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April 6, 2000


The opinion of the court was delivered by: Vanaskie, Chief Judge.


This action pending in this Court on the basis of diversity jurisdiction under 28 West Page 696 U.S.C. § 1332 concerns two disability insurance policies purchased by plaintiff John Krisa from defendant Equitable Life Assurance Society ("Equitable"). Krisa claims entitlement to total disability benefits under the policies on the ground that labile hypertension renders him unable to pursue his chosen profession as a trial lawyer. Contending that the applicable test under the policies is whether Krisa was unable to engage in all the substantial and material duties of his regular occupation at the time he became disabled, and asserting that labile hypertension did not preclude Krisa from engaging in certain of the activities that he described as part of the substantial and material duties of his legal practice at the time he applied for disability benefits, Equitable has denied Krisa's claim. Krisa's complaint asserts four causes of action: (1) breach of contract; (2) violation of Pennsylvania's Bad Faith Statute, 42 Pa.C.S.A. § 8371, in the denial of his total disability claim; (3) fraud and/or negligent misrepresentation in connection with the sale of the policies to him; and (4) violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 P.S. §§ 201-1, et seq. Equitable has moved for summary judgment on all counts with respect to Krisa's claim for total disability benefits.*fn1

Having carefully considered the record and the applicable case law, I find that there are genuine disputes as to material facts with respect to Equitable's assertion that Krisa's breach of contract, fraud and UTPCPL claims should be dismissed. As to Krisa's bad faith claim, however, I find that Krisa has failed to proffer evidence that would enable a jury to find by the requisite clear and convincing standard that Equitable's denial of benefits was without reasonable basis and that Equitable knew or recklessly disregarded the lack of a reasonable basis for denying the claim for total disability benefits. In accordance with Rule 56(d) of the Federal Rules of Civil Procedure, partial summary judgment will be entered in favor of Equitable with respect to the claim in Count II of Krisa's complaint that concerns bad faith in the denial of his claim for total disability benefits. Equitable is also entitled to judgment on Krisa's demand for emotional distress damages for alleged violations of the UTPCPL. In all other respects, Equitable's summary judgment motion will be denied.

Also pending in this matter is Equitable's Motion to Strike Krisa's Eleventh and Twelfth Affirmative Defenses to Equitable's counterclaim. Equitable's counterclaim asserts that Krisa committed fraud in his claim for disability benefits. Equitable contends that Krisa's Eleventh Affirmative Defense (which asserts that the costs and counsel fees claimed by Equitable were caused by the allegedly unreasonable conduct of Equitable's investigators and counsel in their handling of this litigation), and Twelfth Affirmative Defense (which asserts that Equitable's claims are frivolous and made in violation of Rule 11 of the Federal Rules of Civil Procedure), are scandalous, immaterial and impertinent. Having carefully considered the matter, I will strike the Twelfth Affirmative Defense, but not the Eleventh.


It is beyond cavil that the record presented by the parties must be examined in the light most favorable to Krisa, the non-moving party. See White v. Westinghouse Elec. Co., 862 F.2d 56, 59 (3d Cir. 1988). All reasonable inferences that favor Krisa which the record supports must be considered. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Viewed from this perspective, the record reveals the following:

In 1985, Krisa was sold an Equitable disability insurance policy by Joseph Keating, an agent then employed by Equitable. During the course of selling the policy to Krisa, Keating explained that coverage for "the inability to engage in the substantial and material duties of your regular occupation" meant that if Krisa could not engage in the activities of a trial lawyer, but could otherwise work as an attorney, he would be considered disabled under the terms of the policy. (Keating Dep. at 31.) Keating also presented Krisa with an illustration that defined the phrase "regular occupation" as the "occupation . . . or recognized specialty in which you are regularly engaged for profit or gain at the time you become disabled." (Ex. A to Plaintiff's Exhibits in Opposition to Defendant's Motion for Summary Judgment; emphasis added.) This illustration was consistent with Keating's explanation that the inability to engage in a specialized field of practice rendered the insured eligible for disability benefits. On the application for the policy, Krisa generally described his duties as "Courtroom Attorney." (Ex. "C" to Equitable's Statement of Material Facts.)

The policy issued to Krisa, PN85705469, provided a monthly total disability benefit of $4,500. (Id.) It defined "total disability" as the inability "to engage in the substantial and material duties of your regular occupation." (Id.) "Regular occupation" was defined as "the occupation (or occupations, if more than one) in which you are regularly engaged for gain or profit at the time you become disabled." (Id.) Contrary to the written illustration Keating provided to Krisa, the policy definition of "regular occupation" did not explicitly encompass a "recognized specialty." While Krisa does recall being assured by Keating that he would be entitled to benefits in the event that he was unable to engage in a litigation attorney's practice, he does not recall reading the policy between 1985 and 1990. (Krisa Dep. at 124.)

In July of 1992, Krisa applied to Equitable for another disability income insurance policy. Charles Rader was the Equitable agent who sold Mr. Krisa his 1992 policy. (Equitable Statement of Material Facts (Dkt. Entry 76) at ¶ 7.)*fn2 In connection with this transaction, Rader used the same illustration that Keating had used in 1985. That is, Rader provided Krisa with an illustration that defined "your regular occupation" as including the "recognized specialty" in which the insured was regularly engaged for profit or gain at the time he or she became disabled. Rader explained to Krisa that if he was a litigator and was disabled from doing trial work, but could do other legal work, he would qualify for a disability benefit. (Rader Dep. at 29-30.) This explanation was consistent with Rader's understanding that the Equitable policy would provide benefits in the event that an attorney with a specialty in trial practice was unable to perform that specialty. (Id. at 76-77.)

In October of 1992, Equitable issued a disability income policy to Krisa under policy number PN 92710988 with a monthly benefit of $2,500. The 1992 policy contained the identical definitions of "total disability" and "regular occupation" as were contained in the 1995 policy. While the policy was issued by Equitable, it was not delivered to Krisa. (Krisa Dep. at 144-45.)

In December of 1996, Krisa was hospitalized with a primary diagnosis of "labile hypertension."*fn3 (Ex. "F" to Plaintiff's Exhibits in Opposition to Defendant's Motion for Summary Judgment.) Krisa's attending physician, Dr. Kurt Moran, regarded the labile hypertension as precluding Krisa from practicing as a trial lawyer.

On February 10, 1997, Krisa filed a disability claim on both policies issued by Equitable, asserting total disability beginning December 6, 1996. On February 24, 1997, Equitable requested medical records from Dr. Moran and the Community Medical Center, the hospital where Krisa had received treatment in December of 1996. Equitable also requested records from the Social Security Administration, information concerning Krisa's law firm, and the status of Krisa's attorney license. (Equitable's Statement of Material Facts at ¶ 10.) In May of 1997, Krisa submitted to Equitable an attending Physician's Statement in which Dr. Moran opined that Krisa was totally disabled from his occupation as a result of labile hypertension. (See Ex. "F" to Plaintiff's Exhibits in Opp. to Defendant's Summary Judgment Motion.) Krisa also submitted a claimant's Statement for Disability Benefits. (Equitable Statement of Material Facts at ¶ 11.) In response to the request that he list the duties of his occupation in order or importance, Krisa stated:

• Litigate personal injury claims [35 hours per week]

• Firm Administrator & Managing Attorney [five hours per week]
• Solicitor, Carbondale Area and Lakeland School District [5 hours per week]

(Exhibit "H" to Equitable's Statement of Material Facts.)

In June of 1997, Equitable field representative Henry Radke interviewed Krisa at Krisa's law office. (Ex. "H" to Equitable's Statement of Material Facts at Bates No. 000-125-27.) While Krisa informed Radke that he had reduced his work load by about 50%, he also told Radke that his doctor had advised him not to work. (Radke Dep. at 50.) In July of 1997, Equitable received the medical records of Dr. Moran. Along with those records, Dr. Moran submitted the following statement:

John Krisa has been a patient of mine since his first admission to the hospital for uncontrolled hypertension. After a difficult time in controlling his blood pressure during his hospital stay, he was discharged with an average blood pressure of 130/80. However, after returning to his current life style and work, which is most hectic, to say the least, his blood pressure has been vacillating from 120/80 to 190/120, depending on his work load and various commitments. He has had a complete work up for secondary hypertension, of which all results are negative. It is clear that his blood pressure is greatly influenced by the huge pressure placed on him by the nature of his work. He has been on a multitude of combination antihypertensives, with an antidepressant and a daily sedative. In view of this, I have recommended him to stop practicing as a court room or trial lawyer. The patient has been following a rigid diet and exercise program. I explained to him that in view of his family history of heart disease, hyper-cholesterolemia and vacillating hypertension, he is a prime target for coronary artery disease, and unless something is done now, he will be sacrificing his future quality of life and risking his life. Thus, he is, within a reasonable degree of medical certainty, totally and permanently disabled for the purpose of being a court room or trial attorney. Along with this, the patient has been diagnosed with obsessive, compulsive disorder and hyperthyroidism, that are currently also being treated.

(Ex. H. to Equitable's Statement of Material Facts at Bates No. 000102.)

By letter dated August 8, 1997, an Equitable claims manager forwarded to Krisa a refund of his premium payments, with the following explanation:

As your disability has continued for a period of 90 days, you are eligible for the Waiver of Premium Benefit as stated in your policy. Effective with the premium due December 7, 1996, the company will waive the payment of premium and automatically keep your policy in force. You will not be required to pay any further premiums as long as you remain disabled as defined in your policy. [Id. at 000175.]

By letter dated August 14, 1997, an Equitable senior claims examiner sent to Krisa checks providing total disability benefits covering the period December 6, 1996 to April 6, 1997. (Id. at 000194.) The letter also requested additional information pertaining to Krisa's occupation as a trial attorney. (Id.) In particular, the letter requested specific information as to his trial practice. The letter also noted that Krisa may qualify under the residual disability provisions of the Equitable policies in view of the fact that he was working only in a limited capacity. Id.*fn4

On August 20, 1997, both by way of a telephone communication and a letter, Krisa's counsel asserted that the requests for additional information were irrelevant to his eligibility for total disability benefits under the applicable policies. Id. at 000179-80, 182-84. Krisa's counsel demanded payment of all benefits due within ten (10) days or suit would be brought.

By letter dated August 26, 1997, Equitable responded to the August 20, 1997 correspondence from Krisa's counsel. In this letter, Equitable asserted:

Mr. Krisa's professional activities are extremely relevant to his eligibility for benefits under his policies. Disability is based on the occupation at the times the claims commenced, not the occupation at the time the policy was issued.
[I]t appears that Mr. Krisa is not totally disabled, however, he may be residually disabled, and financial information as well as clarification of Mr. Krisa's exact job duties is needed in order to process any further benefits at this time. [Id. at 000188.]

By letter dated September 4, 1997, counsel for Krisa requested that Equitable either pay the claim or deny it. Equitable responded by requesting yet ...

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