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Klay v. AXA Equitable Life Insurance Co.

September 28, 2010


The opinion of the court was delivered by: Conti, District Judge


I. Introduction

Pending before the court is the motion for summary judgment (the "Motion") (Docket No. 72) filed by defendant AXA Equitable Life Insurance Company ("defendant" or "AXA") with respect to all claims asserted in the amended complaint against it by plaintiff John Klay ("plaintiff" or "Klay"). The genesis of the amended complaint is that AXA allegedly failed to pay Klay total disability insurance benefits. The amended complaint includes five counts: 1) count I - declaratory judgment; 2) count II -- breach of contract; 3) count III - violation of the covenant of good faith and fair dealing; 4) count IV - violation of the unfair claims and settlement practices act pursuant to 40 PA. CONS. STAT. §§1171.5 et seq. and 31 PA. CODE §§146.1 et seq.; and 5) count V - punitive damages. (Docket No. 70.) After reviewing the Motion, and all other submissions of the parties, AXA‟s Motion will be granted.

II. Procedural Posture

On June 16, 2008, plaintiff initiated the instant action by filing a complaint against AXA in the Circuit Court of Ohio County, West Virginia. On July 18, 2008, defendant filed a notice of removal to the United States District Court for the Northern District of West Virginia, pursuant to 28 U.S.C. §§1332, 1441 and 1446. (Docket No. 3.) On August 19, 2008, defendant filed a motion to transfer venue to the United States District Court for the Western District of Pennsylvania. ("Motion to Transfer") (Docket No. 6.) On January 6, 2009, the Motion to Transfer was granted. (Docket No. 28.) On October 19, 2009, plaintiff filed an amended complaint against AXA. (Docket No. 70.) On November 23, 2009, defendant filed the Motion and a brief in support (AXA‟s Brief in Support of Motion for Summary Judgment) (Docket No. 73). On December 22, 2009, plaintiff filed a response to the Motion. (Response to Motion for Summary Judgment) (Docket No. 76). On January 1, 2010, AXA filed a reply brief (Defendant‟s Reply Brief) (Docket No. 78.) On January 20, 2010, AXA filed the Joint Concise Statement of Material Facts, which combined the concise statement of material facts submitted by both parties (the "C.S.F.") (Docket No. 81.)

III. Factual Background

The factual background is derived from the undisputed evidence of record and the disputed evidence of record viewed in the light most favorable to the nonmoving party. See Anderson v. Liberty Lobby, Inc. 477 U.S. 242, 255 (1986) ("The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor.").

A. Disability Policies

Klay was a cardiothoracic*fn1 and vascular*fn2 surgeon for over twenty-five years. (C.S.F. ¶ 68.) From February 1984 to December 1989, Klay purchased six disability insurance policies, with residual disability riders, from defendant (the "policies"). (Id. ¶ 1) Robert King ("King"), the sales agent for defendant, sold plaintiff the disability policies along with the residual riders. (Id.¶ 69.) King advised plaintiff that if he could no longer perform his full and complete duties as a cardiothoracic and vascular surgeon, plaintiff would be considered totally disabled. (Id. ¶ 70, J. Klay Dep. Tr. 61-62, Jan. 20, 2009, Pl.‟s Concise S.F. at Ex. 2.) (Docket No. 77.)

The policies contain a provision defining the term "total disability" ("total disability"). (Id. ¶ 2, see e.g. Pl.‟s Concise S.F. at Ex. 1A-B.)*fn3 All six of the policies defined "total disability" as:

TOTAL DISABILITY means your inability due to injury or sickness to engage in the substantial and material duties of your regular occupation. It will not be considered to exist for any time you are not under the regular care and attendance of a doctor. (Id.) Each policy also defined the term "residual disability" ("residual disability"). (Id. ¶ 3, see e.g. Pl.‟s Concise S.F. at Exs. 1A-B.)

Five of the policies defined "residual disability" as:

RESIDUAL DISABILITY meansyour inability due to injury or sickness to perform:

(1) one or more of the substantial and material duties of your occupation; or

2) the substantial and material duties of your occupation for as much time as is usually required to perform them.

Residual Disability will not be considered to exist for any time you are not under the regular care and attendance of a doctor. (Id.) The first issued policy defined "residual disability" as: "one or more of the important duties of your occupation"; or "the important duties of your occupation for as much time as is usually required to perform them." (Id.; Def.‟s S.F. at Ex. 3B.) (Docket No. 74.) The difference in the language between the first issued policy and the other five policies is the first issued policy used the word "important" instead of the words "substantial and material" in the definition of residual disability. (Id. ¶ 3.) Residual disability benefits are payable if the insured has a residual disability, as defined in the policy, and experiences a monthly loss earning of at least twenty percent as compared to his predisability monthly earnings. (Id.)

B. Denial of Plaintiff's Application for Life Insurance and Nature of Practice

On July 6, 2006,*fn4 plaintiff underwent laboratory blood tests in order to apply for life insurance with the United States Life Insurance Company ("U.S.L.I.C.") (Id. ¶ 15, see lab results at Ex. 4.) The blood tests were used in 2006 to diagnosis plaintiff with diabetes. (Id. ¶ 72.) Plaintiff‟s son, who does not live or work with plaintiff, testified that he noticed a "degenerative change" in his father‟s schedule prior to the 2006 diagnosis and that the initial symptoms of the illness manifested themselves years before the diagnosis. (Id. ¶ 16, C. Klay Dep. 26-27, Jan. 21, 2009, Pl.‟s Concise S.F. at Ex. 5.)*fn5 On July 21, 2006, U.S.L.I.C. sent plaintiff a letter -- which plaintiff received a few days later - informing plaintiff that his application for life insurance was denied based upon laboratory results indicating plaintiff had diabetes, high cholesterol, high triglycerides and hypertension. (Id. ¶¶ 19-20.)

As of 2005, plaintiff‟s practice was thirty percent cardiac*fn6 surgery, thirty percent thoracic*fn7 surgery and forty percent vascular surgery. (Id. ¶ 18.) Upon receipt of the 2006 lab results plaintiff did not immediately change his routine practice. (Id. ¶ 21.) Plaintiff continued to perform the same duties that he had been performing as a cardiothoracic and vascular surgeon between the date blood was drawn on July 6, 2006, and the receipt of the insurance denial shortly after July 21, 2006. (Id. ¶ 22.) In the months following July 2006, plaintiff continued to perform some of his duties as a cardiothoracic and vascular surgeon. (Id. ¶ 23.) Upon advice of his physician, he began to reduce the level of his practice by gradually transitioning out of complex cases in consideration of the duties plaintiff owed to his existing patients. (Id.) Complex cases included, among other things, cases: 1) involving a prolonged time in the operating room in which plaintiff could not take a break to eat, drink, check his blood sugar, take medication or use the bathroom and requiring him to stand for long periods of time and to work evening hours to adjust his patients‟ care; 2) presenting complications after surgery requiring plaintiff to return to the operating room; 3) involving complicated emergency room care requiring nighttime care or surgeries; and 4) requiring numerous follow-up appointments. (Id.)

C. Plaintiff's Medical History and Treatment

Plaintiff was not diagnosed with diabetes prior to July 2006, but he suspected something was wrong once he began experiencing symptoms such as intractable thirst and extreme fatigue. (Id. ¶ 72.) Plaintiff sent the July 2006 lab results to Sara Kay Wetzel-Saffle, D.O. ("Dr. Wetzel-Saffle"), his treating physician and a designated expert witness. (Id. ¶ 24.) Dr. Wetzel-Saffle received the lab results on August 17, 2006. (Id.) In August 2006, plaintiff conversed with Dr. Wetzel-Saffle about seeking treatment.*fn8 (Id. ¶ 73, Wetzel-Saffle Dep. Tr. 17, 26, 29-30, Feb. 6, 2009, Pl.‟s Concise S.F. at Ex. 8.) Plaintiff‟s first visit to Dr. Wetzel-Saffle‟s office occurred on October 19, 2006. (Id. ¶ 26.) Plaintiff‟s next in person contact with Dr. Wetzel-Saffle did not occur until plaintiff‟s hospitalization in April 2007. (Id. ¶ 27.)

On April 16, 2007, plaintiff began to experience leg pain at work and went to the emergency room. (Id. ¶ 74.) During the visit to the emergency room, plaintiff learned he was suffering from deep vein thrombosis. (Id.) On April 17, 2007, plaintiff returned to the emergency room with acute shortness of breath and was admitted after being diagnosed with an acute pulmonary embolism. While hospitalized, plaintiff had an intervena cava filter surgically placed in his vein to catch future clots. (Id.) Following plaintiff‟s visit to the hospital, Dr. Wetzel-Saffle became aware that plaintiff was ill, and questioned if plaintiff could perform long hours of surgery out of concern he was at risk of going into a diabetic coma while conducting surgery. (Id. ¶ 75.) Dr. Wetzel-Saffle advised plaintiff to reduce his workload. Although Dr. Wetzel-Saffle did not tell plaintiff to limit his work schedule to two hours maximum per surgery, she believed plaintiff could perform three two-hour long surgeries a day, with an hour break in between each surgery to check his blood sugar and to rest. (Id. ¶ 30.)

Plaintiff testified that following a near death hospitalization in April 2007, he knew he was "in deep trouble" and "that in truth [he] had been totally disabled by the way Bob King described it to [him] back when [he] was first diagnosed" and "probably should have filed his claim back then." (Id. ¶ 31, J. Klay Dep. Tr. 241-42, Pl.‟s Concise S.F. at Ex 2.) Since April 2007, plaintiff has been an insulin-dependent diabetic, taking up to eight injections a day, and continues to experience progressive fatigue, bilateral foot pain, and decreased sensation in his feet associated with the neuropathy and venus claudication of his legs. (Id. ¶¶ 77-78.) In order to have control of his diabetic condition, it is important for Klay to maintain a regular eating schedule, which is difficult with a surgical schedule. (Id. ¶ 80, Glorioso Dep. Tr. 29, Pl.‟s Concise S.F. at Ex. 7.) As a result of his medical condition, plaintiff cannot respond to the prolonged hourly demands of patient care and management, stand for extended periods of time, take necessary medications at proper times during long work hours, eat on a regular basis due to prolonged work hours, and "carry out work as a cardiothoracic and vascular surgeon on a 24-hour/seven-day-a-week work schedule as a solo practitioner." (Id. ¶ 79, J. Klay Dep. Tr. 170.)

Since plaintiff‟s first hospitalization in August 2007, he suffered from diabetic complications, including: neuropathy; trigger fingers - where one‟s fingers lockup -; Reynaud‟s Syndrome - a vascular disease of the distal extremities of the fingers, making one‟s hands intolerable to cold and resulting in decreased blood circulation to the fingertips and loss of sensation, which is particularly cumbersome to a cardiac surgeon as open heart surgeries require a surgeon to have his hands in ice water with the heart; stasis ulcers or ulcerations on his legs which plaintiff‟s physician advised will not improve, and might worsen, if he continues to stand for long periods of time; and aggravated supra ventricular achycardia or paroxysmal atrial tachycardia - a condition that may cause interruption of blood flow to the brain.*fn9 (Id. ¶ 76.)

After AXA stopped selling disability insurance policies, it transferred its claims adjustment duties to a third-party administrator, Disability Management Services, Inc. ("DMS"). (Id. ¶ 90.) Plaintiff completed a claimant‟s statement ("Claimant Statement"), dated July 23, 2007, and sent it to DMS. (Id. ¶ 33, see AXA Equitable Life Insurance Company‟s Statement of Facts ("Def.‟s S.F.") at Ex. 6) (Docket No. 74-12.) In the Claimant Statement plaintiff reported that he was partially disabled from July 6, 2006; was totally disabled between April 17, 2007 and May 3, 2007; was still working as a cardiothoracic and vascular surgeon; his monthly earned income prior to becoming disabled was $24,666.67; and his current monthly income at that time was $15,333.33. (Id. ¶ 34.) On the Claimant Statement plaintiff included information from an "Attending Physician‟s Statement" ("APS") signed by Dr. Wetzel-Saffle on July 24, 2007, noting that plaintiff was totally disabled between April 17, 2007 and May 3, 2007, and he was partially disabled from July 6, 2006 through the date of that APS. (Id. ¶ 35.) On September 13, 2007, Dr. Wetzel-Saffle signed another APS noting that she believed plaintiff, as of August 23, 2007, could perform some of the substantial and material duties of a cardiothoracic and vascular surgeon and that plaintiff was continuing to perform such duties. (Id. ¶ 36.) When Dr. WetzelSaffle retired in March 2009, Dr. Joseph J. Glorioso ("Dr. Glorioso") became plaintiff‟s treating doctor. (Id. ¶ 82.)

Based upon plaintiff‟s treatment records from 2006 to the beginning of August 2009, Dr. Glorioso testified on August 7, 2009, that plaintiff should have immediately been advised to stop working following his original diagnosis in July 2006 until his diabetic condition came under control.*fn10 (Id. ¶ 26, Glorioso Dep. Tr. 15-16, 33, Aug. 7, 2009, Pl.‟s Concise Ex. 7.) Dr. Glorioso testified that, although plaintiff was still practicing, he was unable to practice as a cardiothoracic and thoracic surgeon due to the neuropathies and vascular problems related to plaintiff‟s diabetic condition. (Id. ¶ 83, Glorioso Dep. Tr. 17-18, 34-35, 77, Pl.‟s Concise S.F. at Ex. 7.) Dr. Glorioso never told plaintiff he was totally disabled from practicing as a cardiothoracic and vascular surgeon or to stop working. (Id.) Dr. Glorioso told plaintiff to stop operating because plaintiff posed a safety risk to himself and to his patients. (Id. ¶ 84, Glorioso Dep. Tr. p. 22, 23, 32, 75-77, Pl.‟s Concise S.F. at Ex. 7.)

D. Cut-backs in Plaintiff's Practice

Following plaintiff‟s diagnosis in July 2006, plaintiff met with his office staff and advised them he would be cutting back his practice. (Id. ¶ 85, Haning Tr. p. 18-19, 22-23, 29, Pl.‟s Concise S.F. at Ex. 10.)*fn11 He reduced the amount of surgeries he performed at hospitals other than Wheeling Hospital, and discontinued office hours at several satellite offices. (Id. at ¶ 86.) Plaintiff‟s office manager, Stefanie Haning, testified that although plaintiff continued to work five days per week in the office and operating room between July 2006 and May 2007, he did less during the day, and cut back available office hours and the number, length and complexity of surgeries performed. (Id. ¶ 28, Haning Dep. 42-44, May 1, 2009, Pl.‟s Concise S.F. at Ex. 10.)

Beginning in July 2006, plaintiff reduced significantly the number of open heart surgeries he performed, although he performed a few such surgeries. (Id. ¶ 43, J. Klay Dep. Tr. 98, Pl.‟s Concise S.F. at Ex. 2.) Before July 2006, plaintiff operated five days a week. (Id. ¶ 44.) Since the onset of his disability plaintiff operates two days a week. (Id.) In December 2007, plaintiff met with Elias Edward Joseph ("Joseph"), the agent for his medical malpractice insurance carrier, and advised Joseph about plaintiff‟s health problems that arose in 2006. (Id. ¶ 49, Joseph Dep. Tr. 22, Pl.‟s Concise S.F. at Ex. 6) On December 5, 2007, Joseph wrote a letter to plaintiff‟s medical malpractice carrier advising that plaintiff had a personal health issue in 2006 and substantially reduced his practice. (Id.; letter dated Dec. 5, 2007, Pl.‟s Concise S.F. at Ex. 11.)

E. Surgeries Performed Prior to and After July 2006

Before and after July 2006, plaintiff performed thoracotomies, bronchoscopies, thrombectomies, carotid artery endarterectomies, sphenous vein and posterior tibeal endarterectomies, femoral and peroneal femoral bypass grafts, aortic bifemoral bypasses, node biopsies, mediastinocipies, abdominal aortic aneurism repairs, pleural biopsies, profunda bypass graphs and leg amputations; emplaced and removed mediport catheters for chemotherapy; inserted dialysis catheters; and removed portions of the lung and repaired aneurisms. (Id. ¶ 45, Haning Dep. 46, 51-55, Def.‟s S.F. at Ex. 31.) The number of surgeries plaintiff performed prior to July 2006 for the insertion and removal of pacemakers, amputations and wound care -- usually resulting from vascular disease -- did not change after July 2006. (Id. ¶ 46.) Before July 2006, plaintiff did not perform arteriograms, but performed them after that time. (Id. ¶ 47.)

On November 12, 2007, plaintiff applied at Wheeling Hospital for the privilege to perform twenty-three different cardiac surgeries,*fn12 seventeen thoracic surgeries,*fn13 and fourteen vascular surgeries.*fn14 (Id. ¶ 37.) In the applications plaintiff attested that he was physically and mentally able to perform all of the essential... functions or services necessary to exercise the privileges applied for... [was] able to perform these functions without significant risk of injury to [himself] or others [and did not]... presently have a physical or mental health condition.that affects, or is reasonably likely to affect [his] ability to perform professional or medical staff duties appropriately[.] (Id., Def.‟s S.F. at Ex. 9A.) These were the same procedures for which plaintiff was granted privileges in 2005. (Id., Def.‟s S.F. at Ex. 9B.) Although hospital records reflect use of the operating room with respect to numerous surgical procedures performed by plaintiff from July 2006 through the present lasting three hours or more, including seven-hour procedures on January 2, 2009 and on December 12, 2008, an eight-hour procedure on February 18, 2009, and an eleven-hour procedure on October 24, 2008,*fn15 plaintiff claims these records are not reflective of the actual amount of time a surgeon spends operating. (Id. ¶ 38, J. Klay Dep. Tr. 107, Pl.‟s Concise S.F. at Ex. 2.) Frequently, the patient is in the operating room ("OR") without the surgeon; the surgeon comes into the OR to confirm that the patient is the correct patient; conducts a limited amount of surgery; leaves the OR to consult x-rays, takes breaks, and returns to the OR to finish the surgery. (Id.)

As of January 2009, plaintiff had not informed the hospitals where he worked that he can no longer perform the duties of a cardiothoracic and vascular surgeon. (Id. ¶ 48.) As of January 9, 2009, plaintiff continued to operate two days per week, saw patients in his office one day a week and performed operations lasting up to 2.5 hours. The amount of time plaintiff spent actually operating, however, was much less because he took breaks during surgery to get off of his feet. (Id. ¶ 39, J. Klay Dep. Tr. 107, Pl.‟s Concise S.F. at Ex. 2). Plaintiff no longer performs open-heart surgeries, certain procedures that go hand in hand with open-heart surgeries, and complicated vascular surgeries. (Id. ¶ 87, J. Klay Dep. Tr. 101-02, Pl.‟s Concise S.F. at Ex. 2)*fn16.

Plaintiff still performs routine pacemaker surgeries that take no more than an hour to an hour and a half. (Id. ¶ 88, Haning Dep. Tr. 24-25; Pl.‟s Concise S.F. at Ex. 10.)

Plaintiff‟s current practice consists of eighty to ninety percent vascular surgeries, up to ten percent thoracic surgeries and up to ten percent pacemaker surgeries. (Id. ¶ 89.) When shown current procedural terminology ("CPT") codes relating to approximately 290 different procedures set forth in exhibits 11A (analysis of Klay‟s CPT codes), and 11B (monthly report on procedures performed by Klay), plaintiff testified that - except for one procedure - the procedures listed in exhibit 11A were material and substantial duties of a cardiothoracic surgeon. (Id. ¶ 40, J. Klay Dep. Tr. 109-122, Pl.‟s Concise S.F. at Ex. 2; Def.‟s S.F. at Exs. 11A, 11B (Docket No. 74))*fn17 The substantial and material duties of a cardiothoracic and vascular surgeon include procedures related to pacemakers, transplant grafts of the leg, arm, abdomen and heart, carotid surgery, chest surgeries and peripheral surgeries of the arms and legs. (Id. ¶ 41.) Through January 20, 2009, plaintiff continued to perform a number of the procedures set forth in exhibits 11A and 11B. (Id. ¶ 42, J. Klay Dep. Tr. 95-106, 109-117, Pl.‟s Concise S.F. at Ex. 2.)

F. Plaintiff's Malpractice Insurance Renewal Applications

On a malpractice insurance renewal application dated September 16, 2005, plaintiff indicated he saw forty-five scheduled patients per week. (Id. ¶ 52, Def.‟s S.F. at Ex. 12D.) On a malpractice insurance renewal application dated October 16, 2006, plaintiff selected a range indicating he saw between twenty-six and fifty patients per week. (Id.; Def‟s S.F. at Ex. 12A.) Plaintiff completed another renewal application for malpractice insurance on December 3, 2007. (Id. ¶ 50, Def.‟s S.F. at Ex. 12B.) Plaintiff responded "yes" to certain questions asked on the October 2006 and the December 2007 applications, including "[d]o you perform minor surgery?" and "[d]o you perform major surgery?". (Id., Def.‟s S.F. at Exs. 12A and 12 B.)

On the October 2006 and December 2007 applications plaintiff responded "no" when asked whether "now or within the past twelve months [plaintiff] had any chronic illness or physical defect?" (Id. ¶ 53.) On the same malpractice renewal applications, plaintiff responded "no" when asked

[h]ave you had any changes in your practice that you have not previously reported to WV Physician‟s Mutual Insurance Company? (such as: specialty, type of practice, number or type of diagnostic or surgical procedures performed, employment, moonlighting activity, hours practiced per week, hospital privileges or their status, percentage of practice or admissions at the hospitals where you have privileges, ancillary personnel, office location(s), mailing address, phone numbers, etc.) (Id. ¶ 54.)

On the October 2006 and December 2007 applications plaintiff indicated he performed the following procedures: local anesthesia, angiography, angioplasty, arterial catheterization, diagnostic catheterization, endoscopy (other than proctoscopy), sigmoidoscopy, colposcopy and cystoscopy, permanent pacemaker and radiopaque dye injection. (Id. ¶ 55.) Plaintiff signed the October 2006 and December 2007 applications attesting:

I hereby declare that the foregoing statements and particulars are, to the best of my knowledge and recollection are [sic] correct [and], complete and that I have not willfully concealed or misrepresented any material fact or circumstance ...

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