Opinion
CAUSE NO. IP02-0632-C-M/S
April 2, 2004
CORRECTED ORDER ON PLAINTIFF'S AND DEFENDANT'S MOTIONS FOR SUMMARY JUDGMENT
This matter is before the Court on cross motions for summary judgment on the claim of the plaintiff, Ronald C. Hamaker, M.D. ("Hamaker"), for specific performance on a disability insurance policy issued by the defendant insurer, Paul Revere Life Insurance Co. ("Paul Revere"). Inasmuch as the parties are citizens of different states and the amount in controversy exceeds $75,000.00, this Court has jurisdiction under 28 U.S.C. § 1332.
The motions before the Court concern three questions: whether Hamaker is totally disabled under the terms of Paul Revere's policy; whether, alternatively, he is residually disabled; and whether, if he is residually disabled, he is entitled to the highest benefit level under the formula provided in the policy. On the first two questions, there are no material issues of fact. For the reasons discussed below, the Court finds that Hamaker is residually disabled only. Accordingly, on the issue of total disability, the Court DENIES Hamaker's motion for summary judgment and GRANTS Paul Revere's motion for summary judgment. On the issue of residual disability, the Court GRANTS Hamaker's motion for summary judgment and DENIES Paul Revere's motion for summary judgment.
On the third issue, the amount of residual benefit, both parties have referenced a source of income that neither party has clearly defined in a manner that allows the Court to resolve the dispute over calculation of Hamaker's residual benefit. Accordingly, the Court DENIES both parties' motions for summary judgment on the residual benefit issue.
I. BACKGROUND
In 1986, Paul Revere issued Hamaker, a head and neck surgeon, a disability insurance policy containing provisions for total and residual disability. Compl. Ex. A. The policy included a rider converting the general disability policy into an occupational disability policy, insuring Hamaker's ability to earn income from his particular occupation at the time of his disability. Id. The policy provided for a monthly benefit of $11,000.00 for a total disability. Id. The residual disability provision provided for a pro-rated share of this monthly benefit, if other conditions were met, should injury or sickness cause Hamaker's earnings to fall to 80% or less of his prior earnings. Id. At 20% or less of his prior earnings, Hamaker's monthly benefit would be the same as under the total disability — $ 11,000.00. Id.
In 1998, Hamaker was diagnosed with colon cancer and underwent surgery. Pl.'s Br. at 2. Paul Revere paid the doctor benefits under the total disability provision following the period of elimination in 1998 until May 2001, when the company learned that Hamaker was performing some medical procedures, including thyroidectomies, parathyroidectomies and small partial glossectomies, and was assisting other surgeons. Pl.'s Br. at 5; Def.'s Br. at 1-2. Paul Revere then notified Hamaker that he no longer qualified for total disability benefits, but might qualify for residual disability benefits. Def.'s Br. at 11.
As a head and neck surgeon, Hamaker had earned $237,000.00 in 1993 from his primary practice and $307,982.00 in 1994. Pl.'s Br. at 7. In 2001, his earnings were $36,000.00, and in 2002, his earnings were $42,420.00, an average level below 20% of his prior earnings. Id. at 8-9. Nevertheless, Paul Revere decided that Hamaker did not qualify for a residual disability. Def.'s Br. at 2. Moreover, the company determined, on the basis of its income analysis, that even if the doctor was partially disabled, he would be entitled only to a minor residual disability or none at all. Id. at 13. Paul Revere's analysis incorporated Hamaker's earnings not only from his practice but from other companies in which Hamaker had an ownership interest. Id. at 12. By Paul Revere's calculations, only a small portion of the drop in Hamaker's income was related to his claimed disability. Id.
II. STANDARD
Summary judgment is "an integral part of the federal rules" that promotes the efficient and just determination of actions. Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986). A party may request summary judgement when seeking a declaratory judgment "upon all or any part thereof." Fed.R.Civ.P. 56(a). 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." Celotex, 477 U.S. at 322.In evaluating a motion for summary judgment, the Court draws all reasonable inferences from undisputed facts in favor of the nonmoving party. See Estate of Cole v. Fromm, 94 F.3d 254, 257 (7th Cir. 1996). In a diversity case, the Court looks to state law to provide the substantive law regarding the interpretation of an insurance policy. McFarland v. Gen. Am. Life Ins. Co., 149 F.3d 583, 586 (7th Cir. 1998). In Indiana, courts have generally held that interpretation of an insurance policy is generally a question of law and well suited for summary judgment. Allstate Ins. Co. v. Bradtmueller, 715 N.E.2d 993, 996 (Ind.App.Ct. 1999). Any ambiguities are to be construed in favor of the insured. Id. at 997.
III. DISCUSSION
This case concerns a disability insurance policy — a gamble by an insurer on a doctor's future health and his ability to practice his trade. Two wagers were staked. Paul Revere agreed to pay Hamaker $11,000.00 a month if he lost his ability to practice his occupation. It also agreed to pay a pro-rated benefit if his ability to practice his occupation was restricted by his health. Paul Revere won its first wager but it lost the second.
A. TOTAL DISABILITY CLAIM
This Court finds, after considering the facts not in dispute, that Hamaker was not totally disabled. For the limited purposes of reaching this conclusion, the Court accepts all facts alleged by Hamaker, the non-moving party, to be true. However, even after doing this, and making all reasonable inferences in Hamaker's favor, the Court finds that Hamaker has not presented sufficient evidence allowing a trier of fact to find, as the disability policy requires, that Hamaker was unable to perform the important duties of his regular occupation. Specifically, Hamaker does not dispute that he continues to perform thyroidectomies and parathyroidectomies and he has not offered any evidence, aside from assertions, that these procedures were not among the important duties of his regular occupation both prior to his cancer and afterward.
Neither party disputes that the policy was an occupational policy, the terms of which were outlined in Occupation Benefit Rider H779. This rider specified that Hamaker would be considered totally disabled if, because of sickness or injury, he were unable to perform the important duties of his "regular occupation." Pl.'s Compl. Ex. A. The rider further defined "regular occupation" as the occupation in which Hamaker was established "at the time disability begins." Id.
This language is not new. Except when insurance contracts have contained specific language to the contrary, courts have generally interpreted "regular occupation" to refer to the insured's specific practice or speciality, rather than his general field of employment, at the time of the disability. See Rayman v. Paul Revere Life Ins. Co., 684 F. Supp. 192, 195 (N.D. Ill. 1988); Continental Casualty Co. v. Novy, 437 N.E.2d 1338, 1349-50 (Ind.Ct.App. 1982); Dixon v. Pac. Mut. Life Ins. Co., 268 F.2d 812, 815 (2d Cir. 1959). Paul Revere does not dispute Hamaker's assertion that he was a throat and neck surgeon although it quibbles on whether he was a throat and neck cancer surgeon. Def.'s B.R. at 5.
As court decisions discussing the definition of "regular occupation" make clear, labels are helpful but not determinative. See Rayman, 684 F. Supp. at 195; Novy, 437 N.E.2d at 1349-50; Dixon, 368 F.2d at 815. More important are the facts showing the work that the insured was doing prior to this disability. This is particularly true in disability policies involving independent professionals such as some doctors who enjoy great freedom in defining the parameters of their occupation. In an occupational disability policy, the insured is seeking monetary protection against the loss of a specific skill set. For example, a physician who develops a surgical specialty is covered by a disability policy when dermatitis no longer permits him to operate. See Dixon, 268 F.2d at 815. A doctor whose hands stiffen, preventing him continuing as a general practitioner, is totally disabled even though, in another job, he can still perform some routine diagnosis of patients. See Novy, 437 N.E.2d at 1349-50. A physician who specializes in emergency cardiology has lost his regular occupation when he can no longer run to a bedside, even though he can maintain a general cardiology practice. See Rayman, 684 F. Supp. at 195.
Defining an insured's occupation by examining his or her actual activities helps ensure that the insurance policy is construed according to the parties' intent. As the Indiana Court of Appeals noted, "each individual has a `particular' or `real' occupation against the loss of which an insured may seek protection." Novy, 437 N.E.2d at 1349. Thus, in Stender v. Provident Life and Accident Insurance Co., 2000 U.S. Dist. Lexis 11478, at 21 (N.D. Ill.), the court found a pit trader's prior description of his occupation as a broker/trader to be irrelevant to the determination of his actual occupation. "On the whole, the focus of the case law is on how the claimant earned his `primary living' before his injury." Id. at 19. As the court noted, the intent of the plaintiff in Stender was to insure himself against the possibility that he would no longer be able to trade in the pit.
Similarly, in this case, the Court presumes that Hamaker was seeking protection against the disruption of his medical practice. To that end, both parties have presented evidence about what that practice entailed.
This Court does not look to an insured's activities to redefine his or her occupation but to interpret the contract more precisely with the parties' intent. Paul Revere argues, for example that Hamaker's practice included an entrepreneurial component. Def.'s Br. at 6. Such supporting activities do not make his insured occupation that of a medical businessman.
Hamaker's evidence is of two kinds. First are affidavits asserting which of the pre-cancer procedures he performed were the important duties of his practice. Such evidence is merely conclusory. Secondly, and helpfully, however, Hamaker offers a break down, by type of procedure, of the major surgeries he performed during the year prior to the onset of cancer. Hamaker Aff, Ex. B. Of the 302 surgeries, sixty-seven were thyroidectomies and twenty-five were parathyroidectomies. These two procedures, as Paul Revere points out, constituted 30.5% of the number of surgeries Hamaker performed. For its part, Paul Revere adopts Hamaker's analysis and supports it with testimony from Hamaker's colleague, Dr. Richard W. Borrowdale, that Hamaker's pre-cancer "major surgeries" included thyroidectomies and parathyroidectomies. Clearly such operations were, at least numerically, an important part of the medical practice for which Hamaker sought insurance protection.
The surgeries are those listed in Hamaker's surgical log book and do not include emergency cases and "add on" cases. Hamaker Aff. Ex. B.
Having established the parameters of Hamaker's regular occupation, the Court next looks to see whether if there is a factual issue as to whether Hamaker was unable to perform the important duties of his occupation.
In interpreting total disability policies with similar language, two approaches predominate. In one line of cases, mostly involving policies with residual disability provisions, courts have interpreted the wording to mean that an insured must be unable to perform "all" of his important duties, or material and substantial duties, to qualify for a total disability. See Falik v. The Penn Life Mut. Ins. Co., 204 F. Supp.2d 1155 (E.D. Wis. 2002); Dym v. Provident Life Accident Ins. Co., 19 F. Supp.2d 1147 (S.D. Cal 1998). These courts have held that the wording is not ambiguous, particularly if there is a residual provision providing benefits if the insured is able to perform "some but not all" of the important duties. Under this mathematically oriented reasoning, an insured's ability to perform just one "important duty" precludes a total disability. This is the line of reasoning that Paul Revere urges this Court to adopt. Hamaker can perform at least one important duty, performing thyroidectomies and parathyroidectomies, therefore he is not totally disabled. The problem with this line of reasoning is that it skirts the real issue, and ambiguity, present in such policies — defining "the important duties," or in the language of other policies, "the material and substantial duties."
The other approach — and the one adopted by our circuit in McFarland v. General American Life Insurance Co., 149 F.3d 583 (7th Cir. 1998) — assesses a total disability if an insured's inability to perform certain duties precludes continuation in his or her regular occupation. In this approach, the determination of a total disability could depend on the number of duties that an insured is unable to perform. However, a total disability may also result from the type of duties that an insured is unable to perform. This approach essentially looks more closely at effects and recognizes that some skills or duties are "essential" to continued employment in a particular occupation in any capacity. Under this line of reasoning, regardless of the number of important duties an insured can still perform in isolation, he or she is totally disabled if unable to practice his or her regularly occupation in to to and residually disabled if merely restricted in that practice.
In McFarland, the owner and operator of a heating and air-conditioning business sought a total disability as a result of hernia and knee injuries that left him unable to perform 65% of his former duties, including supervising field jobs, loading and unloading trucks, and making service calls. The court divided the type of disabilities that could trigger a finding of total disability into two broad categories. Id. at 588. One category involves quantitative reductions in which a person's capacity to perform a sufficient number of tasks or to perform them for a long enough period is so reduced that the person is no longer able to continue working at his regular occupation. Id.
In this category, the total disability and residual disability provisions in many insurance policies are indeed part of the same continuum. Such residual provisions, in their benefit payout, mirror the Seventh Circuit, incorporating the reasoning that a quantitative reduction can be so dramatic as to amount to a total disability. The residual provision in the policy issued by Paul Revere to Hamaker, for example, provides the same level of benefits as the total disability provision provides if Hamaker's income from his regular occupation is 20 percent or less of its former level. Pl.'s Compl. Ex. A. In this regard, income serves as a measure of the quantitative reduction. Insofar as Hamaker has suffered a quantitative reduction, his continued work, even in a limited fashion, relegates him to seeking coverage under the residual provision of his policy.
The second category, however, involves qualitative reductions. As the Seventh Circuit explained, some duties may be so essential that an inability to perform just one function may effectively render the insured unable to continue employment. Adopting a baseball analogy, the McFarland court noted that a shortstop who could no longer throw would find his career cut short even though he could still run and hit the ball. Id. at 588. When a person loses a core duty essential to employment, that person is totally disabled even if that duty only comprised 5% of the person's overall duties. Id.
To be sure, the McFarland court was not considering a total disability policy in conjunction with a residual disability provision. However, the presence or absence of a residual disability provision is immaterial. A qualitative reduction that is only partial is a quantitative reduction. In this sense, if the remaining duties that can be performed are "important duties," i.e. sufficiently material and substantial to the practice, the disability is quantitative, not qualitative.
This is the line of reasoning that Hamaker urges the Court to adopt. However, even under this approach, Hamaker has not presented any evidence, aside from conclusory assertions, that he has suffered this type of qualitative reduction. In a case involving a self-employed professional, who can determine his or her job description, such evidence might relate to how the insured has sold his abilities to the public. Or it might explain how certain duties are only incidental or supportive of the insured's regular occupation and that the insured's regular occupation has thereby changed. Hamaker has done neither. He has not shown, for example, that thyroidectomies and parathyroidectomies were not among the services that he was selling to his patients. Nor has he shown that such procedures were only incidental or supplementary to other surgery, which was the reason for his patients employing him. Hamaker states that many of the 302 listed surgeries were done "in combination with other procedures." Hamaker Aff. at 3. This statement, however, sheds no evidentiary light on the relative importance of thyroidectomies and parathyroidectomies.
In contrast, Paul Revere has presented statistics from which a reasonable inference can be drawn that such procedures were not incidental or supplementary. These statistics are supported by evidence that thyroidectomies and parathyroidectomies are among the skills necessary for board certification as an otolaryngologist. And Hamaker's colleague, Borrowdale, has described these procedures as "major." Hamaker's assertion that such procedures are routinely performed by ear, nose and throat specialists does not refute this evidence. Such procedures are the important duties of a head and neck cancer surgeon's regular occupation. Or if not, then Hamaker's regular occupation was that of a head and neck cancer surgeon and a thyroid surgeon.
In a motion for summary judgment, the non-moving party cannot rest on assertions but must designate specific facts showing a genuine issue for the finder of fact. See Celotex, 477 U.S. at 324. Hamaker has not met this burden. He admits that he continues to perform thyroidectomies and parathyroidectomies but has not offered any evidence that these procedures were not important duties of his regular occupation. For this reason, on the issue of total disability, Paul Revere's motion for summary judgment is GRANTED and Hamaker's motion is DENIED.
B. RESIDUAL DISABILITY CLAIM
This Court finds that Hamaker was residually disabled during the twenty-three months in issue. Under the policy, Hamaker had to meet several requirements to be considered residually disabled. Paul Revere contests only two. The first is whether Hamaker, because of his sickness, was unable to perform one or more of the important duties of his occupation. The second is whether his monthly earnings had fallen to 80% or less of his prior earnings. Paul Revere's claims fall short on both. Its attempt to characterize Hamaker's disability as self-imposed and unrelated to his cancer is not supported by even the minimal evidence required to survive summary judgment. Likewise, its attempts to minimize Hamaker's income loss by redefining his policy and employing accounting projections not envisioned by the contract fail as a matter of law.
While describing the period in issue as twenty-four months, Hamaker's own benefit calculation runs from June 2001, through April 2003, the twenty-three-month period that Paul Revere uses.
Other requirements were that Hamaker be working and under the personal care of a physician. Hamaker could also qualify as being unable to perform one or more important duties if unable to perform them for more than 80% of the time normally required.
1. Unable to Perform One or More Important Duties
Under the terms of his policy, Hamaker could seek a residual disability if he was unable, because of sickness or injury "to perform one or more of the important duties" of his regular occupation. Pl.'s Compl. Ex. A. Both parties agree that after Hamaker's surgery, he returned to work but no longer performed several operations that were part of his practice before his cancer was diagnosed. Pl.'s Br. at 3; Def.'s Br. at 5. Hamaker has alleged three disabling conditions that led to this change: a weakened physical state resulting from his cancer and treatment, an anxiety disorder, and risk of relapse. Pl.'s Reply Br. at 16.
While disagreeing about the nature and type of some operations Hamaker continued to perform, he and Paul Revere agree he was no longer performing surgeries involving the removal of the voice box, pharynx, jaw, lymph nodes in the neck, or portions of the skull or a surgery in which chest muscle is used to reconstruct the head and neck. Pl.'s Br. at 3; Def.'s Br. at 5.
Paul Revere takes great issue with the last, which rests on the contention that stress can compromise a person's immune system and make the recurrence of cancer more likely. Citing statements by Hamaker's own oncologist in support, the company asserts that such a theory remains unproven. The company also asserts that the assessment of stress depends entirely on self-reporting. Def.'s Reply Br. at 3, 5. The company's concern is understandable. Allowing such a claim, under the circumstances just mentioned, would allow an insured to assert a disability that is self-diagnosed, self-imposed, and lacking objective limitation.
The issues regarding the alleged risk of relapse need not be decided by this Court, however, because the first two alleged conditions, Hamaker's weakened physical state and condition and anxiety disorder, support his claim of disability. The company has not offered any evidence to counter Dr. Borrowdale's assessment that Hamaker cannot perform these operations because he is too weak physically and unable to concentrate as a result of fears and anxiety over his cancer. See Borrowdale Aff, Ex. B. The insurer asserts that Borrowdale's assessment is contradictory because "fears and anxiety" are involved in weakening Hamaker's stamina. Def.'s Reply Br. at 5. The bogeyman of allowing a disability based on perceptions, rather than objective measures, has re-emerged.
If such evidence were truly contradictory, a material issue of fact would remain and summary judgment would not be appropriate. See Fed.R.Civ.P. 56(d). This, however, is not the case. Borrowdale is clearly reporting a lack of stamina resulting from both physical and mental factors. Moreover, his report lends credence to Dr. Richard Lawlor's diagnosis, following testing and evaluation, that Hamaker suffers from a "generalized anxiety disorder." Lawlor Aff. ¶ 6. Paul Revere's position amounts to nothing more than an unsupported argument that the policy will pay only for physical disabilities, not mental disabilities. The policy contains no such limiting language.
Moreover, Paul Revere misstates both the evidence and the issue. The company suggests that Hamaker's weakened physical condition was not due to his cancer because it resulted from his anxiety brought on by "unsupported subjective belief about stress and the risk of relapse. Def.'s Reply Br. at 5-6. This reasoning simply does not stand up. The issue before this Court is not the reasonableness or sensibility of Hamaker's anxiety but simply whether Hamaker's cancer was the proximate cause of it and whether it was real. Whether or not his anxiety involved unproven theories, Hamaker's anxiety was objectively debilitating, according to Borrowdale's report, as this passage makes clear:
"He has tried and will lose his concentration in difficult areas of the surgery thinking about his own cancer and the potential stress causing a collapse of his immunosystem's defense against his own cancer. Fortunately, I or one of my partners have been assisting and he will immediately stop and allows one of us to complete the procedure. He sits down exhausted and anxious."
Borrowdale Aff. Ex. B. (emphasis added).
Finally, as to whether Hamaker was unable to perform certain operations, Paul Revere notes that by September 2001, Hamaker was working forty hours a week and he was selecting the cases on which to work. Def.'s Br. at 10. Neither of these circumstances, however, present any genuine issue of fact about whether Hamaker was disabled in some capacity. The question before this Court is not the number of hours that Hamaker could work nor his selection process, but simply whether, as a result of his cancer, he was unable to perform some of his major duties. Paul Revere offers a statement by Hamaker's oncologist, Dr. Gregory Smith, that he never prohibited Hamaker from returning to work but left the decision to his patient. See Smith Dep. at 13. This statement also says nothing about Hamaker's ability to perform certain operations. In short, Paul Revere has not raised any genuine dispute that Hamaker's cancer left him unable to perform major duties of his occupation either because of his weakened physical condition, his inability to concentrate or both.
Considered in context, Smith's deposition supports Borrowdale's assessment that Hamaker's anxiety attacks were debilitating: "He was having almost panic attacks in the operating room. Now, I wasn't there, but — and elected, himself, to not do those type of surgeries because he didn't feel that he could do a good job because of the fatigue, the anxiety it created and that sort of stuff."
2. Monthly Earnings are Reduced to 80% or Less
The second requirement Hamaker needed to establish for a residual disability was showing that his monthly earnings had fallen to 80% or less of his pre-cancer earnings. Pl.'s Compl. Ex. A. The intent of this requirement is clear. The policy seeks to protect against major disruptions of income resulting from a partial disability.
There is no dispute that Hamaker's income from his primary practice as a head and neck surgeon dropped precipitously. In 1997, immediately prior to the onset of cancer, Hamaker earned $213,325.00 through Head Neck Surgery Associates Inc. ("Head Neck"), which was at least the primary business, if not the only business, by which he provided direct patient care. See Hakala Aff. Ex. A. Following his return to work, Hamaker's net income through Head Neck was $36,000.00 in 2001, and $42,000.00 in 2002. Id. Exhs. B C.
Paul Revere nonetheless contends that Hamaker's income fell only so slightly as to qualify for greatly reduced benefits in 2001 and no benefit in 2002. It reaches this conclusion by adjusting Hamaker's post-cancer income and his pre-cancer income in two ways. First, it includes income from other businesses in which Hamaker was involved in its analysis of Hamaker's monthly earnings. Secondly, it assumes that a fall in Hamaker's average income from 1993-94, the period used by Hamaker in computing his prior earnings, to 1997, the year just prior to his cancer, would have continued forward had Hamaker not gotten ill. Neither of these adjustments are warranted by the facts, by law or principles of equity.
The disagreement between Hamaker and Paul Revere about the level of his income fall is made possible largely by Hamaker's business dealings. Prior to the onset of his cancer, he was involved, in varying degrees, in more than a dozen other entities. Some made money. Some did not. The majority, however, had been dissolved, had folded into new organizations or were in the process of being dissolved or sold when Hamaker's cancer was diagnosed.
The policy sets out in some detail how average monthly earnings and prior earnings are to be computed, and it imposes two limitations on the type of income that can be considered in computing the insured's current or prior monthly earnings. First, if the insured owns any business or profession, then the monthly earnings includes salary-related compensation and income "due to" the insured's "personal activities." Pl.'s Compl. Ex. A. Secondly, the contract specifically excludes income "not derived" from the insured's "vocational activities." Id.
The parties disagree about the meaning of "due to," "personal activities," "not derived" and "vocational activities." Hamaker, citing a dictionary definition, contends that the plain meaning of vocation is "occupation" or "particular occupation." Pl.'s Reply Br. at 23. Paul Revere, arguing that rules of construction call for "vocation" to be construed differently than "occupation," contends the plain meaning is something broader. Def.'s Reply Br. at 18-19. To the extent that the meaning is disputed, rules of construction favor Hamaker. See Allstate Ins. Co., 715 N.E.2d at 997. Public policy also supports a narrower construction. Under Paul Revere's reasoning, income related to the insured's field, i.e., knowledgeable investments, could be counted against the insured's disability while blind investments would not.
However, this Court does not need to go so far. Hamaker has asserted, and supported with affidavits, that he received no income due to his personal activities or derived from his vocation from the businesses cited by Paul Revere in computing his prior earnings. Hamaker Aff. ¶ 15; Andrew D. Hamaker Aff. ¶¶ 10-20. In rebuttal, Paul Revere merely offers an affidavit from a financial risk consultant providing information about how she interpreted and analyzed the policy provisions and how Hamaker classified his income on his personal and business tax returns. Hakala Aff. ¶¶ 5-19. Her interpretation of the policy and her income analysis is irrelevant, however, as to Hamaker's involvement in these companies. And tax returns, classifying income as passive or non-passive, are merely suggestive about whether the activity was related to Hamaker's vocation or his personal activities. To extend an example cited by Paul Revere, a physician might very well have an active role in a baseball team, the income from which might not be related in any fashion to his medical practice. Paul Revere asks the Court to make a "reasonable inference" that any medically related businesses owned by a physician are aimed at supporting and generating income for the physician's medical practice. However, Paul Revere fails to point the Court toward any evidence that would justify this inference in this case.
The policy also provides no justification for Paul Revere's adjustments of Hamaker's income. The company cites an unpublished opinion by the Sixth Circuit Court of Appeals that effectively discounted a policy holder's disability benefit because the trial court had determined that the insured's decline in earnings were not totally related to his disability. Provident Life Accident Ins. Co. v. Cochrane, Nos. 98-2320, 98-2388, 2000 U.S. App. LEXIS 14697 (6th Cir. June 13, 2000). Paul Revere argues that, in this case, a portion of Hamaker's drop in earnings are equally unrelated to his cancer but are instead the result of his sale of ownership interest. Def.'s Br. at 15.
Cochrane is not applicable. The facts considered by the Sixth Circuit differ in several material ways from this case even though the outlines are similar. Cochrane was a mutual fund trader who specialized in timing his client's trades to changes in the market. Cochrane, 2000 U.S. App. LEXIS 14697, at 2. After surgery for a tumor on his spine left him injured, he applied for a disability benefit. As with Hamaker, Cochrane had the option of using, as his prior earnings, either the average monthly income just before his disability or the highest monthly average for any two successive years in the five prior years. Id at 4. Cochrane used the later method, picking two years in which his income averaged more than $900,000.00. Following a bench trial, the district court determined that using these two years overstated Cochrane's income loss because the market had tumbled right after those two years and the trader's income had dropped to $322,099,00 the year his tumor was discovered. Id. at 3, 7. The Sixth Circuit affirmed that using the second calculation method violated a contract provision that the "loss of Monthly Income must be caused by the Residual Disability for which the claim is made." Id. at 9.
Hamaker's policy, though less direct, also requires that a residual disability be "because of Injury or Sickness." Pl.'s Compl. Ex. A. However, there are reasons for reading this policy differently. First, in Cochrane the overwhelming disparity in prior monthly earnings between the two methods used was itself dramatic evidence that the two-year method produced inaccurate results. Cochrane, 2000 U.S. App. LEXIS 14697, at 10. In Hamaker's case, there is no gross disparity. During the two-year period that Hamaker elected to use, his net income from Head Neck was $237,763.00 in 1993, and $307,982.00 in 1994. In 1997, it was $213,325.00. Secondly, Paul Revere has presented no evidence that the change in income resulted from the organizational change in ownership. Thirdly, Paul Revere essentially asks the Court to rule, as a matter of law, that any income drop between two pre-injury benchmarks are automatically unrelated to the disability and, therefore, are excludable from the benefit calculation. Such a reading would render choice of method provisions meaningless.
In this case, Paul Revere's analysis would only negate a very real and substantial drop in Hamaker's primary income from Head Neck, from $213,325.00 in 1997, to $36,000.00 in 2001, and $42,000.00 in 2002. If Hamaker had been allowed to use these numbers as his benchmark, he would almost certainly have qualified for the highest residual benefit. Paul Revere instead has chipped away at this income drop by focusing on changes in Hamaker's various business investments, changes that were set in motion well before his disability emerged. See Hamaker Aff. at 13 et. seq. In so doing, Paul Revere has attempted to renege on the wager it made.
For these reasons, on the issue of residual disability, Hamaker's motion for summary judgment is GRANTED and Paul Revere's motion is DENIED.
C. RESIDUAL BENEFIT CALCULATION
Summary judgment is not yet ripe on the remaining issue of Hamaker's residual disability benefit. The policy outlines a formula by which the benefit is calculated. At one end, when Hamaker's residual earnings are 20% of his prior earnings, the residual benefit is $11,000,00 a month, the same as the total disability benefit. Conversely, when Hamaker's residual earnings have not fallen by 20% or more, he is not considered residually disabled. The Court has just determined that Hamaker is residually disabled. However, the Court cannot yet determine that Hamaker is entitled to the highest residual benefit. Both parties make reference to income that Hamaker received in 2001 and 2002 from the Surgery Center of Indianapolis, LLC. The record is not entirely clear as to the nature of this business. It is not included, for example, in Hamaker's list of businesses in which he received no income from his vocational or personal activities. If, as it appears, this income is investment or sale proceeds, the Court would find that Hamaker is entitled to the $11,000.00 monthly benefit. On the other hand, if Hamaker were receiving income from this Center arising from patients he was treating, he would still be entitled to a residual benefit of a lesser amount.
For this reason, the Court DENIES both parties' motions for summary judgment on the amount of residual benefit to which Hamaker is entitled.
In summary, Paul Revere gambled on Hamaker's health and his ability to keep his practice. The company ultimately lost. This Court agrees with Paul Revere that Hamaker was not totally disabled. However, Paul Revere has not presented sufficient evidence to challenge Hamaker's claim that he was at least residually disabled because his cancer left him too weak, mentally and physically, to perform some operations. Neither party presented sufficient facts from which the Court can determine the appropriate residual benefit. Accordingly, Paul Revere's motion for summary judgment on the total disability issue is GRANTED and Hamaker's motion on the same issue is DENIED; Paul Revere's motion for summary judgment on the partial disability issue is DENIED and Hamaker's motion on the same issue is GRANTED; and both parties' motion for summary judgment on the issue of residual liability is DENIED.
IV. CONCLUSION
For the reasons stated herein, the Court GRANTS in part and DENIES in part the defendant's, Paul Revere Life Insurance Co., motion for summary judgment and GRANTS in part and DENIES in part Hamaker's motion for summary judgment.
IT IS SO ORDERED.