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  • Massachusetts Mutual Life Insurance Company, Plaintiff-Counter-Defendant-Appellee, v. Daniel J. MILLSTEIN, Defendant-Counter-Plaintiff-Appellant

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    This document summarizes a court case regarding an attorney, Daniel Millstein, who filed a disability claim under his insurance policy with Massachusetts Mutual Life Insurance Company after his law license was suspended due to misusing client funds. The U.S. District Court granted summary judgment for Massachusetts Mutual, finding that Millstein's loss of income was caused by the loss of his license, not a covered disability. The Second Circuit affirmed, agreeing that an insurance company is not liable for losses resulting from license suspension or unlawful behavior, rather than an actual disability.

    Original Description:

    Filed: 1997-10-01 Precedential Status: Precedential Citations: 129 F.3d 688 Docket: 418

    Original Title

    Massachusetts Mutual Life Insurance Company, Plaintiff-Counter-Defendant-Appellee v. Daniel J. Millstein, Defendant-Counter-Plaintiff-Appellant, 129 F.3d 688, 2d Cir. (1997)

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    This document summarizes a court case regarding an attorney, Daniel Millstein, who filed a disability claim under his insurance policy with Massachusetts Mutual Life Insurance Company after his law license was suspended due to misusing client funds. The U.S. District Court granted summary judgment for Massachusetts Mutual, finding that Millstein's loss of income was caused by the loss of his license, not a covered disability. The Second Circuit affirmed, agreeing that an insurance company is not liable for losses resulting from license suspension or unlawful behavior, rather than an actual disability.

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    Massachusetts Mutual Life Insurance Company, Plaintiff-Counter-Defendant-Appellee, v. Daniel J. MILLSTEIN, Defendant-Counter-Plaintiff-Appellant

    Uploaded by

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    This document summarizes a court case regarding an attorney, Daniel Millstein, who filed a disability claim under his insurance policy with Massachusetts Mutual Life Insurance Company after his law license was suspended due to misusing client funds. The U.S. District Court granted summary judgment for Massachusetts Mutual, finding that Millstein's loss of income was caused by the loss of his license, not a covered disability. The Second Circuit affirmed, agreeing that an insurance company is not liable for losses resulting from license suspension or unlawful behavior, rather than an actual disability.

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    of 7

    129 F.

    3d 688

    MASSACHUSETTS MUTUAL LIFE INSURANCE


    COMPANY,
    Plaintiff-Counter-Defendant-Appellee,
    v.
    Daniel J. MILLSTEIN, Defendant-Counter-Plaintiff-Appellant.
    No. 418, Docket 96-7364.

    United States Court of Appeals,


    Second Circuit.
    Argued Dec. 13, 1996.
    Decided Oct. 1, 1997.
    1

    Donald J. O'Brien, Avon, CT, for Defendant-Counter-Claimant-

    Appellant.

    David W. Rubin, Stamford, CT (Peter M. Nolin, Hebb & Gitlin, Hartford, CT,
    on the brief), for Plaintiff-Counter-Defendant-Appellee.

    Before: CARDAMONE and PARKER, Circuit Judges, & WEXLER, District


    Judge.1
    WEXLER, District Judge:

    BACKGROUND
    5

    On September 5, 1990, Millstein, then an attorney practicing in Connecticut,


    purchased a disability income policy from Massachusetts Mutual. The policy
    provided benefits if Millstein proved that he had lost earned income due to a
    disability within the meaning of the policy. Part 1 of the policy defines a
    "disability" as an incapacity of the Insured, which:
    1. is due to injury or sickness; and

    2. begins while this policy is in force; and

    3. requires care by or at the direction of a legally qualified physician, unless


    [Massachusetts Mutual] is furnished with proof satisfactory to [it], that future
    care would be of no use; and

    4. reduces the insured's ability to work; and

    5. causes a loss of earned income, as discussed in this part.

    10

    On May 9, 1994 Millstein filed a notice of claim with Massachusetts Mutual


    alleging that he was suffering from Attention Deficit Disorder ("ADD"),
    conduct disorder ("CD") and chemical dependency which caused him to suffer
    a loss of earned income. Massachusetts Mutual made payments to Millstein in
    the amount of $10,900, representing the benefits ostensibly due for the period
    from July 6, 1994 through September 5, 1994 while it investigated his claim.
    Massachusetts Mutual eventually refused to pay Millstein further benefits under
    the policy and sought a declaratory judgment action in the United States
    District Court, claiming that Millstein's incapacity predated the coverage
    period, and that his loss of earned income was not caused by his incapacity.

    11

    Millstein's history of illegal substance abuse began when he was 15 years old.
    He smoked marijuana daily until he was about forty years of age. By the time
    he was 19 years old, he had used LSD approximately 200 times. By the time he
    was 22 years old, he also had used cocaine on approximately 200 occasions. In
    addition, he used muscle relaxers, quaaludes, psychedelic mushrooms,
    mescaline, illegal barbiturates, seconals, free-base cocaine, opium, speed, and
    hash. Millstein also admitted to selling drugs during both high school and
    college. Millstein's abuse of alcohol, fiorinal with codeine and marijuana
    increased over the years to the point that in 1993 he was ingesting four to six
    fiorinal with codeine per day, 15 to 20 ounces of alcohol per day and four to
    five marijuana cigarettes per day.

    12

    Millstein sought and received treatment for his "chemical


    dependency/substance abuse" from Dr. Julia A. Wellin on or about April 7,
    1994, which was later determined to be Millstein's "date of disability" under the
    policy. On May 9, 1994, Millstein filed a Notice of Claim with Massachusetts
    Mutual pursuant to the terms of the policy. He underwent a twenty-eight day,
    in-patient rehabilitation program at Riverside Rehabilitation in Minnesota from
    May 12, 1994 to June 8, 1994.

    13

    In May 1995, Millstein was diagnosed for the first time with ADD and/or CD
    by Dr. Sybil Baran, a psychologist. Dr. Baran believed that Millstein had

    suffered from these disorders his entire life.


    14

    Millstein began practicing as an attorney in 1980 and has specialized in divorce


    work, commercial litigation, probate work, tax work, corporation formation,
    and general bankruptcy work. Since Millstein began practicing law, he has been
    associated with two firms and has practiced on his own. Despite Millstein's
    drug use, ADD and/or CD, he testified at deposition that he was competent to
    perform the legal work he was conducting. Millstein apparently did not claim
    he was disabled until after he stopped using drugs.

    15

    Millstein diverted $200,000 to $300,000 from his employer in 1986 which he


    admitted to and repaid to avoid criminal prosecution. From 1990 to 1992,
    Millstein committed fraud by facilitating loans from his clients to a third party
    to further his own financial interests. Yet again, in 1993 and 1994, Millstein
    diverted $800,000 of his clients' trust fund accounts to finance personal
    investments. Millstein acknowledged that this diversion was without his clients'
    consent, knowledge or approval and that this amounted to a breach of his
    fiduciary duties. As a result, the Statewide Grievance Committee suspended
    Millstein's license to practice law in the State of Connecticut on July 6, 1994.
    Subsequent to his suspension, criminal proceedings were commenced against
    Millstein for his misuse of client funds, and he was convicted and sentenced to
    six years in a Connecticut prison.

    DISCUSSION
    16

    Rule 56(a) of the Federal Rules of Civil Procedure provides that summary
    judgment shall be granted if the pleadings, depositions, interrogatories and
    affidavits, if any, show that there is no genuine issue of material fact and that
    the moving party is entitled to judgment as a matter of law. Anderson v. Liberty
    Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 106 S.Ct. at 2509-10, 91
    L.Ed.2d 202 (1986). In deciding a motion for summary judgment, the district
    court must draw all reasonable inferences in favor of the party opposing the
    motion. Id. at 255, 106 S.Ct. at 2513. We review a district court's grant of
    summary judgment de novo. Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
    475 U.S. 574, 585-88, 106 S.Ct. 1348, 1355-57, 89 L.Ed.2d 538 (1986).

    17

    Upon cross motions for summary judgment, the District Court granted
    Massachusetts Mutual's motion and denied Millstein's motion holding, as a
    matter of law, that Massachusetts Mutual had no obligation to pay benefits to
    Millstein because Millstein's loss of earned income was caused by a legal
    consequence of his behavior (i.e., the loss of his license to practice law) and not
    a physical or mental disability. Millstein now asserts that the District Court

    erred with respect to the causation of Millstein's loss of income and that at the
    very least such an issue was one of fact for a jury. We disagree. The policy
    requires that Millstein's loss of earned income be caused by a "disability"
    within the meaning of the policy. Part 1 of the policy defines "disability." That
    definition requires that the insured's incapacity "causes a loss of earned
    income."
    18

    Millstein argues below, and on appeal, that his loss of earned income resulted
    from his chemical dependency. He claims that the diagnoses of ADD and/or
    CD and chemical dependency indicate disabilities that impaired his judgment
    and caused him to commit the crimes that led to his disbarment. Massachusetts
    Mutual asserts that Millstein's loss of earned income was due solely to the
    revocation of his license to practice law, which resulted from his illegal and
    unethical use of client funds while practicing. The district court agreed with
    Massachusetts Mutual, relying on a rule stated by other courts which states
    simply that an insurance company is not liable for a loss of earned income that
    results from a license suspension or other consequences of the insured's
    unlawful behavior. See Massachusetts Mut. Life Ins. Co. v. Ouellette, 159 Vt.
    187, 189, 617 A.2d 132, 134 (1992); Goomar v. Centennial Life Ins. Co., 855
    F.Supp. 319, 323 (S.D.Cal.1994), aff'd, 76 F.3d 1059 (9th Cir.1996); Brumer v.
    National Life of Vermont, 874 F.Supp. 60, 64 (E.D.N.Y.1995); see also 15 G.
    Couch, CYCLOPEDIA OF INSURANCE LAW 53.41 (2d ed.1983).

    19

    Ouellette involved an optometrist who lost his license to practice optometry


    after being found guilty of lewd and lascivious behavior with a minor. Dr.
    Ouellette suffered from atypical paraphilia and primary pedophilia, and
    claimed he was totally disabled within the meaning of his disability policy. He
    argued that his illness prevented him from performing his occupational duties
    because it caused his incarceration. Ouellette, 159 Vt. at 188, 617 A.2d at 133.
    The Vermont Supreme Court, stating that imposing liability would be contrary
    to the public interest in discouraging coverage for an insured's own intentional
    criminal conduct, held that the insured's inability to practice optometry was
    caused not by his illness but rather by his conviction. Id. at 189-91, 617 A.2d at
    134.

    20

    Similarly, Goomar involved a physician whose license to practice medicine was


    revoked by New York's Regents Review Committee after he sexually molested
    four female patients. Dr. Goomar alleged that he saw astral beings which
    caused his reprehensible conduct. Goomar sought disability benefits due to his
    psychological impairment. Goomar, 855 F.Supp. at 320. The Southern District
    of California rejected Goomar's claims of coverage under the reasoning stated
    in Ouellette and held that the "Plaintiff's inability to practice his regular

    occupation is due to his license revocation rather than sickness or injury." Id. at
    326.
    21

    In both Ouellette and Goomar, the courts were influenced greatly by the fact
    that the insured was not incapable of performing his occupational duties absent
    the legal restriction placed upon him.

    22

    There is an important difference between an impairment which results in an


    inability to perform the physical or mental functions necessary to engage in
    substantial gainful activity on the one hand and antisocial behavior which
    results in confinement [or license revocation] on the other. In the latter case, it
    is confinement [or revocation] rather than the impairment which precludes the
    individual from engaging in substantial gainful activity.

    23

    Ouellette, 159 Vt. at 190, 617 A.2d at 134 (quoting Waldron v. Secretary of
    H.E.W., 344 F.Supp. 1176, 1180 (D.Md.1972)). We agree with the reasoning of
    these courts. While the question of whether a loss of earned income is caused
    by a disability is often one for the jury, we hold that, as a matter of law,
    Millstein's loss of earned income was caused by his criminal conduct and the
    resulting revocation of his license due to his prior felony conviction, and not by
    a physical inability to perform his occupational duties.

    24

    First, the evidence in this case indicates that Millstein had been abusing drugs
    since he was 15 years old. Although Millstein's medical evidence indicates that
    his ADD and CD probably date back even earlier than that, notwithstanding
    these conditions, Millstein graduated from both college and law school, passed
    the bar examination and practiced law for approximately 15 years. Millstein did
    not seek treatment until his license to practice law was in jeopardy.

    25

    Clearly, for several years, Millstein's conditions did not prevent him from
    performing the basic tasks needed to maintain a law practice. As noted above,
    he became proficient in several areas of the law, in spite of the fact that he was
    constantly using various forms of illegal drugs throughout that time.

    26

    Second, according to Millstein's own deposition, he still has the ability to


    perform legal work, but is only prevented from doing so by the loss of his
    license. Millstein does not claim that his condition is such that even if his
    suspension from the practice of law was lifted, he would still be unable to
    practice law. Notably, Millstein was not punished for his use of drugs but rather
    because he stole money from his clients. Millstein does not dispute this;
    however, he claims that his judgment was impaired by his chemical

    dependency.
    27

    The fact that Millstein has shown that his chemical dependency did not prevent
    him from practicing law in the past and that he admits he could still practice
    today if he were not suspended, are ample reason to affirm the District Court's
    conclusion that, as a matter of law, Millstein's loss of earned income was
    caused by his suspension, not his chemical dependency. We find that a rule
    which would allow a lawyer to steal from his clients, even when such theft
    occurs in the throes of a drug addiction, and then recover disability benefits for
    income lost due to the suspension resulting from such theft, would be against
    public policy.

    28

    Such a rule is in keeping with a longstanding line of cases in which state courts
    have refused to allow an insured to be indemnified from liability resulting from
    the insured's intentional causation of an injury. See Allstate Ins. Co. v.
    Mugavero, 79 N.Y.2d 153, 161, 589 N.E.2d 365, 369-70, 581 N.Y.S.2d 142,
    146-47 (1992)(stating that the ordinary person "would be startled by the notion
    that [an insured] should receive insurance protection for sexually molesting [ ]
    children" and "in effect, be permitted to transfer the responsibility for his deeds
    onto the shoulders of other policyholders," and holding that the insured was not
    entitled to indemnification because he intentionally caused the children's
    injuries); Public Service Mut. Ins. Co. v. Goldfarb, 53 N.Y.2d 392, 400, 425
    N.E.2d 810, 814, 442 N.Y.S.2d 422, 427 (1981)(holding that a further finding
    that the insured intended to injure the defendant would preclude any liability
    for the insurer for indemnification of compensatory or punitive damages). The
    Goldfarb court concluded that allowing indemnity for intentional injuries
    would "violate the 'fundamental principle that no one shall be permitted to take
    advantage of his own wrong.' " Id. (quoting Messersmith v. American Fid. Co.,
    232 N.Y. 161, 165, 133 N.E. 432, 433 (1921)).

    29

    Along somewhat different lines, the Michigan Supreme Court has refused to
    read a public policy exception into indemnification obligations under insurance
    contracts where, unlike the facts here, the result of requiring coverage would
    benefit the innocent victim rather than the insured (read "wrongdoer"). Vigilant
    Ins. Co. v. Kambly, 114 Mich.App. 683, 687, 319 N.W.2d 382, 384-85 (1982).
    Similarly, the Connecticut Supreme Court relying upon the policy reasons of
    both the New York and Michigan courts allowed indemnification of a doctor
    accused of sexual assault and medical malpractice because indemnification was
    sought only for the medical malpractice, not the intentional tort of sexual
    assault, and because the innocent victim would benefit rather than the insured.2
    St. Paul Fire and Marine Ins. Co. v. Shernow, 222 Conn. 823, 831-32, 610 A.2d
    1281, 1285 (1992). Except for Kambly, these cases, including Ouellette and

    Goomar, all support the proposition that allowing an insured to benefit from his
    intentionally injurious conduct is against public policy. In line with these cases,
    we will not allow Millstein's theft of client funds for self gain to trigger his
    disability income policy due to his loss of earned income following his
    suspension from the practice of law.
    CONCLUSION
    30

    Millstein's loss of earned income was not caused by his psychological


    impairments but by the suspension of his license to practice law. Accordingly,
    the order of the District Court granting Massachusetts Mutual's summary
    judgment motion and denying Millstein's cross-motion is hereby AFFIRMED.

    WEXLER, Leonard D., United States District Judge, sitting by designation

    The dissent disagreed with the majority's notion that the indemnification
    provision does not benefit the insured, but rather benefits the innocent victim.
    However, since Millstein's case is one for disability insurance rather than
    liability insurance, there is no question that the only beneficiary of the
    insurance policy will be Millstein. That is to say that there are no innocent
    victims in this case who will collect as a result of a finding of coverage

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