United States District Court, D. Arizona
ORDER
At
issue is Plaintiff Benjamin McClure's motion for partial
summary judgment, which is fully briefed. (Docs. 205, 235,
263.) For the following reasons, the motion is
denied.[1]
I.
Background
McClure
purchased a disability insurance policy
(“Policy”) from Defendant Country Life Insurance
Company (“Country Life”) in 1995. The Policy
provides a monthly base benefit of $800 in the event McClure
becomes disabled. McClure also purchased a supplemental
Social Insurance Rider (“SIR”), which provides up
to $700 per month in additional benefits subject to certain
offsets, including payments received for Social Security
Disability Insurance (“SSDI”) benefits.
Specifically, the SIR provides, in relevant part:
This rider pays monthly benefits when the policy pays monthly
benefits. An adjustment may be made for cost of living. The
amount of the rider monthly benefit is the maximum monthly
benefit of the rider less benefits from social insurance.
Social insurance means:
A. United States Social Security Disability Insurance . . .;
. . .
When you are eligible for benefits from social insurance, you
must apply. This includes reapplication, rehearing or appeal
as necessary. You must provide us proof of your application
and the results.
McClure
submitted a claim for disability benefits in January 2013
after sustaining a disabling head injury in November 2012.
Country Life initially approved the claim and paid monthly
base and SIR benefits from November 2012 until April 2014,
when it terminated his claim. McClure brought this action
against Country Life in December 2015, alleging that it
breached the parties' insurance contract and administered
his claim in bad faith.
In May
2016, during the pendency of this litigation, McClure was
awarded SSDI benefits retroactive to December 2012. Later, in
November 2016, Country Life concluded that McClure's
claim was compensable as of June 2014. Country Life has paid
McClure base benefits retroactive to that date through the
present, but has not paid SIR benefits, retroactive or
otherwise, because McClure now is receiving SSDI benefits
that offset the SIR benefit entirely. McClure moves the Court
to find, as a matter of law, that Country Life is in breach
of the insurance contract and owes him SIR benefits, both for
the retroactive period and going forward.
II.
Legal Standard
Summary
judgment is appropriate when there is no genuine dispute as
to any material fact and, viewing those facts in a light most
favorable to the nonmoving party, the movant is entitled to
judgment as a matter of law. Fed.R.Civ.P. 56(a). Facts are
material if they might affect the outcome of the case under
governing law, and a dispute over those facts is genuine
“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 (1986).
Summary judgment may also be entered “against a party
who fails to make a showing sufficient to establish the
existence of an element essential to that party's case,
and on which that party will bear the burden of proof at
trial.” Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986).
III.
Discussion
McClure
argues that Country Life owes him SIR benefits as a matter of
law for four reasons: (1) the SIR does not include a
reimbursement provision that permits Country Life to recoup
SIR overpayments when SSDI benefits are awarded
retroactively; (2) to the extent Country Life has a right to
reimbursement, it has waived it by not seeking reimbursement
for overpayments between December 2012 and April 2014; (3)
allowing multiple insurers to offset disability benefits
based on the same SSDI benefit violates public policy; and
(4) applying the offset provision under the circumstances of
this case runs counter to McClure's reasonable
expectations. The Court addresses each in turn.
A.
Lack of a Reimbursement Provision
The SIR
does not contain a reimbursement provision, but McClure's
argument on this point is misplaced because Country Life has
not sought reimbursement for past overpayments. Rather,
Country Life has offset McClure's monthly SIR benefit at
the time of payment by the amount of his monthly SSDI
benefit, a practice expressly permitted by the SIR.
The SIR
states that it pays monthly benefits when the Policy pays
monthly base benefits, and that the amount of the SIR benefit
“is the maximum monthly benefit of the rider less
benefits from social insurance, ” including SSDI. From
December 2012 to April 2014, Country Life paid base benefits.
Country Life also paid the maximum SIR benefit because
McClure was not receiving SSDI benefits during this time.
Country Life terminated base benefits in April 2014 and, as a
result, ceased making SIR payments. In May 2016, McClure was
awarded SSDI benefits retroactive to December 2012. Later, in
November 2016, Country Life determined that McClure's
claim was compensable and began paying base benefits
retroactive to June 2014. At the time these base benefits
were paid, ...