Wong Lai v. Northwestern Mutual Life Insurance Company, 3:13-cv-05183

Background

AnaReghina Wong Lai, a dentist, claimed long-term disability benefits after two head-falls in February 2004; Northwestern Mutual (NML) paid accommodation benefits beginning in 2004 and formally approved benefits in 2006.
Multiple treating providers and several independent medical examiners (IMEs) evaluated Wong Lai over 2004–2011; several IMEs and consultants (neuropsychologists and psychiatrists) found evidence of symptom exaggeration or malingering, while some clinicians diagnosed factitious disorder or anxiety/depression.
NML obtained surveillance and other non-medical evidence (e.g., a 2007 wedding video, activities managing family real estate, travel, home renovation) suggesting functioning inconsistent with claimed disability.
NML twice arranged in-person IMEs in 2010–2011 (Drs. Paltzer and Reich); neuropsychological testing in 2011 showed poor effort and invalid test results similar to earlier testing; consultants concluded no neurocognitive impairment attributable to head injury.
On December 8, 2011, NML terminated benefits, citing consulting and IME opinions that plaintiff’s symptoms were consciously produced and therefore not disabling under the policy; plaintiff sued for breach of contract, bad faith, misrepresentation, IIED, and punitive damages.
On summary judgment, the court excluded plaintiff’s expert Dr. Williams’s late July 16, 2014 report as untimely; the court denied summary judgment on the breach-of-contract claim but granted summary judgment for NML on bad faith (breach of implied covenant), misrepresentation, IIED, and punitive damages.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Breach of contract — entitlement to benefits	Wong Lai asserts she is totally disabled from anxiety/depression (possibly from 2004 falls) and entitled to policy benefits	NML contends medical and surveillance evidence show malingering or factitious disorder and no disabling impairment under the policy	Denied summary judgment for NML — genuine factual dispute exists, summary judgment inappropriate on breach claim
Bad faith / breach of implied covenant	NML acted unreasonably and biasedly (experts didn’t examine her; report bias)	NML argues its denial was reasonable: multiple IMEs, testing, and consultants supported denial; a genuine dispute existed	Granted for NML — no reasonable-basis showing for bad faith; genuine dispute existed as matter of law
Intentional/fraudulent and negligent misrepresentation	Plaintiff alleges misrepresentations by NML in claim handling	NML: no misrepresentations; plaintiff produced no evidence	Granted for NML — plaintiff abandoned/failed to support claim
Intentional infliction of emotional distress and punitive damages	NML’s conduct was outrageous/malicious in selecting biased experts, failing objective malingering tests, and terminating benefits	NML shows comprehensive, reasonable claim handling, in-person IMEs, malingering testing, and knowledge of fellowship acceptance	Granted for NML — no outrageous, oppressive, fraudulent or malicious conduct shown; punitive claims fail

Key Cases Cited

Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard)
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (summary judgment requires more than metaphysical doubt)
Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (scintilla of evidence insufficient to defeat summary judgment)
Wright v. Paul Revere Life Ins. Co., 291 F. Supp. 2d 1104 (C.D. Cal. 2003) (insured bears burden to prove entitlement to benefits)
Aydin Corp. v. First State Ins. Co., 18 Cal.4th 1183 (insurer bears burden to prove policy exclusion)
Guebara v. Allstate Ins. Co., 237 F.3d 987 (9th Cir. 2001) (elements for bad faith claim)
Wilson v. 21st Century Ins. Co., 42 Cal.4th 713 (genuine dispute rule in insurer bad faith cases)
Bosetti v. United States Life Ins. Co., 175 Cal. App. 4th 1208 (bad faith summary adjudication where IME created genuine dispute)
Lazar v. Superior Court, 12 Cal.4th 631 (elements of fraud/intentional misrepresentation)
Thornhill Publ’g Co. v. GTE Corp., 594 F.2d 730 (conclusory affidavits insufficient to defeat summary judgment)