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KRISA v. Equitable Life Assurance Society

United States District Court for the Middle District of Pennsylvania · 2000 · Civil Procedure

Civil ProcedureSummary JudgmentInsuranceBad FaithFraudUTPCPLRule 12(f)Rule 56

Facts

Krisa bought disability insurance policies from Equitable in 1985 and 1992. According to Krisa's evidence, Equitable agents used illustrations and explanations stating that an insured attorney's "regular occupation" included a recognized specialty, and that if Krisa could no longer do trial work but could do other legal work, he would still qualify for benefits. After being hospitalized in December 1996 for labile hypertension, Krisa claimed total disability on the ground that he could no longer practice as a trial lawyer, while Equitable maintained that the policies looked to all substantial and material duties of his occupation at the time disability began and noted that he continued to perform some legal and managerial duties. Equitable initially paid some total disability benefits, then sought more occupational information, and by the time suit was filed had withheld further total disability payments while continuing to investigate.

Issue

Whether Equitable was entitled to summary judgment on Krisa's claims for breach of contract, statutory bad faith, fraud/negligent misrepresentation, and UTPCPL violations arising from denial of total disability benefits. Also, whether Equitable was entitled to strike Krisa's eleventh and twelfth affirmative defenses to Equitable's counterclaim.

Rule

Summary judgment is proper only when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. Under Pennsylvania bad faith law, a plaintiff must prove by clear and convincing evidence that the insurer lacked a reasonable basis for denying benefits and knew or recklessly disregarded that lack of a reasonable basis. Under Pennsylvania's reasonable expectations doctrine, courts look to the totality of the insurance transaction, and even clear policy language will not bind the insured where the insurer or its agent created a reasonable expectation of coverage. Under the UTPCPL, nonfeasance such as a mere refusal to pay is generally not actionable, but fraudulent inducement or a promise to pay benefits with no intention of doing so may be; emotional distress damages are not recoverable because the statute limits relief to ascertainable loss of money or property and actual damages.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Pittsburgh, Mara Levin bought a disability policy from Irongate Assurance after its agent showed her a brochure stating that "regular occupation" includes an insured's recognized specialty. The issued policy omitted any reference to specialty, and after a neurological condition developed, Mara could no longer perform emergency-room surgery but still handled clinic consultations and paperwork.

Irongate moves for summary judgment on Mara's breach of contract claim, arguing that the policy unambiguously measures disability by all duties of her occupation at the time she became disabled. How should the court rule?

Explanation. The majority held that under Pennsylvania's reasonable expectations doctrine, courts examine the totality of the insurance transaction, and even clear policy language will not bind the insured where the insurer or its agent created a reasonable expectation of coverage. Evidence of specialty-based sales illustrations and oral explanations, combined with evidence the insured can no longer perform that specialty, creates a jury question on coverage and defeats summary judgment on the contract claim.