25

been cleared as a suspect. (ECF No. 263-1 at 15; ECF No. 256-4 at 5). Guardian was advised

26 that Plaintiff had not been cleared as a suspect. Id.
27

On August 24,2010, Werkheiser received a Claimant Statement form, W-9 tax form,

28

and a death certificate for Robert Stonebreaker with the cause ofdeath listed as "PENDING."
- 6-

llcv797 WQH (WVG)

1 (ECF No. 256-5 at 14-18; ECF No. 256-4 at 5).
2

Werkheiser contacted the Sheriffs

Department to see if Plaintiff had been cleared as a suspect. (ECF No. 263-1 at 17; ECF No.

3 256-4 at 5). Werkheiser states that she was advised by the Sheriffs Department that Plaintiff
4

"is still a suspect and unwilling to cooperate in the investigation at this point." ld.

5
6

On August 24, 2010, Werkheiser sent Plaintiff a letter informing Plaintiffthat her claim
had been received. (ECF No. 256-5 at 19; ECF No. 256-4 at 5-6). The letter also stated:

7

We are unable to proceed with our review of this claim until we receive the
following documents:

8

Ori~inal Finalized Death Certificate with statement from investigating agency
indIcating that the named beneficiary is not a suspect in the insured's passing.

9
10

Or

11

Statement from the investigating agency indicating that the named beneficiary
is not a suspect in the insured's passing.

12
(ECF No. 256-5 at 19).
13
On November 11, 2010, Werkheiser contacted the Sheriffs Department to see if

14
15
16

Plaintiff had been cleared as a suspect. (ECF No. 256-5 at 24; ECF No. 256-4 at 6).
Werkheiser was advised that: "Pam Stonebreaker is still a suspect in the case. She will not
even talk to us now." ld.

17
On December 17, 2010, Plaintiff sent Guardian a copy of the final death certificate for

18

19
20
21
22

Robert Stonebreaker, dated November 12, 2010, which lists the cause of death as "homicidal
violence." (ECF No. 256-5 at 27-31). On December 22,2010, Werkheiser sent Plaintiff a
letter stating: " ... we will require a statement from the investigating policy department advising
us that the named beneficiary is not a suspect in the passing ofyour husband." (ECF No. 256­
5 at 32).

23
On March 24,2011, Werkheiser contacted the Sheriffs Department to see if Plaintiff

24
25
26

had been cleared as a suspect. (ECF No. 263-1 at 25-26; ECF No. 256-5 at 37). Werkheiser
was advised by the Sheriffs Department that: "She is still number one suspect in my book! !!"

ld.
27
Plaintiffsubmits the deposition ofCrews, a financial representative ofGuardian , which

28
states:

-7-

11 cv797 WQH (WVG)

1

2

Q.
As a financial representative of Guardian, are you authorized to make
representations to Guardian insureds on behalf of Guardian?
A.
Yes.

3

Q.

5

- it was your understanding, after talking to The Guardian Home Office
on January 18, 2010, that the Stonebreakers' Guardian policies were still in
force; is that correct?
A. Correct.

6

Q.

4

7

Was it your understanding after talking to the Home Office representative
of The GuardIan on January 18,2010, that the Stonebreakers' policies had not
lapsed?
That is correct.
A.

8
9
10
11
12
13
14
15
16

(ECF No. 263-5 at 14-16).
Plaintiff submits the deposition of Wiegman, the Stonebreakers ' financial advisor,
which states:
Q. Mr. Wiegman, you testified that you had two conversations with Rod Crews
shortly after Dr. Stonebreaker's death; is that correct?
A. Yeah.

Q. The first conversation was when you called Mr. Crews to inquire whether the
Guardian policies were in force; is that correct?
A. Right.
Q. And that was within a day or two of Dr. Stonebreaker's death?
A. Right.

17
18

19
20
21

22
23

Q. And during that phone conversation, Mr. Crews told you that, based on the
Guardian computer screen he was looking at, all three Guardian policies were
in force as of that date; is that correct?
A. That's what he had said, yeah.

Q. And at that point, did Mr. Crews make a phone call or inquire of someone at
the Guardian
home office? ...
A. That's my understanding.
Q. And then you had a subsequent conversation with Mr. Crews regarding his
contact with someone at the Guardian's home office? ...
A. Correct.

24
25

Q. And did the - - did the second conversation with Rod Crews happen on the
[same] day as the first one where you called to inquire about the policies?
A. It was either the same day or the next day.

26

27
28

Q. Okay. But during the second conversation, Mr. Crews told you that -- strike
that. During the second conversation which occurred in or about January 19,
2010, Mr. Crews told you that, based on his conversation with someone at the
Guardian home office, all three Guardian policies were in force as of that date;
is that correct?
-8-

Ilcv797 WQH (WVG)

1

A. They said that based on their screen, they saw that the policies were in force.

2

Q. Okay. And both ofthese conversations that we've been referring to that you
had with Mr. Crews took place on or about January 19,2010; is that correct?
A. Correct.

3
4
5

Q. And then it was a later third conversation where the death claim was actually
reported; is that correct?
A. Right.

6 Id. at 21-26.
7

Guardian submits the declaration of Werkheiser, Guardian's chief claims consultant,

8 who states:
9
10

11

... 7. On January 20, 2010, I listened to Crews voicemail and responded with an
e-mail to Mrs. Stonebreaker's insurance agent Aaron Wiegman ("Wiegman")
informing him that Dr. Stonebreaker's Term Policies had lapsed due to a non­
payment of premiums. I had determined that the poliCIes had lapsed by
referencing regularly maintained files at The Guardian that track the payment of
premiums....

12
13
14
15
16
17
18

8. Despite the passing of Dr. Stonebreaker (the insured and owner of all The
GuardIan PolicIes), I worked with other The Guardian employees to preserve the
death benefits ofDr. Stonebreaker's Term Policies by applying funds from the
dividends earned in Dr. Stonebreaker's whole life Guardian Policy No.1 to the
unpaid premiums ofthe Term Policies. As a result ofthese efforts on behalf of
Dr. Stonebreaker's beneficiaries, The Guardian reinstated the Term Policies to
give Dr. Stonebreaker's beneficiaries the benefit of three policies with a total
death benefit of$2,000,000, instead ofone whole life policy with a death benefit
of$250,000 .... By the time ofDr. Stonebreaker's death, the Term Policies were
paid up only until the end of November, 2009. The December, 2009 and
January, 2010 premiums on the Term Policies were never paid before his death.

19 (ECF No. 256-4 at 3-4).
20

CONTENTIONS OF THE PARTIES

21

Guardian moves for summary judgment on Plaintiff s breach ofcontract claim, breach

22

ofthe implied covenant ofgood faith and fair dealing claim, and prayer for punitive damages.

23

Guardian asserts that Robert Stonebreaker's two term life insurance policies, totaling

24

$1,750,000, had lapsed due to non-payment ofpremiums. (ECFNo. 292-1 at 2-14). Guardian

25

states that it "does not raise a 'lapse defense'" to avoid paying benefits. (ECF No. 279 at 6).

26

Guardian contends that "it voluntarily reinstated the two lapsed policies" and that evidence of

27

a lapse and subsequent reinstatement of the policies is relevant to "prove the Guardian's

28

reasonable 'good faith' conduct ... and to prove that the term policies at the moment of Dr.
-9-

llcv797 WQH (WVG)

1 Stonebreaker's death were not in force and therefore there was no contract at the moment of
2

death upon which Plaintiff can base her 'breach ofcontract' and 'bad faith' claims with respect

3

to the tenn policies." Id at 9. Guardian contends that it acted reasonably pursuant to the

4

insurance policies and did not unfairly interfere with Plaintiff s right to receive the benefits of

5 the insurance policies. (ECF No. 292-1 at 21-27). Guardian contends that Plaintiffs breach
6 ofcontract claim regarding the interpleaded funds "must be dismissed because The Guardian's
7
8

interpleader has already been ruled appropriate by this Court." (ECF No. 256-1 at 18).
Plaintiff contends that Guardian breached the implied covenant of good faith and fair

9 dealing by "unreasonably delay[ing] payment of the policy benefits" and by conducting a
10

"biased and incomplete" investigation. (ECF No. 263 at 7). Plaintiff asserts that "all three

11

Guardian policies were in force at the time of [Robert Stonebreaker's] death." Id Plaintiff

12

contends that Guardian was obligated to pay the benefits of the two tenn policies. Plaintiff

l3

contends that it is entitled to judgment as a matter oflaw on Guardian's "lapse defense." (ECF

14 No. 267-1).
15
16

DISCUSSION

Summary judgment is appropriate ifthere is no genuine issue as to any material fact and

17 the moving party is entitled to a judgment as a matter of law. See Fed. R. Civ. P. 56(c). The
18

moving party has the initial burden of demonstrating that summary judgment is proper. See

19 Adickesv. S.H. Kress & Co., 398 U.S. 144, 152 (1970). The burden then shifts to the opposing
20

party to provide admissible evidence beyond the pleadings to show that summary judgment is

21

not appropriate. See Celotex Corp. v. Catrett, 477 U.S. 317, 322, 324 (1986). "In considering

22

a motion for summary judgment, the court may not weigh the evidence or make credibility

23

detenninations, and is required to draw all inferences in a light most favorable to the

24

non-moving party." Freemanv. Arpaio, 125 F.3d 732, 735 (9th Cir. 1997); see also Anderson

25

v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986).

26

To avoid summary judgment, the nonmovant must designate which specific facts show

27

that there is a genuine issue for trial. See Anderson, 477 U.S. at 256; Harper v. Wallingford,

28

877 F .2d 728, 731 (9th Cir. 1989). A "material" fact is one that is relevant to an element of
- 10­

llcv797 WQH (WVG)

a claim or defense and whose existence might affect the outcome ofthe suit. Matsushita Elec.
2

Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574,586 (1986). The materiality of a fact is

3

determined by the substantive law governing the claim or defense. See Anderson, 477 U.S. at

4

252; Celotex, 477 U.S. at 322; Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989).

5

I.

Plaintiff's Claim for Breach of the Implied Covenant of Duty of Good Faith and

6

Fair Dealing

7

Every contract imposes an implied duty of good faith and fair dealing. See Egan v.

8 Mutual ofOmaha Ins. Co., 24 Ca1.3d 809,818 (1979). The implied covenant ofgood faith and
9

fair dealing holds that "neither party will do anything which injures the right of the other to

10

receive the benefits of the agreement." Schoolcraft v. Ross, 81 Cal. App. 3d 75, 80 (1978)

11

(quotation omitted). In the insurance context, an insurer has the "responsibility to act fairly

12

and in good faith with respect to the handling of the insured's claim .... " Chateau Chamberay

13

Homeowners Ass'n v. Associated Int'llns. Co., 90 CaL App. 4th 335, 345 (2001) (quotations

14

and citations omitted). "A breach of the implied covenant of good faith and fair dealing

15

involves something beyond breach of the contractual duty itself, ... [b]ad faith implies unfair

16

dealing rather than mistakenjudgment...."Chateau Chamberay Homeowners Ass'n, 90 Cal.

17

App. 4th at 345 (quotations and citations omitted). "[B]efore an insurer can be found to have

18

acted tortiously (Le., in bad faith), for its delay or denial in the payment of policy benefits, it

19

must be shown that the insurer acted unreasonably or without proper cause." Id. at 346 (citing

20

Dalrymple v. United Services Auto. Assn., 40 Cal. App. 4th 497, 520 (1995)).

21

reasonableness of an insurer's claims-handling conduct is ordinarily a question of fact."

22

Chateau Chamberay Homeowners Ass'n, 90 Cal. App. 4th at 347. The reasonableness of an

23

insurer's claims-handling conduct "becomes a question of law where the evidence is

24

undisputed and only one reasonable inference can be drawn from the evidence." Id.

25

"Determinations related to assessment ofpunitive damages have traditionally been left to the

26

discretion ofthe jury." Amadeo v. Principal Mut. Life Ins. Co., 290 F.3d 1152, 1165 (9th Cir.

27

2002) (quoting Egan, 24 Cal. at 821).

28

"The

In United Investors Life Ins. Co. v. Grant, the district court denied summary judgment
- 11 -

Ilcv797 WQH (WVG)

1 stating: "[I]t is .. , undisputed that [the insurer] did no investigation of their own to help
2

determine [the beneficiary's] involvement, ifany, in [the insured's] death prior to interpleading

3 the policy proceeds some fourteen months after the claim was initially submitted." United
4

Investors Lifo Ins. Co. v. Grant, Case No. 2:05-cv-1716-MCE-DAD, 2007 WL 521804 at *

5 2 (E.D. Cal. Feb. 15,2007). The district court held: "These circumstances '" present triable
6

issues offact with respect to the reasonableness ofUnited Investors' claims handling that make

7 this case not amenable to disposition on summary judgment." Id. The case went to trial and
8 a verdict was rendered in favor of the beneficiary on the claim of breach of the duty of good
9

faith and fair dealing. The insurer appealed to the Court of Appeals for the Ninth Circuit

10

which stated that "[t]he question of liability was properly presented to the jury." United

11

Investors Lifo Ins. Co. v. Grant, 387 Fed. App'x. 683, 687 (9th Cir. 2010). The Court of

12

Appeals stated:

13
14
15
16
17

fThe insurer] did not dispute coverage, it just worried about double
liability. [The beneficiaryJ proffered evidence that fthe insurerl could
have dealt with that concern much more quickfy, either through
investigation or by filing an action in interpleader earlier. She proffered
evidence that [the insurer] violated both its own unwritten policies and
California law, making Its conduct unreasonable. Contrary to [the
insurer's] assertions, filing an interpleader action fifteen months after
receiving a claim and after minimal, pro forma investigation, where the
beneficiary was never arrested, was not reasonable as a matter of law.

18

Id. at 688; but see Lee v. Crusader Ins. Co., 49 Ca1.AppAth 1750, 1759 (1996) (finding an

19

insurance company's conduct reasonable as a matter oflaw, largely because the claimant was

20

arrested).

21

In this case, a financial representative of Guardian, Crews, was asked the following

22

question in a deposition: "Was it your understanding, after talking to The Home Office

23

representative of The Guardian on January 18,2010, that the Stonebreakers' policies had not

24

lapsed?" (ECF No. 263-5 at 14). Crews gave the following answer: "That is correct." Id.

25

Plaintiff's financial advisor, Wiegman, made a claim for the term policy benefits on January

26

19,2010, and Guardian initiated a claims file for Plaintiff. (ECF No. 292-1 at 24). Wiegman

27

stated in a deposition that he spoke with Crews shortly after Robert Stonebreakers' death and

28

that Crews told him that the policies were in "full force." Id. at 21-26. On February 6,20 I 0,
- 12 -

Ilcv797 WQH (WVG)

I

Guardian's chief claims consultant, Werkheiser, had a telephone conversation with the

2

Sheriffs Department and was infonned that Robert Stonebreaker's death had been ruled a

3

homicide.

4

Enforcement Inquiry" letter from the San Diego County Sheriffs Department. Id. On

(ECF No. 256-5 at 6).

On February 12, 2010, Guardian received a "Law

5 February 26, 2010, Werkheiser sent Plaintiff a letter, which stated: " ... prior to releasing
6

payment of this claim, [Guardian] will require a statement from the Sheriffs Department (on

7 their letterhead) indicating the named beneficiary is not a suspect in the passing of our
8

insured." Id at 10. On April 1, 2010 and August 24,2010, Guardian contacted the Sheriffs

9

Department to detennine whether Plaintiff had been ruled out as a suspect. (ECF No. 256-4).

lOOn both occasions, Werkheiser was infonned that Plaintiffhad not been ruled out as a suspect.
11

Id. On August 24, 2010, Werkheiser received from Plaintiff a Claimant Statement, W -9 tax

12

fonn, and a death certificate for Robert Stonebreaker, with the cause of death listed as

13

"PENDING." (ECF No. 256-5 at 14-18; ECF No. 256-4 at 5). Werkheiser, in her response,

14

told Plaintiff that before the claim could proceed, a statement was required from the

15

"investigating agency indicating that the named beneficiary is not a suspect in the insured's

16 passing." (ECF No. 256-5 at 19). On November 11, 2010, Werkheiser again contacted the
17

Sheriffs Department, and states that she was infonned that: "Pam Stonebreaker is still a

18

suspect in the case. She will not even talk to us now." (ECF No. 256-5 at 24; ECF No. 256-4

19

at 6).

20

Robert Stonebreaker, dated November 12, 2010, indicating that the cause of death was

21

"homicidal violence" (ECF No. 256-5 at 27-31). On March 24,2011, Werkheiser contacted

22

the Sheriff s Department and was told that Plaintiff had not been cleared as a suspect. (ECF

23

No. 256-5 at 32).

On December 17, 2010, Guardian received a copy of the final death certificate for

24

On October 5,2011, Guardian deposited a check with the Clerk of the Court as "the

25

benefits payable under life insurance policies issued by [Guardian] on the life of Robert

26

Stonebreaker." (ECF No. 121 at 2). Guardian is not asserting a "lapse defense" to avoid

27

paying the benefits of the two tenn policies. Guardian is proffering evidence of a lapse to

28

show that it did not breach its duty of good faith and fair dealing in its handling ofPlaintiffs'
- 13-

11 cv797 WQH (WVG)

1 claim to the two term policies. The Court concludes that evidence of a policy lapse may be
2 relevant in determining whether Guardian "acted unreasonably or without proper cause,"
3 Chateau Chamberay Homeowners Ass'n, 90 Cal. App. 4th at 346; however, Guardian is not
4 entitled to summary judgment on Plaintiffs claim for breach ofthe implied covenant of good
5 faith and fair dealing based solely upon evidence of its conduct regarding lapse or on grounds
6 that no contract existed regarding the term policies.
7

In this case, Guardian did not file an interpleader until April 22, 2011, approximately

8

fifteen months after Wiegman made a claim to the benefits on Plaintiffs behalf; there was a

9 delay ofapproximately eight months after Plaintiff submitted a Claim Statement on August 24,
10

2010 before Guardian filed an interpleader. (ECF Nos. 292-1 at 24; 17). Guardian did not

11

deposit the interpleaded funds with the Court until October 5, 2011, approximately twenty-one

12

months after Wiegman made a claim to the benefits and fourteen months after Plaintiff

13

submitted a Claim Statement. (ECF Nos. 292-1 at 24; 121 at 2). There is no indication in the

14

record that Plaintiff was arrested or charged in connection with the death of Robert

15

Stonebreaker. Construing the facts in the light most favorable to Plaintiff, the Court finds that

16

more than "one inference can be drawn from the evidence" ofGuardian's conduct in this case.

17

Chateau Chamberay Homeowners Ass'n, 90 Cal. App. 4th at 346. The Court concludes that

18

issues of material fact exist as to whether Guardian reasonably investigated Robert

19

Stonebreaker's death and whether there was an unreasonable delay before the interpleader was

20

filed. Id. (explaining that the question of whether an insurer breached its duty to investigate

21

"is ordinarily a question of fact" and only becomes a question of law "where but one inference

22

can be drawn from the evidence"); see also United Investors Life Ins. Co., 387 Fed. App'x at

23

687-88 (finding a fourteen-month delay before filing an interpleader with no independent

24

investigation into the cause of death to be unreasonable) (quotations and citation omitted);

25

Paulfrey v. Blue Chip Stamps, 150 Cal. App. 3d 187, 196 (1983) ("[W]hether an insurer

26

breached its duty to investigate ... [is] a question of fact to be determined by the particular

27

circumstances ofeach case"). The Court concludes that there is an issue of material fact as to

28

whether the evidence supports an award of punitive damages in this case. Guardian is not
- 14 -

llcv797 WQH (WVG)

1 entitled to summary judgment on Plaintiffs claim for breach ofthe implied covenant of good
2 faith and fair dealing or on Plaintiffs prayer for punitive damages.

3 II.

PlaintiWs Claim for Breach of Contract

4

Guardian seeks summary judgment on Plaintiffs breach of contract claim on the

5 grounds that "Guardian's interpleader has already been ruled appropriate by this Court." (ECF
6 No. 256-1 at 18).
7

"An insurer does not breach an insurance contract when it retains a good faith beliefthat

8 it faces the possibility of competing claims and thereby interpleads the disputed funds with a
9 courtoflaw." Madduxv. Philadelphia Life Ins. Co., 77 F.Supp.2d 1123,1129 (S.D. Cal 1999)
10 (granting Defendant's motion for summary judgment on Plaintiffs' breach of contract claim
11

after an interpleader filed by Defendant was found to be appropriate); see also Minnesota Mut.

12

Life Ins. Co. v. Ensley, 174 F.3d 977 (9th Cir. 1999).

13

The Court has found that Guardian filed an appropriate interpleader. (ECF No. 212).

14 The Court concludes that Guardian did not breach the insurance contract. See Minnesota Mut.
15

Life Ins. Co., 174 F.3d at 981 ("In light of [Defendant's] good faith belief that it faced the

16 possibility of multiple claims, ... [Defendant] satisfied its obligation under the contract by
17

instituting the interpleader action"). Guardian is entitled to summary judgment on Plaintiffs

18

claim for breach of contract.
CONCLUSION

19
20

IT IS HEREBY ORDERED that the Motion for Summary Judgment (ECF No. 256)

21

filed by Defendant Guardian is GRANTED in part and DENIED in part. The Motion for

22

Summary Judgment on Guardian's Lapse Defense (ECF No. 267) filed by Plaintiff Pamela

23

Stonebreaker is DENIED on the grounds that Guardian has not asserted a lapse defense to

24

dispute coverage.

25
26 DATED:
27
28
- 15 -

l1cv797 WQH (WVG)