Mowers v. Paul Revere Life Ins., Docket Nos. 98-9616

• Decision Date: 01 August 1998
• Docket Number: 98-9664,Docket Nos. 98-9616
• Citation: 204 F.3d 372
• Parties: (2nd Cir. 2000) HOWARD T. MOWERS, Plaintiff-Appellee-Cross-Appellant, v. THE PAUL REVERE LIFE INSURANCE CO., also known as Paul Revere Insurance Company, Defendant-Appellant-Cross-Appellee
• Court: U.S. Court of Appeals — Second Circuit

Page 372

204 F.3d 372 (2nd Cir. 2000)

HOWARD T. MOWERS, Plaintiff-Appellee-Cross-Appellant, v. THE PAUL REVERE LIFE INSURANCE CO., also known as Paul Revere Insurance Company, Defendant-Appellant-Cross-Appellee.

Docket Nos. 98-9616, 98-9664

August Term, 1998

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Argued: June 10, 1999

Decided: February 28, 2000

Defendant The Paul Revere Life Insurance Co. appeals from a decision of the United States District Court for the Northern District of New York (David N. Hurd, Magistrate Judge), inter alia, granting summary judgment in favor of plaintiff Howard T. Mowers on his claim of breach of the terms of his disability policy. The District Court held that the plaintiff's failure to undergo a Functional Capacity Examination scheduled by the defendant did not justify the defendant's termination of payments, as defendant's demands were "unreasonable" as a matter of law. The Court of Appeals, Leval, J., vacates the grant of summary judgment and remands for trial.

Vacated and remanded.

JOHN P. SPEER, Little Falls, NY, for Plaintiff-Appellee-Cross-Appellant.

MATTHEW E. HAMLIN, Kernan & Kernan, P.C., Utica, NY, for Defendant-Appellant-Cross-Appellee.

Before: LEVAL and SOTOMAYOR, Circuit Judges, and POLLACK, District Judge.^*

LEVAL, Circuit Judge:

Defendant The Paul Revere Life Insurance Company appeals from a decision of the United States District Court for the Northern District of New York (David N. Hurd, Magistrate Judge), inter alia, granting summary judgment in favor of the plaintiff Howard T. Mowers on his claim of breach of the terms of his disability insurance policy. The District Court held that the plaintiff's failure to attend medical examinations scheduled by the defendant did not justify the defendant's cessation of payments under plaintiff's disability insurance policy, as defendant's demand for plaintiff to attend the examinations was "unreasonable" as a matter of law. Because there are several reasons why such a demand might have been reasonable, we vacate the grant of summary judgment and remand for trial.

BACKGROUND

In 1989, Mowers, a self-employed chiropractor, purchased a disability insurance policy from Paul Revere. According to the terms of the policy, Mowers was to receive full benefits if "totally disabled" and partial benefits if "residually disabled." During August 1982, Mowers injured his back while lifting a patient. By reason of that injury, in combination with other back and hand injuries, Mowers stopped working. Plaintiff filed a disability claim with Paul Revere and, in November 1992, began receiving $3,760 per month, the maximum benefit allowed under the policy. The defendant stopped payments temporarily during the fall of 1993 but resumed payment during the summer of 1994 upon receipt of additional medical information. Payment then continued until the defendant terminated coverage effective September 1, 1997 in light of the events that are the subject of this appeal.

The insurance policy stipulated that, in the event of disability, Paul Revere could have a physician of its own choice examine the insured at company expense "as often as reasonably required while [his] claim is continuing." At the defendant's request plaintiff attended four independent medical examinations ("IME"'s) before doctors selected by the defendant between July and November of 1993 and a fifth in July 1994. All of the doctors concurred that Mowers had several herniated disks in his back and could not perform certain strenuous tasks usually associated with chiropractic healing (including the lifting of heavy objects and the performance of "strenuous" manipulations of patients). The doctors disagreed, however, on whether these injuries resulted in a total disability, or a severe partial disability.

Despite this disagreement of medical authority, Paul Revere continued to pay full benefits from 1994 to 1997, and did not request any further IME's. During that time, Mowers remained under the care of an orthopedist (Dr. Gary Witchley) and a neurologist (Dr. Reynaldo Lazaro). These doctors continued to certify that Mowers remained totally disabled.

In early 1997, Paul Revere noticed another IME. In February of that year, Dr. Warren Rinehart performed the examination. Rinehart concurred with all of the previous doctors that Mowers could not perform heavy lifting or vigorous manipulations of patients, but determined that the plaintiff might return to part-time work, perhaps performing IME's or limiting his practice to mild manipulations of the cervical region. In order to confirm the plaintiff's subjective complaints of pain and determine what duties were suitable for him, Rinehart recommended that Mowers undergo a Functional Capacity Examination (FCE).¹ Paul Revere then notified the plaintiff that it had scheduled an FCE for July 28, 1997. Plaintiff did not appear for this examination. Paul Revere rescheduled the FCE for September 3. Mowers again did not appear. Paul Revere then stopped paying benefits.

In this litigation, Mowers offers two reasons for missing the first examination: his physician's concerns about possible damage to his back caused by the exam and a desire to have present an attorney who was unavailable on that date. He claims that he was sick for the second exam and attempted to reschedule, but the defendant rebuffed his efforts.

The plaintiff filed this suit in New York state court, alleging, inter alia, breach of contract. The defendant removed the action to federal court on the basis of diversity of citizenship. Both parties then moved for summary judgement.

The parties agreed to have the matter adjudicated by a magistrate judge. Magistrate Judge Hurd issued a memorandum-decision and order granting summary judgment to the plaintiff on the breach of contract claim. Judge Hurd awarded Mowers damages of approximately $60,000 on the breach of contract claim and ordered Paul Revere to resume payments. Paul Revere brought this appeal.²

DISCUSSION

In granting summary judgment for the plaintiff, Judge Hurd determined that the defendant lacked "a reasonable basis" for requiring Mowers to undergo an FCE. While taking no position on whether the request for an FCE was in fact reasonable, we conclude that the defendant has shown that there is a genuine issue of material fact for trial on that issue. Summary judgment was, therefore, inappropriate.

A. The Reasonableness of the Defendant's Request

Courts in other jurisdictions have universally held that a disability claimant's failure to accede to an insurance company's reasonable request for an IME constitutes the failure to perform a condition precedent and may absolve the insurer of further obligations under the contract. See, e.g., VanHaaren v. State Farm Mut. Auto. Ins. Co., 989 F.2d 1,5 n.7 (1st Cir. 1993) (applying Maine law); Fernandez v. Connecticut Mut. Life Ins. Co., 917 F. Supp. 120, 124 (D. Puerto Rico 1996) (applying Puerto Rico law); Hansen v. State Farm Mut. Auto. Ins. Co., 936 P.2d 584, 589 (Colo. Ct. App. 1996), rev'd on other grounds, 957 P.2d 1380 (1998); Hudson v. Omaha Indem. Co., 360 S.E.2d 406, 408 (Ga. Ct. App. 1987). Although New York courts have not yet addressed the failure to perform a condition precedent in the context of disability claims and IME's, they have found that an insured's failure to submit to an examination under oath with respect to fire insurance claims is grounds for an insurer's refusal to pay under the policy. See, e.g., Azeem v. Colonial Assurance Co., 468 N.Y.S.2d 248 (4th Dep't 1983), aff'd 62 N.Y.2d 951 (1984); Pizzirusso v. Allstate Ins. Co., 532 N.Y.S.2d 309 (2d Dep't 1988); Rosenthal v. Prudential Prop. & Cas. Co., 928 F.2d 493 (2d Cir. 1991) (applying New York law). It appears that New York law would treat a disability policyholder's unjustified failure to attend a reasonably demanded medical evaluation as the breach of a condition precedent.

Judge Hurd based his finding that Paul Revere's request was unreasonable upon his determination that Mowers was entitled to full benefits, under the terms of the policy, so long as there was any important duty of his practice that he could not perform.³ As it was clear that there were aspects of his work that he could not perform, the court believed Paul Revere's demand for an FCE was overkill. We find it unnecessary to determine the propriety of the District Court's reading of the contract's "total disability" clause, because, even under such a reading,...