Shapiro v. Berkshire Life Ins.

• Decision Date: 01 August 1999
• Docket Number: No. 1583,Docket Nos. 99-7980,99-7999,1583
• Citation: 212 F.3d 121
• Parties: (2nd Cir. 2000) PAUL SHAPIRO, Plaintiff-Appellee-Cross-Appellant, v. BERKSHIRE LIFE INSURANCE COMPANY, Defendant Appellant-Cross-Appellee
• Court: U.S. Court of Appeals — Second Circuit

Page 121

212 F.3d 121 (2nd Cir. 2000)

PAUL SHAPIRO, Plaintiff-Appellee-Cross-Appellant, v. BERKSHIRE LIFE INSURANCE COMPANY, Defendant Appellant-Cross-Appellee.

No. 1583 Docket Nos. 99-7980, 99-7999

August Term, 1999

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Argued: April 25, 2000

Decided: May 12, 2000

Appeal from the grant of summary judgment by the United States District Court for the Southern District of New York (Schwartz, J.) in favor of a policyholder against an insurer. Cross-appeal from the grant of summary judgment in favor of the defendant on plaintiff's claim under §349 of the New York General Business Law.

Affirmed.

WYLIE M. STECKLOW, New York, NY (Joshua Skillman, on the brief), for Plaintiff-Appellee-Cross-Appellant.

GEORGE BERGER, New York, NY (Bruce J. Turkle, Phillips Nizer Benjamin Krim & Ballon LLP, New York, NY, on the brief), for Defendant Appellant-Cross- Appellee.

Before: JACOBS, LEVAL and SACK, Circuit Judges.

JACOBS, Circuit Judge:

Paul Shapiro, a licensed dentist, brought this diversity action against Berkshire Life Insurance Co. ("Berkshire") contesting Berkshire's denial of his claim for total disability benefits. Berkshire appeals from the judgment of the United States District Court for the Southern District of New York (Schwartz, J.) awarding summary judgment in Shapiro's favor on his claim for total disability benefits against Berkshire. Shapiro cross-appeals the court's grant of summary judgment in favor of Berkshire on his claim under §349 of the New York General Business Law. We affirm.

BACKGROUND

A. The Insurance Contracts

On November 1, 1990, Berkshire issued a Disability Income Insurance Policy, which provided a monthly $3,100 benefit in the event of Shapiro's total disability (the "1990 policy"). On November 1, 1995, Berkshire issued a second, identical policy, which provided Shapiro an additional $1,000 monthly benefit (the "1995 policy").¹

The policies define "total disability" as "the inability to perform the material and substantial duties of your occupation," and "your occupation" is limited to "the occupation you are engaged in immediately preceding the onset of disability." In another clause, the policies also provide benefits for residual disability, and define it: "Residual disability means that due to injury or sickness you are unable: (1) to do one or more of the substantial and material duties of your business or profession; or (2) to perform your duties for the length of time that they usually require." The insured is ineligible for residual disability benefits unless he has suffered a 20 percent drop in income as a result of the disability.

B. Shapiro's Responsibilities

Shapiro has been a licensed dentist since 1981. In 1988, he opened his own practice called Park South Dental. In that office, patients were treated by Shapiro as well as by another full-time dentist, a periodontist and an orthodontist employed by Shapiro. Shapiro also owns North Hill Dental, a one-dentist office at which Shapiro treated patients only rarely. Shapiro is also the 44 percent owner and President of Sharraty Properties, Inc. ("Sharraty"), a for-profit corporation he founded with his brother-in-law, Dr. Monte Ezratty, to provide dental assistants, receptionists and clerical personnel for their offices.

Shapiro testified that before the onset of his disability he worked four or five days a week for a total of 40 to 45 hours. In 1995, the year before he became disabled, Shapiro saw nine to eleven patients a day, and performed an average of 275 procedures per month.

In addition to this dentistry work, Shapiro also spent between one and a half and four hours per week attending to various administrative and managerial duties related to Park South Dental, North Hill Dental and Sharraty.² Shapiro's non-dentistry responsibilities included, inter alia, personnel decisions, staff evaluations, staff meetings, consultations with his office manager on major equipment purchases and difficult billing disputes, troubleshooting the computer, and insurance and health plan proposal reviews.

C. Shapiro's Disability & Berkshire's Denial of His Claim

In December 1995, Shapiro concluded that progressive skeletal illnesses (osteoarthritis and spondylosis of the elbow, neck and other joints) had left him medically unable to perform "chair dentistry," which is the sum of procedures involved in treating dental patients in the dentist's chair. Shapiro stopped treating patients on January 30, 1996. The parties agree that this event marked the "onset of [Shapiro's] disability" within the meaning of the insurance contracts.

On March 26, 1996, Shapiro filed his claim for total disability benefits. Berkshire investigated the claim, agreed that Shapiro was unable to perform chair dentistry, and undertook to pay total disability benefits for a limited time only, while Shapiro recovered from arm surgery, after which time, benefits could be paid only under the "residual disability" provisions of the policies. Berkshire's coverage position was that Shapiro's occupation immediately preceding the onset of his disability was as an administrator and manager of his various dental practices as well as a practitioner of chair dentistry; because the disability did not prevent Shapiro from doing his administrative or managerial work, Berkshire reasoned, Shapiro did not satisfy the policies' definition of total disability: "the inability to perform the material and substantial duties of your occupation."

D. Procedural History

Shapiro brought this diversity action against Berkshire, alleging, inter alia, breach of contract and deceptive business conduct in violation of § 349 of the General Business Law of New York. The parties cross-moved for summary judgment. The district court granted summary judgment in favor of Shapiro on his breach of contract claim. As to the § 349 claim, the court concluded there was no violation and granted summary judgment in favor of Berkshire. Berkshire appeals and Shapiro cross-appeals.

DISCUSSION

The substantive law of New York controls this diversity case. See GNOC, Corp. v. Endico, 876 F.2d 1076, 1078 (2d Cir. 1989). We review a district court's grant of summary judgment de novo, construing the evidence in the light most favorable to and drawing all reasonable inferences in favor of the non-moving party. See Brown v. C. Volante Corp., 194 F.3d 351, 354 (2d Cir. 1999).

A. The Contract Claim

Under New York law, Shapiro bears the burden of proving that he is totally disabled within the meaning of the policies. See Goell v. United States Life Ins. Co., 55 N.Y.S.2d 732, 732-33 (1st Dep't 1945) (per curiam). The definition of total disability in Berkshire's policies tracks the standard articulated by the New York courts: "[A] claimant is 'totally disabled' when he or she is no longer able to perform the 'material' and 'substantial' responsibilities of his or her job." Klein v. National Life of Vt., 7 F. Supp. 2d 223, 227 (E.D.N.Y. 1998) (Trager, J.) (citing, inter alia, McGrail v. Equitable Life Assurance Soc'y, 292 N.Y. 419, 425-26 (1944)). The coverage question entails a "fact-oriented, functional approach that look[s] to the professional activities in which the insured was regularly engaged at the time of the onset of the insured's disability." Id.

After reviewing the record, we conclude that the district court properly granted summary judgment in Shapiro's favor on the breach of contract claim because in the relevant period Shapiro's occupation was that of a dentist. It is uncontested that he spent the vast majority of his time performing chair dentistry. Viewing the evidence in the light most favorable to Berkshire, Shapiro's administrative duties consumed no more than four of his forty working hours per week: 90 percent of his time was spent fixing the teeth of patients and 10 percent on non-dentistry duties. He saw several patients every day, four or five days a week. His office manager described his schedule as being "booked every day" with patients. Shapiro was thus regularly engaged in chair dentistry at the time of the onset of his disability. His administrative work was incidental to his material and substantial duties as a full-time dentist. See Brumer v. National Life of Vt., 874 F. Supp. 60, 64 (E.D.N.Y. 1995) (Trager, J.) ("[W]ere one able to find that the plaintiff's managerial activities were peripheral or incidental when considered in light of the medical or surgical tasks he performed, the court would have to find that he did not have a separate occupation as a medical administrator."), aff'd sub nom. Brumer v. Paul Revere Life Ins. Co., 133 F.3d 906 (2d Cir. 1998) (unpublished summary order).

Berkshire relies primarily on Klein and Brumer, and argues that Shapiro, like the two podiatrist partners in those cases, is not entitled to total disability benefits because of his continued ability to perform administrative duties. On the whole, however, Klein and Brumer support Shapiro's argument, because the plaintiff in neither case could make a credible claim of being a full-time podiatrist. Klein spent (at most) 24 percent of his time performing (or assisting with) a total of 251 surgeries in the thirteen months preceding his disability. See Klein, 7 F. Supp. 2d at 229-30. The bulk of his time was spent operating and managing his six podiatric clinics. Brumer performed no podiatric surgery in the year preceding the onset of his disability, because (for all but the final eight weeks of that year) his podiatry license was suspended. See Brumer, 874 F. Supp. at 61-62. Thus Klein and Brumer were predominantly administrators and managers. See, e.g., Klein, 7 F. Supp. 2d at 227 ("[T]he record is clear that [immediately preceding onset of disability] plaintiff was predominantly engaged in operating and managing his podiatric clinics while practicing, at most, a minimal amount of podiatric surgery.").

In the period relevant to this claim, Shapiro...