United States District Court, N.D. Illinois, Eastern Division
NASEEM M. CHAUDHRY, M.D., Plaintiff,
PROVIDENT LIFE AND ACCIDENT INSURANCE COMPANY and UNUM GROUP, Defendants.
MEMORANDUM OPINION AND ORDER
AMY J. ST. EVE, District Judge.
Plaintiff Naseem M. Chaudhry, M.D., suffers from a deteriorative eye condition, which has impaired his ability to drive and treat his psychiatric patients. Defendant Provident Life and Accident Insurance Company ("Provident Life") paid total disability benefits to Plaintiff under a disability insurance policy from mid-2003 to August 2011. After Provident Life terminated Plaintiff's disability benefits on August 15, 2011, Plaintiff sued Provident Life and its parent company, Unum Group, for breach of contract, unreasonable and vexatious conduct, and declaratory relief arising from the termination of his disability benefits. ( See R. 78, Second Am. Compl. ¶¶ 44-86.)
Before the Court are the parties' cross-motions for summary judgment and Defendants' motion to strike certain materials from Plaintiff's summary judgment submission. For the following reasons, the Court grants in part and denies in part as moot Defendants' motion to strike (R. 115), grants in part and denies in part Defendants' motion for summary judgment (R. 98), and denies Plaintiff's motion for summary judgment (R. 101).
I. Northern District of Illinois Local Rule 56.1
"For litigants in the Northern District of Illinois, the Rule 56.1 statement is a critical, and required, component of a litigant's response to a motion for summary judgment." Sojka v. Bovis Lend Lease, Inc., 686 F.3d 394, 398 (7th Cir. 2012). Local Rule 56.1 "is designed, in part, to aid the district court, which does not have the advantage of the parties' familiarity with the record and often cannot afford to spend the time combing the record to locate the relevant information, ' in determining whether trial is necessary." Delapaz v. Richardson, 634 F.3d 895, 899 (7th Cir. 2011) (citation omitted). It assists the court by "organizing the evidence, identifying undisputed facts, and demonstrating precisely how each side propose[s] to prove a disputed fact with admissible evidence." Bordelon v. Chicago Sch. Reform Br. of Trs., 233 F.3d 524, 527 (7th Cir. 2000).
Local Rule 56.1(a)(3) requires a party moving for summary judgment to submit "a statement of material facts as to which the moving party contends there is no genuine issue and that entitle the moving party to judgment as a matter of law." Cracco v. Vitran Express, Inc., 559 F.3d 625, 632 (7th Cir. 2009) (citing L.R. 56.1(a)(3)). Under Local Rule 56.1(b)(3), the opposing party then must submit a "concise response" to each statement of fact, "including, in the case of any disagreement, specific references to the affidavits, parts of the record, and other supporting materials relied upon." See id. (citing L.R. 56.1(b)(3)(B)). District courts disregard Local Rule 56.1 statements and responses that do not cite specific portions of the record or that contain irrelevant information, legal arguments, conjecture, or evasive denials. See, e.g., id. at 632; Cady v. Sheahan, 467 F.3d 1057, 1060 (7th Cir. 2006); Bordelon, 233 F.3d at 528. "When a responding party's statement fails to dispute the facts set forth in the moving party's statement in the manner dictated by [Local Rule 56.1], those facts are deemed admitted for purposes of the [summary judgment] motion." Cracco, 559 F.3d at 632.
If the party opposing summary judgment wants the court to consider additional facts in deciding the motions, it also must submit a statement of additional facts with supporting citations to the record pursuant to Local Rule 56.1(b)(3)(C). See Ciomber v. Cooperative Plus, Inc., 527 F.3d 635, 643 (7th Cir. 2008). "[D]istrict court[s] [are] entitled to expect strict compliance with Local Rule 56.1." Cichon v. Exelon Gen. Co., L.L.C., 401 F.3d 803, 809 (7th Cir. 2005) (citation omitted). A court, in its discretion, may choose to disregard statements of fact and responses, in full or in part, that do not comply with Local Rule 56.1's requirements. See, e.g., Cracco, 559 F.3d at 632; Cichon, 401 F.3d at 809-10; Cady, 467 F.3d at 1060; Bordelon, 233 F.3d at 528.
In this case, both Plaintiff and Defendants failed to comply with their obligations under Local Rule 56.1. Although Local Rule 56.1(a) requires the parties' statements of facts and statements of additional facts to consist of " short numbered paragraphs, " see L.R. 56.1(a)(1), (b)(3)(C) (emphasis added), the parties submitted statements of fact or additional fact that are several sentences and, in some cases, more than a page long. Additionally, the parties included in their Local Rule 56.1 statements facts that are clearly in dispute. Finally, the parties' statements of fact and their responses contain a significant amount of legal argument. The Court has disregarded any legal arguments presented in the parties' statement of facts and responses in determining which, in any, facts are undisputed in this action. The parties' blatant non-compliance with both the letter and spirit of Local Rule 56.1 has substantially increased the Court's burden in resolving the pending motions.
II. Relevant Facts
A. Jurisdiction and Venue
The following facts are undisputed unless otherwise noted. Plaintiff, a citizen of Illinois, was a board-certified psychiatrist at all times relevant to this case. (Pl. L.R. 56.1 Stmt. ¶ 1.) Defendant Provident Life, a Tennessee corporation, sells and provides insurance services ( id. ¶ 2), and Defendant Unum Group, a Delaware corporation, is Provident Life's parent company. (Def. L.R. 56.1 Stmt. ¶ 5.) Both Defendants have their principal place of business in Chattanooga, Tennessee. (Pl. L.R. 56.1 Stmt. ¶¶ 2-3.) The Court has diversity jurisdiction over this matter because complete diversity exists and the amount in controversy exceeds $75, 000. ( See id. ¶¶ 1-5.) Defendants do not challenge that the Court has personal jurisdiction over them, and the parties agree that venue is proper in this District pursuant to 28 U.S.C. § 1391. ( See id. ¶ 6.)
B. Plaintiff's Disability Income Policy
Provident Life issued Disability Income Policy No. 06-337-4060396 (the "Policy") to Plaintiff effective August 7, 1991. ( Id. ¶ 8.) The Policy provides two types of benefits: Total Disability benefits and Residual Disability benefits. ( See Second Am. Compl. Ex. A, Policy at 4-6, 9-10.) Total Disability benefits apply when, due to injury or sickness, the insured (1) is not able to perform the "substantial and material duties of [his] occupation" and (2) "[is] receiving care by a Physician which is appropriate for the condition causing the disability." ( Id. at 4.) With some exceptions, the Policy pays a $15, 000 Total Disability benefit per month,  beginning on the 91st day of disability in the period and continuing as long as the insured remains Totally Disabled, up to the applicable maximum benefit period outlined in the Policy. ( Id. at 3-4, 6.)
Residual Disability benefits apply when, due to injury or sickness, the insured (1) is not able to do one or more of his "substantial and material daily business duties" or is not able to do his "usual daily business duties for as much time as it would normally take [him] to do it, " (2) has a loss of monthly income in his occupation of at least 20%, and (3) is receiving care by a Physician which is appropriate for the condition causing the loss of monthly income. ( Id. at 9.) To qualify for Residual Disability benefits, the insured must suffer a loss of monthly income of at least 20% due to his disability. ( Id. at 9.) If the insured loses over 75% of his prior monthly income due to disability, the Policy deems the insured to have suffered a total loss of income. ( Id. ) The Policy permits the insurer to require any proof it considers necessary to determine the insured's current and prior monthly incomes for purposes of calculating the Residual Disability benefit due, if any. ( Id. )
Under the Policy, the insured's "occupation" is "the occupation (or occupations, if more than one) in which [the insured is] regularly engaged at the time [he] become[s] disabled." ( Id. ) If the insured's occupation "is limited to a recognized specialty within the scope of [his] degree or license, " the Policy deems that specialty to be his occupation. ( Id. ) Plaintiff listed his occupation as "physician, MD" and his duties as "psychiatric diagnosis and treatment" in his application for the Policy. (Defs. L.R. 56.1 Stmt. ¶ 13.)
B. Plaintiff's Disability Claim
In March 1998, Plaintiff was diagnosed with uveitis-associated retinal neovascularization of both eyes. (Pl. L.R. 56.1 Stmt. ¶ 12.) This condition causes swelling of the eye tissue, which can lead to blind spots, floaters, difficulty with depth perception, dizziness, difficulty focusing, and diminished peripheral vision. ( Id. ¶¶ 12-13.) Plaintiff began experiencing significant vision loss due to his uveitis on January 1, 2003, which made it difficult for him to read charts, make notes, drive, and diagnose and treat patients. ( Id. ¶ 14.)
Plaintiff submitted a claim for disability benefits to Provident Life on May 27, 2003. ( Id. ¶ 19.) Plaintiff reported that due to his uveitis he suffered from severe blind spots in both eyes, could not drive, and could not read or write normal print. ( See R. 78, Sec. Am. Compl. at Ex. B, Claim Application.) Plaintiff's ophthalmologist, Dr. Gieser, submitted an Attending Physician Statement in support of Plaintiff's claim, confirming that Plaintiff suffered from "[d]iminished visual acuity and visual fields" and could not do "[a]nything requiring fine visual discrimination" or "[n]ight driving." (Pl. L.R. 56.1 Stmt. ¶ 21.)
In his claim application, Plaintiff listed his occupation as "physician-psychiatrist" and described his duties at the time of his disability as "seeing patients at hospital[, ] office and nursing homes" and serving as the "medical director of a psychiatric hospital." (Claim Application at 4.) Plaintiff disclosed that he had returned to work in February 2003 for about ten hours per week. (Pl. L.R. 56.1 Stmt. ¶ 20.) He reported that he had made $26, 923.12 for the year as of May 9, 2003, and did not expect to make more than $70, 000 in total for 2003. ( Id. ¶ 22.) To prove his previous years' income for comparison purposes, Plaintiff submitted his W-2 forms for 2001 and 2002 with his application. ( Id. ¶ 19.)
A nurse employed by Provident Life conducted a medical review of Plaintiff's application on June 26, 2003. ( Id. ¶ 25.) The nurse concluded that Plaintiff's "distance acuity would not be conducive to safe driving and... near acuities would not be conducive to reading small print or visualizing details with clarity." ( Id. ) Provident Life approved Plaintiff's Total Disability claim on July 18, 2003, with a disability date of January 1, 2003. ( Id. ¶ 26; see also Defs. L.R. 56.1 Stmt. ¶ 18.) Provident Life then began paying Plaintiff monthly Total Disability benefits upon the expiration of the 90-day elimination period. (Defs. L.R. 56.1 Stmt. ¶ 18.)
C. Post-Claim Evaluation of Plaintiff's Disability Status
Provident Life continued to monitor Plaintiff's disability status and work activities following the approval of his claim. In August 2003, Provident Life interviewed Plaintiff to discuss his pre-disability occupational duties. (Pl. L.R. 56.1 Stmt. ¶ 28; Def. L.R. 56.1 Stmt. ¶ 19.) Plaintiff informed Provident Life's representative that he worked as a traveling geriatric psychiatrist and had a very large patient load with patients at over twenty facilities and located up to 100 miles from his home. (Pl. L.R. 56.1 Stmt. ¶ 28.) Plaintiff estimated that he drove 150 miles per day to see his patients. ( Id. )
According to Defendants, Plaintiff stated during the interview that he primarily provided medical and medication management to his patients, that he had served as medical director of Rock Creek Psychiatric Hospital from 1996 through 2001, and that he worked with his brother as an associate psychiatrist in an office near his home. (Defs. L.R. 56.1 Stmt. ¶ 19; Pl. Resp. to Defs. L.R. 56.1 Stmt. ¶ 19.) Plaintiff informed the field representative that, since his disability had begun, he had turned over some of his former patients to his brother and the rest to local psychiatrists and primary care physicians. (Defs. L.R. 56.1 Stmt. ¶ 19.) Plaintiff reported that he was no longer working in any capacity. ( Id. )
On December 8, 2003, Provident Life completed an internal Vocational Review to determine whether Plaintiff could return to work with accommodations. (Pl. L.R. 56.1 Stmt. ¶ 29.) The consultant who conducted the review reported that Plaintiff's vision was "poor enough that he would need electronic large print reading devices to assist him in reading the medical records" and that such devices "are not portable enough to go from facility to facility and patient room to patient room." ( Id. ) The consultant also stated that even if the devices were more portable, Plaintiff's vision problems prohibited him from physically assessing his patients' appearance for potential side effects from their medications. ( Id. ) Additionally, the consultant found that Plaintiff's vision would cause "unsafe mobility in changing or unfamiliar environments" and an inability to "assess the safety of his environment if dangerous individuals were present." ( Id. ) Finally, the consultant noted that Plaintiff could not legally drive to see his patients. ( Id. )
In addition to these assessments, Provident Life monitored Plaintiff's disability status through its review of monthly proof of loss statements Plaintiff submitted regarding his activity level and medical condition. (Def. L.R. 56.1 Stmt. ¶ 20.) From August 2003 to July 2006, Plaintiff reported in his monthly statements that he engaged in minimal activities, could not drive, and needed his wife to assist him with almost all activities. ( Id. ) Plaintiff also reported on each statement that he had not been to his place of business and had not engaged in any work activity for pay, profit, or other compensation. ( Id. ) Defendants claim that, as they later discovered, the information Plaintiff provided in support of his disability claim was false in a number of respects.
First, Defendants' surveillance of Plaintiff revealed that Plaintiff visited the medical center in which his office is located on several occasions in July 2004, April 2005, and June 2008. ( See Defs. L.R. 56.1 Stmt. ¶¶ 21, 36.) Plaintiff claims that he did not go to his office on these trips but, rather, visited the medical center itself, in which he owns a 9% ownership interest, as a landlord. (Pl. Resp. to Defs. L.R. 56.1 Stmt. ¶ 21.) Defendants' surveillance also revealed that Plaintiff had driven on several occasions, even though he was not legally permitted to do so. (Defs. L.R. 56.1 Stmt. ¶¶ 21, 36; see also Pl. L.R. 56.1 Stmt. ¶ 32.)
Second, Defendants claim that Plaintiff failed to disclose part-time work he performed for his brother's psychiatry practice in 2005 and 2006. Plaintiff's brother, Dr. Saleem Choudhry, has a psychiatric practice in Columbus, Ohio that focuses on workers compensation claims. (Pl. L.R. 56.1 Stmt. ¶ 35.) In November 2005, a family emergency required his brother to leave the country for eight months. ( Id. ) Plaintiff covered his brother's practice for approximately three days per month between November 2005 and July 2006 while his brother was out of the country. ( Id. ¶ 37.) According to Plaintiff, his position at his brother's practice primarily involved dictation and medication refills, rather than diagnosis and treatment of patients. ( Id. ¶ 38.)
Plaintiff claims that when he worked at his brother's practice, his other brother, Mahmood Choudhy, assisted Plaintiff with reading medical charts, entering data onto the computer system, documenting treatment notes, and other tasks that Plaintiff could not complete due to his disability. ( Id. ) Defendants, however, dispute this fact because Mahmood testified that although he helped Plaintiff read notes on a few occasions, he did not write notes, sit in during patient visits, or travel to Ohio with Plaintiff. ( See Defs. Resp. to Pl. L.R. 56.1 Stmt. ¶ 38; see also R. 99-7, M. Choudry Dep 24-29; Defs. L.R. 56.1 Stmt. ¶ 65.)
Plaintiff's monthly proofs of loss for December 2005 to June 2006 make no mention of the work he performed for his brother's practice. (Defs. L.R. 56.1 Stmt. ¶ 25.) According to Plaintiff, he did not disclose the work because the proof of loss statements required him to disclose only "work activity for payment, profit, or other compensation, " and Plaintiff did not expect to receive any compensation for covering his brother's practice. (Pl. Resp. to Defs. L.R. 56.1 Stmt. ¶ 25.) When Plaintiff's brother returned to the country, though, he paid Plaintiff $24, 000 for having covered his practice. Plaintiff reported his work for his brother's practice and the $24, 000 payment to Provident Life two days after receiving his brother's check. (Pl. L.R. 56.1 Stmt. ¶ 41.)
Third, Plaintiff was indicted on June 30, 2006 for several counts of Medicare fraud stemming from his activities from January 1999 to May 2002. (Defs. L.R. 56.1 Stmt. ¶ 24; Pl. L.R. 56.1 Stmt. ¶¶ 50-51.) The indictment charged that during this time period, Plaintiff had billed Medicare for more hours than he could perform in one day, charged for more complex services than he actually performed, and admitted patients to in-patient facilities even when not medically necessary to do so. ( Id. ) In April 2010, Plaintiff pled guilty to one count (Count Twelve) of Medicare fraud. (Defs. L.R. 56.1 Stmt. ¶ 40; Pl. Resp. to Defs. 56.1 Stmt. ¶ 40.) All counts in the indictment, including Count Twelve, concerned Medicare claims for reimbursement of services Plaintiff allegedly performed for patients admitted to Rock Creek Center in Lemont, Illinois.
Provident Life subsequently obtained evidence from the government concerning the work Plaintiff had performed for his brother's practice from 2004 to 2006, including the Current Procedural Terminology ("CPT") codes Plaintiff billed during this time. (Defs. L.R. 56.1 Stmt. ¶ 41.) According to Defendants, the information Provident Life obtained from the government differed from the information Plaintiff previously provided about his work for his brother's practice. ( Id. ) Plaintiff, however, disputes the authenticity, accuracy, and materiality of the information Provident Life obtained from the government. ( See Pl. Resp. to Defs. L.R. 56.1 Stmt. ¶ 41.)
Fourth, Defendants contend that information they obtained during discovery in this litigation further undermines representations Plaintiff made to support his disability claim. ( See Defs. L.R. 56.1 Stmt. ¶¶ 59-65.) Specifically, Defendants contend that they learned through discovery that Plaintiff continued to "routinely" see several patients throughout 2003 and 2004, which Plaintiff did not disclose in his monthly proofs of loss. ( See id. ) Plaintiff admits that during this period he continued to see five or six patients while he transitioned them to a new doctor. (Pl. Resp. to Defs. L.R. 56.1 Stmt. ¶¶ 62-63.) Plaintiff contends, however, that he disclosed this work in his claim application, in which he stated that he had continued to work ten hours per week, and that the monthly proofs of loss did not require him to report this work because he did not receive compensation for it. ( Id. ¶¶ 60-61.)
D. Reevaluation of Plaintiff's Disability Claim in 2006-2007
In August 2006, after learning of the part-time psychiatric work Plaintiff had performed from December 2005 to June 2006, Provident Life informed Plaintiff that it was reevaluating his eligibility for Total Disability benefits during that time period. ( See Pl. L.R. 56.1 Stmt. ¶ 42; Second Am. Compl. Ex. J, 8/22/2006 Ltr.) Provident Life asked Plaintiff to provide additional documentation to support his disability claim. ( See Pl. L.R. 56.1 Stmt. ¶ 43; 8/22/2006 Ltr.) Plaintiff provided the requested information shortly thereafter. (Pl. L.R. 56.1 Stmt. ¶ 44.) According to Defendants, however, the supplemental materials Plaintiff submitted continued to misrepresent his pre- and post-disability work activities. ( See Defs. Resp. to Pl. L.R. Stmt. ¶ 44; Defs. L.R. 56.1 Stmt. ¶¶ 40-45, 67.)
Provident Life referred Plaintiff's claim to its Financial Consulting Unit in October 2006. (Pl. L.R. 56.1 Stmt. ¶ 48.) Two months later, Provident Life informed Plaintiff that it was considering administering his claim as one for Residual Disability benefits, rather than Total Disability benefits, and, as a result, it needed to understand how the allegations in his indictment for Medicare fraud affected his pre-disability earnings. ( Id. ¶ 49.) Provident Life requested more information from Plaintiff in December 2006, and it continued to conduct surveillance of Plaintiff while it reevaluated his claim. ( See Pl. L.R. 56.1 Stmt. ¶¶ 49, 53-54; Defs. Resp. to Pl. L.R. 56.1 Stmt. ¶¶ 53-54.)
In its December 2006 letter to Plaintiff, Provident Life notified Plaintiff that it had become aware of his indictment for Medicare fraud. ( See Pl. L.R. 56.1 Stmt. ¶ 49.) Provident Life informed Plaintiff that the indictment called into question the accuracy of the tax returns and other information Plaintiff had submitted in support of his insurance application and disability claim. ( See 12/12/06 Ltr. at PLA-CL-NL4197253-00862-63.) Provident Life requested that Plaintiff allow it to obtain information about Plaintiff's criminal case directly from the prosecutor working on the case. ( Id. )
In April 2007, Provident Life completed a Vocational Review in which it analyzed Plaintiff's pre-disability occupation through his billing codes and compared his pre-disability billing codes to the billing codes Plaintiff used while working at his brother's practice in 2005-2006. ( Id. ¶ 55.) Provident Life concluded that Plaintiff's pre-disability billing codes were consistent with Plaintiff's description of his occupation as a geriatric psychiatrist who traveled to nursing homes and hospitals to see patients. (Defs. L.R. 56.1 Stmt. ¶ 34.) In performing the analysis, Provident Life's vocational consultant accepted Plaintiff's explanation about his ability to work with assistance at his brother's practice and accepted Plaintiff's description of his pre-disability duties. ( Id. )
On April 24, 2007, Provident Life removed its reservation of rights on Plaintiff's benefit payments. ( Id. ¶ 35.) Provident Life notified Plaintiff that although it was removing its reservation of rights, it would continue to monitor the status of his indictment and request updated information from him. ( Id. ) Provident Life also reminded Plaintiff that he must continue to submit monthly proofs of loss in order to receive benefits. ( Id. ) Finally, Provident Life stated that "[a]t this time, we are ceasing efforts to further pursue your federal income tax returns, however, we reserve the right to request, obtain and review this information in the event circumstances warrant further review of your pre-disability earnings." ( See 4/24/07 Ltr. at PLA-CL-NL4197253-001321.)
E. Plaintiff Pleads Guilty to Healthcare Fraud
On April 14, 2010, Plaintiff pled guilty to one count of healthcare fraud in violation of 18 U.S.C. § 1347. See United States v. Chaudhry, No. 06-cr-469 (N.D. Ill.) at R. 60. The count to which Plaintiff pled guilty, Count Twelve, alleged that Plaintiff had knowingly and willfully executed a scheme to defraud Medicare by causing Medicare to reimburse him for fraudulent claims submitted on August 31, 2001. See id. at R. 1. On June 29, 2012, the district court sentenced Plaintiff to thirty-seven months imprisonment and two years of supervised release, and ...