Opinion
Case No. CIV-21-821-SLP
2022-08-24
Mark A. BENNETT, as Personal Representative of the Estate of Bernard E. Bennett, Deceased, and Ed Dillard, Guardian ad Litem for Elsie M. Bennett, Plaintiffs, v. ALLSTATE LIFE INSURANCE COMPANY, Defendant.
Keith F. Givens, Kenneth G. Cole, Steven S. Mansell, Zachary K. Housel, Mansell Engel & Cole PC, Oklahoma City, OK, for Plaintiffs Elsie M. Bennett, Mark Bennett. Dru A. Prosser, McAfee & Taft, P.C., Tulsa, OK, Jennifer B. Puckett, McAfee & Taft, Oklahoma City, OK, David P. Donahue, Louis Frank Mendez, Bressler, Amery & Ross, P.C., Birmingham, AL, for Defendant.
Keith F. Givens, Kenneth G. Cole, Steven S. Mansell, Zachary K. Housel, Mansell Engel & Cole PC, Oklahoma City, OK, for Plaintiffs Elsie M. Bennett, Mark Bennett. Dru A. Prosser, McAfee & Taft, P.C., Tulsa, OK, Jennifer B. Puckett, McAfee & Taft, Oklahoma City, OK, David P. Donahue, Louis Frank Mendez, Bressler, Amery & Ross, P.C., Birmingham, AL, for Defendant. ORDER SCOTT L. PALK, UNITED STATES DISTRICT JUDGE
Before the Court are two motions, both of which are at issue. Plaintiffs Mark A. Bennett, as personal representative of the Estate of Bernard Bennett, and Ed Dillard, as Guardian ad Litem for Elsie Bennett, filed a Motion for Partial Summary Adjudication and Brief in Support, to which Defendant Allstate Life Insurance Company ("Allstate") responded. See Pls.' Mot. [Doc. No. 38]; Def.'s Resp. [Doc. No. 45]; Pls.' Reply [Doc. No. 48]. Defendant filed a summary judgment motion, to which Plaintiffs responded. See Def.'s Mot. [Doc. No. 37]; Pls.' Resp. [Doc. No. 44]; Def.'s Reply [Doc. No. 49].
Plaintiffs' counsel is reminded to comply with Local Civil Rule 7.1(n) in future filings: "No response . . . brief shall include an exhibit or attachment that is already included with the motion under consideration; reference shall instead be made to the exhibit or attachment to the motion under consideration, including the ECF Document Number." Compare, e.g., Bernard APS [Doc. No. 37-9], with Bud's APS [Doc. No. 44-9].
I. Background
Resolution of these motions principally turns on whether an assisted living center qualifies as a "Nursing Home" under the terms of the relevant long-term care insurance contract. Defendant issued a long-term care insurance certificate to Plaintiffs, who filed claims with Defendant after moving into an assisted living center. Defendant denied coverage at the assisted living center, concluding it did not meet the definition of "Nursing Home" articulated by the certificate.
Plaintiffs contend that Defendant breached its contractual obligation because an assisted living center satisfies the plain-language definition of "Nursing Home" found in the certificate. Plaintiffs further claim Defendant tortiously breached the contract by failing to properly investigate Plaintiffs' claims and premising the denial on more restrictive language than the certificate included. Plaintiffs moved for partial summary adjudication on the narrow issue of whether an assisted living center is a "Nursing Home" under the certificate.
Defendant moved for summary judgment on Plaintiffs' breach of contract and bad faith claims. Defendant, relying on Oklahoma's statutory licensing scheme for long-term care facilities, contends it did not breach the contract because the certificate only covers care at nursing facilities. Defendant also argues Plaintiffs' failure to cooperate with the claims process bars recovery on their breach of contract claim. Defendant contends Plaintiffs' bad faith claim must fail because the undisputed factual record shows there was a legitimate dispute as to coverage. Finally, Defendant seeks a ruling from this Court that Plaintiffs have not established any evidence sufficient to submit the issue of punitive damages to a jury.
For the reasons set forth below, the Court finds that the assisted living center satisfies the contract definition of Nursing Home, and that genuine issues of material fact preclude granting Defendant's motion for summary judgment as to bad faith and punitive damages. Accordingly, the Court GRANTS Plaintiffs' Motion for Partial Summary Adjudication and DENIES Defendant's Motion for Summary Judgment.
II. Governing Standard
"The court shall 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." Fed. R. Civ. P. 56(a). In deciding whether summary judgment is proper, the court does not weigh the evidence and determine the truth of the matter asserted, but determines only whether there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); see also Birch v. Polaris Indus., Inc., 812 F.3d 1238, 1251 (10th Cir. 2015). An issue is "genuine" if there is sufficient evidence on each side so that a rational trier of fact could resolve the issue either way. Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998). An issue of fact is "material" if under the substantive law it is essential to the proper disposition of the claim. Id. In evaluating a motion for summary judgment, a district court must consider the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences from those facts in favor of that party. Sylvia v. Wisler, 875 F.3d 1307, 1328 (10th Cir. 2017). III. Undisputed and Material Facts
Included here are those material facts supported by the record and not genuinely disputed in the manner required by Fed. R. Civ. P. 56(c).
In October 1991, Elsie and Bernard Bennett ("the Bennetts") submitted a Long Term Care Enrollment form to Allstate. See Enrollment Form [Doc. No. 37-1]. That November, Allstate issued a Long Term Care Insurance Certificate ("the Certificate") to the Bennetts. See Cert. [Doc. No. 38-1]. As pertinent here, the Certificate included coverage for Nursing Home Care. Id. at 3. The Nursing Home Care Benefit states:
Allstate issued Certificate 6440306110483 to the Bennetts under Master Policy No. 64403061. See Cert. Data Page [Doc. No. 44-2]; Cert. [Doc. No. 38-2]. At all relevant times, the Bennetts paid the premiums due under the Certificate.
We will pay the applicable Daily Benefit for each day that you are confined in a Nursing Home beginning with the first day after the Waiting Period has been satisfied, up to the Maximum Lifetime Benefit for Nursing Home Care shown in the Schedule of Insurance.Id. The Certificate further defines "Nursing Home" as a facility which:
The Nursing Home confinement must: (1) Be for a covered Chronic Condition; (2) Be recommended by your Doctor in a Plan of Care; and (3) Begin while your coverage under the Policy is in force. No new Waiting Period is required for recurring Nursing Home confinements due to the same or related cause that are separated by less than six months.
1. Is licensed by the state in which the facility is located to provide care for sick and injured persons at their expense.
2. Provides 24 hour care by or under the supervision of a Doctor, Registered Graduate professional nurse (RN), licensed professional nurse (LPN), or a licensed vocational nurse (LVN); and
3. Maintains daily medical records for each patient.
In or around May 2019, the Bennetts moved to Touchmark at Coffee Creek ("Touchmark"), which is licensed as an Assisted Living Center ("ALC") by the Oklahoma State Department of Health ("OSDH"). See Facility Questionnaire [Doc. No. 37-12]. Touchmark provides 24-hour care and maintains daily records for each patient. See id. Both Bennetts required some level of assistance with certain activities of daily living, and Elsie required care for dementia. See Elsie's APS [Doc. No. 38-13]; Bernard's APS [Doc. No. 38-11]. The Bennetts lived together in the same room at Touchmark. See Takahara Dep. [Doc. No. 44-6] at 17:22-25.
On July 22, 2019, the Bennetts' son, Mark Bennett, timely filed claims for benefits under the Nursing Home Care provision of the Certificate on behalf of his parents. See Claim Intake Forms [Doc. No. 37-4]. The following day, Allstate mailed the required claim forms and instructions to Mark. See Letters [Doc. No. 37-5]. Allstate contracted with LifeCare Assurance ("LifeCare"), a third-party administrator, to handle the Bennetts' claims. See Sanford Dep. [Doc. No. 44-3] at 17:19-24. Daniel Takahara, a claim adjuster for LifeCare, Alina Smith, LifeCare's claim supervisor, and Eugene Sanford, Allstate's lead consultant, were primarily responsibly for the Bennetts' claims. See id. at 53:24-54:8. Mr. Sanford is responsible for reviewing and approving claim denials recommended by LifeCare. See Sanford Dep. [Doc. No. 38-5] at 11:18-12:2.
LifeCare is not a party to this action. For clarity, "Allstate" is used below to refer to the actions taken by both LifeCare and Allstate employees on the Bennetts' claims.
Bernard's Claim
On August 16, 2019, Mark Bennett submitted a signed HIPAA authorization form, fraud notice, claimant's statement, and power of attorney form to Allstate on his father's behalf. See Mark Bennett Email [Doc. No. 37-6]. The claimant statement indicated Bernard was seeking benefits for Touchmark, identified as an ALC. See Bernard's Claimant Statement [Doc. No. 38-7] at 2. On August 29, 2019, Allstate received an Attending Physician's Statement ("APS") completed by Dr. Corey Finch. See Bernard's APS [Doc. No. 38-11]; Bernard's Claim History Rep. [Doc. No. 37-10] at 2. On September 30, Allstate informed Mark Bennett it would send a Long Term Care Facility Questionnaire to Touchmark and request medical records from Dr. Finch, the physician who completed Bernard's APS, as part of Bernard's claim. Bernard's Claim History Rep. [Doc. No. 37-10] at 3. Allstate faxed the requests the same day. Id. The claimant statement and APS both indicated Bernard needed assistance with at least two daily activities, but the level of assistance he needed was not consistent between the two forms. See Mark Bennett Dep. [Doc. No. 37-3] at 159:1-9; Bernard's Claimant Statement [Doc. No. 38-7]; Bernard's APS [Doc. No. 38-11]. Allstate used Datafied, a third-party vendor, to request Bernard's medical records from Dr. Finch. See Bernard's Claim History Rep. [Doc. No. 37-10] at 4.
Mark called Allstate on October 21 to ask whether the facility questionnaire and medical records had been received. See id. at 3. Allstate advised him the documents had not been received, and the claim note states Mark would "contact them." Id. Mark called back on October 25, stating the facility faxed the documents on Monday, though Allstate advised they had not yet been uploaded. Id. Mark called a third time on October 30 to check on the status of the document after stating Touchmark had faxed the requested information again the previous week. Id. When Allstate advised the documents had still not arrived, Mark gave them the phone number of a direct contact at Touchmark. See id. Allstate called Touchmark the same day. Id. On October 31, Touchmark submitted its facility questionnaire, which indicated it was licensed as an ALC, and a copy of its license. See Facility Questionnaire [Doc. No. 37-12].
On November 27, Mark called for another status update, and Allstate told him they were still waiting for medical records. Id. Allstate also advised that it was possible care at Touchmark would be denied because it is an ALC. Id. On December 3, Allstate's claim file shows Datafied sent a message regarding the records request from Dr. Finch, stating "Patient is not a patient at the facility[.]" Id. On December 13, Allstate informed Mark that his claim was still under review, but Touchmark would "most likely be denied as not a covered provider" because it is an ALC. Id. at 5-6. That same day, Allstate called Touchmark to request they fax Bernard's medical records. Id. at 6.
Bernard's claim file was referred to Ms. Smith and Mr. Sanford on or around December 20 to confirm Mr. Takahara's conclusion that Touchmark was not a covered facility under the policy. See id. On December 23, Mr. Sanford approved the facility denial by email. See Sanford Email [Doc. No. 38-22]. On December 30, Allstate told Mark by phone that Touchmark was not covered under the Certificate and that they were "still waiting for medical records for eligibility review." Id. at 6-7. Mark told Allstate that the doctor's office had sent the records multiple times. Id. at 7. The following day, Mr. Takahara sent a denial letter for Bernard's claim, explaining Allstate had "determined that Touchmark Coffee Creek [sic] is not a covered provider under the Nursing home provision of the Certificate as they are licensed as an Assisted Living Facility [sic] in the State of Oklahoma." See Denial Letter [Doc. No. 37-13]. The letter asserted "The Certificate provides benefits for Nursing Home Care when it is provided by a Nursing Home, in addition to meeting the terms of coverage and satisfying the Waiting Period." Id.
In its denial letter, Allstate purported to quote the Certificate but included slightly different language, defining a Nursing Home as a facility that:
1. Is licensed by the state in which the facility is located to provide Nursing care for sick and injured persons at their expense.Id. (emphasis added). The language in the denial letter differed from the Certificate by inserting the word "Nursing" into the first provision, and substituting "24 hour Nursing Service" for "24 hour care" in the second provision. See id.; Cert. [Doc. No. 38-2].
2. Provides 24 hour Nursing Service by or under the supervision of a Doctor, Registered Graduate professional nurse (RN), licensed professional nurse (LPN), or a licensed vocational nurse (LVN); and
3. Maintains daily medical records for each patient.
Ms. Smith and Mr. Sanford both testified that they did not follow any written policy interpretation guidelines in handling the Bennetts' claims, and, to their knowledge, no such guidelines exist. See Smith Dep. Vol. I [Doc. No. 38-3] at 40:11-23; Sanford Dep. [Doc. No. 38-5] at 12:16-13:8. Instead, Ms. Smith stated she relies solely on the language of the Certificate to determine whether a contractual obligation exists. See Smith Dep. Vol. I [Doc. No. 38-3] at 29:1-16. Before deciding to approve LifeCare's recommended denial of Touchmark, Mr. Sanford reviewed the insurance certificate, proposed denial letter, facility questionnaire, and facility license. See Sanford Dep. [Doc. No. 44-3] at 63:23-64:5. Mr. Sanford agreed that he did not consult with Allstate's legal department before approving the denial, and that he is unaware of any legal coverage opinion related to the Certificate. See Sanford Dep. [Doc. No. 38-5] at 52:10-53-21.
The denial letter also informed Bernard that if he intended "to keep this claim open for consideration of eligibility," he needed to submit his medical records from Dr. Finch. See Denial Letter [Doc. No. 37-13]. The letter advised his claim would be closed if the records were not received within 30 days. See id. On February 12, 2020, Allstate closed Bernard's claim, alleging it still had not received the requested medical records and reiterating that Touchmark is not a covered facility. See Bernard's Closure Letter [Doc. No. 37-14].
Elsie's Claim
Elsie began exhibiting symptoms of dementia since June 2017. See Elsie's Claimant Statement [Doc. No. 37-15]. On July 22, 2019, Mark made a claim with Allstate on Elsie's behalf. On August 16, Mark emailed to Allstate a claimant's statement, fraud notice, and HIPAA authorization form signed by Elsie. See Mark Bennett Email [Doc. 37-6]; Elsie's Claim History Rep. [Doc. No. 37-21] at 1-2. His email did not include a copy of Elsie's Power of Attorney. See Mark Bennett Email [Doc. 37-6]. On September 30, Allstate faxed a facility questionnaire to Touchmark and a request for Elsie's medical records to Dr. Finch. See Elsie's Claim History Rep. [Doc. No. 37-21] at 2-3. Later that week, Allstate received Elsie's medical records from Dr. Finch, see id. at 3, but Touchmark never returned a facility questionnaire specific to Elsie's care. While Elsie's claimant statement indicated she only needed assistance for one activity of daily living, see Elsie's Claimant Statement [Doc. No. 37-15], her APS indicated she needed assistance with two activities of daily living, see Elsie's APS [Doc. No. 37-16]. The claim recap sheet later filled out by Mr. Takahara reflected Elsie was cognitively impaired and needed assistance with two activities of daily living. See Takahara Dep. [Doc. No. 44-6] at 196:18-197:25.
Mr. Takahara agreed the claim was not closed for lack of a facility questionnaire. See Takahara Dep. [Doc. No. 44-6] at 17:19-21. Elsie's claim file acknowledges care at Touchmark was not covered. See Elsie's Claim History Rep. [Doc. No. 37-21] at 5.
On October 21, an Allstate auditor reviewed Elsie's claim and concluded her medical records were provided without proper authorization because her APS indicated she was legally incompetent. See Elsie's Claim History Rep. [Doc. No. 37-21] at 3; Elsie's APS [Doc. No. 37-16]. Between October 24 and December 23, Allstate sent three letters to Elsie's son, Ed Dillard, each requesting an updated copy of her Power of Attorney document. See First POA Letter [Doc. No. 37-19]; Second POA Letter [Doc. No. 37-20]; Third POA Letter [Doc. No. 37-19]. Mr. Dillard recalled giving each letter to Mark Bennett. See Dillard Dep. [Doc. No. 37-17] at 129:5-12, 131:22-132:6, and 132:18-133:11. Allstate also called Mr. Dillard on December 2 regarding the documents, and Mr. Dillard advised he would discuss with Mark Bennett. See Elsie's Claim History Rep. [Doc. No. 37-21] at 5. The third letter, sent on December 23, advised Mr. Dillard that Elsie's claim would be closed in 30 days if the document was not received. See Third POA Letter [Doc. No. 37-19]. The updated records were never entered into Allstate's file. On January 27, Allstate sent a letter to Mr. Dillard, informing him that Elsie's claim had been closed for lack of response. See Elsie's Closure Letter [Doc. No. 37-24].
Plaintiffs dispute whether Mark Bennett ever sent the requested documents, though there is no real evidence supporting the contention that he sent them. See Mark Bennett Dep. [Doc. No. 37-3] at 188:2-190:18. Mark Bennett could not specifically remember sending the documents, though he testified "there would be no reason for [him] not to." Id. at 189:19-20.
At some point after the claims were denied, Mark Bennett made a complaint to the Oklahoma Insurance Department ("OID"). See OID Letter [Doc. No. 37-25]. On July 16, 2021, Allstate responded to the Bennetts' complaint, stating in part:
[The Bennetts'] claims were not denied; only care at Touchmark was denied. The claims were closed as we were not provided the information required to adjudicate the claims. If the Bennetts choose to relocate to a covered provider, and provide the necessary documentation to adjudicate their claims, Allstate will consider any documentation they are provided, and adjudicate the claims accordingly.Id. On July 29, 2021, the Bennetts filed this lawsuit in the District Court of Oklahoma County, State of Oklahoma. See Pet. [Doc. No. 1-1]. On August 20, 2021, Defendant removed the action to federal court. See Notice of Removal [Doc. No. 1]. Bernard continued living at Touchmark until his death in October 2021, and Elsie continues to reside there.
IV. Discussion
In this case, federal subject matter jurisdiction is predicated on diversity of citizenship. Therefore, Oklahoma law governs Plaintiffs' claims. See, e.g., Universal Underwriters Ins. Co. v. Winton, 818 F.3d 1103, 1105-06 (10th Cir. 2016).
A. The "Nursing Home" Definition
Plaintiffs move for partial summary adjudication on the issue of whether Touchmark qualifies as a Nursing Home pursuant to the Certificate definition. Any facts and inferences, therefore, will be construed in the light most favorable to Allstate, the nonmovant. Insurance contracts are construed under Oklahoma law like other contracts. Equity Ins. Co. v. City of Jenks, 184 P.3d 541, 544 (Okla. 2008); May v. Mid-Century Ins. Co., 151 P.3d 132, 140 (Okla. 2006). Under Oklahoma law, "[w]hen policy provisions are clear, consistent, and unambiguous, [the court must] look to the plain and ordinary meaning of the policy language to determine and give effect to the parties' intent." Porter v. Okla. Farm Bureau Mut. Ins. Co., 330 P.3d 511, 515 (Okla. 2014). The parties' intent is considered "as it existed at the time the contract was negotiated." Dodson v. St. Paul Ins. Co., 812 P.2d 372, 376 (Okla. 1991). Whether an insurance contract is ambiguous "is a matter of law for the Court to determine and resolve accordingly." Id.
Neither party contends that the terms of the Certificate are ambiguous. See Pls.' Resp. [Doc. No. 38] at 9; Def.'s Mot. [Doc. No. 37] at 15. The Court agrees the contract language is unambiguous because it is not "susceptible to two constructions on its face from the standpoint of a reasonably prudent layperson." Haworth v. Jantzen, 172 P.3d 193, 196 (Okla. 2006); see also Gillogly v. Gen. Elec. Cap. Assur. Co., 430 F.3d 1284, 1290 (10th Cir. 2005) (finding similar provision unambiguous); Milburn v. Life Invs. Ins. Co. of Am., 511 F.3d 1285, 1289-91 (10th Cir. 2008) (following Gillogly's analysis).
The provision at issue here defines a Nursing Home as a facility that:
1. Is licensed by the state in which the facility is located to provide care for sick and injured persons at their expense.
2. Provides 24 hour care by or under the supervision of a Doctor, Registered Graduate professional nurse (RN), licensed professional nurse (LPN), or a licensed vocational nurse (LVN); and
3. Maintains daily medical records for each patient.
It is undisputed that Touchmark, which is licensed as an ALC, satisfies the second and third prongs of the definition. See Def.'s Resp. [Doc. No. 45] ¶ 14. The only issue is whether OSDH licenses ALCs "to provide care for sick and injured persons at their expense." The Certificate does not define the word "care" or the phrase "sick and injured persons."
Plaintiffs argue that because Touchmark provided care to the Bennetts, who are sick and injured people, it is a Nursing Home pursuant to the Certificate definition. See Pls.' Mot. [Doc. No. 38] at 9-10. This argument misses the mark, however, as a facility can only satisfy the Certificate definition based on the type of care it is licensed to provide. The treatment of any specific resident is immaterial under the Certificate's definition.
The Court agrees with Allstate's assertion that this definition inherently incorporates Oklahoma's licensing framework. Under the terms of the Certificate, a Nursing Home is a facility licensed by the state to perform a specific function—provide care for sick and injured people. Determining whether a facility qualifies, therefore, necessarily involves a review of the Oklahoma Statutes and regulations related to that facility's license. In Oklahoma, ALCs are licensed pursuant to the Continuum of Care and Assisted Living Act, which defines an ALC as:
any home or establishment offering, coordinating or providing services to two or more persons who:Okla. Stat. tit. 63, § 1-890.2. The OSDH promulgated regulations that further explain the type of care ALCs are licensed to provide. "Intermittent or unscheduled nursing care" is defined as "skilled nursing care given by a licensed practical nurse or registered nurse that is not required twenty-four (24) hours a day." Okla. Admin. Code § 310:663-1-2. "Personal care means assistance with meals, dressing, movement, bathing or other personal needs or maintenance, or general supervision of the physical and mental well-being of a person and includes assistance with toileting." Okla. Admin. Code § 310:663-1-2.
a. are domiciled therein,
b. are unrelated to the operator,
c. by choice or functional impairments, need assistance with personal care or nursing supervision,
d. may need intermittent or unscheduled nursing care,
e. may need medication assistance, and
f. may need assistance with transfer and/or ambulation;
These statutes and regulations unambiguously permit ALCs to care for sick and injured persons. For instance, an ALC's residents may require "intermittent or unscheduled nursing care." While some routine or preventative nursing care could be provided to healthy individuals, unscheduled nursing care contemplates the unexpected medical needs accompanying illness or injury. Similarly, most people who require assistance with the basic tasks of daily life, including taking medication or bathing themselves, require such care due to sickness or injury.
Allstate argues ALCs are not licensed to provide care for sick and injured people because Oklahoma created a different type of establishment—Nursing Facilities—to deliver that type of care. To support this contention, Defendant cites the Nursing Home Care Act, which defines a Nursing Facility as:
[A] home, an establishment or an institution, a distinct part of which is primarily engaged in providing:
a. skilled nursing care and related services for residents who require medical or nursing care,
b. rehabilitation services for the rehabilitation of injured, disabled, or sick persons, orOkla. Stat. tit. 63, § 1-1902(10). But nothing in that definition serves to exclude other licensed facilities, including ALCs, from providing similar types of care to sick and injured people. In fact, the Oklahoma legislature licenses several different facilities to provide the same general type of care in increasing levels. See, e.g., id. (providing "care and services beyond the level of care provided by a residential care home"); Okla. Admin. Code § 310:663-3-1(a) ("An assisted living center shall not care for any resident needing care in excess of the level that the assisted living center is licensed to provide or capable of providing."). The regulations further clarify that a major difference between the care offered by ALCs and the care offered by Nursing Facilities is the frequency with which care is required, rather than the level of skill required. Compare Okla. Stat. tit. 63, § 1-890.2 (licensing an ALC to provide "intermittent or unscheduled nursing care") with Okla. Stat. tit. 63, § 1-1902 (licensing a nursing facility to provide "on a regular basis, health-related care and services to individuals"). The Certificate language does not specify that insureds must reside in the facility that provides the highest level of care to the exclusion of all similar facilities. Rather, the Certificate defines a Nursing Home as any facility that cares for sick and injured persons, so long as it meets the other enumerated qualifications.
c. on a regular basis, health-related care and services to individuals who because of their mental or physical condition require care and services beyond the level of care provided by a residential care home and which can be made available to them only through a nursing facility.
The remainder of the Certificate confirms the Court's conclusion that ALCs qualify as "Nursing Homes." See Okla. Oncology & Hematology P.C. v. US Oncology, Inc., 160 P.3d 936, 948 (Okla. 2007) ("Like any other contract provision, [the disputed] provision will be read together with other provisions of the contract so as to give effect to the intention of the parties ascertained from the four corners of the contract."). The Nursing Home Care Benefit requires, inter alia, that any confinement in the Nursing Home "[b]e for a covered Chronic Condition[.]" See Cert. [Doc. No. 38-1] at 3. Under the Certificate, the term "Chronic Condition" is further defined as a "physical condition or Cognitive Impairment for which an Insured Person requires assistance with two or more of the Activities of Daily Living, as certified by a Doctor in a Plan of Care." Id. at 2 (emphasis added). The Certificate lists the Activities of Daily Living as "Bathing, Dressing, Eating, Mobility, and Toileting," further defining those terms:
• "Bathing" means turning on water faucets, setting temperature and water level, transferring into or out of tub/shower, washing the whole body, drying off completely, or emptying tub.
• "Dressing" means dressing self, including fasteners, braces, or prostheses.
• "Eating" means getting food or drink into the body for nourishment.
• "Mobility" means moving from one location to another, or the ability to get in and out of bed or a chair.
• "Toileting" means the ability to use the toilet, transfer on and off the toileting equipment or perform associated personal hygiene.
The Nursing Home Benefit found in the Certificate requires a person to have a Chronic Condition before they become eligible for coverage at a facility that "provides care for sick and injured persons." The activities of daily living listed in the Certificate mirror the type of care that ALCs are licensed to provide in Oklahoma. For instance, an ALC is licensed to provide personal care, further defined as "assistance with meals, dressing, movement, bathing . . . and includes assistance with toileting." Okla. Admin. Code § 310:663-1-2. By the terms of the Certificate, a person would have a Chronic Condition if they needed assistance with two of the activities also categorized as "personal care" under Oklahoma's regulatory scheme. If the Court adopted Allstate's interpretation, every insured person with a Chronic Condition would be forced to reside in a Nursing Facility, even though they may only require the intermittent care that Oklahoma licenses ALCs to provide.
Beyond providing personal care, ALCs are also licensed to provide nursing care on an unscheduled or intermittent basis. Okla. Stat. tit. 63, § 1-890.2.
Defendant relies on Gillogly and Milburn, but those cases are inapposite. The policy language in those cases defined a nursing home, in relevant part, as a facility "which is licensed by the appropriate licensing agency to engage primarily in providing nursing care and related services to inpatients." Gillogly, 430 F.3d at 1286; Milburn, 511 F.3d at 1287 (emphasis added). Gillogly analyzed the primary function of Residential Care Homes—a different type of facility than is at issue here. See 430 F.3d at 1289. Milburn conducted a similar analysis but concluded ALCs were not covered under the policy. Because ALCs may only provide "intermittent or unscheduled nursing care," the court held, they are not "licensed to engage 'primarily in providing nursing care and related services to inpatients' as provided in the plaintiff's policy." 511 F.3d at 1291 (emphasis added). Milburn does not stand for the proposition that ALCs are unable to provide any care to sick and injured people. Instead, it focused on how consistently an ALC's residents need care. See id. at 1291 ("If the patient needs regular nursing care, the regulatory scheme requires that the patient be transferred to a more appropriate facility.").
Crucially, the applicable Certificate language in this case does not include the same limiting language found in Gillogly and Milburn. As explained above, one of the primary differences between Nursing Facilities and ALCs is the regularity with which residents may need care. The policy language in Gillogly and Milburn excluded facilities that provide only occasional or supplementary nursing care by including the word "primarily" in the policy. The Certificate at issue here does not include such a restriction, meaning a facility can qualify if it is licensed to provide care to sick and injured persons in any capacity.
At least one other district court found Gillogly and Milburn inapposite when the word "primarily" was not included in the relevant policy language. See Gutowitz v. Transamerica Life Ins. Co., 126 F. Supp. 3d 1128, 1144 n.55 (C.D. Cal. 2015).
Though Defendant cites Osborn ex rel. Osborn v. Brookdale Sr. Living, Inc., that case is also inapplicable to the facts in this case. 241 P.3d 674 (Okla. Civ. App. 2010). Because Osborn held that "an assisted living center is a residential care home," 241 P.3d at 677, Defendant urges the Court to limit its inquiry into the care provided by Residential Care Homes, a different type of facility licensed by the state. Osborn analyzed whether the Nursing Home Care Act's prohibition on arbitration provisions applied to ALCs despite the absence of an analogous provision in the Continuum of Care and Assisted Living Act. Id. at 675. The issue in this case, however, centers on the statutory and regulatory restrictions the State of Oklahoma places on ALCs specifically. There is no question that Residential Care Homes and ALCs are licensed and regulated as two separate entities, so they cannot be grouped together here as they were in Osborn. Compare Okla. Admin. Code §§ 310:663-1-1 to 663-31-3 (providing for the licensure of continuum of care facilities and ALCs) with Okla. Admin. Code. §§ 310:680-1-1 to 680-21-1 (providing for the licensure of residential care homes). Because the ultimate issue here is the licensing requirements for ALCs, the Court will not confine its inquiry to the statutes and regulations governing Residential Care Homes.
Osborn and Defendant both cite to the Residential Care Act for the contention that ALCs provide "supportive assistance." See Def.'s Mot. [Doc. No. 37] at 20 (quoting Osborn, 241 P.3d at 676). The words "supportive assistance," however, do not appear in the statutes or regulations governing ALCs. See Continuum of Care and Assisted Living Act, Okla. Stat. tit. 63, §§ 1-890.1 to 1-895; Okla. Admin. Code §§ 310:663-1-1 to 663-31-3.
The Court is not bound by Osborn's holding. See Okla. Stat. tit. 20, § 30.5 ("No opinion of the Court of Civil Appeals shall be binding or cited as precedent unless it shall have been approved by the majority of justices of the Supreme Court for publication in the official reporter.").
Under the applicable statutes and regulations, the Court finds an ALC is licensed to care for sick and injured persons as a matter of law. Accordingly, Plaintiffs' Motion for Partial Adjudication is GRANTED.
B. Breach of Contract
Allstate seeks summary judgment on Plaintiffs' breach of contract claim. See Def.'s Mot. [Doc. No. 37]. Since Allstate is the moving party, the Court interprets all undisputed material facts in the light most favorable to Plaintiffs. As detailed below, Allstate's motion is DENIED.
"A breach of contract is a material failure of performance of a duty arising under or imposed by agreement." Lewis v. Farmers Ins. Co., 681 P.2d 67, 69 (Okla. 1983). To establish a breach of contract, a plaintiff must show: (1) the formation of a contract; (2) breach of the contract; and (3) damages as a result of the breach. Cates v. Integris Health, Inc., 412 P.3d 98, 103 (Okla. 2018). The parties do not dispute that a contract exists between Allstate and the Bennetts, nor that contract damages would be proper if a breach occurred. The only element at issue, therefore, is whether Allstate breached its contract with the Bennetts. Because ALCs are covered facilities under the Certificate, see supra, Allstate breached the contract by denying coverage at Touchmark.
Allstate argues the Bennetts' failure to cooperate in the claim handling process precludes recovery on the breach of contract claim. See Def.'s Mot. [Doc. No. 37] at 24-25. Failure to cooperate may be a valid defense to a breach of contract claim, but it is not applicable to these facts. Defendant cites Bryant v. Sagamore Ins. Co., a case in which the Tenth Circuit upheld summary judgment in favor of the insurer after the insured failed to respond to phone calls, a home visit, and several letters from his insurer. 597 F. App'x 968, 972 (10th Cir. 2015) (unpublished). But the policy in that case required an insured to submit to an examination under oath, and the insured's failure to attend the examination served as the basis for the insurer's denial. Bryant v. Sagamore Ins. Co., 18 F. Supp. 3d 1245, 1249 (E.D. Okla. 2014), aff'd, 597 F. App'x 968 (10th Cir. 2015).
Unlike in Bryant, Allstate's failure to cooperate defense is unrelated to its basis for denying coverage. Allstate's defense is premised on the Bennetts' failure to provide Bernard's medical records and Elsie's power of attorney form, making it impossible for Allstate to corroborate their medical eligibility under the Certificate. Allstate claims that, because it could not obtain these records, it was unable to "evaluate medical information against professional standards of care," as the Certificate gives it the right to do. See Cert. [Doc. No. 38-1] at 4. But Allstate did not deny the claims based on the Bennetts' medical eligibility or failure to provide these documents. Instead, Touchmark's status as an ALC served as the sole basis for Allstate's denial. See OID Letter [Doc. No. 37-25]. Their medical eligibility, therefore, was immaterial to Allstate's breach. This conclusion is bolstered by the fact that Allstate closed the claims for noncompliance several weeks after it informed the Bennetts that their care at Touchmark would not be covered. No matter how sick the Bennetts were or how much documentation they provided, Allstate made it clear their care at Touchmark would not be covered. Because the Bennetts' medical records were immaterial to Allstate's denial of care at Touchmark, the Defendant's motion is DENIED.
On December 30, 2019, Allstate told Mark Bennett Touchmark was not a covered facility. Elsie and Bernard's claims were closed for noncompliance on January 27, 2020, and February 12, 2020, respectively.
C. Bad Faith
Allstate moves for summary judgment on the Bennett's bad faith claim, arguing (1) Plaintiffs cannot demonstrate a breach of the Certificate, and (2) Allstate acted reasonably because there was a legitimate dispute as to whether Touchmark qualified as a Nursing Home under the terms of the Certificate. See Mot. [Doc. No. 37] at 26-27. Plaintiffs respond that Allstate acted in bad faith by, inter alia, denying coverage based on Touchmark's status as an ALC without further investigation. As explained above, the Court finds Allstate breached the contract, so Plaintiffs' bad faith claim hinges on the reasonableness of Allstate's inquiry into whether Touchmark is a covered facility. Considering all undisputed material facts in the light most favorable to Plaintiffs, a rational trier of fact could find that Allstate acted in bad faith. Defendant's motion is therefore DENIED.
Under Oklahoma law, an insurer has a duty to act in good faith and to deal fairly with its insured. A violation of that duty gives rise to a cause of action in tort. Christian v. Am. Home Assur. Co., 577 P.2d 899, 901 (Okla. 1977). To establish a prima facie case of bad faith, the party alleging bad faith carries the burden to demonstrate:
1) coverage under the insurance policy and that the insurer was required to take reasonable actions; 2) the actions of the insurer were unreasonable under the circumstances; 3) the insurer failed to deal fairly and act in good faith toward the insured in its handling of the claim; and 4) breach or violation of the duty of good faith and fair dealing was the direct cause of any damages that the insured sustained.Harris v. Progressive Direct Ins. Co., 740 F. App'x 900, 908 (10th Cir. 2018) (unpublished). A "clear showing that the insurer unreasonably, and in bad faith, withholds payment of the claim of its insured" is necessary to show a breach of that duty. Id. at 905. "A jury question arises only where the relevant facts are in dispute or where the undisputed facts permit differing inferences as to the reasonableness and good faith of the insurer's conduct." Oulds v. Principal Mut. Life Ins. Co., 6 F.3d 1431, 1436 (10th Cir. 1993). "[I]f there is conflicting evidence from which different inferences may be drawn regarding the reasonableness of insurer's conduct, then what is reasonable is always a question to be determined by the trier of fact by a consideration of the circumstances in each case . . . ." McCorkle v. Great Atl. Ins. Co., 637 P.2d 583, 587 (Okla. 1981).
Allstate argues summary judgment is appropriate because a legitimate dispute existed regarding whether Touchmark satisfied the Nursing Home definition found in the Certificate. See Def.'s Mot. [Doc. No. 37] at 26-27. When a legitimate dispute exists, the inference of bad faith is negated "as a 'matter of law.' " Harris, 740 F. App'x at 910 (quoting Oulds, 6 F.3d at 1442). A legitimate dispute, however, "will not act as an impenetrable shield against a valid claim of bad faith." Timberlake Const. Co. v. U.S. Fid. & Guar. Co., 71 F.3d 335, 343 (10th Cir. 1995). "By presenting evidence that casts doubt on the legitimacy of an insurer's good faith justification for disputing a claim, a plaintiff can defeat summary judgment and present his case to the jury." Watts v. Allstate Prop. & Cas. Co., No. CIV-14-483-F, 2015 WL 13549198, at *4 (W.D. Okla. Apr. 9, 2015) (unpublished) (citing McCoy v. Oklahoma Farm Bur. Mut. Ins. Co., 841 P.2d 568 (Okla. 1992)).
In its response, Plaintiffs argue Allstate acted in bad faith by failing to investigate whether ALCs are licensed by the state to provide care to sick and injured people. See Pls.' Resp. [Doc. No. 44] at 26. "[A] duty to timely and properly investigate an insurance claim is intrinsic to an insurer's contractual duty to timely pay a valid claim." Brown v. Patel, 157 P.3d 117, 122 (Okla. 2007); see also McCorkle, 637 P.2d at 587 ("[T]he tort of bad faith with regard to the insurance industry is the insurer's unreasonable, bad-faith conduct, including the unjustified withholding of payment due under the policy[.]"). Under Oklahoma law, the insurer has "an obligation to undertake an investigation reasonable under the circumstances before it denies Plaintiff's claim." Matlock v. Texas Life Ins. Co., 404 F. Supp. 2d 1307, 1314 (W.D. Okla. 2005). The insurer is also "held to knowledge of the applicable Oklahoma law, and the reasonableness of its decision must be judged in light of that law." Willis v. Midland Risk Insurance Company, 42 F.3d 607 (10th Cir. 1994) (citing Timmons v. Royal Globe Ins. Co., 653 P.2d 907, 913-14 (Okla. 1982)).
Plaintiffs also argue Allstate acted in bad faith because the denial letter included more restrictive language than the Certificate, i.e., as discussed supra, by inserting the word "nursing" as a modifier. Based on the record, however, a reasonable trier of fact could only conclude that Allstate based its denial decision on the correct contract language, and that any additions to the Certificate's language in the denial letter were inadvertent.
Allstate denied coverage at Touchmark because the facility is licensed as an ALC in Oklahoma. By issuing a facility questionnaire and reviewing a copy of Touchmark's license, Allstate investigated what type of license Touchmark holds. But the undisputed factual record supports the conclusion that Allstate failed to question whether that license permits ALCs to "provide care to sick and injured persons" in Oklahoma. Mr. Takahara agreed the facility questionnaire only asks what type of license a facility holds, not whether it provides care to sick and injured persons. See Takahara Dep. [Doc. No. 44-6] at 163:14-23. He also stated that he did not investigate whether Touchmark is licensed to provide care for sick and injured people. See id. at 163:24-164:6. Similarly, neither Ms. Smith nor Mr. Sanford could say whether ALCs are licensed by the State of Oklahoma to provide care to sick and injured persons. See Smith Dep. Vol. II [Doc. No. 38-4] at 190:5-11; Sanford Dep. [Doc. No. 38-5] at 196:9-15. Because the Certificate's definition of Nursing Home incorporates Oklahoma's licensing framework, a rational trier of fact could conclude that Allstate acted unreasonably by failing to investigate whether an ALC's license permitted it to care for sick and injured people. Allstate could have, for example, provided an analysis of Oklahoma's licensing scheme to its claim handlers, created a more thorough facility questionnaire, or sought a legal opinion before denying coverage.
Further, when Mark Bennett reported in his initial phone call that Touchmark is an ALC, the adjuster "advised [him] that this policy does not cover [ALCs.]" See Claim Intake Form [Doc. No. 37-4] at 6. By maintaining this initial position without taking steps to confirm its legal or factual accuracy, the reasonableness of Allstate's investigation creates a question of fact for the jury. See Willis, 42 F.3d at 613 ("Rather than investigate the matter, it appears that [the insurer] decided simply to maintain the position that there was no coverage for the loss because it occurred at a location other than the one designated in the policy. This evidence could also give rise to an inference of bad faith."). Accordingly, the Court finds Defendant is not entitled to summary judgment on Plaintiffs' bad faith claim.
Plaintiffs also allege Allstate acted in bad faith with regard to the Bennetts' medical eligibility. Though "the entire course of conduct between the parties" is relevant for purposes of bad faith, the Court finds it unnecessary to address these arguments because summary judgment is independently inappropriate on the facility denial. Timmons, 653 P.2d at 917.
D. Punitive Damages
As a final matter, Defendant argues there is no evidence to support Plaintiffs' request for punitive damages. Oklahoma's punitive damages statute permits the recovery of punitive damages if the jury finds by clear and convincing evidence that the defendant acted, at a minimum, with reckless disregard for the rights of others. Okla. Stat. tit. 23, § 9.1. "Whether that showing has been made remains an issue of law for the trial court in its role as gatekeeper to determine, upon a defendant's challenge . . . whether there is competent evidence upon which a reasonable jury could find reckless disregard, from which malice and evil intent may be inferred." Robinson v. Sunshine Homes, Inc., 291 P.3d 628, 638 (Okla. Civ. App. 2010) (internal footnote omitted).
"A plea for punitive damages is generally considered to be an element of recovery of the underlying cause of action; it does not constitute a separate cause of action." Rodebush ex rel. Rodebush v. Okla. Nursing Homes, Ltd., 867 P.2d 1241, 1247 (Okla. 1993).
After viewing the evidence and drawing all reasonable inferences in Plaintiffs' favor, the Court finds at this stage in the litigation that a genuine dispute exists as to whether Defendant's conduct, at a minimum, could give rise to a finding of reckless disregard. Accordingly, summary judgment in favor of Defendant on the issue of punitive damages is unwarranted.
E. False Representation
Plaintiffs initially brought a claim of false representation, concealment, and deceit regarding the 1991 sale of the Certificate. See Compl. [Doc. No. 1-1]. Following Bernard's death and Elsie's incapacity, however, Plaintiffs decided not to pursue this claim. See Final Pretrial Rep. [Doc. No. 51] at 5. Allstate's motion to dismiss this claim on summary judgment is therefore DENIED AS MOOT.
V. Conclusion
For the reasons set forth, the Court finds that Touchmark is a qualified facility under the Certificate, and that Defendant is not entitled to summary judgment on any claim or issue.
IT IS THEREFORE ORDERED that Plaintiffs' Motion for Partial Summary Adjudication [Doc. No. 38] is GRANTED.
IT IS FURTHER ORDERED that Defendant's Motion for Summary Judgment [Doc. No. 37] is DENIED, as set forth herein.
IT IS SO ORDERED this 24th day of August, 2022.