Borden v. Paul Revere Life Ins. Co.

• Citation: 935 F.2d 370
• Decision Date: 01 April 1991
• Docket Number: Nos. 90-2006,90-2025,s. 90-2006
• Parties: Ronald BORDEN, et al., Plaintiffs, Appellants, v. The PAUL REVERE LIFE INSURANCE COMPANY, Defendant, Appellee. Ronald BORDEN, et al., Plaintiffs, Appellees, v. The PAUL REVERE LIFE INSURANCE COMPANY, Defendant, Appellant. . Heard
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

Page 370

935 F.2d 370

Ronald BORDEN, et al., Plaintiffs, Appellants, v. The PAUL REVERE LIFE INSURANCE COMPANY, Defendant, Appellee.

Ronald BORDEN, et al., Plaintiffs, Appellees, v. The PAUL REVERE LIFE INSURANCE COMPANY, Defendant, Appellant.

Nos. 90-2006, 90-2025.

United States Court of Appeals First Circuit.

Heard April 1, 1991.

Decided May 30, 1991.

Jeffrey S. Michaelson, with whom Julius C. Michaelson and Michaelson & Michaelson were on brief, for plaintiffs.

Jeffrey C. Schreck, with whom Flanders & Medeiros, Inc. was on brief, for defendant.

Before CAMPBELL, SELYA and CYR, Circuit Judges.

SELYA, Circuit Judge.

Invoking diversity jurisdiction, 28 U.S.C. Sec. 1332, Ronald Borden (Borden) sued Paul Revere Life Insurance Company (Revere), a Massachusetts corporation, in Rhode Island's federal district court. ¹ Revere counterclaimed. At trial, the jury found dupery all around and, with an assist from the judge, authored what might fairly be characterized as a split decision. After entry of judgment, both sides appealed. We believe the result is supportable and leave the parties where we found them.

I. LISTEN, MY CHILDREN, AND YOU SHALL HEAR

While the bona fides of the original ride of Paul Revere, memorialized by Longfellow, have not seriously been questioned, the present protagonists bitterly dispute whether the corporate Paul Revere took Borden for a ride, or vice versa. We limn the facts, resolving occasional evidentiary conflicts in favor of the jury's verdict.

Borden, a thirtysomething Rhode Islander, moved to Florida in 1985. He organized a frozen lemonade business, Rainbow Frosty Cup, Inc. (Rainbow Frosty). The company was housed in a fairly primitive facility which contained no offices as such. It owned a fleet of vehicles, many of which were outfitted for the curbside sale of frozen lemonade at schools, ball games, and kindred venues. At any given time, Rainbow Frosty had a handful of employees, involved chiefly in mixing the lemonade, driving the good-humor trucks, and selling the product in the field. Borden ran the show, handling all phases of the operation: formulating strategy, doing the purchasing, overseeing production, supervising distribution, managing the finances, performing manual labor, serving as a jack-of-all-emergencies, and standing in for hired hands where needed.

On October 22, 1986, Gerald Terry, an independent broker, successfully solicited Borden's purchase of a disability insurance policy, to be underwritten by Revere. The transaction was contingent on Revere's approval. Terry filled out an application based on information supplied verbally by Borden during a question-and-answer session at Rainbow Frosty's premises. Borden signed the completed form. It described Borden's duties in the vaguest of generalities ("Operate retail and wholesale frozen lemonade, management & supervision"), but stated that ninety percent of his work-related activities were supervisory in nature. In response to the application's meticulously detailed section regarding medical history, Borden reported only a mild ankle sprain, suffered three years previously, from which he had fully recovered.

The underwriting protocol which Revere used for policies of this sort involved slotting an insured into a particular class based in considerable part on the insured's occupation and duties. When Borden's application was received at Revere's home office, Joan Megarry, an underwriter, responding primarily to Borden's status as business owner, the amorphous description of his job duties, and his "ninety percent supervisory" role at Rainbow Frosty, classified Borden's application "2-A." Megarry did not order a personal history interview to supplement the application, even though computer analysis indicated that, under Revere's internal operating procedures, such an interview was warranted. A standard 2-A policy was issued retroactive to October 12, 1986. The monthly premium was $116.92; the benefit period ran through age 65; and the benefit amount was $1400 per month, with a social security supplement in the event of total disability.

Borden paid his premiums regularly. On July 26, 1987, he injured his back while unloading a heavy bag of sugar from a storage truck at Rainbow Frosty. He promptly filed a claim for disability benefits. On the claim form, he described his occupation as "Owner--Operator" and listed his duties as "Loading--unloading supplies--mixing and lifting stainless steel buckets containing product, ordering, driving--All phases of operation." When Borden's claim was scrutinized at Revere's home office, the reviewer noticed that the job description seemed much more "physical" than the policy application led one to believe. A Revere field agent, William Cooper, was dispatched to Florida. In the meantime, as monthly progress reports were received and reviewed (the plaintiff and his physician being obliged to sign and submit same), Revere would forward each month's benefit check. A seven to ten day lag time was customary.

Based on what Borden told him during the ensuing interview, Cooper prepared a written description of Borden's true duties at Rainbow Frosty--duties which included a steady diet of heavy lifting and other operose tasks. After perusing Cooper's report, Revere concluded that Borden had grossly overstated the executive aspects of his work on his original application, thereby triggering issuance of the "wrong" policy. Consequently, Revere decided to replace the 2-A policy with an A policy. ² Its decision was entirely unilateral; rather than notifying Borden immediately of its proposed course of action, Revere simply withheld benefit payments until an agent could conveniently visit him.

On March 22, 1988, a Revere representative, Richard Boutilier, called unannounced on Borden (who by then had returned to Rhode Island). Boutilier's mission was to get the insured to sign a new application, backdated to the time of the original application, so as to support the planned policy switch. The new application was to have a different, more accurate, description of Borden's duties, conforming to the company's prototype for an A policy. Boutilier told Borden that the original policy should not have been issued and that a substitution was going to be made. Boutilier completed the new application at Borden's home and in Borden's presence, but without Borden's participation, copying much of the first application but changing the job description. The new application listed Borden's occupation as "Business Owner" and his responsibilities as "Mixing lemonade, delivering, filling in for employees on all jobs." There was no percentage breakdown between white-collar and blue-collar tasks. According to Borden, the neoteric description understated his management duties and he told Boutilier as much. When Borden complained that his current payment was overdue, Boutilier came to the rescue, arranging on the spot and with considerable flourish for the check to be sent. Boutilier also waived filing of the next month's progress report.

Although Borden signed the new application, he refused to surrender the original policy. Boutilier left the meeting realizing that Borden was not completely sold on the policy swap. Undeterred, Boutilier delivered the replacement policy that summer. Borden was unhappy. Beginning in September 1988, he made numerous complaints to Revere about the policy substitution and recurrent delays in payment. Beginning in February 1989, Revere insisted that Borden fill out new, more intrusive, monthly progress reports as a condition to receiving benefits. This proved to be the last straw. Borden filed suit against Revere on March 8, 1989.

II. THE SUIT

In his complaint, the plaintiff claimed that Revere committed fraud, acted in bad faith, invaded his privacy, and intentionally inflicted emotional distress. The defendant denied the charges. Discovery began. Early in 1990, Revere learned for the first time that Borden had experienced, and received medical care for, chronic back problems, not previously disclosed. Eventually, Revere documented that Borden suffered from myriad back, neck and head injuries between 1980 and 1984; that he was disabled for some months; and that he had received disability payments from another insurer on that account. The defendant stopped paying benefits. Borden amended his complaint. Revere counterclaimed, alleging misrepresentation and seeking a ruling that both the original and replacement policies were void. Borden then added a breach of contract claim and some new bad faith claims.

The case was tried to a jury. At the close of the evidence, the court instructed the jury on various liability issues, reserving the question of damages. In respect to Borden's amended complaint, the jury answered certain special questions as follows:

1. Did the defendant defraud Mr. Borden by substituting the Replacement Policy for the Original Policy?

Answer: Yes.

2. [D]o you find Paul Revere breached its contract in stopping benefit payments to the plaintiff Borden?

Answer: No.

3. Is the defendant guilty of a bad faith refusal to pay Mr. Borden or to timely perform its obligations under the insurance policy?

Answer: No.

4. Is the defendant guilty of intentionally inflicting emotional distress on the [plaintiff]?

Answer: Yes.

5. [D]id the defendant's conduct cause Mrs. Borden to suffer a loss of consortium?

Answer: No.

6. Was Mr. Borden's privacy invaded?

Answer: No.

Although Borden testified, inter alia, that he had severe memory problems and did not remember much of his medical history, the jurors' collective memory was vivid; in respect to Revere's counterclaim, they answered a special interrogatory as follows:

. Did Mr. Borden fail to disclose certain significant facts to Paul Revere at the time the application for the Original Policy was submitted, which facts were material to its decision regarding Mr. Borden's application?

Answer: Yes.

After...