Sometimes when an insurance company doesn't do what the person insured
wants them to do, the insured sues seeking to profit from the dispute, even
though the policy wording is clear and unambiguous. These insureds might do
better taking what the policy offers rather than wasting their time in
litigation, as a recent case illustrates.
In Fiorentini v. Paul Revere Life Ins. Co., 893 F.3d 476 (7th Cir.
2018), Fiorentini gave up the right to partial disability to sue for damages to
which the trial court found he was not entitled. The Seventh Circuit Court of
Appeals was called on to resolve the dispute.
Background
Henry Fiorentini was the owner and president of Panatech, Inc., a small
technology company. When cancer treatment left him unable to perform his job,
he received total disability benefits under a policy he held with the Paul
Revere Life Insurance Company. Five years later, after Fiorentini was back at
work and exercising full control of the company, Paul Revere notified him that
he no longer qualified for the benefits. Fiorentini argued that he still
satisfied the policy's requirements for total disability because even
though he could perform most of his job duties, he was unable to do what it
takes to generate new business. Paul Revere rejected that argument, and
Fiorentini sued it for breach of contract.
In 1998, he was diagnosed with invasive basal cell carcinoma of the right
ear. After minor surgeries failed to remove the cancer, Fiorentini had his
right ear amputated in 2008. Several more surgeries and radiation followed,
leaving him with permanent hearing loss, fatigue, migraines, dry mouth,
tinnitus (a constant ringing sound), and an inability to localize sound. To
compensate for the amputation, Fiorentini received a prosthetic ear that was
virtually indistinguishable from his left ear.
Ever since Fiorentini's surgery, Panatech survived exclusively on work
from its existing clients. Fiorentini claimed he was the only one capable of
bringing in new clients and that he could only do so by meeting personally with
prospects, giving presentations, and attending seminars. He said that kind of
face-to-face contact was impossible because of his continuing symptoms,
including tinnitus and fatigue. He dismissed the suggestion that he could
solicit new business through phone calls, emails, the Internet, or a marketing
company—for his small business, he said, only in-person contact would do.
However, Fiorentini's own testimony contradicted that claim. He admitted
to meeting regularly with existing clients at their businesses or over lunch;
he also visited job sites weekly to discuss and address computer problems.
Fiorentini offered no explanation for why he could meet with existing clients
but not prospects. Indeed, his own vocational expert conceded that he was able
to conduct face-to-face meetings on a "limited basis," and his own
surgeon confirmed that he could "hear and communicate" in one-on-one
meetings.
The Insurance Policy
The policy defined the key terms for total disability coverage as
follows:
"Total Disability" means that because of Injury or Sickness …
You are unable to perform the important duties of Your Occupation.
"Your Occupation" means the occupation in which You are
regularly engaged at the time You become Disabled.
Fiorentini listed his occupation as "President & Owner" of
Panatech and said that his occupation entailed four "important
duties": sales (6–8 hours per week), consulting/meetings (7–10 hours per
week), programming (15–25 hours per week), and administrative work (2–3 hours
per week). Concluding that Fiorentini was unable to perform these duties, Paul
Revere approved his claim and began paying total disability benefits in
February 2009.
Disability Ends
Five years later, Paul Revere notified Fiorentini that he no longer met the
total disability requirements of his policy. He had been cancer-free since 2009
and was working regularly again. He continued to suffer side effects from the
surgery and worked fewer hours than he had before. Nonetheless, he was now well
enough that he was exercising full control over Panatech.
While it found him ineligible for total disability benefits, Paul Revere
invited Fiorentini to apply for "residual disability" benefits under
his policy. Coverage under that provision would have required Fiorentini to
show that he was either unable to perform "one or more of the important
duties" of his occupation or could only perform his important job duties
for "80 percent of the time normally required to perform them" and
that he earned at least 20 percent less than he did predisability. Fiorentini
did not submit that information; instead, he let his policy lapse and sued Paul
Revere, seeking damages for breach of contract, statutory penalties for
unreasonable and vexatious conduct under Illinois law, and a declaratory
judgment. The district court entered summary judgment for Paul Revere.
Court's Analysis
Fiorentini argued vigorously that the "total disability" clause
covered him even though he could still do almost everything his occupation
required him to do. He didn't dispute that he was able to perform three of
the important duties listed on his claim for total disability benefits:
consulting with clients, programming, and administrative duties. His claim
turned on his alleged inability to perform the fourth, which he characterized
as essential: sales.
Fiorentini's claim that his inability to execute one task rendered him
"unable to perform the important duties of [his] Occupation" seized
upon an opening in case law. For example, in one case, the court noted that a
shortstop who could no longer throw would be unable to do his job even if he
could still run, hit, and catch. Fiorentini argued that in-person solicitation
is to him what throwing is to a shortstop—utterly essential. And, because he
couldn't sell, he couldn't do his job even if he could program, consult
with existing clients, and do administrative tasks.
The Seventh Circuit found Fiorentini's analogy inapt. A shortstop who
can't throw can't be a shortstop; Fiorentini, on the other hand,
functioned daily as Panatech's president. Critically, the total disability
provision does not cover the insured who has a diminished ability to
perform his occupation, but rather the insured who is unable to
continue it.
Fiorentini's ineligibility for benefits under the total disability
provision of the policy was underscored by the policy's provision for
residual disability benefits. Fiorentini said that he could not perform one of
his four important duties; the residual disability provision applied when
"you are unable to perform one or more of the important duties of Your
Occupation." This is the clause that fits a claim like Fiorentini's;
it protects an insured whose disability has reduced but not eliminated his
capacity to work, so long as he is earning at least 20 percent less as a
result.
Even if the language of the policy were on his side, Fiorentini had a proof
problem: the evidence would not permit a reasonable juror to conclude that he
was unable to meet with potential clients in person.
Fiorentini's off-the-job activities also undercut his contention that
his symptoms render him mentally and physically unable to meet personally with
potential clients. In 2013, Fiorentini renewed his pilot's license—which he
had originally obtained in the 1980s but had permitted to lapse—and bought an
airplane. He spent 75–80 hours a year flying around the Midwest, primarily to
have breakfast with other recreational pilots. And, while Fiorentini claimed
that he was unable to put on work-related presentations to sell Panatech's
product, he conducted a 90-minute seminar for other flying enthusiasts about an
iPad application called ForeFlight. Nor was flying Fiorentini's only hobby.
Just as his symptoms had not kept him out of the air, they had not kept him off
the ice; Fiorentini played in a weekly adult hockey league.
The court noted that Fiorentini had the right to reduced benefits, but
Fiorentini chose not to apply for those benefits.
Consequently, the court held that Fiorentini bore the burden of proving that
his loss fell within the terms of his insurance policy. His alleged inability
to perform one of his four important job duties—sales—did not. Even if it did,
and even if the claim that he cannot make sales without in-person meetings, the
evidence construed most favorably to him would not permit a reasonable juror to
conclude that he is unable to meet with potential clients face-to-face.
Conclusion
Greed, and the apparent joy of suing an insurance company and the potential
for punitive damages, is the reason for this type of suit. Fiorentini had the
right to reduced benefits but refused those benefits in exchange for the
attempt to get damages from the insurer. This was dumb and perhaps a reason to
punish those who try for punitive damages without right.
© 2018 Barry Zalma, Esq., CFE