Emerson v. The Prudential Insurance Company of America

Background

Maria Emerson held a long-term-care insurance policy issued by The Prudential Insurance Company of America. The policy provided benefits when an insured lost the ability to perform at least two specified daily activities with substantial assistance, or had a severe cognitive impairment requiring substantial supervision. The policy also provided optional cash benefits without requiring the insured to incur charges and submit bills.

Prudential paid Maria’s claims from 2012 through 2019 based on cognitive impairments. In 2020, Prudential’s anti-fraud team flagged her policy because of her age, cash benefits, and home care. A review followed that lasted about one year and ended with Prudential denying coverage in 2021. The parties disputed whether Maria qualified for benefits and whether Prudential’s investigation and interpretation of the policy were reasonable.

Frank and Maria Emerson sued in state court for breach of contract, bad-faith denial of insurance benefits, and emotional distress. Prudential removed the case to federal court and moved for partial summary judgment—that is, a request to resolve some claims without a trial—on all claims except breach of contract.

Bad-Faith Denial of Benefits

Under the applicable standard, Maria had to show that benefits due under the policy were withheld and that Prudential’s reason for withholding them was unreasonable or lacked proper cause. Because Prudential did not move for summary judgment on breach of contract, the court considered the disputed issue of whether benefits were due in Maria’s favor for purposes of this motion.

The court held that a reasonable jury could find bad faith. The evidence could support findings that Prudential’s anti-fraud team directly influenced the investigation, repeatedly sought reviews, and helped produce the denial. The evidence could also support a finding that Prudential instructed medical reviewers to apply terms such as “loss of functional capacity” and “neurocognitive,” even though those terms were not used in the policy’s coverage triggers in the same way. The court concluded that a jury could find the investigation biased and the denial unreasonable.

The court rejected Prudential’s argument that the investigation was full and fair as a matter of law, its argument that its policy interpretation was necessarily reasonable, and its argument that there was no connection between the anti-fraud team and the denial. The court emphasized that factual disputes made those issues appropriate for trial.

The motion for summary judgment on Maria’s bad-faith denial claim was DENIED.

Punitive Damages

Prudential also sought summary judgment on Maria’s request for punitive damages. The court explained that bad faith alone does not automatically establish entitlement to punitive damages, but concluded that a reasonable jury could find the additional requirements, including conscious disregard of Maria’s rights.

The motion as to punitive damages was DENIED.

Frank Emerson’s Bad-Faith Claim

Prudential attempted in a footnote to extend its motion to Frank’s parallel bad-faith claim. The court found that the footnote did not adequately address that claim. Prudential later filed a separate motion concerning the same subject.

To the extent the motion addressed Frank’s bad-faith claim and related punitive damages, it was DENIED AS MOOT because of the later motion. The court stated that those claims survived for the time being.

Intentional Infliction of Emotional Distress

Frank alone brought the intentional-infliction-of-emotional-distress claim. To prevail, he would have to prove outrageous conduct, at least reckless disregard for his emotional distress, actual and proximate causation, and severe emotional distress.

Prudential did not dispute for purposes of the motion that its conduct caused Frank severe emotional distress. It argued instead that its conduct was reasonable and therefore could not be outrageous or reckless. The court found that Frank’s opposition was insufficient and that the authority he cited supported Prudential’s position. Although a jury could find Prudential’s denial unreasonable, the court concluded that Frank had not shown that the record supported the additional requirement of outrageous conduct under California law.

The motion for summary judgment on Frank’s intentional-infliction-of-emotional-distress claim was GRANTED.

Disposition

The court ordered that Prudential’s motion for partial summary judgment was GRANTED IN PART AND DENIED IN PART. The motion was denied as to Maria’s bad-faith denial claim and punitive damages; denied as moot as to Frank’s parallel bad-faith claim and punitive damages; and granted as to Frank’s intentional-infliction-of-emotional-distress claim. The latter claim was removed from the case.