KARLIN v. PAUL REVERE LIFE INSURANCE COMPANY

Should it appear from the affidavits of a party opposing the motion that the party cannot for reasons stated present by affidavit facts essential to justify the party's opposition, the court may refuse the application for judgment or may order a continuance to permit affidavits to be obtained or depositions to be taken or discovery to be had or may make such other order as is just.

The nonmovant must satisfy several requirements to obtain relief under Rule 56(f). By affidavit, he must explain: (1) why facts precluding summary judgment are unavailable; (2) what probable facts he can find through further discovery; (3) what steps he has taken to obtain such facts; and (4) how additional time will allow him to controvert facts.

In this case, the parties agreed to submit the instant cross-motions for summary judgment on stipulated facts and to forego discovery for now, in order to obtain an opinion from the Court on the meaning of the Policy. Although defendants' motion limits the facts to those stipulated by the parties, Dr. Karlin's motion and briefs in support rely on nineteen paragraphs of additional "supplemental" uncontroverted facts and his own affidavit in support, attesting to the nature of his disability and details of his duties as an interventional radiologist.

In response, defendants filed a Rule 56(f) affidavit. Christopher Leopold, an attorney for defendants, states that Dr. Karlin attached to his affidavit a previously undisclosed document from Hokanson, Lehman Stevens, Inc. ("Hokanson"), an insurance brokerage that marketed Paul Revere LTD products to Radiology Associates. Leopold states that defendants need to conduct discovery on some of the factual averments in plaintiff's statement of additional facts, including deposing plaintiff about his job duties, practice responsibilities, physical abilities, statements made to him about the contractual requirements, employment history and educational background, sources of income, decision to return to work after claiming to be disabled, and any changes in his practice or job duties during 2004 through 2006. Leopold also states that defendants need to subpoena documents from plaintiff's two practice groups as well as other entities for whom he did work, and gather information about what types of procedures he performed for these entities, the job duties and responsibilities associated with those procedures, the income or earnings associated with his work with those entities, and any changes in his practice or job duties during 2004 through 2006. Leopold states that defendants also need to depose several individuals regarding plaintiff's job duties and medical condition, as well as representatives of Hokanson about statements allegedly made to plaintiff concerning the contractual requirements of the Policy and about Hokanson's relationship with Alliance

Radiology in order to determine if an agency relationship existed.

The Court finds that defendants' affidavit satisfies the requirements of Rule 56(f). Notably, the parties agreed to follow a procedure for filing early summary judgment motions before discovery had been completed. Allowing Dr. Karlin's supplemental facts and affidavit to be considered under these circumstances would be inappropriate. The nature and circumstances of Dr. Karlin's "important duties" are central to the remaining issue pending before the Court. Rule 56(f) rests on the principle that "summary judgment [should] be refused where the nonmoving party has not had the opportunity to discover information that is essential to his opposition." As discussed further below, in the interests of justice, the Court denies plaintiff's motion without prejudice for renewal on the issue of whether Dr. Karlin is "totally disabled," and will consider only those facts stipulated to by the parties in considering the remaining issues.

A. Breach of Contract

Dr. Karlin contends that Paul Revere breached its contract with him by denying his claim for total disability benefits. This dispute turns on the meaning of "Total Disability" as delineated in the Policy, which requires the Court to address two issues: 1) whether the Policy is ambiguous; and 2) whether Dr. Karlin was unable to perform any of the important duties of his occupation at the time of his disability. The Court addresses each in turn.

Defendants argue that in order to be totally disabled, Dr. Karlin must be unable to perform "any" of the important duties of his occupation. Defendants contend that because Dr. Karlin still performs diagnostic radiology, he is not totally disabled and therefore not entitled to total disability benefits. Dr. Karlin argues that the Policy's definition of total disability is ambiguous and must be interpreted in the manner that is most favorable to him, meaning that he only has to be unable to perform one important duty to be totally disabled.

In resolving this issue, it is well settled that this Court must attempt to ascertain and apply state law, which in this case is the law of Kansas. The Court must look to the rulings of the state's highest court and, where no controlling state decision exists, the Court must endeavor to predict how the state's highest court would rule. The Court should consider analogous decisions by the state supreme court, decisions of lower courts in the state, decisions of federal and other state courts, and the general weight and trend of authority. Ultimately, the Court's task is to predict what decision the Kansas Supreme Court would make if faced with the same facts and issue.

In Kansas, the insured bears the burden of proving entitlement to benefits under a disability policy. The interpretation of an insurance contract is a question of law. If the language in an insurance policy is clear and unambiguous, it must be construed in its plain, ordinary and popular sense and according to the sense and meaning of the terms used. An insurance policy is ambiguous when it contains language of doubtful or conflicting meaning based on a reasonable construction of the policy's language. An ambiguity does not exist merely because the parties disagree on the interpretation of the language.

To determine whether an insurance contract is ambiguous, the Court must not consider what the insurer intends the language to mean. Instead, the Court must view the language as to what a reasonably prudent insured would understand the language to mean. This does not mean that the policy should be construed according to the insured's uninformed expectations of the policy's coverage. Courts should not strain to find an ambiguity when common sense shows there is none. The Court must consider the terms of an insurance contract as a whole, without fragmenting the various provisions and endorsements. "As a general rule, exceptions, limitations, and exclusions to insurance policies are narrowly construed. The insurer assumes the duty to define limitations to an insured's coverage in clear and explicit terms." To restrict or limit coverage, an insurer must use clear and unambiguous language, otherwise, the insurance policy will be construed in favor of the insured.

The Policy provides that in the event of disability, Dr. Karlin would be eligible for total disability or residual disability benefits. The Policy defines "Total Disability" as occurring when the insured, because of injury or sickness, is unable "to perform the important duties of Your Occupation." The Policy defines "Your Occupation" as "the occupation or occupations in which You are regularly engaged at the time Disability begins." To be considered residually disabled under the Policy, an insured must be "unable to perform one or more of the important duties of Your Occupation."

The interplay between the "Total Disability" and "Residual Disability" provisions at issue in this case is an open question under Kansas law. Dr. Karlin contends that the failure of the Policy to define "important duties of Your Occupation" renders the Policy ambiguous. Dr. Karlin asks the Court to apply cases that conclude that the definition of "Total Disability" is ambiguous because it is susceptible to multiple interpretations as it does not speak in terms of "any," "all," "some" or "the most important" part of the insured's duties. Dr. Karlin argues that defendants' interpretation would limit coverage to only the most extreme cases of incapacity. Defendants contend that the Policy is unambiguous and ask the Court to follow the line of cases holding that in order to recover total disability benefits, an insured is "obligated to show that his disability prevented him from performing all of those duties, not just some of them.

When construed as a whole, the Court agrees that the Policy language is unambiguous: a person who can perform some but not all of his or her important duties has a "Residual Disability" within the meaning of the Policy, and thus, in order to be eligible for total disability benefits, a person is required to show that he or she is unable to perform any of those important duties. To read it otherwise would not give effect to both parts of the Policy, and renders the term "Residual Disability" superfluous. Although Kansas courts have not weighed in on this issue, this construction conforms with the law of insurance contract construction and the results reached by other courts faced with interpreting identical or substantially identical language. Accordingly, the Court does not consider the various parole evidence that Dr. Karlin cites. Defendants' motion for summary judgment is granted on this issue.

2. "Important Duties"

The Court turns to the issue of whether Dr. Karlin was unable to perform any of the important duties of his occupation at the time of his disability. The Policy does not define "important duties." Kansas courts have recognized, generally, that "[u]nder `occupational' coverage, if an insured is unable, by reason of his disability, to perform the ususal and customary duties of his actual occupation, disability payments are owing." The parties do not cite, nor did the Court's research find, any Kansas case law defining or discussing the term "important duties" in the context of a total disability clause in an occupation policy. Several other courts have analyzed identical or substantially similar clauses in the context of various occupations, including physicians. Indeed, many of these cases involve occupation policies issued by Paul Revere and/or Unumprovident. The courts agree, generally, that a policy that insures against the inability to work at one's usual occupation does not require total helplessness of the insured, but instead, it is sufficient that the insured cannot perform all the "substantial and material" duties of his occupation in the ususal and customary manner. The parties do not dispute this so-called "substantial performance test," but rather, advocate different approaches to its application under the Policy in this case.

Dr. Karlin argues that the Court should apply a qualitative analysis rather than a quantitative analysis when assessing the "important duties" of his occupation. Dr. Karlin argues the proper standard is whether he can continue in his pre-disability occupation or whether he is essentially performing another occupation altogether, although using some of the skills he employed in his predisability occupation. If he is prevented from performing some "indispensible" part of his occupation, then he is unable to perform the important duties of that occupation. Dr. Karlin argues that his occupation at the time of his disability consisted predominantly of interventional procedures, and that interventional procedures were the "most important duties" of his occupation as an interventional radiologist. Dr. Karlin urges the Court to follow the line of cases that allow an insured to establish total disability if he is unable to perform the most important or the majority of the substantial and material duties of his occupation. However, several of the cases cited by plaintiff are inapposite to this case because the courts framed the standard in the context of holding that the "total disability" language in the various policies was ambiguous.

Defendants counter that they do not rely on a purely quantitative analysis and under either standard, Dr. Karlin does not meet the Policy's definition of total disability. Defendants maintain that Dr. Karlin's occupation at the time of his disability in June 2006 was that of an interventional radiologist with two important duties — interventional and diagnostic radiology. Alternatively, defendants contend that plaintiff had two separate occupations and remains able to perform one of them, diagnostic radiology. Defendants urge the Court to apply a fact-oriented, functional approach to determining whether an insured is totally disabled, which focuses in

part on signs of "professional transition" in the plaintiff's occupation.

In Hershman v. Unumprovident Corp., cited by defendants in support of their position, the court applied New York law in examining a disability claim made by a cardiologist who claimed that he was disabled because he could no longer practice "invasive cardiology." The relevant language in Dr. Hershman's policy, including the definition of "Total Disability" and "Your Occupation" is identical to the language in Dr. Karlin's policy. Dr. Hershman claimed that pain in his lower back, most likely caused and aggravated by the heavy lead apron he was required to wear during invasive procedures, caused his disability. Dr. Hershman stopped practicing invasive cardiology procedures, but continued to practice "consultative" cardiology, examining patients in his office. The court noted that New York courts had construed language substantially similar to "important duties" to mean that an insured is totally disabled if "he or she is no longer able to perform the `material' and `substantial' responsibilities of his or her job." The court explained, "[p]ut differently, an insured is totally disabled where his condition prevents him from performing work `of the same general character as the insured's previous job, requiring similar skills and training, and involving comparable duties . . .,'" "The [total disability] question entails a `fact-oriented, functional approach that look[s] to the professional activities in which the insured was regularly engaged . . ., "

The court noted that under this rule, if an insured routinely performs a specialty "but also devotes substantial time" to a non-specialty practice, or the non-specialty practice is not merely "incidental" to the specialty practice, the insured is not totally disabled by an inability to perform the specialty. Thus, the court found, Dr. Hershman was totally disabled if his back injury prevented him from performing work "of the same general character . . . requiring similar skills and training" as that which he previously performed. "To the extent his pre-disability work encompassed more than one distinct set of occupational duties — if he did, as defendants argue, practice both invasive and non-invasive cardiology, and if his non-invasive work was not `incidental' to his invasive surgeries — he is not totally disabled if he is able to perform either occupation."

In ruling for the insurance company, the court found that there was "far too much continuity between [plaintiff's] work before and after the onset of his back condition to sustain a `total disability' finding." The "only professional consequence" of Dr. Hershman's disability was his inability to perform invasive procedures, while everything else remained the same, including his practice with two practice groups and his income. "[I]f [plaintiff] had switched into a specialty that did not comprise more than an incidental portion of his prior practice, one would expect to observe signs of professional transition." Additionally, while acknowledging that loss in income was not required by the policy, the court noted that "trends in net income are relevant to the question of whether the insured's disability actually caused a change in occupation." The court concluded, "[a]t best, then, plaintiff was a cardiologist with two sets of duties, consultative and invasive," and his inability to do one set of duties did not satisfy the definition of total disability, which required him to be unable to do both.

The Court has reviewed the cases cited by the parties and finds the approach taken by the Southern District of New York both persuasive and compatible with the limited guidance provided by Kansas courts. In fact, the standard set forth in Hershman is not unlike that articulated in several cases cited by Dr. Karlin. In Gross v. Unumprovident Life Insurance Co., for example, the insured's policy also utilized the "important duties" language as a requirement for total disability. Applying California law, the court found that in order to determine whether the insured, an orthopedic surgeon, was totally disabled, "it is necessary to determine the contours of Plaintiff's pre-disability practice in order to ascertain which duties were important and which were merely incidental and to determine whether he continues to perform his pre disability duties in substantially the same manner." And, in Raithaus v. UNUM Life Insurance Co. of America, the court held that determining whether the insured was totally disabled required a qualitative analysis into whether surgery was a "material and substantial duty" of the plaintiff's regular occupation as a urologist. The court explained, "[i]n other words, what were the duties Plaintiff was expected to perform as a urologist? And, could plaintiff work as a urologist without performing any of those duties?"

Defendants argue that the stipulated facts demonstrate that diagnostic radiology was an important duty of Dr. Karlin's pre-disability occupation because, as in Hershman, there was no sign of professional transition after the onset of his disability. As the parties stipulate, Dr. Karlin admits that a portion of his practice in the months leading up to his claim for benefits was made up of diagnostic radiology, and that he earns the same amount of money as he did prior to his disability. Dr. Karlin counters, however, that defendants' statements about the nature and amount of his diagnostic work at the time in question are misleading, as he scaled back his interventional duties in stages, and that a percentage of his diagnostic work was incidental to interventional procedures. Given the "unique and specialized nature" of interventional radiology, and its prominence in his pre-disability occupation, Dr. Karlin argues that his disability has forced him out of that occupation and into another.

Applying the functional, fact-based analysis articulated above, the Court is unable to rule for either party as a matter of law on the present record. Although Hershman was decided on summary judgment, the Court notes that the record before that court was more extensive than in this case. The stipulated facts present minimal information on the nature of Dr. Karlin's duties as an interventional radiologist leading up to the date of his disability, as illustrated by Dr. Karlin's supplemental facts and affidavit and as outlined in defendants' responsive affidavit lodged under Rule 56(f). Accordingly, the Court denies both parties' motions for summary judgment on this issue, without prejudice to later renewal after discovery has been completed.

Count IV of Dr. Karlin's Complaint asserts a claim for negligent misrepresentation. Dr. Karlin states that when he purchased the Policy, an unidentified agent of defendants misrepresented certain terms of the Policy to him. Defendants argue that the ten-year statute of repose bars Dr. Karlin's negligent misrepresentation claim.

Kansas law provides a two-year statute of limitations for fraud and tort claims, including plaintiff's claim for negligent misrepresentation. Under Kansas law, the statute of limitations begins to run when the claim accrues, which for certain tort claims occurs when the fact of the injury becomes "reasonably ascertainable" to the injured party. K.S.A. § 60-513(b) provides, however, that "in no event shall an action [subject to the two-year statute of limitation] be commenced more than 10 years beyond the time of the act giving rise to the cause of action." This ten year statute of repose "require[s] a negligence action to be brought within 10 years of the wrongful act." "Statutes of repose are generally substantive and abolish a cause of action after a specific time period, even if the cause of action may not have accrued yet." In this case, the wrongful act in question is the statement made at the time Dr. Karlin purchased his Policy in 1992. This lawsuit was not filed until February 2009, more than ten years after the wrongful act.

Dr. Karlin does not dispute that § 60-513(b) applies to his negligent misrepresentation claim or that the statements at issue occurred outside the ten-year statute of repose. Instead, he asserts the defense of equitable estoppel, arguing that Paul Revere's statements and actions between 1993 and 2005 induced him to believe that the alleged misrepresentation was true. Specifically, Dr. Karlin contends that he relied on statements by Paul Revere's agents that the Policy's definition of "total disability" included the insured's inability to perform a subspecialty within the specialty of radiology. Because Dr. Karlin reasonably believed that he had no cause of action for misrepresentation, he argues that defendants are estopped from asserting the statute of repose as a defense.

The Court disagrees. To the extent the defense of equitable estoppel bars the application of the statute of repose, it appears to be limited to claims for fraud. In Robinson v. Shah, a divided panel allowed the defense in a medical malpractice case "where the defendant's own fraudulent concealment has resulted in the delay in discovering the defendant's wrongful conduct." There is no question that the claim in this case is for negligence rather than fraud. Defendants' motion for summary judgment is granted on this claim.

IT IS THEREFORE ORDERED BY THE COURT that defendants' Motion for Summary Judgment (Doc. 21) is GRANTED in part with respect to the question of whether the Policy is ambiguous and with respect to plaintiff's negligent misrepresentation claim;

IT IS FURTHER ORDERED that the parties' cross-motions for summary judgment (Docs. 18, 21) are DENIED without prejudice to renew with respect to the issue of whether plaintiff is totally disabled as defined by the Policy and consistent with the rulings herein.

IT IS SO ORDERED. Dated: September 24, 2010