A doctor addicted to crystal methamphetamine lost his ability to practice plastic surgery before the state took away his medical license, an appellate panel found, making an important distinction in determining whether the doctor’s insurer is obligated to provide him with medical disability coverage.

A 4-0 panel of the Appellate Division, Second Department, rejected Northwestern Mutual Life Insurance Company’s attempt to dismiss on summary judgment Brad Jacobs’ suit seeking disability payments. The insurer claimed Jacobs’ debility resulted from the loss of his medical license, and not, as he maintained, from a bipolar disorder that he said he tried to self -medicate by using crystal meth and anti-depressants.

Jacobs’ eight disability policies all required that he establish he was totally disabled and no longer able to perform the functions of his profession when his illness or injury began.

Northwestern’s assertion that Jacobs treated patients until the hour his license was suspended by the state Board for Professional Medical Conduct on June 18, 2007, for being an “imminent danger” to others, is insufficient to show Jacobs was not debilitated well before the loss of his license, the appellate court said in Jacobs v. Northwestern Mutual Life Insurance , 21913/08.

The insurer argued that it was not bound to pay benefits under the eight policies Jacobs held because he incurred a “legal disability” by having his medical license suspended rather than a “factual disability” because of mental problems and drug use.

“While this approach has the benefit of clarity, it is substantially outweighed by common sense and the reasonable expectations of an insured,” Justice Ruth Balkin (See Profile) wrote for the panel. “Disability insurance is concerned with insureds’ ability—not just their attempt—to do their jobs… The fact that the plaintiff’s waiting room was filled with unwitting patients on the day the plaintiff’s license was suspended is not the end of the inquiry. We must also examine the ability of the insured to perform the principal tasks of the profession competently.”

Northwestern failed to present evidence rebutting Jacobs’ contention that he suffers from a bipolar disorder, nor that his conditions did not exist before his license was suspended, the panel ruled.

Jacobs, on the other hand, submitted affidavits or affirmations from his psychologist and his three treating psychiatrists indicating that he suffers from Bipolar II Disorder and substance abuse secondary to that disorder, the panel said.

“The doctors opined that the plaintiff had been suffering from Bipolar II Disorder for many years before they began treating him, and that, significantly, its effects rendered him unable to perform ‘the principal duties of his occupation as a plastic surgeon, let alone safely and competently’ before his license was suspended,” Balkin wrote.

The court said it refused to accept, as Northwestern argued, that the doctors’ affidavits were conclusory.

“The doctors’ opinions were based on their examinations of the plaintiff, his history, and the statement of charges against him,” the panel said. “This evidence, coupled with the plaintiff’s deposition testimony, established, prima facie, that the plaintiff’s Bipolar II Disorder and drug addiction were the primary causes of plaintiff’s inability to practice his profession and that plaintiff’s loss of his medical license was secondary.”

The ruling affirmed a December 2010 decision by Nassau County Supreme Court Justice Randy Sue Marber (See Profile).

Presiding Justice Randall Eng (See Profile) and Justices Peter Skelos (See Profile) and Sandra Sgroi (See Profile) joined in Balkin’s determination.

Jacobs, a prominent plastic surgeon on Manhattan’s Upper East Side whose promotions said he had performed cosmetic surgery on at least two Playboy models, acknowledged that he began using crystal meth in 2001. He blamed his escalating use of the drug, plus Xanax and Fentanyi he prescribed for himself, with causing lapses in judgment that resulted in the filing of more than two dozen medical malpractice claims against him before his license was suspended.

He testified that in the six months before his suspension, he was sleeping little and was in a “fog” due to his use of crystal meth and anti-depressants to even out his mood swings and to keep him functional.

When suspending his license, state health officials also said Jacobs had used illegal drugs and had sex with patients.

Jacobs surrendered his medical license in September 2007, acknowledging after 11 days of hearings that he could not “successfully defend against acts of misconduct” alleged against him.

Heath Olnowich and Scott Markowitz of Markowitz & Rabbach in Melville represented Jacobs.

Olnowich called the ruling a “thoughtful, courageous” one that will serve as a “landmark” in the field of disability insurance jurisprudence.

“It serves notice to all insurers that they cannot just rubber-stamp a denial of benefits on the basis of legal disabilities, especially where mental illness and substance abuse claims are concerned,” Olnowich said.

He estimated that Jacobs’ policies, if honored, are worth a total of about $3 million.

Evan Krinick, Norman Tolle, Cheryl Korman and Merril Biscone were on the team of Rivkin Radler attorneys that argued for Northwestern. The attorneys referred questions to Northwestern.

Betsy Hoylman, director of media and public relations for the Milwaukee-based Northwestern, said the company was disappointed.

“We continue to believe that the decisions the company made in this case were consistent with our disability insurance contract,” she said. “We will continue to study the ruling and have not decided whether to make a further appeal.”

@| Joel Stashenko can be contacted at jstashenko@alm.com.