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Evaluating Disability Insurance Claims - What is the Insured's Occupation?

In evaluating disability insurance claims, determining the insured's pre-disability occupation is often a complicated task. Many individuals derive their income from a variety of sources; and courts use two primary approaches in determining whether a person is disabled from performing their own occupation as the following discussion of a recent court ruling decided by a federal court in Michigan shows:

Leonor v. Provident Life and Acc.Ins.Co., 2014 U.S.Dist.LEXIS 59816 (E.D.Mich. April 30, 2014)(Issue: Total versus Residual Disability/Dual Occupation). The plaintiff, a dentist, had to cease working due to a cervical spine disc herniation. His ensuing claim for benefits under three policies issued to him by Provident and Paul Revere Life Insurance Company was initially approved as a "total disability" claim. However, shortly after approving Dr. Leonor's claim, Unum ceased paying benefits. Although the plaintiff ceased practicing dentistry, following his disability, he continued to manage several dental practices and other businesses. Hence, the insurers determined that he was not "totally disabled" as defined by the policies.

The plaintiff had first begun practicing dentistry in 1987; however, shortly after he began his practice, he started acquiring other practices and employed the dentists working there. Leonor also owned supply companies and various commercial and residential properties that generated income. Prior to undergoing surgery in March 2009 to repair a cervical spine disc herniation, the plaintiff still worked as a dentist for 35 to 40 hours per week. However, following the surgery, he ceased performing dentistry, although his income increased. The Paul Revere policy contained the following definitions:

"Total Disability" means that because of Injury or Sickness:

a. You are unable to perform the important duties of Your Occupation; and

b. You are under the regular and personal care of a Physician.

"Residual Disability," prior to the Commencement Date, means that due to Injury or Sickness:

a. (1) You are unable to perform one or more of the important duties of Your Occupation; or (2) You are unable to perform the Important duties of Your Occupation for more than 80% of the time normally required to perform them; and

b. Your Loss of Earnings is equal to at least 20% of Your Prior Earnings while You are engaged in Your Occupation or another occupation; and

c. You are under the regular and personal care of a Physician.

As of the Commencement Date, Residual Disability means that due to the continuation of that Injury or Sickness:

a. Your Loss of Earnings is equal to at least 20% of Your Prior Earnings while You are engaged in Your Occupation or another occupation; and

b. You are under the regular and personal care of a Physician.

"Your Occupation" is defined as "the occupation in which You are regularly engaged at the time You become Disabled." (Pg. ID # 920.)

A second Paul Revere policy contained a nearly-identical set of definitions except that "Your Occupation" was defined as "the occupation or occupations in which You are regularly engaged at the time Disability begins." The Provident policy also defined "Your Occupation" as "the occupation or occupations, as performed in the national economy, rather than as performed for a specific employer or in a specific location, in which You are regularly engaged at the time You become Disabled."

Unum sought summary judgment both as to the question of whether Dr. Leonor was totally disabled as well as whether he was under the care of a doctor as required by the policy. The court found the second issue had not been raised in the defendants' answer, but was also not supported by the evidence. Thus the court easily denied that aspect of Unum's motion.

As to the second issue, the court found that the answer to whether the insured was totally disabled from performing the duties of his own occupation turned on defining Dr. Leonor's pre-disability occupation. From the evidence presented, prior to surgery, Dr. Leonor spent 2/3 of his time performing dental procedures and the other third of his time managing his other dental practices and businesses. However, approximately half of the plaintiff's income was derived from his business activities and not from the active practice of dentistry. Unum used that fact to assert that based on Gross v. UnumProvident Life Ins. Co., 319 F. Supp. 2d 1129, 1150 (C.D. Cal. 2004), income was key factor in determining "important duties." However, the court observed that the nature of one's important duties does not necessarily correlate to income. The court found, "An important duty does not necessarily generate a large portion of one's income. In fact, an essential duty may generate comparatively little income." The court recognized that prior cases on this issue take two approaches:

Under the first approach, upon which Defendants rely, courts have interpreted similar language to mean that an insured must be unable to perform "all" of his important duties to be considered "Totally Disabled." These courts have held that an insured's ability to perform just one important duty precludes a determination of total disability. The logic of the first approach is that where a policy provides for total and residual/partial disability, an insured cannot be "Totally Disabled" if the insured is able to perform some of the important duties of his "Occupation" because any other construction would render the residual/partial disability provision meaningless. For example, in Canu v. Nat'l Life Ins. Co., 12-12838, 2013 WL 1883534, at *6 (E.D. Mich. May 6, 2013), Judge Cohn explained:

National Life correctly states that the "total disability" provisions in the policies must be read together with the "partial/residual disability" provisions. As other courts have held, when a policy provides for both "total" and "residual" disability insurance benefits, the terms must be read in conjunction with one another. When total and residual disability are read together in an insurance policy such as the one here, total disability requires that the insured be unable to perform all of his significant duties of his occupation. See, e.g., Miller v. Northwestern Mut. Life Ins. Co., 392 F.3d 973 (8th Cir. 2004); Dym v. Provident Life and Acc. Ins. Co., 19 F. Supp. 2d 1147, 1149-50 (S.D. Cal.1998). Any other interpretation would render the policies' residual disability provisions nugatory. Such an interpretation would be inconsistent with Michigan's requirement that insurance contracts be read as a whole so as to give effect to every provision.

The second approach identified by the court deems

the definitions of "Total Disability" and "Residual Disability" ambiguous. Using this approach, courts explain that just because an insured is able to continue in "some" of his pre-disability duties, he is not precluded from "Total Disability" benefits. For example, in Giddens v. Equitable Life Assur. Soc. of U.S., 445 F.3d 1286, 1298 (11th Cir. 2006), the Eleventh Circuit Court of Appeals concluded that ambiguity existed in a similar "Total Disability" provision, explaining: "[w]e do not suggest that 'all' is an unreasonable interpretation of the policy language, but we do say that 'most' or the 'majority' of the substantial and material duties is also a reasonable interpretation if an insured is unable to engage in his regular occupation as a result of his inability to perform most or the majority of those duties." Giddens held that the plaintiff-insured was not precluded from showing a "Total Disability" despite retaining an ability to "perform a few substantial and material duties--including . . . selecting house plans, materials, and subcontractors--" because "his ability to perform those tasks in isolation still would not allow [plaintiff] to continue in his real estate development occupation [where] he is unable to perform his entrepreneurial, financial, planning, coordinating, and administrative duties, which were the heart of his real estate occupation." Id. In interpreting similar policy provisions, the Eighth Circuit Court of Appeals reached the same result as the Eleventh Circuit: "[t]he policies' definitions of 'total disability' are susceptible to differing interpretations, because the policies do not speak in terms of "any," "all," "some," or "the most important part" of [the insured's] duties." Dowdle v. Nat'l Life Ins. Co., 407 F.3d 967, 970 (8th Cir. 2005). Dowdle held that a surgeon who could no longer stand long enough to perform orthopedic surgery but who could conduct office visits, see patients, read x-rays, perform independent medical examinations, interpret data, and promote referrals was totally-not residually--disabled because he could not perform "the most important substantial and material duty" of his pre-disability occupation. Id. at 972. Dowdle emphasized that it was relying on Minnesota law, which requires an interpretation in favor of coverage when a contract is ambiguous. As noted previously, like Minnesota, under Michigan law, "[a]mbiguities and reasonable doubts in insurance contracts are construed most favorably to the insured to maximize coverage." Carlyon, 559 N.W.2d at 408.

The court deemed the second approach "more convincing." The court further explained that its interpretation would not nullify the residual disability provision. Instead, the terms "total disability" and "residual disability" create a "continuum of disability." The court referred back to Giddens for the following conclusion:

If the insured is unable to perform only "one or more" of many material occupational duties, then the insured would not be totally disabled. Where the insured . . . is unable to perform most or the majority (but not all) of the material duties and thus cannot engage in his regular occupation, the insured nevertheless is totally disabled from his regular occupation, and this interpretation does not nullify the Residual Disability clause. At some point, a line must be drawn where the disability becomes so severe, and affects such a large percentage of the insured's material and substantial duties, that the disability is total rather than residual. The language of the Residual Disability clause does not suggest where that line should be drawn and certainly does not require that it be drawn only where [the insurance company] suggests.

Giddens, 445 F.3d at 1300-01. The court further concluded that the absence of language about engaging in another occupation as a condition of total disability prevented Unum from arguing that the plaintiff's earnings as a business manager disqualified him from receiving total disability benefits. However, because examination findings revealed that the plaintiff was suffering from anxiety, the mental impairment limitation in one of his policies applied since the disability was wholly or partially caused by a psychiatric condition.

Discussion: There is a lot to digest in this opinion. Although the court relied primarily on the Giddens decision, there are many other supporting cases. Another case involving a dentist is Shapiro v. Berkshire Life, 212 F.3d 121 (2d Cir. 2000). There, because the plaintiff was a "chair dentist" prior to the onset of disability, his inability to perform that occupation qualified him for benefits even though he was able to pursue other business activities. Another ruling that has an extensive discussion about the issues presented here is Giampa v. Trustmark, 73 F.Supp.2d 22 (D.Mass. 1999) which involved a chiropractor who could no longer perform manipulations but was able to continue running clinics. Also see, Pittman v. Standard Ins.Co., 2009 U.S.Dist.LEXIS 5325 (E.D.La. January 15, 2009)(urologic surgeon found totally disabled even though he continued to see patients following surgery and despite his ownership of an imaging center).

For further information, contact Mark DeBofsky (mdebofsky@debofsky.com)

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