Court: Court of Appeals for the Sixth Circuit; February 28, 2001; Federal Appellate Court
Defendant-Appellant The Paul Revere Life Insurance Company appeals the district court's October 28, 1999, summary judgment favoring Plaintiff-Appellee David Kerwin. Kerwin claims that Paul Revere failed to pay him disability benefits under an insurance policy due to his inability to work as a criminal defense attorney, stemming from a diagnosis of Crohn’s disease. The district court determined that Paul Revere did not provide sufficient evidence to create a genuine issue regarding Kerwin’s total disability under the policy terms, thus granting summary judgment to Kerwin. The court partially denied Paul Revere's motion, ordering it to pay Kerwin statutory interest and attorneys’ fees, as Kerwin's claim was not reasonably in dispute.
On appeal, the court affirmed the summary judgment for Kerwin but reversed the district court’s award of statutory interest, finding that Kerwin’s claim was reasonably in dispute. The appellate court also vacated the attorneys’ fees award, citing insufficient record development, and remanded the case for further proceedings.
Kerwin, a lawyer since 1972 and a judge from 1978 to 1994, resumed criminal defense work in 1994, establishing a firm with his then-wife. He purchased an 'own occupation' disability insurance policy from Paul Revere in 1995, which defined total disability as the inability to perform important duties of his occupation while receiving physician care. Following a Crohn’s disease diagnosis in 1996, Kerwin claimed he could no longer fulfill his professional responsibilities.
Kerwin underwent a colostomy in January 1997 and a subsequent surgery in October 1998 due to Crohn's disease, which has been inactive since February 1997. After experiencing debilitating symptoms, he filed a claim for total disability benefits with Paul Revere on January 24, 1997, citing his inability to work since July 15, 1996. Paul Revere initially paid the benefits during its investigation, which revealed that Kerwin did not attempt to return to trial practice after his colostomy and accepted a position as a visiting judge due to dissatisfaction with private practice rather than disability. In June 1998, Paul Revere denied his claim, stating that Kerwin chose to work as a visiting judge instead of seeking reasonable accommodations to return to trial law. Kerwin subsequently filed a diversity action against Paul Revere in the U.S. District Court for the Eastern District of Michigan on September 24, 1998, alleging breach of contract and estoppel, among other claims, and sought various forms of relief including a declaration of rights, specific performance, and damages. The court granted Kerwin’s motion for partial summary judgment on September 24, 1999, leading to a final judgment on October 28, 1999, which ordered Paul Revere to pay Kerwin $198,000 in benefits and $6,600 monthly for continued total disability, along with attorneys’ fees and statutory interest. Paul Revere has appealed this judgment, arguing that conflicting evidence existed regarding Kerwin's ability to perform as a trial attorney, which they claim the district court failed to properly consider.
Paul Revere presents several arguments regarding the determination of total disability under an insurance policy. First, it contends that the question of whether an insured is 'totally disabled' is typically a jury issue, citing various cases; however, Michigan courts have not mandated a jury determination in all instances and have resolved such cases through summary judgment. Second, Paul Revere claims the district court erred by not considering the specific duties of Kerwin’s legal practice prior to his Crohn’s disease diagnosis. It argues that this assessment is crucial in evaluating Kerwin’s summary judgment motion and criticizes the court for relying on Kerwin's self-serving testimony and that of his physician, Dr. Bodzin. Paul Revere highlights testimony from Ada Kerwin, indicating that Kerwin engaged minimally in trial work and often distracted himself during business hours. It asserts that had the court properly weighed this testimony, it would have found a genuine issue of material fact regarding the stress levels of Kerwin's prior practice compared to his current judicial position. Nonetheless, the district court did consider Kerwin's pre-diagnosis practice but concluded that it was not material to the total disability question, stating that abundant evidence indicated Kerwin's inability to perform essential trial attorney functions. Thus, Paul Revere's arguments were deemed without merit.
The district court received unrebutted testimony indicating that Kerwin is no longer able to fulfill the essential responsibilities of a trial attorney, placing the onus on Paul Revere to provide evidence that would establish a genuine material fact dispute regarding Kerwin's ability to return to private practice. Paul Revere's primary argument centered on whether Kerwin's departure from trial work was due to his illness or a lifestyle choice to assume a more prestigious and financially lucrative role as a visiting judge on the Wayne County Circuit Court. Evidence cited by Paul Revere included Kerwin's quick acceptance of a judicial appointment post-surgery, his dissatisfaction with private practice, his refusal to address health-related lifestyle factors, his demanding current schedule, and his previous applications for permanent judicial roles without health concerns mentioned.
However, evidence presented contradicted Paul Revere's claims, highlighting that Kerwin was a respected and competent trial lawyer before his illness, with a strong reputation and client referrals from prominent attorneys. Testimony indicated that Kerwin's previous role as a criminal defense attorney was significantly more stressful and physically demanding than that of a judge, a point supported by findings from Paul Revere's own personnel, who acknowledged that the stress levels associated with a judgeship were considerably lower than those of a trial attorney.
Paul Revere failed to provide sufficient evidence to create a genuine issue of material fact regarding whether Kerwin made a "lifestyle decision" to leave private practice. The nonmovant is required to present specific facts to demonstrate a genuine issue for trial, and merely raising doubts is inadequate; evidence must be substantial enough to necessitate jury involvement. Paul Revere did not submit expert testimony or affidavits to contest Kerwin's ability to perform essential duties as a trial attorney, allowing the district court to conclude that Kerwin is "totally disabled," making summary judgment in favor of Kerwin appropriate.
Regarding statutory interest under Mich. Comp. Laws Ann. 500.2006, a district court may award interest to an insured when an insurer fails to pay disability benefits for claims that are "not reasonably in dispute." The statute mandates timely payment and imposes a 12% interest penalty for late payments unless the claim is reasonably disputed. Paul Revere contests the district court's imposition of this penalty, arguing there was a reasonable dispute. Kerwin counters that the Michigan Supreme Court's ruling in Yaldo v. Northpointe Ins. Co. permits interest assessment regardless of dispute status and asserts that the district court correctly found no reasonable dispute existed, given Paul Revere's unsupported claim that Kerwin was not totally disabled.
While the Yaldo decision suggested that insurers could be penalized for interest even if claims were reasonably disputed, subsequent rulings have questioned this interpretation. The relevant portion of the Yaldo ruling is viewed as dictum and does not constitute binding law, as it was not essential to the decision at hand.
Yaldo remains unoverruled and does not require overruling if the statement in question is merely dictum. The Michigan Supreme Court has not definitively addressed the issue, but it is likely to endorse the trend among lower courts against assessing statutory interest when a claim is reasonably in dispute. Federal authorities must interpret state law while considering relevant state rulings in the absence of a decision from the highest state court. Kerwin's arguments are deemed without merit. The district court determined that Paul Revere's failure to provide disability benefits to Kerwin stemmed from a misinterpretation of the law. The court found that Paul Revere did not present evidence supporting its claim that Kerwin was not totally disabled, leading to the conclusion that the claim was not reasonably in dispute. Consequently, the district court ordered Paul Revere to pay 12% statutory interest on unpaid benefits. However, the penalty interest statute aims to penalize insurers for delaying meritorious claims, not merely for failing to pay benefits ultimately deemed owed. Paul Revere's actions, including initially paying benefits while investigating the claim, did not demonstrate bad faith or an unreasonable legal interpretation. The district court’s imposition of statutory interest was erroneous and is reversed. Additionally, under Michigan law, individuals harmed by violations of the Michigan Consumer Protection Act (MCPA) can recover actual damages or $250, plus reasonable attorneys’ fees. Kerwin claimed entitlement to attorneys’ fees due to the defendant's breach of contract and discrepancies between the promised and actual benefits.
The district court found that Kerwin had a legitimate claim for disability benefits, supported by clear evidence of his disability. Paul Revere contested the district court's decision to grant Kerwin attorneys’ fees, arguing that Kerwin did not specify which provision of the Uniform Trade Practices Act (UTPA) was violated and that the deceptive statements alleged by Kerwin fell under the UTPA rather than the Michigan Consumer Protection Act (MCPA). The appellate court acknowledged that the issue of attorneys' fees was inadequately briefed, leading to the conclusion that the district court erred in granting these fees without allowing further argument. Citing relevant case law, the appellate court vacated the attorneys’ fees award and remanded for additional briefing on this issue.
The court upheld the district court's summary judgment favoring Kerwin regarding liability but reversed its decision on statutory interest. Kerwin suffers from severe symptoms related to Crohn’s disease that hinder his ability to perform as a trial attorney, despite any claims of prior inadequacies as a professional. Testimonies from experts indicated that Kerwin lacks the stamina and ability required for the demanding role of a criminal defense attorney and that the stress associated with such work would impede his recovery.
