Chad Mathis v. Metropolitan Life Insurance Co ( 2021 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 20-2719
CHAD E. MATHIS,
Plaintiff-Appellant,
v.
METROPOLITAN LIFE INSURANCE COMPANY,
a.k.a. METLIFE, et al.,
Defendants-Appellees.
____________________
Appeal from the United States District Court for the
Southern District of Indiana, Indianapolis Division.
No. 1:18-cv-01893-JRS-DLP — James R. Sweeney II, Judge.
____________________
ARGUED APRIL 1, 2021 — DECIDED AUGUST 30, 2021
____________________
Before MANION, ROVNER, and ST. EVE, Circuit Judges.
MANION, Circuit Judge. Dr. Chad Mathis served as an or-
thopedic surgeon in Alabama. He had a disability-insurance
policy issued by Standard Insurance. This policy provided
“occupational disability coverage.” It insured his income if he
became disabled and unable to work as an orthopedic sur-
geon. This coverage applied even if he obtained (or was able
2 No. 20-2719
to obtain) other employment. In other words, it covered Dr.
Mathis if he was unable to perform his occupation, regardless
of whether he was otherwise gainfully employed.
Dr. Mathis switched insurance policies. But the new policy
turned out to be different from what he wanted and expected.
So he sued Lee Moore (the insurance broker) and Source Bro-
kerage for negligent procurement. Dr. Mathis also sued Met-
Life (the new insurer) for breach of contract because MetLife
did not pay him the entire sum he thought even the new,
wrong policy required.
The district judge dismissed the negligent-procurement
claim with prejudice and granted summary judgment to Met-
Life on most of the breach-of-contract claim. A narrow portion
of the contract claim survived: the claim for the period from
August 21 to September 30, 2017. Dr. Mathis and MetLife then
settled this narrow portion. So the case ended below.
Dr. Mathis appeals. He argues Indiana law, not Alabama
law, should govern his negligent-procurement claim. And he
argues his breach-of-contract claim is not ripe. We disagree on
both points and affirm.
I. Background
Moore served as an insurance broker based in Indiana. He
was Dr. Mathis’s insurance agent. Sometime before Novem-
ber 16, 2006, Moore advised Dr. Mathis to replace his Stand-
ard Insurance disability-insurance policy with a MetLife dis-
ability-insurance policy with higher limits. Moore told Dr.
Mathis that the MetLife policy provided occupational disabil-
ity coverage, like the Standard Insurance policy. So Dr. Mathis
switched. Moore arranged with Source Brokerage to procure
the MetLife policy.
No. 20-2719 3
Here’s the problem. The MetLife policy did not provide
occupational disability coverage. Instead, the MetLife policy
provided total disability coverage only if Dr. Mathis is not
gainfully employed. And the MetLife policy provided resid-
ual disability coverage only under various limitations. But no
one recognized the problem for many years.
Dr. Mathis became disabled in March 2017. Neck and arm
problems prevented him from performing some of his duties
at various times. He resigned from his practice in April 2017
and began working as an orthopedic surgeon at a different
practice. In June 2017, he underwent surgery on his neck. He
then returned to his work. But by the end of September 2017,
he could no longer work at his usual level and his income had
decreased. He left his new practice in March 2018 and began
working for a device manufacturer in a nonsurgical capacity.
He has performed no surgeries since then.
Dr. Mathis did not learn that his MetLife policy did not
provide occupational disability coverage until after he be-
came disabled in 2017. It is undisputed that Dr. Mathis con-
tinued to be gainfully employed after his disability onset, so
he has no claim to payment of benefits under the total disabil-
ity coverage of the MetLife policy.
The residual disability monthly benefit is calculated by
comparing earnings during the month claimed with earnings
before the disability began. The policy requires written proofs
of loss: “Written proof of loss satisfactory to [MetLife] must
be sent to [MetLife] within 90 days after the end of each
monthly period for which You claim benefits. … After [Met-
Life receives] Written proof of loss, [MetLife] will pay the ben-
efits due under the policy.”
4 No. 20-2719
MetLife paid residual disability benefits to Dr. Mathis for
April through August 20, 2017. But MetLife determined he
was not entitled to residual disability benefits for the rest of
August or September 2017. Dr. Mathis admits he did not sub-
mit any proof of loss to MetLife for any month after Septem-
ber 2017. MetLife has not paid any benefits to Dr. Mathis for
any period after September 2017. The policy lapsed in Decem-
ber 2018 due to Dr. Mathis’s failure to pay premiums.
Dr. Mathis sued Moore and Source Brokerage for negli-
gent procurement. He claimed they “negligently failed to be-
come familiar with the MetLife Policy and negligently failed
to insure [him] for a total disability within his occupation as
an orthopaedic surgeon (without the need to be gainfully em-
ployed).”
Dr. Mathis also brought a breach of contract claim against
MetLife. He claimed it breached the terms of the policy it is-
sued by failing to pay him the full amount of disability bene-
fits owed under that policy.
On March 28, 2019, the district judge dismissed the negli-
gence claims against all Defendants with prejudice. Sitting in
Indiana, the district judge applied Indiana’s choice-of-law
rules and determined that Alabama law, rather than Indiana
law, applied to the negligence claims. So the district judge ap-
plied Alabama law and concluded that Dr. Mathis’s contribu-
tory negligence in failing to read the new policy barred his
negligence claims and that the Alabama statute of limitations
also barred his negligence claims. The judge dismissed the
negligence claims with prejudice. He also determined that Al-
abama law applied to Dr. Mathis’s breach-of-contract claim
against MetLife. The judge granted Dr. Mathis leave to amend
his contract claim to try to bring it under Alabama law.
No. 20-2719 5
Dr. Mathis amended his complaint. He claimed he per-
formed all conditions of the MetLife policy but MetLife
breached the policy by failing to pay total “and/or” residual
disability benefits.
On July 6, 2020, the judge granted partial summary judg-
ment to MetLife on the breach-of-contract claim. He held that
Dr. Mathis failed to comply with his contractual obligation to
submit proofs of loss for any period after September 30, 2017.
Therefore Dr. Mathis, as a matter of law, could not prove a
breach-of-contract claim for any period after that date. A por-
tion of Dr. Mathis’s breach-of-contract claim—seeking bene-
fits for the period from August 21, 2017, through September
30, 2017—survived summary judgment. The parties then set-
tled that portion.
Dr. Mathis appeals. The only claims before us are his neg-
ligent-procurement claims against Moore and Source Broker-
age and his breach-of-contract claim against MetLife for peri-
ods after September 30, 2017.
II. Analysis
A. Negligent procurement
Dr. Mathis claims Moore and Source Brokerage procured
the wrong policy. Dr. Mathis wanted the same sort of cover-
age he already had: occupational disability coverage that in-
sured his income as an orthopedic surgeon if he were no
longer able to be an orthopedic surgeon but were still able to
work at something else. But his new MetLife policy did not
provide that coverage. Instead, it conditioned payment of
benefits on various employment factors and other factors.
6 No. 20-2719
The district judge faced a conflict of laws. We review his
resolution of this conflict de novo. Auto-Owners Ins. Co. v. Web-
solv Computing, Inc., 580 F.3d 543, 546 (7th Cir. 2009).
A federal court sitting in diversity applies state “substan-
tive” law and federal “procedural” law. Erie R. Co. v. Tomp-
kins, 304 U.S. 64, 78 (1938); Horne v. Elec. Eel Mfg. Co., Inc., 987
F.3d 704, 713 (7th Cir. 2021).
But does Indiana law or Alabama law apply? Dr. Mathis
urged the judge to apply the law of Moore’s home, Indiana.
But Defendants pressed the judge to apply the law of Dr.
Mathis’s home, Alabama.
The district judge sits in Indiana, so he applied Indiana’s
choice-of-law rules. See West Bend Mut. Ins. Co. v. Arbor Homes
LLC, 703 F.3d 1092, 1095 (7th Cir. 2013) (“A district court sit-
ting in diversity must apply the choice of law principles of the
forum state (in this case Indiana) to determine which state’s
substantive law governs the proceeding.”).
The first step in (or a pre-requisite to) Indiana’s choice-of-
law analysis is to determine whether there is an actual, mate-
rial conflict of laws. Simon v. United States, 805 N.E.2d 798, 805
(Ind. 2004).
Here, there is an actual, material conflict. Indiana law
holds that “reasonable reliance upon an agent’s representa-
tions can override an insured’s duty to read the policy.” Filip
v. Brock, 879 N.E.2d 1076, 1084 (Ind. 2008). But Alabama law
recognizes contributory negligence (like failing to read your
own insurance policy) as a complete bar. Alfa Life Ins. Corp. v.
Colza, 159 So.3d 1240, 1253 (Ala. 2014). Dr. Mathis concedes
that if Alabama law applies, then he loses his negligent-pro-
curement claims.
No. 20-2719 7
When there is an actual, material conflict of laws, as there
is here, Indiana’s next step in tort cases is to presume that the
traditional lex loci delicti rule applies and that the applicable
law is the law of the place of the wrong. Simon, 805 N.E.2d at
805. In tort cases, the place of the wrong is the place where the
last event necessary to make an actor liable occurred (or alleg-
edly occurred). Id.
The last event necessary for liability here is the injury. Id.
at 806; see also Allen v. Great Am. Reserve Ins. Co., 766 N.E.2d
1157, 1164–65 (Ind. 2002) (“[T]he reliance and consequent
damage incurred by the plaintiffs is the ‘last event’ necessary
to establish the elements of misrepresentation of a material
fact reasonably relied upon.”). The claimed injury occurred
(or allegedly occurred) in Alabama. Dr. Mathis lived in Ala-
bama.1 He earned income in Alabama. He allegedly sustained
economic loss in Alabama. 2 Thus Alabama is the loci delicti,
and we presume Alabama law applies.
The presumption to apply the law of the State where the
wrong occurred can be overcome if that State “bears little con-
nection to this legal action.” Simon, 805 N.E.2d at 805 (internal
quotation mark omitted).
Here, Dr. Mathis cannot overcome the presumption to ap-
ply Alabama law. Alabama bears a significant connection to
this case. When Dr. Mathis applied for the MetLife policy, he
lived and worked in Alabama. He held a license to practice in
1 At some point, Dr. Mathis moved to Massachusetts. But he does not
claim Massachusetts law applies.
2He may have conceded below that he first suffered injury in Ala-
bama. (Pl.’s Resp. Def. Moore’s Mot. Dismiss, DE 39 at 7 (“the losses of
monthly benefits may have started in Alabama”).)
8 No. 20-2719
Alabama. He lived and worked in Alabama when the policy
was issued. The policy was delivered to him in Alabama. The
policy insured the income he earned in Alabama. He sus-
tained at least some of his alleged economic losses in Ala-
bama. Alabama regulates insurance transactions with its resi-
dents. Alabama has an interest in protecting Dr. Mathis and
his income. Thus Alabama bears far more than a “little con-
nection” to this case.
The district judge did not err in applying Alabama law.
And under Alabama law, the negligent-procurement claims
fail, as Dr. Mathis concedes. 3
B. Breach of contract
Even under the MetLife policy, Dr. Mathis claims he is en-
titled to more benefits than he received. The only portion of
the breach-of-contract claim at issue in this appeal is the claim
for residual disability benefits for periods after September 30,
2017. But Dr. Mathis concedes he never submitted proofs of
loss for any periods after September 30, 2017.
Again, Alabama law applies.4 In Alabama, the elements of
a breach of contract are: (1) the existence of a valid contract
binding the parties, (2) the plaintiff’s own performance under
the contract, (3) the defendant’s nonperformance, and (4)
3 We rest our decision regarding the negligent-procurement claims on
contributory negligence. We make no comment on the statutes of limita-
tions.
4 On appeal, Dr. Mathis does not argue that Indiana law should apply
to his breach-of-contract claim. Instead, he concedes that Alabama law ap-
plies: “In the instant diversity case, the District Court was obligated to fol-
low the path that an Alabama trial court would have followed.” (Mathis
Appellant Br., DE 25 at 25.)
No. 20-2719 9
resulting damages. Dupree v. PeoplesSouth Bank, 308 So.3d 484,
490 (Ala. 2020).
Here, MetLife argues Dr. Mathis must lose his claim be-
cause he did not submit any proofs of loss for any periods af-
ter September 30, 2017. Thus he cannot prove the second ele-
ment of his claim. MetLife also argues Dr. Mathis must lose
this claim because MetLife did not fail to perform since its
duty to perform is only triggered if Dr. Mathis submits a proof
of loss. So Dr. Mathis cannot prove the third element of his
claim either.
Alabama mandates compliance with an insurance policy’s
requirements for proof of loss. Baldwin Mut. Ins. Co. v. Adair,
181 So.3d 1033, 1045 (Ala. 2014). The MetLife policy required
written proof of loss within 90 days after the end of each
monthly period claimed. But Dr. Mathis did not submit any
proofs of loss to MetLife for any month after September 2017.
Dr. Mathis concedes this.
The heart of Dr. Mathis’s appellate argument on his
breach-of-contract claim is that it is not ripe. Since it is not
ripe, the argument goes, it is not a case or controversy under
Article III of the Constitution. Thus the district court lacked
subject-matter jurisdiction, he argues.
Dr. Mathis readily admits he flip-flopped on this issue. He
invoked federal subject-matter jurisdiction by bringing a di-
versity suit in federal court and purporting to raise an active,
ripe claim and controversy. And he fended off dismissal with
prejudice of his breach-of-contract claim by arguing that he
did perform all conditions the policy required of him. His sec-
ond amended complaint explicitly alleges his performance:
“Mathis performed all conditions of the Policy and its riders,
10 No. 20-2719
including but not limited to, paying premiums, providing
timely notice of his claim, completing and sending claims’
forms,” et cetera. But now he argues his claim is not ripe.
MetLife also reversed itself on this issue. It moved the dis-
trict judge to dismiss the breach-of-contract claim for lack of
ripeness. Now it argues summary judgment on the merits was
proper.
But Dr. Mathis argues his reversal does not matter because
federal subject-matter jurisdiction is not waiveable. He is right
about this. Federal courts at all levels must assure themselves
of their subject-matter jurisdiction. Even if no party contests
subject-matter jurisdiction, and the district judge assumes
subject-matter jurisdiction, we must address the issue sua
sponte even if for the first time on appeal. See Jackson v. Consol.
Rail Corp., 717 F.2d 1045, 1055 (7th Cir. 1983). If a court lacks
subject-matter jurisdiction, a ruling it issues on the merits is
void. See Brownback v. King, 141 S. Ct. 740, 749 (2021) (“Ordi-
narily, a court cannot issue a ruling on the merits when it has
no jurisdiction because to do so is, by very definition, for a
court to act ultra vires.” (internal quotation marks omitted));
In re IKO Roofing Shingle Prods. Liab. Litig., 757 F.3d 599, 600
(7th Cir. 2014) (“If the problem deprived the court of subject-
matter jurisdiction, then there is nothing for us to do but va-
cate the order of January 28—and every other order [the
judge] entered during the preceding four years.”); Pacurar v.
Hernly, 611 F.2d 179, 181 (7th Cir. 1979).
But here, the district judge had subject-matter jurisdiction
over the claim for breach of contract. The case was ripe. A case
is ripe when it is “not dependent on contingent future events
that may not occur as anticipated, or indeed may not occur at
all.” Trump v. New York, 141 S. Ct. 530, 535 (2020); see also Texas
No. 20-2719 11
v. United States, 523 U.S. 296, 300 (1998). A case is not ripe
“when the parties point only to hypothetical, speculative, or
illusory disputes as opposed to actual, concrete conflicts.”
Wisconsin Cent., Ltd. v. Shannon, 539 F.3d 751, 759 (7th Cir.
2008). We review ripeness de novo, but we defer to the district
judge’s underlying factual findings absent clear error. Church
of Our Lord and Savior Jesus Christ v. City of Markham, 913 F.3d
670, 676 (7th Cir. 2019).
Here, Dr. Mathis alleged he performed the policy’s condi-
tions. He did not allege that he was damaged by a speculative
future event that might not happen. Rather, he claimed Met-
Life damaged him by its past conduct, by a completed breach
of contract. So the case was ripe. The judge faced an actual
case and controversy. He properly determined that Dr.
Mathis’s claim “is not an abstract disagreement but rather a
concrete and actual dispute between the parties over Met-
Life’s obligation to pay monthly benefits.” (Entry on Cross-
Mots. Summ. J., July 6, 2020, DE 137 at 16–17.)
The mere fact that Dr. Mathis is unable to prove his case
does not mean that the judge lacked subject-matter jurisdic-
tion. See McCarter v. Ret. Plan for Dist. Managers of Am. Fam.
Ins. Grp., 540 F.3d 649, 650 (7th Cir. 2008) (“Plaintiffs’ claim
may be weak, but the shortcomings of a legal theory differ
from a lack of 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 ele-
ments. But his failure does not mean the district judge lacked
subject-matter jurisdiction.
12 No. 20-2719
III. Conclusion
We also considered other arguments raised by Dr. Mathis
and found them lacking. The district judge committed no er-
ror in disposing of Dr. Mathis’s claims. So we affirm.