Opinion ID: 779780
Heading Depth: 2
Heading Rank: 2

Heading: Harris' First Claim: Breach of Contract

Text: 18 The primary dispute in this case is whether Harris is entitled to payments under the disability insurance policy she had with Provident; in other words, is Harris not able to perform the substantial and material duties of [her] occupation as an anesthesiologist. As the moving party, Harris bears the burden of establishing that no genuine issue of material fact exists as to whether she is totally disabled under the policy; any ambiguity is to be resolved in favor of Provident. See Carlton v. Mystic Transp., 202 F.3d 129, 133 (2d Cir.2000). Further, not only must there be no genuine issue as to the evidentiary facts, but there must also be no controversy regarding the inferences to be drawn from them. Donahue v. Windsor Locks Bd. of Fire Comm'rs, 834 F.2d 54, 57 (2d Cir.1987). Upon de novo review, we conclude that genuine issues of material fact exist as to whether Harris is totally disabled, and summary judgment on this claim in her favor should not have been granted. 19 In support of her motion for summary judgment, Harris submitted the opinions of Dr. Slaughter, her treating allergist, and Dr. Desmond DelGiacco, her treating pulmonologist. Each of these doctors stated that it was his opinion that Harris was totally disabled due to latex-induced asthma and unable to work as an anesthesiologist. Harris also produced the report of Dr. Berlin, which concluded that Harris was allergic to latex. 20 In opposition to Harris' motion, Provident produced the medical evaluation of Dr. DeMasi, as well as the reports of the evaluations performed at Johns Hopkins and the Mayo Clinic. Each of these evaluations found no evidence that Harris was allergic to latex, and found Harris' pulmonary function to be normal. Dr. DeMasi, Dr. Adkinson and Dr. Hunt each found that Harris could return to work, at least after the construction at Glens Falls Hospital was completed. 21 This disagreement among the doctors who evaluated Harris gives rise to a genuine issue of material fact as to (1) what disability, if any, affects Harris, and (2) whether that disability totally disables her from working as an anesthesiologist. The district court erroneously stated that Provident relied solely on Dr. DeMasi's opinion in opposing summary judgment, and that because Dr. DeMasi made no finding as to whether Harris was disabled because of asthma, his opinion did not give rise to a genuine issue of material fact. [W]here, as here, there are conflicting expert reports presented, courts are wary of granting summary judgment. Hudson Riverkeeper Fund v. Atlantic Richfield Co., 138 F.Supp.2d 482, 488 (S.D.N.Y. 2001). See also B.F. Goodrich v. Betkoski, 99 F.3d 505, 527 (2d Cir.1996) (denying summary judgment where expert affidavit raised genuine issue of material fact); Iacobelli Constr. v. County of Monroe, 32 F.3d 19, 25-26 (2d Cir.1994) (same); In re Joint E. & S. Dist. Asbestos Litig., 964 F.2d 92, 96 (2d Cir.1992) (same); Jiminez v. Dreis & Krump Mfg. Co., 736 F.2d 51, 54 (2d Cir.1984) (same). Considering the Mayo Clinic and Johns Hopkins reports in conjunction with Dr. DeMasi's opinion, as is appropriate, and drawing all reasonable inferences in favor of Provident as the nonmoving party, we find that the district court erred in granting summary judgment in favor of Harris on this claim. 22 The district court focused solely on the issue whether Harris suffered from asthma, as opposed to latex-induced asthma. The original Notice of Claim filed by Harris with Provident includes a statement from Dr. Slaughter which repeatedly refers to Harris' disability as being related to latex. The form poses the following question: What restrictions or limitations, if any, are there on your patient's ability to perform the duties of his/her occupation, and why? In response, Dr. Slaughter wrote: Patient has become hypersensitive to airborne concentrations of latex. The hospitals and medical facilities where she performs her duties are major repositories of latex antigens. The patient develops significant coughing, wheezing and [illegible] onset March 16-98, ceased work on our direction 5-5-98. Dr. Slaughter did not mention asthma as a reason for Harris' inability to work in the claim form. Thus, when Harris applied for benefits, she applied on the grounds that she was allergic to latex and therefore unable to work in the latex-intensive environment of a hospital. Provident evaluated Harris' claim for benefits accordingly. Provident's expert determined that Harris was not allergic to latex, and Harris' own physician could not state unequivocally that Harris was allergic to latex. Harris' claim was therefore denied. 23 There is ample evidence in the record to raise a genuine issue of material fact as to whether Harris is severely allergic to latex. There is also sufficient evidence to raise a genuine issue of fact as to whether Harris is totally disabled by asthma. Although Dr. DeMasi, Johns Hopkins and the Mayo Clinic evaluated Harris primarily for latex sensitivity, each also performed testing on Harris' pulmonary functioning, as asthma is often a symptom of latex sensitivity, and Harris had specifically complained of breathing difficulty. Each of these evaluations found Harris to be in good pulmonary health. Dr. DeMasi and Johns Hopkins found that it was possible that Harris did suffer from some asthma; however, none of these three experts found that Harris suffered from severe or debilitating asthma, and each recommended she return to work. The district court's order granting summary judgment on this claim is therefore vacated, and this case is remanded for further proceedings on Harris' breach of contract claim. 24 III. Harris' Second Claim: Breach of the Implied Covenant of Good Faith and Fair Dealing 25 The second count of Harris' complaint alleges that Provident breached the covenant of good faith and fair dealing implied in the disability insurance contract between Harris and Provident. Under New York law, parties to an express contract are bound by an implied duty of good faith, but breach of that duty is merely a breach of the underlying contract. Fasolino Foods Co. v. Banca Nazionale del Lavoro, 961 F.2d 1052, 1056 (2d Cir.1992) (internal quotation marks and citations omitted). The district court found that Harris' claim for breach of the implied covenant was therefore duplicative of her claim for breach of contract, and dismissed the implied covenant claim accordingly. See ICD Holdings S.A. v. Frankel, 976 F.Supp. 234, 243-44 (S.D.N.Y.1997) (A claim for breach of the implied covenant will be dismissed as redundant where the conduct allegedly violating the implied covenant is also the predicate for breach of covenant of an express provision of the underlying contract.) (internal quotation marks omitted). 26 Harris has appealed the dismissal of this claim on two grounds. First, Harris points to a series of New York cases holding that, under certain circumstances, an insurer may be held liable by an insured or the insured's excess insurer for a bad faith failure to settle a claim. In Pavia v. State Farm Mutual Automobile Ins. Co., 82 N.Y.2d 445, 453-54, 626 N.E.2d 24, 27-28, 605 N.Y.S.2d 208, 211-12 (1993), the court held that a plaintiff in such a case must establish that the defendant insurer engaged in a pattern of behavior evincing a conscious or knowing indifference to the probability that an insured would he held personally accountable for a large judgment if a settlement offer within the policy limits were not accepted. See also Geler v. Nat'l Westminster Bank USA, 770 F.Supp. 210, 215 n. 1 (S.D.N.Y.1991) (noting that a cause of action exists in New York for bad-faith failure to settle an insurance claim). These cases are inapposite, as the bad faith claim they recognize is limited to cases in which an insurance company refuses to settle a claim against the insured, thereby exposing the insured or its excess insurer to unreasonable or unnecessary liability. Here, there is no claim against Harris; rather, Harris herself is the claimant. 3 27 Harris also contends that an appropriate conflict-of-laws analysis counsels the application of California law to this claim, and that under California law, breach of the implied covenant by an insurer may form the basis of a separate cause of action, distinct from a claim for breach of the contract itself. The insurance contract was signed in 1992 in California where she lived and worked at the time. Therefore, we must conduct a choice of law inquiry. 28 Because our subject matter jurisdiction here is grounded on the diversity statute, and because the District Court whose judgment we are reviewing sits in New York, we must determine the body of substantive law that applies here with reference to New York's choice of law rules. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 497, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Under these rules, the first step in any choice of law inquiry is to determine whether there is an actual conflict between the laws invoked by the parties. See In re Allstate Ins. Co., 81 N.Y.2d 219, 223, 597 N.Y.S.2d 904, 905, 613 N.E.2d 936 (1993). If there is such a conflict, the court must then classify the conflicting laws by subject matter with reference to New York law. See, e.g., Tanges v. Heidelberg N. Am., Inc., 93 N.Y.2d 48, 54, 687 N.Y.S.2d 604, 606, 710 N.E.2d 250 (1999) (explaining that New York law determines whether, for choice of law purposes, a Connecticut statute of limitations is substantive or procedural); see also, e.g., Martin v. Julius Dierck Equip. Co., 52 A.D.2d 463, 466-67, 384 N.Y.S.2d 479, 482 (2d Dept.1976) (classifying a products-liability claim as sounding in tort, not contract). Having classified the conflicting laws, the court must then select and apply the proper body of choice of law rules. 29 Booking v. Gen. Star Mgmt. Co., 254 F.3d 414, 419-20 (2d Cir.2001). New York law, as discussed above, does not recognize a separate cause of action for breach of the implied covenant of good faith and fair dealing when a breach of contract claim, based upon the same facts, is also pled. Under California law, it is also normally the case that 30 [i]f the allegations [of breach of the implied covenant] do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated. 31 Careau & Co. v. Sec. Pac. Bus. Credit, 222 Cal.App.3d 1371, 1395, 272 Cal.Rptr. 387, 400 (1990). However, in California, unlike in New York, [i]n insurance cases there is a well-developed history recognizing a tort remedy for a breach of the implied covenant where the insurer has acted unreasonably or without proper cause. Id. (internal citations omitted). Thus, there is an actual conflict between the law of New York and the law of California. However, we need not determine which law applies, because under the law of either state, the district court was correct in dismissing the plaintiff's claim. 32 The Ninth Circuit has recently explained California law as follows: In order to establish a breach of the implied covenant of good faith and fair dealing under California law, a plaintiff must show: (1) benefits due under the policy were withheld; and (2) the reason for withholding benefits was unreasonable or without proper cause. The key to a bad faith claim is whether or not the insurer's denial of coverage was reasonable. Under California law, a bad faith claim can be dismissed on summary judgment if the defendant can show that there was a genuine dispute as to coverage[.] A court can conclude as a matter of law that an insurer's denial of a claim is not unreasonable, so long as there existed a genuine issue as to the insurer's liability. 33 Guebara v. Allstate Ins. Co., 237 F.3d 987, 992 (9th Cir.2001) (internal citations and quotation marks omitted). 34 When Harris filed her notice of claim with Provident in May 1998, the attached Attending Physician's Statement, completed by Dr. Slaughter, identified the conditions suffered by Harris as latex induced asthma, plus latex anaphylactoid reaction, plus latex contact reactivity, plus allergic rhinitis. On the same form, Dr. Slaughter indicated that the reason that Harris was unable to work was that she had become hypersensitive to airborne concentrations of latex. Based on Dr. Slaughter's diagnosis, Provident made an initial payment under the policy to Harris for benefits from May 4, 1998 through September 3, 1998. In September 1998, Provident hired Dr. DeMasi to evaluate Harris for the condition which she had claimed rendered her unable to work: hypersensitivity to latex. Dr. DeMasi found that Harris was not allergic to latex. Based on this finding, Provident determined that it would not pay Harris any further benefits under the policy. Harris appealed this decision, and Provident's review board upheld the decision to deny benefits, based on Harris' failure to present any new medical evidence that would cause Provident to change its position. 35 [T]he reasonableness of the insurer's decisions and actions must be evaluated as of the time that they were made; the evaluation cannot fairly be made in the light of subsequent events which may provide evidence of the insurer's errors. Chateau Chamberay Homeowners Ass'n v. Associated Int'l Ins. Co., 90 Cal.App.4th 335, 347, 108 Cal.Rptr.2d 776, 784 (2001). At the time Provident made its initial decision to deny coverage, in October 1998, and its decision to deny Harris' appeal of the denial, in November 1998, Provident had only Dr. DeMasi's report, Dr. Slaughter's diagnosis, and Harris' own statements on which to base its decisions. Harris also was evaluated by Johns Hopkins in October 1998, but she did not disclose that fact to Provident until months after Provident had reached its decision. As Dr. DeMasi noted, even Dr. Slaughter's diagnosis was equivocal, using terms such as I believe and I suspect that Harris had a latex allergy, and Dr. Slaughter's own initial testing left him unable to confirm that Harris was actually allergic to latex. 36 A California appellate court has recently held that 37 [i]n a bad faith case, the primary test is whether the insurer withheld payment of an insured's claim unreasonably and in bad faith. Where benefits are withheld for proper cause, there is no breach of the implied covenant.... A court can conclude as a matter of law that an insurer's denial of a claim is not unreasonable, so long as there existed a genuine issue as to the insurer's liability. The genuine dispute doctrine may be applied where the insurer denies a claim based on the opinions of experts. 38 Fraley v. Allstate Ins. Co., 81 Cal.App.4th 1282, 1292, 97 Cal.Rptr.2d 386, 391 (2000) (internal citations and quotation marks omitted). Further, the existence of a significant disagreement between the insurer's expert and the insured's expert does not render the insurer's decision to rely on its expert's opinion unreasonable. See id. at 1292-93, 97 Cal.Rptr.2d 386. Provident relied on Dr. DeMasi's expert opinion, which was supported by medical testing, and not contradicted by any conclusive evidence. In light of the information available to Provident at the time it made its decision, it was not unreasonable for Provident to deny her claim and discontinue payments to her. Harris did not produce any evidence that would create a genuine issue of material fact as to the reasonableness of Provident's decision, and Provident therefore was entitled to summary judgment on this claim even under California law. Because this claim was properly dismissed under either New York law or California law, we affirm the district court's dismissal of this claim.