Equitable Life Assurance Society v. Studenic

United States Court of Appeals,

Eleventh Circuit.

No. 94-9401.

EQUITABLE LIFE ASSURANCE SOCIETY OF the UNITED STATES, Plaintiff-
Counter-defendant-Appellant,

v.

Gary S. STUDENIC, Defendant-Counter-claimant-Appellee.

March 13, 1996.

Appeal from the United States District Court for the Northern
District of Georgia. (No. 1:92-CV-416-RLV), Robert L. Vining, Jr.,
Chief Judge.

Before TJOFLAT, Chief Judge, CARNES, Circuit Judge, and FAY, Senior
Circuit Judge.

FAY, Senior Circuit Judge:

I. BACKGROUND

Gary Studenic became a licensed chiropractor in 1979. He

opened his own chiropractic clinic after obtaining his license and

by 1984, had opened a second clinic. In 1980 and 1984, Studenic

entered into three disability insurance contracts with Equitable

Life Assurance Society of the United States ("Equitable"). The

first policy provided for payment of $2000 per month should he

become disabled from the practice of chiropractic. The second

policy provided for an additional $2000 per month in the event he

became disabled. The third policy, which was an overhead

disability policy, would pay $2000 a month for 15 months. The

contracts provided that if the insured became "totally disabled,"

he was required to notify Equitable of the claim and provide

monthly statements to Equitable as long as the disability

continued. The contracts defined the term "total disability" as
"the inability of the insured, due to injury or sickness, to engage

in the substantial and material duties of your regular occupation."

Studenic had a chronic shoulder condition rooted in a history

of shoulder injuries sustained during a college wrestling career.

In 1984, while working at his chiropractic clinic, Studenic

aggravated his condition when he fell from a ladder. He

experienced significant pain while treating patients between 1984

and 1988. Studenic then found that he was no longer capable of

enduring the pain on a regular basis and elected not to treat

patients after January 1989. Although Studenic no longer practiced

chiropractic after January 1989, he continued to own and operate

his two chiropractic clinics.

Before filing a claim for total disability due to his shoulder

condition and giving Equitable notice about the injury a certain

event transpired. Despite his shoulder condition and resulting

inability to practice chiropractic, Studenic was nevertheless able

to play tennis and injured his knee in the process of doing so on

June 18, 1990. Studenic filed a total disability claim on August

17, 1990, which pertained solely to his knee injury. Studenic

asserted in the claim form that it was a disability due to his left

knee injury that caused him to quit practicing on June 18, 1990.

However, apparently he had not been treating patients for at least

seventeen months at the time his knee was injured. Studenic

confirmed during his trial testimony that nothing was mentioned

about his shoulder injury in the initial total disability claim.

On September 21, 1990, over twenty months after he quit

practicing chiropractic, Studenic filed a claim form with Equitable
alleging a disability attributable to his shoulder injury.1 Notes

introduced at trial made by the Equitable claims agent who handled

Studenic's claim revealed that in a telephone conversation with the

agent, Studenic explained that he had not filed a claim sooner

because it did not occur to him to do so. Studenic testified at

trial that his disability began when he first stopped working

because of the trouble with his shoulder in 1989.

Equitable paid Studenic $44,133.33, equalling nine months

total disability benefits for the period between June 18, 1990 and

March 17, 1991. However, in April 1991, Equitable discontinued

further payment of total disability payments to Studenic based, in

part, on a surveillance video that showed him performing various

physical activities at his farm which Equitable believed were

inconsistent with his claim for "total disability."

Equitable resumed payments to Dr. Studenic after an

independent medical exam provided inconclusive evidence with regard

to his disability. The payments made were for 50% of the maximum

benefits and amounted to $16,000 in partial benefits covering an

eight month period. After that period, Equitable discontinued

1
The September 21, 1990 claim form solely listed Studenic's
knee injury as the disabling condition which caused his inability
to practice chiropractic. (Exhibit 5) Although some mention was
made by an attending physician of a chronic shoulder condition,
our reading of the claim form causes us to believe that no real
claim whatsoever was made as a result of that condition.
Nevertheless, the parties to this case treated the aforementioned
claim as one based on Studenic's shoulder injury. Further, as
noted in the order on the motion for judgment as a matter of law,
the district court accepted as fact that the claim form filed on
September 21, 1990 was based on a shoulder disability.
Therefore, for purposes of dealing with this suit, we will accept
this proposition, although there is grave doubt that any claim
was made specifically based upon a shoulder condition.
payments and filed an action for declaration of its obligations

under the policies.

II. PROCEDURE

On February 20, 1992, Equitable filed a declaratory judgment

action against Studenic requesting clarification of its rights,

obligations, and liabilities, if any, under the three disability

insurance contracts entered into with Studenic between 1980 and

1984. In its complaint, Equitable alleged, inter alia, that

Studenic was neither totally disabled nor residually disabled, as

defined in the insurance contracts, and that he failed to satisfy

conditions precedent to payment under the contracts. Studenic

counterclaimed and demanded a jury trial, seeking a declaration

that he was disabled, the payment of past due disability benefits,

and bad faith penalties and attorney's fees pursuant to Official

Code of Georgia Annotated § 34-4-6.

Equitable moved for a directed verdict at the close of both

Studenic's case in chief and at the close of all the evidence. One

of the grounds for the motion was that Studenic did not timely file

his claim for disability based on the notice requirement in the

contracts and the eighteen month delay in filing. Both of

Equitable's motions for directed verdict were denied. The jury

returned a verdict in Studenic's favor and specifically found that

Studenic was totally disabled from engaging in his occupation as a

chiropractor within the meaning of the three insurance contracts,

he was entitled to a 1% award of bad faith penalties, however, he

was not entitled to an award of attorneys' fees. The district

court entered judgment on the jury's verdict, which judgment
awarded Studenic, inter alia, $157,747.62 in past due payments and

interest under the policies.

Equitable moved for judgment as a matter of law both before

and after the district court's entry of judgment on the grounds

that: (1) Studenic did not provide timely notice of his disability

claims; (2) Studenic was not "disabled" as a chiropractor because

Studenic himself testified that he was an investor at the time he

filed his disability claims, and because there was no evidence

showing Studenic was totally disabled from his occupation as an

investor; and (3) an award of bad faith penalties was improper

because Equitable's denial of Studenic's claims were not frivolous,

unreasonable or unfounded as a matter of law.

The district court granted, in part, and denied, in part,

Equitable's motion. The court held that the question of the

sufficiency of Studenic's excuse and Studenic's diligence in giving

notice to Equitable were properly submitted to the jury. Further,

the district court held that Equitable waived its claim that

Studenic's occupation was that of an investor at the time the

disability claim was filed, by withdrawing a jury charge related to

that issue. The district court further held that Studenic was not

entitled to recover bad faith penalties because there were factual

disputes regarding Studenic's claims. Amended judgment consistent

with the district court's order was filed on November 15, 1994.

Equitable appeals the district court's order denying its motion for

judgment as a matter of law, and the judgment entered thereon.

III. STANDARD OF REVIEW

"We review rulings on motions for judgment as a matter of law
by applying de novo the same legal standards used by the district

court. Both courts consider all of the evidence, but all

reasonable inferences must be drawn in the nonmovant's favor. If

the jury verdict is supported by substantial evidence—that is,

enough evidence that reasonable minds could differ considering

material facts—the motion should be denied. A mere scintilla of

evidence in the entire record, however, is insufficient to support

a verdict." United States Anchor Manufacturing, Inc., v. Rule

Industries, Inc., 7 F.3d 986, 993 (11th Cir.1993).

IV. ANALYSIS

Equitable contends that the district court erred in denying

its motion for judgment as a matter of law. Equitable argues that

Studenic failed to provide timely notice of his claim and that the

delay was unreasonable and unjustifiable, and therefore, the

district court should have found, as a matter of law, that Studenic

failed to satisfy conditions precedent to recovery. Under the

terms of the policy, Studenic was required to give Equitable

written notice of claim for "total disability" within thirty days

after the occurrence or commencement of any loss covered by the

policy, or as soon thereafter as is reasonably possible.

Under Georgia law, "[t]imely notice to the insurer of a claim

or occurrence is a condition precedent to the insurer's duty to

defend or pay." Insurance Co. of N. Am. v. Waldroup, 462 F.Supp.

161, 162 (M.D.Ga.1978). As previously mentioned, the type of loss

covered by Studenic's policies was "total disability." The

policies' provisions clearly show that "total disability," within

the meaning of the contracts, occurs when the insured is unable,
because of injury or sickness, to engage in the substantial and

material duties of the insured's regular occupation. Studenic

testified that he quit practicing chiropractic in January of 1989

due to his shoulder condition. Therefore, it was in January of

1989 that Studenic was "totally disabled" within the meaning of the

policies.

Georgia courts have held that an immediate notice requirement

is met as long as notice is given "with reasonable diligence and

within a reasonable length of time in view of the attending

circumstances of each particular case." Bituminous Casualty Corp.

v. J.B. Forrest & Sons, Inc., 132 Ga.App. 714, 719, 209 S.E.2d 6

(1979) (emphasis added). However, "[u]nder all of the facts and

circumstances of a particular case it may be found that an

insured's delay in giving notice of [a loss] to his insurer was

unjustified and unreasonable." Dillard v. Allstate Insurance

Company, 145 Ga.App. 755, 245 S.E.2d 30, 31 (1978), (citing

Richmond v. Georgia Farm Bureau Mutual Insurance Co., 140 Ga.App.

215, 220-221, 231 S.E.2d 245, 249 (1976)). "As is true generally

with regard to issues relating to reasonableness and sufficiency of

compliance with stated conditions, questions of the adequacy of the

notice and the merit of [the insured's] claim of justification are

ones of fact which must be resolved by a jury...." State Farm

Automobile Ins. Co. v. Sloan, 150 Ga.App. 464, 466, 258 S.E.2d 146,

148 (1979) (emphasis added). However, "it does not follow that

such an issue never can be resolved by the court as a matter of

law." Bates v. Holyoke Mutual Insurance Co., 253 Ga. 697, 324

S.E.2d 474, 475 (1985). "Whether or not the condition has been met
is not always a jury question because an unexcused significant

delay may be unreasonable as a matter of law." Townsend v.

National Union Fire Ins. Co., 196 Ga.App. 789, 397 S.E.2d 61, 62

(1990).

Studenic did not file the claim for total disability due to

his shoulder condition for at least 20 months after it was required

to have been filed under the policies. What must be determined,

therefore, is whether his delay in filing could be found to be

reasonable under Georgia law.

In the following instances, Georgia courts have allowed the

jury to decide the reasonableness of the insured's excuse: Lathem

v. Sentry Ins., 845 F.2d 914 (where the insured alleges he was

misled by the insurer into believing there was no coverage); Smith

v. Southeastern Fidelity Ins. Co., 258 Ga. 15, 365 S.E.2d 105

(1988) (where the insured is incapacitated or otherwise unable to

notify the insurer); Standard Guaranty Ins. Co. v. Carswell, 192

Ga.App. 103, 384 S.E.2d 213 (1989) (where the insured believes the

claim is specious); Rucker v. Allstate Ins. Co., 194 Ga.App. 407,

390 S.E.2d 642 (1990) (where the insured believes the injury is

minor); Southern Trust Ins. Co. v. Clark, 148 Ga.App. 579, 251

S.E.2d 823 (1978) (where the insured is confused as to against whom

a claim should be made); Sands v. Grain Dealers Mutual Ins. Co.,

154 Ga.App. 720, 270 S.E.2d 8 (1980) (where the insured is

uncertain whom the beneficiaries of the policy are); State Farm

Mutual Automobile Inc. Co. v. Sloan, 150 Ga.App. 464, 258 S.E.2d

146 (1979) (where there is lack of knowledge of the insured as to

coverage).
 Studenic's explanation for not timely filing a claim is

basically threefold. First, he testified that he did not file a

claim because he never even considered or thought about filing

disability. Second, he further testified that he thought his

condition might improve if he gave it a chance to rest. Third, he

testified that he equated disability with being paraplegic. Thus,

he did not realize that the terms of the policy covered that

particular injury. The first two explanations do not fall within

any of the instances in which the Georgia courts have allowed the

jury to decide the reasonableness of an excuse. We hold that those

two explanations are unreasonable as a matter of Georgia law.

In some circumstances, Georgia courts have allowed the jury to

determine the reasonableness of a delay which was based on lack of

knowledge of coverage. In Sloan, the court affirmed the denial of

summary judgment to the insurer, who had raised the issue of

timeliness of notice, where the evidence showed that the delay in

giving notice for six months was because the insured did not know

the policies would afford coverage for an automobile collision

involving the insured's son and a third party.

Nevertheless, there are instances in which Georgia courts have

held that explanations regarding lack of knowledge of coverage are

unreasonable as a matter of law. In Townsend, the court held that

an insured's seventy month delay in giving notice to an insurer was

unreasonable as a matter of law where the insured's explanation was

that he was not aware that he might be entitled to no-fault

benefits under his employer's policy and that he did not know the

name of the carrier insuring the truck involved in the incident.
Studenic's explanation is less compelling than Townsend's.

Townsend did not know he was covered under his employer's policy,

whereas, Studenic allegedly did not know he was covered under his

own policy which clearly stated that total disability is the

inability of the insured, due to injury or sickness, to engage in

the substantial and material duties of the insured's regular

occupation. We find Studenic's explanation to be unreasonable as

a matter of Georgia law.2

V. CONCLUSION

We REVERSE and REMAND for proceedings consistent with this

opinion.

2
We note that although Studenic argues that the timeliness
of notice issue should be decided by a jury, no such jury charge
was requested or given. Indeed, the record fails to disclose
that the attorneys ever argued this question to the jury. In
view of our ruling, this issue is moot.