Mettler v. Ability Ins. Co.

HOWARD LANCE METTLER, ATTORNEYIN FACT FOR HOWARD METTLER, Plaintiff, v. ABILITY INSURANCE COMPANY, Defendant.

1:14-CV-01021-CBK

UNITED STATES DISTRICT COURT DISTRICT OF SOUTH DAKOTA NORTHERN DIVISION

October 21, 2016

MEMORANDUM OPINION AND ORDER

Howard Lance Mettler, son of and attorney in fact for Howard Mettler ("Mettler"), filed a complaint against the defendant alleging breach of contract, breach of the implied covenant of good faith and fair dealing, common law fraud and misrepresentation, and statutory deceit. Plaintiff is also seeking punitive damages and attorney fees. These accusations are based upon a long-term care insurance policy purchased in 1988 by Howard Mettler through Medico Life Insurance Company ("Medico"). The policy has been assigned to Ability Insurance Company ("AIC") and AIC has assumed the responsibility to adjust, manage, and pay claims.

Both of the parties have made motions for summary judgment. Defendant has made a motion in support of summary judgment on plaintiff's claims of breach of contract, breach of good faith and fair dealing, common law fraud and misrepresentations, statutory deceit, as well as plaintiff's request for punitive damages and attorney fees. Plaintiff has made a motion in support of summary judgment on the following legal issues: (1) AIC was required to provide coverage to Mettler; (2) AIC must interpret ambiguous terms in favor of the policyholder; and (3) AIC was required to waive Mettler's premium upon receiving benefits under the policy for two months.

FACTUAL BACKGROUND

Mettler bought a long-term care insurance policy from Medico in 1988. In addition, Mettler purchased a policy rider, which increased the maximum daily benefit to $87.50 per day. In 2007, Medico was acquired by AIC. In 2009, Mettler was diagnosed with a broken right leg, along with his pre-existing conditions of Alzheimer's, dementia, diabetes, and hypertension. His doctor, Dr. Ostowski, determined Mettler required intermediate care. Pl.'s Ex. 59. On April 17, 2009, Dr. Ostrowski recommended that Mettler be admitted to Avera Eureka Health Care Center in Eureka, South Dakota, and Mettler was admitted. Id.

The policy defines "Long-Term Care" as "skilled nursing care, intermediate nursing care, or custodial care." "Skilled Nursing Care" and "Intermediate Nursing Care" are defined as:

[M]edically necessary care that is prescribed in a physician's plan of care. This care uses professional nursing methods and procedures that are administered by licensed or certified health care personnel. It includes post-hospital care, rehabilitation nursing care, maintenance therapy, administration of medication, injections, and catheterization. It is NOT: custodial care; care that can be learned and given by unlicensed or uncertified medical personnel; routine health care services; routine administration of oral or nonprescription drugs; or general supervision of routine daily activities.

The policy defines "Nursing Facility" as:

[A] facility or that part of one that is licensed as a skilled nursing facility or intermediate care facility by the state in which it is located. It must keep daily medical records for each patient and have a staff committee which includes a physician and/or [sic] director of nursing that meets at least on a quarterly basis to review the levels of care and the need for further confinement. It is NOT a place that is used primarily for: rest; a home for the aged; the care of drug addicts or alcoholics; educational care; or the care and treatment of mental diseases or disorders, other than those due to organic disease.

The policy's schedule explains the maximum number of days the policy will pay benefits during a period of confinement is 1,095 days, or three years. The policy expressly states: "The benefit we pay will be the actual charges made by the nursing facility or the Daily Benefit, whichever is the lesser." Def.'s Ex. A. (emphasis added).

In July of 2009, Mettler submitted a claim for benefits under the policy with AIC, and the claim was denied because allegedly Avera Eureka Health Care Center was an "assisted living" facility and did not qualify under the policy as a "nursing facility." AIC, nevertheless, paid fifty percent (50%) of the maximum daily benefit for three years, amounting to $47,906.25 in total, or $43.75 per day. Mettler's actual expenses at Avera Eureka Health Care Center were $55.00 per day. In August of 2012, AIC informed Mettler that he had exhausted the benefits under hispolicy. On July 22, 2014, AIC, as an "accommodation," paid Mettler $47,906.25. In addition, AIC paid for another year of coverage at the maximum daily benefit rate, plus interest, amounting to $55,837.50. In total, AIC paid Mettler $103,743.75 as an "accommodation" on July 22, 2014. Plaintiff filed a complaint in federal court on September 25, 2014.

On or about May 15, 2016, Howard Mettler died. Proceedings to appoint a personal representative of the estate may or may not be pending. A motion to substitute parties has not been made.

STANDARD OF REVIEW

Fed. R. Civ. P. 56 requires the Court to grant summary judgment "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." The movant must support the motion with evidence admissible at trial in order to meet its initial burden of showing the absence of a genuine issue of material fact. Adickes v. S.H. Kress & Co., 398 U.S. 144, 159, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970), superseded on other grounds by Celotex Corp v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If undisputed facts fail to establish each required element in a cause of action, summary judgment is proper." McKie v. Huntley, 2000 S.D. 160, ¶ 17, 620 N.W.2d 599, 603 (citing Groseth Int'l, Inc. v. Tenneco Inc., 410 N.W.2d 159, 169 (S.D. 1987)). The nonmoving party must "substantiate his allegations with enough probative evidence to support a finding in his favor" by citing to particular materials in the record which support the assertion that a fact is genuinely disputed." Roeben v. BG Excelsior Ltd. P'ship, 545 F.3d 639, 642 (8th Cir. 2008). A genuine dispute arises "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 206 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

The Court must view the admissible evidence in a light favorable to the nonmoving party and give that party the benefit of all reasonable inferences drawn from the evidence. Country Life Ins. Co. v. Marks, 592 F.3d 896, 898 (8th Cir. 2010). However, the scope of admissible evidence is quite finite: "Only disputes over facts that might affect the outcome of the suit under the governing substantive law will properly preclude the entry of summary judgment." Paulsen v. Ability Ins. Co., 906 F. Supp. 2d 909, 911 (D.S.D. 2012) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed. 202 (1986)).

ANALYSIS

A. Application of South Dakota Law

Subject matter jurisdiction is established by diversity of citizenship in this case, and South Dakota law applies. SDCL § 53-1-4 states: "A contract is to be interpreted according to the law and usage of the place where it is to be performed or, if it does not indicate a place of performance, according to the law and usage of the place where it is made." SDCL § 53-1-4. "Generally, unless the parties agree otherwise, an insurance contract is 'made' at the place where the last act necessary to its completion is accomplished." Great W. Cas. Co. v. Hovaldt, 603 N.W.2d 198, 201 (S.D. 1999). The place of performance in this case was at Avera Eureka Health Care Center in Eureka, South Dakota. Mettler signed the policy in Eureka, South Dakota, and the policy was delivered to Mettler in Eureka, South Dakota. Therefore, South Dakota law governs the substantive issues in this case.

B. Breach of Contract

To establish a breach of contract under South Dakota law, a plaintiff must show: (1) an enforceable promise, (2) breach of that promise, and (3) resulting damages. Bowes Constr., Inc. v. S. Dakota Dep't of Transp., 2010 S.D. 99, ¶ 21, 793 N.W.2d 36, 43. The measure of damages, as set out in SDCL § 21-2-1, allows compensation to "the party aggrieved for all the detriment proximately caused . . . or which, in the ordinary course of things, would be likely to result therefrom." McKie v. Huntley, 2000 S.D. 160, ¶ 14, 620 N.W.2d 599, 603. In an action for breach of contract, the damages should not exceed the amount he would have gained by full performance. Ducheneaux v. Miller, 488 N.W.2d 902, 915 (S.D. 1992). "No damages can be recovered for a breach of contract which are not clearly ascertainable in both their nature and their origin." SDCL § 21-2-1. The ultimate goal in awarding damages for breach of contract is to "place the injured party in the position he or she would have occupied if the contract had been performed." Ducheneaux, 488 N.W.2d at 915. The prejudgment interest is in place to provide the injured party compensation for any "loss of use" damages. See Casper Lodging, LLC v. Akers, 871 N.W.2d 477, 499 (S.D. 2015) (noting that prejudgment interest "seeks to compensate the injured party for this wrongful detention of money owed").

Mettler's actual cost for the care he received was $55.00 per day at Avera Eureka Health Care Center. The policy expressly states that AIC will pay the actual cost of care, or the maximum daily benefit, whichever is lesser. Because $55.00 is lesser than plaintiff's maximumdaily benefit of $87.50, AIC was obliged to pay $55.00 per day. As stated above, AIC was obliged to pay benefits for 1,095 days, or three years. Therefore, Mettler was entitled to $60,225.00 under the policy.

From July of 2009 to August of 2012, AIC paid Mettler half of the maximum daily benefit allowed under the policy for three years, totaling to $47,906.25, or $43.75 per day. The difference of what...