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Merrill v. Crown Life Ins. Co.

United States District Court, E.D. Washington

May 23, 2014


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[Copyrighted Material Omitted]

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For Robert M Merrill, Plaintiff: Steven Craig Lacy, LEAD ATTORNEY, Lacy & Kane PS, East Wenatchee, WA.

For Crown Life Insurance Company, Reassure America Life Insurance Company, Defendants: Medora A Marisseau, LEAD ATTORNEY, Karr Tuttle & Campbell - SEA, Seattle, WA.


THOMAS O. RICE, United States District Judge.

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BEFORE THE COURT are the parties' cross-motions for summary judgment (ECF Nos. 15 and 19), and Defendant's Motion to Strike Third Declaration of Robert Merrill (ECF No. 55) and Motion to Expedite (ECF No. 54). These matters were heard with oral argument on May 22, 2014. Steven C. Lacy appeared on behalf of the Plaintiff. Medora A. Marisseau appeared on behalf of Defendant. The Court has reviewed the briefing and the record and files herein, and is fully informed.


Plaintiff sustained a fractured eye socket during a skiing accident in January 2011. This injury caused him to experience double vision. Surgery to repair the eye socket improved Plaintiff's vision, but did not correct it entirely. Despite experiencing lingering vision problems, Plaintiff returned to his practice as an orthodontist in February. By June, however, it became clear to Plaintiff that he could not competently place brackets on patients' teeth due to his impaired vision. Plaintiff filed for total disability insurance benefits commencing on the date of his injury under three policies issued by Crown Life. Plaintiff continued to perform less visually demanding tasks until November, at which time he sold his interest in the practice to his business partner and retired from the practice of orthodontics.

After performing a thorough claims investigation, Crown Life determined that Plaintiff was totally disabled-- i.e., " unable . . . to perform the material and substantial duties of [his] regular occupation" --as of the date he sold his practice. With regard to the period that Plaintiff remained employed, however, Crown Life denied total disability coverage and awarded only proportional benefits. The most significant result of this decision was that Plaintiff was denied " Professional Overhead Expense" benefits, payable in the maximum amount of $24,000 per month, for the nine months that he continued working.

In the instant lawsuit, Plaintiff asserts claims for breach of contract, bad faith, and violations of the Washington Insurance Fair Conduct Act (" IFCA" ) and Washington Consumer Protection Act (" CPA" ) arising from Crown Life's denial

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of total disability coverage from January 2011 to November 2011. Plaintiff now moves for partial summary judgment [1] on his breach of contract and CPA claims. Crown Life has filed a cross-motion for summary judgment on all claims.

For the reasons discussed below, the Court concludes that Plaintiff is entitled to partial summary judgment on his breach of contract claim and a single CPA claim arising from a violation of WAC 284-30-330(7). Crown Life is entitled to summary judgment on all remaining CPA claims. Genuine issues of material fact preclude summary judgment on Plaintiff's bad faith and IFCA claims.


Plaintiff Robert Merrill (" Plaintiff" ) is a retired orthodontist who formerly practiced with his younger brother, Thomas Merrill, in Wenatchee, Washington. At all times relevant to this litigation, Plaintiff was insured under three disability insurance policies issued by Defendant Crown Life Insurance Co. (" Crown Life" ). Two of these policies provide disability income coverage, while the third provides coverage for professional overhead expenses (" POE" ). Both the disability income and POE policies have riders which provide for payment of partial benefits (termed " income replacement benefits" and " proportionate expense benefits," respectively) in the event that the claimant experiences a loss of business income due to an injury.

On January 14, 2011, Plaintiff was involved in a skiing accident at Alta Ski Resort in Alta, Utah. The accident resulted in a blowout fracture to Plaintiff's left eye socket and caused Plaintiff to experience double vision. Plaintiff underwent surgery one week later to repair his eye socket and the muscles attached to his eye. This surgery improved Plaintiff's double vision, but did not entirely correct it.

Plaintiff returned to his orthodontics practice in late February 2011. Although he was still experiencing problems with double vision, Plaintiff was hopeful that his vision would improve over time. Plaintiff continued to perform the same basic duties he had performed prior to his accident: devising treatment plans, installing braces on new patients, and making periodic adjustments to wires.

In May 2011, Plaintiff's brother began noticing problems with the quality of Plaintiff's work while attending to patients during follow-up visits. Specifically, Plaintiff's brother noted that the brackets on several patients' teeth had been installed so far off the correct location that they needed to be removed and reinstalled. He and several assistants also observed excessive amounts of glue around many brackets. Plaintiff and his brother discussed these issues, and Plaintiff acknowledged that his vision problems were adversely affecting his work. The following month, the two partners agreed that Plaintiff's brother would assume sole responsibility for initial bracket installations and that Plaintiff would only perform tasks that required less visual acuity such as adjusting wires and removing braces at the conclusion of a patient's treatment. Because this arrangement placed a significantly higher workload on Plaintiff's brother, the partners reduced Plaintiff's share of the partnership profits from one-half to one-third.

On June 10, 2011, Plaintiff filed claims for disability benefits under his three policies with Crown Life. On his claim form, Plaintiff indicated that, as a result of double vision caused by his skiing accident, he was unable to do " [a]nything requiring

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precise visual acuity and three-dimensional perception such as placement of orthodontic braces on teeth, fine tooth positioning adjustments to wires, removal of excessive adhesive, accurate assessment of tooth positions, etc." In a recorded statement taken on June 21, 2011, Plaintiff explained that he was applying for proportionate (as opposed to total) disability benefits and provided an overview of his reduced role within the practice. Crown Life opened a claims investigation.

Unfortunately, Plaintiff continued to experience difficulties in his modified role. On September 12, 2011, Plaintiff informed Crown Life that he could no longer competently practice as an orthodontist and that, as a result, he would be selling his interest in the practice. He also advised Crown Life that he now considered himself totally disabled and wished to modify his claims to reflect that fact:

After reading [through] my policies and talking frankly with my family, I now recognize that I have been in denial about my ability to practice orthodontics and realize that I probably should have been filing a claim for full disability since I appear to be fully disabled . . . even though I have been trying to work.
While I have been working at a reduced rate of pay, I believe that is mainly due to my partner's (my brother) kindness and generosity and his hope that my vision could be restored and I would be able to resume practice, and not due to my ability to contribute meaningfully to the income of the practice. I have really been working as a glorified assistant to my brother as far as the tasks I've been performing, since my vision isn't good enough to do the technical aspects of orthodontics that produce any significant income to the practice.
* * *
Since I can't contribute to practice income as a partner and am not able to do my normal duties in the practice, this disability will trigger the involuntary sale/purchase clause of our partnership agreement. . . . I haven't been able to perform my normal duties since the accident. The practice is currently being appraised and sale documents are being prepared.

Plaintiff subsequently sold his interest in the business to his brother on November 1, 2011, and retired from the practice of orthodontics.

On November 16, 2011, Crown Life sent a field investigator to interview Plaintiff about his claims. After meeting with Plaintiff, Plaintiff's brother and several employees, the investigator prepared a narrative report outlining the status of the investigation and the work that still needed to be completed. Among the items that needed to be completed was a review of Plaintiff's medical records by an independent ophthalmology expert and an independent medical examination.

On December 13, 2011, Crown Life advised Plaintiff that he did not qualify for total disability benefits from the date of his accident to the date he sold his business. The company did, however, determine that Plaintiff qualified for payment of partial benefits under the " income replacement benefits" riders to his two disability income policies during that period. Based upon that decision, Crown Life paid income replacement benefits for the months of April ...

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