Arellano v. Primerica Life Ins. Co.

• Decision Date: 12 August 2014
• Docket Number: No. 1 CA–CV 13–0011.,1 CA–CV 13–0011.
• Citation: 235 Ariz. 371,332 P.3d 597,693 Ariz. Adv. Rep. 13
• Court: Arizona Court of Appeals
• Parties: Miriam ARELLANO, a widow, Plaintiff/Appellee/Cross–Appellant, v. PRIMERICA LIFE INSURANCE COMPANY, CO., a Massachusetts corporation; Donald Edward Page, Jr. and Jane Doe Page dba Primerica Financial Services; Huel Cox, Jr. dba Cox & Associates and Primerica Financial Services, Defendants/Appellants/Cross–Appellees.

235 Ariz. 371

332 P.3d 597

693 Ariz. Adv. Rep. 13

Miriam ARELLANO, a widow, Plaintiff/Appellee/Cross–Appellant,

v.PRIMERICA LIFE INSURANCE COMPANY, CO., a Massachusetts corporation; Donald Edward Page, Jr. and Jane Doe Page dba Primerica Financial Services; Huel Cox, Jr. dba Cox & Associates and Primerica Financial Services, Defendants/Appellants/Cross–Appellees.

No. 1 CA–CV 13–0011.

Court of Appeals of Arizona, Division 1.

Aug. 12, 2014.

Frederick C. Berry, Jr., PC By Frederick Curtis Berry, Jr., Schneider & Onofry, PC By Charles D. Onofry, Luane Rosen, Phoenix, Co–Counsel for Plaintiff/Appellee/Cross–Appellant.

Jennings Strouss & Salmon, PLC By John J. Egbert, Phoenix, Counsel for Defendants/Appellants/Cross–Appellees.

Presiding Judge PATRICIA A. OROZCO delivered the decision of the Court, in which Judge LAWRENCE F. WINTHROP and Judge KENTON D. JONES joined.

OPINION

OROZCO, Judge.

¶ 1 Miriam Arellano (Mrs. Arellano) brought suit against Appellants Primerica Life Insurance Company (Primerica) and several of its employees. A jury found substantially in favor of Mrs. Arellano. Primerica, Donald Edward Page, Jr. (Donald) and Huel Cox, Jr. (dba Cox and Associates) ¹ appeal (1) the trial court's ruling that the life insurance application was inadmissible; (2) the court's denial of Primerica's motion for judgment as a matter of law regarding the tort of forgery; and (3) the punitive damages award. On cross-appeal, Mrs. Arellano appeals the trial court's denial of her request for interest on unliquidated damages pursuant to Arizona Rule of Civil Procedure 68(g). For the following reasons, we affirm in part, reverse in part, and remand to the trial court with directions.

FACTS AND PROCEDURAL HISTORY

¶ 2 In October 2006, Mrs. Arellano twice met with Tammy S. (Tammy) a Primerica agent with Cox, in order to obtain life insurance for her husband, Martin Arellano (Mr. Arellano). On the second visit, Mr. Arellano completed the life insurance application (Application # 1) and medical questionnaire with the assistance of Tammy, as well as Mrs. Arellano because Mr. Arellano did not speak or write “a lot of” English. Tammy advised the Arellanos they qualified for a $100,000 life insurance policy. Tammy also took a mouth swab for lab testing from Mr. Arellano and accepted a premium payment from Mrs. Arellano.

¶ 3 Later, Mrs. Arellano contacted Tammy to explain she was having second thoughts about purchasing the policy, because the premium was too high. Another agent in the Cox office, Donald, then met with Mrs. Arellano. Donald did not meet with Mr. Arellano, who never knew Mrs. Arellano met with Donald.

¶ 4 At their meeting, Donald told Mrs. Arellano he could increase the coverage to $150,000 for a slightly higher premium. Mrs. Arellano agreed and, provided a premium payment, this time to Donald. Mrs. Arellano testified that, at the meeting's conclusion, she understood the policy was in effect immediately, based upon Donald's statement that her check was proof of coverage. Donald did not provide Mrs. Arellano a copy of a new or revised life insurance application (Application # 2). Furthermore, Donald did not ask Mrs. Arellano to sign Application # 2. Donald submitted Application # 1 and Application # 2 (collectively the Applications) to Cox for processing.

¶ 5 Because Mr. Arellano's age was incorrectly reflected ² on Application# 2, the $150,000 insurance coverage requested, and Mr. Arellano's history of hypertension, Primerica required an underwriting medical interview and additional medical tests of Mr. Arellano. Primerica's outside vendor, Examinations Management Services, Inc. (EMSI), contacted Mr. Arellano to conduct a telephone interview on January 8, 2007, to obtain necessary medical information and to arrange for the collection of required blood and urine specimens. After the EMSI representative identified herself, Mr. Arellano stated “Uh ... oh, they already got one for me.” The representative advised him she was verifying information and asked Mr. Arellano if he had spoken with Donald. Mr. Arellano responded, “Oh, no. My wife already bought some for me. At another company; I don't know where.” Upon hearing this, the representative thanked Mr. Arellano and ended the call.

¶ 6 As a result of the conversation with Mr. Arellano, the EMSI representative issued an alert to Donald's attention at the Cox office, advising him that Mr. Arellano cancelled his application. By this time, however, Donald no longer worked for Primerica. No one from Primerica ever contacted the Arellanos.

¶ 7 Mr. Arellano died suddenly on March 14, 2007. Thereafter, Mrs. Arellano submitted a claim for death benefits to Primerica. Primerica denied the claim, asserting there was no policy or coverage because Mr. Arellano failed to schedule the required medical tests and advised the EMSI representative, who in turn advised Primerica, that he was no longer interested in the coverage. Along with the denial letter, Primerica included a copy of Application # 2 that contained signatures and initials Mrs. Arellano later testified were forged.

¶ 8 Mrs. Arellano filed suit against Primerica, Tammy, Donald, and Huel claiming breach of contract and bad faith as to Primerica and insurance producer malpractice as to Tammy and Donald. After discovery, Mrs. Arellano filed an amended complaint, and added breach of contract to procure insurance against Donald; consumer fraud, fraud and negligence against Tammy, Donald, Huel and Primerica; promissory estoppel against Primerica and Donald; waiver and reasonable expectations against Primerica; forgery against Tammy, Donald and Huel; and added Huel to the insurance producer malpractice claim. Mrs. Arellano alleged her initials were forged in an attempt to reduce the policy coverage from $150,000 to $100,000. The amended complaint also alleged Mr. Arellano's signature was forged in two separate places on Application # 2. Primerica denied liability, contending that the Arellanos made material misrepresentations in the Applications and failed to satisfy the conditions necessary for the Applications to be processed and coverage issued.

¶ 9 Mrs. Arellano served an offer of judgment on Primerica for $150,000 plus costs and attorney fees of $15,000 or such other amounts determined by the court. Primerica declined the offer.

¶ 10 The case initially went to trial in January 2012. Shortly before that trial commenced, Mrs. Arellano filed a memorandum regarding the inadmissibility of the insurance applications pursuant to Arizona Revised Statutes (A.R.S.) section 20–1108 (2010). Mrs. Arellano argued that:

Primerica claims that no temporary insurance came into existence under the conditional coverage contract because the Arellanos failed to satisfy three of the conditions for coverage. One of those conditions, Condition # 1, required that all the information on the application be “true and complete.” ... Defendants claim the application contained false information....

Although [Mrs. Arellano] maintains that all information provided was accurate, whether there is a question of accuracy presupposes that Primerica can establish that the Arellanos made certain affirmative representations. If there is no admissible evidence that any untrue representations were made, then this defense fails. In this case, Defendants' only evidence on this point is the insurance application itself....

... However, Arizona law is well-established that an insurance application is not admissible in a civil action unless a copy of the application was attached to the policy when delivered.

¶ 11 The court agreed with Mrs. Arellano and ruled the Applications were inadmissible. Based upon this ruling and upon the parties' subsequent stipulation, the trial court granted a mistrial.

¶ 12 A second trial began in March 2012. Without admitting the Applications, Mrs. Arellano's handwriting expert testified that Application # 2 contained forgeries. Moreover, he testified that it was obvious some effort was made to mimic Mrs. Arellano's signature. The expert also noted that the forger misspelled Arellano, and most people do not have a problem spelling their own name.

¶ 13 The trial court dismissed: all claims against Tammy; the forgery, fraud, and consumer fraud claims against Huel; and the forgery claim against Donald.

¶ 14 The jury found in favor of Mrs. Arellano and against Primerica in the following amounts: $164,586 for the breach of contract claim; $32,000 for the forgery claim; $82,000 for the promissory estoppels claim; $57,400 for the negligence claim; $82,000 in bad faith damages; and $1,117,572 in punitive damages. Based on its determination of Mrs. Arellano's comparative fault, the jury reduced the negligence award by thirty percent to $40,180.

¶ 15 The jury found in favor of Mrs. Arellano and against Huel for $100,000 for the insurance provider malpractice claim and $73,800 for the negligence claim. Based on its determination of Mrs. Arellano's comparative fault, the jury reduced the negligence award by ten percent to $66,420.

¶ 16 The jury also found in favor of Mrs. Arellano against Donald for negligence in the amount of $49,000. Based on its determination of Mrs. Arellano's comparative fault, the jury reduced the award by forty percent to $29,400.

¶ 17 The trial court denied Primerica's motion to reduce the punitive damages award. In the final judgment, the court struck Mrs. Arellano's proposed language requesting prejudgment interest on her unliquidated claims based upon Mrs. Arellano's offer of judgment declined by Primerica. The court ruled that A.R.S. § 44–1201.D barred “pre- or post-judgment interest on punitive damage awards.”

¶ 18 Primerica, Donald and Huel timely appealed, and Mrs. Arellano timely cross-appealed. We have jurisdiction pursuant to Article 6, Section 9, of the Arizona Constitution, A.R.S. §§ 12–120.21 (2003), and –2101.A.1 (Supp.2013).

DISCUSSION

I. Admissibility of the Life Insurance Applications

¶ 19 Primerica argues...