Hudson v. Pennsylvania Life Insurance Co. et al

Filing 32

MEMORANDUM OPINION AND ORDER that the motion for summary judgment is GRANTED on plaintiff's claims for bad faith and anticipatory breach of contract, and DENIED on his claim for breach of contract and Plaintiff's motion to strike is DENIED as more fully set out in order. Signed by Judge C Lynwood Smith, Jr on 6/20/2013. (AHI)

FILED
2013 Jun-21 AM 08:02
U.S. DISTRICT COURT
N.D. OF ALABAMA

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ALABAMA
NORTHEASTERN DIVISION
RICK HUDSON,
Plaintiff,
vs.
PENNSYLVANIA LIFE
INSURANCE COMPANY, et al.,
Defendants.

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Civil Action No. CV-12-S-2225-NE

MEMORANDUM OPINION AND ORDER
This action arises from the sale of a disability insurance policy to plaintiff, Rick
Hudson, by defendant Susan R. Sellers, and the denial of plaintiff’s claim for longterm benefits under the terms of the policy by defendant Pennsylvania Life Insurance
Company (“Penn Life”).1 Plaintiff commenced this action in the Circuit Court of
Cullman County, Alabama.2

He asserted claims against defendant Sellers for

negligent procurement, fraud, and misrepresentation,3 and against defendant Penn Life
for bad faith and breach of contract.4
Defendant removed this action to the Northern District of Alabama pursuant to
28 U.S.C. §§ 1332, 1441, and 1446, based upon the parties’ complete diversity of
1

Doc. no. 1-1 (Complaint) ¶¶ 4-9.

2

See id.

3

Id. ¶¶ 16-21.

4

Id. ¶¶ 10-15.

citizenship and the requisite amount in controversy.5 Accordingly, “state substantive
law and federal procedural law” apply. Hanna v. Plumer, 380 U.S. 460, 465 (1965).
Plaintiff then filed an amended complaint adopting the four claims asserted in his
original complaint, and adding a fifth claim for “anticipatory breach of contract or
repudiation” against defendant Penn Life.6
Plaintiff recently consented to the dismissal of his claims against defendant
Susan R. Sellers without prejudice.7 Thus, only plaintiff’s claims against defendant
Penn Life remain pending. That defendant is succeeded in interest by Union Bankers
Insurance Company (“Union Bankers”).8 This action is before the court on Union
Bankers’ motion for summary judgment, and plaintiff’s motion to strike two exhibits
filed in support of summary judgment.9 Upon consideration, this court will grant
Union Bankers’ summary judgment motion in part and deny the motion in part. The
court will deny plaintiff’s motion to strike.
I. STANDARD OF REVIEW

5

Id. ¶¶ 5-6.

6

Doc. no. 8 (Amended Complaint) ¶¶ 23-24.

7

See doc. no. 16 (Penn Life’s Motion to Dismiss plaintiff’s claims against defendant Susan
R. Sellers for failure to timely effect service of the complaint in accordance with Federal Rule of
Civil Procedure 4(m)); doc. no. 17 (Plaintiff’s Response in support of the motion); doc. no. 18
(Order granting the motion).
8

See doc. no. 15 (Motion for Summary Judgment).

9

See id.; doc. no. 26 (Motion to Strike).

2

Federal Rule of Civil Procedure 56 indicates that summary judgment “should
be rendered if the pleadings, the discovery and disclosure materials on file, and any
affidavits show that there is no genuine issue as to any material fact and that the
movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). “[T]he plain
language of Rule 56(c) mandates the entry of summary judgment, after adequate time
for discovery and upon motion, against a party who fails to make a showing sufficient
to establish the existence of an element essential to that party’s case, and on which
that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986) (alteration supplied).
In making this determination, the court must review all evidence and
make all reasonable inferences in favor of the party opposing summary
judgment.
[However,] [t]he mere existence of some factual dispute will not
defeat summary judgment unless that factual dispute is material to an
issue affecting the outcome of the case. The relevant rules of substantive
law dictate the materiality of a disputed fact. A genuine issue of material
fact does not exist unless there is sufficient evidence favoring the
nonmoving party for a reasonable [factfinder] to return a verdict in its
favor.
Chapman v. AI Transport, 229 F.3d 1012, 1023 (11th Cir. 2000) (en banc) (internal
citations omitted) (alterations and emphasis suppled).
II. SUMMARY OF FACTS
A.

Penn Life Policy No. PA02305180
3

Plaintiff, Rick Hudson, is a 56-year-old former drywall/sheet rock installer who
applied for a disability insurance policy with defendant Pennsylvania Life Insurance
Company (“Penn Life”) on February 13, 2003.10 In response, defendant issued to
plaintiff Policy No. PA02305180, which provides maximum lifetime disability
benefits of $1,200 per month.11 The Policy was effective February 13, 2003.12
Policy No. PA02305180 is “an accident only policy,” meaning that it covers
“specified loss resulting from injury,” and does not cover “loss from sickness.”13 The
term “injury” refers to an “accidental bodily injury sustained: (1) directly and
independently of disease or bodily infirmity, or any other causes; and (2) while th[e]
Policy is in force.”14
B.

Plaintiff’s Pre-Existing Medical Conditions
In 1990 and again in 1993, prior to applying for disability benefits with Penn

Life in February of 2011, plaintiff underwent two surgeries on his cervical spine.15
Plaintiff underwent a cervical discectomy and fusion at C5-6 on March 23, 1990, as

10

Doc. no. 15-3 (Deposition of Rick Hudson), at 28; see also doc. no. 27-2 (Claim File), at
136 (discussing plaintiff’s occupation).
11

Id. at 26-28; doc. no. 15-4 (Policy), at 29-50.

12

Doc. no. 15-4 (Policy), at 29-50.

13

Id. at 29; see also doc. no. 15-3 (Deposition of Rick Hudson), at 28-29.

14

Doc. no. 15-4 (Policy), at 38 (alteration supplied).

15

Doc. no. 15-3 (Deposition of Rick Hudson), at 46-47, 64.

4

a result of a neck injury sustained in a motor vehicle accident.16 Plaintiff underwent
a cervical discectomy at C6-7 and removal of osteophytes (i.e., bone spurs) on April
7, 1993, after he was diagnosed with herniated nucleus pulposus at C6-7.17
An MRI of plaintiff’s spine taken in December of 2003 revealed a defect at the
L3-L4 level compatible with disc herniation, as well as degenerative disc disease and
stenosis at L4-L5 and L5-S1.18 Plaintiff underwent back surgery to remove the disc
herniation at L3-L4 on February 5, 2004.19 The medical records from the 2004
surgery also showed that plaintiff had a history of chronic neck, back, and upper
extremity pain.20
Plaintiff began to complain of pain radiating down his legs in February and
March of 2004.21 An x-ray taken of plaintiff’s lumbar spine in March of 2004
revealed “extensive degenerative disc changes.”22 An MRI taken of plaintiff’s lumbar
spine in April of 2004 showed “postoperative changes at L3-4 and degenerative disc
at L4-5 and L5-S1,” “a moderate degree of spinal stenosis at the L4-5 level,” and “a

16

Id. at 19:6-22; doc. no. 15-5 (Records of Dr. Robert Ward), at 721-22.

17

Doc. no. 15-5 (Records of Dr. Robert Ward), at 721-22.

18

Doc. no. 15-6 (Records of Dr. Robert L. Hash), at 989.

19

Doc. no. 15-3 (Deposition of Rick Hudson), at 45; doc. no. 15-6 (Records of Dr. Robert
L. Hash), at 993-95.
20

Doc. no. 15-6 (Records of Dr. Robert L. Hash), at 989.

21

Id. at 997; doc. no. 15-7 (Records of Dr. James Matter), at 740.

22

Doc. no. 15-6 (Records of Dr. Robert L. Hash), at 997.

5

small recurrent disc herniation at L3-4.”23 A July of 2004 x-ray showed “degenerative
disc disease at L4-5 and L5-S1.”24
Plaintiff complained of chronic back and neck pain from September of 2004
through November of 2005, as well as pain in his hands, wrists, right arm, and left
leg.25 An MRI taken in December of 2005 revealed “multilevel degenerative disc
disease focused at L3-L4, L4-L5, and L5-S1.”26
C.

Plaintiff’s December 11, 2010 Accident
Plaintiff climbed onto the seat of a chair to clean the windows of his garage in

preparation for the holidays on December 11, 2010.27 The chair gave way, and
plaintiff fell down, striking his head on the wall and floor.28 He was the only witness
to the accident.29
D.

Plaintiff’s Medical Treatment
Immediately after sustaining the fall, plaintiff allegedly experienced pain in his

head and a burning sensation in his left arm and down his chest.30 Even so, he was

23

Id. at 998-99.

24

Id. at 999.

25

Doc. no. 15-7 (Records of Dr. James Matter), at 741, 746-48, 765-66.

26

Id. at 767-68).

27

Doc. no. 15-3 (Deposition of Rick Hudson), at 29-30.

28

Id. at 29-31.

29

Id. at 32.

30

Id. at 33.

6

able to pull himself up and attempted to “walk it off.”31
Plaintiff did not seek immediate medical attention.32 Instead, he called Dr.
James Matter, his primary care physician, two days later: on December 13, 2010.33
However, Dr. Matter was out of town, and plaintiff did not see him until January 4,
2011.34
Plaintiff was able to perform the duties of his job hanging drywall on the day
before his fall.35 He did not return to work after the fall, allegedly because he was in
too much pain to do so.36 Plaintiff testified during his deposition as follows:
Q.

When you say that you didn’t return to work, did you attempt to
do a drywall job and realize that you couldn’t, or did you just
make up in your mind that it wasn’t good for you to work at that time?

A.

Yeah, it was just painful. It was just pain.

Q.

So you didn’t actually go on a job and attempt to do it?

A.

No.37

An x-ray taken on January 12, 2011 revealed “marked degenerative change at

31

Id. at 30-31.

32

Id. at 32.

33

Doc. no. 15-3 (Deposition of Rick Hudson), at 34.

34

Doc. no. 15-3 (Deposition of Rick Hudson), at 34-36; doc. no. 15-7 (Records of Dr. James
Matter), at 781.
35

Doc. no. 15-3 (Deposition of Rick Hudson), at 37-38.

36

Id.

37

Id. at 38-39.

7

C6-C7 with loss of height and end plate sclerosis. Lesser degenerative change [was]
noted at the remaining visualized levels.”38 The x-ray showed that plaintiff suffered
from cervical spondylosis with “[n]o acute disease.”39
A CT scan taken of plaintiff’s cervical spine on January 28, 2011 revealed a
mild disc bulge and osteophyte complex (i.e., bone spur) and stenosis at C2-C3.40 The
CT scan also showed mild to moderate disc degeneration with a bone spur and mild
stenosis at C3-C4, C4-C5, and C6-C7.41 The radiologist who performed the x-ray
noted the fusion at C6-C7 and mild to moderate disc degeneration at C7-T1.42
An MRI taken of plaintiff’s cervical and lumbar spine on February 21, 2011
revealed that plaintiff suffered from cervical spondylosis, postoperative change, and
multilevel canal compromise.43 The physician who performed the MRI observed “a
minimal broadbased posterior protrusion with effacement of the anterior thecal sac”
(i.e., a herniated disc) and degenerative disc disease at C4-C5.44
After reviewing plaintiff’s MRI results, Dr. Robert Ward, an orthopedic

38

Doc. no. 15-7 (Records of Dr. James Matter), at 786 (alteration supplied).

39

Id.; see also id. at 00794 (noting that the x-ray revealed “severe degenerative [change at]
C6-C7”) (emphasis and alteration supplied).
40

Doc. no. 15-7 (Records of Dr. James Matter), at 798.

41

Id.

42

Id.

43

Doc. no. 15-5 (Records of Dr. Robert Ward), at 647, 655-56.

44

Id. at 655-56.

8

surgeon, recommended surgical fusion at C4-C5, and performed the fusion on March
2, 2011.45
E.

Plaintiff’s Social Security Disability Insurance Claim
Plaintiff submitted a claim for disability benefits to the Social Security

Administration on January 5, 2011, prior to the existence of any objective medical
evidence to show that he had a herniated disc.46 In the section seeking “all physical
or mental conditions . . . that limit [plaintiff’s] ability to work,” he listed the
following: “2 fusions in neck”; “back problems and 1 surgery”; “ulcerated colitis”;
“stroke, one side of brain is not working”; “sleep apnea”; “hbp” (i.e., high blood
pressure); “copd” (i.e., chronic obstructive pulmonary disease); “high cholesterol”;
and “depression.”47
F.

Plaintiff’s Penn Life Disability Insurance Claim
Plaintiff submitted a claim for disability benefits to Union Bankers Insurance

Company (“Union Bankers”) (the successor in interest to defendant Penn Life) on
February 4, 2011.48 Plaintiff’s “Policyholder’s Claim Report” disclosed his previous

45

Doc. no. 15-3 (Deposition of Rick Hudson), at 54-55; doc. no. 15-5 (Records of Dr. Robert
Ward), at 665-67; doc. no. 27-2 (Claim File), at 130-34.
46

Doc. no. 15-18 (SSDI Records), at 1262.

47

Id. at 1010.

48

Doc. no. 15-3 (Deposition of Rick Hudson), at 64; doc. no. 27-1 (Claim File), at 1-4.

9

spinal surgeries.49 Four days later, plaintiff submitted an “Attending Physician’s
Report” from Dr. Robert Ward, his orthopedic surgeon.50 The Report stated that
plaintiff’s condition was affected by multilevel degenerative disc disease, injuries
from a motor vehicle accident, and surgeries on his neck and back.51
Union Bankers entrusts all decisions on disability benefits claims by Penn Life
policyholders to CHCS Services, Inc., a third-party administrator.52 In turn, CHCS
Services assigns all Penn Life claims that arise in the State of Alabama to a single
claims adjuster, Melinda Riley.53 Training on handling such claims is provided by
Dan Howe, the vice president and assistant general counsel of Universal American
Corporation (the parent company of Union Bankers), and Michael Orr, an employee
of either Penn Life or another third-party administrator.54
Adjuster Melinda Riley interviewed plaintiff by telephone on February 23,
2011.55 In her report of that interview, Riley noted that plaintiff “has fusions and
screws in his neck,” and that he “had back surgery in 2004.”56 She also began the
49

Doc. no. 27-1 (Claim File), at 2.

50

Id. at 5-6.

51

Id. at 5.

52

Doc. no. 15-14 (Deposition of Anita Neptune), at 7-8.

53

Id. at 32.

54

Doc. no. 15-13 (Deposition of Melinda Riley), at 9-10; doc. no. 15-14 (Deposition of Anita
Neptune), at 42-44.
55

Doc. no. 15-13 (Deposition of Melinda Riley), at 25; doc. no. 27-1 (Claim File), at 7.

56

Doc. no. 27-1 (Claim File), at 7.

10

process of obtaining plaintiff’s complete medical records.
After completing a “Preliminary Review” of plaintiff’s claim, Union Bankers
decided to pay him one month’s worth of benefits on March 3, 2011, and reserve the
right to make a final determination after reviewing his medical history, and based on
the reasonable recovery period for his injuries.57
Accordingly, Union Bankers initially paid plaintiff $1,920, an amount reflecting
total disability benefits of $1,200 per month for the period of December 11, 2010
through January 31, 2011.58 Union Bankers sent plaintiff two additional payments of
$1,200 each on April 6 and April 27, 2011, covering the two-month period of
February 1 through March 31, 2011.59
G.

The First Benefits Decision
Plaintiff later sent Union Bankers an “Attending Physician’s Supplemental

Report,” dated March 28, 2011, and authored by Dr. Robert Ward, his orthopedic
surgeon.60 The Report stated that plaintiff suffered from “cervical pain” as a result of
the cervical fusion performed on March 2, 2011.61 It also stated that plaintiff would
57

Doc. no. 15-9 (Advisor Opinion & Management Review), at 9; doc. no. 27-1 (Claim File),

at 10.
58

Doc. no. 15-3 (Deposition of Rick Hudson), at 65-66; see also doc. no. 15-10 (Explanation
of Benefits), at 525.
59

Doc. no. 15-3 (Deposition of Rick Hudson), at 66-67; see also doc. no. 15-10 (Explanation
of Benefits), at 531, 536.
60

Doc. no. 15-12 (Attending Physicians’ Statements), at 66.

61

Id.

11

be “able to resume full work” on August 1, 2011.62
Adjuster Melinda Riley referred plaintiff’s disability claim to Dr. John David
Nye on May 27, 2011.63 Dr. Nye was a board certified physician who served as
Medical Director of CHCS Services and practiced in the areas of trauma and bariatric
surgery.64 The Medical Director completed his report on June 3, 2011, and concluded
as follows:
Mr. Hudson is a 56-year-old drywall/sheet rock installer, who
[states] he hurt his neck and back on 12/11/10 when he fell off a chair in
his garage. [He] first received medical treatment on 01/4/2010, by Dr.
Matter. He indicates he previously had surgery at C5-C6, in 1990, and
in 1993 at C6-C7. In addition to the cervical spine surgery, Mr. Hudson
had previous back surgery in 2004. His diagnosis at that time was multilevel degenerative disc disease, a motor vehicle accident, and injury.
On 2/17/11, Mr. Hudson was seen by Dr. Ward of Coleman Spine
Institute in Alabama. The neurological examination was basically
normal. An MRI of [his] cervical spine and a CT myelogram was
ordered. X-rays, performed on 01/14/2011, of the cervical spine
demonstrated the fusion from previous surgery [at] C5 and C6
bodies. There [were] marked degenerative changes at C6-C7 [with]
a loss of height in the bodies and end plate sclerosis. There [were] also
some degenerative changes noted in the remaining . . . levels.
A CT scan of the cervical spine, performed 01/28/2011,
demonstrated moderately severe disc degeneration and osteophyte
complexes throughout from C2 to T1. The C5-C6 had a complete
fusion. There [were] still some osteophyte[] complexes in the left [latter]
62

Id.

63

Doc. no. 27-2 (Claim File), at 136.

64

Doc. no. 15-13 (Deposition of Melinda Riley), at 32; doc. no. 15-14 (Deposition of Anita
Neptune), at 82-83.

12

recess area.
[A m]yelogram, performed on Mr. Hudson on 1/20/28/2011 [sic]
was totally unremarkable with no spinal cord[] stenosis identified.
Mr. Hudson apparently underwent a C4-C5 spinal fusion with
hardware.
On 02/21/2011, an MRI of the [lumbar] spine demonstrated
moderate degenerative changes throughout, with [spondylosis] and no
herniation[] and no other findings.
There is clearly documented history of the previous cervical neck
surgery twice, . . . in addition to lumbar surgery. Although this fall may
have exacerbated previous surgical sites and medical conditions, the
MRI report and CT [scans] of the cervical spine, demonstrate, beyond
any reasonable doubt, the fact that there is significant degenerative disc
disease present. Mr. Hudson was operated on for symptoms related to
degenerative disc disease of the neck. This degenerative disease may
have and an acute exacerbation from the fall but certainly was not caused
by the fall. Mr. Hudson should have reached . . . maximum medical
improvement within a period of eight to 12 weeks after this fall.
A typical [time frame] to reach maximum medical improvement
(MMI) after a single level surgical fusion with previous fusions above
and below this, plus hardware, is in the range of eight to 12 weeks, and
sometimes [four] months.
The lumbar MRI did no demonstrate any surgical pathology but
did demonstrate degenerative disc disease throughout.
It is reasonable to allow eight weeks to 12 weeks to reach (MMI)
maximum medical improvement after the fall, although the majority of
the problems are due to degenerative disc disease that was previously
present plus the prior two single level cervical spinal fusion[]s,

13

performed in 1990 and 1993.65
Dr. Nye’s report incorrectly stated that an MRI taken of plaintiff’s cervical and
lumbar spine on February 21, 2011 revealed “no herniation[].”66 In fact, the physician
who performed the MRI observed “a minimal broadbased posterior protrusion with
effacement of the anterior thecal sac” (i.e., a herniated disc) and degenerative disc
disease at C4-C5.67
Union Bankers sent plaintiff a letter regarding his disability benefits claim on
June 8, 2011.68 The letter stated that,
After a review of the all information received to date, it appears that this
occurrence caused an exacerbation of your pre-dated medical conditions.
Based on this, it has been determined that you would be entitled to
benefits for the reasonable recovery period for the acute injuries you
sustained.
We have previously provided benefits on your claim from
December 10, 2010 through March 31, 2011. At this time, we would
like to advise you that your claim has been closed as additional benefits
are not payable.69
H.

The Second Benefits Decision
After receiving Union Bankers’ letter, plaintiff submitted new “Attending
65

Doc. no. 27-2 (Claim File), at 136 (emphasis in original) (alterations supplied to correct
spelling and grammatical errors).
66

Id. (alteration supplied).

67

Doc. no. 15-5 (Records of Dr. Robert Ward), at 655-56.

68

Doc. no. 15-11 (June 8, 2011 Letter), at 137.

69

Id.

14

Physicians’ Statements of Disability” from Dr. James Matter, his primary care
physician, and Dr. Robert Ward, his orthopedic surgeon.70 The physicians reviewed
an MRI taken of plaintiff’s cervical spine in February of 2011, and rendered a
diagnosis of cervical radiculpathy and spinal stenosis.71 The Statements contained a
significant contradiction with Dr. Ward’s Report dated March 28, 2011, which stated
that plaintiff would be “able to resume full work” by August 1, 2011.72 Both
Statements also indicated that plaintiff was totally disabled from any occupation, and
that he would not be able to return to work.73
More specifically, Dr. Matter noted that plaintiff “was working and active until
the time of [his] injury” on December 11, 2010.74 He concluded that the accident
“caus[ed plaintiff’s] cervical radiculopathy and spinal stenosis,” and “rendered him
unable to work.”75 Dr. Ward observed that, while plaintiff had had “previous neck
surgeries back in 1990 and 1993,” he had “functioned well for approximately 17
years,” and was “working and doing well up until his injury.”76 Like Dr. Matter, Dr.
Ward concluded that the fall “caused [plaintiff’s] current disability and prevent[ed]
70

Doc. no. 15-12 (Attending Physicians’ Statements), at 183-84.

71

Id.

72

Doc. no. 15-12 (Attending Physicians’ Statements), at 66.

73

Id.

74

Doc. no. 27-1 (Claim File), at 56 (alteration supplied).

75

Id. (alteration supplied).

76

Id. at 55.

15

him from returning to work.”77 He also opined that plaintiff would remain on
“permanent total disability.”78
Union Bankers provided Dr. Nye with a copy of Dr. Ward’s “Attending
Physician’s Statement of Disability.”79 It also gave Dr. Nye a “Referral to Medical
Director” form stating: “Please call the treating physician and discuss insured
occurrence of 12-11-10. The physician has sent in new information.”80 Even so, Dr.
Nye did not “discuss” the accident with either of plaintiff’s treating physicians.81 By
way of explanation, CHCS Disability Claims Advisor Anita Neptune testified that:
“we use Dr. Nye as a tool. He doesn’t follow all of our suggestions and we don’t
follow all of his suggestions. We go to him just for the science of the human body.”82
In any event, Union Bankers contacted plaintiff’s physicians and requested
plaintiff’s updated medical records to assist in Dr. Nye’s reassessment of the claim.83
Dr. Nye completed his second medical review on July 21, 2011, and concluded as
follows:
77

Id. (alterations supplied).

78

Id.

79

Doc. no. 15-13 (Deposition of Melinda Riley), at 37, 39; doc. no. 27-2 (Claim File), at 140;
doc. no. 27-3 (Claim File), at 141.
80

Doc. no. 27-3 (Claim File), at 141.

81

Doc. no. 15-13 (Deposition of Melinda Riley), at 44-45; doc. no. 15-14 (Deposition of
Anita Neptune), at 114-16.
82

Doc. no. 15-14 (Deposition of Anita Neptune), at 130.

83

Doc. no. 27-3 (Claim File), at 144.

16

Mr. Hudson indicated he hurt his neck on 12/11/2010, when he
fell off of a chair in his garage, but he did not seek medical treatment
for three weeks. There is a prior history of the surgery on his neck
at two different time frames, one in 1990, and [one] in 1993. The
surgery in [1990] was reportedly at C5-C6 and at C6-C7 in 1993. The
x-rays performed on 01/14/2011 of the cervical spine demonstrated
marked degenerative changes and previous surgery with fusion. A CT
scan of the cervical spine, performed 01/28/2011 demonstrate[s] the
previous surgery and severe degenerative disc disease with
[osteophyte] formation and disc degeneration. There was no evidence
of dislocation or fracture. A myelogram performed 01/20/2011
demonstrated no evidence of spinal canal stenosis.
Mr. Hudson underwent a C4-C5 spinal fusion by Dr. Ward.
It would be best to obtain an independent medical evaluation by
a neurosurgeon concerning the neck issue.
It is obvious, in reading the CT scan and myelogram reports that
there was no evidence of spinal stenosis of significance. The myelogram
confirmed this. There is diffuse cervical spine arthritis, documented,
plus documented previous cervical neck surgery — twice.
Although there may be a disability or impairment due to the
cervical neck problem, that cervical neck problem has been an issue
for at least 15 years, with two previous surgeries. There is C.T., MRI,
and myelogram documentation of the severe degenerative changes and
no acute fractures or [ruptured discs]. Therefore, it is clear, that although
the fall may have exacerbated a previously existing condition, that
condition — degenerative disc disease of the cervical spine — is
documented beyond any reason to exist prior to the fall.
Additionally, the fall did not produce any fractures or dislocations and
would be considered at most, [an] exacerbation of previously
documented prior existing degenerative conditions.
Therefore, again an independent medical evaluation by a neural
surgeon (not in Coleman[,] Alabama, but in Birmingham or Mobile)
17

would be indicated, with a request to determine what damages the fall
actually produced.84
Union Bankers did not act on the recommendation that it “obtain an
independent medical evaluation by a neurosurgeon concerning the neck issue,”85
allegedly because “[t]here wasn’t a question that . . . needed answering that required
an independent medical evaluation.”86
Union Bankers sent plaintiff a letter regarding its reevaluation of his disability
benefits claim on November 10, 2011.87 The letter stated that,
Your policy defines Injury as “accidental bodily injury sustained: 1)
directly and independently of disease or bodily infirmity, or any other
causes; and 2) while this policy is in force.”
While reviewing your medical records, we noticed that in addition
to your acute injuries sustained to your neck, specifically the disc
herniation to C4-C5 as shown in your February 21, 2011 MRI, . . . there
is degenerative disc disease throughout your cervical spine as well as
cervical spondylosis. These are considered sickness conditions and are
not covered by your accident only policy.
For these reasons, it has been determined that you are entitled to
additional benefits for the reasonable recovery period for the
aforementioned acute injuries you sustained, post surgical intervention.
Shortly, you will be receiving a check that represents a final payment for
84

Doc. no. 27-3 (Claim File), at 144 (emphasis in original) (alterations supplied to correct
spelling and grammatical errors).
85

Id. (alteration supplied); see also doc. no. 15-14 (Deposition of Anita Neptune), at 132-33;
doc. no. 15-15 (Nov. 10, 2011 Letter), at 203.
86

Doc. no. 15-14 (Deposition of Anita Neptune), at 132 (alteration supplied); see also id. at

146-47.
87

Doc. no. 27-3 (Claim File), at 203.

18

your total disability benefit as well as your surgical benefit for your
loss.88
In accordance with the representations in the November 10, 2011 letter, Union
Bankers paid plaintiff a total of $4,650 on December 1, 2011, reflecting surgical
benefits of $1,050 and total disability benefits of $1,200 per month for the period of
April through June of 2011.89
I.

Plaintiff’s Complaint to the Alabama Department of Insurance
Plaintiff contacted the Alabama Department of Insurance regarding his claim

for disability benefits prior to the conclusion of Union Bankers’ reexamination of the
claim.90 In response to a letter of inquiry from the Department dated October 7, 2011,
Union Bankers reassessed plaintiff’s waiver of premium benefit under the Policy, and
refunded to plaintiff premium payments in the amount of $593.11 on December 23,
2011, reflecting the period of January through June of 2011.91
III. MOTION TO STRIKE
Plaintiff seeks to exclude two items of evidence in support of Union Bankers’
motion for summary judgment: i.e., an Internet article entitled “Cervical Spondylosis”

88

Id.

89

Doc. no. 15-3 (Deposition of Rick Hudson), at 67-68; doc. no. 15-10 (Explanation of
Benefits), at 542.
90

See doc. no. 15-16 (Letters to ADOI).

91

See doc. no. 15-17 (Disbursement Check), at 1296.

19

(document number 15-8); and a report from defendant’s expert witness, Dr. Steven R.
Nichols (document number 15-19).92
A.

“Cervical Spondylosis” Article
Union Bankers observes in a footnote that, according to the National Institute

of Health,
Cervical spondylosis is a disorder in which there is abnormal wear
on the cartilage and bones of the neck (cervical vertebrae). It is a
common cause of chronic neck pain.
Cervical spondylosis is caused by chronic wear on the cervical
spine. This includes the disks or cushions between the neck vertebrae
and the joints between the bones of the cervical spine. There may be
abnormal growths or “spurs” on the bones of the spine (vertebrae).
People who are very active at work or in sports may be more
likely to have them.
The major risk factor is aging.93
The motion quotes an article entitled “Cervical Spondylosis,” which is available
on the MedlinePlus website cited in the following footnote.94 MedlinePlus is
produced by the U.S. National Library of Medicine, a division of the National Institute
of Health, which is part of the United States Department of Health and Human

92

See doc. no. 26 (Motion to Strike).

93

Doc. no. 15-1 (Brief in Support of Motion for Summary Judgment), at 7 n.2 (emphasis
omitted) (quoting doc. no. 15-8 (“Cervical Spondylosis” Article).
94

Id. See http://www.nlm.nih.gov/medlineplus/ency/article/.

20

Services.95 The National Institute of Health is the nation’s largest medical research
agency.96
Plaintiff has filed a motion to strike the “Cervical Spondylosis” article on the
grounds that “[t]he article is classic hearsay.”97 Even if the article is hearsay, this
court may take judicial notice of a fact in the article, if that fact “is not subject to
reasonable dispute because it: (1) is generally known within the trial court’s territorial
jurisdiction; or (2) can be accurately and readily determined from sources whose
accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b).
“In the absence of expert testimony, several courts have used judicial notice to
. . . better critique and understand . . . medical representations.” Mosley v. General
Revenue Corp. (In re Mosley), 330 B.R. 832, 844-45 (Bankr. N.D. Ga. 2005)
(alteration supplied). See Wangenstein v. Equifax, Inc., 191 F. App’x 905, 917 (11th
Cir. 2006) (citing Dorland’s Illustrated Medical Dictionary 1564 (28th ed. 1994) and
295 J. Am. Med. Ass’n 2320 (May 17, 2006) for definitions and symptoms of cervical
spondylosis, myelopathy, and migraines); Krohmer-Burkett v. Hartford Life and
Accident Insurance Co., No. 803CV873T30MAP, 2005 WL 2614503, *2 n.6 (M.D.
Fla. Oct. 14, 2005) (taking judicial notice of the Merriam Webster Medical
95

Doc. no. 30 (Response to Motion to Strike), at 7

96

Id.

97

Doc. no. 26 (Motion to Strike), at 2 (alteration supplied).

21

Dictionary’s website’s definition of “stenosis”).98
Further, multiple courts have taken judicial notice of websites “whose accuracy
cannot reasonably be questioned.” Fed. R. Evid. 201(b)(2). See Coleman v. Dretke,
409 F.3d 665, 667 (5th Cir. 2005) (holding that a district court could take judicial
notice of a state agency website); In re Everglades Island Boat Tours, LLC, 484 F.
Supp. 2d 1259, 1261 (M.D. Fla. 2007) (taking judicial notice of a state agency
website); Mitchell v. Nix, CV 105-2349, 2007 WL 779067, *4 (N.D. Ga. Mar. 8,
2007) (taking judicial notice of a state agency website); Vlahos v. Schroeffel, CV No.
02-CV-019DLI, 2006 WL 544444, *5 (E.D. N.Y. Mar. 6, 2006) (taking judicial notice
of a university hospital’s website); Hendrickson v. eBay, Inc., 165 F. Supp. 2d 1082,
1084 (C.D. Cal. 2001) (taking judicial notice of a defendant business’s website).
Indeed, this court recently took judicial notice of an exhibit containing
definitions and descriptions of a plaintiff’s medical conditions in an action challenging
the denial of a disability claim. See Garmon v. Liberty Life Assurance Co. of Boston,
385 F. Supp. 2d 1184, 1203-1214 (N.D. Ala. 2004). This court reasoned that: “The

98

See also Pobiner v. Education Credit Management Corp. (In re Pobiner), 309 B.R. 405,
419-20 (Bankr. E.D.N.Y. 2004) (taking judicial notice of the career prospects of persons suffering
from Attention Deficit Hyperactivity Disorder as described in a National Institute of Mental Health
publication); Green v. Sallie Mae (In re Green), 238 B.R. 727, 735-36 (Bankr. S.D. Ohio 1999)
(taking judicial notice of the career prospects of persons suffering from bipolar disorder); Doherty
v. United Student Aid Funds, Inc. (In re Doherty), 219 B.R. 665, 670 (Bankr. W.D. N.Y. 1998)
(reviewing medical publications and treatises on bipolar disorder and taking judicial notice of the
“most probable near-future” for persons suffering from the disorder).

22

Exhibit bears the imprimatur of both the National Institute of Arthritis and
Musculoskeletal and Skin Diseases and [as here,] the National Institutes of Health
Department of Health and Human Services. The facts recited therein are not subject
to reasonable dispute because the sources cannot be reasonably questioned.” Id.
(alterations supplied). (citing Fed. R. Evid. 201 and the notes of the Advisory
Committee thereunder).
Like the exhibit in Garmon, the exhibit in this case contains a description of a
medical condition from a website maintained by the National Institute of Health: a
“source [that] cannot be reasonably questioned.”

Id. (Alteration supplied).

Accordingly, this court will deny plaintiff’s motion to strike the exhibit.
B.

Dr. Nichols’s Expert Witness Report
Union Bankers has submitted an expert witness report from Dr. Steven R.

Nichols, a board certified orthopedic surgeon.99 Dr. Nichols opined that plaintiff
has almost a twenty-year history of chronic neck and low back pain with
associated disability. According to the medical records, this has required
intermittent and ongoing pain management in some form or fashion.
It is my opinion that falling out of the chair in December 2010
most likely was not a significant factor leading up to his surgery in
March 2010. Also this injury most likely was not a significant factor in
his subsequent complaints of disability since according to the
preoperative radiology reports there was evidence of significant
multilevel degenerative disc changes throughout the cervical spine with
99

Doc. no. 15-19 (Expert Report of Dr. Steven R. Nichols).

23

multilevel disk/osteophyte complexes and associated stenosis not just at
C4-5.
....
In summary, based on my experience as well as the orthopedic and
spine literature, it is my opinion that the patient’s ongoing cervical
spondylolysis along with his adjacent segment disease at C4-5 led to his
surgical fusion at C4-5 in March 2011. While falling out of a chair may
very well have caused a temporary increase in his symptoms; all in all I
do not feel that this significantly altered his ongoing disease process.100
Plaintiff has filed a motion to strike Dr. Nichols’s expert witness report on two
grounds.101 First, plaintiff argues that the report is “inadmissible hearsay” because it
is “an unsworn memorandum.”102 Second, he asserts that the report is “irrelevant to
the resolution of the pending summary judgment motion” because it “is dated March
22, 2013 and was unavailable at the time Defendant reviewed the claim and denied it
the first time on June 8, 2011 and the second time on November 10, 2011.”103
Federal Rule of Civil Procedure 56(e)(1) states that “[i]f a party fails to properly
support an assertion of fact[,] . . . the court may give an opportunity to properly
support . . . the fact.” Fed. R. Civ. P. 56(e)(1) (alterations supplied). Consistently
with Rule 56, a “number of district courts have permitted affidavits to cure previously

100

Id. at PennLife/Hudson 1292-93.

101

See doc. no. 26 (Motion to Strike).

102

Id. at 2.

103

Id. at 3-4.

24

unsworn materials.” DG&G, Inc. v. FlexSol Packaging Corp. of Pompano Beach, 576
F.3d 820, 826 (8th Cir. 2009).104
Union Bankers addressed plaintiff’s argument that Dr. Nichols’s report is
hearsay by filing a declaration from Dr. Nichols affirming his report under penalty of
perjury.105 Union Bankers’s use of Dr. Nichols’s declaration to cure the defect in his
previously unsworn report will not prejudice plaintiff because defendant provided
plaintiff with a copy of the report on March 22, 2013, more than two months before
plaintiff responded to the motion for summary judgment.106 Accordingly, plaintiff’s
argument that the report is hearsay is now moot.

104

See also Medtronic Xomed, Inc. v. Gyrus ENT LLC, 440 F. Supp. 2d 1300, 1310 n.6 (M.D.
Fla. 2006) (holding that an expert report was properly before the court in considering motions for
summary judgment because the expert had identified his unsworn report during his deposition);
Volterra Semiconductor Corp. v. Primarion, Inc., 796 F. Supp. 2d 1025, 1038-39 (N.D. Cal. 2011)
(overruling an objection to unsworn expert reports where the proponent provided a sworn
declaration from the expert with the challenged reports attached); Straus v. DVC Worldwide, Inc.,
484 F. Supp. 2d 620, 634 (S.D. Tex. 2007) (“While filing [an] unsworn expert report did not
constitute admissible summary judgment evidence, see Fed. R. Civ. P. 56(e), that deficiency was
cured by filing the sworn declaration.”) (alteration supplied); Maytag Corp. v. Electrolux Home
Products, Inc., 448 F. Supp. 2d 1034, 1064 (N.D. Iowa 2006) (“This court concludes that subsequent
verification or reaffirmation of an unsworn expert’s report, either by affidavit or deposition, allows
the court to consider the unsworn expert’s report on a motion for summary judgment.”); Gache v.
Town of Harrison, 813 F. Supp. 1037, 1052 (S.D. N.Y. 1993) (“To the extent defendants seek to
strike the submissions . . . as unsworn reports by experts, the issues have been mooted by plaintiff’s
submission of sworn declarations by each of these individuals swearing to the veracity of their
statements.”).
105

See doc. no. 30-1 (Declaration of Dr. Steven R. Nichols).

106

Doc. no. 30 (Response to Motion to Strike), at 4. See, e.g., Gache, 813 F. Supp. at 1052
(“No prejudice results to defendants since the sworn declarations have been submitted by plaintiff
well in advance of trial and defendants were already fully cognizant of the opinions of plaintiff’s
experts.”).

25

Plaintiff also contends that the report is “irrelevant” because it was not written
until after the review of his disability benefits claim was complete.107 He observes
that, “under longstanding Alabama law, in the area of bad faith, ‘information received
by the insurer after the date of the denial is irrelevant to the determination of whether
the insurer denied at that date in bad faith.’” Union Bankers Fire & Casualty Co. v.
Slade, 747 So.2d 293, 317 (Ala. 1999) (emphasis in original) (quoting Insurance Co.
of North America v. Citizensbank of Thomasville, 491 So.2d 880, 883 (Ala.1986)).108
However, plaintiff’s claims against Penn Life are not limited to bad faith.
Plaintiff asserts three claims against defendant: i.e., bad faith; breach of contract; and
“anticipatory breach of contract or repudiation.”109 As discussed in greater detail
below, the analysis of a “normal” bad faith claim focuses on whether the insurer had
a reasonably legitimate basis for denying the claim, and the analysis of an “abnormal”
bad faith claim focuses on whether the insurer properly investigated the claim before
issuing the denial. See Pyun v. Paul Revere Life Insurance Co., 768 F. Supp. 2d 1157,
1169-70 (N.D. Ala. 2011); Singleton v. State Farm Fire & Casualty Co., 928 So. 2d
280, 283 (Ala. 2005). Therefore, an expert report written after the date of the denial
is not relevant to the existence of either type of bad faith. In contrast, the analysis of
107

Doc. no. 26 (Motion to Strike), at 3-4.

108

Id.

109

Doc. no. 1-1 (Complaint) ¶¶ 10-15; doc. no. 8 (Amended Complaint) ¶¶ 23-24.

26

a breach of contract claim asks simply whether the insurer was required to pay the
claim under the terms of the policy. See generally Pyun, 768 F. Supp. 2d at 1169. Dr.
Nichols’s report addresses the issue of whether plaintiff’s injuries were caused by
various preexisting conditions and, thus, whether they were covered under the policy.
Accordingly, his report is relevant to the existence of a duty to pay.
For all of those reasons, this court will deny plaintiff’s motion to strike that
exhibit.
IV. MOTION FOR SUMMARY JUDGMENT
A.

Breach of Contract
Plaintiff asserts that defendant committed a breach of contract by refusing to

pay his claim for total disability benefits.110 In the context of an insurance claim under
Alabama law, “the insured bears the initial burden of establishing insurance coverage
by demonstrating that a claim falls within the insurance policy.” Pyun v. Paul Revere
Life Insurance Co., 768 F. Supp. 2d 1157, 1169 (N.D. Ala. 2011) (citing Shalimar
Contractors, Inc. v. American States Insurance Co., 975 F. Supp. 1450, 1454 (S.D.
Ala. 1997); Colonial Life & Accident Insurance Co. v. Collins, 280 Ala. 373, 194 So.
2d 532, 535 (Ala. 1967)).
The policy issued by Penn Life is “an accident only policy” that pays benefits

110

Doc. no. 1-1 (Complaint) ¶¶ 14-15.

27

“for specified loss resulting from injury,” and does not pay benefits “for loss from
sickness.”111 The term “injury” refers to an “accidental bodily injury sustained: (1)
directly and independently of disease or bodily infirmity, or any other causes; and (2)
while th[e] Policy is in force.”112 Thus, in order to establish his claim for breach of
contract, plaintiff must prove that his alleged disability was caused directly by
“injuries” sustained in his fall on December 11, 2010, and independently of
“sicknesses,” such as his preexisting conditions of cervical spondylosis and
degenerative disc disease.
Union Bankers relies on Black-Gammons v. Zurich American Insurance Co.,
No. CIVA104CV819MHTWO, 2006 WL 47503 (M.D. Ala. Jan. 9, 2006), an
unpublished decision from a district court in Alabama granting an insurer’s motion
for summary judgment on a claim for breach of contract brought by a plaintiff
suffering from preexisting conditions. However, unlike the plaintiff in this case, the
plaintiff in Black-Gammons did not argue “that the injuries she sustained during the
accident are solely responsible for her herniated discs,” or even “that the herniated
discs are the sole cause of her inability to work.” Id. at *3.
Here, both of plaintiff’s treating physicians have attributed his disability to the

111

Doc. no. 15-4 (Policy), at 29; see also doc. no. 15-3 (Deposition of Rick Hudson), at 28-

112

Doc. no. 15-4 (Policy), at 38 (alteration supplied).

29.

28

accident. Dr. James Matter, his primary care physician, noted that plaintiff “was
working and active until the time of [his] injury.”113 He concluded that the fall
“caus[ed plaintiff’s] cervical radiculopathy and spinal stenosis,” and “rendered him
unable to work.”114 Dr. Robert Ward, plaintiff’s orthopedic surgeon, observed that,
while plaintiff had had “previous neck surgeries back in 1990 and 1993,” he had
“functioned well for approximately 17 years,” and was “working and doing well up
until his injury.”115 Like Dr. Matter, Dr. Ward concluded that the accident “caused
[plaintiff’s] current disability and prevent[ed] him from returning to work.”116
Even so, CHCS Medical Director Dr. John David Nye reviewed plaintiff’s
medical records, and reached the opposite result. Dr. Nye decided that, “although the
fall may have exacerbated a previously existing condition, that condition —
degenerative disc disease of the cervical spine — is documented beyond any
reason to exist prior to the fall.”117 Dr. Nye also determined that the accident “did
not produce any fractures or dislocations and would be considered at most, [an]
exacerbation of previously documented prior existing degenerative conditions.”118

113

Doc. no. 27-1 (Claim File), at 56 (alteration supplied).

114

Id. (alteration supplied).

115

Id. at 55.

116

Id. (alterations supplied).

117

Doc. no. 27-3 (Claim File), at 144 (emphasis in original).

118

Id. (alteration supplied).

29

Likewise, Union Bankers’ expert witness, Dr. Steven R. Nichols, determined
that plaintiff’s
ongoing cervical spondylolysis along with his adjacent segment disease
at C4-5 led to his surgical fusion at C4-5 in March 2011. While falling
out of a chair may very well have caused a temporary increase in his
symptoms; all in all I do not feel that this significantly altered his
ongoing disease process.119
Viewing the evidence in the light most favorable to the nonmoving party (in
this case, plaintiff), the difference of opinion between plaintiff’s treating physicians,
on one hand, and CHCS’s Medical Director and defendant’s expert witness, on the
other, is sufficient to create an issue of fact on whether plaintiff’s disability was
caused directly by “injuries” sustained in his fall on December 11, 2010, or whether
it was instead caused by “sicknesses,” such as preexisting cervical spondylosis and
degenerative disc disease. Accordingly, this court will deny the motion for summary
judgment on plaintiff’s breach of contract claim.
B.

Bad Faith
Plaintiff asserts that defendant acted in bad faith by denying his disability

benefits claim.120
1.

“Normal” bad faith
In order to recover on a “normal” bad-faith claim under Alabama

119

Doc. no. 15-19 (Expert Report of Dr. Steven R. Nichols), at PennLife/Hudson 1292-93.

120

Doc. no. 1-1 (Complaint) ¶¶ 11-12.

30

law, a plaintiff must prove (1) an insurance contract between the parties
and a breach thereof by the defendants; (2) an intentional refusal to pay
the insured’s claim; (3) the absence of any reasonably legitimate or
arguable reason for that refusal (i.e., the absence of a debatable reason);
(4) the insurer’s actual knowledge of the absence of any legitimate or
arguable reason; and (5) if the intentional failure to determine the
existence of a wrongful basis is relied upon, the plaintiff must prove the
insurer’s intentional failure to determine whether there is an legitimate
or arguable reason to refuse to pay the claim. Smith v. MBL Life
Assurance Corp., 589 So. 2d 691, 697 (Ala. 1991). As the Alabama
Supreme Court later explained:
The Plaintiff asserting a bad-faith claim bears a
heavy burden. To establish a prima facie case of bad-faith
refusal to pay an insurance claim, a plaintiff must show that
the insurer’s decision not to pay was without a[] ground for
dispute; in other words, the plaintiff must demonstrate that
the insurer had no legal or factual defense to the claim. The
insured must eliminate any arguable reason propounded by
the insurer for refusing to pay the claim. A finding of bad
faith based upon rejection of an insurers [sic] legal
argument should be reserved for extreme cases. The right
of an insurer to deny a claim on any arguable legal issue is
to be as zealously guarded as is its right to decline benefits
on any debatable issue of fact, the test of reasonableness
being the same.
Shelter Mut. Ins. Co. v. Barton, 822 So. 2d 1149, 1154 (Ala. 2001)
(internal citations and quotation marks omitted). In other words,
Plaintiff must show that he is entitled to a directed verdict on the breach
of contract claim in order to have the claim of bad submitted to a jury.
Employees’ Benefit Ass’n v. Grissett, 732 So. 2d 968, 976 (Ala. 1998).
“Ordinarily, if the evidence produced by either side creates a fact issue
with regard to the validity of the claim and, thus, the legitimacy of the
denial thereof, the [normal bad-faith] claim must fail and should not be
submitted to the jury.” Nat’l Sav. Life Inc. Co. v. Dutton, 419 So. 2d
1357, 1362 (Ala. 1982).
31

Pyun v. Paul Revere Life Insurance Co., 768 F. Supp. 2d 1157, 1169-70 (N.D. Ala.
2011) (alterations in original).
Plaintiff has not established that defendant lacked an “arguable reason” for
denying his claim. Prior to his December 11, 2010 accident, plaintiff underwent three
spinal surgeries, and suffered from herniated discs, moderate spinal stenosis,
“extensive” multilevel degenerative disc disease, chronic neck and back pain, and
upper and lower extremity pain.121 Further, plaintiff did not seek emergency medical
attention immediately after his fall, did not see his primary care physician for almost
three weeks after the fall, and did not receive the MRI revealing his disc herniation at
C4-5 for more than two months after the fall.122 Under those circumstances, defendant
had a “debatable reason” for denying the claim. Accordingly, this court will grant
summary judgment on plaintiff’s “normal” bad faith claim.
2.

“Abnormal” bad faith

In the “normal” bad-faith case, the plaintiff must show the absence
of any reasonably legitimate or arguable reason for denial of a claim.
[State Farm Fire & Cas. Co. v.] Slade, 747 So. 2d [293] at 306 [(Ala.
1999)]. In the “abnormal” case, bad faith can consist of: 1) intentional
or reckless failure to investigate a claim, 2) intentional or reckless failure
121

See doc. no. 15-3 (Deposition of Rick Hudson), at 45-47, 64; doc. no. 15-5 (Records of
Dr. Robert Ward); doc. no. 15-6 (Records of Dr. Robert L. Hash); doc. no. 15-7 (Records of Dr.
James Matter).
122

Doc. no. 15-3 (Deposition of Rick Hudson), at 29-36; doc. no. 15-5 (Records of Dr.
Robert Ward), at 647; doc. no. 15-7 (Records of Dr. James Matter), at 781.

32

to properly subject a claim to a cognitive evaluation or review, 3) the
manufacture of a debatable reason to deny a claim, or 4) reliance on an
ambiguous portion of a policy as a lawful basis for denying a claim. 747
So. 2d at 306-07.
Singleton v. State Farm Fire & Casualty Co., 928 So. 2d 280, 283 (Ala. 2005)
(alterations in original). The “abnormal” bad faith test “dispense[s] with the predicate
of a preverdict JML [i.e., judgment as a matter of law] for the plaintiff on the contract
claim if the insurer had recklessly or intentionally failed to properly investigate a
claim or to subject the results of its investigation to a cognitive evaluation.” White v.
State Farm Fire & Casualty Co., 953 So. 2d 340, 348 (Ala. 2006) (alterations
supplied) (quoting Employees’ Benefit Association v. Grissett, 732 So. 2d 968, 976
(Ala. 1998)).
Plaintiff has not established that the facts of this case fit one of the four
categories of “abnormal” bad faith claims. Plaintiff argues that defendant “failed to
properly investigate and evaluate” his disability claim for two reasons.123 First,
defendant did not wait to receive plaintiff’s complete medical records before deciding
to pay him based on the reasonable recovery period for his injuries on March 3,
2011.124 Second, defendant did not act on Dr. Nye’s recommendation that it “obtain
an independent medical evaluation by a neurosurgeon concerning the neck [injury]
123

Doc. no. 25 (Response to Motion for Summary Judgment), at 27.

124

Doc. no. 15-9 (Advisor Opinion & Management Review), at 9.

33

issue.”125 As noted above:
An insurer is liable for ‘abnormal’ bad faith when it intentionally or
recklessly fails investigate a plaintiff’s claim or when it intentionally or
recklessly fails to properly subject a plaintiff’s claim to a cognitive
evaluation or review. [State Farm Fire & Casualty Co. v. Slade, 747 So.
2d 293, 306-07 (Ala. 1999).] In taking this position, Plaintiff bears the
burden of presenting “sufficient evidence of ‘dishonest purpose’ or
‘breach of known duty, i.e., good faith and fair dealing, through some
motive of self-interest or ill will.’” Singleton [v. State Farm Fire &
Casualty Co.], 928 So. 2d [280,] 287 [(Ala. 2005)] (quoting Slade, 747
So. 2d at 303-04) . . . . “[M]ore than bad judgment or negligence is
required in a bad-faith action.” Singleton, 928 So. 2d at 286-87; see also
Pioneer Services, Inc. v. Auto Owners Inc. Co., 2007 U.S. Dist. LEXIS
50678, 2007 WL 2059109 (M.D. Ala. 2007).
Pyun v. Paul Revere Life Insurance Co., 768 F. Supp. 2d 1157, 1172 (N.D. Ala. 2011)
(alterations supplied).
Plaintiff first argues that defendant did not await his complete medical records
before deciding to pay him based on the reasonable recovery period for his injuries on
March 3, 2011.126 However, it is undisputed that CHCS Medical Director Dr. John
David Nye reassessed plaintiff’s disability claim after receiving his updated medical
records on July 21, 2011.127 Even so, plaintiff’s counsel asserts that, “[h]aving
declared on March 3, 2011 that it would process Plaintiff’s disability claim based on
a ‘reasonable period of recovery’ and that . . . this was only a exacerbation of
125

Doc. no. 27-3 (Claim File), at 144 (alteration supplied); see also doc. no. 15-14
(Deposition of Anita Neptune), at 132-33; doc. no. 15-15 (Nov. 10, 2011 Letter), at 203.
126

Doc. no. 25 (Response to Motion for Summary Judgment), at 27.

127

Doc. no. 27-3 (Claim File), at 144.

34

pre-existing conditions, Defendant . . . set out to prove its premature declarations.”128
The Eleventh Circuit has expressly held that an attorney’s argument in a brief
“is not evidence.” Bryant v. United States Steel Corp., 428 F. App’x. 895, 897 (11th
Cir. 2011) (affirming grant of summary judgment) (citing Skyline Corp. v. National
Labor Relations Board, 613 F.2d 1328, 1337 (5th Cir. 1980)129). Accordingly,
plaintiff has not presented evidence that the reevaluation of his claim after receipt of
his updated medical records was tainted by “dishonest purpose” or “breach of known
duty” through “some motive of self-interest or ill will.” See Pyun, 768 F. Supp. 2d at
1172.
Plaintiff further argues that defendant did not act on Dr. Nye’s recommendation
that it “obtain an independent medical evaluation by a neurosurgeon concerning the
neck [injury] issue.”130 However, plaintiff’s medical records depicted a twenty-year
history of multiple herniated discs, moderate spinal stenosis, “extensive” multilevel
degenerative disc disease, chronic neck and back pain, and upper and lower extremity
pain.131 Under those circumstances, defendant’s failure to commission an independent
128

Doc. no. 25 (Response to Motion for Summary Judgment), at 27 (alteration supplied).

129

In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), the
Eleventh Circuit adopted as binding precedent all Fifth Circuit decisions handed down prior to the
close of business on September 30, 1981.
130

Doc. no. 27-3 (Claim File), at 144 (alteration supplied); see also doc. no. 15-14
(Deposition of Anita Neptune), at 132-33; doc. no. 15-15 (Nov. 10, 2011 Letter), at 203.
131

See doc. no. 15-5 (Records of Dr. Robert Ward); doc. no. 15-6 (Records of Dr. Robert L.
Hash); doc. no. 15-7 (Records of Dr. James Matter).

35

medical evaluation showed, at worst, bad judgment or negligence, which do not rise
to the level of “abnormal” bad faith. See Pyun, 768 F. Supp. 2d at 1172.
For all of those reasons, this court will grant summary judgment on plaintiff’s
“abnormal” bad faith claim.
C.

Anticipatory Breach of Contract
Finally, plaintiff asserts an “anticipatory breach of contract or repudiation”

claim against defendant for its alleged denial of plaintiff’s current and future benefits
under the Policy.132 The Alabama Supreme Court has observed that, “to give rise to
an anticipatory breach of contract, the defendant’s refusal to perform must have been
positive and unconditional.” International Paper Co. v. Madison Oslin, Inc., 985 So.
2d 879, 887 (Ala. 2007) (quoting 23 Richard A. Lord, Williston on Contracts § 63:45
(4th ed. 2002)). “Merely because a given act or course of conduct . . . is inconsistent
with the contract is not sufficient; it must be inconsistent with the intention to be
longer bound by it.” Johnston v. Green Mountain, Inc., 623 So. 2d 1116, 1121 (Ala.
1993).
Plaintiff’s amended complaint alleges, without elaboration, that “[o]n or about
November 10, 2011, the Defendant denied [his] benefits, indicating that the disability
benefits, both current and future, to which [he] is entitled under his contract with the

132

Doc. no. 8 (Amended Complaint) ¶¶ 23-24.

36

Defendant would not be payable to him.”133 Upon review of the November 10, 2011
letter regarding plaintiff’s claim, Union Bankers concluded that plaintiff was entitled
to surgical benefits for the C4-C5 fusion performed by Dr. Ward, and disability
benefits for the reasonable recovery period following the surgery, but was not entitled
to additional benefits for sicknesses excluded from coverage under the policy.134
Nowhere does the November 10, 2011 letter state that defendant would not consider
plaintiff’s future disability benefits claims under the Policy.
Plaintiff quotes Congress Life Insurance Co. v. Barstow, 799 So. 2d 931, 938
(Ala. 2001), for the proposition that “[a] repudiation is a manifestation by one party
to the other that the first cannot or will not perform at least some of his obligations
under the contract.”135 Plaintiff also contends that, “[a]s a general rule, an anticipatory
repudiation gives the injured party an immediate claim to damages for total breach,
in addition to discharging his remaining duties of performance.”136 However, the
Alabama Supreme Court held in Congress that the insurer repudiated the insurance
contract by conditioning its performance on the insured’s consent to a modification
of the contract. Id. at 938. The Court did not hold that the mere denial of a claim rises
133

Id. ¶ 23 (alteration and emphasis supplied).

134

Doc. no. 15-15 (Nov. 10, 2011 Letter), at 203.

135

Doc. no. 25 (Response to Motion for Summary Judgment), at 29 (emphasis in original)
(alteration supplied).
136

Id. (alteration supplied) (quoting Congress, 799 So. 2d at 938).

37

to the level of an anticipatory repudiation of the insurance contract.
Plaintiff further argues that, “[i]n cases where the insurer has repudiated the
Policy, an insured is entitled to recover future benefits from his disability insurer.”137
Plaintiff relies on one unpublished case from the Ninth Circuit, and two cases from
state courts in California and Wisconsin, respectively. See Greenberg v. Paul Revere
Life Insurance, Co., 2004 WL 74630 (9th Cir. 2004); DeChant v. Monarch Life
Insurance Co., 554 N.W.2d 225 (Wis. Ct. App. 1996); Egan v. Mutual of Omaha
Insurance Co., 620 P.2d 141 (Cal. 1979). However, unlike the plaintiff in this case,
the plaintiffs in the cases cited above successfully showed the existence of bad faith.
Accordingly, this court will grant summary judgment on plaintiff’s anticipatory
breach of contract claim.
V. CONCLUSION
For the reasons explained above, summary judgment is GRANTED on
plaintiff’s claims for bad faith and anticipatory breach of contract, and DENIED on
his claim for breach of contract. Plaintiff’s motion to strike is DENIED.
DONE this 20th day of June, 2013.

______________________________
United States District Judge

137

Id. at 29 (alteration supplied).

38