Opinion
Civil Action No. 99-1191 (JBS).
October 26, 2000.
David L. Braverman, Esq., Steven L. Bloch, Esq., BRAVERMAN KASKEY CAPRARA, Philadelphia, Pennsylvania, Attorneys for Plaintiff.
Douglas F. Johnson, Esq., EARP COHN P.C., Westmont, New Jersey, Attorneys for Defendants.
OPINION
Plaintiff, Zenon J. Rotuski ("Rotuski"), filed this action against the Paul Revere Life Insurance Company ("Paul Revere") and Provident Companies, Inc. ("Provident"), seeking a declaratory judgment that Rotuski was disabled during the time period claimed and therefore covered under the disability income policy issued by Paul Revere, and damages, attorneys fees and costs related to Paul Revere's termination of disability income benefits. Jurisdiction is based upon diversity of citizenship and an amount in controversy in excess of $75,000.00, exclusive of interest and costs. See 28 U.S.C. § 1332.
The instant matter before the Court is defendant Paul Revere's motion for partial summary judgment pursuant to Fed.R.Civ.P. 56 to dismiss plaintiff Rotuski's claims for consequential and punitive damages and attorney's fees arising from an alleged bad faith termination of disability benefits. This case first requires the Court to determine the circumstances under which an insurance carrier doing business in New Jersey may be exposed to bad faith and punitive damages for its refusal continue paying disability income benefits where plaintiff's total disability was uncertain. The court must next determine whether New Jersey law allows attorney's fees to be granted in a direct action against an insurer to enforce payment of benefits pursuant to an alleged breach of contract. For the reasons stated herein, Defendant's motion for partial summary judgment will be granted and Count IV of plaintiff's complaint will be dismissed.
I. BACKGROUND
On or about September 27, 1990, defendants Paul Revere Life Insurance Company ("Paul Revere") and Provident Companies, Inc. ("Provident") issued a disability income policy, numbered 2459742 (the "Policy"), to plaintiff Zenon J. Rotuski ("Rotuski"). (Rotuski Cert., Ex. 2). The Policy provides in detail the procedure that must be followed in the event of a disability and the related payment information. (See Id. at 16). The policy defines these relevant terms in Part One:
1.6 "Sickness" means sickness or disease other than a Pre-existing Condition which causes loss commencing while Your Policy is in force. . . .
1.9 "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.
(Rotuski Cert., Ex. 2 at 6).
A. Rotuski's Initial Sickness and Disability Settlement
Rotuski is the sole shareholder, officer, and director of the Associated Building Maintenance Corp., Inc. ("ABMC"), which provides cleaning services to commercial and industrial organizations. (Pls.' Complaint at ¶ 16). At the time he first purchased his disability income policy, Rotuski devoted sixty-five to seventy hours each week to his work, which included sales and customer relations, job site inspections, administrative duties, and accounting. (Cahill Cert., Ex. B). Rotuski's occupation, for purposes of the Policy, is president of ABMC. From June 3, 1993 until June 10, 1993, Rotuski was an in-patient at West Jersey Hospital Health Systems-Marlton for treatment of paroxysmal atrial fibrillation. Rotuski was subsequently hospitalized twice for the same ailment from July 14, 1993 to July 17, 1993 and from August 9, 1993 to August 11, 1993. In his complaint, Rotuski alleges that Dr. Stephen Fox advised him, as a result of his condition, that he should avoid the stress associated with the operation of his ABMC business.
The Policy defines "Your Occupation" as "the occupation in which you are regularly engaged at the time You become Disabled." (Rotuski Cert., Ex. 2 at 6).
On October 10, 1993, Rotuski submitted a disability benefit claim (No. 01-02459742-001) to Paul Revere alleging complete disability. On May 23, 1994, Diane M. Cahill, Senior Claim Examiner for Paul Revere ("Cahill"), communicated with Rotuski's attorneys and advised that while Paul Revere acknowledged Rotuski's medical condition, his limitations had been determined to be minimal. Cahill further wrote that Paul Revere, after reviewing Rotuski's financial data, had determined that Rotuski's loss in income was a result of increased business expenses rather than his disability. (Rotuski Cert., Ex. 4). On July 11, 1994, in response to a request for reevaluation from Rotuski, Cahill again advised that Paul Revere had determined that Rotuski's condition did not reveal any evidence of significant impairment, but encouraged him to submit other physician reports to substantiate his claim of total disability and offered to have a Field Representative review the status of the claim with Rotuski. (Rotuski Cert., Ex. 6).
On July 24, 1995, Rotuski submitted a letter from Allen M. Greenspan, M.D., to Cahill in support of his claim of total disability. Dr. Greenspan advised that Rotuski's recurrent paroxysmal atrial fibrillation was aggravated by the stress associated with his job and that he should remain out of work for the foreseeable future. Dr. Greenspan also advised that patients such as Rotuski should be monitored to obviate the possibility of sudden death. (Rotuski Cert., Ex. 8). Counsel for Rotuski sent two additional letters, dated September 13, 1995 and September 14, 1995, requesting further evaluation of his claim.
On October 6, 1995, at the request of Paul Revere, Rotuski completed a Statement for Disability Benefits indicating that his back and heart impairments severely limited his ability to inspect and travel to client locations. (Cahill Cert., Ex. B). The attached attending physician report from Dr. Greenspan listed diagnoses of rapid atrial fibrillation and congestive heart failure and concluded that Rotuski should not expose himself to stress or physical exertion. Greenspan reported that, in his opinion, Rotuski had become totally disabled on October 20, 1994. (Rotuski Cert., Ex. 11).
From September 19, 1995 to September 22, 1995, Rotuski was hospitalized at Hahnemann University Hospital for treatment of atrial fibrillation and congestive heart failure. (Rotuski Cert., Ex. 12). Rotuski was again hospitalized from March 12, 1996 to March 21, 1996, in St. Francis Hospital in Tulsa, Oklahoma for treatment of his heart condition. While hospitalized, Rotuski underwent a transesophageal echocardiography and radiofrequency catheter ablation of his atrial fibrillation. While hospitalized, Rotuski developed several complications including adult respiratory distress syndrome, sepsis, and parietal and cerebellar septic emboli, which were resolved prior to discharge. (Id.).
On December 16, 1996, Paul Revere and Rotuski entered into a Settlement Agreement and Release ("Agreement and Release") for claim No. 01-2459742-001. The Agreement and Release reads, in part:
1. Settlement of Claim. Rotuski agrees that his claim #01-2459742-001 is closed and that he waives entitlement to benefits under said claim.
2. New Claim. Rotuski agrees that his new date of disability under disability income Policy #2459742 shall be February 20, 1995, and Rotuski's claim for benefits commencing on February 20, 1995, shall be assigned claim no. 01-2459742-002. Rotuski shall continue to receive monthly disability benefits and waiver of premiums under his . . . Policy . . . for as long as he shall remain disabled in accordance with the terms and provisions of his policy.
3. Compromise. Paul Revere shall pay Rotuski the sum of $56,000.00 for a disputed period of disability from October 19, 1994 through October 20, 1995, and in addition to said $56,000.00 a premium refund for any and all premiums paid during the period between February 20, 1995 and October 20, 1995.
(Rotuski Cert., Ex. 14). Paul Revere continuously paid Rotuski disability benefits from December, 1996 through 1998. Rotuski submitted monthly progress reports during this time period to Paul Revere and Provident, describing his activities as "some bicycle riding, some house chores, and visits with family and friends" and admitting that he went to work "to check on mail and answer correspondence." (Rotuski Cert., Ex. 21).
B. Paul Revere's Termination of Disability Income Benefits
On August 27, 1998, Paul Revere informed Rotuski that further benefits under the total disability provision of his Policy would no longer be considered. This determination by Paul Revere was based on several things including a review of plaintiff's medical records from the Philadelphia Cardiac Group, St. Francis Hospital, Dr. Alan Greenspan, Dr. Stephan Scafidi, and Hahnemann University Hospital, business and personal tax returns for 1993 and 1994 (Cahill Cert., Ex. E), an evaluation of plaintiff's medical records by a cardiologist (Greenspan Cert.), and surveillance reports monitoring Rotuski's activities (Bloch Cert., Ex. B E).
On July 30, 1998, Paul Revere's cardiologist, Dr. Marvin Goldstein, had reviewed Rotuski's medical records and concluded that Rotuski was currently working and that any restrictions and/or limitations on his ability to do so were minimal. (Goldstein Cert., paras. 3, 5). In particular, Dr. Goldstein based his opinion on the objective tests submitted by Rotuski's physicians (Goldstein Cert., para. 3) and cited an Exercise Tolerance Test, dated September 17, 1997, which was essentially normal. (Cahill Cert., Ex. D). On September 4, 1998, Dr. Goldstein reviewed a letter from Rotuski's treating physician, Dr. Allan Greenspan. The Greenspan letter states that Rotuski was under treatment for atrial fibrillation, tachycardia induced cardiomyopathy and stress induced atrial fibrillation. Dr. Greenspan also noted that Rotuski suffered from thalmic pain syndrome and significant cervical spine radiculopathy and opined that Rotuski was unable to perform any work now or in the future. (Rotuski Cert., Ex. 22). Goldstein concluded that the Greenspan letter did not negate the objective test results and other information indicating, in his opinion, that Rotuski was capable of working in his regular occupation as president of ABMC. (Goldstein Cert., para. 8).
On September 9, 1998, Greenspan reviewed a letter submitted to Paul Revere along with a report from Dr. Barry Korn in an attempt to substantiate Rotuski's continued claim for disability. Korn's examination and report concluded that Rotuski's condition had a substantial impact on his work ability and limited his activity level. Greenspan's opinion after reviewing the Korn letter remained unchanged. (Greenspan Cert., Ex. C). In a deposition conducted on August 19, 1999, Goldstein testified that he did not believe his cardiac condition prevented him from performing the duties of his regular occupation. (Id. at para. 12). No physical examination of Rotuski was requested by Paul Revere or conducted by Greenspan. Dr. Greenspan never personally consulted Rotuski or any of his treating physicians regarding his condition. (Rotuski Cert., Ex. 31 at 75, l. 12-17).
Paul Revere's determination to discontinue Rotuski's disability benefits in August, 1998, was also based on surveillance reports, requested by Paul Revere and conducted by Profile Group, Inc. ("Profile"), which revealed that Rotuski conducted social activities and attended to business at his office for periods ranging from five to seven hours per day from January 5, 1998 to January 7, 1998 and from June 23, 1998 to June 24, 1998. (Bloch Cert., Ex. B E). The surveillance report detailing Rotuski's activities from January 5, 1998 through January 7, 1998 stated that Rotuski was observed at his place of business, retrieving mail, drinking at a bar and pumping gas into his car. (Bloch Cert., Ex. E). The surveillance report detailing Rotuski's activities on June 23, 1998 and June 24, 1998, stated that Rotuski was observed videotaping an intersection in Hammonton, New Jersey, remaining at his place of business for five hours each day, entering a diner, pumping gas, and conversing with an unidentified male. The report also noted that Rotuski was not wearing or using any visible therapeutic devices. (Bloch Cert., Ex. B). Plaintiff's attorney challenged the validity of the report after viewing the videotapes produced by Profile and identifying several inconsistences. (Bloch Cert., paras. 2-16). Specifically, Bloch certifies that the videotapes depicting Rotuski's activities do not reveal that he was not disabled and do not show that he had returned to work with the same vigor as before his disability. (Bloch Cert., paras. 13-14).
The issue of Defendant's late production of the videotapes depicting plaintiff's activities in June and July, 1998 will be discussed later in this opinion.
In addition to challenging the accuracy of the video transcripts prepared by Profile, Plaintiff's attorney also questions defendant's late production of the surveillance video taken in June of 1998. Pursuant to plaintiff's May 4, 2000 subpoena for the additional tapes, Defendant's counsel conducted an investigation and determined that the tapes showing plaintiff's activities in June of 1998 had been lost. (Johnson Cert., paras. 15, 16, 17). On June 26, 2000, new copies of the previously lost tapes were produced to plaintiff's counsel. (Id., para. 17). Regardless of the specific reason for the late production of the videotapes depicting plaintiff at his office for extended periods of time, in a diner, and photographing intersections, the videos and accompanying transcripts support Paul Revere's decision to terminate Rotuski's disability income benefits.
Although plaintiff's attorney alludes to some collusion, stating, "[i]nterestingly, counsel for defendants now represents Profile, and it was only as a result of Mr. Rotuski's May 4, 2000 subpoena that the additional videotapes were produced," there is no evidence that Defendant's counsel intentionally withheld the subsequently produced tapes. (Bloch Cert., para. 2 n. 1). Additionally, defendant's counsel certified that he and his firm at no time "intentionally attempt[ed] to preclude the discovery of these missing videotapes by covering up their existence or willfully failing to produce them." (Johnson Cert., para 18).
On January 7, 1999, Paul Revere wrote to Rotuski and, based on claim representative Kathyrn J. Roberts' review of Rotuski's complete file, denied further disability income benefits under claim 001-02459742-002, citing their determination that he was capable of performing his occupational duties as president of AMBC. (Cahill Cert., Ex. H). On September 17, 1999, Rotuski underwent an independent medical examination with Lawrence J. Gessman, M.D., for a second opinion on his cardiac disability status at Paul Revere's request. (Rotuski Cert., Ex. 32). Gessman recommended a stress test, echocardiogram and transient arrhythmia monitor. (Id.) On March 21, 2000, Gessman reported that Rotuski had uncontrolled arrhythmia and disabling palpitation symptoms and recommended drug and surgical intervention. (Id.)
On March 17, 1999, this action was filed, naming Paul Revere, Provident Companies, Inc., and John Does I-V. In his complaint, plaintiff Rotuski seeks actual and punitive damages, interest, attorneys fees and costs. In this motion, defendant Paul Revere seeks summary judgment on Count Four of the complaint, alleging bad faith termination of plaintiff's disability benefits.
II. DISCUSSION
A. Summary Judgment Standard
A court may grant summary judgment when the materials of record "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); see Hersh v. Allen Prods. Co., 789 F.2d 230, 232 (3d Cir. 1986);Lang v. New York Life Ins. Co., 721 F.2d 118, 119 (3d Cir. 1983). A dispute is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the non-moving party." See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is "material" only if it might affect the outcome of the suit under the applicable rule of law.Id. Disputes over irrelevant or unnecessary facts will not preclude a grant of summary judgment. Id.
In deciding whether there is a disputed issue of material fact, the court must view the evidence in favor of the non-moving party by extending any reasonable favorable inference to that party. See Aman v. Cort Furniture Rental Corp., 85 F.3d 1074, 1080-81 (3d Cir. 1996);Kowalski v. L F Prods., 82 F.3d 1283, 1288 (3d Cir. 1996); Meyer v. Riegel Prods. Corp., 720 F.2d 303, 307 n. 2 (3d Cir. 1983), cert.dismissed, 465 U.S. 1091 (1984). The threshold inquiry is whether there are "any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Liberty Lobby, 477 U.S. at 250; Brewer v. Quaker State Oil Refining Corp., 72 F.3d 326, 329-30 (3d Cir. 1995) (citing Anderson, 477 U.S. at 248) ("[T]he nonmoving party creates a genuine issue of material fact if it provides sufficient evidence to allow a reasonable jury to find for him at trial.").
The moving party always bears the initial burden of showing that no genuine issue of material fact exists, regardless of which party ultimately would have the burden of persuasion at trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Jalil v. Avdel Corp., 873 F.2d 701, 706 (3d Cir. 1989), cert. denied, 493 U.S. 1023 (1990). However,
the plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. In such a situation, there can be `no genuine issue as to any material fact,' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders other facts immaterial.Celotex, 477 U.S. at 322-23. In such situations, "the burden on the moving party may be discharged 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; Brewer, 72 F.3d at 329-30 (citing Celotex, 477 U.S. at 322-23) ("When the nonmoving party bears the burden of persuasion at trial, the moving party may meet its burden on summary judgment by showing that the nonmoving party's evidence is insufficient to carry its burden of persuasion at trial.").
The non-moving party, here the plaintiff, "may not rest upon the mere allegations or denials of" its pleading in order to show the existence of a genuine issue. Fed.R.Civ.P. 56(e). They must do more than rely only "upon bare assertions, conclusory allegations or suspicions." Gans v. Mundy, 762 F.2d 338, 341 (3d Cir. 1985), cert. denied, 474 U.S. 1010 (1985) (citation omitted); see Liberty Lobby, 477 U.S. at 249-50;Celotex, 477 U.S. at 324-25. Once the moving party has carried its burden of establishing the absence of a genuine issue of material fact, "its opponent must do more than simply show that there is some metaphysical doubt as to material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Thus, a "motion for summary judgment must be granted unless the party opposing the motion can produce evidence which, when considered in light of that party's burden at trial, could be the basis for a jury finding in that party's favor." J.E. Mamiye Sons, Inc. v. Fidelity Bank, 813 F.2d 610, 618 (3d Cir. 1987) (Becker, J., concurring) (citing Anderson, 477 U.S. 242, 106 S.Ct. 2505, and citingCelotex, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)).
B. Count Four of Plaintiff's Complaint
Paul Revere has filed a motion for partial summary judgment on Rotuski's claims for attorney's fees and punitive damages based on bad faith termination of disability income benefits. Paul Revere argues that, under New Jersey law, Rotuski is not entitled to make a claim for bad faith because there was a "fairly debatable" basis for their termination of benefits, see Pickett v. Lloyds, 131 N.J. 457, 473, 621 A.2d 445 (1993), and also that Rotuski is not entitled to punitive damages because plaintiff could not show that Paul Revere did more than breach a good faith obligation, as defined by the New Jersey Supreme Court. Id. at 475-76.
When evaluating defendant's motion this Court, as a federal court sitting in diversity, will apply the substantive law of the state as determined by the New Jersey Supreme Court. See Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). This Court will apply New Jersey's "fairly debatable" standard and consider whether plaintiff could "have established as a matter of law a right to summary judgment on [plaintiff's first cause of action]." Pickett, 131 N.J. at 473, 621 A.2d 445.
1. Bad Faith Consequential Damages
The New Jersey Supreme Court recognizes a cause of action for consequential damages based on an insurer's bad faith failure to pay a claim. Pickett, 131 N.J. at 461, 621 A.2d 445. The test for determining bad faith has two prongs; first, "a plaintiff must show the absence of a reasonable basis for denying benefits of the policy[,]" and second, plaintiff must show "the defendant's knowledge or reckless disregard of the lack of a reasonable basis for denying the claim." Id. at 473 (citing Bibeault v. Hanover Ins. Co., 417 A.2d 313 (R.I. 1980) (quoting Anderson, 271 N.W.2d at 376-77)).
The New Jersey Supreme Court explained how a bad faith claim for non-coverage might be disposed of on summary judgment:
Under the "fairly debatable" standard, a claimant who could not have established as a matter of law a right to summary judgment on the substantive claim would not be entitled to assert a claim for an insurer's bad faith refusal to pay a claim.Id. at 473. Essentially, under Pickett, the insured must show that "no debatable reasons existed for denial of the benefits" available under the policy. Id. at 481. Paul Revere argues that it had a "fairly debatable" reason for denying Rotuski's claim and that there are genuine issues of material fact that would preclude summary judgment in favor of plaintiff on the substantive claim of entitlement to benefits. As such, Paul Revere argues, plaintiff's claim that they are liable in bad faith for consequential damages cannot be sustained. Rotuski argues that Paul Revere had no reasonable basis for denying his claim and that "at the very least, Paul Revere's conduct creates an issue for the trier of fact that cannot be determined in the context of Paul Revere's motion for partial summary judgment." (Pls.' Opp. to Mot. for Summ. J. at 27).
In a recent opinion from the United States District Court, District of New Jersey, Judge Wolin criticized this method of determining bad faith as anomalous. Judge Wolin further wrote that he felt it was odd that the New Jersey rule required the District Court to examine a cause of action (i.e., whether plaintiff is entitled to benefits at all) different from the motion presently before the court (i.e., whether defendant acted in bad faith). Judge Wolin acknowledged, however, and this Court agrees, that a District Court sitting in diversity must apply the substantive law of the State. See Tarsio v. Provident Ins. Co . , 108 F. Supp.2d 397 (D.N.J. 2000).
The issue of whether an insurer's denial of a claim constitutes bad faith can be disposed of as a matter of law on summary judgment. See Polizzi Meats, Inc. v. Aetna Life and Cas. Co., 931 F. Supp. 328, 334 (D.N.J. 1996) (citing Anderson v. Continental Ins. Co., 85 Wis.2d 675, 271 N.W.2d 368, 376-77 (1978) (holding that an insurer should have the right to litigate a claim when it feels there is a question of law or fact which needs to be decided before it in good faith is required to pay a claimant)). Rotuski's claim that Paul Revere's conduct in denying disability income payments raises an issue of fact for the jury undermines his opposition to Paul Revere's motion for summary judgment. Under New Jersey law, unless plaintiff could have established as a matter of law a right to summary judgment on the substantive claim, no assertion of a claim for insurer's bad-faith refusal to pay the claim is proper.Pickett, 131 N.J. at 473, 621 A.2d at 454.
Rotuski's argument demonstrates an apparent misunderstanding of the burden placed on plaintiffs under Pickett, which is different from the burden articulated in Anderson, 271 N.W.2d 368. Rotuski likens the instant case to the facts in Lewis v. Paul Revere Life Ins. Co., 80 F. Supp.2d 978 (E.D.Wis. 2000), where the court denied defendant's motion for summary judgment because it found that there was a genuine issue of material fact to be decided by a jury concerning Paul Revere's discontinuation of disability benefits. The plaintiff in Lewis suffered from disabling depression and was paid benefits by Paul Revere for two and one-half years, until Paul Revere determined that plaintiff was no longer disabled. Plaintiff correctly states that Lewis and the instant case are factually similar. The Lewis court, however, applied the test differently pursuant to Wisconsin law, which specifically recognizes "a special duty aris[ing] from the insurer to the insured, a breach of which duty is a tort and is unrelated to contract damages." Lewis, 80 F. Supp.2d at 989. The Lewis court evaluated plaintiff's claim under a two-prong test from Wisconsin law; "[t]he tort [of bad faith denial of insurance benefits] arises when an insurer lacks a reasonable basis for terminating benefits under a policy (the objective prong) and knows or recklessly disregards that it lacks a reasonable basis for terminating the benefits (the subjective prong)." Lewis, 80 F. Supp.2d at 990 (quoting Anderson v. Continental Ins. Co., 85 Wis.2d 675, 686, 271 N.W.2d 368 (1978)) (emphasis added). This test puts the burden of showing a reasonable basis for the termination of benefits on theinsurer. In Lewis, the court denied the defendant's motion because it found that the insurer had failed to meet its summary judgment burden of showing that no genuine issues of material fact concerning the insurer's reasonable basis for termination of benefits and the insurer's knowledge thereof existed. Lewis, 80 F. Supp.2d at 991-92. That case is distinguishable from the instant case, which must be evaluated under New Jersey law.
Although Pickett refers to the tests used in other jurisdictions, such as Wisconsin, the New Jersey Supreme Court did not adopt those tests without modification. See Anderson , 271 N.W.2d 368; Bibeault, 417 A.2d 313. The New Jersey Supreme Court, while acknowledging that most of the other jurisdictions that recognize a cause of action for such a claim characterize them as torts, determined that such a cause of action under New Jersey law would best be understood as one that sounds in contract. The court in Pickett also clearly places the initial burden on New Jersey plaintiffs, when faced with a summary judgment motion to dismiss their bad faith claim, to show that they were entitled to benefits in the first place as a matter of law. Pickett, 131 N.J. at 473; but see Tarsio v. Provident Ins. Co., supra n. 3 (criticizing this method of evaluating a bad faith claim as anomalous).
The New Jersey Supreme Court determined, therefore, that this State's substantive law of bad faith denial of disability insurance benefits is grounded in contract and thus erects a formidable barrier to recovery unless there was no fairly debatable ground for such denial. Pickett places a burden upon the insured, at the summary judgment stage, to demonstrate that no reasonable basis existed upon which the insurer could have discontinued benefits. Summary judgment is available to the insurer if it had a reasonable basis for discontinuation of benefits at the time it made the decision, and the insured may overcome this showing by demonstrating that no reasonable factfinder could agree that the insurer's decision had a fairly debatable basis, even if that decision was incorrect on balance. With this standard in mind, we turn to the facts of Rotuski's claim and Paul Revere's disposition.
The facts of this case must be analyzed using the "fairly debatable" standard articulated in Pickett. This standard, unlike the test used by the court in Lewis, requires that the insured show that "no debatable reasons existed for denial of benefits." Pickett, 131 N.J. at 481, 621 A.2d 445; see Polizzi Meats, 931 F. Supp. at 335 (placing burden of showing defendant's failure to have a fairly debatable basis for denying coverage on plaintiff). In this case, the evidence considered by Paul Revere prior to terminating the continued payment of disability income insurance, including the review of plaintiff's records by Marvin Goldstein, M.D., and Defendant's independent surveillance reports, provide a sufficiently reasonable basis for their denial of plaintiff's disability claim. Although plaintiff's argument that Rotuski was, in fact, disabled under the terms of the policy is not inconceivable, such argument does not defeat the finding that Paul Revere's termination was fairly debatable in light of their ongoing investigation. The Superior Court of New Jersey, Appellate Division, when considering a plaintiff's claim of bad faith denial of a claim, determined that a defendant need not prove that it conducted a fool-proof investigation prior to denying insurance benefits. Universal-Rundle Corp. v. Commercial Union Ins. Co., 319 N.J. Super. 223, 249-50, 725 A.2d 76 (N.J.Super.Ct. App. Div. 199 9), cert. denied, 161 N.J. 149, 735 A.2d 574 (N.J. Jun. 9, 1999).
In other words, even if a reasonable jury could conclude that Paul Revere was incorrect, no jury could reasonably conclude that it had no fairly debatable basis for discontinuing Rotuski's benefits based upon medical reports and surveillance. Thus, Paul Revere had reason to believe that Rotuski was not "unable to perform the important duties of Your Occupation" under Section 1.9 of the Policy, supra, as of the summer of 1998. Rotuski was observed working for extended periods of time, driving his car, and keeping social engagements; his cardiac tests showed improvement, including the Exercise Tolerance Test of September 17, 1997, which was interpreted by defendant's expert cardiologist as essentially normal.
Because Rotuski cannot demonstrate that Paul Revere lacked at least a "fairly debatable" basis in fact upon which to deny coverage under his disability benefits insurance policy, Rotuski cannot succeed on its claim for bad faith damages. Accordingly, Paul Revere's motion for partial summary judgment on the issue of bad faith damages will be granted.
2. Bad Faith Punitive Damages
New Jersey law clearly establishes that the duties of an insurer presented with a first-party claim for loss are a matter of contract law, and that punitive damages are, therefore, generally not recoverable. See Polizzi Meats, Inc. v. Aetna Life and Cas. Co., 931 F. Supp. 328 (D.N.J. 1996) (citing George J. Kenny Frank A. Lattal, New Jersey Insurance Law § 5.19 (1993)). Most recently, in Pickett, the New Jersey Supreme Court held that "a plaintiff would have to show something other than a breach of the good-faith obligation as we have defined it" to sustain a claim for punitive damages. Pickett, 131 N.J. at 475-76, 621 A.2d at 455. The New Jersey Supreme Court has defined conduct warranting imposition of punitive damages as that which is "wantonly reckless or malicious." Nappe v. Anschelewitz, Barr, Ansell Bonello, 97 N.J. 37, 49-50, 477 A.2d 1224 (1984).
Rotuski has alleged that Paul Revere's termination of his disability income insurance payments amounted to conduct severe enough to constitute award of punitive damages because there was no "reasonably debatable defense to the proof of loss and medical opinions of Plaintiff's experts." (Complaint, Count Four). In response to Defendant's motion for partial summary judgment, Rotuski cites several unreported cases and asserts that Paul Revere's conduct in this action "mirror[s] the conduct in [those] cases wherein the courts found liability and/or denied motions for summary judgment by Paul Revere/Provident on the issues of bad faith and punitive damages" and that such "reckless, unreasonable and intentional conduct in this case has caused Mr. Rotuski to incur substantial damages." (Pls.' Opp. to Mot. for Summ. J. at 33). Plaintiff's arguments again seem to confuse the issue presently before the court.
Similar to the plaintiff in Polizzi, Rotuski fails to adequately distinguish between his claim for consequential damages and punitive damages. See Polizzi Meats, Inc., 931 F. Supp. at 335-36 (granting summary judgment on claim for punitive damages where plaintiff failed to address the standard of "egregious circumstances" as required by the New Jersey Supreme Court). The conduct cited by Rotuski as evidence of Paul Revere's egregious conduct, (e.g., requiring a showing of continued disability, termination of benefits based on apparent ability to work, and consideration of medical records from before settlement of plaintiff's initial claim), fails to adequately support his claim for punitive damages based on a bad faith denial of insurance benefits.
A motion for summary judgment must be granted "unless the party opposing the motion can produce evidence which, when considered in light of that party's burden of proof at trial, could be the basis for a jury finding in that party's favor. Polizzi Meats, 931 F. Supp. at 336 (quoting J.E. Mamiye Sons, Inc. v. Fidelity Bank, 813 F.2d 610, 618 (3d Cir. 1987) (Becker, J., concurring)). Because Rotuski has not provided this Court with evidence sufficient to show the requisite egregious circumstances and wanton conduct, Defendant's motion for partial summary judgment on plaintiff's claim for punitive damages arising out of defendant's termination of disability income benefit payments is granted.
C. Plaintiff's Claim for Attorney's Fees
As a general rule, each party is responsible for paying their own attorney's fees, unless an exception to that rule, as created by statute or court rule, is applicable. See Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 95 S.Ct. 1612 (1975) (explaining the history of this rule in contrast to the British rule, which allows the award of attorney's fees to prevailing litigants); Iafelice v. Arpino, 319 N.J. Super. 581, 590, 726 A.2d 275 (N.J.Super.Ct. App. Div. 1999) (discussing an exception to this rule created by R. 4:42-9(a)(6)).
In this case, New Jersey Court Rule 4:42-9(a)(6) is relevant. That rule provides, in pertinent part, as follows:
4:42-9. Counsel Fees
(a) Actions in Which Fee is allowable. No fee for legal services shall be allowed in the taxed costs or otherwise, except . . .
(6) In an action upon a liability or indemnity policy of insurance, in favor of a successful claimant.
The comment to the rule describes that it is "intended to cover all such actions, including those brought by third-party beneficiaries, in which the insurer or indemnitor is found therein to have failed to comply with its contractual undertakings." Iafelice, 319 N.J. Super. at 590, 726 A.2d 275 (quoting Pressler, Current New Jersey Court Rules, cmt. 2.6). In light of this intent, the comment also defines the scope of the rule, instructing that the rule "should not be extended, beyond its express terms, to permit a counsel fee award to be made to an insured who brings direct suit against his insurer to enforce casualty or other direct coverage." Pressler, Current New Jersey Court Rules, cmt. 2.6.
The case at bar is a direct suit brought by an insured, Rotuski, against a carrier, Paul Revere, to enforce coverage and, as such, is beyond the scope of R. 4:42-9(a)(6). See Vesley v. Cambridge Mut. Fire Ins. Co., 189 N.J. Super. 521, 461 A.2d 162 (N.J.Super.Ct. 1981) (no counsel fees in a suit for fire casualty loss under a homeowner's policy); Enright v. Lubow, 215 N.J. Super. 306, 312-13, 521 A.2d 1300 (N.J.Super.Ct. App. Div. 1987) (discussing the New Jersey Supreme Court's decision not to amend R. 4:42-9(a)(6) to explicitly permit fees in first party claims); Ellmex Constr. Co., Inc. v. Republic Ins. Co., 202 N.J. Super. 195, 494 A.2d 339 (N.J.Super.Ct. 1985) (no counsel fees in action for loss incurred by vandalism under a builder's risk policy);Miller v. New Jersey Ins. Underwriting Asso., 188 N.J. Super. 175, 194, 457 A.2d 23 (N.J.Super.Ct. 1983) (no counsel fees in a direct action upon a fire insurance policy).
In view of the foregoing law, there is no genuine issue of material fact to be decided regarding plaintiff's complaint for attorney's fees in this action. Because plaintiff has not offered any evidence to the contrary, and has not cited to any other applicable statute or rule which would entitle him to such fees, defendant's partial motion for summary judgment on plaintiff's claim for attorney's fees is granted.
III. CONCLUSION
For the foregoing reasons, Paul Revere's motion for partial summary judgment with respect to plaintiff's claims for consequential and punitive damages related to the termination of his disability income benefits and plaintiff's claim for attorney's fees is granted.
The accompanying order is granted.
ORDER
This matter having come before the Court upon the motion of Defendant Paul Revere Life Insurance Company for partial summary judgment pursuant to Fed.R.Civ.P. 56 to dismiss plaintiff Rotuski's claims for consequential and punitive damages and attorney's fees arising from an alleged bad faith termination of disability benefits; and this Court having considered the parties' submissions; and for the reasons expressed in an opinion of today's date;
IT IS this day of October 2000 hereby
ORDERED that Paul Revere's motion for partial summary judgment [Docket Item 53-1] be and hereby is, GRANTED, and Count IV of the complaint and its related claim for attorney's fees shall be DISMISSED.