In re Green

• Decision Date: 22 November 1999
• Docket Number: Bankruptcy No. 97 B 32525. Adversary No. 98 A 01174.
• Parties: In re Theophilus GREEN, Debtor. Massachusetts Casualty Insurance Company, Plaintiff, v. Theophilus Green, Defendant. Theophilus Green, Counter-Plaintiff, v. Massachusetts Casualty Insurance Company, Counter-Defendant.
• Court: United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois

241 B.R. 550 (1999)

In re Theophilus GREEN, Debtor.

Massachusetts Casualty Insurance Company, Plaintiff, v. Theophilus Green, Defendant.

Theophilus Green, Counter-Plaintiff, v. Massachusetts Casualty Insurance Company, Counter-Defendant.

Bankruptcy No. 97 B 32525. Adversary No. 98 A 01174.

United States Bankruptcy Court, N.D. Illinois, Eastern Division.

November 22, 1999.

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John D. Lien, & Frank DiCastri, Foley & Lardner, Chicago, IL, Larry R. Eaton & Bruce M. Lichtcsien, Blatt, Hammesfahr & Eaton, Chicago, IL, for Movant or Plaintiff.

Theophilus E. Green, Psy.D, for pro se.

MEMORANDUM OPINION

ERWIN I. KATZ, Bankruptcy Judge.

This matter comes before the Court on several motions. Massachusetts Casualty Insurance Company ("MCIC") filed an Amended Complaint (the "Amended Complaint") in which it seeks: (1) a declaration that a debt for disability benefits paid to Theophilus Green ("Green") is nondischargeable due to fraud under § 523(a)(2)(A) of the Bankruptcy Code, 11 U.S.C. § 101 et seq., and (2) a declaration that an award of discovery sanctions granted to it against Green in the Circuit Court of Cook County, Illinois is nondischargeable as a debt for willful and malicious injury under § 523(a)(6). MCIC moves for summary judgment in its favor on the Amended Complaint and prayer for rescission of the insurance contracts. Green, a pro se litigant, moves to dismiss MCIC's Amended Complaint. Green also moves for summary judgment in his favor on the Amended Complaint.

Green has filed a six-count Second Amended Counterclaim (the "Second Amended Counterclaim") against MCIC, seeking damages for: Breach of Contract (Count I); Tortious Interference of Contract (Count II); Breach of Contract (Count III); Collusion and Bad Faith Claims Practices (Count IV); Negligence (Count V); and Filing Bad Faith Claims Before the State Court (Count VI). Green moves for summary judgment on the Second Amended Counterclaim. MCIC moves for summary judgment on the first three counts of the Second Amended Counterclaim.¹ MCIC also moves to dismiss Counts IV, V, and VI of the Second Amended Counterclaim.

Green has also filed a Motion to Exclude All Medical Information Not Within the Four Corners of the Contract in Contest (the "Motion to Exclude Medical Information").

For the reasons set forth herein, the Court denies Green's Motion to Exclude Medical Information. Counts II, IV, V, and VI of the Second Amended Counterclaim are dismissed without prejudice for lack of subject matter jurisdiction; Green may pursue those causes of action in a court that has jurisdiction. The insurance contracts are rescinded and void. The Court grants MCIC's motion for summary judgment on Counts I (Breach of Contract) and III (Breach of Contract) of the Second Amended Counterclaim. The Court also grants MCIC's motion for summary judgment on its claim under 11 U.S.C. § 523(a)(2)(A). The Court denies MCIC's motion for summary judgment on its claim under 11 U.S.C. § 523(a)(6); Green's motion for summary judgment on that claim is granted. The Court denies Green's Motion to Dismiss MCIC's Amended Complaint.

I. FACTUAL BACKGROUND

This background statement has been compiled using the parties' statements of uncontested facts, pleadings, depositions, answers to interrogatories, admissions on file, and affidavits.

In 1993, Green was a licensed clinical psychologist practicing in Chicago, Illinois. He is a veteran of the United States Armed Forces, in which he served from 1965 until 1968.

On December 16, 1993, Green applied for disability insurance and overhead disability insurance from MCIC. Alan Bloomfield ("Bloomfield"), an insurance agent, completed the applications (the "Applications") using information provided by Green and information contained in Green's prior insurance policy. The Applications contained the following questions:

8. Have you ever been treated for or had any known indication or symptom of . . .

(a) chest pain, high blood pressure, mental, nervous or emotional conditions (to include but not limited to anxiety, depression or stress) . . . ?

11. In the past 5 years, have you:

. . . .

(b) received or been refused any disability or medical benefits . . . ?

Green answered "No" to both questions.

In the Applications, Green authorized an exhaustive list of medical care providers and related entities, including insurance companies and the Veterans Administration (the "VA"), to release medical and non-medical information about him to MCIC (the "Releases"). The Applications each contained a statement certifying that the statements made therein were true and complete and that Green understood that false statements might result in loss of coverage. On December 16, 1993, Green signed and dated the Applications.

On March 11, 1994, MCIC issued disability policy number 0611031 with Green as the insured. That policy provided in part that if Green became disabled before his sixty-second birthday then MCIC would pay benefits of $4,400 per month. The same day, MCIC also issued overhead disability policy number 0613764 which provided in part that MCIC would pay up to $5,000 a month for Green's office expenses in the event that Green became disabled.

On March 28, 1994, Green submitted to MCIC two Statement of Health Forms (the "Statements"). The Statements specified that when executed, they would become part of the insurance policies. The Statements also required that "the Agent shall not deliver the Policy unless the insured completes and signs this Statement which represents there has been no change in his or her health." The Statements contain the following additional representations:

1. I, the Insured under the above-numbered Policy, in order to induce the Company to issue and deliver the said Policy to me hereby represent that I am now and have continued in the same status of health (mental and physical) as indicated in the application for said Policy. . . .

2. I further represent that since the date of the aforesaid application . . . (1) I have had no injuries, ailments or illnesses and have not been sick from any cause, (2) I have not consulted or been prescribed for or attended by a physician or practitioner for any cause, and have not been confined to any hospital or institution.

3. I hereby represent to the best of my knowledge and belief that all of the foregoing statements are true and complete.

Green signed and dated the Statements.

In June, 1994, Green suffered a stroke and made a claim for benefits under the disability policies. MCIC paid Green a total of $39,940.50 in benefits.

MCIC began investigating Green's claims. MCIC entered into correspondence with Dr. Patrick Israel ("Israel"), a psychiatrist practicing in a suburb of Chicago. In a letter dated December 9, 1994, Israel states in part:

Dr. Green has been under my professional care since 1985. Intervals of therapy have varied from weekly to monthly in frequency. His symptoms have consisted of recurring episodes of depression and anxiety.

In the past several years there has been increasing difficulty in functioning in his profession, in response to which he has progressively decreased his work hours and accepted fewer and fewer referrals of clients.

The psychotherapy has been supportive but has not altered his progressive functional impairment. He will continue to receive psychotherapy as needed.

Two later letters from Israel, dated January 26, 1995 and January 31, 1995, respectively, explain that Green was discharged from treatment on December 16, 1987. The letters further explain that eight visits from January, 1989 through the winter of 1990 were consultations about Green's practice. In August, 1990, Green "returned to discuss again problems with the mental health administration and to deal with some difficulties in family and social relationships." Israel testified that, until 1994, he treated Green for depression, stress, or anxiety. In addition, Israel consulted with Green about his work. The last record Israel has of treating Green is in August, 1994.

During his deposition, Israel explained that he diagnosed Green as suffering from dysthymia, or minor depression. Israel prescribed one hour psychotherapy sessions for him. Israel submitted claims to Green's health insurer and the claims were paid.

On September 7, 1992, Israel's billing records show that he filed a disability report with the City of Chicago, Green's then-employer, on Green's behalf. Israel further testified that on November 4, 1991, he drafted a report to the VA. Israel sent the report because Green was seeking mental and emotional disability benefits from the VA. In the report, Israel explains:

Green had been in urgent need of treatment for a long time but his fear and distrust of authority, paranoid in intensity, has previously made him unable to tolerate more than an occasional visit to one or another psychiatrist to obtain medication. He was taking Chlorpromazine, 400 mg per day as needed to control episodes of severe agitation during which he feared loss of control. He worked sporadically, when his condition was in partial remission, in a semi-volunteer capacity at an alcoholism clinic. . . . There has been some progress in terms of a lessening of tension and longer periods of superficially adequate social appearance and vocational functioning, but the underlying paranoia and depression are constant and his surface adequacy is accomplished via intense conscious effort. He is required to keep regular control over recurring impulses to self-harm or violence toward others. . . . His psychopathology repeatedly interferes with his vocational efforts. . . .

While investigating Green's claims, MCIC discovered that Green had been receiving disability benefits from the VA since at least 1989, based on the VA's 1968 diagnosis of Green as a paranoid schizophrenic. During his deposition, Green testified that he had been on...