Chiropractic Physician, Joan Hangarter, owned her own chiropractic practice in Berkeley, California and during a typical day she would treat between 30 and 50 patients. In 1989, Dr. Hangarter purchased an “own occupation” disability insurance policy from Paul Revere. Unfortunately, in 1993, Dr. Hangarter began to experience severe recurrent shoulder pain, which progressed to ongoing severe pain in her shoulder, arm and neck that interfered with her ability to treat patients as a chiropractor. Although Dr. Hangarter underwent significant treatment, her condition did not improve. After imaging was performed, she was diagnosed with epicondylitis, cervical intervertebral disk syndrome, and tendinitis. Though Dr. Hangarter’s orthopedist offered surgery to correct the problem, Dr. Hangarter declined given her past negative experience with post-surgery pain medication. Dr. Hangarter did continue with chiropractic treatments which gave some pain relief. Dr. Hangarter’s doctors advised and testified that she could not maintain a normal, continuous chiropractic occupation in light of her medical conditions.
Paul Revere initially approved Dr. Hangarter’s total disability income benefits. While Dr. Hangarter was receiving benefits under her policy, she hired a doctor to adjust patients while she assisted with office management at her practice. Dr. Hangarter stopped seeing all but 5-7 patients at the recommendation at her doctor to see if her condition was at all improving. Testimony was provided that Dr. Hangarter only performed adjustments for about 5 out of 9,000 patient visits. Dr. Hangarter ultimately had to sell her practice as she became unable to afford to pay the doctor she hired to treat her patients.
Paul Revere terminated Dr. Hangarter’s “total disability” benefits, claiming that Dr. Hangarter was ineligible for these benefits because she was working and earning income. After terminating benefits, Paul Revere then attached her bank account for the insurance premiums until her account was drained, and then cancelled her policy. Dr. Hangarter thereafter brought a lawsuit in federal court against Paul Revere alleging violation of § 17200 of the Unfair Competition Act, breach of contract, breach of the covenant of good faith and fair dealing, and intentional misrepresentation. After an 11-day trial, the jury returned a unanimous verdict for Dr. Hangarter and awarded her over $7.6 million, including $5 million for punitive damages, over $1.5 million for past and future unpaid benefits, $400,000 for emotional distress, and $750,000 for attorneys’ fees.
The definition of “total disability” under the disability income policy at issue was that because of injury or sickness, you are unable to perform the important duties of your Occupation, which meant according to her state’s law that Dr. Hangarter was eligible for benefits if she was unable to perform the substantial and material duties of her own occupation in the usual and customary way with reasonable continuity.
The Court of Appeals held that given that Dr. Hangarter’s policy was an occupational policy that insured Dr. Hangarter against the loss of her ability to perform her occupation as a chiropractor, and the occupational nature of her policy, the district court appropriately formulated a jury instruction that only referred to Dr. Hangarter’s ability to perform the important duties of her own occupation. The Court of Appeals likewise held that there was sufficient evidence for the jury to find that Dr. Hangarter was totally disabled and entitled to total disability benefits under her policy with Paul Revere, and also that although Dr. Hangarter hired another chiropractor to treat her patients while she performed clerical tasks incidental to her primary occupation, that this was insufficient to disqualify her from being “totally disabled” under her policy and her state’s law. Further, the Court upheld the jury’s determination of bad faith concluding that there was substantial evidence before the jury to find that Defendants engaged in a biased, and thus “bad faith” investigation, and the award of punitive damages finding that the Defendants had engaged in biased medical examinations, misinformed Dr. Hangarter regarding her potential benefits, and employed policies to achieve net termination rations which supported the jury’s finding that Defendants had a “conscious course of conduct, firmly grounded in established company policy” disregarding the rights of insureds. Hangarter v. Provident Life and Accident Insurance Company and The Paul Revere Life Insurance Company, UnumProvident Corp., 373 F.3d 998 (9th Cir. 2004).
If you are experiencing injury or illness and preparing to file a disability claim with your insurance company, have been wrongfully denied benefits under your disability income policy, or been subjected to bad faith claims handling processes, contact us for a complimentary consultation with one of our experience disability insurance attorneys.