Fallow v. Bankers Life and Casualty Company

Filing 79

ORDER: Granting Motion for Partial Summary Judgment 44 ); Granting in Part Denying in Part Motion for Summary Judgment 48 ; Denying Motion to Strike 53 ; Granting in Part Denying in Part Motion for Leave to File Amended Complaint/Petition 68 . Please access entire text by document number hyperlink. Ordered and Signed on 01/15/2013 by Magistrate Judge Mark D. Clarke. (rsm)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
MEDFORD DIVISION

DENNIS EVAN FALLOW, as Personal
Representative ofthe ESTATE OF
KATHERINE FALLOW
Case No. 1:11-cv-03088-CL
Plaintiff,
V.

ORDER

BANKERS LIFE AND CASUALTY
COMPANY,
Defendant.

CLARKE, Magistrate Judge.
This matter comes before the court on plaintiffs motion for partial summary judgment
(#44), defendant's motion for summary judgment (#48), defendant's motion to strike (#53), and
plaintiffs motion for leave to file a third amended complaint (#68). For the reasons stated
below, plaintiffs motion for partial summary judgment is granted, defendant's motion for
summary judgment is granted in part and denied in part, defendant's motion to strike is denied,
and plaintiffs motion for leave to amend is granted in part and denied in part.

Pagel- ORDER

PROCEDURAL HISTORY
Plaintiff Dennis Evan Fallow ("plaintiff') originally filed this action on April14, 2011, in
the Josephine County Circuit Court. Fallow v. Bankers Life and Casualty Co., Case No.
11 CV040 1. On July 27, 2011, defendant Bankers Life and Casualty Company ("Bankers")
removed the case to federal court, alleging jurisdiction based on diversity of citizenship under 28
U.S.C. § 1332. The parties executed written consents to entry of judgment by a magistrate judge
(#26). Oral argument occurred on November 20, 2012.

BACKGROUND
The material facts are not in dispute. Plaintiff is Katherine Fallow's son and the personal
representative of her estate. At all material times, Katherine Fallow resided in Grants Pass,
Oregon. Bankers is an Illinois corporation that provides long-term care insurance to Oregon
consumers.
On February 15,2002, Bankers issued a Tax Qualified Home Health Care Policy ("the
Policy") to Katherine Fallow. Pltf. Ex. A. The Policy covered long-term care expenses,
including regular visits by a "Home Health Aide," defined in the Policy as "a licensed or
certified home health care worker, other than a Physician, nurse or professional therapist, who
performs Personal Care Services." The Policy further required that the Home Health Aide be
either part of a Home Health Care Agency, or be an independent "Qualified Home Health Care
Provider." The Policy defined "Qualified Home Health Care Provider" as "an individual or
organization licensed or certified to prove home health care services."
In June 2009, Katherine Fallow began receiving in-home care from Linda Davis, a
private caregiver who had previous experience caretaking in the state of Washington. On July 2,
2009, Plaintiff, as Katherine Fallow's power of attorney, filed a claim to be reimbursed for

Page 2- ORDER

Davis' work as a Home Health Aide. Pltf. Ex. B. Plaintiff attached Davis' credentials to the
claim, which included a certificate from the state of Washington's Aging and Adult Services
Administration, dated November 16, 2000, for completing a three-day "Caregiving
Fundamentals" course, and three certificates, dated between 2000 and 2003, from Ferry County
Community Services in Washington state for completing continuing education courses on senior
information and assistance. On August 19, 2009, Bankers informed Katherine Fallow that she
was eligible for benefits beginning May 13, 2009, and that Davis met the Policy's requirements
for Home Health Aides. Pltf. Ex. C.
On September 2, 2009, plaintiff informed Bankers that three other caregivers, Lorrie
Watters, Yvonne Archer, and Jill Colin, had begun caring for Katherine Fallow. Pltf. Ex. D.
Plaintiff attached the caregivers' credentials, which indicated that Lorrie Watters was registered
with the State of Oregon's Home Health Care Commission 1 and had previously provided home
health care for seniors through Oregon's Senior and Disabilities Program, and that Yvonne
Archer and Jill Colin were Certified Nursing Assistants ("CNAs"). Pltf. Ex. J.
On December 9, 2009, a Bankers care management specialist, in a routine check,
reviewed Katherine Fallow's caregivers' daily visit notes and documentation to substantiate their
eligibility under the Policy. As part of the review, the care management specialist telephoned
Davis and asked if she was a CNA or part of an Oregon Home Health Care Agency. Davis
stated that she was not. The care management specialist reviewed Watters's credentials and
found that Watters also was not a CNA or part of an Oregon Home Health Care Agency. The
Bankers care management specialist then called plaintiff and told him that neither Davis nor

1

The Oregon Home Health Care Commission's registry provides a listing of people looking for work as home
health aides and does not provide any form of licensing or certification.
Page 3- ORDER

Watters qualified under the Policy as Home Health Aides because they were not CNAs or
licensed by the state of Oregon to provide home health care services.
On January 4, 2010, plaintiff sent Bankers a letter asking Bankers to review its decision
to deny reimbursement for the work of Davis and Watters. Bankers reviewed the matter and
upheld its decision, stating that that a Home Health Aide who was not part of a Home Health
Care Agency must be a "Qualified Home Health Care Provider," which the Policy defined as "an
individual or organization licensed or certified to provide home health care services." Because
neither Davis nor Watters were CNAs or licensed by the state of Oregon to provide home health
care services, Bankers contended they did not meet the Policy's definition of a Qualified Home
Health Care Provider and thus were not eligible for reimbursement.
Despite Bankers' letter, plaintiff continued to employ Davis and Watters, maintaining
that they were eligible as Home Health Aides under the Policy. Bankers continued to deny
coverage. On October 8, 2010, in an effort to resolve the dispute, Bankers sent plaintiff a letter
stating that it would reimburse plaintiff for Davis' and Watters' work up to the Maximum
Weekly Benefit of the Policy for their work performed through mid-October. Pltf. Ex. L. In
conjunction with the letter, Bankers sent plaintiff checks later in October for a total of $9,097.01.
Plaintiff refused this offer.
On February 21, 2011, in response to denied requests for reimbursement for other
workers caring for Katherine Fallow, Bankers send plaintiff a letter stating that anyone providing
home health services under the Policy who is not employed by a Home Health Care Agency
must be "(a) a currently licensed Registered Nurse; (b) a Licensed Practical Nurse; (c) a Certified
Nurse Aide; or (d) included in a government sponsored Nurse Aide Registry." Despite the letter,

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plaintiff continued to employ Davis, Watters, and other workers who did not meet this definition
until Katherine Fallow's death in July 2011.
Plaintiff brings three claims in its Second Amended Complaint. Plaintiff alleges (1)
Bankers breached its insurance contract by refusing to cover the care Katherine Fallow received
from Davis

2

;

(2) Bankers acted in bad faith in refusing to initially reimburse plaintiff for care

received from Davis and Watters; and (3) Bankers committed fraud by representing that Davis
told Bankers that she was not a Home Health Aide. Plaintiff prays for economic damages, noneconomic damages, punitive damages, "unpaid premiums," and attorney fees.
On August 7, 2 0 12, plaintiff moved for partial summary judgment on plaintiffs first
claim for breach of contract (#44). On August 14, 2012, Bankers filed its own motion for
summary judgment (#48), arguing that Bankers did not breach its insurance contract, and, even if
Bankers had, plaintiff is entitled only to economic damages in the amount of the unpaid Policy
benefits. Bankers also moved for summary judgment on plaintiffs second and third claims for
bad faith and fraud. On August 31, 2012, Bankers moved to strike exhibits attached to plaintiffs
memo in support of its motion for partial summary judgment (#54), arguing that the exhibits
were not properly authenticated and contained inadmissible hearsay.
On October 5, 2012, plaintiff filed a motion for leave to file a third amended complaint
(#68), seeking to amend its fraud claim and add new caregivers to its breach of contract and bad
faith claims. Bankers filed an objection to plaintiffs motion on October 19, 2012 (#71).

PRELIMINARY PROCEDURAL MATTER
As an initial matter, the court must address the admissibility of the evidence offered by
plaintiff in support of its motion for summary judgment. Bankers moved to strike Exhibits 2

2

The court notes that plaintiffs breach of contract claim relates only to Davis' work and not to other home
healthcare workers.
Page 5- ORDER

through 16 attached to plaintiffs memo in support of its motion for summary judgment, arguing
that the documents were not properly authenticated and contained inadmissible hearsay. In
response, plaintiff filed supplemental declarations in support of its motion for partial summary
judgment. Bankers did not file a reply.
The court finds that plaintiffs supplemental declarations properly authenticate the
exhibits, and that the declarations lay foundations for applicable hearsay exceptions. For
example, Exhibits 2, 5, 11, and 12 include resumes and certificates for completion of trainings by
various homecare providers for Katherine Fallow. Plaintiffs supplemental materials include
declarations by the homecare providers establishing that the exhibits meet the business records
exception to the hearsay rule. 3 Based on the material in plaintiffs supplemental declarations,
Bankers' motion to strike is DENIED.
APPLICABLE INSURANCE POLICY PROVISIONS
I.

Coverage Grant.

The Policy in the coverage grants provides as follows:
The charges incurred for the following services and supplies provided by a Home
Health Care Agency or a Qualified Home Health Care Provider under a Plan of Care:
a. Visits by: a licensed nurse; a licensed nutritional specialist; a medical social
worker; a Home Health Aide; and a legally qualified physical, occupational,
speech or inhalation therapist;
b. Prescription drugs, medicines, medical supplies and laboratory services which are
of a type customarily provided in a Hospital or Nursing Home;
c. Rental (not to exceed purchase price) of a wheelchair, hospital bed and other
durable portable equipment used for therapeutic treatment;
d. Personal Care Services; and
e. Homemaker Services Incidental to Personal Care Services.
3

Hearsay evidence may be admissible under the business records exception if the evidence is a record of regularly
conducted activity and was (1) made at or near the time of the event by someone with knowledge; (2) the record was
kept in the course of regularly conducted activity of a business or organization; (3) making the record was a regular
practice of that that activity; (4) all of these conditions are shown by the testimony of the custodian or by
certification compliant with Rule 902( ll); and (5) neither the source of information nor the method or circumstances
ofpreparation indicate a lack of trustworthiness. Fed. R. ofEvid. 803(6).

Page 6- ORDER

Pltf. Ex. A, p. 15 (emphasis added).

II.

Definitions.
The Policy defines a Health Home Aide as:
"[A] licensed or certified home health care worker, other than a Physician, nurse or
professional therapist, who performs Personal Care Services."
The Policy defines a Home Health Care Agency as an agency or organization that:
a. Specializes in giving nursing care or therapeutic services in the home;
b. Is licensed to provide such care or services by the appropriate licensing agency
where they are performed or is certified as a Home Health Care Agency under
Title XVIII of the Social Security Act of 1965, as amended;
c. Is operating within the scope of its license or certification; and
d. Maintains a complete medical record and Plan of Care for each patient.
Pltf. Ex. A., p. 16 (emphasis added).
The Policy defines a Qualified Home Health Care Provider as:
"[A ]n individual or organization licensed or certified to provide home health care
services. The Qualified Home Health Care Provider must be included in the Plan of Care
as the provider of home health care services."
Id. (emphasis added).

SUMMARY JUDGMENT
The court must grant summary judgment if there is no genuine issue of material fact and
the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c). An issue is
"genuine" if a reasonable jury could return a verdict in favor of the non-moving party. Rivera v.
Philip Morris. Inc., 395 F.3d 1142, 1146 (9th Cir. 2005) (citing Anderson v. Liberty Lobbv. Inc.,
477 U.S. 242,248 (1986)). A fact is "material" if it could affect the outcome ofthe case. Id.
The court views the evidence in the light most favorable to the non-moving party and draws "all
justifiable inferences" in that party's favor. Miller v. Glenn Miller Prods .. Inc., 454 F.3d 975,
988 (9th Cir. 2006) (quoting Hunt v. Cromartie, 526 U.S. 541, 552 (1999)). When the moving

Page 7- ORDER

party has met its burden, the non-moving party must present "specific facts showing that there is
a genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587
(1986) (quoting FED. R. Clv. P. 56( e)). Conclusory allegations, unsupported by factual material,
are insufficient to defeat a motion for summary judgment. Tavlor v. List, 880 F.2d 1040, 1045
(9th Cir. 1989).
I.

Breach of Contract Claim.
A. Parties' Arguments.

Plaintiff moves for partial summary judgment on its first claim of breach of contract.
Plaintiff argues that Bankers breached its insurance contract when it determined that Davis was
not a Qualified Home Health Care Provider under the terms of the Policy. The Policy defines
Qualified Home Health Care Provider as "a licensed or certified home health care worker, other
than a Physician, nurse or professional therapist, who performs Personal Care Services."
Bankers denied reimbursement for Davis' services on the grounds that she did not meet this
definition, arguing that only CNAs and those licensed in Oregon to provide home healthcare
were "licensed or certified" under the Policy as home health care workers. The Policy does not
define "licensed or certified" or specify the resulting jurisdiction or authority for such license or
certification. Plaintiff contends that "licensed or certified" plainly means "granted permission by
a competent authority to provide home health care services," regardless of the authority's
location, and that Davis met this definition because she was certified by the state of Washington
to provide home health care. In response, Bankers argues that plaintiffs definition of"licensed
and certified" is too broad, and that there are genuine issues of material fact regarding both the
meaning of "licensed or certified" and whether Davis falls within plaintiffs interpretation of the
terms.

Page 8 -ORDER

B. Analytical Framework.

Resolution of plaintiffs breach of contract claim turns on the interpretation of the phrase
"licensed or certified" in the Policy issued by Bankers. The interpretation of an insurance policy
is a question of law and not of fact. Hoffman Constr. Co. v. Fred S. James & Co, 313 Or. 464,
469 ( 1991 ). Only the four comers of the policy may be used when examining a policy; extrinsic
evidence is not admissible as an aid to interpretation. Ortiz v. State Farm Fire & Cas. Co., 244
Or. App. 355, 360 (2011). When interpreting insurance contracts, "[t]he primary and governing
rule" is to "ascertain the intention of the parties." Hoffman, 313 Or. at 469 (quoting Totten v.
New York Life Ins. Co., 298 Or. 765, 770 (1985)). To obtain the intent of the parties, the court
first looks to the terms and conditions of the policy. Id. If a particular term is not defined in the
contract and could be construed in di±Ierent ways, the court follows a series of steps to give the
term meaning. Id. If the term's meaning is still ambiguous after these steps, then the term is
construed against the drafted and iri the insured's favor. Id. at 470-4 71.
The first step a court follows to define an unclear term is to identify the term's "plain
meaning." Id. A dictionary definition may be used to help determine the plain meaning of a
term. Id. If the term has a plain meaning, then that meaning is applied and no further analysis is
done. Ortiz, 244 Or. App. at 360. If the term is still susceptible to more than one plausible
explanation after this step, however, the court turns to the second step: analyzing the particular
context in which the term is used in the policy, and the broader context of the policy as a whole.
Hoffman, 313 Or. at 470. At this step, the court looks to "all parts and clauses" of the insurance
contract to determine "if and how far one clause is modified, limited, or controlled by others."
Id. (quoting

Dento~

Page 9 - ORDER

v. Int'l Health & Life, 270 Or. 444, 450 (1974)). Only if multiple plausible

interpretations of the term remain after this second step should the term be construed in the
insured's favor. Id. As the court stated in Hoffman, "when two or more competing, plausible
interpretations prove to be reasonable after all other methods for resolving the dispute over the
meaning of particular words fail, then the rule of interpretation against the drafter of the language
becomes applicable, because the ambiguity cannot be permitted to survive." Id. at 470-471.

C. Discussion.
Using the analysis set out in Hoffman, the court finds that plaintiffs interpretation of
"licensed and certified," which is not defined in the Policy, is correct, and that Bankers breached
its contract by refusing to reimburse plaintiff for the cost of Davis' services. A dictionary
definition may be used to ascertain a term's plain meaning. In this case, plaintiff relies on
Merriam-Webster's online dictionary definition of "license" as "pennission to act" or "a
permission granted by a competent authority to engage in a business or occupation or in an
activity otherwise unlawful." Pltf. Memo in Support ofMot., p. 9 (citing Merriam-Webster
Online Dictionary, http://www.merriam-webster.com/dictionary/license (last accessed January
15, 2013)). "Certify" is defined in the same dictionary as "to recognize as having met special
qualifications (as of a governmental agency or professional board) within a field." Id. (citing
Merriam-Webster Online Dictionary, http://www.merriam-webster.com/dictionary/certify (last
accessed January 15, 2013)). Plaintiff argues that "licensed or certified," then, plainly means
"granted permission by a competent authority to provide home health care services."
While the court agrees with plaintiff that "licensed or certified," as used in the Policy,
plainly means "granted permission by a competent authority to provide home health care
services," the court finds that there is ambiguity as to the meaning of "competent authority."
That is, it is unclear under the definition whether only health care agencies or facilities in certain

Page I0- ORDER

states may grant permission to provide home health care services, or whether any health care
agency or facility may grant permission to provide home health care services.
Because there is still ambiguity as to the meaning of "licensed or certified," the court
turns to the second step in the Hoffman analysis: considering the particular context in which the
term is used in the policy and the broader context of the policy as a whole. Hoffman, 313 Or. at
470. At this step, the court considers "if and how far one clause is modified, limited, or
controlled by others." Id. (quoting Denton, 270 Or. at 450). When examining the policy in its
entirety, the court "assume[ s] that parties to an insurance contract do not create meaningless
provisions," and thus favors interpretations of a term that give meaning to all provisions. Id. at
472.

Using this analysis, the court finds that "licensed or certified," as used in the definition of
a "Qualified Home Health Care Provider," means "granted permission by any competent
authority to provide home health care services." The court notes that the phrase "licensed and
certified" is used with qualifiers in the majority of the Policy, but not in the definition of
"Qualified Home Health Care Provider." The Policy's definition of "Assisted Living Facility,"
for example, is a facility "certified as an assisted living residence by the state." Pltf. Ex. 1 at 7
(emphasis added). Likewise, the Policy's definition of a "Home Health Care Agency" is an
agency or organization "licensed to provide such care or services by the appropriate licensing
agency where they are performed," and "Residential Care Facility" is defined as a facility

"licensed or certified by the appropriate state agency to provide ongoing care." Id. at 11, 13
(emphases added). Only the definition of a Qualified Home Health Care Provider is simply "an
individual licensed or certified to provide home health care services," with no limits on the
location of the facility. Applying the principal that all parts of an insurance contract should be

Page 11 -ORDER

given meaning, Hoffman, 313 Or. at 4 70, the court finds that the lack of qualifier to the phrase
"licensed or certified" in the definition of "Qualified Home Health Provider" is intentional.
Accordingly, the court finds that "licensed or certified," as used in the in definition of "Qualified
Home Health Care Provider," refers to any competent authority providing home health care
services, regardless of the authority's location.
The court turns next to whether Davis was in fact a "Qualified Home Health Care
Provider." Adopting the definition of "licensed and certified" set forth above, a "Qualified
Home Health Care Provider" is an individual, other than a physician, nurse, or professional
therapist, who provides personal care services and is granted permission to provide home health
care services by a competent authority. The court finds that Davis meets this definition. Davis is
not a physician, nurse, or professional therapist, and Washington's Aging and Adult Services
Administration, a competent authority, issued Davis a certificate following a three-day course on
"Caregiving Fundamentals" to provide home health care services. Because Davis was a
Qualified Home Health Care Provider under the Policy's terms, the court finds that Bankers
breached its contract with Katherine Fallow when it refused to compensate plaintiff for Davis'
services. Summary judgment is GRANTED to plaintiff on its breach of contract claim.

D. Damages.
In its own motion for summary judgment, Bankers argues that if plaintiff recovers on his
breach of contract claim, there is no question of fact that recovery should be limited to economic
damages in the amount of unpaid policy benefits, and that recovery should not include attorney
fees and non-economic damages. Bankers contends that a court may only award attorney fees to
a litigant if authorized to do so by statute or contract. Bankers also argues that, as a matter of
law, plaintiff cannot recover non-economic damages.

Page 12- ORDER

1. Attorney Fees.
Generally, "a court awards attorney fees to a litigant only if a statute or contract
authorizes such an award." Swett v. Bradbury, 335 Or. 378, 381 (2003). In this case,
Or.Rev.Stat. § 742.061 authorizes an award of attorney fees. The statute provides, in part:
[I]f settlement is not made within six months from the date proof of loss is filed
with an insurer and an action is brought in any court of this state upon any policy
of insurance of any kind or nature, and the plaintiffs recovery exceeds the amount
of any tender made by the defendant in such action, a reasonable amount to be
fixed by the court as attorney fees shall be taxed as part of the costs of the action
and any appeal thereon.
For the purposes of Or.Rev.Stat. § 742.061, "proof of loss" is any "event or submission
that would permit an insurer to estimate its obligations." Dockins v. State Farm Ins. Co., 329 Or.
20, 29 (1999). Here, on October 8, 2010, in response to plaintiffs argument that he should be
reimbursed for Davis' and Watters' services, Bankers sent plaintiff a letter stating that it would
reimburse plaintiff for Davis' and Watters' work up to the Maximum Weekly Benefit of the
Policy for the services they had provided through mid-October. In conjunction with the letter,
Bankers sent plaintiff checks totaling $9,097.0 1. Plaintiff filed his lawsuit on April 14, 2011,
over six months after Bankers' proof of loss. Because plaintiffs economic damages on its
breach of contract claim include reimbursement for all of the services provided by Davis and
Watters, plaintiffs recovery clearly exceeds the $9,097.01 offered by Bankers to settle.
Plaintiffs breach of contract claim meets the requirements of Or.Rev.Stat. § 742.061 for attorney
fees. Bankers' motion for summary judgment on this point is DENIED.

2. Noneconomic Damages.
A successful plaintiff on a breach of contract claim is usually limited to recovery of
economic damages. Moser v. DKN Ind., 191 Or. App. 346,349 (2004) (citing Keltner v. Wash.
Cnty., 310 Or. 499, 504 (1990). That is, "when a contract is breached the injured party is entitled

Page 13 -ORDER

to receive what he would have ifthere had been no breach; he is not entitled to receive more."
Timberline Equip. Co., Inc. v. St. Paul Fire & Marine Ins. Co., 281 Or. 639,646 (1978) (citation
omitted). In this case, plaintiffs recovery on its breach of contract claim is limited to
reimbursement for care provided by Davis. Bankers' motion for summary judgment as to
noneconomic damages for plaintiffs breach of contract claim is GRANTED.
II.

Bad Faith Claim.

Bankers also moves for summary judgment on plaintiffs claim of bad faith. Plaintiffs
second claim in the operative complaint alleges that Bankers acted in bad faith when it refused to
pay benefits under the Policy for the services of both Davis and Watters on the grounds that
neither were Qualified Home Health Care Providers. Bankers contends that plaintiffs bad faith
claim is premised on the same facts as its breach of contract claim and is thus barred under
Oregon law.
The court agrees with Bankers. Unlike many other states, Oregon does not allow firstparty bad faith claims. That is, "an insurer's bad faith refusal to pay policy benefits to its insured
sounds in contract and is not an actionable tort in Oregon." Emp'rs Fire Ins. Co. v. Love It lee
Cream Co., 64 Or. App. 784, 791 (1983). In this case, plaintiffs bad faith claim and breach of
contract claim rely on the same conduct: nonpayment of benefits under the Policy. Plaintiffs
liability is exclusively for breach of contract, not for a tort. Summary judgment in favor of
Bankers on plaintiffs bad faith claim is GRANTED.
III.

Fraud Claim.

Bankers also moves for summary judgment on plaintiffs third claim of fraud. In the
operative complaint, plaintiff alleges, "Bankers represent that it spoke to Linda Davis, and that
she said she was not a Home Health Aide." Pltf. Sec. Am. Com pl., 1f 51. Plaintiff asserts that

Page 14- ORDER

Bankers made the representation in an effort to have Katherine Fallow rely on it and not seek
reimbursement for Davis' services, and that the representation was false because Davis was a
Qualified Home Health Care Provider under the Policy. 4
Bankers argues that plaintiffs allegations do not constitute fraud because Davis'
statement was truthful. Bankers contends that when Davis was deposed, she admitted that she
was not a CNA or otherwise authorized by the state of Oregon to provide home healthcare
services. Under Bankers' definition of a Qualified Home Health Care Provider, Bankers argues,
this statement was an admission that Davis did not meet the Policy's requirements. Bankers also
argues that plaintiffs allegations do not constitute fraud because there is no evidence plaintiff
relied on this statement to his detriment.
To sustain a fraud claim, a plaintiff must prove (1) the defendant made a false, material
misrepresentation; (2) the defendant did so knowing that the representation was false; (3) the
defendant made the statement intending that plaintiffrely on it; (4) plaintiff did in fact rely on
the misrepresentation; and (5) plaintiff was damaged as a result of the reliance. Strawn v.
Farmers Ins. Co. of Oregon, 350 Or. 336, 352 (2011).
Regardless of whether Bankers in fact misrepresented its conversation with Davis about
her qualifications, plaintiff cannot establish all of the elements of a fraud claim. Even assuming
Bankers knowingly made a false misrepresentation by stating that Davis admitted that she was
not a Qualified Home Health Care Provider, there is no evidence that plaintiff actually relied on
the statement, or was damaged as a result. Indeed, plaintiff continued to employ Davis after
being told that Davis had admitted she was not a Qualified Home Health Care Provider and after

4

The operative Complaint's fraud claim is solely based on Bankers allegedly knowingly misrepresenting a
conversationwith Davis about her qualifications. To the extent that plaintiffs Response to Banker's Motion for
Summary Judgment discusses the fraud claim in relation to other caregivers and other portions of the Policy, this
argument is not considered by the court.
Page 15- ORDER

Bankers stated that it would not reimburse plaintiff for Davis' services. Because there is no
evidence of reliance or resulting damages, plaintiff cannot prove the required elements of fraud.
Summary judgment in favor of Bankers on plaintiffs fraud claim is GRANTED.

LEAVE TO AMEND
Leave to amend should be freely given "when justice so requires." FED.R.Civ.P.
15(a)(2); Lockheed Martin Corp. v. Network Solutions. Inc., 194 F.3d 980, 986 (9th Cir. 1999).
The decision whether to grant leave to amend remains within the discretion of the district court.
Leadsinger. Inc. v. BMG Music Pub!' g, 512 F.3d 522, 532 (9th Cir. 2008). In deciding whether
to grant leave to amend, the court may consider (1) whether the request is unduly delayed; (2)
whether the request is made in bad faith or for a dilatory motive; (3) whether the movant has
repeatedly failed to cure the deficiency in previously allowed amendments; (4) whether granting
leave to amend will cause the opposing party undue prejudice; and (5) whether the amendment
sought is futile. Id. (citing Foman v. Davis, 371 U.S. 178, 182 (1962)); Lockheed Martin, 194
F .3d at 986. Of these factors, prejudice to the opposing party carries the most weight. Jackson
v. Bank of Haw., 902 F.2d 1385, 1387 (9th Cir. 1990).
I.

Summary.

Plaintiff seeks leave to file a third amended complaint to (1) change the basis and factual
allegations of his fraud claim, and (2) include new caregivers in his breach of contract and bad
faith claim. Bankers objects to both amendments.

II.

Fraud Claim.
Plaintiffs fraud claim in the operative complaint states:
51.
Bankers represents that it spoke to Ms. Linda Davis and that she said she
was not a Home Health Aide.
52.

Page 16- ORDER

Linda Davis is a Home Health Aide, under the terms of their policy, and
never told them that she did not provide home health care; indeed her
invoices reference "senior care" as her activity.
53.
Defendant made the aforementioned misrepresentations falsely and with
knowledge of their falsity or with reckless disregard for the truth of the
matter.
Plaintiffs Second Amended Complaint,

~~51

through 53.

Plaintiffs fraud claim in the proposed Third Amended Complaint states:
64.
Bankers defined the terms Qualified Home Health Care Provider and Home
Health Aide in its policy. Bankers maintains the actual definition of
qualified home care providers requires the provider must be a currently
licensed Registered Nurse, a Licensed Practical Nurse; a Certified Nursing
Aide, or included in a government sponsored Nurse Aide Registry.
65.
Bankers knew the definitions in the policy were false because they were
different than the definition used internally to assess home care providers.
66.
Bankers intended the Insured rely on the policy definitions of a Qualified
Home Health Care Provider and a Home Health Aide because it provided
these definitions to the Insured.
67.
The Insured was justified in relying on the definitions in the policy and on
Bankers' initial acceptance of Linda Davis when hiring Lorrie Watters,
Tonja Ebben and Heather Davis.
68.
The Insured was damaged when Bankers used a different definition to
qualify home care providers than defined in the policy because the Insured
established relationships of trust with the caregivers during the inordinately
long time it took Bankers to notify the Insured of the caregivers'
ineligibility.
1. Delay.

The first F oman factor the court considers in determining whether to grant leave to
amend is whether the moving party substantially delayed in bringing its motion. Foman, 371
U.S. at 182. "Relevant to evaluating the delay issue is whether the moving party knew or should
have known the facts and theories raised by the amendment in the original pleading." Jackson,

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902 F.2d at 1388. Also relevant to the issue of delay is the stage of the case as a whole and
whether the complaint includes new legal theories. That is, a party "'is not entitled to wait until
the discovery cutoff date has passed and a motion for summary judgment has been filed on the
basis of claims asserted in the original complaint before introducing entirely different legal
theories in an amended complaint."' Stations W .. LLC v. Pinnacle Bank of Or., No. 06-1419-KI,
2008 WL 1944715, at *7 (D. Or. April30, 2008) (quoting Acri v. Int'l Ass'n of Machinists &
Aerospace Workers, 781 F.2d 1393, 1398-99 (9th Cir. 1986). Additionally, "[t]he district court's
discretion to deny a motion for leave to amend is particularly broad where the court has already
given the plaintiffs one or more opportunities to amend their complaint." Lamdev v. Jones, No.
2: 11-CV-774-PK, 2012 WL 2019522, at *2 (D. Or. May 18, 2012).
The delay in this case is significant and unexplained. Plaintiff states that it seeks to
amend its Complaint due to "facts discovered in the course of discovery." Pltf. Reply to Def.'s .
Obj. to Mot, p. 5. However, discovery in this case closed on July 2, 2012. Plaintiffs motion
was not filed until October 5, 2012, three months after discovery closed and nearly two months
after the parties had submitted motions for summary judgment. Additionally, plaintiff provides
no reason the new fraud claim was not included in plaintiffs Second Amended Complaint.
While not dispositive, the unexplained delay weighs against plaintiffs motion.
2. Bad Faith.
Bad faith exists when "the addition of new legal theories are baseless and presented for
the purpose of prolonging the litigation," or when "the adverse party offers evidence that shows
'wrongful motive' on the part of the moving party." Axial Vector En2:ine Corp. v. Transporter.
Inc., No. 05-1469-AC, 2008 WL 4547795, at *4 (D. Or. October 9, 2008) (citations omitted).
There is no evidence of bad faith in this case, and this factor thus weighs in favor of plaintiff.

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3. Prejudice.
Of the Foman factors, prejudice carries the greatest weight. Jackson, 902 F .2d at 13 87.
"A need to reopen discovery, a delay in the proceedings, or the addition of complaints or parties
are indicators of prejudice." Axial Vector, 2008 WL 4547795, at *4. In cases of fraud claims,
prejudice may be of particular concern. In contrast to "notice" pleading required for most
claims, fraud claims must "state with particularity the circumstances constituting fraud." Fed. R.
Civ. P. 9(b ). As Bankers points out, this is in part because "fraud and mistake embrace such a
wide variety of potential conduct that a defendant needs a substantial amount of particularized
information about the plaintiffs claim in order to enable him to understand it and effectively
prepare a responsive pleading and an overall defense of the actions." SA Charles A. Wright &
Arthur R. Miller, Federal Practice & Procedure§ 1296 (3d ed. 2004).
Bankers' primary objection to plaintiffs motion is based on prejudice. Bankers argues
that new discovery will be needed to defend against plaintiffs new fraud claim. Bankers notes
that fraud claims are held to a heightened pleading standard in part to allow a defendant to
prepare a defense in advance, and that allowing an amendment in this case will significantly
prejudice Bankers. The court agrees. Plaintiffs fraud claim in the operative complaint is based
on the theory that Bankers knowingly misrepresented a statement Davis made about her
qualifications. In contrast, the proposed amended fraud claim is based on the theory that
Bankers knowingly misrepresented key terms in the Policy. The proposed amended claim is
based on a new, much broader theory of fraud, and a proper defense would likely require
substantial new discovery, and potentially new legal research. This factor weighs heavily against
plaintiff.

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4. Futility.
A claim is futile if there is no set of facts that can be proved that would constitute a valid
claim. Miller v. RykoffSexton, Inc., 845 F.2d 209,214 (9th Cir. 1988). There is no evidence at
this stage that the amended claim would be futile. Accordingly, this factor weighs in plaintiff's
favor.
5. Conclusion.
Having considered all of the required factors, the court denies plaintiff's motion for leave
to amend its fraud claim. Plaintiff has previously amended his complaint, and the current motion
was filed long after discovery closed. More importantly, allowing an entirely new basis for fraud
at this stage of the proceedings would be substantially prejudicial to Bankers. Plaintiff's motion
for leave to amend its fraud claim is DENIED.
III.

Additional Caregivers.

Plaintiff also seeks leave to amend its complaint to include caregivers Lorrie Watters, Tonja
Ebben, and Heather Davis to plaintiff's breach of contract claim, and to add Tonja Ebben and
Heather Davis to plaintiff's bad faith claim.
1. Delay, Bad Faith, and Futility.

As stated above, the delay in this case is lengthy, and plaintiff has not adequately stated its
reasons for not amending its complaint earlier. The caregivers whom plaintiff seeks to add to its
breach of contract claim were identifiable to plaintiff early on, and discovery closed nearly three
months before plaintiff sought leave to amend its complaint to add the additional caregivers.
Delay weighs against granting plaintiff leave to add additional caregivers. The court does not
find evidence of bad faith or that, at this stage, plaintiff's amendment of its breach of contract
claim would be futile. These factors weigh towards granting leave to amend.

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2. Prejudice.

While Bankers will likely be prejudiced by the addition of new caregivers to plaintiffs
breach of contract claim, the court finds that the prejudice will not be severe. Unlike plaintiffs
proposed amendment to its fraud claim, the addition of new caregivers does not change the basis
or theory behind the breach of contract claim. While discovery may need to be briefly re-opened
to allow for additional limited discovery, the prejudice in allowing leave to amend to add new
caregivers is less significant than in allowing amendment of the fraud claim. Having considered
the Foman factors, the court GRANTS plaintiffs motion for leave to amend its complaint to
allow the addition of new caregivers to plaintiffs breach of contract claim.
CONCLUSION

For the foregoing reasons, plaintiffs motion for partial summary judgment is
GRANTED, defendant's motion for summary judgment is GRANTED IN PART AND DENIED
IN PART, defendant's motion to strike is DENIED, and plaintiffs motion for leave to amend is
GRANTED IN PART AND DENIED IN PART.
IT IS SO ORDERED.

United States Magistrate Judge

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