Opinion
No. 00 C 4612
September 20, 2002
ORDER
Plaintiff, Larry Stern ("Stern"), brings this lawsuit against defendant, National Life Insurance Company ("National Life"), alleging in Count I an Illinois common law claim for breach of contract and in Count II a claim under the Illinois Insurance Act, 215 ILCS 5/155, alleging unreasonable delay in the settling of his insurance claims. Stern is a citizen of Illinois. National Life is a Vermont corporation with its principal place of business in Montpelier, Vermont. Neither party contests that the amount in controversy exceeds $75,000. The court, therefore, possesses diversity jurisdiction over this matter pursuant to 28 U.S.C. § 1332. National Life moves for summary judgment as to Count I. For the reasons set forth below, the court denies the motion.
SUMMARY JUDGMENT STANDARDS
Summary judgment obviates the need for a trial where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). To determine whether any genuine fact exists, the court must pierce the pleadings and assess the proof as presented in depositions, answers to interrogatories, admissions, and affidavits that are part of the record. Fed R. Civ. P. 56(c) Advisory Committee's notes. The party seeking summary judgment bears the initial burden of proving there is no genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). In response, the non-moving party cannot rest on bare pleadings alone but must use the evidentiary tools listed above to designate specific material facts showing that there is a genuine issue for trial. Id. at 324; Insolia v. Philip Morris Inc., 216 F.3d 596, 598 (7th Cir. 2000). A material fact must be outcome determinative under the governing law. Insolia, 216 F.3d at 598-599. Although a bare contention that an issue of fact exists is insufficient to create a factual dispute, Bellaver v. Quanex Corp., 200 F.3d 485, 492 (7th Cir. 2000), the court must construe all facts in a light most favorable to the non-moving party as well as view all reasonable inferences in that party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
DISCUSSION
The court refers to the relevant facts where necessary.
Stern is a floor trader or "market maker" at the Chicago Board of Options Exchange ("CBOE"). Market makers trade their own capital on their own account, deriving income from net gains and losses. (Pl. L.R. 56.1 ¶ 6.) Stem notified National Life in May 1998 that he suffered from hearing loss and wished to make a claim for total disability under his insurance policy. Doctors had previously diagnosed Stern with central auditory processing disorder, which is an inability to understand sound in noisy situations. (Pl. L.R. 56.1 App., Ex. 14.)
Market makers further "provide liquidity in option trading by risking their own capital for personal trading, and are the backbone of the CBOE'a trading system. They take the opposite side of public orders by competing in an open outcry auction market." (Pl. L.R. 56.1 ¶ 7.)
National Life refuses to recognize Stern's claim as total disability because Stem can still buy and sell IBM stock outside of the CBOE, an activity that Stem took part in before his disability began, and because Stern continues to trade options on the CBOE floor. According to National Life, because Stern can still perform these activities, he is partially and not totally disabled under his insurance policy. Specifically, National Life's motion for summary judgment centers on whether there is a genuine issue of material fact that Stem cannot perform the "material and substantial duties" of a market maker because of his hearing loss. National Life maintains that to be totally disabled under their policy, an insured must not be capable of performing any duties that go along with the insured's occupation. Otherwise, the insured would be only partially disabled.
The disability policy provides for total disability benefits when the insured "is unable to perform the material and substantial duties of an occupation due to: a) accidental injury; orb) sickness. . . ." (Pl. Reap. to Def. L.R. 56.1 ¶ 5.) (emphasis added). The policy also provides for partial disability benefits when, due to accidental injury or sickness, the insured is not able "1) to perform one or more of the important daily duties of the insured's occupation as defined in the policy; or 2) to engage in the insured's occupation as defined in this policy for as much time as was usual prior to the state of disability." (Id ¶ 7.) The policy provides that Stem's occupation was defined as the "occupation of the Insured at the time disability begins." (Def. L.R. 56.1 ¶ 7.)
Under Illinois law, determining whether someone is disabled within the meaning of an insurance contract is a fact question for the jury. May v. National Life Ins. Co., No. 96 C 616, 1997 WL 461085, at *5 (N.D. Ill. Aug. 8, 1997) (Coar, J.) citing Snelson v. Pennsylvania Life Ins, Co., 65 Ill. App.2d 416, 430, 212 N.E.2d 873, 880 (1965). As one district court explained: "[t]he determination of whether or not [an insured is] unable to perform the substantial and material duties of his occupation at the time of his disability is inherently a fact question." Soil v. Provident Life Acc. Ins. Co., No. CIV.A. 00-3670, 2002 WL 1379183, at *10 (E.D. La. June 26, 2002) (Engelhardt, J.)
In diversity cases, the court looks to state law to provide the substantive law regarding interpretation of insurance policies. McFarland v. General American Life Ins. Co., 149 F.3d 583, 586 (7th Cir. 1998). Neither party disputes what law governs this diversity action, so the court will apply Illinois law. See Wood v. Mid-Valley Inc., 94 F.2d 425, 426 (7th Cir. 1991) ("The operative rule is that when neither party raises a conflict of law issue in a diversity case, the federal court simply applies the law of the state in which the federal court sits.").
In McFarland v. General American Life Ins., 149 F.3d 583 (7th Cir. 1998), the Seventh Circuit applied Illinois law to a disability insurance policy that provided benefits on substantially the same terms as here, i.e., if the insured could not perform the "material and substantial duties" of his occupation. The court concluded that the "material and substantial duties" language would not preclude benefits even if the insured is able to perform some of his former duties. Id. at 587-88. The court determined that the policy language could be reasonably interpreted to cover qualitative reductions in work (where an insured would not be able to perform an essential duty of their occupation) or quantitative reductions in work (where the insured can perform any given task, but sickness or injury prevents them from performing enough of the tasks for a long enough period to continue working at his regular occupation). Id.
National Life argues that McFarland is not applicable because the policy in McFarland did not contain a partial or residual disability clause, resulting in what National Life refers to as an "all or nothing proposition" for the insured. (Def Resp. at 9.) In McFarland, the court defined situations in which an insured is totally disabled, not in which the insured is partially disabled. In Stender v. Provident Life Acc. Ins. Co., No. 98 C 1056, 2000 WL 875919, at 7-8 (N.D. In. June 29, 2000) (Guzman, J.). the court applied the McFarland total disability definition to a policy that contained a partial disability clause and held that summary judgment should be granted in favor of the plaintiff insured. Based on Stender's application of McFarland, the court rejects National Life's assertion that McFarland is inapplicable here.
Here, Stem has presented sufficient evidence to create a genuine issue of material fact that he is either qualitatively or quantitatively disabled. Although Stern admits that he still trades IBM options on the CBOE floor and buy and sells IBM stock, he argues that because of his disability he cannot perform his occupation's "material and substantial duties." Stern points to evidence that he has hearing problems, that doctors have examined him and found that his hearing problems affect his ability to trade on the CBOE floor, that he cannot hear well enough to provide the best bid on options, that he misses close to 75% of the trades in the CBOE pit, that he "gets in last" and exposes himself to more risk, that he cannot participate in "fast markets, " that his trading volume has greatly decreased, and that he only trades a few hours a day and stands around because he cannot hear the trades. (Pl. L.R. 56.1 ¶¶ 21-23, 42.)
As such, Stem's admission that he buys and sells stock off the floor and that he continues in some of his duties after his disability's onset does not mean that as a matter of law he is still performing his occupation's "material and substantial" duties. Instead, the issue remains whether or not the duties Stern continues to perform after his disability were the material and substantial duties of his occupation at the time his disability began. Accordingly, National Life's motion is without merit and must be denied.
CONCLUSION
For the reasons stated above, the court denies National Life's motion for partial summary judgment [#31]. A status hearing is set for October 21, 2002 at 9:30 a.m. In the meantime, the parties are directed to meet in a sincere effort to resolve this case in short of trial.