Fairly Debatable Action by Insurer

Reasonable & Arguable Reason to Deny Claim not Bad Faith

Post 4778

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William A. Lemons, Jr., M.D., a doctor who specialized in obstetrics and gynecology (“OB/GYN”), sued Principal Life Insurance Company (“Principal”) for breach of contract and bad faith for its refusal to pay him disability benefits under a “regular occupation rider” provision contained in his insurance policy with the company. A jury returned a verdict in favor of Lemons on the breach of contract claim and in favor of Principal on the bad-faith claim.

William A. Lemons, Jr. MD v. Principal Life Insurance Company, No. 22-12064, United States Court of Appeals, Eleventh Circuit (April 5, 2024)


Lemons decided to open his own OB/GYN practice, which he called Covenant Gynecology & Wellness, P.C. (“Covenant”). In October 2015, during Covenant’s business development phase, Lemons worked for Blue Cross Blue Shield (“BCBS”) as an insurance claims consultant. A few months later, in February 2016, he began working at the Birmingham Metro Treatment Center, an opioid addiction treatment and recovery facility. A month later, he started working at the Fritz Clinic, another opioid treatment clinic.

In April 2016, Lemons opened Covenant and started seeing patients. He did not deliver babies or otherwise engage in obstetrics, and he did not submit any insurance claims for any obstetrics-related work. Eventually, Lemons devoted most of his time and resources to Covenant, and he reduced the number of hours at his other jobs to concentrate more on his OB/GYN practice. Lemons’ solo medical practice was unsuccessful. On July 15, 2016, he closed Covenant because he was not seeing enough patients. Lemons’s deteriorating health also played a significant role in his decision to close Covenant. Beginning in 2013, Lemons started developing hand tremors and was officially diagnosed with a neurological condition in March 2016.

In November 2016, Lemons completed a disability claim form and reported that, as of July 15, 2016, he was totally disabled and could no longer work as an OB/GYN. Lemons was interviewed and stated that he was working at BCBS approximately 15 hours per week, at Birmingham Metro approximately 12-18 hours per week, and at the Fritz Clinic 4 hours per week. He maintained that, at the time of his disability, his regular occupation was as an OB/GYN and, therefore, Principal should approve his claim under the “regular occupation rider.” The claims person responded that because Lemons was working other non-OB/GYN jobs when he became disabled, Principal could not just look at his occupation as an OB/GYN and would need to consider his other jobs in evaluating his claim.

Principal eventually approved Lemons’ claim under a “loss of earnings” provision in the policy based on the reduction to Lemons’s income as a result of his disability. A few weeks later, on February 9, 2017, Principal denied Lemons’s claim for benefits under the “regular occupation rider” provision. Principal explained that, because Lemons regularly worked at BCBS, Birmingham Metro, and the Fritz Clinic prior to the onset of his disability, he was not “totally disabled from all occupations that [he was] engaged in prior to [d]isability” as the regular occupation rider required.


The Supreme Court of Alabama has made clear that mental anguish damages are unavailable for breach of contract claims related to long-term disability insurance policies. Therefore, the Eleventh Circuit affirmed the district court’s ruling as to Lemons’s recoverable damages.

The “Benefit Update Rider” Claim

Lemons acknowledges that he did not specifically plead a separate claim related to the “benefit update rider” provision. It is undisputed that Principal sent letters to Lemons regarding the “benefit update rider” provision in 2004, 2007, and 2010. The 2004 letter explained that his benefits had increased to $10,000 per month, and the subsequent letters informed him that his benefits had been capped at that amount.

The Bad-Faith Claim

The Eleventh Circuit concluded that the district court did not err in denying Lemons’ motions. At trial, Lemons testified that he spent most of his time working at Covenant prior to the onset of his disability. He admitted that he did not derive any income from his practice at Covenant and did not submit any insurance claims for OB/GYN services to patients. The jury also could have found that Principal had an arguable reason for not issuing Lemons benefits pursuant to the “regular occupation rider” policy provision because the evidence showed that Principal gathered-as part of its decisional process-information suggesting that Lemons’s regular occupation was not as an OB/GYN.

The verdict in this case was not against the clear weight of evidence given the genuine issue of fact as to whether a breach of contract occurred. The Eleventh Circuit affirmed the district court’s judgment.


Lawyers representing people whose claim was rejected in whole or in part will always include a cause of action for the tort of bad faith and seek exemplary as well as tort damages. However, if, as in this case the insurer honors the claim that was available to the insured and refused to provide benefits related to his specialty of OB/GYN because he tried but never acted as an OB/GYN and admitted he made no money from the failed practice. They paid what they owed and there was neither a genuine dispute about the coverage nor were the actions of the insurer fairly debatable.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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