JAMES F. McCLURE, JR., United States District Judge
BACKGROUND:
Before the court is a motion for summary judgment on an insurance-based bad-faith claim. Plaintiff John Alexander is suing defendant Provident Life and Accident Insurance Company (Provident) for benefits under a disability insurance policy. The policy provides that in the event Alexander becomes "totally disabled" from his occupation as a manager of a car dealership, he would receive a monthly benefit of $2,000. According to Alexander, in 1994 he was diagnosed with tubular aggregate myopathy, which causes him chronic and progressive symptoms, including fatigue, muscle pain, and loss of balance. Alexander asserts that this affliction has caused him to be unable to perform his job duties and therefore totally disabled. He submitted a disability claim to Provident, but Provident denied the claim.
Alexander then filed a two-count complaint against Provident. Count II of the complaint alleges that Provident's denial of the disability claim was in bad faith, and Provident moves for summary judgment on the bad-faith claim. In order to establish that Provident acted in bad faith, Alexander must show that Provident's denial of benefits lacked a reasonable basis. Because Alexander cannot set forth sufficient evidence that the denial lacked a reasonable basis, summary judgment is appropriate.
DISCUSSION:
I. SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate if the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c).
The moving party bears the initial responsibility of stating the basis for its motions and identifying those portions of the record which demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). "It can discharge that burden by `showing' — that is, pointing out to the district court — that there is an absence of evidence to support the nonmoving party's case." Id. at 325.
Once the moving party points to evidence demonstrating that no issue of material fact exists, the non-moving party has the duty to set forth specific facts showing that a genuine issue of material fact exists and that a reasonable factfinder could rule in its favor. Ridgewood Bd. of Educ. v. N.E., 172 F.3d 238. 252 (3d Cir. 1999) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). "Speculation and conclusory allegations do not satisfy this duty." Ridgewood, 172 F.3d at 252 (citing Groman v. Township of Manalapan, 47 F.3d 628, 637 (3d Cir. 1995)).
II. STATEMENT OF FACTS
The relevant policy is Provident policy number 6PC-369479. (See Policy, Attached to Complaint, Exhibit 1 of Defendant's Brief, Rec. Doc. No. 22.) The policy states that in the event of "total disability," Alexander would receive benefits monthly until his 65th birthday. "Total disability," as it applies to Alexander, is defined by the policy as "your inability to engage in any gainful occupation in which you might reasonably be expected to engage because of education, training or experience, and with due regard to your vocation and earnings at the beginning of disability." (Policy at 4.)
On December 31, 1997, Alexander provided Provident with a "statement of claim." He described his condition as "myopathy, muscle pain, dizziness/loss of balance, nausea, muscle tremor." In response to a question of what duties he was unable to perform, he wrote "difficult standing while talking, negotiating, or physical activity." (Statement of Claim, Defendant's Exhibit 2.)
In early 1998, a Provident Field Representative attempted to contact Alexander. She had a difficult time getting in touch with him, and on February 26, 1998, she called his dealership. The person answering the phone stated that Alexander was "in and out" a lot but that he would return messages. The next week, the representative called the dealership and was told that while Alexander was not at work that day, he would probably call for his messages. The two finally met on March 5, 1998, and during that interview Alexander stated that a prime concern preventing him from performing his job duties was his loss of balance and that he was "afraid to get up and move around." (Field Referral Report, Defendant's Exhibit 3.)
On March 28, 1998, Provident began a process of surveilling Alexander. That day, Alexander left his home and traveled approximately 100 miles. Three days later, he traveled in a truck with two other men to a local storage facility. There, Alexander was seen operating a motorcycle, climbing onto the bed of a truck, and pushing a lawn tractor into a pickup truck. Later that day, he was seen unloading the lawn tractor from the back of the pickup truck.
On April 14, 1998, Alexander was spotted driving a car containing a passenger. He stopped the car along the road in order to switch places with the passenger. While he was outside of the car, he kneeled at the rear of the car while exchanging its dealership tag for a temporary license plate.
On May 1, 1998, Alexander submitted an "insured's supplementary statement of claim." In that statement, in response to a request that he describe his current daily activities, he wrote "read newspaper, watch TV, light exercise, rest." He stated that he suffered from dizziness, fatigue, and poor coordination. (Supplementary Statement of Claim, Defendant's Exhibit 5.)
The surveillance continued. On May 22, 1998, Alexander was seen traveling in a car with three other people. The car stopped at a gas station near Alexander's home. Alexander cleaned the car's windshield while the another man pumped gas. The car then traveled to a store approximately 40 miles from Alexander's home. That day, Alexander was away from his home for more than four hours.
On June 18, 1998, Alexander filled out another supplementary statement of claim. He again described his current daily activities with the phrase "read newspaper, watch TV, light exercise, rest." In response to a question of whether he had been at his place of business, he stated that he had gone there to pick up personal mail and a card from a customer. (Supplementary Statement of Claim, Defendant's Exhibit 7.)
On July 21, 1998, a man in a green truck arrived at Alexander's home. The man exchanged license plates with a white minivan and entered Alexander's home. Alexander exited the house and backed the minivan into the garage and then loaded two items into the rear of the van. Later that day, Alexander left his home driving the green truck, which contained an "Alexander Dealership." emblem. He drove to a car wash, where he used a high-powered sprayer to wash the truck. After he returned home, he washed the truck with a cloth. Then he drove the truck to a local business. At the site of this business, he met another man, who inspected the truck and completed paperwork. Alexander drove another truck back to his house.
The next day, Alexander loaded yard debris and branches into this other truck. He drove the truck to a nursery, where he obtained shrubs. He returned to his house and unloaded the shrubs from the truck. Later, he shoveled mulch from the bed of a truck and raked the mulch around trees and shrubs.
On July 20, 1998, Alexander underwent an independent medical examination (IME). The examiner, Dr. Laurence A. Primack, failed to disclose to Provident prior to the IME that he counted as a colleague Dr. Emile Pierre Roy, who was Alexander's treating physician. Primack stated his conclusion regarding Alexander: "Despite a normal examination, [Alexander] certainly has symptoms consistent with a tubular aggregate myopathy. I have actually discussed this case personally with Dr. Roy, who is, of course, a colleague of mine." (See IME Report of Laurence A. Primack, M.D., Defendant's Exhibit 9.)
On August 11, 1998, Alexander submitted a third supplementary statement of claim. He described his current daily activities with the phrase "light exercise when able, rest, read few news articles, watch TV." In response to a question of which duties of his occupation he is unable to perform, he wrote "all." (See Supplementary Statement of Claim, Defendant's Exhibit 10.)
Provident forwarded the IME report to its in-house physician, Dr. Dowell. Citing the potential bias stemming from the fact that Primrack was Dr. Roy's "colleague" and the fact that Primack's conclusion was inconsistent with the surveillance, Dowell discredited Primack's IME report. More surveillance was ordered.
On October 27, 1998 at approximately noontime, Alexander exited his garage carrying a stepladder. The same day, he used a sander around the windows behind his house. From noon until 5:00 PM, he sanded and painted while climbing up and down the stepladder.
Approximately two weeks later, Alexander submitted a fourth supplementary statement of claim. It was consistent with the previous three, and it stated that at times he felt lightheaded and experienced loss of balance and memory loss. (See Supplementary Statement of Claim, Defendant's Exhibit 13.)
On November 23, 1998, Alexander underwent another IMB, which was administered by Dr. Kornel Lukacs. After examining Alexander and viewing a surveillance videotape, Lukacs determined that Alexander's disability claim was baseless:
I do feel that the videotape . . . does prove sufficient evidence that [Alexander's] able to engage in normal and sustained physical activity, he's able to walk normally, he's able to use the arms and legs normally, he's able to kneel, bend in a consistent, repetitive fashion. Therefore, it has been established with a reasonable degree of medical certainty that he's able to function in a normal fashion and there is significant symptom magnification. Based on the evidence on the video tape (as well as it was suspected during the examination), it is felt that his claim for disability in not substantiated and this statement, especially based on the video tape, could be supported factually and substantially.
(IME Report of Kornel Lukacs, M.D., Defendant's Exhibit 15.)
On December 18, 1998, Provident sent Alexander a letter stating that it had determined that he was not totally disabled. The letter stated that while benefits were paid up to the point that Provident received the final report from Lukacs, Provident reserved its rights to seek recovery of all benefits paid. (Letter Dated 10/18/98, Defendant's Exhibit 17.) Alexander, through attorney Jonathan H. Rudd, wrote Providence a letter contesting the decision, and Provident responded by explaining its impression that Primack was not an impartial examiner. (Defendant's Exhibits 18, 19.)
Alexander sent Provident three additional medical reports, each of which was completed after December 18, 1998 (the day Alexander's claim was initially denied). He also informed Provident that since Provident's denial of his claim, two things occurred: (1) he received disability benefits based on his ailment from Principal Financial Group, his employer's disability insurance company; and (2) he received Social Security benefits. While Provident was reviewing this information, Alexander filed the instant lawsuit.
III. ANALYSIS
Pennsylvania has enacted a statute to control Pennsylvania bad-faith claims. See 42 Pa.C.S. § 8371. The statute provides:
In an action arising under an insurance policy, if the court finds that the insurer has acted in bad faith toward the insured, the court may take all of the following actions:
(1) Award interest on the amount of the claim from the date the claim was made by the insured in an amount equal to the prime rate of interest plus 3%.
(2) Award punitive damages against the insurer.
(3) Assess court costs and attorney fees against the insurer.
Id. "`[T]o recover under a claim of bad faith, the plaintiff must show that the defendant did not have a reasonable basis for denying benefits under the policy and that defendant knew or recklessly disregarded its lack of reasonable basis in denying the claim.'"
Petrecca v. Allstate Ins. Co.,
797 A.2d 322, 325 (Pa.Super. 2002) (quoting
Terlestsky v. Prudential Property Casualty Ins. Co.,
649 A.2d 680, 688 ( Pa. Super. 1994)). "`These two elements — absence of a reasonable basis for denying a claim under the policy and knowledge or reckless disregard of the lack of such reasonable basis — must be proven by clear and convincing evidence.
Krisa v. Equitable Life Assurance Society,
113 F. Supp.2d 694, 703 (M.D. Pa. 2000) (citing
Klinger v. State Farm Mut. Auto. Ins. Co.,
115 F.3d 230, 233 (3d Cir. 1997)).
In Krisa, Judge Vanaskie of the Middle District of Pennsylvania synthesized a number of bad-faith cases and gleaned the principle that in order to survive bad-faith claims, an insurance company's procedures must be reasonable, but they need not be perfect:
[F]or an insurance company to show that it had a reasonable basis, an insurance company is not required to demonstrate its investigation yielded the correct conclusion or even that its conclusion more likely than not was accurate. The insurance company also is not required to show the process by which it reached its conclusion was flawless or that the investigatory methods it employed eliminated possibilities at odds with its conclusion. Rather an insurance company simply must show it conducted a review or investigation sufficiently thorough to yield a reasonable foundation for its action.
Id. at 704 (collecting cases).
Provident had a reasonable basis to deny Alexander's disability claim. It had before it two separate IME reports, and it reasonably relied on Kovacs's report, which stated that Alexander was not totally disabled. Even without the benefit of the IME report, it relied on the extensive surveillance evidence. The undisputed surveillance evidence showed Alexander traveling far distances from his house, loading and unloading a tractor from a pickup truck, operating a high-powered sprayer to wash a truck, shoveling mulch, and sanding his windows and painting his house while climbing up and down a ladder. These activities are directly contradictory to Alexander's claims both that he was unable and afraid to move freely and that his activity was limited mainly to resting and watching television. Further, Alexander's activities captured on videotape suggest that he was selling cars, which was a main function of his job. Based on Kovacs's definitive IMB report and the compelling videotape evidence, Provident's decision did not lack a reasonable basis.
According to Alexander, Provident's bad faith is evident from three things: (1) Provident disingenuously found another independent medical examiner after receiving Primack's report; (2) Provident did not fully rely on information from Dr. Roy, his treating physician; and (3) Alexander received both alternate insurance benefits and Social Security benefits, each of which was given to compensate him for his tubular aggregate myopathy.
First, Provident's decision to obtain another examiner was in response to Primack's potential bias; Alexander cannot show otherwise. Second, while Provident may not have relied on all possible information, it relied on an independent examination of Alexander and incontrovertible evidence of actions inconsistent with his described symptoms. Provident was not required to show that its process was flawless or that it eliminated possibilities at odds with its conclusion. Alexander's disagreement with the result of Provident's investigation is not enough to show that Provident lacked a reasonable foundation for its action. Third, Alexander's receipt of other benefits does not necessarily establish bad faith. The law allows for the possibility that an insurer makes an incorrect decision; the insurer "is not required to demonstrate its investigation yielded the correct conclusion or even that its conclusion more likely than not was accurate." Id. The bottom line is that while Provident's methods may have been lacking, its conclusion did not lack a reasonable basis.
CONCLUSION:
Alexander has failed to show that Provident's decision to deny his disability claim lacked a reasonable basis. Accordingly, summary judgment will be granted on his bad-faith claim.
ORDER#1
For the reasons set forth in the accompanying memorandum,
IT IS ORDERED THAT:
1. Defendant's motion for partial summary judgment (Rec. Doc. No. 21) is granted.
2. The clerk is directed to defer entry of judgment in favor of defendant and against plaintiff on Count II of plaintiff's complaint until the conclusion of the case.