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PAUL REVERE LIFE INS. CO. v. BAVARO

February 11, 1997

The Paul Revere Life Insurance Company, Plaintiff, against Roy J. Bavaro, Defendant.


The opinion of the court was delivered by: SCHEINDLIN

 SHIRA A. SCHEINDLIN, U.S.D.J.:

 Plaintiff, Paul Revere Life Insurance Company ("Paul Revere"), moves for summary judgment on its claim for a declaratory judgment that defendant, Roy J. Bavaro ("Bavaro"), is not disabled within the meaning of its Preferred Professional Disability Income Policy, number 0102429166 (the "Policy"), because the Policy does not provide coverage for legal disabilities. Bavaro, in turn, cross moves for partial summary judgment dismissing the second count of the complaint in which plaintiff seeks to recover disability benefits paid to defendant prior to September 17, 1996.

 For the purposes of its motion, Paul Revere concedes that as of April 19, 1994 and continuing to date, Bavaro has been and remains factually disabled as defined by the Policy. *fn1" Pl.'s 3(g) PP 8, 10. Bavaro suffers from anxiety neurosis as diagnosed by his personal physician and from post traumatic stress disorder as later diagnosed by a treating psychologist. Id. P 7; Plaintiff's Notice of Motion, "Pl.'s Notice" Ex. D. This psychologist, Dr. Donald Erwin, states that Bavaro suffers from a personality disorder known as passive avoidant. Pl.'s Notice Ex. D.

 There is also no dispute that beginning in April, 1993, Bavaro engaged in criminal conduct in the course of his occupation as an insurance broker culminating in a plea of guilty on January 4, 1995, to a single count of wire fraud. *fn2" Pl.'s 3(g) PP 15, 16, 20. On August 17, 1994, the Illinois Insurance Exchange notified Bavaro of suspected violations of Illinois insurance regulations. Id. P 18. Bavaro offered no defense. Id. His Illinois broker membership was terminated on September 23, 1994. Id. In September 1994, the New York Insurance Department began an investigation of licensees through whom the entity Bavaro was affiliated with worked in New York. Pl.'s Mem. at 11. On October 18, 1994, Bavaro notified that Department that the entity was no longer conducting business in New York. Pl.'s 3(g) P 19. On June 1, 1995, Bavaro's New Jersey insurance broker's license was revoked. Id. P 21.

 The issue to be determined in these cross motions is when did the defendant's legal disability occur and, if the legal disability was subsequent to the factual disability, whether that permits the insurance company to deny disability benefits. For the reasons set forth below, plaintiff's motion is denied and defendant's cross motion is granted in part.

 I. Factual Background

 On October 29, 1989, Bavaro executed an application for disability insurance to Paul Revere. Pl.'s Mem. at 3. He identified his employment as President of an insurance brokerage company. Pl.'s 3(g) P 6. The parties agree that Bavaro had no known or diagnosed mental condition prior to executing the application. *fn3" Id. P 9. Effective April 21, 1990, Paul Revere issued a disability insurance policy which included benefits for full lifetime total disability, cost of living for total or residual disability, and supplemental social insurance. Id. P 1; Ex. A.

 The following are the pertinent definitions set forth in Part 1 of the Policy:

 1.5 " Injury " means accidental bodily injury sustained after the Date of Issuance and while your policy is in force.

 1.6 " Sickness " means sickness or disease other than a Pre-existing Condition which causes loss commencing while Your Policy is in force . . .

 1.8 " Your occupation " means the occupation in which You are regularly engaged at the time You become Disabled.

 1.9 " Total disability " means that because of Injury or Sickness:

 A. You are unable to perform the important duties of Your ...


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