Opinion
IndexNo.: 120877/01
04-17-2002
BARRY SEIDEL, Plaintiff, v. NATIONAL LIFE INSURANCE COMPANY, FIRST UNUM LIFE INSURANCE COMPANY, UNUMPROVIDENT LIFE INSURANCE COMPANY, PROVIDENT COMPANY, INC., PROVIDENT LIFE AND CASUALTY FNSURANCE COMPANY, and UNUMPROVIDENT CORPORATION Defendants.
DECISION, ORDER AND JUDGMENT
KORNREICH, SHIRLEY WERNER, J.: I. Facts:
Beginning on June 30,1983, plaintiff Barry Seidel, a triaL attorney, began purchasing private, "own occupation," long-term disability policies from the predecessors of defendant National Life Insurance Company ("National Life") and of defendant First Unum Life Insurance Company ("First Unum"). According to the terms of the policies purchased by plaintiff, in the event that he became ''totally disabled," he would receive benefits of $3,500 a month for as long as his total disability lasted, or, if need be, for life. In January 1993, plaintiff purchased additional Overhead Expense Coverage of $2,000 per month for the first twelve months of any "total disability."
"Total disability" commences, according to the policy, when an insured becomes unable "to perform the material and substantial duties of [his] 'regular occupation'." In a letter to plaintiff dated July 1, 1983, the insurer's agent wrote:
We consider 'regular occupation' for professionals such as you to be their professionally recognized specialties, We understand that you currently specialize in trial law. If you were unable to perform the material and substantialduties of this specialty due to a covered accident or sickness, we would consider you to be totally disabled even though you might be able to teach or engage in another professional specialty.
On March 20, 2000, plaintiff was hospitalized with an acute myocardial infarction, which, according to plaintiff's doctors, caused rim serious heart damage. Over the next several weeks, plaintiff was hospitalized twice more for congestive heart failure.
On April 17, 2000, plaintiff submitted a claim under his disability policies. In the claim, plaintiff explained that he was weak, dizzy, and short of breath, and that he could no longer conduct his practice, which had consisted of 25 hours a week of court appearances, plus 25 hours a week of office work.
By letter dated April 24, 2000, defendant First Unum informed plaintiff that his claim would have to be reviewed by a "Benefits Representative," and then by a "Disability Benefits Analyst."
In another letter, dated May 5,2000,.First Unum demanded that plaintiffs doctors supply medical "updates" and fill out a form — all for submission to and review by the insurer's "Medical Department." First Unum also expressed confusion about the nature of plaintiff's occupation. It sent plaintiff a questionnaire to fill out regarding his professional duties, and requisitioned copies of all of his billing records broken down by month from June 1,1999 to the present. These were to be reviewed by the insurer's "Vocational Case Management Unit." Then, the company explained that plaintiff's business overhead expense benefits could not be paid until after the insurer's "Financial Services Unit" had inspected proof of his monthly expenses. A "Schedule of Expenses Form" was supplied for plaintiff's convenience. A preliminary check was enclosed for $2,733.33, to cover plaintiff's documented business expenses for the period March 20-May 1, 2000.
Under cover of a letter dated May 20, 2000, plaintiff sent First Unum the requested information, and described his business. He and his five to six associates provided a "court coverage service" for other attorneys at both Supreme Court and Civil Court in Queens County. Before his heart attack, plaintiff himself used to make approximately ten court appearances per day. plaintiff had also spent most of his afternoons conducting his separate legal practice in personal injury and real estate Jaw
In letters dated July 25, 2000 and August 16,2000, First Unum responded that plaintiffs occupation was really "comprised of three distinct duties, each of which contributes to your overall income stream," Even assuming that plaintiff could no longer make court appearances, First Unum's "Lead Customer Care Specialist" wrote, he could continue to conduct the remaining two-thirds of his business - ie., his supervision of his office staff andjunior associates, and his private personal injury and real estate law practice. In addition, First Unum's unnamed "physician" had reviewed plaintiff's most recent medical records, and had concluded that ''there is no ongoing evidence of a cardiac impairment" - notwithstanding a recent ejection fraction of 28%. Otherwise, First Unum claimed, it did not dispute plaintiff's physician's diagnosis.
First Unum enclosed a check with the July 25th letter, but, in light of its doubts about plaintiffs claim, offered to "settle" it by paying him a total of $7,000 in additional disability benefits and $8,133.33 in business overhead expense benefits, while waiving certain future premiums. When plaintiff accepted this offer, First Unum withdrew it.
The August 16, 2000 letter contained a check for $3,000, representing "partial disability benefits for the period. July 1,2000 to October 1,2000." With this, First Unum declared plaintiffs file to be closed.
Plaintiff protested the discontinuation of his benefits. He continued to document his disability with, updated physician's statements, recent medical test reports, and descriptions of the impact of his condition on his ability to practice law. First Union responded in letters in which it minimized plaintiff's physician's findings, while it deflected plaintiff's demands for an explanation of its rejection, and insisted that he and his doctors supply more and more information. For example, in a letter dated October 10, 2000, First Unum's "Customer Care Specialist" wrote to plaintiff that his abnormal echocardiogram findings did "not provide objective evidence of your current functional capacity," She required plaintiff and his physician to fill out more forms, and she indicated that any reconsideration of plaintiff's application was contingent upon his writing "a detailed ... explanation of [his] occupational status," containing descriptions of specific duties and how his heart condition prevented him from performing each of them. Exchanges of this sort continued through November 2001.
During this period, First Unum replaced the claims examiner who was handling plaintiffs file, and changed the address to which plaintiff was required to forward his information. First Unum only belatedly informed plaintiff of these changes, and in doing so did not identify his new representative. The insurer intimated that consideration of plaintiff's claim would be delayed because all of his paperwork had been sent to the wrong office. At the same time, First Unum began sending its correspondence to plaintiff at the wrong address.
First Unum does not deny that it has rejected plaintiffs demand for benefits without ever having had him examined by a physician, nor does it deny that its policy does not require "objective evidence" of functional incapacity before it is obliged to pay disability benefits,
In November 2001, plaintiff commenced the instant lawsuit against National and First Unum, as well as against several affiliated businesses. In his two causes of action, plaintiff seeks to recover first party benefits pursuant to his breach of contract claim, and, under a theory alleging deceptive acts and business practices under General Business Law ("GBL")349, plaintiff also seeks both compensatory and punitive damages.
Defendants now move for summary judgment dismissing plaintiffs second cause of action against all defendants, and dismissing plaintiff s first cause of action insofar as it is asserted against parties with whom plaintiff did not expressly contract. Plaintiff has cross-moved to amend his complaint to amplify his second cause of action. II. Discussion:
A. Plaintiffs Breach of Contract Claim (First Cause of Action):
That branch of defendants' motion which seeks to dismiss plaintiff's breach of contract claim insofar as asserted against UnumProvident life Insurance Company, Provident Company, Inc., Provident Life and Casualty Insurance Company, and UnumProvident Corporation is granted, without opposition from plaintiff.
Defendants have presented evidence establishing that UnumProvident Corporation is the parent of the holding company that owns First Unum. Provident Companies, Inc. (s/h/a ';Provident Company, Inc.") was UnumProvident Corporation's predecessor. Plaintiff may not recover breach of contract damages, nor damages for breach of the implied obligation of good faith and fair dealing implicit in every contract, from these parties, with whom he has no contract. See. Levine v. Yokell, 258 A.D.2d 296,297 (l"Dept. 1999).
Plaintiff has nowhere alleged that he was insured under any policies issued by Provident Life and Casualty Insurance Company, with the result that his complaint should be dismissed insofar as asserted against that entity as well Finally, "UnumProvident Life Insurance Company" is not a separate entity, but is another name for First Unum.
B. Plaintiff's General Busine Law 349 Claim (Second Cause of Action):
The second branch of defendants' motion is denied, and plaintiff s cross-motion is granted to the extent that his complaint is deemed amended, nunc pro tunc, to include the additions to his second cause of action contained in his Proposed Amended Complaint insofar as asserted against all named defendants.
GBL 349 allows an individual consumer to sue for compensatory and punitive damages when he has been injured by a fraudulent, deceptive or materially misleading practice aimed against consumers who purchase defendant's products or services. In order to state a claim under GBL 349, a plaintiff must charge that a defendant has engaged in deceptive conduct that is consumer oriented, causing injury to plaintiff. To be "consumer oriented," defendant's conduct need not be repetitive or recurring, but defendant's acts or practices must have a broad impact on consumers at large. ,See New York University v. Continental Insurance Company, 87 N.Y.2d 308,320 (1995); Oswego Laborers' Local 214 Pension v. Midland Bank. N.A., 85 N,Y.2d 20, 25 (1995). The sale of a standard form insurance policy has been held to constitute such consumer oriented conduct under this statute. See Riordan v. Nationwide Mutual Fire Ins. Co. , 977 F.2d 47, 51-53 (2d Cir. 1992).
Plaintiff's amplification of his second cause of action consists of allegations, supported by documentary evidence, reflecting that in March 1996, Provident Life and Accident Insurance Company ("Provident Life and Accident") - traditionally the lead company in the Provident group of insurance companies - completed a plan of reorganization. The result was that a Delaware-based, non-insurance-vending holding company - Provident Companies, Inc. ("Provident Companies," s/h/a "Provident Company, Inc.") replaced Provident Life and Accident as the parent of the organization. Thereafter Provident Life and Accident and its two former subsidiaries, Provident Life and Casualty Insurance Company and Provident National Assurance Company, all became wholly-owned subsidiaries of Provident Companies. In April 1996, Provident Companies bought The Paul Revere Corporation for $1.2 billion, thereby becoming the largest writer of individual disability income insurance in the U.S. Subsequently, Provident Companies was taken over by UnumProvident Corporation, which is currently the parent of the holding company that owns First Unum. According to defendants' evidence, defendant UnumProvident Corporation (formerly Provident Companies) is the sole stockholder of Provident Life and Casualty Insurance Company (a Tennessee insurer), as well as the sole stockholder of Unum Holding Company. Unum Holding Company is in turn the sole stockholder of First Unum - a New York insurer, formerly known as Unionmutual Stock life Insurance Company of New York.
with this reorganization, according to plaintiff's evidence, the Provident insurance companies undertook to streamline their disability policy divisions, in order to increase profitability for their investors. They discontinued non-cancellable own-occupation policies, and stopped offering lifetime benefits. The old disability policies were replaced by new contracts that compensated the insured only for "lost earnings," with emphasis on occupational rehabilitation and a rapid return by the insured to gainful employment. Plaintiff has also adduced evidence of the companies' simultaneous institution of review processes and employee incentive programs aimed at identifying grounds for denying disability claims and for discontinuing payments of previously approved benefits.
Defendants oppose plaintiff's application to amend and continue his GBL 349 claim, arguing that their failure to provide benefits in accordance with a policy of insurance constitutes at worst a breach of a private contract of insurance, which is remediable only by conventional contract damages. They insist that the broader, GBL 349 concerns regarding fraudulent practices committed upon consumers at large have no place here.
The defendants are correct that an insured is limited to contract damages where his dispute with his insurer concerns facts of policy coverage that, are unique to the parties, such as, for example, where the sole disagreement between the parties relates to the sufficiency of a particular proof of loss. See .New York Univ. v. Continental Ins. Co., supra, at 320; Security Mutual Life Tns. Co. of New York v DiPasquale, 283 A.D.2d 182(1" Dept. 2001), 1v dismissed 97 N.Y.2d 653,700; Korn v First UNUM Life Ins. Co., 277 A,D.2d 355,356 (2d Dept. 2000); Pe11echia.& Pellechia v. American National Fire Ins. Co., 244A.D.2d 395 (2d Dept. 1997).
However, contrary to defendants' further assertion, GBL 349 is not necessarily inapplicable in all ostensibly "private" insurance disputes. See New York Univ. v. Continental Ins. Co.. supra, at 321. Here there is evidence that the practices of which the plaintiff complains were part of a systematic program aimed at policyholders generally, with the result that they were likely to have an "impact on consumers at large." Accordingly, the plaintiff has adequately stated a claim of an unfair or deceptive practice under GBL 349. See Gaidon v. Gm___ 94 N.Y.2d 330 ((1999):Acquista v. New York Life Ins. Co., 285 AD.2d 73 (1st Dept. 2001); Batas v. Prudential Ins. Co. of America, 281 AD.2d 260 (2001).
It is worthy of note that even before the Proposed Amendment, plaintiffs complaint articulated an adequate GBL 349 claim under the standards enunciated in Acquista, supra. An "unfair or deceptive practice" has been defined as a pattern of representations or omissions 'likely to mislead a reasonable consumer acting reasonably under the circumstances." See Karlin v. IVF Am., 93 N,Y.2d 282,294 (1999). Plaintiff originally alleged that the defendants made a practice of indefinitely delaying his claim, requiring duplicative information from him and his physicians, unilaterally changing the contract terms, and ultimately denying him benefits without reference to his claim's viability. The "unfair and deceptive practices" he describes are orchestrated, and cannot reasonably be supposed to have been devised to apply to his claim alone. See, e.g., Provident Life and Casualtv Ins. Co. v. Brittenham, (2d Dept. 2001); see also Wiener v. Unumprovident Corporation, WL #334468 (S.D.N.Y. February 28,2002).
Plaintiff's Proposed Amended Complaint merely fleshes out his GBL 349 claim with additional facts tending to prove that, indeed, defendants' unfair policies were directed at most if not all of their private, long-term disability policy holders after the mid- 1990's. The new information serves to satisfy plaintiffs burden of proving that the conduct complained of was not unique to him, but would "have a broad impact on consumers at large." See Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank. N,A., supra,
Leave to amend a pleading should be freely given. CPLR 3025(b). The rule is particularly applicable where, as here, no discovery has yet been held. See also,Acquista v. New York Life
Ins. Co.. supra, The defendants are not prejudiced, inter alia, because the amendment consists merely of the addition of recently-discovered facts to plaintiffs originally-pleaded legal theory. See Silyin v. Karwoski, 242 A.D.2d 945 (4th Dept. 1997).
Dated: April 17,2002
New York, New York
SHIRLEY WERNER KORNREICH