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

• Decision Date: 13 January 2003
• Docket Number: No. 99-4028.,No. 98-5500.,98-5500.,99-4028.
• Parties: Audrey SHAPS, Plaintiff-Appellant, v. PROVIDENT LIFE AND ACCIDENT INSURANCE COMPANY, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1326

317 F.3d 1326

Audrey SHAPS, Plaintiff-Appellant, v. PROVIDENT LIFE AND ACCIDENT INSURANCE COMPANY, et al., Defendants-Appellees.

No. 98-5500.

No. 99-4028.

United States Court of Appeals, Eleventh Circuit.

January 13, 2003.

Howard Scott Grossman, Grossman & Goldman, P.A., Boca Raton, FL, Edward David Schuster, Massey, Coican & Schuster, LLC, Fort Lauderdale, FL, for Plaintiff-Appellant.

John E. Meagher, Jeffrey M. Landau, Shutts & Bowen, Sandy Pallo, Miami, FL, for Defendants-Appellees.

Appeals from the United States District Court for the Southern District of Florida.

Before EDMONDSON, Chief Judge, MARCUS, Circuit Judge, and RESTANI,^* Judge.

MARCUS, Circuit Judge:

This is an appeal from a jury verdict in favor of two insurers and against appellant Audrey Shaps, who asserts that the insurers breached a disability insurance contract to which they and she were parties. We first considered the case in early 2001, but we found that ambiguities in Florida law prevented us from reaching a conclusive determination as to one of the issues raised by Shaps. In particular, we were unable to decide whether the district court erred as a matter of state law by placing the burden of proof as to the existence of appellant's disability on appellant.

Accordingly, we certified to the Florida Supreme Court two questions. See Shaps v. Provident Life & Accident Ins. Co., 244 F.3d 876, 878 (11th Cir.2001). Specifically, we asked:

1. Is the burden of proof rule recognized in Fruchter v. Aetna Life Insurance Co., 266 So.2d 61 (Fla.App. 3 Dist.1972), cert. discharged, 283 So.2d 36 (Fla.1973), part of the substantive law of Florida, such that it would not be applied in a case where under Florida's doctrine of lex loci contractus the substantive law of another state (New York) governs the parties' contract dispute?

2. Would requiring the insured to prove disability in this context violate the public policy of Florida, such that the burden of proof must be placed on the insurer? See Gillen v. United Services Automobile Ass'n, 300 So.2d 3 (Fla.1974).

Id.

The Florida Supreme Court has now responded to our certified questions, answering the first question in the negative and declining to reach the second question. See Shaps v. Provident Life & Accident Ins. Co., 826 So.2d 250, 254-55 (Fla.2002).

Based on the Court's answer to our first question, we conclude that the district court's placement of the burden of proof on the insured in this case was error. Consequently, we vacate the district court's entry of judgment in favor of Provident Casualty on the breach of contract claim and remand for further proceedings consistent with this opinion.¹

I.

The facts and procedural history of the case are straightforward. In June 1987, Defendant Provident Life and Casualty Insurance Company ("Provident Casualty") issued an individual disability policy to Plaintiff Audrey Shaps, who at the time resided and worked in New York. Shaps first submitted a claim for disability benefits on or about July 29, 1989, asserting that the nature of her disabling sickness or injury was "TMJ syndrome" (temporal mandibular joint disorder). Shaps subsequently submitted additional claim forms to Provident Casualty's New York office, and thereby continued to receive benefits. On September 7, 1990, Provident Casualty made a final payment to Shaps, as it determined that there was no evidence of continuous total disability as defined by her policy.

On December 15, 1994, Provident Casualty received from Shaps notice of a new claim for disability benefits, in which she stated that the nature of her disabling sickness or injury was breast cancer and TMJ syndrome, and that she had been disabled as a result of this illness since October 24, 1994. Provident Casualty initially paid benefits on this claim, but stopped doing so in May 1995, based on a claim form submitted by Shaps's physician which indicated that Shaps was no longer totally disabled. After receiving additional information, however, Provident Casualty sent Shaps a benefit check representing benefits from May through September 1995. Shaps did not submit claim forms to Provident Casualty for the period spanning September 8, 1995 to April 6, 1996, and Provident in turn sent no payments for that period.

Shaps filed this lawsuit on September 18, 1995 in the Circuit Court for Palm Beach County, Florida, against Provident Life and Accident Insurance Company ("Provident Accident"), and the case was subsequently removed to the Southern District of Florida. As amended, Shaps's complaint eventually advanced three separate counts for breach of contract and specific performance against Provident Accident and Provident Casualty, and a count for intentional infliction of emotional distress against both defendants. Provident Accident and Provident Casualty moved for summary judgment on all counts, and the district court granted the motion in part. Specifically, it dismissed the count for intentional infliction of emotional distress, and ruled that in the event Shaps prevailed at trial she would have no claim for attorneys' fees pursuant to Florida law. Shaps thereafter amended her complaint to seek disability benefits from October 1990 through the date of trial.

The policy at issue contains a clause providing that no action on the policy may be brought more than three years after the time proof of loss was required. Provident Casualty first discontinued payments in 1990, and Shaps brought suit five years later in 1995. Under New York law, which governs the contract, the limitations period for an insurance policy such as this one begins upon the termination of the disability. Accordingly, the district court ruled that Shaps's breach of contract claim (which related to the cessation of benefits in September 1990) would be time-barred unless she could prove that she was continuously disabled from October 1990 through October 24, 1994 (when Shaps alleged that a new period of disability, for breast cancer as well as TMJ syndrome, commenced).

The case went to trial in August 1998 on the breach of contract and specific performance counts against Provident Accident and Provident Casualty. At trial, Provident Casualty presented evidence that Shaps was not continuously disabled during the 1990-94 period. In particular, Provident Casualty pointed to evidence that during this time Shaps moved to Florida, arranged a mortgage, sold an apartment in New York, filed tax returns that stated she was "disabled" in 1990, "unemployed" in 1991, "loan officer" in 1992, and "retired" in 1993 and 1994. Provident Casualty also admitted into evidence Shaps's March 20, 1991 application to Federal Kemper Life Insurance Company for a life insurance policy. The application listed her occupation as a mortgage loan officer who was "between jobs." The application stated that Shaps received disability payments in the past for TMJ as a result of stress, but also stated that she was "doing fine," with respect to TMJ had "[n]o problems. Haven't seen doctor for 2 years," and that all of her tests were "normal." Shaps also affirmed on the forms that she had no "mental or physical impairment or disease." The forms were signed by Shaps, although she testified at trial that she did not intend to make the statements contained in the forms.

For her part, Shaps presented the testimony of two health care providers that she saw during the 1990-94 period. Ethel Green, a social worker who Shaps saw from 1990 to 1992, testified that Shaps exhibited the symptoms of general anxiety disorder, but stated that she could not testify as a medical expert as to whether Shaps was disabled as a result of TMJ syndrome. John Girard, an internist Shaps began seeing in 1992, also testified. He stated that he had no medical knowledge as to whether Shaps was disabled before he saw her in 1992, but said that Shaps was disabled from June 1992 through June 1995. Shaps also pursued at trial her separate claim that she was denied benefits between September 8, 1995, and April 6, 1996, in breach of her insurance contract. Among other things, Shaps presented the testimony of her oncologist, Gerald Spunberg, who testified that Shaps was totally disabled as a result of breast cancer. Shaps's psychotherapist, Beth Kreakower, testified that it was her opinion that Shaps was unable to perform her duties as a loan officer from the time Shaps began seeing her in April 1995 until Shaps moved to California in April 1996.

At the close of the evidence, the trial court directed verdicts in favor of Provident Accident on the counts remaining against it — breach of contract and specific performance — and in favor of Provident Casualty on the count for specific performance. However, the court permitted the jury to consider the remaining claims involving the breach of contract allegations against Provident Casualty. In a special verdict, the jury determined that Shaps was not continuously disabled within the terms of her Provident Casualty disability policy from September 10, 1990 through October 23, 1994, and thereby rejected her first claim for relief. With respect to her second claim, the jury determined that Shaps was continuously disabled from September 8, 1995 through April 6, 1996, but denied relief because it found that she had failed to comply with certain conditions precedent. The district court entered final judgment in favor of Provident Accident and Provident Casualty, and awarded costs to the defendants.

Shaps appealed to this Court, arguing that the district court committed multiple errors warranting a new trial. In our earlier opinion, we found all of Shaps's objections to the trial to be unpersuasive, except one which we could not decide at the time — that is, whether the district court erred by determining that a rule of Florida law placing the burden of proof on the insurer in this context was inapplicable because that rule is substantive and the substantive law of New...