Kelly v. Provident Life & Accident Insurance Co.

Facts

P filed his complaint with three claims: P filed his complaint on April 19, 2004, alleging three claims: (1) rescission of an August 2001 settlement agreement ending prior litigation between the parties in this district; (2) breach of disability insurance contracts; and (3) breach of the implied covenant of good faith and fair dealing. The court dismissed the claims holding P's breach of contract and bad faith claims were barred by the statute of limitations and that P's rescission claim failed to allege sufficient facts to establish undue influence. The Ninth Circuit reversed and remanded holding that the seven factors listed in Odorizzi were not the only factors which could support a claim for rescission based on undue influence under California law. It also held that if P could establish that he is entitled to rescission, the Court should equitably toll the statute of limitations on P's breach of contract and bad faith claims. On remanded D filed a Motion for Summary Judgment. Various companies terminated P as an agent for them, during his disability period. D began investigating P. It stopped paying benefits for a six-month period, stating in a letter to P's then-attorney that P was not totally disabled but doing quite well and working in his occupation as an insurance agent. P denied the allegations. D revealed it has covertly videotaped P's activities 'over a period of four (4) separate days between May 23, 1990, and June 28, 1990' and sought Dr. Gold's explanation of 'why P's activities in the videotape make it appear that he leads a normal life and is not disabled.' D resumed payments. D's own doctor's evaluated P and concluded P was suffering from dysthymia, or low-grade depression, as well as 'mixed personality disorder with schizoidal and passive-aggressive features' at the time of the examination. It concluded P was temporarily totally disabled at the very least from November of 1990 until the time of the final evaluation on September 25, 1991. P was already recovering notably from his major depression at the time of his first interview and was no longer totally disabled. Despite this finding, D continued to pay benefits. After more investigations and back and forth D sent a field investigator, Blochl, to P's residence. Blochl estimated the price of P's home ($600,000-$700,000), the landscaping, pool, and the make of a car in P's garage (a Mercedes). The report also noted that assets, including the house, cars, and Wobegone Enterprises, a company P founded, were held in P's wife Anna's name, not his own name. P's ex-wife, Wanda, stated P threatened to go on disability if she filed for divorce, that P abused her, that P went to Europe with another woman while on disability and that P faked his depression. Total commissions by P's company, Kelly Insurance Services, which changed its name to Wobegone Enterprises in 1997, ranging from approximately $88,000 to $185,000 per year from 1991 through 1998. These records 'confirmed for the first time that P was working, and receiving income from activities other than mere 'renewals' and 'sporadic courtesy services' during the entire period of his claimed disability.' A letter from General American in 1994 informs P that as of October, P had only met 2.8% of his yearly sales goals. P proved that they were virtually all are repeat sales to existing customers. D contacted the San Diego District Attorney's Office, the United States' Attorney's Office, and the FBI to report insurance fraud. A deputy district attorney informed Blochl that 'Mr. Kelly should be asked if he has sold policies after his date of disability and whether or not he has an office. Very specific questions about sales, marketing, and prospecting should be asked' and warned Blochl that 'the questions on the Insured's Supplementary Statement of Claim form were vague.' On April 16, 1999, Dr. Alan Abrams, M.D., J.D., examined P for D. Dr. Abrams stated 'I do not find evidence that Mr. Kelly was ever disabled by a mental illness, during the entire period of claimed disability' and that 'non-clinical elements, i.e., malingering, completely dominate the claim.' D sent P a letter notifying him that it was terminating his benefits, although it would provide him with benefits through August 16, 1999, which was the date it concluded P was not disabled. In November of 2000, P sued D for fraud, conspiracy to defraud, breach of the covenant of good faith and fair dealing, rescission, and restitution. P attempted to hire an attorney, but could not afford the fees and could not find an attorney who would take his case on a contingency basis because he was a defendant. P sought a settlement and was told by D they would put the suit on hold until they looked into it. P learned that a clerk's default had been entered against him and the companies and that D was moving for default judgment. P represented himself pro se but was not an attorney, he could not file an answer or oppose default judgment on behalf of the corporate defendants, and D obtained a default judgment. Although P's wife, not P, was the registered agent for service of process, she was never served. P began drinking heavily and researching suicide. P settled his case with D, giving up his claim for disability benefits in exchange for D agreeing to dismiss the lawsuit and 'giving up its judgment against Anna's company.' P claimed he not sign the agreement because it was what I wanted to do, but because I could not resist D's pressure. P got Dr. Lynn Ponton, M.D. to state that P's condition creates 'undue susceptibility to [] pressure,' such as the pressure that D's investigations, the prior lawsuit, and the investigations of alleged insurance fraud by various law enforcement agencies would create and that 'his depression and social avoidance would have been at an all-time high' at the time of the settlement. Ponton presented evidence that the three IME evaluations of P were extremely flawed. 

Issues

Rule of Law

Holding and Decision

Legal Analysis

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