NELSON v. NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

Filing 46

ORDER - The Court therefore DENIES 19 Plaintiff's Motion for Partial Summary Judgment, DENIES 26 Defendant's Motion to Strike. The Court GRANTS 27 Defendant's Cross-Motion for Summary Judgment. Summary judgment in this matter is hereby entered in favor of Defendant and against Plaintiff, and final judgment in accordance with this entry will issue. Signed by Judge Sarah Evans Barker on 12/18/2012. (CKM)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
CHRISTOPHER S. NELSON, M.D.,
Plaintiff,
vs.
NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY,
Defendant.

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1:11-cv-0588-SEB-TAB

ORDER ADDRESSING PENDING MOTIONS
This lawsuit concerns the legal interpretation of a life insurance policy issued by
Defendant, Northwestern Mutual Life Insurance Company (“NML”), to Plaintiff,
Christopher S. Nelson, M.D. (“Dr. Nelson”). Three motions are presently before the
Court: (1) Plaintiff’s Motion for Partial Summary Judgment [Docket No. 19], filed
September 6, 2011; (2) Defendant’s Motion to Strike Plaintiff’s Designated Expert Reports
and Affidavits [Docket No. 26], filed October 27, 2011 (“the Motion to Strike”); and (3)
Defendant’s Cross-Motion for Summary Judgment [Docket No. 27], filed October 27,
2011. All of the motions are fully briefed, and the Court is properly advised in the matter.
Accordingly, the Court DENIES Plaintiff’s Motion for Partial Summary Judgment,
DENIES Defendant’s Motion to Strike, and GRANTS Defendant’s Cross-Motion for
Summary Judgment.
I. Factual Background
1

A. Dr. Nelson’s Relevant Professional and Personal History
Dr. Nelson is a citizen of the State of Indiana and a 1998 graduate of the Indiana
University School of Medicine. Compl. ¶ 1; Pl.’s Br. at 2. After completing his medical
education, a postgraduate internship, and a residency program, he began his career in
anesthesiology. He served as staff anesthesiologist at Goshen General Hospital between
2002 and 2003, at Great Lakes Anesthesia between 2003 and 2004, and, beginning in
2004,1 at Unity Arts Surgery Center (“the Surgery Center”). Dr. Nelson’s chief duty in
this capacity was to administer anesthesia to patients before, during, and after surgeries.
See Pl.’s Br. at 2. He earned in excess of $200,000 annually during his first two years in
practice. Id. at 8. As of 2005, his role at the Surgery Center had expanded to include
Director of Anesthesia, primary anesthesiologist, and minority shareholder; he earned
approximately $229,594 that year. Id. at 2-3, 8.
Regrettably, Dr. Nelson’s relationship with narcotics crossed the line from
professional to personal in January 2006, when he began abusing opiates that had been
prescribed to his mother.2 Pl.’s Ex. 1 (“Nelson Aff.”) ¶ 5. He depleted his mother’s
cache of Vicodin three months later and subsequently obtained narcotics from other family
members without their knowledge. When these relatives ultimately confronted Dr.
Nelson, he started diverting property of the Surgery Center for personal use. Between
May and August of that year, he abused Demerol and Fentanyl from the Surgery Center,
1

In 2004, Dr. Nelson also obtained certification from the American Board of Anesthesia.
Pl.’s Resp. at 2.
2
Dr. Nelson’s mother, who suffered from chronic medical conditions, died prior to January
2006. Nelson Aff. ¶ 5.
2

self-administering the drugs through intramuscular and intravenous injections. Id. Dr.
Nelson’s alleged “attempt[s] to quit using narcotics during the weekends” during this time
period were evidently unsuccessful; “invariably[, he] began using immediately upon his
return to work.” Pl.’s Br. at 3.
On August 20, 2006, Dr. Nelson sought professional help for drug addiction and
was referred to the Indiana State Medical Association’s Physician Assistance Program
(“the ISMA Program”). Pl.’s Br. at 3; Nelson Aff. ¶ 6. Dr. Nelson entered a
twelve-week intensive outpatient addictions program at Rush Behavioral Health on August
24 and was discharged following successful completion of the program in November
2006.3 Nelson Aff. ¶ 7. He obtained part-time employment as an anesthesiologist in
December 2006 and worked in that capacity “[up] to March[] 2007.” Id. ¶ 8. Hoping to
return to the full-time practice of medicine in St. Joseph, Michigan, Dr. Nelson began
applying for a Michigan medical license in March 2007. Id. ¶ 9. He enrolled in the State
of Michigan’s health professionals monitoring program in June 2007 and received an
unrestricted license to practice. Id. ¶ 9. Around the same time, he began working for
Sunset Coast Anesthesia (“Sunset Coast”), which he describes as “a very high stress/high
volume environment with unlimited access to narcotics,” and obtained staff privileges at
St. Joseph Regional Hospital. Id.
Only four weeks into his employment with Sunset Coast, Dr. Nelson “experienced
3

Given Dr. Nelson’s allegations concerning his employment history between December
2006 and March 2007, see Nelson Aff. ¶ 8, as well as his own assertion that he completed
treatment in 2006, we presume that the reference to “discharge[] in 2007,” see Pl.’s Br. at 3, was
incorrect.
3

many overpowering triggers in the operating room” that proved too strong for him to resist.
Pl.’s Br. at 4. He again began misappropriating the facility’s Demerol for personal
intravenous use, which “led to [his] privileges being suspended.” Nelson Aff. ¶ 10. Dr.
Nelson returned to Rush Behavioral Health in August 2007 for further inpatient treatment,
but his stay ended the following month due to family and financial difficulties. He
“voluntarily signed [a contract] with Rush agreeing not to practice medicine . . . in any
form or capacity” for one year. Id. ¶ 13. Despite the completion of a partial inpatient
program at South Bend, Indiana’s Madison Center between September and December
2007, Dr. Nelson began abusing Vicodin and alcohol shortly thereafter. He resumed
treatment at Madison Center in January 2008 and completed an “aftercare program” in
May of that year. Id. ¶¶ 16-17. Nevertheless, the Michigan Board of Medicine
suspended Dr. Nelson’s Michigan medical license for six months in October 2007; the
Indiana Medical Licensing Board (“the Indiana Board”) took similar action against him on
April 27, 2009. Id. ¶ 19; Pl.’s Br. at 6-7.
The suspension of Dr. Nelson’s Indiana medical license was for an “indefinite”
period, and the Indiana Board considered his petition for reinstatement on December 3,
2009. See Pl.’s Br. at 7; Pl.’s Ex. 3-C (“Prob. Lic.”) at 1. By order stating its findings of
fact and conclusions of law, the Indiana Board voted 6-0-0 to issue Dr. Nelson a
probationary medical license on December 17, 2009. Id. at 1-2. One of the Indiana
Board’s conclusions of law was that Dr. Nelson had “establish[ed] that he [was] able to
practice with reasonable skill and safety to the public.” Id. at 2. Dr. Nelson’s
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reinstatement was subject to several conditions: (1) complying with his ISMA Program
contract and reporting on his progress; (2) abstaining from the practice of anesthesiology;
(3) working under physician supervision; (4) working in “a corrections employment
setting;” (5) complying with the terms of his Michigan probation; (6) paying transcript
costs in his reinstatement proceeding; and (7) complying with all laws governing the
practice of medicine. Id. at 2-3.
Dr. Nelson sought employment in the corrections setting soon after his
reinstatement. In late 2009, he approached Dr. Michael Mitcheff,4 the Statewide Medical
Director of the Indiana Department of Correction (“IDOC”) and the Regional Medical
Director of Correctional Medical Services (“CMS”), to discuss joining CMS as a primary
care physician. Pl.’s Br. at 8. It was Dr. Mitcheff’s professional judgment that “Dr.
Nelson was not competent to serve as a primary care physician with CMS based upon his
education, training or experience” at that time. Pl.’s Ex. 5 (“Mitcheff Aff.”) ¶ 3. Thus,
before extending an offer of employment, CMS required Dr. Nelson to complete
“approximately 100 hours of continuing medical education in subject matters related to
primary care” and spend several weeks “shadowing” in one of Indiana’s correctional
facilities. Id. ¶ 4. CMS officially retained Dr. Nelson as a staff physician on January 1,
2010, placing him “under direct supervision” by Dr. Michael Person for the first six
months and “under weekly supervision” thereafter. Id. ¶¶ 5-6 (noting that Dr. Nelson’s

4

Dr. Mitcheff testified at the hearing before the Indiana Board regarding reinstatement of
Dr. Nelson’s Indiana medical license. See Lic. Mod. at 2.
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training would “continue indefinitely”). As of September 6, 2011 (the filing date of
Plaintiff’s Brief in Support of the Motion for Summary Judgment), Dr. Nelson’s annual
income was approximately $185,000. Pl.’s Br. at 8.
The Indiana Board reviewed its order granting Dr. Nelson’s probationary license in
early 2010 to ensure compliance with credentialing standards for two governing
correctional health care associations. Pl.’s Ex. 3 Attach. D (“Lic. Mod.”) at 1-2. On
February 4, 2010, the Indiana Board issued a ruling modifying its December 17, 2009 order
as follows: “Paragraph 3(d) of [Dr. Nelson’s] probation is modified to read . . . . Any
change in Dr. Nelson’s employment, occupation or duties[,] as described by Dr. Michael
Mitcheff at the December 3, 2009 hearing, must be approved by the Board.” Id. at 2. All
other terms and conditions of Dr. Nelson’s probationary license remained unchanged and,
to the Court’s knowledge, remain in full effect.
B. The Northwestern Mutual Life Insurance Policies
On June 4, 2003, NML5 issued a term life insurance policy to Dr. Nelson. Policy
Number 16 447 735 (“the Term Policy”), a “select (non-tobacco use) premium class” plan,
insured Dr. Nelson’s life for $3,000,000. Def.’s Ex. 1 (Term Pol.) at 3. Dr. Nelson was
listed as both “Owner” and “Insured” on the Term Policy; his wife, Jennifer Nelson, was
the “Direct Beneficiary.” Id. For the year 2003, when Dr. Nelson was 34 years old, the
total scheduled premium amount for the Term Policy was $1,700. Id. Premiums were to

5

NML is a Wisconsin corporation with its principal place of business in Milwaukee,
Wisconsin. Compl. ¶ 2.
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increase throughout the term, which ran to Dr. Nelson’s seventy-fifth birthday. Id. Dr.
Nelson had the option to convert the Term Policy to a new policy on or before June 4,
20296 without providing proof of insurability. Id. at 7-8.
The Term Policy contained a Waiver of Premium Benefit providing: “If total
disability of the Insured starts on or before the policy anniversary nearest his 60th birthday,
[NML] will waive all premiums that come due on the policy as long as the total disability
continues.” Term Pol. at 13. NML defined “total disability” under the Term Policy as
follows:
A total disability is one which prevents the Insured from engaging in an occupation.
For the first 24 months of total disability, an occupation is the one that the Insured
had at the time he became disabled. After 24 months, an occupation is one for
which the Insured is qualified by education, training or experience. Due regard
will be given to his vocation and earnings before he became disabled.
Id. According to the Term Policy, premiums could be waived for total disability “only if:
the Insured becomes disabled while this Benefit is in force; the disability results from an
accident or sickness; and the disability lasts for at least six months.” Id. Eligibility for
this benefit required proof of total disability within one year of total disability onset.
Additionally, the Term Policy provided: “Proof that the total disability has continued may
be required once a year. If the proof is not given when it is required, no more premiums
will be waived.” Id.
In early 2008, on the advice of his NML insurance agent,7 Dr. Nelson exercised his

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June 4, 2029 was the final conversion date listed on the Term Policy. Term Pol. at 3.
Dr. Nelson alleges that “[t]he NML agent was fully aware of [Dr. Nelson’s] disease and
7

option to convert the Term Policy into a flexible premium adjustable life insurance policy
“due to the waiver of premium clause.” Nelson Aff. ¶ 21; Def.’s Br. at 2. Policy Number
18 296 274 (“the Second Policy”), a “premier (non-tobacco)” plan, had an official issue
date of July 7, 2008 and also insured Dr. Nelson’s life for $3,000,000. Def.’s Ex. 2 (Flex.
Pol.) at 3. The Second Policy required premium payments at the rate of $3,672.50 per
month (“the Selected Monthly Premium”). Id. In the event that Dr. Nelson surrendered
the Second Policy for cash, NML would determine the cash surrender value using a
guaranteed interest rate of 4% during the first fifteen years of the Second Policy and 3%
thereafter.
Pursuant to the terms of the Second Policy, as before, Dr. Nelson could exercise a
waiver benefit. The Second Policy’s version of this benefit (“Waiver Benefit: Payment
of Selected Monthly Premium Upon Total Disability,” hereafter “the Waiver Benefit”)
provided that:
If total disability of the Insured starts on or before the [Second] Policy anniversary
nearest the 60th birthday of the Insured, on each monthly processing date following
approval of a claim [NML] will credit to [the Second] Policy for as long as the total
disability continues the Selected Monthly Premium Benefit, which shall be the
greater of:
a. the Selected Monthly Premium amount . . . ; and
b. a premium in an amount that, after deducting the Premium Expense
Charge, will equal the Specified Monthly Charges. The Specified
Monthly Charges shall consist of the Monthly Policy Charge for this
Policy, excluding the Monthly Policy Debt Expense Charge.
Flex. Pol. at 23. In the Second Policy, NML defined “total disability” as follows:

treatments at the time he suggested converting the policy.” Nelson Aff. ¶ 21.
8

A total disability is one which prevents the Insured from engaging in an occupation.
For the first 24 months of total disability, an occupation is the one that the Insured
had at the time the Insured becomes disabled. After 24 months, an occupation is
one for which the Insured is qualified by education, training or experience.
Id.
The Second Policy limited the Waiver Benefit by clarifying that the Selected
Monthly Premium Benefit would be payable “only if: the Insured becomes totally
disabled while this Waiver Benefit is in force; the total disability results from an accident
or sickness; and the total disability lasts for at least six consecutive months.” Id.
Provisions governing proof of total disability and continuing disability were substantially
similar to those contained in the Term Policy. See id. at 24.
Dr. Nelson’s onset date of total disability was July 11, 2007; therefore, the first
24-month period of total disability concluded July 11, 2009. Pl.’s Ex. C (“NML Ltr.”) at
1. Pursuant to the Term Policy, NML paid Dr. Nelson’s premiums beginning July 11,
2007. Nelson Aff. ¶ 21. After Dr. Nelson converted the Term Policy to the Second
Policy, NML honored the Waiver Benefit and paid his premiums through the first
24-month period of total disability. NML Ltr. at 1. NML “continued the Waiver Benefit
as an exception in December 2009, even though [NML] did not receive proof of an
ongoing total disability.” Id. At some point in 2010, Dr. Nelson requested a continuance
of the Waiver Benefit and submitted various documents to support his claim. Following a
thorough review of all claim documentation, NML notified Dr. Nelson of its decision to
terminate the Waiver Benefit by letter dated December 20, 2010. Id. NML informed Dr.

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Nelson that “there [was] insufficient proof to support that due to a total disability, Dr.
Nelson [could not engage] in an occupation for which he is qualified by education, training
or experience[,] as he has returned to work as a primary care physician.” Id. at 2. Dr.
Nelson has sued NML in this breach of contract action in an effort to challenge the
lawfulness of this determination.
Legal Analysis
I. Standard of Review
The interpretation of written contracts such as insurance policies is typically a
matter of law. Accordingly, disputes arising under the terms of such agreements are
particularly appropriate for resolution by summary judgment. See Hurst-Rosche Eng’rs,
Inc. v. Commercial Union Ins. Co., 51 F.3d 1336, 1342 (7th Cir. 1995). Summary
judgment is warranted when the record demonstrates that there is “no genuine issue as to
any material fact and that the moving party is entitled to a judgment as a matter of law.”
Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In deciding
whether genuine issues of material fact exist, the court construes all facts in a light most
favorable to the non-moving party and draws all reasonable inferences in favor of the same.
See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
Courts are often confronted with cross-motions for summary judgment because
Rules 56(a) and (b) of the Federal Rules of Civil Procedure allow plaintiffs and defendants
to move for such relief. In these circumstances, courts must consider the motion of each
party individually to determine if the party has satisfied the Rule 56 standard. Am. Gen.
10

Life Ins. Co. v. Tomlinson Ins. Trust, No. 1:08-cv-1747-SEB-TAB, 2010 WL 3893673, at
*3 (S.D. Ind. Sept. 30, 2010) (citing Kohl v. Ass’n of Trial Lawyers of Am., 183 F.R.D. 475,
478 (D. Md. 1998)). Thus, our review of the record before us requires us to draw all
inferences in favor of the party against whom a particular issue in the motion under
consideration is asserted. Int’l Bhd. of Elec. Workers, Local 176 v. Balmoral Racing
Club, 293 F.3d 402, 404 (7th Cir. 2002); Hendricks-Robinson v. Excel Corp., 154 F.3d
685, 692 (7th Cir. 1998).
Because this is a diversity case, we look to state law to provide substantive guidance
regarding the relevant insurance policies. McFarland v. Gen. Am. Life Ins. Co., 149 F.3d
583, 586 (7th Cir. 1998). “The operative rule is that when neither party raises a conflict of
law issue in a diversity case, the federal court simply applies the law of the state in which
the federal court sits.” Wood v. Mid-Valley Inc., 942 F.2d 425, 426 (7th Cir. 1991).
Here, because the relevant policy has no choice of law provision and the parties do not
dispute that Indiana law controls, the Court need not discuss whether another forum’s law
should be applied. See id.
Under Indiana law, insurance contract provisions are susceptible to the same rules
of construction as other contracts. Am. Family Mut. Ins. Co. v. Ginther, 843 N.E.2d 575,
578 (Ind. Ct. App. 2006). Courts must therefore construe insurance policies as a whole
and must not consider words, phrases, or paragraphs in isolation. Westfield Cos. v.
Knapp, 804 N.E.2d 1270, 1274 (Ind. Ct. App. 2004). Policy language that is clear and
unambiguous should be given its plain and ordinary meaning. Id. Insurance companies
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are also “free to limit their liability, so long as they do so in a manner consistent with public
policy as reflected by case or statutory law.” Gheae v. Founders Ins. Co., 854 N.E.2d 419,
423 (Ind. Ct. App. 2006). Consequently, “[a]n insurance policy that is unambiguous must
be enforced according to its terms, even those terms that limit an insurer’s liability.”
Haag v. Castro, 959 N.E.2d 819, 824 (Ind. 2012). Terms in such a policy are given their
ordinary and common meaning unless the policy indicates that the parties intended some
other connotation. See Westfield Cos., 804 N.E.2d at 1274. However, when terms
limiting coverage are “not clearly and plainly expressed,” the policy should be construed in
favor of the insured “to further the policy’s basic purpose of indemnity.” Meridian Mut.
Ins. Co. v. Auto-Owners Ins. Co., 698 N.E.2d 770, 773 (Ind. 1998).
II. Discussion
We first note NML’s request that the Court strike from the record four affidavits
filed by Dr. Paul Calkins (“Calkins Aff.”), Dr. Michael Mitcheff (“Mitcheff Aff.”), Joseph
Gordon (“Gordon Aff.”), and Joseph Zacharias (“Zacharias Aff.”), respectively, in support
of Plaintiff’s Motion for Partial Summary Judgment. As a preliminary matter, we DENY
AS MOOT Defendant’s Motion to Strike with respect to Dr. Mitcheff’s affidavit. NML’s
original objection to the Mitcheff Affidavit was that it was not signed. In our view, Dr.
Nelson’s subsequent submission of a signed affidavit (and NML’s apparent acceptance of
the same in its reply brief) obviates the need for further analysis. We therefore accept the
Mitcheff Affidavit as part of the evidentiary record and address the remaining affidavits in
the latter part of this entry.
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Dr. Nelson moved for partial summary judgment on the issue of liability on
September 6, 2011. NML responded and filed its own motion for summary judgment on
October 27, 2011, “seeking to have [Dr.] Nelson’s allegations of breach and repudiation
dismissed.” Def.’s Br. at 5. Both motions necessarily focus on the proper determination
of disability under the occupational disability policies issued in Indiana. As noted above,
the Second Policy’s definition of “total disability” is “one which prevents the Insured from
engaging in an occupation.” Flex. Pol. at 23. And the meaning of the term “occupation”
is time-dependent; for the first 24 months following disability onset, it means “the one that
the Insured had at the time.” Id. Dr. Nelson’s occupation on July 11, 2007 (the date of
disability onset) can be found in his application for life insurance: “[a]nesthesiologist,
MD.” Term Pol. App. at 5. Beginning July 11, 2009, however, “an occupation is one for
which the Insured is qualified by education, training or experience.” Flex. Pol. at 23.
Dr. Nelson first contends that he is totally disabled due to “chemical dependency.”
He further alleges that such dependency “creates a risk of death[,] rendering him unable to
practice anesthesiology” or any medical discipline which exposes him to the operating
room, surgeries, and/or “frequent exposure to needles and alcohol swabs.” Pl.’s Br. at 19.
As an initial point of clarification, we do not view Dr. Nelson’s risk of drug and/or alcohol
relapse a “sickness” under the Second Policy. The Second Policy cannot reasonably be
construed as providing coverage for the future potentiality of sickness; rather, it
unambiguously covers a presently existing “sickness.” See Forste v. Paul Revere Life &
Acc. Ins. Co., No. 1:02-cv-1584-RLY-TAB, 2004 WL 3315386, at *12 (S.D. Ind. Sept. 22,
13

2004). Importantly, as Dr. Nelson’s own proffered expert has implied, discussing his
chemical dependency is a hypothetical exercise. Dr. Nelson is not presently abusing
drugs, nor is he practicing medicine in an environment replete with the “known triggers” of
relapse. See Pl.’s Ex. 2 (Hinchman Aff.) at 4. Our only task, therefore, is to determine
Dr. Nelson’s disability status with his presently existing “sickness,” i.e., past opiate use,
family history of chemical dependency, and lower tolerance for stress. Id. at 4. This we
do with an eye toward his current employment as a CMS staff physician.
“[I]t is undisputed [that] Dr. Nelson’s severe chemical dependency removed him
from anesthesia . . . by his treating physicians and licensing boards.” Pl.’s Br. at 14.
Since his treatment and reinstatement, and with the Indiana Board’s specific finding that he
was “able to practice with reasonable skill and safety to the public,”8 Dr. Nelson has
worked as a primary care physician for nearly three years. Prob. Lic. at 1 (relying on
testimony of Dr. Fred Frick of the ISMA Program). For purposes of summary judgment,
the applicable “total disability” inquiry is whether Dr. Nelson’s current employment
represents work for which he is “qualified by education, training or experience.”
Indiana law supports construction of “total disability” in favor of the insured. To
that end, in Ross v. Farmers Insurance Exchange, 277 N.E.2d 29, 34 (Ind. Ct. App. 1971),
the Indiana Court of Appeals held that total disability “does not mean a state of utter
helplessness . . . [or] that [courts] are allowed to rewrite the provisions under which the
8

The Indiana Board qualified this statement by noting that Dr. Nelson could practice in this
manner, provided that he had adequate monitoring and did not practice anesthesiology. Prob. Lic.
at 1.
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parties contracted.” The Ross court also noted the distinction between “occupational” and
“general” disability in the context of insurance policies:
If the policy is of the ‘occupational’ type and undertakes to insure against disability
to transact a certain business or to perform labor in a particular occupation in which
the insured is engaged, the insured is [‘totally disabled’] within the meaning of the
policy if the infirmity resulting from the accidental injury is such as to render the
insured unable to do all the substantial and material acts necessary to the . . .
carrying on of his occupation . . . were it not for the disability.
If the policy is of the ‘general’ type and undertakes to insure against loss only in
case the insured shall become . . . ‘totally disabled,’ and there are no words limiting
the disability to a particular business or occupation, the insured becomes . . .
‘totally’ disabled, within the meaning of the policy, if the infirmity occasioned by
the accident in fact renders the insured unable to carry on any business, or
remunerative vocation, which business or vocation the insured would be qualified,
physically and mentally, to carry on if it were not for such infirmity.
Ross, 277 N.E.2d at 32 (citations omitted).
A decade later, in Continental Casualty Co. v. Novy, 437 N.E.2d 1338 (Ind. Ct. App.
1982), the Indiana Court of Appeals addressed the foregoing distinction in circumstances
similar to those in the case at bar. Novy involved a general practice physician with
radiodermatitis (a skin condition triggered by overexposure to x-rays) who had purchased
insurance coverage for both “occupational” and “general” disability. Novy, 437 N.E.2d at
1340-41. As Dr. Novy’s condition worsened, he developed ulcers on his hands that
required skin grafts and eventually the amputation of two fingers. He received disability
benefits while recovering from these procedures, but his benefits ceased when he reopened
his practice to wind down the business and refer patients elsewhere. Id. at 1341. While
his lawsuit against Continental Casualty was pending, Dr. Novy began working as a staff

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physician at a VA hospital. This position authorized him to examine, diagnose, and treat
patients, but not to conduct any surgeries. Following a bench trial, the trial court awarded
Dr. Novy $1200 per month in disability benefits dating back approximately to the time of
his amputations. Id. at 1341-42. The trial court opined that because Dr. Novy could not
exercise the degree of skill possessed by similarly situated general practice physicians for
the 60-month period specified in the policy, he was “occupationally disabled” during that
time. Id. at 1346. Moreover, the trial court concluded, Dr. Novy was “generally
disabled” following that 60-month period because, in his staff physician job, he was not
“engag[ed] in each and every occupation or employment for wage or profit for which he
[was] reasonably qualified by reason of education, training, or experience.” Id. at 1352.
Among other issues on appeal was Continental Casualty’s challenge to the trial
court’s determination of Dr. Novy’s disability status. Given that Dr. Novy had secured a
position at the VA hospital that required his medical knowledge and skill, Continental
Casualty argued that the doctor was neither occupationally nor generally disabled. Novy,
437 N.E.2d at 1350. The appellate court rejected the insurer’s former argument, holding
that “the trial court reasonably concluded that Novy sought . . . to protect himself against
the loss of his [former] general practice.” Id. at 1351. However, on the issue of general
disability, the appellate court took a different view, to wit:
The general disability provision encompasses more than a disability in a particular
occupation . . . . [Dr.] Novy would be entitled to benefits [for general disability] if
he were unable to pursue any gainful employment for which he was “qualified by
reason of education, training or experience.” [Dr.] Novy, however, was employed
as staff physician at the V.A. Hospital . . . . While we recognize that [Dr.] Novy
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was no longer pursuing his occupation as a general practitioner, he was employed in
his capacity as a licensed physician . . . . Therefore, we hold that a doctor of
medicine is employed for wage or profit for which he is reasonably qualified by
reason of education, training or experience when he works full time as a staff
physician at a V.A. Hospital.
Id. at 1351-52. The appellate court therefore (1) upheld the trial court’s finding that Dr.
Novy was occupationally disabled; (2) reversed the trial court’s finding that he was
generally disabled; and (3) reduced the trial court’s award of disability benefits.
Applying these principles to Dr. Nelson’s situation (and noting no other case law as
germane to the instant lawsuit as Ross and Novy) simplifies the Court’s decision. Indeed,
well before these decisions issued, the Seventh Circuit made a similar ruling concerning
general disability policies:
We think it is now well settled under the laws of Indiana that total disability . . . does
not mean absolute physical inability or complete helplessness to transact any kind of
business. The test is whether the condition of the insured is such as to prevent him
from transacting all kinds of work pertaining to his . . . profession.
Mut. Life Ins. Co. of N.Y. v. Tormohlen, 118 F.2d 163, 166 (7th Cir. 1941) (applying
Indiana law) (emphasis added). Here, none of the parties’ proffered evidence indicates
the existence of a genuine issue of material fact regarding Indiana’s “test.” By his own
admission, Dr. Nelson has completed four years of medical school and four years of
postgraduate medical education. He has necessarily passed numerous qualifying exams
in order to become a licensed and board-certified anesthesiologist. Presumably, a
showing of inferior general medical knowledge at any point in this process would have
thwarted his career trajectory. We are therefore not persuaded that completing additional

17

training for employment at CMS rendered Dr. Nelson generally disabled under the Second
Policy. Professionals such as physicians (and attorneys) are routinely required to
complete continuing education to maintain licensure. In fact, we suspect Dr. Nelson
might have needed to “brush up” on generalist training in 2010 (when Dr. Mitcheff
officially hired him at CMS) regardless of his career status. The Indiana Board’s
December 2009 finding that Dr. Nelson could practice medicine “with reasonable skill and
safety to the public” corroborates our opinion, as does Dr. Hinchman’s assertion that Dr.
Nelson could practice medicine 40 hours per week in a structured environment. Thus, in
our view, Dr. Nelson’s specialty change does not rise to the level of general disability.9
Although the facts readily support the conclusion that Dr. Nelson is no longer
entitled to disability benefits, Dr. Nelson contends that the Court must engage in a detailed
comparison of his current salary to that which he might have earned had he (1) remained an
anesthesiologist, (2) retained his position as Director of Anesthesia, and (3) abstained from
narcotics.10 Relying on several state cases that are not binding on this court, Dr. Nelson
asserts that “income which can be derived from another occupation is an important
consideration in determining whether [he] is disabled.” Pl.’s Br. at 15. NML rejoins that
such an argument likens the Second Policy to “income insurance” and, to that end, has

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The facts adduced by the parties indicate that Dr. Nelson can practice general medicine
without risking his life and health. Because of this, and because we have determined that Dr.
Nelson’s ability to do so at CMS does not render him generally disabled, we need not address Dr.
Nelson’s reliance on the so-called “relapse rule” articulated in Prudential Insurance Co. v. Girton,
12 N.E.2d 379 (Ind. Ct. App. 1938). Such reliance is, in the Court’s reasoned judgment,
inapposite.
10
The confluence of these factors is, to say the least, extremely hypothetical.
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asked the Court to strike the Calkins, Gordon, and Zacharias Affidavits (all of which
discuss income considerations) from the evidentiary record.
NML cites Rules 56(c) and 56(e) of the Federal Rules of Civil Procedure as the
bases for its objections to these affidavits, deeming the substance therein “speculative
opinions that are irrelevant, not germane, and immaterial to [the] Court’s analysis” at the
summary judgment stage. Def.’s Mot. at 1. Rule 56(c) states, in pertinent part, that
affidavits filed in support of a motion “must be made on personal knowledge, set out facts
that would be admissible in evidence, and show that the affiant or declarant is competent to
testify on the matters stated.” Fed. R. Civ. P. 56(c)(1)(4). If a party fails to meet this
burden, Rule 56(e) gives the court wide discretion to: “(1) give an opportunity to properly
support or address the fact; (2) consider the fact undisputed . . .; (3) grant summary
judgment if the motion and supporting materials . . . show that the movant is entitled to it;
or (4) issue any other appropriate order.” Fed. R. Civ. P. 56(e). The Court is satisfied
that, based on personal knowledge, these declarants are competent to testify (albeit very
generally) on anesthesiologists’ average yearly earnings. The remaining issue, therefore,
is whether their testimony has any tendency to make Dr. Nelson’s ability to engage in an
“occupation” (as defined by the Second Policy) more or less probable. If it does, it is
relevant and should not be stricken; if it does not, it is irrelevant and inadmissible. See
Fed. R. Evid. 401-02.
As NML correctly observes, no courts interpreting Indiana law have relied upon
income comparisons when determining the disability status of an insured. Moreover,
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“[t]he Seventh Circuit has not directly considered the scope of the factors relevant to the
termination of benefits under [a general] definition of disability.” Schaub v. Consol.
Freightways, Inc. Extended Sick Pay Plan, 895 F. Supp. 1136, 1144 (S.D. Ind. 1995). We
are not obligated to follow non-binding authority on the matter regardless of Dr. Nelson’s
ample research. We do, however, note a leading insurance treatise’s guidance that an
insurer may avoid liability if “remuneration from the insured’s employment [is] reasonably
comparable with that which he or she earned prior to being injured.” 10A COUCH ON
INSURANCE § 147.26 (3d ed. 2012). Accordingly, we conclude that the foregoing
affidavits may have some tendency to prove Dr. Nelson’s ability to engage in gainful
employment and thus DENY Defendant’s Motion to Strike in its entirety.
Nevertheless, although relevant and admissible, these affidavits do not alter the
Court’s determination regarding Dr. Nelson’s disability status. The significant facts
remain unchanged, i.e., Dr. Nelson’s maximum former annual income is $229,594, and his
present annual income is $185,000. Notwithstanding a relatively recent blow to his
career, Dr. Nelson has returned to practice, earning nearly 81% of his former salary. His
standard of living, while not precisely as affluent as it was before, seems reasonable in light
of all of the circumstances. Of course, implicit in Dr. Nelson’s briefing materials is the
sense that working as a correctional facility staff physician is somehow less rewarding than
practicing anesthesiology. Lest it appear otherwise, we are mindful that Dr. Nelson’s
current employment opportunities may not be as financially lucrative or intellectually
stimulating (at least not from his perspective) as his former anesthesiology practice. But
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we are equally mindful of the fact that Dr. Nelson’s own actions factored substantially into
the disruption of his career. Regrettably, the policy language under consideration does not
indicate that the parties intended to indemnify Dr. Nelson’s inability to practice pain
medicine because of narcotics abuse. It is sufficient to bar recovery under the general
disability provision that Dr. Nelson can (and, indeed, has done so since January 2010)
pursue other employment which is, in a fair sense, compensatory.
For each of the foregoing reasons, we conclude that NML’s termination of life
insurance benefits was not a breach of its contract with Dr. Nelson. Additionally, the
termination of such benefits was not a repudiation of the agreement. Repudiation does not
lie every time an insurer denies coverage, nor where liability is denied following an honest
dispute concerning facts. See Prudence Life Ins. Co. v. Morgan, 213 N.E.2d 900, 910-11
(Ind. Ct. App. 1966). Rather, it occurs when the insurer’s “denial of liability . . . amounts
to a frustration of the ends it was expected to subserve.” Colonial Life & Acc. Ins. Co. v.
Newman, 288 N.E.2d 195, 196 (Ind. Ct. App. 1972). NML’s December 20, 2010 letter to
Dr. Nelson explaining the termination of the Waiver Benefit was not such a frustration of
the Second Policy. It was certainly not a “positive, absolute, and unconditional”
declaration of intent not to perform, as is required for a finding of repudiation. Eden
United, Inc. v. Short, 573 N.E.2d 920, 929 (Ind. Ct. App. 1991). The letter simply
informed Dr. Nelson that NML no longer found him “totally disabled” under the Second
Policy and that Dr. Nelson should resume payment of premiums to maintain coverage.
See NML Ltr. Because we do not believe NML’s conduct represents a breach of contract,
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it therefore stands to reason that NML’s conduct was also not an anticipatory breach or
repudiation of the contract.
Conclusion
Based on the foregoing analysis, the Court now declares that although Dr. Nelson
was occupationally disabled for the first 24 months of the applicable policy period, he was
not—and still is not—generally disabled at any point thereafter. Accordingly, he can no
longer rely on the Waiver Benefit, and NML is not liable to Dr. Nelson for having
terminated this benefit. Dr. Nelson must begin paying his premiums under the Second
Policy if he wants such policy to remain in force. If he resumes payment before the
Second Policy expires, he will be eligible to apply for the Waiver Benefit in the event that
he becomes disabled in the future, provided that he is “disabled” as that term is defined in
the Second Policy. The Court therefore DENIES Plaintiff’s Motion for Partial Summary
Judgment and, as previously discussed, DENIES Defendant’s Motion to Strike.
Additionally, the Court GRANTS Defendant’s Cross-Motion for Summary Judgment.
Summary judgment in this matter is hereby entered in favor of Defendant and against
Plaintiff, and final judgment in accordance with this entry will issue.
IT IS SO ORDERED.
12/18/2012
Date: ____________________________
_______________________________
SARAH EVANS BARKER, JUDGE
United States District Court
Southern District of Indiana

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Copies to:
Robert E. Saint
EMSWILLER WILLIAMS NOLAND & CLARKE
[e-mail]
Curtis T. Jones
BOSE MCKINNEY & EVANS, LLP
[e-mail]
George E. Purdy
KRIEG DEVAULT LLP
[e-mail]

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