Vincente Prieto v. Paul Revere Life Insurance Company, a Massachusetts Corporation

I. INTRODUCTION

Vincente Prieto (“Prieto”) appeals the district court’s grant of partial summary judgment and amended judgment entered in favor of Paul Revere Life Insurance Company (“Paul Revere”). We have jurisdiction under 28 U.S.C. §§ 1291 and 1294(1) (2000). For the reasons that follow, we affirm the district court’s grant of summary judgment to Paul Revere on Prieto’s bad faith and punitive damage claims. We reverse the district court’s sua sponte finding of waiver and remand with instructions to award Prieto residual benefits for the period of August 1996 to August 1997.

II. FACTUAL AND PROCEDURAL BACKGROUND

Prieto purchased a disability insurance policy (“the policy”) from Paul Revere in 1983. The policy provided for two types of disability benefits — total and residual. The policy defined total disability as follows:

Total disability benefits were not payable until the ninety-first day of the disability. This ninety-day period was referred to as the “elimination period.” The policy also provided for residual disability benefits, which were defined as follows:

Residual benefits were payable only if the disability immediately followed a period of total…