148 F.3d 1206 (10th Cir. 1998), 96-6254, Vining on Behalf of Vining v. Enterprise Financial Group, Inc.

Docket Nº:96-6254, 96-6267 and 97-6082.
Citation:148 F.3d 1206
Party Name:Billie VINING, surviving spouse and next of kin on behalf of Milford Vining deceased, Plaintiff-Appellee-Cross Appellant, v. ENTERPRISE FINANCIAL GROUP, INC., a foreign corporation, Defendant-Appellant-Cross Appellee.
Case Date:July 22, 1998
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit
 
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Page 1206

148 F.3d 1206 (10th Cir. 1998)

Billie VINING, surviving spouse and next of kin on behalf of

Milford Vining deceased, Plaintiff-Appellee-Cross Appellant,

v.

ENTERPRISE FINANCIAL GROUP, INC., a foreign corporation,

Defendant-Appellant-Cross Appellee.

Nos. 96-6254, 96-6267 and 97-6082.

United States Court of Appeals, Tenth Circuit

July 22, 1998

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Jared D. Giddens, Self, Giddens & Lees, Inc., Oklahoma City, Oklahoma (Bryan J. Wells with him on the brief), for defendant-appellant-cross-appellee.

Mark A. Engel, Mansell & Engel, Oklahoma City, Oklahoma (Steven S. Mansell with him on the brief), for plaintiff-appellee-cross-appellant.

Before SEYMOUR, Chief Judge, EBEL, and BRISCOE, Circuit Judges.

ORDER

This matter is before the court on its own motion to vacate the opinion and judgment issued on July 6, 1998 and to reissue an amended opinion and partial judgment. The attached opinion constitutes the decision of the court. A forthwith partial mandate and partial judgment are issued with respect to the issues addressed in today's amended opinion. The court retains jurisdiction to address the issues of prejudgment interest and attorneys' fees. We will issue a supplemental decision on those issues following the Oklahoma Supreme Court's resolution of the certified questions submitted in appeal number 95-5207, Taylor v. State Farm Fire and Casualty Company. The order submitting those certified questions was filed in this court on June 19, 1997. The parties to this appeal shall monitor the proceedings in the Taylor matter and submit notice to this court immediately upon its resolution in the Oklahoma Supreme Court. Pending that disposition, the portion of these appeals concerning the issues of prejudgment interest and attorneys' fees is abated.

OPINION

EBEL, Circuit Judge.

Plaintiff-Appellee Billie Vining brought a bad faith insurance claim as surviving spouse and next of kin on behalf of her deceased

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husband Milford Vining. 1 Vining claimed that defendant-appellant Enterprise Financial Group, Inc. acted improperly in rescinding a credit life insurance policy after Vining made a claim under the policy as a result of her husband's death. At trial, the jury found in favor of Vining and awarded her compensatory and punitive damages. Enterprise appeals the judgment of the district court on the grounds of insufficient evidence, improper consideration of inadmissable evidence, improper jury instructions, failure to order a remittitur based on an excessive damage award, failure to order a new trial because the jury verdict was the product of passion and prejudice, improper award of prejudgment interest, and improper award of attorneys' fees. Vining cross-appeals, arguing that in the event a new trial is ordered, the court should award additional punitive damages based on Enterprise's willful conduct. We affirm on all issues, except we retain jurisdiction and do not now decide the issues raised on appeal pertaining to prejudgment interest and attorney's fees.

BACKGROUND

On March 9, 1992, Milford Vining ("Milford"), now deceased husband of plaintiff-appellee Billie Vining ("Vining"), purchased a Jeep at Crown Auto World in Tulsa, Oklahoma. Defendant-Appellant Enterprise Financial Group ("Enterprise"), through a wholly owned subsidiary ELIC, had appointed Nancy Sidler ("Sidler") as its finance and insurance representative at the car dealership. Enterprise sold credit life insurance policies as a way for customers to insure that car payments would be covered in the event of death. Sidler offered and Milford elected to buy an Enterprise credit life insurance policy (the "Policy") in connection with the purchase of the vehicle. Sidler had never been trained in any way by Enterprise, including training on what constituted "good health" under Enterprise's definition.

Milford died on May 28, 1993 of an acute myocardial infarction (sudden heart attack). At the time of his death, Milford's Policy had a pay-out value of $10,046. Vining made a claim for death benefits under the Policy, and Enterprise subsequently rescinded the Policy, claiming that Milford had misrepresented material health history in his insurance application and that the Policy was issued in reliance upon this misrepresentation. Vining unsuccessfully contested the rescission and sent letters to the Oklahoma Insurance Department complaining of Enterprise's conduct. On July 27, 1995, Vining brought an action for breach of contract and for bad faith in the United States District Court for the Western District of Oklahoma. Enterprise defended on the grounds that it had a legitimate basis for contesting Vining's claim, and thus did not act in bad faith. Enterprise also raised the affirmative defense of rescission, arguing that Milford made material misrepresentations in the insurance application which justified a rescission of the Policy pursuant to Okla. Stat. tit. 36, § 3609 (1990).

During trial, Vining proved the following facts. 2 Milford had suffered from coronary artery disease which resulted in a triple

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coronary bypass operation in 1983. After the surgery, Milford underwent a series of post-bypass tests and procedures and began taking heart maintenance medication to prevent the occurrence of angina. Milford complained of no chest pains or other symptoms from the time immediately following the operation up until the time of his death. Milford visited Dr. Michael Sullivan ("Dr.Sullivan") on February 12, 1992, for a get-acquainted visit because he recently had moved and wanted to find a new doctor nearer to his home. Milford's visit was not precipitated by any symptoms or medical reasons. In fact, Milford led a very active life. Dr. Sullivan continued Milford on his heart maintenance medications as a preventive measure. At the time of Milford's visit with Dr. Sullivan, Milford suffered from little, if any, angina.

The insurance application Milford signed included a disclaimer that stated:

I HEREBY CERTIFY THAT I AM IN GOOD HEALTH AS OF THE EFFECTIVE DATE ABOVE. I FURTHER CERTIFY THAT I DO NOT PRESENTLY HAVE, NOR HAVE I EVER HAD, NOR HAVE I BEEN TOLD I HAVE, NOR HAVE I BEEN TREATED WITHIN THE PRECEDING 12 MONTHS FOR ANY OF THE FOLLOWING: ANY HEART DISEASE, OR OTHER CARDIOVASCULAR DISEASES....

Both parties agree that Milford did not intentionally attempt to mislead Enterprise by signing the disclaimer, that Milford's appointment with Dr. Sullivan was his only medical visit in the twelve months preceding the Policy purchase date, and that under Oklahoma Insurance Regulations, an insurance company may only consider the last twelve months of an insured's medical history to evaluate an insurance application.

After Milford's death, Enterprise sought all of Milford's medical records, including Dr. Sullivan's notes. On the same day it received Dr. Sullivan's notes, Enterprise rescinded the Policy. Enterprise routinely contests all claims on life insurance policies made within two years of a policy's effective date and investigates to find misrepresentations in the insurance application. 3 Debbie Cluck ("Cluck"), Enterprise's claims examiner, denies four out of every ten claims that she reviews. Enterprise does not have a claims manual or any written guidelines specifying when a claim is payable or not, and it never informed Cluck of any applicable Oklahoma law or regulation pertaining to when a policy may be rescinded. Enterprise had no system of tracking whether any of its agents routinely sold policies to ineligible applicants.

Cluck felt it appropriate to rescind a policy even if the agent issued the policy with full knowledge of an applicant's medical history. Cluck's beliefs comport with Enterprise company philosophy. Cluck never paid a claim if she had any reason to doubt whether a person's medical history was inconsistent with the health disclaimer included on the insurance application. Cluck rescinded Milford's Policy because she considered the office visit with Dr. Sullivan and the continuation of his angina medication by Dr. Sullivan to constitute treatment for triple bypass surgery. Cluck did not investigate whether Sidler was informed of Milford's medical history, did not contact either Sidler or Vining, and did not contact Dr. Sullivan to discuss his notes before rescinding the Policy.

Enterprise's training manual for its agents (the "Manual") emphasizes that applicants only need to be between the ages of 18 and 65 to purchase insurance. The Manual does not discuss the health disclaimer or in any way suggest that the agent is supposed to ask the customer about his health or that health is relevant in issuing the policy. The Manual also encourages agents to maximize profit by overstating the actual monthly premium that should be charged and by secretly increasing the actual amount of monthly payments the customer agrees to pay, for example, raising a payment from $78.22 to $78.99 because customers look more closely at dollars than cents. The Manual informs agents that the life insurance policies they sell are guaranteed issue polices, which means that the coverage is in force immediately as compared

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to ordinary life insurance applicants who first must be approved by the insurer before coverage takes effect. Enterprise objected to the introduction of the Manual into evidence.

John Myerson ("Myerson") was Enterprise's representative to agents at automobile dealerships that sell Enterprise life insurance policies, including Sidler. Myerson testified that he did not know what the terms used in the health disclaimer statement meant and that he did not know how Enterprise processed claims. Myerson also testified that he does not train agents to ask about doctor visits or medication.

In response to numerous complaints against Enterprise for improper rescission...

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