Falik v. Penn Mutual Life Ins. Co.
| Decision Date | 07 March 2002 |
| Docket Number | No. 00-CV-1336.,00-CV-1336. |
| Citation | 190 F.Supp.2d 1156 |
| Parties | Holly FALIK, Plaintiff, v. THE PENN MUTUAL LIFE INS. CO., Defendant. |
| Court | U.S. District Court — Eastern District of Wisconsin |
Jordan M. Lewis, Siegel, Brill, Greupner, Duffy & Foster, Milwaukee, WI, for Plaintiff.
Paul E. Benson, James Patrick Thomas, Matthew S. MacLean, Michael Best & Friedrich, Milwaukee, WI, for Defendant.
DECISION AND ORDER
Plaintiff Holly Falik, M.D. ("Dr.Falik") brought suit against defendant Penn Mutual Life Ins. Co. ("Penn Mutual") for breach of contract, bad faith, and breach of fiduciary duty arising out of Penn Mutual's decision to discontinue payment of long-term disability benefits. Penn Mutual has moved for summary judgment. For the reasons stated below, the motion is granted in part and denied in part.
Dr. Falik previously worked as a pediatric physician in New York City. Plaintiff's Proposed Findings of Fact ("PFOF"), ¶ 2; Defendant's Proposed Findings of Fact ("DFOF"), ¶ 12. On November 13, 1996, while visiting her husband in California (he was seeking a transfer to New York), Dr. Falik was injured in an automobile accident. DFOF, ¶ 13. Dr. Falik suffered a partially collapsed lung, sprain/strain of the neck and spine, bruising of the chest and sternum, and ulnar neuritis. DFOF, ¶¶ 14, 16. Dr. Falik filed a claim under her disability insurance policy with Penn Mutual. DFOF, ¶¶ 7, 16. At the time she filed for benefits, Dr. Falik's treating physician estimated that Dr. Falik would be able to work again beginning February 27, 1997. DFOF, ¶ 17.
As part of its benefits-related process, Penn Mutual sent a representative to California to meet with Dr. Falik in January 1997. The claims representative interviewed Dr. Falik and asked her for a description of the activities that, due to the accident, she was no longer able to perform. DFOF, ¶ 19. The claims representative recommended surveillance of Dr. Falik, as well as an independent medical examination by a specialist. DFOF, ¶ 21. Also as part of its benefits-related process, a physician employed by a subsidiary of Penn Mutual, Dr. Betjemann, telephoned Dr. Falik's physician to inquire as to her status and when she would return to work. DFOF, ¶ 25. On March 7, 1997, Dr. Falik's physician sent Penn Mutual a letter stating that Dr. Falik would be "temporarily totally disabled" for another four to eight weeks, although he subsequently signed a letter from Dr. Betjmann that stated Dr. Falik's symptoms had improved. DFOF, ¶ 26.
After receiving the signed letter from Dr. Falik's physician, Penn Mutual forwarded a letter to Dr. Falik along with a check for $12,982.80. The letter stated that there were insufficient limitations or restrictions caused by Dr. Falik's injuries that would prevent her from returning to work full-time as a pediatrician, and that as such Penn Mutual was closing her claim and returning her policy on a premium basis. DFOF, ¶ 28.
After Dr. Falik called Penn Mutual to complain about this finding, DFOF, ¶ 29, and after Dr. Falik's treating physician sent another letter to Penn Mutual stating that Dr. Falik was disabled for another 4 weeks, DFOF, ¶ 30, Dr. Falik underwent an independent medical examination by Dr. Silver. DFOF ¶ 31. Dr. Silver found that "there do appear to be objective findings in the physical examination to support [Dr. Falik's] subjective complaints," and that "Dr. Falik is unable to do the substantial and material duties of her regular occupation in the usual and customary way." See March 26, 1997 Silver Let. at 2. Dr. Silver also found that if Dr. Falik continued to improve, she would be considered partially disabled by May 15, 1997, with an ability to perform some but not all of her duties. DFOF, ¶ 31.
On April 17, 1997, Dr. Falik carried out, at Penn Mutual's behest, a KEY functionality assessment. The physical therapist who conducted the assessment concluded that Dr. Falik could only engage in weighted activities under 4 pounds, and that "she may not be able to perform the Physical demand outlined in her job description." See April 17, 1997 Yamamoto Let. During the month of April, 1997, Penn Mutual carried out surveillance on Dr. Falik on multiple days. DFOF, ¶ 37. Penn Mutual also hired a counseling service to carry out a job analysis of the demand upon Dr. Falik, although that analysis was done without any input on Dr. Falik's actual job duties. DFOF, ¶ 34. Based upon the KEY assessment and the job assessment, Dr. Betjmann concluded that Dr. Falik was ready to return to work part if not full time, and that although she had problems with lifting objects over 4 pounds, "with high motivation that obstacle could be overcome." DFOF, ¶ 38.
On May 12, 1997, Dr. Falik returned to work part-time, with a staff nurse assisting her with activities that she could not perform in the clinical setting. According to the assisting nurse, Dr. Falik was unable to do a number of activities required by her job, including: (1) using an otoscope for examinations (she would groan in pain when she had to lift her arms high enough to look in patients ears); (2) throat cultures; (3) examining patients for stiff necks; (3) moving and positioning patients; (4) vaccinations; (5) and using a nebulizer. Dr. Falik also had to take breaks from work due to severe pain, and was found by staff on at least two occasions crying from the pain. See Oct. 27, 1997 Lopez Let., at 1-2. Because she had returned to work, Penn Mutual discontinued total disability payments, and it is undisputed that Dr. Falik has been paid total disability benefits through May 12, 1997. DFOF, ¶ 41; see generally, PFOF.
On July 1, 1997, Dr. Falik resigned from her pediatric position, effective July 2, 1997. See July 27, 1997 Sykes. Let. Dr. Falik subsequently requested continuation of her total disability benefits from Penn Mutual. Penn Mutual refused, and Dr. Falik eventually filed suit in state court. The matter was removed to this Court on the basis of diversity jurisdiction, 28 U.S.C. § 1332.
Penn Mutual argues the following: (1) the breach of contract claim is barred by the contractually-created statute of limitations; (2) alternatively, the breach of contract claim must be dismissed because Dr. Falik does not meet the definition of total disability under the policy; and (3) the bad faith and breach of fiduciary duty claims are time-barred under Wis. Stat. § 893.57. After outlining the relevant policy provisions, each argument is discussed separately below.
I. The Policy
Three policy provisions will require special consideration: the proof of loss provision, the contractual limitation on bringing a cause of action, and the definitions of total and residual disability.
The proof of loss provision provides:
Proof of loss You must give written proof of loss within 90 days after:
• each total or residual disability period for which we are liable; or
• the occurrence of any other loss for which you are covered.
If you fail to give proof within this time because it is not reasonably possible, we will not reduce or deny your claim. But you must give proof of loss as soon as it is reasonably possible to do so. And you must give this proof within one year after the time limit unless you are legally unable to do so.
See Policy, § 6 (emphasis in original).
The contractually-created statute of limitations provides:
Legal Actions You cannot start any legal action against us for benefits until 60 days after you give required proof of loss. See Proofs of Loss in this Section. You also cannot start any legal action more than 3 years after the time limit for giving proof of loss.
See Policy, § 6 (emphasis in original).
The policy defines total disability as follows:
Total Disability Defined You will be considered totally disabled if all of these conditions are met:
• You are unable to do the substantial and material duties of your regular occupation. Your regular occupation is your usual work when total disability starts. If you are retired and not working when total disability starts, your regular occupation will be the normal activities of a retired person of like age and sex.
• Your total disability starts while this policy is in force.
• Your total disability results from sickness or injury.
• You are under a doctor's care. Doctor means a licensed physician other than yourself.
See Policy, § 2 (emphasis in original).
Finally, the policy defines residual disability as follows:
Residual Disability Defined You will be considered residually disabled if all these conditions are met:
• You are able to do some but not all of the substantial and material duties of your regular occupation, or you are able to do all of the substantial and material duties of your regular occupation but for less than full time.
• You are working, and your earnings during a month do not exceed 80% of your pre-disability earnings.
• Your residual disability results from sickness or injury.
• You are under a doctor's care.
See Policy, § 2 (emphasis in original).
Penn Mutual argues that Dr. Falik's breach of contract claims are time-barred. Although Wisconsin's statute of limitations for breach of contract is six years, as outlined above, Dr. Falik's policy provides that the insured "cannot start any legal action more than 3 years after the time limit for giving proof of loss." Policy, § 6 (emphasis added). Correspondingly, the policy provides the time limit for giving proof of loss: "You must give us written proof of loss within 90 days after: [1] each total or residual disability period for which we are liable; or [2] the occurrence of any other loss for which you are covered." Policy, § 6 (emphasis added).
The parties contest the meaning of the phrase "each total or residual disability period for which" Penn Mutual is liable. Because it made monthly payments, and because Dr. Falik apparently submitted proof of loss on...
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