Berkshire Life Ins. Co. v. MIA

• Decision Date: 27 February 2002
• Docket Number: No. 2000., No. 1935 Sept. Term, No. 1248
• Citation: Berkshire Life Ins. Co. v. MIA, 791 A.2d 942, 142 Md. App. 628 (Md. App. 2002)
• Parties: BERKSHIRE LIFE INSURANCE COMPANY v. MARYLAND INSURANCE ADMINISTRATION et al.
• Court: Court of Special Appeals of Maryland

791 A.2d 942

142 Md. App. 628

BERKSHIRE LIFE INSURANCE COMPANY v. MARYLAND INSURANCE ADMINISTRATION et al.

Nos. 1248, .

Court of Special Appeals of Maryland.

February 27, 2002.

Bryan D. Bolton (Jefferson L. Blomquist and Funk & Bolton, P.A., on the brief), Baltimore, for appellant.

Christina Gerstung Beusch, Asst. Atty. Gen. (J. Joseph Curran, Jr., Atty. Gen., on the brief), Baltimore, for appellees.

Argued before SALMON, KENNEY, and RAYMOND G. THIEME, Jr. (Ret'd, specially assigned), JJ. KENNEY, Judge.

This appeal arises out of two separate decisions by the Circuit Court for Baltimore City in favor of appellee, Maryland Insurance Administration ("MIA"), and against appellant, Berkshire Life Insurance Company ("Berkshire"). The first decision was the denial of Berkshire's request to stay the Insurance Commissioner's (the "Commissioner") Final Order requiring it to pay a monetary award to an individual insured, and it is the subject of Appeal No. 1248, September Term, 2000. The second decision affirmed the Commissioner's Order and is the subject of Appeal No. 1935, September Term, 2000. These appeals were consolidated on the parties' motion on December 29, 2000. Appellant raises the following two issues on appeal:

I. Appeal No. 1248: Under the separation of powers doctrine and constitutional and statutory tenets of due process, was Berkshire Life entitled to a stay of the Commissioner's Substituted Conclusions of Law and Final Order ("Final Order") pending judicial review in the circuit court where the administrative order required only the payment of a monetary award to an individual insured and Berkshire Life agreed to post an adequate cash bond?

II. Appeal No. 1935 Did the circuit court commit reversible error in affirming the Final Order of the Commissioner where the Commissioner ignored the standard of review for a Recommended Decision of an ALJ mandated by the insurance regulations and substituted his determinations for those of the ALJ?

FACTUAL AND PROCEDURAL BACKGROUND

This case involves three different disability policies purchased by Howard F. Rosenstein: Policy No. NC216442 dated February 11, 1976 (the "1976 Policy"), Policy No. NC240959 dated September 12, 1980 (the "1980 Policy"), and Policy No. NC247381 dated November 23, 1981 (the "1981 Policy"). The 1976 policy provided coverage for total disability, which is defined in the policy as

the complete inability of the Insured to engage in his occupation, except that if indemnity has been paid for 120 months in any period of continuous disability, and this policy provides indemnity in excess of 120 months, then for the remaining duration of that period of continuous disability, the term "total disability" shall mean the complete inability of the Insured to engage in any gainful occupation in which he might reasonably be expected to engage, having due regard to his education, training, experience and prior economic status[.]

The 1980 policy insured against total disability as well, which is defined as

your inability to engage in your occupation, except: the terms of this policy may provide that the indemnity payments are to be made beyond the policy anniversary that falls on or most nearly follows your sixty-fifth birthday. In such a case, for benefits that are to be paid for disability after such anniversary, or after disability benefits have been paid for a period of two years (if this is longer), the term "total disability" will have this meaning: your inability to engage in any gainful occupation in which you might reasonably be expected to engage, with due regard to your education, training, experience, and prior economic status.

The 1980 policy also contained a supplementary agreement covering residual disability benefits. Residual disability is defined by the policy as "(1) your inability to do one or more of your important daily business or professional duties; or (2) your inability to do these duties for the length of time that they usually require." The policy further provides that residual disability payments would be made, inter alia, if "you enter a period of such disability right after the end of a period of total disability." The 1981 policy covered only total disability as previously defined in the 1980 policy.

Mr. Rosenstein bought the first policy when he was working as a Special Agent in the Criminal Investigation Division of the Internal Revenue Service. Mr. Rosenstein went into business for himself in September 1980, and continued to operate his business until the time of his disability claim.

Although Mr. Rosenstein is licensed to practice law in Maryland, he has always worked as an investigator specializing in financial and fraud investigations. When he opened his business, Mr. Rosenstein began consulting with private firms in addition to state and local governments in both criminal and private matters. Mr. Rosenstein described some of his work as follows:

My expertise in financial and fraud investigations has encompassed the reconstruction of complicated factual and financial transactions to determine whether fraud has occurred; locating funds wrongfully taken from financial institutions and businesses; assisting defense counsel in white collar crime prosecutions and investigations; assisting insurance companies in reconstructing financial documents, books and records in order to evaluate their coverage and defense of claims; and assisting attorneys and their clients in the resolution of tax disputes, criminal and civil.

He testified that he often helped obtain successful outcomes for his clients and that he worked on a number of high profile cases, including representing the Maryland Deposit Insurance Fund in cases involving Old Court Savings & Loan, Ridgeway Savings & Loan, Community Savings & Loan, and Merritt Commercial Savings & Loan.

With Mr. Rosenstein's success came his involvement in increasingly complex and high profile cases. Between 1991 and 1994, he was working on two demanding cases, one in Rhode Island and one in New Jersey. These cases required frequent travel, adherence to strict deadlines, review of voluminous amounts of material, and supervision of a number of other people. Mr. Rosenstein was under "tremendous pressure." Nevertheless, he found the work to be "a lot of fun. I was having a great time but it was hard and it took its toll on me so during that period I first started to note small lapses of short term memory, loss of concentration."

After some soul searching, Mr. Rosenstein decided that the job was "just taking too heavy a toll on me, physically and mentally." In late 1994, therefore, he decided to cut back on the sprawling complex cases requiring travel in favor of local cases that, although complicated, were not as large in terms of document review.

Although Mr. Rosenstein reduced his workload, he continued to notice "little slippages" in concentration and short term memory during 1995 and 1996. In addition to these problems, in November of 1996, he began suffering from substantial pain in his knees, headaches that were sometimes incapacitating, fatigue, and "constant indigestion." Mr. Rosenstein sought the help of Dr. Steven Diener, an internist who diagnosed and began treating him for hypertension, reflux, and a hiatal hernia.

Although he was now being treated, Mr. Rosenstein's problems grew worse. The pain in his knees did not subside, and he continued to have problems with concentration and memory. He was later diagnosed with sleep apnea, and Dr. Diener suggested that Mr. Rosenstein might also be suffering from depression. Mr. Rosenstein continued to work until January 1997, when he finished his duties in a white collar defense case. He took no new cases despite being approached to do so.

Notwithstanding his various problems, Mr. Rosenstein believed at that time that he would be returning to work. His health continued to deteriorate, however, and he began seeing a rheumatologist, Dr. Matthew P. Bunyard, and a psychiatrist, Dr. Lawrence R. Hyman, in addition to Dr. Diener. In March of 1997, after his "third, or fourth or fifth visit with Dr. Diener," Mr. Rosenstein filed a disability claim with Berkshire under all three policies. If he was found to be totally disabled, he would receive payments of $1,000 a month for each policy for a total of $3,000 per month. These benefits would be paid until he reached age 65.

On his claim form, he listed "Mid 1996 to present" as the period of disability. His duties were listed as "expert in the analysis of complex factual and financial transactions, reconstruction of documentation related to those matters including expert testimony," and his symptoms were listed as "dementia, headaches, sleep depreviation [sic], stress, hypertension, depression, reading sight deterioration, arthritis." He stated that he was unable to perform the following job duties: "review numerous documents, large analyses, memory loss, testimony at hearings and trials, meetings involving stress." Mr. Rosenstein also enclosed a "description of occupation" form with the claim form. Dr. Diener submitted an "Attending Physician's Statement," which included statements in pre-printed blanks that Mr. Rosenstein was totally disabled from December 1996 and that he was also partially disabled from December 1996.¹ In April 1997, Berkshire asked Mr. Rosenstein for copies of his personal and business income tax forms for the period 1992 through 1996, as well as for other financial information. Mr. Rosenstein provided this information to Berkshire.

On May 14, 1997, Bruce Hodsoll, Berkshire's Vice President of Claims Management, met with Mr. Rosenstein at Mr. Rosenstein's home. During that meeting, Mr. Hodsoll offered to settle the claims under all three policies for $36,000, but Mr. Rosenstein declined the offer. Mr. Hodsoll then indicated that, if Mr. Rosenstein did not accept the offer, Berkshire was likely to pay only under the residual disability benefit clause of...