Opinion
Civil No. 99-808 (JRT/FLN)
October 9, 2001
Thomas Bennett Wilson, III, WILSON LAW OFFICE, 7600 France Avenue South, Suite 558, Edina, MN, 55435, for plaintiff.
Terrance J. Wagener, KRASS MONROE, 1100 Southpoint Center, 1650 West 82nd Street, Bloomington, MN, 55431, for defendant.
MEMORANDUM OPINION AND ORDER
Plaintiff Shirley Adzick brings this declaratory judgment action against her disability insurer, defendant UNUM Life Insurance Company of America ("UNUM"). Following plaintiff's submission of an application for insurance on February 28, 1993, UNUM issued plaintiff a long-term disability policy (the "policy"). Plaintiff filed a claim for long-term disability benefits in January 1997, which UNUM denied. UNUM seeks to rescind the policy based on several alleged misrepresentations on plaintiff's application for insurance. This matter is before the Court on UNUM's motion for summary judgment. Alternatively, UNUM seeks partial summary judgment denying any claim for benefits arising after February 26, 1998, on the basis that plaintiff has failed to present any evidence that she meets the policy's definition of "totally disabled" for the period after that date. For the reasons set forth below, the Court denies UNUM's motion for summary judgment, but grants partial summary judgment to UNUM on the issue of whether plaintiff meets the policy's definition of "totally disabled" after February 26, 1998.
Plaintiff also filed a motion for summary judgment on the basis of the policy's incontestability clause. During the course of the parties' briefing, it became c lear that defendant intended to rely on the fraudulent misstatement exception to the incontestability clause, and obtained leave from the Magistrate Judge to amend its answer in order to allege fraud. In light of these developments, plaintiff withdrew her motion at oral argument.
BACKGROUND
At the time plaintiff applied for disability insurance from UNUM, she was a practicing dentist and was an employee of Pentagon Dental. On her insurance application, plaintiff answered "no" to the following question: "Other than already mentioned in this application, have you in the past five years regularly used, or do you currently use, cocaine, amphetamines, hallucinogens, barbiturates, heroin or any other narcotic drug?" Plaintiff also reported her 1993 projected income to be $35,000 and her income for 1991 and 1992 "as reported on your federal income tax return" to be $30,000 per year.
In 1996, the state Board of Dentistry investigated a number of patient complaints against plaintiff. As part of the investigation, plaintiff entered a Professional Assessment Program ("PAP") at Abbott Northwestern Hospital. The PAP team found that "Dr. Adzick is clearly actively dependent upon cocaine and appears to have been in this pattern for approximately twenty years"; the report also states that "Shirley began using cocaine in her late teens and reports a twenty year history of cocaine use . . . she acknowledged that she has a significant dependency on cocaine which has, except for her pregnancies, been more or less continuous." In March of 1997, plaintiff was admitted to a recovery program at Talbott Marsh Recovery Center in Atlanta, Georgia. The admission note states that plaintiff "has been snorting [cocaine] for 22 years." Another note states that plaintiff "identifies herself as a drug addict and describes a 22 year history of using cocaine. She has been a dentist for 12 years and admits to having used cocaine throughout her work as a dentist but states she did not use at work."
Following her discharge from Talbott Marsh, plaintiff sought treatment from Dr. Sheila Specker. A June 1997 progress note by Dr. Specker states that "Dr. Adzick reports using cocaine intermittently until 1992. From 1992 to the present it developed into a substantial problem for her. . . . The only time she has been able to stop using cocaine for a substantial period of time is when she had a child." On April 4, 1997, plaintiff signed a stipulation and order with the Board of Dentistry acknowledging "habitual use of and dependency on cocaine." The stipulation further stated that during her PAP plaintiff acknowledged a "twenty-year history of cocaine use, which was more or less continuous during that time except during [plaintiff]'s pregnancies, and significant dependence on cocaine."
Plaintiff offers two responses to this evidence. First, she contends that she suffers from a memory impairment and her medical records are inherently unreliable because there are numerous factual discrepancies apparently attributable to this impairment. The evidence of her memory impairment stems from a September 1997 neuropsychological evaluation in which the doctor found "[r]ecent memory is mildly impaired, particularly under verbal conditions. . . . In any event, the cognitive deficits are not severe enough to preclude a return to her dental practice." Plaintiff cites two discrepancies in her medical records: the age at which she was first married and the timing of her PAP (Talbott Marsh records indicate that the PAP team referred her to Talbott Marsh three years previously, when in fact it had only been a couple of weeks). Second, in her deposition, plaintiff explains that when she stated to medical professionals that she used cocaine for twenty years, that was not from a "layperson" perspective but rather from a "recovery" or "treatment" perspective, according to which she is supposed to call herself an addict from the very first time she used cocaine. According to her testimony, she used cocaine only rarely before 1995.
Plaintiff's tax returns reflect her adjusted gross income to be $17,125 for 1991, $17,600 for 1992, and $0 for 1993. As noted above, her insurance application states that her income for those years was $30,000, $30,000, and $35,000, respectively. Plaintiff argues that she is not to blame for this discrepancy because her income was difficult to track. She notes that her employer answered the application questions regarding her income because she did not actually know her income. Plaintiff was paid on a monthly basis, with no statement of earnings to date. While she was paid as an employee, her employer deducted expenses from her patient collections. In comparison to other dentists with whom she worked, the ratio of plaintiff's salary to her patient collections was small. She suspected that her employer overcharged her for expenses and expected to collect additional income after a reconciliation of accounts.
Plaintiff filed a claim for benefits in February 1997. Although the parties do not explicitly specify the basis of her claim, UNUM does not dispute that plaintiff's cocaine addiction caused her to be "totally disabled" within the meaning of the policy until February 26, 1998. The policy defines "totally disabled" as follows:
In her complaint, plaintiff alleges that she filed a claim for benefits in February 1997. Other evidence indicates that she is claiming benefits from and after January 23, 1997. UNUM's expert opined that plaintiff was totally disabled as a result of cocaine dependence from February 12, 1997 until February 20, 1998, but UNUM concedes that her disability extended to February 26, 1998, which was the day plaintiff last saw Dr. Specker. The parties do not address the issue of the appropriate date for the commencement of plaintiff's disability, however, and the Court will therefore not resolve it.
1. Injury or sickness restricts your ability to perform the material and substantial duties of your regular occupation to an extent that prevents you from engaging in your regular occupation; and
2. you are receiving medical care from someone other than yourself which is appropriate for the injury or sickness. We will waive this requirement when continued care would be of no benefit to you.
Plaintiff has not used cocaine since February 1997 and does not claim that she is currently disabled as a result of her cocaine dependence. Instead, she claims that she suffers from disabling depression, which she treats with over-the-counter herbal medications. Although there appears to be little or no record evidence on this point, plaintiff also claims she attends support groups. There is no dispute that plaintiff has not been under psychiatric care or otherwise received treatment for depression since February 26, 1998, the day she last saw Dr. Specker.
ANALYSIS
A. Standard of Review
Summary judgment is appropriate where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. SeeFed.R.Civ.P. 56(c). Only disputes over facts that might affect the outcome of the suit under the governing substantive law will properly preclude the entry of summary judgment. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In considering a motion for summary judgment, a court is required to view the facts in a light most favorable to the nonmoving party. See Lomar Wholesale Grocery, Inc. v. Dieter's Gourmet Foods, Inc., 824 F.2d 582, 585 (8th Cir. 1987). Summary judgment is to be granted only where the evidence is such that no reasonable jury could return a verdict for the nonmoving party. See Anderson, 477 U.S. at 248. The moving party bears the burden of bringing forward sufficient evidence to establish that there are no genuine issues of material fact and that the movant is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
B. UNUM's Motion for Summary Judgment
UNUM moves for summary judgment on the basis of plaintiff's allegedly fraudulent misrepresentations on her insurance application. UNUM contends Minn. Stat. § 60A.08, subd. 9, is applicable to this case. That statute states, in relevant part:
No oral or written misrepresentation made by the assured, or in the assured's behalf, in the negotiation of insurance, shall be deemed material, or defeat or avoid the policy, or prevent its attaching, unless made with intent to deceive and defraud, or unless the matter misrepresented increases the risk of loss.
This subdivision shall not apply to life insurance or accident and health insurance.
Plaintiff contends that disability insurance is "accident and health insurance," and therefore § 60A.08, subd. 9 is inapplicable.
Chapter 62A of the Minnesota Statutes governs "accident and health insurance," which is defined as insurance against "loss or damage by the sickness, bodily injury or death by accident of the assured or dependents." Minn. Stat. § 62A.01, subd. 1; Minn. Stat. § 60A.06, subd.1, cl. 5(a). This definition plainly encompasses disability insurance. Moreover, Minnesota courts recognize that Chapter 62A governs disability insurance. See Kersten v. Minnesota Mut. Life Ins. Co., 608 N.W.2d 869, 873 (Minn. 2000) (noting that Minnesota Statutes Chapter 62A regulates "various health and disability policies"). Accordingly, the Court concludes that the applicable standard is found in Minn. Stat. § 62A.06, subd. 3, which states:
The falsity of any statement in the application for any policy covered by sections 62A.01 to 62A.09 hereof [accident and health insurance], may not bar the right to recovery thereunder unless such false statement materially affected either the acceptance of the risk or the hazard assumed by the insurer.
Because the policy is more than two years old, UNUM must also prove fraud in addition to materiality. See Minn. Stat. § 62A.04, subd. 2(2). UNUM does not contest that it must prove both fraud and materiality, and thus identifying the applicable statute does not affect the parties' positions. The Court therefore addresses this issue only to avoid later confusion.
It is UNUM's burden to prove both fraud and materiality. See Independent Sch. Dist. No. 197 v. Accident and Cas. Ins., 525 N.W.2d 600, 606 (Minn.Ct.App. 1995); Useldinger v. Old Republic Life Ins. Co., 377 N.W.2d 32, 35 (Minn.Ct.App. 1985). UNUM has offered evidence that plaintiff's alleged fraudulent misstatements materially affected UNUM's ability to make a reasonable decision to accept the risk, and plaintiff does not attempt to dispute this issue. Instead, the parties focus on the issue of fraud.
A line of cases in Minnesota hold that where the insured had full knowledge of the concealed facts, an inference that the insured was willfully false or intentionally misleading arises as a matter of law. See, e.g., Ellis v. Great-West Life Assurance Co., 43 F.3d 382, 387 (8th Cir. 1994). Under this standard, UNUM contends, plaintiff's misrepresentations on her insurance application are fraudulent as a matter of law.
To prevail on summary judgment, UNUM must prove that plaintiff used cocaine regularly sometime between 1988 and 1993 and that she knew her answers were false when she submitted her application in 1993. Although there is strong evidence regarding plaintiff's cocaine use, the Court cannot find that it establishes fraud as a matter of law. The cases UNUM cites involve quite specific evidence of the insured's knowledge of concealed facts. For example, in LeBus v. Northwestern Mutual Life Insurance Co., 55 F.3d 1374 (8th Cir. 1995), the insured underwent numerous invasive diagnostic procedures to determine the cause of an abnormal mass found in his lung. See id. at 1377. On the very day that he was subject to one of these procedures, he signed an application indicating that the only recent medical consultation he had was for a cold. See id. Similarly, in Howard v. Aid Association for Lutherans, 272 N.W.2d 910 (Minn. 1978), the insured was participating in treatment for drug abuse at the same time that he signed an application denying that he had ever had such treatment. See id. at 911-12. The issue in those cases was not the falsity of the concealed facts or the insureds' knowledge of the facts, both of which were undisputed, but whether the insureds' motivation for concealing the facts could establish the lack of an intent to deceive.
In contrast to LeBus and Howard, the evidence that plaintiff willfully misrepresented her cocaine use is not nearly so compelling. The evidence of plaintiff's cocaine use consists of her own statements, made several years after she completed the insurance application, that she had a twenty year history of cocaine use. There is no contemporaneous evidence of her use, and nothing that quantifies how much or how often she used cocaine during the relevant time period. Without any indication of the actual frequency of her use, the Court cannot determine as a matter of law that plaintiff "regularly" used cocaine between 1988 and 1993. Moreover, plaintiff made the statements regarding her use either as a part of her treatment or as a direct consequence of treatment for her undisputed abuse of cocaine in the mid-1990s. Thus, these statements were plaintiff's attempt to summarize her then-current understanding of the source of her problems. It may well be that in 1997, after her abuse of cocaine spun out of control, plaintiff was only too willing to acknowledge a "twenty year history of cocaine use" in order to overcome her addiction. The Court cannot conclude, however, that general statements made in such a context satisfy UNUM's burden to prove both that plaintiff regularly used cocaine during a specific five-year period and that plaintiff knowingly misrepresented this use. Accordingly, the Court declines to grant summary judgment to UNUM on the basis of plaintiff's alleged fraudulent misrepresentation regarding her cocaine use.
UNUM also argues that plaintiff fraudulently misrepresented her income. The Court finds that there is sufficient evidence of confusion regarding her income such that plaintiff's representations cannot be considered fraudulent as a matter of law. There is no evidence that plaintiff actually knew her 1992 income, and her 1993 income was a projection. While an accountant prepared her 1991 tax return prior to plaintiff's application for insurance, plaintiff's signature does not appear on the document and there is no other evidence that plaintiff knew of the contents of this return prior to her application. Moreover, plaintiff's own employer supplied the information regarding her income. The fact that plaintiff's employer misstated her income supports plaintiff's argument that tracking her income was difficult and that she did not in fact know her earnings for the relevant years. Accordingly, material factual issues preclude granting summary judgment to UNUM on the basis of plaintiff's alleged fraudulent misrepresentation of her income.
C. UNUM's Alternative Request for Partial Summary Judgment
UNUM alternatively seeks partial summary judgment precluding plaintiff from obtaining benefits after February 26, 1998 because she has failed to meet the policy's definition of "totally disabled" after that date. The policy defines "totally disabled" to mean
1. Injury or sickness restricts your ability to perform the material and substantial duties of your regular occupation to an extent that prevents you from engaging in your regular occupation; and
2. you are receiving medical care from someone other than yourself which is appropriate for the injury or sickness. We will waive this requirement when continued care would be of no benefit to you.
UNUM contends that plaintiff has failed to comply with the policy requirement that she receive medical care from someone other than herself. There is no dispute that plaintiff is not currently under psychiatric care, and her last appointment with her psychiatrist was February 26, 1998. Plaintiff uses over-the-counter herbal medications such as St. John's Wort to control her alleged depression, and she apparently attends support groups to keep her addiction to cocaine under control.
Plaintiff argues that UNUM's own expert indicates that her self-treatment with herbal medications is appropriate for her depression, and that therefore UNUM has waived the requirement of continued medical care. This is misleading, however, because UNUM's expert opined that plaintiff is not depressed, there is no evidence that she ever suffered from disabling depression, and that "[h]er depression, if it ever existed, was so mild that it responded to self-treatment with over-the-counter herbal medications and St. Johns Wort." Accordingly, he concluded that "[t]here is no indication for treatment for depression at the present time since she is not depressed." This opinion does not establish that UNUM has waived the requirement of continued medical care, and plaintiff points to no other evidence of waiver. Moreover, plaintiff offers no other evidence to establish that continued care would be of no benefit to her. The Court has reviewed the report of plaintiff's expert as well as the expert's deposition testimony; nowhere does he opine that plaintiff's self-treatment is appropriate care or that continued medical care would be of no benefit to her. The Court therefore concludes that plaintiff has failed to establish that she was disabled within the meaning of the policy at any time after February 26, 1998, and grants partial summary judgment to UNUM.
ORDER
Based on the submissions of the parties, the arguments of counsel, and the entire file and proceedings herein, IT IS HEREBY ORDERED that:
1. Defendant UNUM Life Insurance Company of America's motion for summary judgment [Docket No. 30] is GRANTED in part and DENIED in part;
2. Defendant's motion is GRANTED with respect to plaintiff's claims for benefits arising after February 26, 1998, and such claims are hereby DISMISSED WITH PREJUDICE;
3. Defendant's motion is DENIED in all other respects.