Dennis Vanhaaren v. State Farm Mutual Automobile Insurance Company

989 F.2d 1, 1993 U.S. App. LEXIS 6246, 1993 WL 81505

• Court: Court of Appeals for the First Circuit
• Decided: March 5, 1993
• Docket: 92-1667
• Status: Published

Opinions

CYR, Circuit Judge.

The district court determined that plaintiff Dennis VanHaaren had forfeited coverage under the uninsured motorist policy issued by defendant State Farm Mutual Automobile Insurance Company (“State Farm”) by not complying with State Farm’s requests that he submit to an independent medical examination (“IME”). The district court granted summary judgment in favor of State Farm, and VanHaaren appealed. We affirm.

I

BACKGROUND

VanHaaren was involved in an automobile collision with an uninsured motorist on July 1, 1989. Alleging permanent back injury, VanHaaren soon exhausted the $5,000 medical payments coverage provided under his State Farm automobile insurance policy, and in March 1991 he submitted a $100,000 claim representing the full amount of the uninsured motorist coverage under the State Farm policy. The State Farm policy contained a provision (“IME clause”) which required VanHaaren to submit to an “examin[ation] by physicians chosen and paid by [State Farm] as often as [State Farm] reasonably may require.”

On April 8, and again on May 2, 1991, State Farm wrote VanHaaren’s counsel requesting confirmation that VanHaaren was residing in Florida, so that an IME could be conducted in Florida. On May 17, Van-Haaren’s counsel advised State Farm that VanHaaren had relocated to North Carolina to take a job at a summer resort, and suggested that “a realistic approach to the case would be to allow [State Farm] to obtain an [IME] in the Ashville, North Carolina area and then to set up an arbitration or mediation.” The State Farm representative responded, noting that the policy in-eluded an arbitration provision. He requested that VanHaaren’s counsel advise State Farm “where [VanHaaren] will be for a reasonable period of time so I may refer [sic] to the proper State Farm office to make [IME] arrangements.” It is conceded that VanHaaren’s counsel did not respond to the latter request.

On September 13, VanHaaren brought an action in Maine Superior Court, which State Farm promptly removed to federal district court. Counsel to State Farm wrote VanHaaren’s counsel on December 16, requesting confirmation that VanHaaren would attend an IME scheduled for January 14, 1992, in Portland, Maine. One week later, VanHaaren’s counsel declined to confirm VanHaaren’s attendance at the IME, noting that he considered the usual diagnoses of the orthopedist chosen by State Farm too “conservative,” inviting State Farm to propose other orthopedists, and inquiring why the IME could not be conducted in Florida where VanHaaren was again residing. Otherwise, VanHaaren’s counsel suggested, State Farm “may bring a motion for an examination in the [district court].” On January 10, 1992, over VanHaaren’s opposition, the presiding magistrate judge granted State Farm’s motion to compel VanHaaren to attend the IME scheduled for January 14 in Portland. VanHaaren complied.

In May 1992 the district court granted State Farm’s motion for summary judgment on the ground that VanHaaren’s conduct before and after filing suit constituted a breach of the IME clause, barring recovery under the uninsured motorist provision in the State Farm policy.

II

DISCUSSION

A. Applicable State Law

We review a grant of summary judgment de novo, employing the same criteria incumbent upon the district court. Pedraza v. Shell Oil Co., 942 F.2d 48, 50 (1st Cir.1991), cert. denied, — U.S. -, 112 S.Ct. 993, 117 L.Ed.2d 154 (1992). Summary judgment is appropriate where the record, including the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits, viewed in the light most favorable to the nonmoving party, reveals no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c); Canal Ins. Co. v. Benner, 980 F.2d 23, 25 (1st Cir.1992).

Although the parties agree that Maine law informs the present determination as to the materiality of any fact in genuine dispute, see Blanchard v. Peerless Ins. Co., 958 F.2d 483, 485 (1st Cir.1992), the Maine Supreme Judicial Court has yet to address the pivotal issue presented by this appeal: what material facts must an insurer establish beyond genuine dispute to warrant summary judgment against a policy holder who breaches an IME clause? Absent controlling state court precedent, a federal court sitting in diversity may certify a state law issue to the state’s highest court, or undertake its prediction “when the course [the] state courts would take is reasonably clear.” Porter v. Nutter, 913 F.2d 37, 41 n. 4 (1st Cir.1990) (quoting Bi-Rite Enters., Inc. v. Bruce Miner Co., 757 F.2d 440, 443 n. 3 (1st Cir.1985)). See also American Waste & Pollution Control Co. v. Browning-Ferris, Inc., 949 F.2d 1384, 1386 (5th Cir.1991); S & R Metals, Inc. v. C. Itoh & Co., 859 F.2d 814, 816 (9th Cir.1988). The prognostic chore is reasonably straightforward in the instant case.

State Farm argues that Maine law would follow established contract law principles, permitting the insurer to avoid all liability under its insurance contract where the policy holder commits an anticipatory breach of a condition precedent to coverage by “refusing” to submit to an IME, irrespective of any prejudice to the insurer. In our view, its assessment is less than prescient.

In Ouellette v. Maine Bonding & Cas. Co., 495 A.2d 1232 (Me.1985), the Maine Supreme Judicial Court, sitting as the Law Court, explicitly “abandoned] the analysis of a negotiated contract,” under which an insurer’s performance would be excused on the bare showing that the insured breached a condition precedent to coverage by inexcusably delaying notification of the policy claim for four years. Id. at 1235. Rather, the Law Court held that the insurer must prove “that the notice provision was in fact breached, and ... that the insurer was prejudiced by the insured’s delay." Id. (emphasis added). Ouellette brought Maine law in line with the growing majority of jurisdictions which acknowledge that a post-occurrence forfeiture of insurance coverage is rarely to be invoked, absent actual prejudice to the insurer, because (1) insurance policies are contracts of adhesion, (2) the insured has prepaid the premiums for coverage, and (3) insurance coverage furthers broader public policy aims. See, e.g., St. Paul Fire & Marine Ins. Co. v. Petzold, 418 F.2d 303, 305 (1st Cir.1969) (applying New Hampshire law to “notice of claim” provision); Johnson Controls, Inc. v. Bowes, 381 Mass. 278, 282-83, 409 N.E.2d 185, 188 (1980) (“notice of claim” provision); cf. Piro v. Pekin Ins. Co., 162 Ill.App.3d 225, 113 Ill.Dec. 220, 223, 514 N.E.2d 1231, 1234 (1987) (“Declaring forfeiture of the benefits of [fire] insurance bought and paid for based solely on events occurring subsequent to the event of the insured-against loss should be avoided.”). As Maine law plainly requires a showing of prejudice for “notice of claim” violations, we can discern no sound reason to anticipate a less stringent requirement for breach of an IME clause in an uninsured motorist policy. Cf. Bankers Ins. Co. v. Macias, 475 So.2d 1216, 1217-18 (Fla.1985) (breach of “notice of claim” provision raises rebuttable presumption of prejudice to insurer, whereas breach of “cooperation clause" in policy raises no presumption but requires showing by insurer that breach was material and caused substantial prejudice).¹

State Farm endeavors to forfend against the portent of the Ouellette decision on the ground that the “prejudice” issue was not preserved in the district court. State Farm correctly points out that VanHaaren neither cited to the Ouellette decision nor argued to the district court that Maine law would require proof of prejudice. Although the district court acknowledged the significance of Ouellette, it expressly bypassed the issue since VanHaaren had neither contended that State Farm was required to show “prejudice” under Maine law, nor argued that prejudice had not been established. Although loathe to conclude that VanHaaren waived the “prejudice” issue, we do so in light of the district court’s pellucid determination that VanHaaren had made no claim that State Farm was either required to demonstrate prejudice or failed to do so.² In these circumstances, VanHaaren’s failure to move for reconsideration of the district court order should not be excused. See Boston Celtics Ltd. Partnership v. Shaw, 908 F.2d 1041, 1045 (1st Cir.1990); Brown v. Trustees of Boston Univ., 891 F.2d 337, 357 (1st Cir.1989), cert. denied, 496 U.S. 937, 110 S.Ct. 3217, 110 L.Ed.2d 664 (1990).

B. Breach of IME Clause

VanHaaren nevertheless contends that State Farm failed to establish beyond reasonable disputation the other essential element of its defense — that he breached the IME clause by “refusing” to comply with State Farm’s reasonable IME requests.

As a general rule, whether there was substantial compliance with a condition precedent in an insurance contract is a question of fact ill-suited to disposition on summary judgment. See, e.g., Piro, 514 N.E.2d at 1234 (noting that whether the insured provided necessary information “too late” normally is a question for the factfinder). Under Maine law, even if the insurer suffers appreciable prejudice from the breach, the insured may still quell the insurer’s affirmative defense by proffering a valid excuse or justification for the failure or refusal to comply. See Ouellette, 495 A.2d at 1234 (noting that if insured’s delay was “unreasonable or unexplained,” insurer may avoid coverage by demonstrating “prejudice”); cf. Hines v. State Farm Fire & Cas. Co., 815 F.2d 648, 652 (11th Cir.1987) (holding that, under Georgia law, asserted justification for failure to provide tax returns foreclosed summary judgment on issue of breach); St. Paul, 418 F.2d at 305 (requiring that jury determine, under New Hampshire law, whether insured’s failure to comply with condition was unexplained, unexcused, unreasonable, or arbitrary); cf. also Matthias v. Government Employees Ins. Co., 132 A.D.2d 534, 517 N.Y.S.2d 540, 541 (1987) (finding that insured failed to defeat insurer’s defense by showing a justification for repeated noncompliance); Pennsylvania Gen. Ins. Co. v. Becton, 475 A.2d 1032, 1035 (R.I.1984) (using multi-factor test, requiring factfin-der to weigh length of delay, reasons for delay, and probability of prejudice to insurer).

Even if we were to accord VanHaaren the benefit of every conceivable doubt, allowing that he may have misperceived the intent or urgency of State Farm’s inquiries on April 8, May 2, and June 10,³ the ongoing pattern of noncooperation unmistakably exceeded the bounds of reasonableness by December 16, 1991, when he flatly rejected State Farm’s definitive and objectively reasonable IME request, and invited State Farm instead to pursue a judicial remedy which would compel compliance. Even if Maine law permitted an insured to test the “reasonableness” of an IME request prior to compliance without thereby committing an incurable breach, see Kay v. Aetna Cas. & Sur. Co., 152 So.2d 198, 199-200 (Fla.App.1963) (fact that plaintiff seeks “legal ruling as to whether he was required to submit to the [IME]” should not constitute breach of policy condition); cf. Insurance Co. of North America v. Goelz, 4 Ill.App.3d 862, 863, 282 N.E.2d 15, 16 (1972) (good faith refusal based on “honest mistake” will not work forfeiture “without first giving the insured a right to comply”), the insured must act in good faith in asserting a challenge to the IME request.

VanHaaren’s objections to the terms of the December 1991 IME request belie a “good faith” challenge. See Falagian v. Leader Nat’l Ins. Co., 167 Ga.App. 800, 801, 307 S.E.2d 698, 700 (1983) (reasonableness of IME terms is a jury question, “but there are instances in which it can be decided as a matter of law by the court”). An IME clause is a condition precedent which imposes a duty of performance on the insured. A contracting party’s insistence, “wilfully or by mistake,” on preconditions to performance not stated in the contract, constitutes a breach by anticipatory repudiation. See 4 Arthur L. Corbin, Corbin on Contracts § 973, at 910 (1951) (“Such a repudiation is conditional in character, it is true; but the condition is a performance to which the repudiator has no right.”); cf. Martell Bros., Inc. v. Donbury, Inc., 577 A.2d 334, 337 n. 1 (Me.1990) (a “distinct and unequivocal” repudiation entitles the injured party to treat the contract as “entirely rescinded,” and its obligations under the contract as discharged); cf. also REA Express v. Interway Corp., 538 F.2d 953, 955 (2d Cir.1976) (New York law).

VanHaaren’s objection to the final State Farm IME request on the ground that the selected physician’s diagnoses were too conservative was just such an untenable precondition. The IME clause required VanHaaren to submit to an “ex-amin[ation] by physicians chosen” by State Farm as often as State Farm “reasonably may require.” The IME clause would afford the insurer little protection if the insured were entitled to dictate the identity of the examining physician. Thus, the IME clause reasonably cannot be interpreted as affording an insured a veto power based on physician preference, as distinguished from reasonable and timely objection to the scheduled location, date, or time, or to particular risks which the examination might pose to the health of the insured. See, e.g., Kay, 152 So.2d at 199-200 (insured did not breach IME clause by objecting, on advice of physicians, to lower GI examination which would aggravate his physical condition, even though he was later ordered to comply). The insured’s preference for an examining physician more likely to provide a “favorable” (i.e., gloomier) diagnosis certainly cannot qualify as a reasonable basis for failing to accommodate the IME request, unless the clause is to be rendered meaningless. See, e.g., Allstate Ins. Co. v. Graham, 541 So.2d 160, 162 (Fla.App.1989) (holding “unreasonable,” under Florida law, insured’s refusal to submit to IME on counsel’s advice that physician was not sufficiently “independent”); Lockwood v. Porter, 98 N.C.App. 410, 411, 390 S.E.2d 742, 743 (1990) (holding that insurer’s affirmative defense was established as a matter of law where insured refused to submit to IME “because he did not want to waste his time with a doctor who was not going to do anything for him and would report to [the insurer] that nothing was wrong with him when that was not so”).

VanHaaren’s complaint with the place for conducting the IME was objectively unreasonable as well, for at least three reasons. First, VanHaaren chose Portland, Maine as a convenient forum for instituting suit against State Farm, which entailed the reasonable prospect that he would be required to make himself available in the forum district for court appearances, depositions, and other reasonably foreseeable examinations relating to the matter in litigation. Thus, it would be unreasonable to indulge a presumption that VanHaaren would be inconvenienced by an IME in Maine, especially since State Farm scheduled VanHaaren’s IME and deposition for the same day, in the same city. Second, in the letter rejecting State Farm’s December 16 IME request, counsel indicated that VanHaaren might be willing to come to Maine for an IME if State Farm were to designate an orthopedist acceptable to him.⁴ Finally, viewed in the context of State Farm’s earlier expressions of willingness to schedule an IME wherever Van-Haaren was residing, coupled with Van-Haaren’s repeated failure to identify his current place of residence, VanHaaren’s objection to an IME in Maine rings hollow.

Nor is VanHaaren saved by his eventual submission to the court order compelling his attendance at the January 14 IME. Were it otherwise, IME clauses would be reduced to little more than invitations to litigate IME requests. As the unreasonableness of VanHaaren’s earlier repudiation was beyond dispute, Falagian, 167 Ga.App. at 801, 307 S.E.2d at 701,⁵ State Farm’s obligation to cover VanHaaren’s claim for the alleged occurrence was excused upon VanHaaren’s unequivocal repudiation.⁶

Ill

CONCLUSION

As no reasonable trier of fact could find that VanHaaren acted in good faith in refusing to comply with State Farm’s December 16 IME request, and VanHaaren inexplicably refrained from raising the prejudice issue below, summary judgment for State Farm was proper.⁷

Affirmed.

1 . VanHaaren contends that the IME clause is unenforceable, as it violates the public policy enunciated in the Maine uninsured motorist statute, Me.Rev.Stat.Ann. tit. 24-A, § 2902 (1990 & Supp.1991), by impermissibly constricting the scope of mandated uninsured motorist coverage. First, VanHaaren waived this claim by failing to raise it before the district court. Sandstrom v. Chemlawn Corp., 904 F.2d 83, 87 (1st Cir.1990). Second, courts quite generally have found that reasonable "proof of loss” obligations serve a legitimate purpose, affording the insurer a more objective accounting of the insured’s injuries or damages. See McKimm v. Bell, 790 S.W.2d 526, 528 (Tenn.1 990) (and cases cited therein); cf. Huntt v. State Farm Mut. Auto. Ins. Co., 72 Md.App. 189, 527 A.2d 1333, 1335 (1987) (noting that no-fault personal injury protection ("PIP") coverage was never "intended to provide a PIP claimant with a blank check”). Third, the IME clause is readily distinguishable from other types of uninsured motorist policy restrictions invalidated by the Maine Law Court. See, e.g., Lanzo v. State Farm Mut. Auto. Ins. Co., 524 A.2d 47, 50 (Me.1987) (statutory term "hit- and-run" does not allow insurer to restrict uninsured motorist coverage to accidents involving physical contact). Given the relative ease of compliance with a "reasonable” IME request, an IME clause does not unduly circumscribe uninsured motorist coverage or remove it beyond the insured's control. Fourth, the Law Court has suggested, quite clearly, that insurers are entitled to the protection of an IME at "critical stages" in the uninsured motorist claim process. See Home Ins. Co. v. Horace Mann Ins. Co., 603 A.2d 860, 861 (Me.1992). Finally, the principal case upon which VanHaaren relies is inappo-site., Benson v. Nationwide Mut. Ins. Co., 269 S.C. 563, 238 S.E.2d 683 (1977), turns on the peculiar language of the South Carolina uninsured motorist insurance statute ("[T]he uninsured motorist provision shall not require anything not otherwise herein provided for_”), which disallows all proscriptive policy provisions not specifically authorized by statute. Id. 238 S.E.2d at 684.

2 . The district court opinion could not have been more clear:

The plaintiff, however, does not argue that the court must find prejudice resulting from his failure to submit to an IME upon request in order to relieve the defendant of its obligation to him under the uninsured motorist provisions of the policy. Nor does he contest the defendant's assertion that the amount of time and money spent by State Farm to secure an IME of the plaintiff constitutes prejudice. He simply argues that any expenses incurred by State Farm are a result of its failure to cooperate with him.

3 . IME clauses, and similar provisions, differ from other types of conditions precedent in that the insured's obligation is not automatically triggered by the occurrence which forms the basis for the insurance claim. Rather, the insurer must activate the contractual obligation by communicating a reasonable IME request to the insured. Cf. Weber v. General Acci. Fire & Life Assur. Corp., 10 Ohio App.3d 305, 307, 462 N.E.2d 422, 424 (1983) (“sworn examination” clause not a "self-executing" condition precedent, and there can be no noncompliance absent a "demand” by insurer). State Farm posits that it made three reasonable IME requests on April 8, May 2, and June 10, 1991, all prior to the date VanHaaren filed suit. On the other hand, VanHaaren’s attorney characterizes State Farm’s pre-litigation inquiries as exploratory settlement negotiations. Thus, the asserted excuse for VanHaaren’s noncompliance is tantamount to a claim of mutual miscommunication.

Viewed in isolation from the events which followed, these initial communications might reasonably be thought sufficiently indefinite to have excused VanHaaren’s failure to cooperate. Much of the language in the State Farm letters was arguably precatory (e.g., I "would like your agreement ...” and "I request permission ...”). The IME clause provides that VanHaaren must submit to an examination "by physicians chosen” by State Farm, conceivably suggesting that the insured might reasonably reserve assent until such time as a doctor was "chosen” by State Farm. See Ray v. Blue Alliance Mut. Ins. Co., 594 A.2d 1110, 1111 (Me.1991) (ambiguous policy language construed against insurer). Finally, State Farm’s initial letters failed to designate specific or comprehensive IME terms (date, place, name of physician). See Ferro v. Gebbia, 252 So.2d 545, 546-47 (La.App.1971) (insurer must notify insured that it has scheduled doctor’s appointment at specific time and place); cf. Huggins v. Hartford Ins. Co., 650 F.Supp. 38, 42 (E.D.N.C.1986) (requests for oral examination must specify date, place, examiner, and not leave it up to plaintiff to get in touch with insurer); Saft America, Inc. v. Insurance Co. of North America, 155 Ga.App. 500, 501, 271 S.E.2d 641, 642 (1980) (insurer must designate terms of oral examination; not sufficient to set forth agreeable choices for insured, and ask insured to decide; minimum requirement for valid “request” is identification of examiner); Weber, 10 Ohio App.3d at 307, 462 N.E.2d at 424 (defective "demand” for "sworn exam" contained precato-ry language and shifted arrangement of details to insured).

Notwithstanding his protestations of "good faith” misunderstanding, however, VanHaaren’s later suit against State Farm sealed the breach since it foreseeably deprived State Farm of the valuable opportunity to assess and settle the claim without the attendant costs and burdens of litigation. Cf. Falagian v. Leader Nat’l Ins. Co., 167 Ga.App. 800, 801-02, 307 S.E.2d 698, 700 (1983) (finding refusal to comply where insurer had scheduled an IME, which the insurer cancelled when the insured’s counsel promised the insurer he would reschedule the IME but instead filed suit).

4 . The letter stated: "Under all the circumstances I strongly suggest that you consider the possibility of an independent medical examination where Mr. VanHaaren is located in Florida rather than here [Maine] or we agree on a different physician." (Emphasis added.)

5 . The theory advanced by our dissenting brother was never argued by the appellant. Absent any suggestion in the record below or on appeal, we cannot accept the sua sponte assumption indulged in the dissent that VanHaaren’s counsel somehow may have exceeded his representational authority in responding to the IME requests. (Much less would we assume "bad faith” on the part of counsel. See infra at p. 9.) The court below, unlike those in the cases cited in the dissent, could not have been expected to allocate responsibility, as between attorney and client, for the insured’s responses to IME requests. We leave any such allocation to whatever forum might be invited, by attorney or client, to undertake it.

6 .VanHaaren belatedly argues that State Farm waived its right to substantial compliance with the IME request because it (1) proceeded to obtain the court order to compel the presumably "unnecessary” IME, (2) accepted VanHaaren’s compliance with the court order, and (3) made a settlement offer on the basis of the IME results. As these bootstrapping arguments were neither presented to the district court, see Brown, 891 F.2d at 357, nor presented in appellant’s opening brief on appeal, see Pignons S.A. de Mecanique v. Polaroid Corp., 701 F.2d 1, 3 (1st Cir.1983) ("In preparing briefs and arguments, an appellee is entitled to rely on the content of an appellant’s [initial] brief for the scope of the issues appealed_’’); see also Fed. R.App.P. 28(a), (c), we deem them waived.

7 . Also before us is State Farm’s motion to strike various portions of VanHaaren’s reply brief and to impose sanctions on the ground that the reply brief materially exceeded the scope of the issues raised in VanHaaren’s opening brief. VanHaaren did raise a bevy of new legal arguments in his reply brief, thereby frustrating State Farm's right to prepare an appropriate response. See Pignons, 701 F.2d at 3; Fed.R.App.P. 28(a), (c). For example, VanHaaren argued for the first time that State Farm’s IME requests were ineffective because they were delivered to his attorney. We deliberately bypass these belated arguments in arriving at our decision, see Frazier v. Bailey, 957 F.2d 920, 932 n. 14 (1st Cir.1992) (issues raised for first time in reply brief deemed waived), but decline to impose sanctions.