R. DAVID PROCTOR, District Judge.
This case is before the court on Defendant The Paul Revere Life Insurance
Plaintiffs Amended Complaint contains a total of eight claims against Defendants. (Doc. # 18). The first three counts allege breach of contract, ordinary bad faith, and extraordinary bad faith against Defendant Metropolitan Life Insurance Company ("Met Life"). (Id.). The remaining five counts allege breach of contract, ordinary bad faith, extraordinary bad faith, negligence, and breach of fiduciary duty as to Defendant The Paul Revere Life Insurance Company ("Paul Revere"). (Id.). Defendants' Counterclaim (Doc. # 23) contains two claims against Plaintiff: restitution of benefits paid and money had and received. (Id.). Plaintiff and both Defendants have moved for summary judgment as to all claims against them.
For the reasons below, Defendant Paul Revere's Motion for Summary Judgment (Doc. #34) is due to be granted; Defendant Met Life's Motion for Summary Judgment (Doc. # 36) is due to be granted in part and denied in part; Plaintiffs Motion for Summary Judgment on the Counterclaim Filed by Defendants (Doc. # 41) is due to be denied; Defendants' Motion to Strike Testimony of Dr. C.E. Herrington (Doc. # 58) is due to be overruled as moot; and Defendants' Motion to Strike Testimony and Report of Lynn Hare Phillips (Doc. # 73) is also due to be overruled as moot.
Plaintiff is at 61 year old anesthesiologist of Korean descent who has been practicing anesthesiology for approximately 30 years. (Doc. # 40 at 13-16). In the mid 1980's Plaintiff purchased two disability policies from New England Mutual Life Insurance Company.
Plaintiff has two disability policies with Met Life that provide a maximum monthly benefit of $5,000.00 each (Policy Nos. D098118 and D089651). (Doc. #38-1). The policies provide that:
The Company will pay the Owner of the policy monthly income benefits:
Monthly income benefits will be paid for the period:
(Doc. #38-1 at 8, 37). The polices do not contain definitions for part-time or fulltime work. (See Doc. 38-1).
In May 1999, Plaintiff fell from a ladder and injured his back. (Doc. #40 at 26). His fall resulted in an herniated disk that required surgery with cervical fusion. (Doc. 38-2 at 4). In June 1999, Plaintiff filed a disability claim with Met Life stating that he was totally disabled beginning May 6, 1999. (Doc. #38-2 at 4-9). Met Life paid Plaintiff total disability benefits until January 2000, when Plaintiff informed Met Life that he would be returning to work on a part-time basis.
When Plaintiff returned to work in January 2000, he did so under an agreement with his employer whereby he would work 26 weeks per year without any time for vacation.
While Defendant Met Life was aware that Plaintiff was working part time, it was not until February 2008 that Met Life's claim file indicates any awareness as to the nature of Plaintiff's part-time schedule. (Doc. #38-2 at 35). In other words, February 2008 is the first time Defendant Met Life's records indicate knowledge that Plaintiff was working on a full time basis for one month but not working at all the following month. Prior to that time, Defendant's records indicate that Plaintiff was working 20-35 hours per week. (See Doc. #38-2).
In November 2000, Met Life's file indicates that it had questions concerning Plaintiffs claims such as Plaintiff's level of vocational functioning, how many days a week he was working, and whether he was doing any on-call work. (Doc. #38-2 at 19). In December 2000, Bob Rodecker, a vocational consultant, spoke with Plaintiff on the phone and reported that "Dr. Pyun continues to work part time, 20 hours per week" and that he "has remained at parttime hours since January 2000 and there are no plans to increase his hours." (Doc. #38-2 at 20); (Doc. #61-1 at 2). Mr. Rodecker states that Plaintiff did not indicate that 20 hours per week was an average number of hours a week. (Doc. #61-1 at 2). Throughout 2000 to 2003, Plaintiff continued to submit monthly progress reports stating that his present activities were "rest, exercise, and part-time working," and Met Life continued to pay residual disability based on Plaintiffs claimed disability and reported monthly income. (See Docs. #40-1 at 34-53, 40-2 at 1-10).
Met Life's records reflect that in a March 2004 phone call with Met Life's disability benefits specialist, Cathy Bleau, Plaintiff represented that he "continue[d] to work an average of 20 hours a week" and that "[a] full time position in his occupation would require 70 hours a week." (Doc. #38-2 at 21) (Doc. #61-2 at 1). In a later declaration, Ms. Bleau indicated that during her conversation with Plaintiff, they specifically discussed the amount he was working each week and that Plaintiff never gave any indication that he was working on a full time basis every other month. (Doc. #61-2 at 2). On June 24, 2004, Gwynne Hupfer met with Plaintiff in his home. (Doc. #38-2 at 22-26). Hupfer's report of that interview states that during the interview Plaintiff reported that he "is in constant pain in [his] neck and both of [his] shoulders" and that he "had very little energy and is constantly fatigued." (Doc. #38-2 at 23). The report further states that Plaintiffs constant fatigue limits the length of his workday— where Plaintiff previously worked 50-70 hours a week, he was currently only able to work "between 25-35 hours a week." (Doc. #38-2 at 23). Mr. Hupfer stated in a later declaration that Plaintiff clearly told him that he was working every week, but was working a reduced number of hours and that Plaintiff did not indicate that he was working a full time schedule every other month. (Doc. #61-3 at 2).
In November 2007, Dr. Howard Taylor spoke to Plaintiffs attending physician Dr. Otero. At that time, Dr. Otero indicated that he thought Plaintiff should work less than 35 hours per week.
In December 2007, Plaintiff was again interviewed by Mr. Hupfer. The report of that interview indicates that Plaintiff stated that he does work some 70 hour work weeks, but those weeks are usually followed by a greatly reduced work load the following week (20-30 hours). (Doc. #38-2 at 28). The report further states that Plaintiff "indicated that his work schedule is `dictated by the needs of The DCH Medical Center.' When they need him to work a 70 hour week he complies with their wishes, but they understand that he can no longer do this on a regular basis." (Doc. #38-2 at 28). The report also states that Plaintiff said "you have to look at the big picture" (on a yearly basis) to see how many hours he has cut back his work schedule. (Doc. #38-2 at 28). Finally, the report indicates that Plaintiff was on-call an average of one weekend a month. (Doc. #38-2 at 28).
In February 2008, Met Life disability specialist Susan Watkins attempted to contact DCH Regional Medical Center concerning Plaintiffs schedule. (Doc. #38-2 at 36-37). She spoke with Chris Harris. (Doc. #38-2 at 37). The entry concerning the phone call indicates that Mr. Harris does the scheduling for the anesthesiology department and stated that Plaintiff works every other month and that Plaintiff's partner, Leisa DeVenny works the months that Plaintiff is off. (Doc. #38-2 at 37). The record further indicates that when Plaintiff is scheduled he works two 24 hour shifts on a Friday and Sunday and then 6-8 hours daily if not on call. (Doc. #38-2 at 37). Mr. Harris does not recall speaking with anyone at any insurance company about Plaintiff and further states that he is the materials manager for the anesthesia department at DCH Regional Medical Center and has never been in charge of scheduling anesthesiologists in Plaintiff's group. (Doc. #54-6).
On February 11, 2008, Met Life received a faxed response to a questionnaire it had sent on December 17, 2007 to Dr. C.E. Herrington concerning Plaintiffs schedule. (Doc. #38-2 at 45). In response to the question asking how many hours a week Plaintiff was typically scheduled to work, Dr. Herrington responded that Plaintiff was scheduled for 20-25 hours per week over the course of a year and that Plaintiffs schedule varied week to week due to the nature of the practice of anesthesiology. (Doc. #38-2 at 45). On February 13, 2008, Met Life sent a letter to Plaintiff informing him that it would need clarification on the schedule he was working based on his indication during the December 2007 interview that he had cut back his work schedule on a yearly basis. (Doc. #38-2 at 41).
On May 6, 2008, Mr. Hupfer, a Met Life field representative, made an unannounced visit to Plaintiffs place of business. (Doc. 38-2 at 48). Mr. Hupfer met briefly with Plaintiff before meeting with Dr. Greg Billman, Chair of the Department of Anesthesiology at DCH Medical Center. (Doc. #38-2 at 48). During that interview, Dr. Billman confirmed that Plaintiff and another physician shared a job in which each person would work a full month and then take a full month off. (Doc. #38-2 at 49). Dr. Billman also indicated that the "average work week" usually includes between 50-60 hours on the job, but can encompass as few as 30 hours and as many as 70 hours. (Doc. #38-2 at 49).
After obtaining information about the nature of Plaintiff's work schedule, Met Life had the claim file reviewed by several medical professionals in its office. On May 14, 2008, a nurse, Beth O'Brien, reviewed the claim file and stated that it was unclear how Plaintiff could function daily for one month and then require the next month to rest. (Doc. #38-2 at 69). Ms. O'Brien recommended that the file be forwarded on to a physician for additional review. (Doc. #38-2 at 69). Met Life then forwarded the file to Dr. Jerry D. Beavers, a board certified physician in both occupational and internal medicine, who reviewed the entire claim file to date, including but not limited to all medication information, attending physician statements, clinical records, claimant's statements and the clinical review by Beth O'Brien. (Doc. #61-4 at 1); (Doc. #38-2 at 72). On May 19, 2008, he completed a report finding that Plaintiff's full schedule for a month "confirms that he is able to maintain activity through an entire shift." (Doc. #38-2 at 73). He further found that
(Doc. #38-2 at 73-74). Dr. Beavers further stated that given Plaintiff's known present activity level it was not necessary to obtain an accurate measurement of his strength and fatigue. (Doc. #38-2 at 74). In conjunction with his review, Dr. Beavers contacted Plaintiff's attending physician, Dr. Otero. (Doc. #38-2 at 73). Dr. Otero reported that Plaintiff should work part time "at a leisurely pace" due to pain and easy fatiguing of the arm.
After Dr. Beavers reviewed the file, he referred it for review by a Designated Medical Officer. (Doc. #38-2 at 79). The filed was then reviewed by Dr. Alan Neuren, an on-site physician who is board certified in neurology and psychiatry. (Doc. #38-2 at 80). Dr. Neuren concluded as follows:
(Doc. #38-2 at 80).
On June 1, 2008, Met Life informed Plaintiffs attorney that Plaintiff was not entitled to further benefits. (Doc. #38-2 at 91-101). The decision was based on Plaintiff's work schedule, the medical reviews, and the information contained in Plaintiff's file. (Doc. #38-2 at 91-101). Plaintiff was notified of the opportunity to submit additional information in support of his claim or to appeal the decision. (Doc. #38-2 at 100).
On August 28, 2008, Plaintiff submitted the sworn statement of Plaintiffs attending physician Dr. Otero, which was presented in the form of an interview of Dr. Otero by Plaintiff's attorney. (Doc. #38-2 at 106-12). Dr. Otero's interview indicated that he has been treating Plaintiff for approximately three years and sees him formally about once a year and informally on various occasions at which time they discuss his case, therapy, ailments, and how Plaintiff is feeling. (Doc. #38-2 at 108). Dr. Otero stated that he sees Plaintiff at the hospital from time to time. (Doc. #38-2 at 108). He opined that Plaintiffs symptoms are reasonably attributed to the medical diagnoses he has been given and that he does not suspect Plaintiff of malingering. (Doc. #38-2 at 108-09). When asked whether Plaintiffs experience of pain, fatigue, or weakness was severe enough to interfere with the attention and concentration needed to perform tasks, he stated that "[t]hat will vary according to the physical activity that he has. The more physical the activity, the more pain and weakness he will have. The more pain and weakness, the less attention and concentration." (Doc. #38-2 at 109). Dr. Otero has not placed numerical restrictions on Plaintiffs lifting, but has told him to be very careful with heavy lifting, pushing, and pulling. (Doc. #38-2 at 110). He had advised Plaintiff to lighten his work load and thinks that his one-month-on-onemonth-off schedule is reasonable considering his impairments. (Doc. #38-2 at 110). Dr. Otero stated that it is reasonably consistent
Dr. Otero's statement was reviewed by both Dr. Beavers and Dr. Neuren. (Doc. #38-2 at 113-16). Dr. Beavers concluded that while the transcript did include the new information that Dr. Otero felt that Plaintiff would be unable to tolerate working a 40 hour work for several months in a row, because it did not include any rationale for why such a schedule was required, it should not change the decision to terminate benefits. (Doc. #38-2 at 114). Dr. Beavers reiterated that "muscle fatigue is not a phenomenon that comes on gradually over a month's time and requires a month's rest, rather it is a phenomenon that comes on over a few hours and, if any rest periods were required, they would have to be on a far more frequent basis than monthly. (Doc. #38-2 at 114). Dr. Neuren concluded that "Dr. Otero's contention that the insured would be unable to work full time on a regular basis is speculative and inconsistent with the insured's known level of activity." (Doc. #38-2 at 116). Dr. Neuren also pointed out that Dr. Otero did not provide any basis for his opinion that it would not be appropriate for Plaintiff to work full time. (Doc. #38-2 at 116). Dr. Neuren further pointed out that there was no "physiologic basis that would support the contention that [Plaintiff] would only be capable of [working] on an every other month basis." (Doc. #38-2 at 116). He also agreed with Dr. Beavers that the need for rest and recovery would be less prolonged than for a month at a time. (Doc. #38-2 at 116). Dr. Neuren concluded that the information "provided would indicate that the insured elected to alter[ ] his practice pattern in conjunction with one of his partners as a life style choice and not due to a physical inability to do his work." (Doc. #38-2 at 116).
On September 23, 2008, Met life notified Plaintiffs attorney that Dr. Otero's statement had been reviewed by Dr. Beavers and Dr. Neuren and that their contention that Plaintiff was capable of working full time had not changed. (Doc. #38-2 at 126-27). Plaintiff was reminded of his opportunity to appeal and was notified that the claims file was being forwarded to the appeals department. (Doc. #38-2 at 126-27). On December 15, 2008, Plaintiff notified Met Life of his appeal, including a Vocational Report from Mary Kessler, PhD. for consideration on appeal.
In forming her opinion for the Vocational Report, Dr. Kessler met with Plaintiff. (Doc. #38-2 at 133). During that interview, Plaintiff reported that his major problem is fatigue and that he is unable to continue working month after month due to fatigue and increased pain during the months that he works. Plaintiff stated that he "only had a three-minute interval to save a person's life when he is working with that person, and he must be one hundred percent (100%) alert and ready to handle any situation at any time." (Doc. #38-2 at 135). In his interview with Dr. Kessler, Plaintiff stated that "working on a continuing basis without regular breaks every other month will keep him from being mentally and physically alert enough to function at the necessary level to continue with his job." (Doc. #38-2 at 135). In her Vocational Report, Dr. Kessler opined that:
(Doc. #38-2 at 133-37).
Met Life referred the file, including Dr. Kessler's Vocational Report, to Richard Byard, an in-house vocational rehabilitation consultant, for review. (Doc. #38-2 at 138-40). Mr. Byard found that:
(Doc. #38-2 at 140).
On January 21, 2009, Met Life notified Plaintiff that it had decided to uphold its decision to terminate benefits on appeal. (Doc. #38-2 at 141-46). The Lead Appeals Specialist, Sharon Deraney, stated that after a thorough review of Plaintiffs file, she agreed with the initial decision that Plaintiff is not eligible for ongoing residual disability benefits. (Doc. #38-2 at 145). Ms. Deraney found that Plaintiffs ability to work full time every other month demonstrated his ability to work on a full time basis. (Doc. #38-2 at 145). On appeal, Met Life found that because Plaintiff demonstrated the ability to work in his occupation on a full time basis and because there was no rationale for a one month off requirement, he was not eligible for further residual disability benefits. (Doc. #38-2 at 146).
On March 31, 2009, Plaintiff filed the instant lawsuit.
In addition to suing Met Life, Plaintiff has also filed suit against Paul Revere, based on the contractual relationship between it and Met Life. (Doc. #1). In 1990, New England Mutual Life Insurance Company, Met Life's predecessor, and Paul Revere entered into two agreements: a reinsurance agreement and a service agreement. Under these agreements, Paul Revere provides Met Life with certain claim administration services on behalf of Met Life on New England Mutual Life Insurance Company policies, including Plaintiffs policies. (Doc. #38-2 at 2). As part of these agreements, Paul Revere agreed to indemnify Met Life for a portion of Met Life's liability under the New England Mutual Life Insurance Company policies that are the subject of the agreements between Met Life and Paul Revere.
Specifically, the reinsurance agreement provides that "[e]xcept for the claims incurred prior to January 1, 1990, Paul Revere will reinsure 80% and [Met Life] will retain 20% of the policy benefit liabilities of each policy in this block." (Doc. #64 at 4). It further provides that "Paul Revere will provide services as outlined in the Service Agreement." (Doc. #64 at 4). With regards to liability, the reinsurance agreement provides that "For claims incurred after December 31, 1989, Paul Revere indemnifies [Met Life] for 80% of policy benefits paid on policies reinsured under this agreement." (Doc. #64 at 7).
The Service agreement provides that "Paul Revere will provide complete claim handling service for both of The New England
Summary judgment is appropriate when "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." FED.R.CIV.P. 56(c). "Genuine disputes are those in which the evidence is such that a reasonable jury could return a verdict for the nonmovant." Mize v. Jefferson City Bd. of Educ., 93 F.3d 739, 742 (11th Cir. 1996) (quoting Hairston v. Gainesville Sun Publ'g Co., 9 F.3d 913, 918 (11th Cir. 1993)). In making this assessment, the court must view the evidence "in the light most favorable to the nonmoving party." Thomas v. Cooper Lighting, Inc., 506 F.3d 1361, 1363 (11th Cir.2007) (citing Damon v. Fleming Supermarkets of Fla., Inc., 196 F.3d 1354, 1357 (11th Cir.1999)). But while that is the case, "[a] court need not permit a case to go to a jury . . . when the inferences that are drawn from the evidence, and upon which the nonmovant relies, are `implausible.'" Mize, 93 F.3d at 743 (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 592-94, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)).
Alternatively, there is no genuine issue of material fact if "the nonmoving party fails to make a showing sufficient to establish the existence of an element essential to that party's case and on which the party will bear the burden of proof at trial." Jones v. Gerwens, 874 F.2d 1534, 1538 (11th Cir.1989) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). Consequently, the court "must view the evidence presented through the prism of the [movant's] substantive evidentiary burden." Anderson, 477 U.S. at 254, 106 S.Ct. 2505.
To respond, the nonmoving party "may not rely merely on allegations or denials in its own pleadings; rather, its response must . . . set out specific facts showing a genuine issue for trial. If the opposing party does not so respond, summary judgment should, if appropriate, be entered against that party." FED. R. CIV. P. 56(e)(2). Importantly, "[t]he mere existence of a scintilla of evidence in support of the plaintiffs position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
The underlying substantive law determines the materiality of a dispute and, hence, whether the dispute is sufficient to create a question of fact for the jury. The parties agree that Alabama law governs this controversy.
Plaintiffs disability policies provide that Residual Disability benefits will be paid for "a disability . . . which results from the same sickness or injury that caused the Total Disability it follows and causes a continuous Percentage Reduction of Earning from all occupations of at least 20 percent." (Doc. #38-2 at 8, 37) (emphasis added). Met Life argues that it is entitled to summary judgment because Plaintiffs loss of income was not caused by his alleged
A plaintiff can establish a breach of contract claim by showing "the defendant's nonperformance and damages." State Farm & Cas. Co. v. Slade, 747 So.2d 293, 303 (Ala.1999). However, under Alabama law, in the context of an insurance claim the insured bears the initial burden of establishing insurance coverage by demonstrating that a claim falls within the insurance policy. Shalimar Contractors, Inc. v. American States Ins. Co., 975 F.Supp. 1450, 1454 (S.D.Ala.1997) (citing Colonial Life & Accident Ins. Co. v. Collins, 280 Ala. 373, 194 So.2d 532, 535 (1967)). In other words, in order for there to be a breach of the insurance contracts here, Plaintiff must show that his medical condition prevented him from working full time and thus caused a reduction in his income.
Met Life's main argument is that because Plaintiff is able to work full time for one month, sometimes more, it follows that he is able to work full time continuously. However, Plaintiff has offered the opinions of both his treating physician, Dr. Otero, and a vocational expert, Dr. Kessler, as evidence that his disability requires a month of rest in between months of working full time, thus presenting evidence that his ability to work full time for one month at a time is not indicative of the fact that he is able to work full time on an ongoing basis. The differing opinions between Met Life's Doctors (Dr. Beavers, Dr. Neuren, and Dr. Denver) and Plaintiffs treating physician and vocational expert create an issue of fact as to whether Plaintiffs ability to work full time every month demonstrates his ability to work full time year round.
Met Life argues that neither Dr. Otero's nor Dr. Kessler's testimony creates an issue of fact. Met Life points to the fact that Dr. Otero only saw Plaintiff is his office three times and did not charge him out of professional courtesy. Met Life further notes to the fact that at one point Dr. Otero was unaware of the nature of Plaintiffs work schedule. However, Met Life's assertions overlook the fact that Dr. Otero testified that he saw Plaintiff informally on various occasions and that he has had the opportunity to see Plaintiff from time to time at the hospital. (Doc. #38-2 at 108). Further, Met Life points out that Dr. Otero agreed that most often, patients require a matter of hours or days to recover from fatigue and not months. While this statement may indeed be true, in the immediately preceding statement Dr. Otero testified that sometimes patients require more than a month to recover from fatigue or muscle weakness depending on what the illness is. (Doc. #38-4 at 20). With respect to Dr. Kessler's testimony, Defendant Met Life argues that it should be discounted because the only bases for her opinions were Plaintiff's subjective complaints and Dr. Otero's medical recommendations. However, it is the job of the jury, not this court, to determine how much weight to accord any properly admitted testimony of Dr. Kessler.
Viewing the evidence in the light most favorable to the nonmoving party, in this case, Plaintiff, the court finds that there is an issue of fact as to whether Plaintiffs one-month-on-one-month-off schedule indicates that he is able to work full time on a continuing basis and whether his medical condition caused a reduction in his earnings. Accordingly, summary judgment is due to be denied on the breach of contract claim.
In order to recover on a "normal" bad-faith claim under Alabama law, a plaintiff must prove (1) an insurance contract
Shelter Mut. Ins. Co. v. Barton, 822 So.2d 1149, 1154 (Ala.2001) (internal citations and quotation marks omitted). In other words, Plaintiff must show that he is entitled to a directed verdict on the breach of contract claim in order to have the claim of bad submitted to a jury. Employees' Benefit Ass'n v. Grissett, 732 So.2d 968, 976 (Ala.1998). "Ordinarily, if the evidence produced by either side creates a fact issue with regard to the validity of the claim and, thus, the legitimacy of the denial thereof, the [normal bad-faith] claim must fail and should not be submitted to the jury." Nat'l Sav. Life Ins. Co. v. Dutton, 419 So.2d 1357, 1362 (Ala.1982).
Plaintiff cannot meet this heavy burden here. Met Life has established that it had a debatable reason to deny Plaintiff's claim. It is undisputed that Plaintiff was working a schedule where he would work full time for one month and then take the following month off. Met Life has offered the opinions of numerous doctors to say that because Plaintiff is able to perform the duties of his occupation for one month at a time, there is no medical reason why Plaintiff shouldn't be able to work full time on an ongoing basis. The final denial letter sent to Plaintiff provided Plaintiff with the same reason for denial— that Plaintiffs demonstrated ability to work full time for one month combined with the lack of rationale as to why he requires one month off to rest afterwards at least suggests that he is able to work full time on an ongoing basis. (Doc. #38-2 at 146). Because Met Life had a debatable reason for denying Plaintiffs claim, summary judgment is due to be granted with regard to the ordinary bad faith claim.
In order to recover under a theory of abnormal bad faith failure to investigate a claim, the insured must show "(1) that the insurer failed to properly investigate the claim or subject the results of the investigation to a cognitive review and (2) that the insurer breached the contract for insurance coverage with the insured when it refused to pay the insured's claim." Simmons v. Congress Life Ins. Co., 791 So.2d 371, 379 (Ala.2000). "In the `abnormal case', bad faith can consist of: (1)
As a preliminary matter, Met Life argues that, as with ordinary bad faith, a claim for extraordinary bad faith cannot stand when an insurer has a lawful basis for denial. In making this argument, Met Life cites Weaver v. Allstate Ins. Co., 574 So.2d 771 (Ala.1990) in support of its contention that "Alabama law is clear . . . that regardless of the imperfections of [insurer's] investigation, the existence of a debatable reason for denying the claim at the time the claim was denied defeats a bad faith failure to pay the claim." Id. at 775 (internal citations omitted). In response, Plaintiff relies upon Mutual Service Cas. Ins. Co. v. Henderson, 368 F.3d 1309 (11th Cir.2004) for the contention that under Alabama law "providing an arguable reason for denying an `abnormal' bad faith claim does not defeat that claim." Id. at 1315. This court is fully aware that there are cases when, under Alabama law, it is appropriate to submit an extraordinary bad-faith claim to a jury even though a legitimate or arguable reason for denying the claim exists. However, this case is distinguishable from those situations. See Jones v. Alfa Mutual Ins. Co., 1 So.3d 23 (Ala.2008) (allowing the abnormal bad-faith claim to survive summary judgment even though there was a debatable issue when support for that debatable issue was obtained after the denial of the claim); Henderson, 368 F.3d 1309 (finding that summary judgment was not appropriate on an abnormal bad-faith claim when insurer did not have a debatable reason for denying insured's claim when it issued its first two denial letters, even though insurer later conducted an investigation that resulted in a debatable reason for denial of the claim). This case is notably different from these decisions because here, Met Life had a legitimate or debatable reason for denial at the time it denied Plaintiff's claim, making this case analogous to the Weaver case. Weaver, 574 So.2d 771; see also Singleton, 928 So.2d 280 (holding that summary judgment on insured's abnormal bad faith claim was appropriate when insurer had a evidence of a reasonably debatable reason for denial and insured subsequently failed to produce evidence to contradict that debatable reason).
In Weaver, the plaintiff was in a motorcycle accident and sued his insurer for its refusal to pay his claim for uninsured motorist benefits. After the accident, but before denying the claim, the insurer immediately began investigating the claim by talking with the plaintiff, reviewing the accident report, discussing the accident with the investigating officer and eye witness, and reviewing a recorded statement from the driver of the other vehicle involved. Id. at 772-73. After reviewing all of that information, the insurer denied the claim. With regard to plaintiffs allegation that the insurer failed to adequately investigate the accident, the court found that there was no triable issue because the insurer's "investigation established a legitimate or arguable reason for refusing to pay the claim, which is all that is required." Id. at 774. The court further stated that "Alabama law is clear . . . that regardless of the imperfections of [insurer's] investigation, the existence of a debatable reason for denying the claim at the time the claim was denied defeats a bad faith failure to pay claim." Id. at 775 (quoting State Farm Fire & Cas. Co. v. Balmer, 891 F.2d 874, 877 (11th Cir.1990)). Like the insurer in Weaver, Met Life had a
But even assuming arguendo that the existence of a reasonably arguable or legitimate reason for denial of the claim at the time the claim was denied does not preclude recovery under extraordinary bad faith, the court would still find that Plaintiff has failed to offer substantial evidence showing that the facts of this case fall within one of the categories of cases that constitute extraordinary bad faith. In Slade, the Alabama Supreme Court stated that to that date, "the abnormal cases have been limited to those instances in which the plaintiff produced substantial evidence showing that the insurer: (1) intentionally or recklessly failed to investigate the plaintiffs claim; (2) intentionally or recklessly failed to properly subject the plaintiffs claim to a cognitive evaluation or review; (3) created its own debatable reason for denying the plaintiffs claim; or (4) relied on an ambiguous portion of the policy as a lawful basis to deny the plaintiffs claim." Slade, 747 So.2d at 306-07. In this case, Plaintiff has failed to produce substantial evidence to show that the circumstances of this case fit within any of these "extraordinary circumstance" categories that warrant submitting the issue of extraordinary bad faith to the jury.
Plaintiff also argues that Met Life failed to properly investigate the claim or subject the results of the investigation to a cognitive review. An insurer is liable for `abnormal' bad faith when it intentionally or recklessly fails investigate a plaintiffs claim or when it intentionally or recklessly fails to properly subject a plaintiffs claim to a cognitive evaluation or review. Id. In taking this position, Plaintiff bears the burden of presenting "sufficient evidence of `dishonest purpose' or `breach of known duty, i.e., good faith and fair dealing, through some motive of selfinterest or ill will.'" Singleton, 928 So.2d at 287 (quoting Slade, 747 So.2d at 303-04). Plaintiffs submissions fall short of this requirement.
Plaintiff argues that Met Life's failure to investigate is shown by the fact that Met Life never had Plaintiff evaluated by an independent physician, that Met Life ignored the opinions of Plaintiffs treating physician and the vocational expert,
Finally, it is clear that Met Life did not rely on ambiguous portions of the policies in question as its lawful reason for denying Plaintiff's claim. Plaintiff argues that the policy is ambiguous because it does not describe or define what constitutes parttime or full-time work. However, this argument overlooks the fact that Met Life terminated Plaintiffs benefits because it determined he was no longer disabled under the policy, not because of any ambiguities over what constitutes part-time as opposed to full-time work. It is certainly true that Met Life took Plaintiff's work schedule into account when making its decision to terminate benefits, but it did so because Plaintiffs own work schedule arguably demonstrated his functional ability to work, not because there was an issue over whether the hours he was working met the requirements of some undefined part-time schedule.
For all these reasons, Met Life's motion for summary judgment on the extraordinary bad faith claim is due to be granted.
Defendants' counterclaims assert that Met Life is entitled to restitution from Plaintiff in the amount of benefits paid and premiums waived and to the return of benefits received by Plaintiff. (Doc. #23 at 22-23). Plaintiff argues that Defendants' counterclaims should be barred by the defenses of unconscionability, estoppel, and waiver. (Doc. #42). Plaintiffs initial brief does not raise the issue of whether Defendants have established the elements of either of their counterclaims; however, in his reply brief, Plaintiff asserts that Defendants have failed to meet their burden. (Id.). The court recognizes that the "party seeking summary judgment always bears the initial responsibility of informing
"The essence of the theories of unjust enrichment or money had and received is that facts can be proved which show that defendant holds money which in equity and good conscience belongs to plaintiff or was improperly paid to defendant because of mistake or fraud." Foshee v. General Telephone Co. of Southeast, 295 Ala. 70, 322 So.2d 715, 717 (1975).
Before turning to the merits of Plaintiffs affirmative defenses, the court must first address whether the defenses of unconscionability and waiver were waived by Plaintiffs failure to plead said defenses in his answer.
Plaintiff argues that it would be unconscionable to require him to repay Defendants for three reasons: (1) because Plaintiff always fully disclosed information requested of him by Defendants, (2) because the insurance policy language is ambiguous, and (3) because Defendants created their own debatable reason to deny Plaintiff benefits. (Doc. #42).
With regard to Plaintiff's first argument, there is an obvious question of fact as to whether Plaintiff fully disclosed the nature of his work schedule when asked by Defendants. Defendants have produced Rule 56 evidence which indicates that on a number of occasions when Plaintiff was asked about work, he indicated that he was working 20-35 hours a week. (See Docs. #61-1, 61-2, 61-3). Given this evidence it is for the trier of fact to determine whether Plaintiff fully disclosed the nature of his work schedule. Plaintiff also argues that it would be unconscionable to require him to repay Defendants because the policy language was ambiguous. However, as discussed in section III.A.3 above, there is no ambiguity as to the pertinent policy language that is relevant to a determination of whether Plaintiff was disabled. Finally, the question of whether Defendants created their own debatable reason to deny Plaintiff's benefits was also previously addressed by this court in section III. A.3. For the reasons discussed in that section, there is sufficient evidence in the Rule 56 record to show that Defendants did not create their own debatable reason for denying Plaintiff's claim.
Accordingly, Plaintiff has failed to show that there are no material issues of fact and that he is entitled to judgment as a matter of law on the issue of unconscionability
Estoppel has three important elements. "The actor, who usually must have knowledge of the true facts, communicates something in a misleading way, either by words, conduct or silence. The other relies on that communication. And the other would be harmed materially if the actor is later permitted to assert any claim inconsistent with his earlier conduct." Hughes v. Mitchell Co., Inc., 49 So.3d 192, 200 (Ala. 2010) (internal quotations and citations omitted). In this case, Plaintiff bears the burden of proving that all three elements of estoppel are met. General American Life Ins. Co. v. AmSouth Bank, 100 F.3d 893, 899 (11th Cir.1996). Here, Plaintiff has failed to meet his burden because he has not shown that Defendants had knowledge of the true facts. Indeed, in some respects there is a question for the jury to decide about what the true facts are in this case.
There is also a genuine issue of fact as to whether Met Life knew, while it was paying Plaintiff's disability benefits, that Plaintiff was working a schedule where he worked one month and was off the following month. Plaintiff argues that this element is met because Defendants had eight years to obtain a work schedule from Plaintiff. However, even if Plaintiff could point to any case law supporting his contention that this type of constructive knowledge is sufficient, a question of fact remains as to whether Met Life did in fact inquire into Plaintiff's work schedule and the number of hours he was working.
Waiver is defined as "the voluntary surrender or relinquishment of some known right, benefit, or advantage." Hughes v. Mitchell Co., Inc., 49 So.3d 192, 201-02 (Ala.2010). The party claiming waiver as an affirmative defense bears the burden of proving that a known right was voluntarily
For the reasons mentioned above, Plaintiffs Motion for Summary Judgement on the Counterclaim Filed by Defendants (Doc. #41) is due to be denied.
The basis for Plaintiffs breach of contract claim against Defendant Paul Revere is a reinsurance agreement and corresponding service agreement between Defendant Paul Revere and Defendant Met Life.
"In Alabama, a reinsurer . . . is liable to the policyholders if the reinsurance contract specifically provides for such liability." Am. Benefit Life Ins. Co. v. Ussery, 373 So.2d 824, 829 (Ala.1979) (quoting United States Fire Ins. Co. v. Smith, 231 Ala. 169, 164 So. 70 (1935)). In other words, under Alabama law, Paul Revere would be liable to Plaintiff if the reinsurance agreement specifically provided for such liability. However, there is nothing in the reinsurance agreement indicating that Paul Revere assumed this direct liability to policy holders. In Ussery, the
In arguing that the reinsurance agreement does provide for direct liability to the policy holders, Plaintiff quotes language from the Service Agreement. However, the point is as tautological as it is true— the relevant language for determining whether direct liability exists under the contract is the language of the contract itself, and in this case the key language is found in the liability section of the reinsurance agreement (quoted above). Because the court finds that the reinsurance agreement does not render Paul Revere directly liable to Plaintiff, the court will turn to Plaintiff's alternative argument that he is a third party beneficiary of the contract.
It is well settled in Alabama that a third party has no rights under a contract between others unless the contracting parties intend that the third person receive a direct, as opposed to incidental, benefit from the contract. Locke v. Ozark City Bd. of Educ., 910 So.2d 1247, 1250 (Ala. 2005). "To recover under a third-party beneficiary theory, the complainant must show: 1) that the contracting parties intended, at the time the contract was created, to bestow a direct benefit upon a third party; 2) that the complainant was the intended beneficiary of the contract; and 3) that the contract was breached." Id. "As a general rule, it is appropriate for a court to examine the contract documents as well as the surrounding circumstances in resolving the question of whether the parties intended to directly benefit a third party." Federal Mogul Corp. v. Universal Const. Co., 376 So.2d 716 (Ala.Civ.App. 1979).
Plaintiff argues that he was an intended beneficiary of the agreements between Paul Revere and Met Life, and that Paul Revere and Met Life intended to confer a benefit on him by allocating financial responsibilities and liabilities between themselves. Plaintiff argues that he benefits from the agreements because the service agreement states that Paul Revere will provide complete claims handling services for his insurance contract, including the right to pay claims. Plaintiff's argument assumes too much. That is, he is essentially asserting that because he received some benefit from the agreement between Defendants, he is an intended
Because the reinsurance agreement in question does not provide for Paul Revere's direct liability to Plaintiff and because Plaintiff is not a third party beneficiary to that reinsurance agreement, Paul Revere is entitled to judgment as a matter of law on the breach of contract claim.
As previously noted, Alabama recognizes two forms of bad faith: the "ordinary" case and the "extraordinary" case. See State Farm Fire & Casualty Co. v. Slade, 747 So.2d 293, 306 (Ala.1999). "Certain elements are common to both the ordinary and the extraordinary forms of bad faith: (1) the existence of an insurance contract between the parties; (2) an intentional refusal to pay the insured's claim; and (3) the insured's contractual entitlement to payment of the claim." Preis v. Lexington Ins. Co., 508 F.Supp.2d 1061, 1077 (S.D.Ala.2007) (citing Slade, 747 So.2d at 316-18). For the reasons explained above, there is no contractual relationship between Paul Revere and Plaintiff. Thus, Plaintiffs claims for bad faith necessarily fail as a matter of law. Further, even if Paul Revere could be held liable for the tort of bad faith, summary judgment on the bad faith claims would still be appropriate for the reasons discussed in sections I.B.2 and I.B.3.
"The existence of a duty to the plaintiff is fundamental to a negligence claim." Akpan v. Farmers Ins. Exch., Inc., 961 So.2d 865, 873 (Ala.Civ.App.2007) (quoting Patrick v. Union State Bank, 681 So.2d 1364, 1367 (Ala.1996)) (internal quotations omitted). The question of whether a legal duty exists is a question of law. Patrick, 681 So.2d at 1368. "In determining whether a duty exists, the court considers factors including public policy; social considerations; foreseeability; the nature of the defendant's activity; the relationship between the parties; and the type of possible injury or harm." Akpan, 961 So.2d at 873. In deciding whether an independent adjustor or investigator with whom an insurance company contracts for the investigation and adjustment of claim owes a duty to the insured, the Alabama Court of Civil Appeals is in agreement with the
Thus under Alabama law, Paul Revere owed a duty to Met Life, the party with whom it contracted to administer Plaintiff's claims—not Plaintiff. Plaintiff argues that the policy considerations cited by the Court in Akpan do not apply in this case because Paul Revere had the power to make decisions on Plaintiff's claim. While that may be true, it is inapposite. The Alabama Court of Civil Appeals also quoted another policy consideration which is more on point—"imposing a duty on the adjuster in these circumstances would work a fundamental change in the law . . . the law of agency requires a duty of absolute loyalty of the adjuster to . . . the insurer." Akpan, 961 So.2d at 873. This consideration is equally important in this case given the contractual relationship whereby Paul Revere administers claims on behalf of Met Life. Because Alabama law is clear that Paul Revere did not owe a duty to Plaintiff, Plaintiffs claim for negligence against Paul Revere cannot stand as a matter of law.
Further, to the extent Plaintiff contends that Paul Revere is liable for directly handling his claim, the Alabama Supreme Court has "expressly rejected any cause of action based upon an insurer's negligence in handling direct claims." Chavers v. Nat'l Sec. Fire & Cas. Co., 405 So.2d 1, 5 (Ala.1981) (reaffirming the position that a cause of action does not exist based on an insurer's negligence in handling direct claims); Kervin v. Southern Guar. Ins. Co., 667 So.2d 704, 706 (Ala. 1995) ("[T]his Court has consistently refused to recognize a cause of action for the negligent handling of insurance claims.").
Because as a matter of law Plaintiff cannot maintain an action against Paul Revere sounding in negligence, summary judgment is due to be granted on the negligence claim.
Plaintiff concedes that Alabama has no binding precedent on the specific issue of whether there is a fiduciary relationship between a claims adjuster and an insured. Given the decision of the Alabama Court of Civil Appeals in Akpan, this court is hard pressed to see how fiduciary duty can exist where, as a matter of law, there is no duty even in a negligence context. In Akpan, the court stressed that the duty of loyalty was between the insurer and the adjuster but not between the adjuster and the insured. Akpan, 961 So.2d at 873.
Even assuming such a duty could exist between Plaintiff and Paul Revere, a fiduciary duty cannot exist absent a fiduciary relationship. The Alabama Supreme Court has recently defined a fiduciary or confidential relationship as follows:
DGB, LLC v. Hinds, 55 So.3d 218 (Ala. 2010) (internal citations omitted). Given this definition, it is clear to this court that a fiduciary or confidential relationship did not exist between Paul Revere and Plaintiff. Paul Revere acted merely as claims administrator, it did not take on the role of counselor or advisor such to create a relationship that support a claim for breach of fiduciary duty.
Because Plaintiff cannot establish that Paul Revere owed him a fiduciary duty, Defendant is entitled to summary judgment on this claim.
For the foregoing reasons, Defendant Paul Revere's motion for summary judgment (Doc. #34) is due to be granted; Defendant Met Life's motion for summary judgment (Doc. #36) is due to be granted in part and denied in part; Plaintiff's motion for summary judgment on the counterclaim filed by defendants (Doc. #41) is due to be denied; Defendants' motion to strike testimony of Dr. C.E. Herrington (Doc. #58) is due to be overruled as moot
The court will enter an order consistent with this Memorandum Opinion.
(Doc. #38-2 at 102-03). Dr. Beavers reviewed the amendments made by Dr. Otero and found that they did not change his original opinion because they were not relevant to the issue of working a one-month-on-onemonth-off schedule. (Doc. #38-2 at 104).
