Audrey Shaps v. Provident Life and Accident Insurance Company

Citations: 317 F.3d 1326; 2003 U.S. App. LEXIS 432; 2003 WL 103390Docket: 98-5500, 99-4028

Court: Court of Appeals for the Eleventh Circuit; January 13, 2003; Federal Appellate Court

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Audrey Shaps appealed a jury verdict favoring Provident Life and Accident Insurance Company, alleging breach of a disability insurance contract. The Eleventh Circuit initially encountered ambiguities in Florida law regarding the burden of proof on disability claims, prompting certification of two questions to the Florida Supreme Court. The first question asked whether the burden of proof established in *Fruchter v. Aetna Life Insurance Co.* was part of Florida's substantive law, while the second questioned if requiring the insured to prove disability violated Florida public policy.

The Florida Supreme Court responded negatively to the first question and did not address the second. As a result, the Eleventh Circuit determined that the district court erred in placing the burden of proof on Shaps. Consequently, the court vacated the judgment in favor of Provident Casualty regarding the breach of contract claim and remanded for further proceedings.

The case originated when Provident issued a disability policy to Shaps in 1987. Shaps first claimed disability benefits in 1989 for TMJ syndrome, which Provident initially paid but later ceased after determining no continuous total disability. In 1994, Shaps filed a new claim citing breast cancer and TMJ syndrome, which was initially approved but later terminated based on medical evaluations indicating she was no longer totally disabled. Shaps did not submit claims for a subsequent period, resulting in no payments from Provident.

Shaps initiated a lawsuit on September 18, 1995, in the Circuit Court for Palm Beach County, Florida, against Provident Life and Accident Insurance Company and Provident Accident. The case was later moved to the Southern District of Florida, where Shaps amended her complaint to include three counts for breach of contract and specific performance against Provident Accident and Provident Casualty, along with a count for intentional infliction of emotional distress against both defendants. Provident Accident and Provident Casualty filed for summary judgment, which the district court partially granted by dismissing the emotional distress claim and ruling that Shaps would not be entitled to attorneys' fees if she won at trial. Subsequently, Shaps amended her complaint to seek disability benefits retroactively from October 1990 until the trial date.

The relevant insurance policy included a provision limiting actions to three years after proof of loss is required. Since Provident Casualty stopped payments in 1990 and Shaps filed her lawsuit in 1995, the court determined that her breach of contract claim was time-barred unless she could demonstrate continuous disability from October 1990 to October 24, 1994, when she alleged a new disability period began due to breast cancer and TMJ syndrome.

During the August 1998 trial, Provident Casualty presented evidence indicating Shaps was not continuously disabled during the 1990-1994 timeframe, including her relocation to Florida, mortgage arrangements, and contradictory statements made on tax returns and life insurance applications that indicated she was 'unemployed' or 'retired' during that period. Despite Shaps testifying that she did not intend to make those statements, her claims of continuous disability were challenged.

In her defense, Shaps introduced testimonies from two health care providers: Ethel Green, a social worker, who noted Shaps showed symptoms of general anxiety disorder but could not confirm disability, and John Girard, an internist, who stated Shaps was disabled from June 1992 to June 1995. Shaps also sought to prove a separate breach of contract claim for denied benefits between September 8, 1995, and April 6, 1996. Testimonies included that of her oncologist, Gerald Spunberg, claiming Shaps was totally disabled due to breast cancer, and her psychotherapist, Beth Kreakower, who opined Shaps was unable to perform her job duties from April 1995 until her move to California in April 1996.

At the close of evidence, the trial court directed verdicts favoring Provident Accident on breach of contract and specific performance claims, and Provident Casualty on specific performance, while allowing jury consideration of breach of contract claims against Provident Casualty. The jury concluded Shaps was not continuously disabled under her Provident Casualty policy from September 10, 1990, to October 23, 1994, rejecting her first claim. For her second claim, the jury found her continuously disabled from September 8, 1995, to April 6, 1996, but denied relief due to non-compliance with conditions precedent. The district court issued a final judgment for the defendants and awarded costs. Shaps appealed, claiming multiple trial errors, but most objections were deemed unpersuasive, except for one regarding the applicability of Florida’s burden of proof rule, which was certified to the Florida Supreme Court for clarification. The district court's jurisdiction was based on diversity, necessitating adherence to Florida's conflict-of-law rules, which dictate that contracts are governed by the law of the state where they are executed unless specified otherwise. The contract in question was executed in New York, thus New York law applied, but procedural issues were governed by Florida law. The dispute centered on whether Florida's burden of proof rule, which places the burden on the insurer regarding proof of disability cessation, is procedural or substantive, a determination that was uncertain and led to the certification for clarification.

The Florida Supreme Court determined that the Fruchter burden of proof rule is a procedural issue for conflict-of-law purposes, based on its review of the Fruchter case and related precedents. In Fruchter, the Third District Court of Appeal found that the trial court had erred by not instructing the jury that the insurer bore the burden of proving the cessation of total disability under the insurance policy. The Florida Supreme Court denied the insurer's request for review, stating it found no conflict and reaffirming the Third District's decisions in related cases. 

In addressing whether the burden of proof rule is substantive or procedural, the Florida Supreme Court clarified that, generally, in Florida, the burden of proof is considered a procedural matter. It distinguished between substantive law, which defines rights and duties, and procedural law, which outlines how those rights and duties are enforced. The court concluded that the burden of proof relates to the methods of enforcing contractual duties, thus affirming its procedural nature for conflict-of-law purposes. 

Consequently, the court ruled that the Florida burden of proof rule applies in this case, placing the burden on Provident Casualty to prove Shaps was not disabled after previously paying her disability benefits. The district court's application of New York law, which would have shifted the burden to Shaps, was deemed incorrect. The judgment in favor of Provident Casualty was vacated, and the case was remanded for further proceedings. The remainder of the earlier opinion remains unaffected, and the court found it unnecessary to answer a second certified question after addressing the first.