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Dentist Unable to Perform “Duties” Totally Disabled


A dentist purchased three different disability income insurance policies. Each policy provided “total disability benefits” in the event that the dentist became unable to perform “the important duties of [his] Occupation.”

 

After cervical spine surgery, the dentist could no longer perform dental procedures. At the time of his surgery, he spent approximately two-thirds of his time performing dental procedures and approximately one third managing his dental practices and other businesses that he owned. After his surgery, the dentist remained able to manage and operate the businesses he owned. Following his surgery, the man claimed benefits for total disability under each of the three policies.

 

After initially granting coverage, his insurers denied total disability benefits after they discovered the extent of his managerial duties. The insurers argued that, because the dentist’s occupation at the time of his injury included his managerial duties and because he could still perform those duties after his injury, he was not totally disabled under the policies.

 

The dentist sued the insurers alleging breach of contract and fraud. The United States District Court for the Eastern District of Michigan, Southern Division, granted the insurers’ motion to dismiss the dentist’s fraud claim. The district court granted summary judgment in favor of the dentist on the breach of contract claim but denied his request for statutory penalty interest. The district court held that “the important duties” of the dentist’s occupation could plausibly be read to mean “most of the important duties” and resolved the ambiguity in favor of the dentist. The district court denied the dentist’s request for statutory penalty interest because, under Mich. Comp. Laws § 500.2006(4), the insurers did not owe penalty interest because their interpretation of the policies was not plainly erroneous and so their dispute with the dentist was reasonable.

                                                                                                                      

The Sixth Circuit United States Court of Appeals affirmed the district court’s grant of summary judgment in favor of the dentist, reversed the district court’s denial of the dentist’s request for statutory penalty interest, and remanded with instructions. The court held that the policies’ definition of total disability was ambiguous and thus would be construed in favor of the dentist, the dentist was totally disabled under the policies, and the dentist was not required to establish that his claim for benefits was not reasonably in dispute in order to obtain statutory penalty interest.

 

The policies’ definition of total disability was ambiguous and thus would be construed in favor of the dentist. Under Michigan law, courts must construe an insurance contract in favor of the insured if an ambiguity is found. A contract is ambiguous when its words may reasonably be understood in different ways. The definition of total disability in the three disability income insurance policies as the insured’s being unable to perform “the important duties” of his occupation was ambiguous as to whether it referred to all of the important duties of his pre-injury occupation as a dentist or most of them. Under Michigan law, the ambiguous definition must be construed in favor of the insured to mean most of his or her important duties. The court noted that the set of important duties of the dentist’s occupation was not precisely defined for either party when the policies were issued, suggesting that the policies did not focus on each and every important duty when it was not even clear what those duties were. The court also noted that nothing in the policies suggested that the parties anticipated that being able to perform some small percentage of the dentist’s important duties would make much of a difference for the dentist in the event he was injured. The court reasoned that given the ambiguity regarding the set of duties identified by the phrase “the important duties,” the plain meaning of “You are unable to perform the important duties of Your Occupation” was at least plausibly a general statement about most of the important duties rather than an absolute statement about all of them. The general statement about most of the important duties makes more sense with regard to the risk insured against—the possibility that injury will force the insured to quit the insured’s occupation.

 

The dentist was totally disabled under the policies even though he could perform some management duties. The dentist had spent approximately two-thirds of his time performing dental procedures and his remaining time managing his dental practices and other businesses before the surgery that prevented him from performing dental procedures. His injury prevented him from performing important duties that had occupied approximately two-thirds of his time. Being able to perform only one-third of the important duties of the occupation totally precludes one from participating in that occupation. Although after his injury the dentist was able to manage his businesses and these activities were more lucrative than his dental work ever was, his business management activities were not at the core of his occupation, even if they were a significant source of income.

 

The dentist was not required to establish that his claim for benefits was not reasonably in dispute in order to obtain statutory penalty interest. Under Michigan law, a first-party insured is not required to establish that his claims for benefits under disability income insurance policies were not reasonably in dispute in order to obtain statutory penalty interest on his claims. The district court erred when it interpreted Mich. Comp. Laws § 500.2006(4) to award penalty interest only if the claim for benefits was not reasonably in dispute.

 

The Sixth Circuit United States Court of Appeals affirmed the district court’s grant of summary judgment in favor of the dentist, reversed the district court’s denial of the dentist’s request for statutory penalty interest, and remanded with instructions.

 

See: Leonor v. Provident Life and Acc. Co., 2015 WL 3874808 (6th Cir.(Mich.) Jun 24, 2015) (not designated for publication).

 

See also Medical Law Perspectives, October 2014 Report:Backaches and Court Battles: When Chronic Back Pain Leads to Litigation 

 

 

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