7th Circuit affirms dismissal of Alabama surgeon’s claims against Hoosier insurance broker

An out-of-state surgeon did not sway the 7th Circuit Court of Appeals on Monday from affirming the dismissal of his negligent procurement claims against an Indiana insurance broker who convinced him to switch disability policies.

Alabama orthopedic surgeon Dr. Chad Mathis followed the advice of his Indiana-based insurance agent Lee Moore to replace his standard insurance disability-insurance policy with a MetLife disability-insurance policy with higher limits. Moore told Mathis that the MetLife policy provided occupational disability coverage like his previous policy.

But years later, Mathis ran into a problem with the MetLife policy — it didn’t provide occupational disability coverage, but rather provided total disability coverage only if Mathis was not gainfully employed. It also provided residual disability coverage only under various limitations.

Following a neck surgery after becoming disabled in 2017, Mathis could no longer work at his usual level and his income decreased, prompting him to leave his job and begin working in a nonsurgical position.

MetLife paid residual disability benefits to Mathis from April through August 20, 2017, but stopped after finding him ineligible for residual disability benefits for the rest of that month of September 2017. The policy eventually lapsed in December 2018 due to his failure to pay premiums.

“It is undisputed that Dr. Mathis continued to be gainfully employed after his disability onset, so he has no claim to payment of benefits under the total disability coverage of the MetLife policy,” Circuit Judge Daniel Manion wrote for the 7th Circuit in an Aug. 30 decision.

Mathis sued Moore and Source Brokerage for negligent procurement and MetLife for breach of contract, but the Indiana Southern District Court dismissed the negligence claims against all defendants with prejudice.

The district court applied Alabama laws, concluding that Mathis’ contributory negligence in failing to read the new policy barred his negligence claims, as did the Alabama statute of limitations. It also determined that Alabama law applied to Mathis’ breach-of-contract claim against MetLife.

It ultimately granted partial summary judgment to MetLife on the breach-of-contract claim, holding Mathis failed to comply with his contractual obligation to submit proofs of loss for any period after Sept. 30, 2017. A portion of Mathis’s breach-of-contract claim — seeking benefits for the period from Aug. 21, 2017 through Sept. 30, 2017 — survived summary judgment and was eventually settled.

In Chad E. Mathis v. Metropolitan Life Insurance Company, a.k.a. METLIFE, et al., 20-2719,  the 7th Circuit affirmed on the issues of Mathis’ negligent-procurement and breach-of-contract claims.

First, it found the district court did not err in applying Alabama law, concluding that the southern state bore far more than a “little connection” to the case. The 7th Circuit noted that when Mathis applied for the MetLife policy, he lived and worked in Alabama, held a license to practice there and lived and worked in Alabama when the policy was issued, among other relations.

Doing away with Mathis’s breach-of-contract claim, which he argued wasn’t ripe, it also concluded the district judge had subject-matter jurisdiction over the claim for breach of contract and that the claim was in fact ripe.

“The mere fact that Dr. Mathis is unable to prove his case does not mean that the judge lacked subject-matter jurisdiction. Dr. Mathis did not and could not waive subject-matter jurisdiction. But he did present a live, ripe, actual case and controversy to the judge. He lost his claim because he failed to prove its elements. But his failure does not mean the district judge lacked subject-matter jurisdiction,” it concluded.

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