Kelly v. Provident Life & Accident Insurance Co.

Kelly (plaintiff) obtained two own-occupation disability insurance policies from Provident Life & Accident Insurance Co. (Provident) (defendant). The policy allowed Kelly to claim total disability if he became unable to perform the substantial and material duties of his occupation and underwent a physician’s care. In May 1986, Kelly went under the care of a psychologist. Kelly thereafter filed an insurance claim for total disability and received disability benefits for the next thirteen years. During this period, Blochl, a representative of Provident, suspected Kelly had been working while receiving disability benefits and so informed law enforcement authorities. Provident later admitted that Kelly had previously disclosed to Provident that he was still performing some work and had provided copies of his business records. On August 18, 1999, Provident determined Kelly was not disabled and informed him it would terminate his benefits. In November 2000, Provident brought suit against Kelly alleging fraud, but agreed to put the lawsuit on hold pending settlement negotiations. On April 11, 2001, Kelly found that a default judgment had been entered against him. As a result, Kelly began drinking heavily and considered suicide. Kelly eventually settled with Provident by agreeing to forfeit his claim to disability benefits in exchange for dismissal of the lawsuit. Kelly subsequently brought the present suit against Provident for rescission of the settlement agreement. Kelly argued that he agreed to settle in the earlier action because he lacked the mental and emotional capacity to handle the lawsuit. Kelly further presented the testimony of a professor of psychology, who opined that Kelly suffered from Avoidant Personality Disorder, which caused Kelly to be unduly susceptible to pressure. Provident moved for summary judgment.