Provident Life and Acc. Ins. Co. v. Knott

Decision Date19 December 2003
Docket NumberNo. 02-0485.,02-0485.
Citation128 S.W.3d 211
CourtTexas Supreme Court

Patrick C. Frank, Fiedler Akin Frank & Carlton, P.C., Plano, for Debra Lucille Townley.

Mark T. Davenport, Andrew C. Whitaker, Figari Davenport & Graves, LLP, Dallas, for petitioner.

Ben C. Martin, Law Office of Ben C. Martin, Dallas, for respondent.

Justice WAINWRIGHT delivered the opinion of the Court.

In this insurance coverage dispute, we construe the definition of total disability found in two insurance policies. Interpreting the policies as they are written, we hold that an insured is totally disabled when he is unable to perform all of the important and usual duties of his occupation. Because the insured in this case was able to perform some of the important and usual duties of his occupation as a physician, he was not totally disabled under the policies' terms. We also conclude that the insured's extra-contractual claims are barred by limitations. The trial court was correct in granting the motions for summary judgment. Accordingly, we reverse the judgment of the court of appeals in part and affirm in part.

I. Factual and Procedural Background

In 1968, Dr. James Knott began practicing obstetrics and gynecology with Dr. Robert Kuhne. Around 1970, the doctors formed a professional association, Kuhne & Knott Gynecological Associates, which was eventually renamed Richardson Women's Clinic.

In the early 1970s, Knott met with Ellis Garland Gatlin, an insurance agent, to discuss buying disability insurance. Knott eventually bought two policies: one issued in 1970 and a second policy issued in 1974. The policies, as amended, provided benefits for total disability and partial disability, among other things.

In June 1985, Knott suffered a spine fracture in a plane crash and underwent surgery (a thoracolumbar fusion) to stabilize the fracture. Knott was unable to return to work until August 1985. On December 19, 1985, Knott submitted a claim to Provident for benefits for total disability under both policies. At the time of his claim, Knott acknowledged that he was working part-time seeing gynecological patients, conducting pelvic exams, providing consulting services to other physicians, and performing administrative duties. However, he claimed that he was unable to perform operative obstetrics, prolonged gynecological procedures, endoscopic procedures, and vaginal procedures because the bending and stress of these procedures aggravated his back injury. Within five days of receipt of Knott's claim, Provident issued Knott a check for $7500 in total disability benefits. However, in a letter dated February 19, 1986, Provident requested repayment of the $7500, less $1250 in benefits, because Knott had failed to satisfy the "90-day elimination period," which was a condition of coverage. The ninety-day elimination period refers to a requirement that the total disability continue for more than ninety days, and benefits, if any, would commence on the ninety-first day of a covered disability. According to a November 20, 1985 medical report completed by Dr. George Wharton, Knott's treating physician, and submitted to Provident in support of Knott's claim, Knott was totally disabled from June 9, 1985 through August 4, 1985. The statement of claim that Knott submitted to Provident, dated December 19, 1985, indicates that Knott believed himself to be totally disabled from June 9, 1985 to the date of the claim.

The parties negotiated this dispute, which culminated in a solution described in Provident's March 21, 1986 letter to Knott. The March letter stated that Provident would treat Knott's claim "on a residual basis,"1 waive Knott's premiums as long as he was disabled, and waive repayment of the $7500. Under this arrangement, Knott continued to submit claims for benefits through 1989, and Provident continued to pay benefits.2 In 1991, Provident informed Knott that he no longer qualified for residual benefits and that Provident planned to resume billing him for his premiums. Provident had discontinued billing for these premiums while Knott was receiving benefits under the policy. Knott retained an attorney who negotiated the payment of premiums with Provident, and, apparently, Provident agreed to continue to waive Knott's premium payments. Knott did not submit another claim until December 1995. Provident did not pay Knott any additional benefits until 1996.

Except for a two-month period immediately following the 1985 plane crash, Knott worked as a physician from 1985 through 1995, performing all of his pre-accident duties except for certain surgical and office examination procedures. On August 20, 1995, Knott turned sixty-five. A few months later, on December 15, 1995, Knott submitted a claim for total disability to Provident. No new event or accident precipitated the claim. After the ninety-day elimination period was satisfied, Provident began to pay Knott benefits under the policies. Provident made total disability payments to Knott for twenty-four months. Then, in a letter dated March 11, 1998, Provident notified Knott that it was closing his claim because it had paid him the maximum benefits to which he was entitled.

Under the "policy schedule" in both disability insurance policies at issue, the maximum benefit period for total disability commencing on or after the insured's sixty-fifth birthday is twenty-four months. An insured who has a total disability that commences prior to his sixty-fifth birthday is entitled to lifetime benefits under the policies. In August 1998, Knott sued Provident and the executrix of Gatlin's estate3 for breach of contract, misrepresentation, breach of the duty of good faith and fair dealing, violations of the Texas Insurance Code and violations of the Texas Deceptive Trade Practices Act ("DTPA").

Provident and Gatlin filed motions for summary judgment. Provident argued that it was entitled to summary judgment on Knott's breach of contract claim under three alternative theories: (1) Provident did not breach the insurance contract because Knott's disability commenced after his sixty-fifth birthday; (2) Knott is not totally disabled; and (3) federal law preempts the contract claim. Provident also argued that summary judgment was proper on Knott's bad faith and statutory claims on several alternative bases: (1) Provident did not breach the policies; (2) Provident had a reasonable basis for its decision to close Knott's claim; (3) the applicable statutes of limitation and the Dead Man's Rule bar the claims; (4) federal law preempts Knott's claims; and (5) Provident did not make any misrepresentations that were the producing cause of Knott's damages. Gatlin sought summary judgment on several alternative grounds including statute of limitations, the Dead Man's Rule, no evidence that Gatlin violated the DTPA, and lack of privity of contract, among other defenses. Knott did not move for summary judgment.

The trial court granted Provident's and Gatlin's motions for summary judgment without specifying the grounds for its judgment. The court of appeals reversed the trial court's judgment on Knott's breach of contract claim against Provident,4 remanding the claim to the trial court, but affirmed the trial court's judgment on the remaining claims (misrepresentation, breach of the duty of good faith and fair dealing, and violations of the Texas Insurance Code and the DTPA). 70 S.W.3d 924. Provident and Knott petitioned this Court for review.

II. Standard of Review

We review the trial court's summary judgment de novo. See FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex.2000). When reviewing a summary judgment, we take as true all evidence favorable to the nonmovant, and we indulge every reasonable inference and resolve any doubts in the nonmovant's favor. Southwestern Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex.2002); Sci. Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911 (Tex.1997). Under Texas Rule of Civil Procedure 166a(c), the party moving for summary judgment bears the burden to show that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law. Haase v. Glazner, 62 S.W.3d 795, 797 (Tex.2001); Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 223 (Tex.1999).

Because the trial court's order does not specify the grounds for its summary judgment, we must affirm the summary judgment if any of the theories presented to the trial court and preserved for appellate review are meritorious. Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623, 626 (Tex.1996); Carr v. Brasher, 776 S.W.2d 567, 569 (Tex.1989).

III. Total Disability

We begin by reviewing the central issue in this case—the interpretation of total disability as defined in the insurance policies. Both of the policies contain the following definition of total disability: "Total Disability means that due to Injuries or Sickness, you are unable to perform the duties of your occupation."5 Provident argues that under this provision, Knott is totally disabled only when he is unable to perform all of the duties of his occupation. Provident explains that it did not breach its insurance contract with Knott because he was able to perform some of his duties as a physician and, therefore, was not totally disabled under the policies' definition as a matter of law. Knott argues that whether he is totally disabled is a fact question that depends on whether he is unable to do any substantial portion of the work connected with his occupation. Knott contends that this interpretation of total disability in an insurance contract was articulated by this Court in Prudential Ins. Co. v. Tate, 162 Tex. 369, 347 S.W.2d 556 (1961), and controls this case. The court of appeals relied on Tate to conclude that the determination of total...

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