Opinion
Case No. CV 16-9307-MWF (Ex)
02-17-2021
LINCOLN BENEFIT LIFE COMPANY v. Alexander DALLAL, et al.
Deputy Clerk: Rita Sanchez, Attorneys Present for Plaintiff: None Present Court Reporter: Not Reported, Attorneys Present for Defendant: None Present
Deputy Clerk: Rita Sanchez, Attorneys Present for Plaintiff: None Present
Court Reporter: Not Reported, Attorneys Present for Defendant: None Present
Proceedings (In Chambers): ORDER AMENDING CONCLUSIONS OF LAW [209]; ORDER DENYING DEFENDANTS’ MOTION FOR NEW TRIAL AND OTHER RELIEF [212]
MICHAEL W. FITZGERALD, U.S. District Judge
Before the Court is Defendants Alexander Dallal and Claire Dallal's Motion for a New Trial and Other Relief (the "Motion"), filed on December 11, 2020. (Docket No. 212). Plaintiff Lincoln Benefit Life Company ("Lincoln") filed an opposition on January 11, 2021. (Docket No. 217). Defendants filed a reply on January 25, 2021. (Docket No. 219).
The Court has read and considered the papers filed in connection with the Motion and held a telephonic hearing on February 8, 2021, pursuant to General Order 20-09 arising from the COVID-19 pandemic.
For the reasons that follow, the Motion is DENIED to the extent that Defendants request a new trial, a partial new trial, an amended judgment or a reduction in punitive damages. Defendants received a fair trial and neither the Court nor the jury committed manifest error that would entitle Defendants to the extraordinary relief that they seek.
The Court does, however, exercise its discretion under Federal Rule of Civil Procedure 59(a)(2) to amend its prior Conclusions of Law with respect to Lincoln's third cause of action to void the Policy.
I. BACKGROUND
Lincoln initiated this action on December 16, 2016, seeking relief against Defendants for fraud, and seeking restitution and punitive damages. (Complaint (Docket No. 1)). A jury trial was held from July 31, 2018, through August 13, 2018. (Docket Nos. 133-167). The jury found in favor of Lincoln. (Docket No. 172). The jury found that both Mr. and Mrs. Dallal engaged in fraud against Lincoln in connection with the long-term care insurance policy issued by Lincoln (the "Policy") and received benefits to which they were not entitled. (Id. at 2). It found that Lincoln did not know of facts before December 16, 2013, that would have caused a reasonable insurance company to suspect that it had suffered harm that was caused by someone's wrongful conduct. (Id. at 3). The jury awarded Lincoln $619,290.49 in damages for fraud. (Id. at 4) and $300,000 in punitive damages. (Docket No. 174).
On November 13, 2020, the Court ruled on the equitable claims, declaring that Mr. Dallal was not entitled to benefits from 2004 through December 2016 and that the Policy was void as of at least July 29, 2016 (the first day that Mr. Dallal was seen on surveillance), and thereafter. (Docket No. 209 at 51).
II. DISCUSSION
Defendants seek relief under Federal Rules of Civil Procedure 52, 59, and 60, and request that the Court order a new trial, a partial new trial, or alter the verdict and/or damages, asserting that the jury verdict and the Court's equitable rulings go against the great weight of the evidence. (See Motion at 1-2).
Juries perform a vital role in our justice system, and a jury was constitutionally required in this action under the Seventh Amendment. As triers of fact, jurors become a part of the court itself, and judges are "rarely entitled to disregard jury verdicts that are supported by substantial evidence." Duk v. MGM Grand Hotel, Inc. , 320 F.3d 1052, 1058 (9th Cir. 2003). But on occasion, a new trial may be granted on certain "historically recognized" grounds. See Fed. R. Civ. P. 59(a) ("A new trial may be granted ... for any of the reasons for which new trials have heretofore been granted in actions at law in the courts of the United States."); Zhang v. Am. Gem Seafoods, Inc. , 339 F.3d 1020, 1035 (9th Cir. 2003) (when deciding whether to grant new trial, courts are "bound by those grounds that have been historically recognized").
The Ninth Circuit has previously indicated that "[t]he trial court may grant a new trial only if the verdict is contrary to the clear weight of the evidence, is based upon false or perjurious evidence, or to prevent a miscarriage of justice." Molski v. M.J. Cable, Inc. , 481 F.3d 724, 729 (9th Cir. 2007) (quoting Passantino v. Johnson & Johnson Consumer Prods. , 212 F.3d 493, 510 n.15 (9th Cir. 2000) ); 11 Charles A. Wright, Arthur Miller & Mary Kay Kane, Federal Practice and Procedure § 2805 (3d ed. & 2015 Supp.) ("It has been said that the general grounds for a new trial are that the verdict is against the weight of the evidence, that the damages are excessive, or that for other reasons the trial was not fair, and that the motion also may raise questions of law arising out of substantial errors in the admission or rejection of evidence or the giving or refusal of instructions.").
"While the district court reviews the record as a whole to ensure that the verdict is not against the clear weight of the evidence, the district court may not second guess how the jury weighed specific testimony." Manfred v. Superstation, Inc. , 365 F. App'x 856, 858 (9th Cir. 2010) (citing Union Oil Co. of Cal. v. Terrible Herbst, Inc. , 331 F.3d 735, 743 (9th Cir. 2003) ). "A district court abuses its discretion when it denies a motion for a new trial arguing that the verdict was against the clear weight of the evidence only if: (1) the district court erred in applying the standard for a new trial, or (2) the record contains no evidence that supports the verdict." Id. at 857-58 (citing Alford v. Haner , 446 F.3d 935, 936 (9th Cir. 2006) ).
Under Rule 59(e), a party may move to have the court amend its judgment within twenty-eight days after entry of the judgment. Fed. R. Civ. P. 59(e). "Since specific grounds for a motion to amend or alter are not listed in the rule, the district court enjoys considerable discretion in granting or denying the motion." Allstate Ins. Co. v. Herron , 634 F.3d 1101, 1111 (9th Cir. 2011) (citation omitted). But amending a judgment after its entry remains "an extraordinary remedy which should be used sparingly." Id. (citation omitted). "In general, there are four basic grounds upon which a Rule 59(e) motion may be granted: (1) if such motion is necessary to correct manifest errors of law or fact upon which the judgment rests; (2) if such motion is necessary to present newly discovered or previously unavailable evidence; (3) if such motion is necessary to prevent manifest injustice; or (4) if the amendment is justified by an intervening change in controlling law." Id.
A. The Jury's Finding on the Statute of Limitations
Defendants assert that the jury's verdict goes against the great weight of the evidence suggesting that Plaintiff's recovery was barred by the statute of limitations. (Motion at 3-7). Pursuant to Rule 59(a), Defendants request that the Court orders a new trial to determine Defendants’ liability for claims made between December 16, 2013, and December 16, 2016, since the evidence adduced at trial demonstrated that Lincoln was on notice as early as December 16, 2013, of facts that would have caused a reasonably diligent insurer to investigate. (Id. at 7).
With respect to the statute of limitations issue, in reviewing the record as a whole, the Court cannot conclude that it "contains no evidence that supports the verdict." Alford , 446 F.3d at 936. The statute of limitations was specifically addressed at trial, including by way of a question on the verdict form. Defendants’ arguments now were made to the jury, and neither the jury nor this Court were persuaded. Rather, it is Lincoln's responses to Defendants’ arguments this issue that are persuasive. (Opposition at 6-10). Indeed, Defendants’ basic argument — that Lincoln should have seen through their criminal scheme — smacks of the classic "chutzpah" argument by the man who murdered his parents and then begs for mercy because he's an orphan.
Accordingly, the Motion is DENIED insofar as it challenges the jury's finding that the statute of limitations did not bar Plaintiff's recovery.
B. The Court's Exclusion of Defense Expert
Defendants contend that the Court erred in excluding the testimony of Dr. William Chow and the MRI that Dr. Chow ordered. (Motion at 8). In support of this claim, Defendants point to events that occurred after the trial, which purportedly validate Dr. Chow's opinions on Mr. Dallal's health conditions. ( Id. ). "District courts are granted broad discretion in admitting evidence, and their rulings are reviewed only for an abuse of discretion." Ruvalcaba v. City of Los Angeles , 64 F.3d 1323, 1328 (9th Cir. 1995) (citation omitted). "A new trial is only warranted when an erroneous evidentiary ruling ‘substantially prejudiced’ a party." Id. (citation omitted).
Along with all the persuasive responses to this argument in the Opposition at 10-12, the main problem is the timing: The issue was not Mr. Dallal's health even at the time of trial, let alone after trial. Defendants had the opportunity at trial to explain why Mr. Dallal's medical history and behavior on the video was consistent with their theory of the case. Neither the jury nor this Court was persuaded.
Accordingly, the Motion with respect to the exclusion of Dr. Chow is DENIED .
C. The Jury's Punitive Damages Award
Defendants assert that the jury's punitive damages award was excessive in violation of the Due Process Clause of the Fourteenth Amendment and warrants either an amendment of the judgment or a new trial pertaining to damages. (Motion at 9-13).
"Compensatory damages and punitive damages serve different purposes; compensatory damages redress concrete loss caused by the defendant's wrongful conduct, while punitive damages are aimed at deterrence and retribution." Planned Parenthood of Columbia/Willamette Inc. v. Am. Coalition of Life Activists , 422 F.3d 949, 953 (9th Cir. 2005) (citing State Farm Mutual Automobile Insurance Company v. Campbell , 538 U.S. 408, 416, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003) ; Cooper Industries, Inc. v. Leatherman Tool Group, Inc. , 532 U.S. 424, 432, 121 S.Ct. 1678, 149 L.Ed.2d 674 (2001) ). " ‘Elementary notions of fairness enshrined in our constitutional jurisprudence dictate that a person receive fair notice not only of the conduct that will subject him to punishment, but also of the severity of the penalty" that may be imposed." Id. (quoting BMW of North America, Inc. v. Gore , 517 U.S. 559, 574, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996) ). "Accordingly, ‘the Due Process Clause of the Fourteenth Amendment prohibits the imposition of grossly excessive or arbitrary punishments on a tortfeasor.’ " Id. (quoting State Farm , 538 U.S. at 416, 123 S.Ct. 1513 ) (internal alternations omitted).
"Whether an award comports with due process is measured by three guideposts: (1) the degree of reprehensibility of the defendant's misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases." Id. Under the first guidepost, courts consider whether
the harm caused was physical as opposed to economic; the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others; the target of the conduct had financial vulnerability; the conduct involved repeated actions or was an isolated incident; and the harm was the result of intentional malice, trickery, or deceit, or mere accident.
State Farm , 538 U.S. at 419, 123 S.Ct. 1513.
With respect to the first guidepost, Defendants argue that the reprehensibility of their conduct was only negligible because the damage "was entirely economic" and resulted in no physical injuries or emotional trauma. (Motion at 10). Defendants further assert that Lincoln's harm was "miniscule" relative to its massive net worth as a "sophisticated and highly profitable" company. (Id. at 11).
It is true that the harm to Lincoln was economic, not physical, and that Lincoln is an established business that has no financial vulnerabilities. However, punitive damages need not be supported by proof of physical or emotional damage or financial injury to an economically vulnerable plaintiff. See BMW , 517 U.S. at 576, 116 S.Ct. 1589 ("infliction of economic injury, especially when done intentionally through affirmative acts of misconduct ... can warrant a substantial penalty") (internal citation omitted); Bardis v. Oates , 119 Cal. App. 4th 1, 26, 14 Cal. Rptr. 3d 89 (2004) ("the fact that only economic injury resulted does not mean that a punitive damages award should not sting"). Here, where Defendants’ intentional and deceitful insurance fraud scheme spanned over the course of many years and required a high degree of sophistication, the Court cannot conclude that Defendants’ conduct was of negligible reprehensibility.
Defendants next argue that a $300,000 award of punitive damages was excessive compared to Defendants’ net worth. (Motion at 11-13). Defendants claim that after subtracting the compensatory damages, the punitive damages are 9% of Defendants’ remaining net worth. (Id. at 11).
At trial, Defendants stipulated that their net worth was $4,000,000. (See Motion at 11; Opposition at 19). Their reduction request must therefore be evaluated with this figure in mind. See Bell v. Clackamas Cty. , 341 F.3d 858, 868 (9th Cir. 2003) (explaining that trial courts must evaluate a request to reduce punitive damages on the basis of the defendant's ability to pay "only to the extent the record substantiates [the defendant's] wealth").
Defendants cite no authorities in support of their contention that a punitive damages award amounting to 7.5% of a defendant's net worth is grossly excessive. The Court agrees with Lincoln that this amount is not excessive as a matter of law. See, e.g., Vallbona v. Springer , 43 Cal. App. 4th 1525, 1540, 51 Cal. Rptr. 2d 311 (1996) (holding that $200,000 punitive damages award was not excessive in light of the defendants’ stipulated net worth of $866,000, an award that left defendants with "almost 77 percent of their demonstrated net worth").
Accordingly, the Motion with respect to punitive damages is DENIED .
D. The Court's Equitable Findings and Conclusions of Law
Defendants assert that the Court erred by treating Defendants’ two separate insurance policies as one policy and thereby concluding that the fraud related to Mr. Dallal's policy voided Mrs. Dallal's right to continued coverage under her individual policy. (Motion at 13-17). Defendants contend that it would not conflict with the jury's findings for the Court to uphold Mrs. Dallal's individual policy. (Id. ). At the hearing, Defendants clarified that they challenge the Court's voiding of the Policy as to both Mr. and Mrs. Dallal, asserting that an insurer cannot void a policy absent an express fraud and concealment provision.
Under California law, does fraud void a policy that lacks an express fraud provision? The Court has addressed this issue repeatedly since the beginning of the case. To summarize, California law is not definitive either way. The Court first ruled that Lincoln had perhaps adequately alleged a basis for voiding the Policy as to Mrs. Dallal because of the fraudulent scheme. (Order Denying Motion to Dismiss (Docket No. 29 at 13-14)). As the Court later noted, however, this Order did not rule definitively on the circumstances under which California statutes and case law provide for the voiding of a policy. (Order re: Motions for Summary Judgment (Docket No. 89 at 16)). In denying both summary judgment motions, including Lincoln's, the Court noted the lack of specific California authority to void a policy lacking an express fraud provision. (Id. at 12-16). In other words, the Court kicked the can down the road until a jury determined whether Mrs. Dallal had committed fraud.
We're now at the end of the road. The jury did find that Mrs. Dallal committed fraud. In the Findings of Fact and Conclusions of Law ("FF&CC" (Docket No. 209)), the Court determined that the fraud voided the Policy. However, the Court relied in a cursory fashion on the authorities proffered by Lincoln, which were largely the same authorities that the Court had ruled insufficient when it denied summary judgment to Lincoln. Defendants correctly point out in the Motion that those authorities are, by themselves, not dispositive.
Therefore, the Court must now explicitly answer the question that has implicitly been in this action from its beginning: Do basic equitable principles allow for voiding a policy when fraud is present but an express fraud provision is not? The Court again determines that the Policy must be voided because of the fraud. However, the Court will also amend its prior Conclusions of Law to focus its reliance on equitable principles and not solely on the ambiguous California authorities.
"The difference between rescinding a policy and voiding a policy is that rescission renders the policy void from the beginning, as if it never existed (ab initio), while voiding the policy operates to nullify the policy from some date after its inception." Crosky, Heeseman, Ehrilch & Klee, California Practice Guide: Insurance Litigation (The Rutter Group 2020) ("Insurance Litigation "), Ch. 5-F. Rescission by Insurer ¶ 5:249. "The insured's intentional concealment or misstatement of ‘material’ facts in a claim for policy benefits (as distinguished from the insurance application) entitles the insurer to void the insurance contract." Id. ; see also id. , Ch. 12D-C Effect of Insured's Conduct Contributing to Loss ¶ 12:1174 (stating that a false claim for benefits can justify denial of the claim or even void coverage) (quoting Kransco v. Am. Empire Surplus Lines Ins. Co. , 23 Cal. 4th 390, 408, 97 Cal. Rptr. 2d 151, 2 P.3d 1 (2000) (discussing an insurer's remedies for an insured's bad faith breach of a policy and acknowledging that fraudulent misconduct will void policy coverage)).
Typically, insurance policies will contain a "fraud and concealment" provision, stating that the policy will be voided in the event that the insurer submits a fraudulent claim. See, e.g., Cummings v. Fire Ins. Exch. , 202 Cal. App. 3d 1407, 1414, 249 Cal. Rptr. 568 (1988) (affirming trial court's grant of summary judgment for defendant on breach of contract claim because plaintiff's fraudulent claim for benefits had voided the policy under its express fraud provision); Watts v. Farmers Ins. Exch. , 98 Cal. App. 4th 1246, 1260, 120 Cal. Rptr. 2d 694 (2002) (holding that an innocent spouse's ability to recover under a joint policy after the other insured spouse has defrauded the insurer turns on the language of the fraud provision in the policy rather than the type of property involved); Essex Ins. Co. v. Hartford Fire Ins. Co. , No. CV 12-05067-DMG (DTBx), 2013 WL 3389549, at *9 (C.D. Cal. July 8, 2013) (explaining that, even if plaintiff were a co-insured of fraudster policyholder, plaintiff would not be entitled to coverage because, applying Watts , the language of the policy's fraud provision voided its coverage based on the acts of "any insured," not merely "the insured"); Safeco v. Rawstron , No. CV 96-5139, 1999 WL 989740, at *1 (C.D. Cal. Apr. 28, 1999) (granting summary judgment for plaintiff-insurer and interpreting the policy's fraud provision to permit voiding the policy as to defendant-insured who submitted fraudulent claims, but not as to the innocent co-insured spouse).
It is undisputed that the Policy did not contain a fraud provision. The question, then, is whether a policy must contain this provision for the insurer to be able to void the policy on the basis that an insured submitted a fraudulent claim.
Lincoln cites American General Life & Acc. Ins. Co. v. Findley for the proposition that courts will void contracts due to fraud even in the absence of express fraud provisions. (Opposition at 22) (citing No. CV 12-01753-MMM (PSWx), 2013 WL 1120662, at *10 (C.D. Cal. Mar. 15, 2013)) (granting plaintiff-insurer summary judgment on its rescission claim, explaining that, although the policy had no express fraud provision, the intentional misrepresentation of a material fact in an insurance claim is a basis for rescinding a policy under the California Insurance Code).
Although Findley stands for the rule that Lincoln proposes, the Court is dubious about Findley ’s holding that California Insurance Code sections 331 and 359 apply "to post-application representations made in benefits claims as well as to representations made in policy applications." 2013 WL 1120662, at *10. In support of this conclusion, Findley cites Twin City Fire Ins. Co., Inc. v. Mitsubishi Motor Credit of America, Inc. Id. (citing No. SACV 04-00043 CAS, 2006 WL 5164189, *11 (C.D. Cal. Aug. 15, 2006) (rejecting defendant-insured's argument that, as a matter of law, post-issuance misrepresentations cannot provide the basis for a rescission claim, explaining that section 359 does not expressly limit rescission to misrepresentations on an application for insurance)). But this portion of Twin City is merely dictum, since the court ultimately relied on the language of the policy's express fraud provision. 2006 WL 5164189, at *12 (analyzing the policy's express fraud provision which referred to an insured's material misrepresentations " ‘before or after’ a loss").
Findley also quotes a misleading excerpt from Mitchell v. United Nat. Ins. Co. that changes the meaning of the quoted text. See 2013 WL 1120662, at *10 (citing Mitchell , 127 Cal. App. 4th 457, 473, 25 Cal. Rptr. 3d 627 (2005) (addressing issue of first impression as to whether Insurance Code section 2071, which requires willful misrepresentation to void a fire insurance policy, conflicts with Insurance Code sections 331 and 359, which permit rescission of an insurance policy for a negligent or unintentional misrepresentation)).
Findley ’s parenthetical quotation from Mitchell provides: "Both Insurance Code sections 331 and 359 ... apply to misrepresentations made at any time ... [and] allow[ ] the insurer to rescind the policy in the event of a negligent or unintentional misrepresentation.’ " 2013 WL 1120662, at *10 (quoting Mitchell , 127 Cal. App. 4th at 473, 25 Cal.Rptr.3d 627 ).
But Mitchell did not hold that sections 331 and 359 apply to an insured's post-application representations made in a claim for benefits. To the contrary, Mitchell acknowledged that " Insurance Code sections 331 and 359 normally govern the parties’ obligations during formation of the insurance contract," and contrasted these sections with " Insurance Code section 2071 [which] typically is exercised in connection with a claim for policy benefits." 127 Cal. App. 4th at 473, 25 Cal.Rptr.3d 627.
The Court has identified no California case applying Insurance Code sections 331 and 359 to an insured's post-application submission of a fraudulent claim.
Lincoln also asserts that California Civil Code section 3412 authorizes a court to void an insurance policy where the insured has submitted a fraudulent claim. (Opposition at 24) (citing U.S. Bank National Assn. v. Naifeh , 1 Cal. App. 5th 767, 778, 205 Cal. Rptr. 3d 120 (2016) (substantial evidence supported the trial court's conclusion that recorded false documents purportedly transferring title of real property were void or voidable due to fraud and would result in pecuniary loss and prejudicial change in position to trustee if the documents were not cancelled under section 3412 )).
Civil Code section 3412 provides: "A written instrument, in respect to which there is a reasonable apprehension that if left outstanding it may cause serious injury to a person against whom it is void or voidable, may, upon his application, be so adjudged, and ordered to be delivered up or canceled." Lincoln pointed to no case applying this section to insurance policies. The Court's review of Civil Code section 3412 revealed that California courts primarily apply it in disputes over real property.
At the hearing, Lincoln argued that the Court need not agree with Lincoln's reading of Insurance Code sections 331 and 359 or Civil Code section 3412 to deny the Motion because the Court's voiding of the Policy with respect to Mr. and Mrs. Dallal was justified on purely equitable grounds.
"[E]quity is, peculiarly, a forum of conscience." Cortez v. Purolator Air Filtration Prod. Co. , 23 Cal. 4th 163, 180, 96 Cal. Rptr. 2d 518, 999 P.2d 706 (2000). Indeed, "the absence of an adequate remedy at law is a reason for the exercise of equity jurisdiction." 13 Witkin, Summary of California Law (11th Ed. 2020) Equity, § 3 Adequacy of Legal Remedy (citing cases). Accordingly, "equitable relief is flexible and expanding, and the theory that ‘for every wrong there is a remedy’ may be invoked by equity courts to justify the invention of new methods of relief for new types of wrongs." Id. (quoting Cal. Civ. Code § 3523 ) (internal citations omitted).
Where a defendant has committed fraud, courts fashioning equitable relief "are not so much concerned with decreeing that defendant receive back the identical property with which he parted as they are in declaring that his nefarious practices shall result in no damage to the plaintiff." Farina v. Bevilacqua , 192 Cal. App. 2d 681, 685, 13 Cal. Rptr. 791 (1961) (general rescission rule requiring plaintiff to restore the other party to the status quo does not apply where plaintiff seeks to recover for other party's fraud rather than to keep benefits while unjustly shedding obligations) (citation and internal alterations omitted).
"The district court enjoys broad powers in equity, and its choice of equitable remedies is reviewed for an abuse of discretion." Kenney v. United States , 458 F.3d 1025, 1032 (9th Cir. 2006) (citation and internal quotation marks omitted).
The Court agrees with Lincoln that the Policy with respect to both Mr. and Mrs. Dallal must be voided on equitable grounds. It would be manifestly unjust to force Lincoln to continue to insure two people who deceitfully and systematically cheated it out of hundreds of thousands of dollars in a several-years-long scheme. The jury's damages award does not compensate Lincoln for the future harm it will suffer if it is forced to provide coverage after Lincoln's trust in the Dallals has been so irreparably damaged. Because the Policy lacked an express fraud provision, it does not appear that an adequate remedy at law exists to void the Policy. Although, notably, no statute expressly forbids a court from voiding an insurance policy under these circumstances. See Timberline, Inc. v. Jaisinghani , 54 Cal. App. 4th 1361, 1369 n.5, 64 Cal. Rptr. 2d 4 (1997) (explaining that a court's equitable power cannot be used to compel an outcome that statute or policy expressly forbid).
Moreover, as a practical matter, how could Lincoln be expected to respond to future claims made by the Dallals, knowing of their unwavering willingness to lie and falsify documents? Lincoln, reasonably, will never trust anything they do or say. So, would Lincoln be required to launch a comprehensive investigation for each and every future claim that the Dallals make, as to ensure that it is not defrauded once again? The Court will not aid the Dallals in putting Lincoln in such a vulnerable position.
Defendants assert that, at the very least, the Court should not void Mrs. Dallal's coverage because the Policy is severable into two separate contracts of insurance and Defendants submitted no fraudulent claims under Mrs. Dallal's portion of the Policy. The Court need not determine whether the Policy is, in fact, separable because the fact that Defendants made fraudulent claims only under Mr. Dallal's name is far beside the point. Both insureds worked together to defraud Lincoln. Even if the Policy were separable, Mrs. Dallal should not be rewarded for her role in the scheme on the mere "technicality" that she helped submit fraudulent claims for her husband but not — yet — herself.
The Court's equitable voiding of the Policy as to both Mr. and Mrs. Dallal was the only just result here.
E. Amending Conclusions of Law
Federal Rule of Civil Procedure 59(a)(2) provides that "[a]fter a nonjury trial, the court may, on motion for a new trial, open the judgment if one has been entered, take additional testimony, amend findings of fact and conclusions of law or make new ones, and direct the entry of a new judgment." Because Lincoln's third cause of action to void the Policy seeks equitable relief, Rule 59(a)(2) applies. (See Conclusions of Law, Lincoln's Third Cause of Action (Docket No. 209 at 46-50 (subsection B))).
Accordingly, pursuant to Rule 59(a)(2), the Court amends the Conclusions of Law with respect to Lincoln's cause of action to void the Policy as follows:
To the extent that the Court's Conclusions of Law conflict with subsection D of this Order ("The Court's Equitable Findings and Conclusions of Law"), subsection D of this Order shall supersede those conflicting portions of the Court's Conclusions of Law — i.e. the analysis and conclusions with respect to Civil Code section 3412, Insurance Code section 359, Findley , and Twin City.
The Court's verdict finding and ruling that Lincoln is entitled to a declaration that the Policy was void as of at least July 29, 2016, remains unchanged. (FF&CC (Docket No. 209 at 51)). The judgment (Docket No. 210) likewise remains unchanged.
Other than this amendment, the Motion is DENIED .
IT IS SO ORDERED.