Fabric v. Provident Life & Acc. Ins. Co.

• Decision Date: 24 June 1997
• Docket Number: 95-4975,Nos. 95-4388,s. 95-4388
• Citation: 115 F.3d 908
• Court: U.S. Court of Appeals — Eleventh Circuit
• Parties: 11 Fla. L. Weekly Fed. C 75 Robert K. FABRIC, M.D., Robert K. Fabric, M.D., P.A., a Florida Professional Association, Plaintiffs-Appellees, v. PROVIDENT LIFE & ACCIDENT INSURANCE COMPANY, a Tennessee Corporation authorized to do business in the State of Florida, Defendant-Appellant.

Page 908

115 F.3d 908

11 Fla. L. Weekly Fed. C 75

Robert K. FABRIC, M.D., Robert K. Fabric, M.D., P.A., a Florida Professional Association, Plaintiffs-Appellees, v. PROVIDENT LIFE & ACCIDENT INSURANCE COMPANY, a Tennessee

Corporation authorized to do business in the State

of Florida, Defendant-Appellant.

Nos. 95-4388, 95-4975.

United States Court of Appeals, Eleventh Circuit.

June 24, 1997.

John E. Meagher, Jeffrey M. Landau, Shutts & Bowen, Miami, FL, for Defendant-Appellant.

Martin G. Brooks, Hollywood, FL, for Plaintiffs-Appellees.

Appeals from the United States District Court for the Southern District of Florida.

Before TJOFLAT and BARKETT, Circuit Judges, and GODBOLD, Senior Circuit Judge.

GODBOLD, Senior Circuit Judge:

This is a removed diversity case brought by Dr. Robert K. Fabric and his professional association against Provident Life and Accident Insurance Company, which had issued disability insurance policies providing for payment of business expense if Dr. Fabric became disabled. Fabric did become disabled, and Provident made monthly payments amounting to $10,000 per month for twenty-four months. Two years after payments ceased Fabric filed this suit, claiming that he had been entitled to $20,000 per month. Provident asserted affirmative defenses including accord and satisfaction, rescission, waiver and estoppel. The district court granted summary judgment for Fabric, denying all of Provident's defenses. We REVERSE and DIRECT that summary judgement be entered for Provident.

In July 1983 Provident issued to Dr. Fabric an overhead expense disability insurance policy providing that if he became disabled it would pay covered expenses incurred in the operation of his business or profession up to $10,000 per month for twenty-four months. In December 1987 Fabric applied to Provident for additional business expense coverage of $10,000 per month in the event he became disabled. In March 1988 Provident issued a new policy that provided for payment of up to $20,000 per month for twenty-four months. The new policy stated "this policy is issued in lieu of and replaces policy number 6-BE-571223, dated July 25, 1983."

The December 1987 application required Fabric to state whether he had or was applying for other disability income coverage or overhead expense disability coverage. He responded by giving information on two individual disability policies that had been issued by Provident (that is, with benefits payable to Fabric but unrelated to his business expense), and the 1983 policy issued by Provident. He did not reveal disability policies issued by two other companies, Monarch Life and MGIS, that provided for benefits of approximately $11,500 per month.

In February 1989 Fabric became disabled. His disabled status is not disputed. In March 1989 he submitted to Provident through his attorney, Leslie Zuckerman, a single notice of claim asserting benefits under Provident's two individual policies and the March 1988 overhead expense policy. ¹ In an accompanying letter Zuckerman stated that Fabric desired that future correspondence regarding the claim be through Zuckerman's office.

In June 1989 Provident made an initial payment under the 1983 policy of some $28,000. ² However, in reviewing Fabric's status Provident discovered other disability insurance coverage that had not been revealed in the December 1989 application. It commenced an investigation to determine whether pursuant to its underwriting guidelines it would have issued the 1988 policy had it known of the undisclosed insurance. In July 1989 Provident notified Fabric's attorney that until the matter was resolved it would pay Fabric the $10,000 per month benefit that Fabric would be entitled to under the 1983 policy if it had not been replaced by the 1988 policy, and it continued to make such monthly payments.

After full investigation and review Provident concluded that, counting the undisclosed coverage, Fabric was grossly overinsured. It notified Fabric's attorney that it would not have issued the 1988 policy had it known of the non-disclosed policies because the total insurance already in force at the time of the December application exceeded the limits of the coverage it would write. On November 29, 1989 Provident wrote Zuckerman:

Our Underwriting Department has reviewed the information concerning Dr. Fabric's disability coverage with us and other carriers. The amount of disability insurance in force exceeds the limits of coverage we would have been willing to issue.

The 12/14/87 application for overhead coverage did not contain the complete outline of disability insurance coverage in force at the time. Had our Underwriting Department been aware of the extent of disability coverage in force the 12/14/87 application would not have been approved and no additional overhead expense coverage would have been issued. Again the reason being that Dr. Fabric's coverage already in force at the time of the 12/14/87 application exceeded our Underwriting approval limits. This rule applies to both overhead and disability income coverage as well.

Our only choice was to reissue Policy # 06 BE 571223 [the 1983 policy] which we have enclosed.... Should you have any questions concerning this please do not hesitate to contact us. (bracketed material added).

In January 1990 Provident sent to Fabric a check for $939 with a reference that it was unearned premium on the 1983 policy. Fabric's office inquired about the check, and Provident wrote that it represented the difference between the premiums for the 1988 policy and the 1983 policy. Fabric did not respond and never cashed the check. He made no response to Provident's reissuance of the 1983 policy. However, after the November notification letter was received, he filed a claim form each month that detailed his expenses and listed the policy numbers of the two individual policies and of the 1988 policy.

For sixteen months following Provident's November 29 notification letter to Fabric, Provident continued to make monthly payments that totaled $160,000, that is, until $240,000, the extent of the benefits under the 1983 policy, had been paid. Each of these checks was cashed by Fabric without comment or protest. The last check, issued March 14, 1991, recited that it was "FULL settlement of claim originating on or about February 3, 1989" (the date on which Fabric claimed to have become disabled). It also said: "This is a full and final payment as you have received the maximum allowance under this contract," and it listed the policy number of the 1983 policy. The check was accompanied by a letter stating that a "final check" on the 1983 policy was enclosed. This check too was cashed without comment. Two years passed without further demand or inquiry by Fabric, then Fabric filed this suit seeking additional benefits of $10,000 per month for twenty-four months.

Provident's counsel was also retained by Monarch Life, one of the companies with which Fabric had an undisclosed disability policy. Monarch had challenged the validity of its policy because in his application to it (made before Provident's November 1989 letter) Fabric had not disclosed the 1988 Provident policy. According to Provident/Monarch counsel, in pursuing the dispute between Fabric and Monarch he became aware, after the summary judgment decision was entered in this case, of a letter previously unknown to Provident, that had been written to Monarch by Zuckerman. On September 15, 1989 Zuckerman had written Monarch:

As I indicated to you in our meeting, Provident Life & Accident has rescinded their policy effective February 1, 1988. Since the rescission relates back to the effective date, Dr. Fabric was never covered under Provident's disability policy other than the original policy in the amount of $10,000.00. ... Provident's $10,000.00 of additional overhead reimbursement was effectively never issued by Provident....

(Emphasis added). Provident moved the court to reconsider the summary judgment decision against it because of the acknowledgments in the letter. The court denied the motion on the ground the letter was irrelevant. This was error. Fabric and Zuckerman agree that Zuckerman was authorized to act for Fabric in dealings with Provident. The statements by Zuckerman in the letter were admissions against Fabric's interest, highly relevant to Provident's defense, whether specifically authorized by Fabric or within the attorney's actual or apparent authority.

Fabric argues to this court that Zuckerman's letter could not constitute an admission that Provident had rescinded any obligation to pay the second $10,000 per month because it was written September 15, 1989 and Provident's letter of notification was not written until November 30. But before he wrote his letter of September 15 Zuckerman had been negotiating with Provident and had sought information concerning Provident's right to rescind based on its underwriting policies. It is astonishing to us that Fabric should contend that representations to Monarch by his authorized attorney, made in pursuit of Fabric's interests with Monarch but describing Fabric's relations with Provident (conducted through that same attorney), were not binding upon him because the attorney could not have known whether what he represented as truth was actually true.

We turn to the Florida law. By statute existent at the time of relevant events of this case Florida provided that misrepresentations or incorrect statements would not prevent a recovery under an insurance policy unless either:

"(a) Fraudulent; or

"(b) Material either to the acceptance of the risk, or to the hazard assumed by the insurer; or

"(c) The insurer in good faith would either not have issued the policy or contract, or would not have issued it at the same premium rate, or would not have issued a policy or contract in as large an amount, or would not have provided coverage with respect to the hazard resulting in the loss, if the true facts...