Stenger v. Provident Life & Acc. Ins. Co.

• Decision Date: 01 December 2000
• Docket Number: No. 99-C-643.,99-C-643.
• Citation: 121 F.Supp.2d 1238
• Court: U.S. District Court — Eastern District of Wisconsin
• Parties: George S. STENGER, Plaintiff, v. PROVIDENT LIFE & ACCIDENT INSURANCE COMPANY, Defendant.

121 F.Supp.2d 1238

George S. STENGER, Plaintiff, v. PROVIDENT LIFE & ACCIDENT INSURANCE COMPANY, Defendant.

No. 99-C-643.

United States District Court, E.D. Wisconsin.

December 1, 2000.

COPYRIGHT MATERIAL OMITTED

Allen C. Schlinsog, Jr., Kurt D. Dykstra, Milwaukee, WI, for Plaintiff.

Paul E. Benson, Matthew S. MacLean, Milwaukee, WI, for Defendant.

ORDER

STADTMUELLER, Chief Judge.

Currently before the court in this action seeking reinstatement of cancelled insurance benefits are two motions: defendant's principal motion for summary judgment on preemption grounds, and defendant's alternative motion for partial summary judgment on the ground that the plaintiff failed to state a claim for bad faith termination of benefits.¹ For the following reasons, both motions will be denied.

BACKGROUND

For many years plaintiff George Stenger maintained a general medical practice as a solo practitioner in New Berlin and Wauwatosa, Wisconsin. In order to provide himself with a stream of income should he become disabled, on August 12, 1971, Dr. Stenger contracted with defendant Provident Life and Accident Insurance Company ["Provident"] to establish an Accident and Sickness Insurance Policy ["the 1971 Policy"]. Pursuant to its terms, the 1971 Policy is to provide Dr. Stenger with a monthly disability benefit in the amount of $1000 beginning on the 91st day of total disability and lasting until Dr. Stenger reaches the age of 65. This policy defines "total disability" as "your inability to perform the duties of your occupation."² Effective on August 12, 1973, the 1971 Policy was amended to provide a higher monthly benefit for total disability—$2000 per month.

Apparently feeling the need for even more protection, Dr. Stenger entered into another contract with Provident for an Accident and Sickness Policy on December 29, 1975 ["the 1975 Policy"]. Pursuant to the 1975 Policy, Provident agreed to pay Dr. Stenger an additional monthly benefit of $1500 beginning on the 91st day of total disability and lasting until Dr. Stenger reaches age 65. The 1975 Policy defines "total disability" in the same way as the 1971 Policy.³

Effective on March 15, 1983, Dr. Stenger entered into a third contract for a Disability Income Policy with Provident ["the 1983 Policy"]. Pursuant to the 1983 Policy, Provident agreed to pay Dr. Stenger a monthly benefit in the amount of $5500 beginning on the 91st day of total disability and lasting until Dr. Stenger becomes 65. This Policy states that "Total disability" means that "1. You are not able to perform the substantial and material duties of your occupation; and 2. You are under the care and attendance of a physician."⁴ All three policies indicate that payments will only be made upon "due written proof" of loss.

At some point Dr. Stenger organized his practice as a corporation, Dr. George S. Stenger, D.O., Ltd. ["GSS"]. He was the sole shareholder of this business. During much of the lifetime of the three disability policies [collectively, "DI Policies"], GSS paid Dr. Stenger's premiums. Beginning in 1979, GSS began offering group health and life insurance to its employees, which also was paid for from the General Ledger of GSS.⁵ This insurance was procured from the United Wisconsin Group and administered by American Medical Security ["AMS"]. Dr. Stenger obtained his health insurance through AMS, as did the up to eight nurses, assistants, and clerical personnel who came to work for him. Besides Dr. Stenger himself, none of GSS's employees received disability insurance, however.

By the early 1990s, Dr. Stenger's practice had become a great success. He counted 7000 people among his patients, operated a 4000 square foot office, and saw more than 60 patients daily. During the mid-1990s, though. Dr. Stenger began to experience physical and psychological problems. At times Dr. Stenger would fail to make hospital rounds or to honor appointments, refusing to accept telephone calls, admit visitors or leave his residence for days on end. Both his personal and professional life suffered as a result.

After extensive testing and treatment, mental health professionals diagnosed Dr. Stenger as suffering from manic depression with suicidal and homicidal ideation and bipolar depression. He was hospitalized for these psychiatric problems from October 25, 1996 to December 9, 1996. Shortly thereafter Dr. Stenger's physical health collapsed, as well. As a result, Dr. Stenger underwent both abdominal and carpal tunnel surgery in the fall of 1997. Dr. Stenger continues to complain of mental and physical problems including carpal tunnel syndrome, a bleeding duodenal ulcer, high blood pressure, a defect in the submuscular branch of the right coronary artery and Brady cardiac arrhythmia. Dr. Stenger has not practiced medicine since his hospitalization in 1996 and remains under the psychiatric care of Dr. Melvin Soo Hoo.

When Dr. Stenger became unable to practice medicine, he contacted the Social Security Agency ["SSA"] and Provident through his accountant, Bernard Mitby of Suby, Von Haden and Associates. Mr. Mitby was also GSS's accountant. The SSA determined that Dr. Stenger had a "condition" that totally disabled him from engaging in "any" type of work and awarded him monthly benefits effective beginning October 25, 1996.⁶ On the private insurance front, Provident mailed Mr. Mitby a claim form and an occupational duties questionnaire on November 5, 1996. These forms were not returned to Provident until February 7, 1997. When they did arrive, the forms indicated that Dr. Stenger sought disability benefits under the DI Policies due to a number of physical and mental impairments.

Upon receipt of Dr. Stenger's claim, it was assigned to Gregory Breter, a Claim Representative in the Disability Operations Department, and Provident began its investigation. On February 12, 1997, Provident wrote to Dr. Stenger to acknowledge receipt of his claim materials, and to inform him that the company was currently in the process of requesting medical records and treatment notes from some of the physicians and medical facilities listed on his claim forms. Provident also requested that Dr. Stenger complete a full questionnaire with regard to his claim for disability benefits. At the same time, Provident requested additional information from Dr. Stenger's Human Resources/Business Manager, his primary treating physician, and the Wisconsin Board of Medical Examiners. Also, a request for background information on Dr. Stenger was made to an organization called "Superbureau."

On March 3, 1997, Provident received medical records from Lakeview Hospital, Sinai Samaritan Hospital, James A. Thurow, and Milwaukee Psychiatric Physicians Chartered. Included in the materials from Milwaukee Psychiatric Physicians was the completed Physicians/Therapist Questionnaire from Dr. Soo Hoo. According to Dr. Soo Hoo, Dr. Stenger was totally disabled from his occupation due to a Bipolar Affective Disorder Type II.

Later in March Provident received medical records from Dr. Arthur Angove, additional medical records from Lakeview Hospital, and a preliminary response concerning its background check from Superbureau. On March 21, 1997, however, Provident contacted Dr. Stenger's assistant, Kathy, indicating that additional information was still required before a decision could be made on Dr. Stenger's claim.

On April 4, 1997, Provident received Dr. Stenger's responses to its questionnaire. Throughout this document, Dr. Stenger attributed his disability to problems he claimed to be experiencing mentally, as opposed to physical injuries or limitations.

After receiving additional information from Superbureau, Mr. Breter referred Dr. Stenger's claim to management on April 14, 1997. Based upon information currently in the claim file, Mr. Breter recommended that payment be issued to Dr. Stenger, but indicated that he would follow up with a field visit and an Independent Medical Examination ["IME"] at some future point. Accordingly, Provident issued Dr. Stenger a check in the amount of $18,000 for benefits due during the period 1/23/1997 to 3/23/1997, less the ninety-day elimination period. In the cover letter accompanying the check, Provident informed Dr. Stenger that under its policies, proof of disability was required on a monthly basis and, therefore, he would be required to submit supplemental forms with attending physicians' statements each month on or about the anniversary date of his claim.

Thereafter, from April 1997 to April 1998, Dr. Stenger submitted to Provident forms entitled "Insured's Supplementary Statement of Claim," which included an "Attending Physician's Statement." On every one of these forms, Dr. Soo Hoo was the only physician certifying Dr. Stenger's disability, though Provident received separate medical records from two doctors named Sadoughian and Robinson on June 17, 1997. On each "Attending Physician's Statement," Dr. Soo Hoo attributed Dr. Stenger's disability to a Bipolar Affective Disorder—Type II.

On September 12, 1997, Provident contacted Psychiatric Disability Consultants, Inc. ["PDC"] for the purpose of arranging an IME of Dr. Stenger. PDC scheduled an evaluation by a psychologist, Dr. Kenneth Smail, on November 25, 1997, and a psychiatrist, Dr. John Pankiewicz, on December 2, 1997. On November 4, 1997, Provident wrote Dr. Stenger to inform him that the company was exercising its right to have him examined by an Independent Medical Examiner.

On November 26, 1997, Provident received a telephone call from Dr. Smail in which he explained that Dr. Stenger had left him a message indicating that he would be unable to attend the IME as previously scheduled. On December 8, 1997, Dr. Smail confirmed that Dr. Stenger did not, in fact, show up for the scheduled examination. Three days later, Provident contacted an attorney representing Dr. Stenger, Bill Tobin, to inquire into the matter. Mr. Tobin indicated that Dr. Stenger had been...