Did U.S. Life Breach its Contract When it Denied Total Disability Claim of ABA Policy Holder?

In Cynthia Cheney v. United States Life Insurance company In the City of New York et. Al (U.S. Life), Plaintiff was covered under a disability insurance policy that was issued to an association, the American Bar Endowment (ABE). In order to be a member of the ABE, a member must also be a member of the American Bar Association (ABA).

On January 17, 2014, Plaintiff submitted a claim for total disability to the ABE asserting that her disability began in December 2006. Eventually, the actual disability date was determined to be January 1, 2007. She claimed her regular occupation was that of a trial attorney. Along with her claim, she submitted a statement from her treating nurse practitioner stating Plaintiff had a moderate limitation of functional capacity due to arthritis and had been unable to work since July 1, 2012. Plaintiff also claimed she was unable to work due to uncontrolled diabetes.

The policy defined total disability in relevant part as the “complete inability of the member to perform the material duties of [her] regular job to include [her] specialty in the practice of law; ‘specialty in the practice of law’ means the specialty in the practice of law which the member was performing on the day before total disability began.”

A board-certified endocrinologist hired by U.S. Life reviewed Plaintiff’s medical records and opined that they did not support her claimed severe limitation as of 2007. Accordingly, U.S. Life denied her plain finding “insufficient evidence to support that [Plaintiff] was Totally Disabled” during the relevant time period for which she claimed she was unable to work.

Plaintiff then filed a claim for breach of contract and bad faith in the United States District Court for the District of Arizona. In order to determine if U.S. Life breached its contract and its duty to deal in good faith and fair dealing, the Court analyzed three main issues and held that Plaintiff was not disabled since she could perform the substantial and material duties of her regular occupation.

U.S. Life Did Not Breach Its Contract with Plaintiff Since Plaintiff Substantially Performed the Material Duties of her Regular Occupation and Was Therefore Not Disabled Under the terms of the Policy.

The Court carefully analyzed the meaning of “total disability” as defined by the policy, the Plaintiff’s “regular job” and determined she could perform the substantial duties of her regular job and was therefore not totally disabled; therefore U.S. Life did not breach its contract when it denied her total disability benefits.

The meaning of “total disability” under the policy. After analyzing the definition of “total disability” as defined by the policy and case law applicable to Arizona, the Court stated that “the relevant question under a disability policy in Arizona is whether the insured can perform the substantial and material duties of her occupation in the usual and customary way.” The Plaintiff is not required to be totally helpless, even if the policy language seems to infer that meaning.

The meaning of “Regular Job” as defined by the policy. The parties agreed that the definition of regular job was “that which [she] was performing on the day before disability began.” The disputes were all factual. The Court determined that December 31, 2006 was the day before her disability began. It then analyzed what job she was doing on that date.

Plaintiff claimed she was a trial and medical malpractice lawyer. But U.S. Life pointed out Plaintiff’s last trial was in November 2005. After that, she spent the year 2006 “offloading her clients and cases to other attorneys.” From July to December 2006, she billed a part-time rate of between 7.6 and 78.1 hours a month. U.S. Life claimed that by December 31, 2006, she was no longer a “trial and medical malpractice lawyer” but a “part-time litigator.”

The Court held that the “undisputed facts” showed that as of January 1, 2007, she was no longer a trial attorney but was a part-time litigator. Therefore, the proper analysis would be whether she could perform the substantial duties of a part-time litigator.

Plaintiff was not disabled since she was able to substantially perform the duties of her regular job. Therefore, U.S. Life did not breach the contract when it denied her claim. Plaintiff continued her part-time work as a litigator through 2008 and after. She started her own mediation practice in 2007, which showed she was able to “perform the substantial and material duties of her job after her disability date.” Plaintiff did not disagree with this analysis; however, she argued that U.S. Life should consider her unable to perform the substantial and material duties of a trial lawyer.

The Court noted that the policy defined “regular job” as the one Plaintiff was performing on the day before the disability, and that on December 31, 2006, Plaintiff was a part-time litigator, not a trial attorney. In fact, Plaintiff had not been a trial attorney since November 2005.

As a part-time litigator, Plaintiff billed between 12 and 46.8 hours a month after January 1, 2007. She also started a mediation practice. Accordingly, the Court held that “Plaintiff was not disabled even under the substantial performance test. As a result, she cannot establish U.S. Life’s breach of the contract.”

U.S. Life Did Not Act in Bad Faith

Arizona law “implies a covenant of good faith and fair dealing in every contract.” The proper evaluation at this stage of the proceedings was to determine if “the insurer acted unreasonably and either knew or was conscious of the fact that its conduct was unreasonable”.

The Court held that “the record supports U.S. Life’s determination that Plaintiff was not disabled under the Policy, and Plaintiff cites no evidence showing that U.S. Life acted unreasonably, dishonestly, or unfairly.” The Court granted U.S. Life’s Motion and dismissed Plaintiff’s bad faith claim.

This case was not handled by our office, but we think it can be instructive to those who may be dealing with their disability insurance company on similar issues. If you have any questions about this case, or about any matter related to your disability claim, contact one of our attorneys at Dell & Schaefer for a free consultation.

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