Aetna Life Ins. Co. v. Lavoie

• Decision Date: 07 December 1984
• Citation: 470 So.2d 1060
• Parties: AETNA LIFE INSURANCE COMPANY v. Margaret W. LAVOIE and Roger J. Lavoie, Sr. 82-426, 82-1152.
• Court: Alabama Supreme Court

Page 1060

470 So.2d 1060

AETNA LIFE INSURANCE COMPANY v. Margaret W. LAVOIE and Roger J. Lavoie, Sr.

82-426, 82-1152.

Supreme Court of Alabama.

Dec. 7, 1984.

Motion for Disqualification, Withdrawal

of Opinion and Hearing De Novo

Denied March 8, 1985.

Rehearing Denied March 8, 1985.

Peter V. Sintz and William M. Cunningham, Jr. and Mary Beth Mantiply of Sintz, Pike, Campbell & Duke, Mobile, for appellant.

Joseph M. Brown, Jr. of Cunningham, Bounds, Yance, Crowder & Brown, Mobile, for appellees.

PER CURIAM.

These cases, involving a claim of bad faith refusal to pay an insurance claim, have been before this court on two previous occasions. Lavoie v. Aetna Life & Casualty Co., Inc., 374 So.2d 310 (Ala.1979); Lavoie v. Aetna Life & Casualty Co., Inc., 405 So.2d 17 (Ala.1981). On the first appeal, we reversed the trial court's granting of the defendant/insurer's motion to dismiss for failure to state a claim. On the second appeal, we reversed the trial court's summary judgment for the defendant on two bad faith refusal to pay counts and summary judgment for the plaintiff on the contract counts.

In the instant cases, the insurer "admit[ted]" at the close of the plaintiff's evidence that the plaintiff had "made out a prima facie case to recover" on the contract of insurance, but moved for a directed verdict on the bad faith counts. The trial court denied the motion. The case went to the jury on two counts of bad faith refusal to pay, and on the contract claim. The jury was out for fifty minutes and returned a verdict for the plaintiffs in the sum of $3,501,650.22, of which sum $3,500,000 was for punitive damages. The defendant filed motions for judgment notwithstanding the verdict, or in the alternative, remittitur, or in the alternative, for a new trial. The trial judge denied the motions. The question presented on this appeal is whether the evidence presented a jury question on the tort of bad faith refusal to pay an insurance claim.

THE EVIDENCE

The plaintiffs, Margaret and Roger Lavoie, are husband and wife. Mrs. Lavoie was insured as a dependent under a group policy of health and medical insurance issued by the defendant, Aetna Life Insurance Company (hereinafter Aetna). Mr. Lavoie had been a policeman for the City of Mobile, but was retired on disability because of a brain tumor. The plaintiffs lived approximately forty miles from Mobile at the time this claim arose.

Mrs. Lavoie was examined by John B. Douglas, M.D., at his office on or around 31 January 1977. Mrs. Lavoie had telephoned Dr. Douglas and requested the examination. Upon her arrival at his office, Dr. Douglas arranged for Mrs. Lavoie to proceed directly to an examination room, rather than waiting, as was customary. Dr. Douglas testified this was done because of his concern over the symptoms Mrs. Lavoie had related to him in the telephone conversation. After an examination of Mrs. Lavoie, Dr. Douglas recommended to both Mr. and Mrs. Lavoie that Mrs. Lavoie be admitted to the Mobile Infirmary Hospital. The hospital was "full" so arrangements were made for admission when a room came available. Mrs. Lavoie was admitted to the hospital on 3 February 1977.

On the day of admission, Dr. Douglas dictated a "History and Physical Summary." In pertinent part this summary reads:

"This 54 year old lady has been followed in the past for mechanical low back pain and osteoarthritis. She had not been seen in our office in about 3 years. She came in with the interval history that she had been retired for 2 years, that her arthritis had become more active over the last several months and she was having generalized arthritis pains in her back, neck and all extremities particularly in the hips, left knee and around the pelvic area. She complains of being very nervous. She said that she has been noticing some intermittent bleeding from the bowel and has a past history of diagnosis of chronic ulcerative colitis. Because of the general exacerbation of her arthritis and the apparent exacerbation of her ulcerative colitis, she is admitted at this time for evaluation and treatment.

"PAST HISTORY: She had gall bladder surgery in 1970, a fibroid tumor removed in 1946 and an exploratory laparotomy in 1953. She has a history of a couple episodes of pnemonia [sic] but denies history of peptic ulcer, hepatitis, rheumatic fever, diabetes or hypertension, she has a questionable history of glaucoma, does not know the severe state of it. She has had episodes of chest pain in the past, about 4 years ago, none recently. No diagnosis or EKG's were done at the time of the pain.

"FAMILY HISTORY: Positive for hypertension and she has a brother who had 1 episode of what was called inflammatory arthritis as a child. No family history of cancer, diabetes or early heart disease."

Mrs. Lavoie was in the hospital a total of twenty-three days. During this period, Dr. Douglas, or his partner, ordered medical diagnostic tests to be completed on Mrs. Lavoie; an electroencephelogram (EEG), and electrocardiogram (EKG), a gastrointestinal series (GI series), a barium enema, a computer assisted tomogram (CAT scan) and various other tests. During her stay in the hospital, Mrs. Lavoie complained of headaches, dizziness, diarrhea, nervousness, problems with her family, blood in her stools, pain in her abdomen, joint pain, and shortness of breath. The evidence shows that Aetna had knowledge of these complaints before it finally denied the claim.

Dr. Douglas dictated a "discharge summary," after Mrs. Lavoie's discharge on 26 February 1977, which reads in full:

"54-year-old white female who was admitted with an abdominal pain, osteoarthritis and mechancial low back pain. She had not been seen in my office for three years when she came in because of general aching and particularly saying that she had had intermittent bleeding from the bowel and had a past diagnosis of chronic ulcerative colitis. We are unable to substantiate this diagnosis in the hospital. In fact, she had a negative GI workup. Her musculoskeletal complaints while she does have some normal amount of osteoarthritis varying from place to place for her age, it is not really outstanding and her general situation suggests that she considerable [sic] psychogenic overlay to her somatic symptoms, and therefore, they are somewhat exaggerated. She has been placed on Mellaril in depth. She has shown some suggestion of slight improvement in the hospital but continues to somaticize her symptoms rather vigorously. It has been explained to her that this is primarily a nervous problem and we have mentioned that she may need the help of a psychiatrist if she does not continue to improve following discharge.

"DISCHARGE DIAGNOSIS: OSTEOARTHRITIS, MILD PSYCHOPHYSIOLOGIC REACTION MANIFESTED BY ABDOMINAL PAIN."

On 3 March 1977, the hospital completed the appropriate forms and forwarded them along with the two summaries, the physician's progress notes and various other data such as the consultation on the EKG, to the Aetna office in Mobile. Included was a bill for $3,028.25. The supervisor of the Mobile office of the insurer, Alice Murphy, sent a request to the hospital for further information on 24 March 1977. This letter in pertinent part read:

"It would be greatly appreciated if you would send complete hospital records including, admitting and discharge summary, nurses and physicians notes."

On 5 April 1977, before receiving anything further from the hospital, Brenda Harris, a claim worker for Aetna, forwarded the information she had from the hospital to Jean Becker, a "Senior Claims Examiner," in Aetna's office in Hartford, Connecticut. To the information forwarded, Harris appended a memorandum stating:

"In our opinion a 23-day confinement for the diagnosis was not necessary. Hospital records do not indicate anything to the contrary."

In pertinent part, Aetna's response reads:

"DATE: April 27, 1977

"...

"This file has been reviewed with a member of the Medical Dept. On the basis of the limited information submitted, this confinement does not appear to have been medically necessary. We feel this patient could have been evaluated and treated on an out-patient basis.

"Several of the X-ray and lab procedures performed are not usual and customary for the diagnsois given. These include the CAT scan, EEG and EKG. Since the City of Mobile policy clearly limits coverage to services and supplies which are reasonably necessary for the diagnosis and treatment of nonoccupational disease or injury, room and board charges as well as the aforementioned miscellaneous charges must be denied. Thank you."

The Lavoies received notification, by a letter from Harris, on 3 June 1977, which reads in full:

"After having this file reviewed by our Medical Department we must, at this time, deny benefits for room and board charges.

"From the information we submitted to them it appears the evaluation and test could have been performed on an out-patient basis. Also, we must deny charges for the CT Brain Scan, EEG and EKG since they are not usual and customary procedures for the diagnosis given.

"If you have any questions please feel free to contact this office."

The defendant then paid $1,057.20 to the hospital for the medical diagnostic tests, other than the EEG, EKG, and CAT scan, and did not pay for physical therapy and a back brace. Dr. Douglas was paid $305.20 and the Lavoies were paid $217.34 directly. The parties stipulated the remainder on the claim was $1,650.22.

On 4 November 1977, Dr. Douglas wrote a very detailed medical report to Thomas J. Stein, Mrs. Lavoie's attorney at the time: It reads:

"Mrs. Lavoie was first seen here in 1973 and we continued seeing her on a regular basis for several months until January of 1974. At that time she had complaints of 'muscular rheumatism.' She was concerned about severe medical illnesses such as muscular distrophy and multiple sclerosis because of her muscular pains. She was reassured that her problem was...