Newman v. Bankers Life and Casualty Company et al
Filing
78
MEMORANDUM OPINION AND ORDER granting in part and denying in part 52 Motion for Partial Summary Judgment; denying 53 Motion for Summary Judgment; denying 59 Motion to Strike. Plaintiff shall file an amended complaint within ten (10) days regarding enclosed discussion. Details set forth in Order. Signed by Honorable William O Bertelsman on 04/25/2012.(alan, )
IN THE DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
CHARLESTON DIVISION
CASE NO. 2:10-CV-2135 DCN-WOB
KAY NEWMAN, as Power of Attorney
For Mattie J. Poston
VS.
PLAINTIFF
MEMORANDUM OPINION AND ORDER
BANKERS LIFE AND CASUALTY
COMPANY and
JAMES D. HARNETT
DEFENDANTS
This matter is before the Court on plaintiff’s motion
for partial summary judgment (Doc. 52), and the motions of
defendant Bankers Life and Casualty Company for summary
judgment (Doc. 53) and to strike plaintiff’s motion for
partial summary judgment (Doc. 59).
The Court heard oral argument on these motions on
Friday, April 13, 2012.
David Yarborough and David Lail
represented the plaintiff, and Michael Griffin represented
the defendants.
Court reporter Debbie Potocki recorded the
proceedings.
Having heard the parties, the Court issues the
following Memorandum Opinion and Order.
Factual and Procedural Background
Plaintiff Kay Newman’s mother, Mattie Poston
(“Poston”), purchased a “Tax Qualified Long-Term Care
Policy, Number 200,233,597” from defendant Bankers Life and
Casualty Company (“Bankers”) on March 17, 2000.
See Doc.
1-3 at 1 (“Policy”) (citations to internal pagination).
The Policy lists Alzheimer’s and dementia as examples
of “covered conditions” under the definition of “cognitive
impairment.”
See Policy at 4, 12.
The Policy covers
nursing home, assisted living, or other similar expenses,
see id. at 6-10, “but only to the extent that [the
expenses] constitute ‘Qualified Long-Term Care Services.’”
Id.
The Policy specifically excludes services that are not
“included in” the patient’s “Plan of Care” or that were
“paid under Medicare1 or any other federal government
insurance plan (except Medicaid).”
Id. at 12.
The key provisions at issue are these definitional
sections:
“Qualified Long-Term Care Services” means
necessary
diagnostic,
preventative,
therapeutic, curing, treating, mitigating,
and rehabilitative services and maintenance
or personal care services which are:
1
“This includes expenses that would be reimbursable by Medicare but
for the application of a deductible or coinsurance amount.” Policy
at 12.
2
a) needed
Member; and
by
a
Chronically
Ill
Family
b) provided under a Plan of Care prescribed
by a Licensed Health Care Practitioner.
* * * * *
“Chronically Ill” means a Family Member has
been certified by a Licensed Health Care
Practitioner within the preceding 12 month
period as:
1. being Functionally Incapacitated for a
period expected to last at least 90 days; or
2. having a Cognitive Impairment.
“Cognitive Impairment” means a deterioration
or loss in intellectual capacity which
requires Substantial Supervision to protect
oneself from threats to health and safety.
* * * * *
“Substantial Supervision” means continual
supervision (which may include cuing by
verbal
prompting,
gestures
or
other
demonstrations) by another person that is
necessary to protect a Cognitively Impaired
person from threats to his or her own health
and safety.
Policy at 4-5 (emphasis added).
Further, an “Assisted Living Facility” is defined as:
a place providing room, board and personal care
services to persons in need of assistance because of a
Functional Incapacity or Cognitive Impairment, but
given at a level of care less intense than that which
would be received in a Nursing Home. . . An Assisted
Living Facility must:
a.
provide 24 hour a day care and services to at
least 5 inpatients in one location.
b.
have a trained and ready-to-respond employee on
duty at all times to provide care;
3
c.
d.
e.
f.
provide 3 meals a day and accommodate special
dietary needs;
be licensed by the appropriate licensing agency
(if any) to provide such care;
have formal arrangements for the services of a
Physician or nurse to furnish emergency medical
care; and
have appropriate methods and procedures for
handling and administering drugs and biological.
Policy at 7.
In February 2010, psychologist Dr. Gordon Teichner
diagnosed Poston with “Probable Mixed Dementia (Dementia of
the Alzheimer’s Type/Vascular Dementia)” at a “moderate”
severity.
Doc. 53-4.
He recommended that: a neurologist
prescribe Poston medications that can slow the rate of
cognitive decline; Poston immediately discontinue driving;
and that Poston’s daughter consider “nursing care options.”
He made the last recommendation because Poston “requires
24-hour monitoring [and] her unawareness stemming from her
dementia makes her a danger to herself,” such as when she
decided to “go off all medication without consulting her
doctor.”
Shortly after Poston’s diagnosis, she fell and was
admitted to the hospital with a broken ankle.
Poston’s
physicians recommended that she be placed in The Heartland
Skilled Nursing Facility (“Heartland”) to recuperate
because it offered a restricted atmosphere with “skilled
4
nursing.”
Poston entered Heartland on February 13, 2010
and stayed until March 22, 2010.
Bankers did not pay for this stay at Heartland because
Medicare covered this hospitalization.
That stay is not at
issue in this litigation.
Toward the end of Poston’s Heartland stay, plaintiff,
her husband, and a social worker and nurse at Heartland
discussed whether Poston “could manage being in assisted
living versus skilled nursing.”
Plf. Depo. at 34.
They
“wanted her to try to be as independent as possible,” so
they approached The Bridge Assisted Living Facility
(“Bridge”), a facility Poston was familiar with because she
had lived there at one point with her husband.
Poston transferred to Bridge on March 22, 2010, and
she remained there until May 12, 2010, when she was again
hospitalized for a fall that resulted in broken ribs.
Plaintiff believed Bridge failed to properly monitor and
regulate Poston’s blood sugar levels and that caused the
fall.
See id. at 69.
Poston never returned to Bridge.
After four days in the hospital, Poston transferred
back to Heartland for recuperation and rehabilitation.
Id.
Because “she seemed to be thriving there,” plaintiff and
others decided to leave Poston at Heartland where “she was
getting more care.”
Id.
She remains there to this day.
5
Poston began her “Heartland 2” stay on May 16, 2010,
and the very next day, plaintiff submitted a claim for
Poston’s new living arrangement.
See Doc. 52 at 15 n.2.
Thus, she began the claims process for the Heartland 2 stay
before she received final word about the Bridge claim.
Bankers denied coverage for the Bridge stay.
On April
29, 2010, Claims Adjuster Joanne Polleck initially
recommended denial due to “insufficient evidence.”
Her
rationale was that, although plaintiff explained Poston had
been diagnosed with dementia/Alzheimer’s, the documentation
did not show that Poston met the definitions for
“chronically ill” or “cognitively impaired.”
Doc. 53-8.
After receipt of Dr. Teichner’s evaluation and other
information, on May 19, 2010, Claims Adjuster Debra Bilek
still recommended that Bankers deny the claim.
Bilek’s
rationale was that while Poston “did require care due to”
her cognitive impairment, she “did not receive substantial
supervision while at this facility.”
Doc. 53-9.
In a letter dated May 19, 2010, Bankers explained:
According to your policy, to be eligible for
benefits you must be certified by a Licensed
Health Care Practitioner as being unable to
perform (without substantial assistance from
another individual) at least two Activities
of Daily Living for a period of 90 days due
to loss of functional capacity, or requiring
Substantial Supervision to protect yourself
6
from threats to health and
Severe Cognitive Impairment.
safety
due
to
We are unable to certify that you meet the
above criteria.
The provider you selected . . . Bridge . . .
meets the policy requirements.
You did
require
care
due
to
your
Cognitive
Impairment,
however,
benefits
are
not
payable for the care or services provided by
this provider since you didn’t receive
substantial supervision at this facility as
required by your policy.
Doc. 53-11 (emphasis added).
After receiving this letter,
plaintiff contacted an attorney.
In a letter to Poston dated May 24, 2010, that does
not specify whether it was addressing the Heartland 1,
Bridge, or Heartland 2 claim, Bankers explained Poston did
not meet the definition of “chronically ill” because
Your LONG TERM CARE insurance states you
must
meet
the
policy
definition
of
‘chronically ill’ to qualify for benefits.
This
means
you
must
be
functionally
incapacitated for a period expected to last
at least 90 days, or you have a cognitive
impairment.
Based on the information we have, you did
not meet either qualification.
Doc. 52-6.
Bankers eventually approved the Heartland 2 stay under
the policy, but those benefits were not immediately
7
forthcoming.
As will be seen below, plaintiff’s alleges
that the delay in the payment for Heartland 2 amounts to a
breach of contract and bad faith.
On July 14, 2010, plaintiff filed suit in the
Charleston County Court of Common Pleas against Bankers for
bad faith, negligent misrepresentation, and violation of
the South Carolina Unfair Trade Practices Act (“SCUTPA”)
and against James Harnett, an independent agent, for
negligent misrepresentation and violation of SCUTPA.
Defendants removed the action to this Court on August
16, 2010, alleging that Harnett was fraudulently joined.
By order dated November 8, 2010, this Court dismissed
Counts 4 and 5 of plaintiff’s complaint, dismissing Harnett
from the case.
(Doc. 17).2
Thereafter, the parties filed the motions which are
now before the Court.
Analysis
A.
Breach of Contract – Bridge Claim
An insurance contract is subject to the general rules
of contract construction.
Beaufort County School Dist. v.
United Nat’l Ins. Co., 709 S.E.2d 85, 90 (S.C. App. 2011)
2
This dismissal makes it clear that the Court dismissed Counts 4 and 5
in their entirety, and plaintiff’s counsel so conceded at oral
argument. Moreover, Harnettt should have been dismissed as a defendant
at that time. As this appears to have been a clerical error, the Court
will order that Harnett be dismissed nunc pro tunc.
8
(citation omitted).
“If the contract’s language is clear
and unambiguous, the language alone, understood in its
plain, ordinary, and popular sense, determines the
contract’s force and effect.”
Id.
“An insurance contract is read as a whole document so
that ‘one may not, by pointing out a single sentence or
clause, create an ambiguity.’”
Id.
“However, an insurance
contract which is ‘in any respect ambiguous or capable of
two meanings must be construed in favor of the insured.’”
(Id.).
See also Crossman Comtys. of N.C., Inc. v.
Harleysville Mut. Ins. Co., 717 S.E.2d 589, 592-93 (S.C.
2011) (“The lack of clear meaning, we believe, leaves us
with an ambiguity, which we must construe against the
insurer.”) (citation omitted).
The Court has reviewed this policy and finds it
ambiguous in several respects.
First, while Bankers denied
coverage for the Bridge stay on the basis that Poston did
not receive “substantial supervision” during her stay
there, it is not at all apparent that such is a requirement
for coverage under the policy.
The definition of “Cognitive Impairment” means, in
relevant part, only that the policyholder “requires
Substantial Supervision.”
(Policy at 4) (emphasis added).
It is undisputed that Dr. Teichner’s diagnosis of Poston
9
included the observation that she “requires 24-hour
monitoring” due to her dementia.
Doc. 52-2 at 5.
Indeed,
Bankers agreed that Poston “required care due to [her]
Cognitive Impairment.”
Doc. 53-11 at 1.
Importantly, Bankers further conceded that Bridge
“meets the policy requirement” for an Assisted Living
Facility.
Doc. 53-11 at 1.
The Court finds no basis in the policy – and Bankers
cited none in its denial letter – which precludes coverage
because, although Poston was placed at Bridge with the
intent that she receive covered “Assisted Living Facility”
services, she did not “receive” such services because the
level of monitoring there did not meet expectations.
The Court also does not find persuasive Bankers’s
argument that the alleged “receives” requirement is present
in the policy by virtue of the second prong of the
definition of “Qualified Long-Term Care Services,” which
states that services must be “provided under a Plan of Care
prescribed by a Licensed Health Care Practitioner.”
at 4 (emphasis added).
Policy
It bears noting that, despite the
characterization of Bankers’s claim denial in its brief
(Doc. 53-1 at 5), Bankers did not, in fact, invoke this
definition when it denied the Bridge claim.
at 1.
10
See Doc. 53-11
Moreover, this clause appears to establish only the
objective criteria for the plan of care for the patient
(must be a written plan, etc.), as well as the
qualifications of the healthcare provider creating the plan
(i.e., a licensed physician, registered nurse, etc.).
To
interpret this clause as excluding coverage because the
policyholder, although suffering from a covered condition
and admitted to a covered facility, does not ultimately
receive the intended degree of care requires the Court to
supply terms not found in this provision.
See Crossman,
717 S.E.2d at 593 n.4 (“However, if insurers intend to
preclude this construction, it is incumbent upon them to
include clear language accomplishing this result.”)
(citation omitted).
Second, and independently, the definition of
“Substantial Supervision” is internally inconsistent.
By
its very definition, the word “substantial” means something
less than total: “considerable in . . . degree, amount, or
extent.”
The American Heritage Dictionary of the English
Language (4th ed. 2006).
The policy, however, defines
“Substantial Supervision” as “continual” supervision.
“Continual” means, of course, “not interrupted; steady.”
Id. at 397.
Therefore, “substantial” does not equal
11
“continual” in the lay sense, and this definition thus
creates a patent ambiguity.
This definition is also ambiguous in light of the fact
that the policy incorporates the term “Cognitive
Impairment” into the definition of an “Assisted Living
Facility.”
An Assisted Living Facility is defined as a
place providing care and services to those with “Cognitive
Impairments.”
Policy at 7.
This makes sense, of course,
because an Assisted Living Facility provides a lesser
degree of monitoring than a Nursing Home, also covered in
the policy.
That persons with Cognitive Impairments – by
definition those requiring only “substantial” rather than
total supervision – could be adequately cared for in an
Assisted Living Facility comports with the common
understanding of these terms.
Further, the Court holds that the policy is ambiguous
by reason of listing an “Assisted Living Facility” under
the heading “Covered Expenses.”
This implies that the type
of supervision usually provided in such a facility meets
the supervision requirements for one, such as Poston, who
has a “cognitive impairment.”
For these reasons, the Court concludes that the policy
is patently ambiguous and that Poston was entitled to
coverage for the Bridge stay as a matter of law.
12
B.
Bad Faith
The Court concludes that material issues of fact
preclude summary judgment in defendant’s favor on
plaintiff’s claim for bad faith in relation to the Bridge
claim.
The documentation and deposition testimony of
Bankers’ representatives raise jury questions as to whether
Bankers’s denial of this claim was objectively reasonable
given the circumstances known to it at the time.
C.
The Heartland 2 Claim
Plaintiff also asserts breach of contract and bad
faith claims as to Bankers’s handling of the Heartland 2
claim.
While plaintiff’s complaint is admittedly deficient
in failing to delineate this claim, the parties nonetheless
have conducted discovery on and briefed the issues
underlying it.
Although Bankers argues that claims based
on Heartland 2 should not be allowed by the Court, it
argues in the alternative that there are issues of fact
which preclude summary judgment on them.
The Court concludes that the causes of action related
to the Heartland 2 claim have effectively been tried by
consent and that the pleadings should be allowed to be
amended to conform to this evidence.
15(b).
13
See Fed. R. Civ. P.
Therefore, having heard the parties, and the Court
being sufficiently advised,
IT IS ORDERED that:
(1)
The Clerk of Court terminate James D. Harnett as
a defendant, nunc pro tunc, pursuant to the Court’s prior
Order (Doc. 17);
(2)
Defendants’ motion for summary judgment (Doc. 53)
be, and is hereby, DENIED;
(3)
Plaintiff’s motion for partial summary judgment
(Doc. 52) be, and is hereby, GRANTED IN PART as to breach
of contract for failure to provide coverage for Poston’s
stay at the Bridge and DENIED IN PART as to the alleged bad
faith in denying the Bridge claim and the alleged breach of
contract and bad faith in the processing of the Heartland 2
claim;
(4)
Defendants’ motion to strike (Doc. 59) be, and is
hereby, DENIED WITHOUT PREJUDICE TO RENEWING SUCH
OBJECTIONS AT TRIAL; and
(5)
Within ten (10) days of entry of this Order,
plaintiff shall file an amended complaint setting forth her
causes of action related to Poston’s Heartland 2 claim, in
accord with the above discussion.
14
This 25th day of April, 2012.
15
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