Corrente v. Fitchburg Mut. Fire Ins. Co.
| Decision Date | 21 April 1989 |
| Docket Number | No. 87-333-A,87-333-A |
| Citation | 557 A.2d 859 |
| Parties | Barbara CORRENTE, v. FITCHBURG MUTUAL FIRE INSURANCE COMPANY. ppeal. |
| Court | Rhode Island Supreme Court |
This case comes before us on the appeal of Fitchburg Mutual Fire Insurance Company (Fitchburg) from a judgment entered in the Superior Court in favor of Barbara Corrente (Corrente) in the sum of $16,650 (together with statutory interest in the sum of $10,989, making a total judgment of $27,639) in compensatory damages for theft loss, and $25,000 in punitive damages as a result of alleged bad faith on the part of Fitchburg in settling this claim. We reverse and remand. The facts of the case insofar as pertinent to this appeal are as follows.
On December 21, 1979, Fitchburg issued a homeowner's policy to Corrente. Shortly after the policy was issued, a "scheduled personal property endorsement" was added covering certain jewelry and silverware. This endorsement covered silverware appraised by a representative of Ross-Simons Jewelers on an "as told to me" basis in the amount of $12,630.50 and jewelry appraised by a representative of the same jewelry firm on the basis of inspection in the sum of $5,725.
In January 1981 Corrente submitted a claim to Fitchburg based on theft loss arising out of a break into her residence. This claim was made for six pieces of jewelry on the scheduled property. The claim was paid, and six pieces of jewelry were deleted from the policy. This reduced the total jewelry coverage to $4,615.
On or about August 3, 1981, Corrente's apartment was again subjected to a forceable break, and certain jewelry and all her scheduled silverware were stolen. Immediately thereafter, Corrente executed an "insured's statement and claim form, theft burglary loss," and filed it with her insurance agent. This form set forth the items lost, together with the age of the items and their appraised value where applicable, and claimed the total sum of $17,650.50. Most of the items listed were gifts. Other items listed were scheduled as having been paid for in cash. Attached to the claim form was a police report of the North Providence police department concerning the break.
Approximately five months later, Fitchburg requested that Corrente be interviewed by two of its investigators. One interview was recorded on tape and, when reduced to writing, covered about forty-two pages of transcript (as presented at the trial). Throughout this interview Corrente stated that she was unable to say where and when the silverware had been purchased, that it was a gift from her parents, and that much of her jewelry had been purchased in Italy and given to her over the years by her mother. When the investigators inquired about obtaining information concerning these items from her parents, Corrente flatly refused on the grounds that her father had recently suffered a heart attack and had not been told about the loss. Consequently she forbade any attempt to obtain any information from her parents.
The investigators posed some tactless and unproductive questions concerning whether any of the jewelry had been smuggled into the country and indicated that the questioning had "pretty well torn [her] apart." Corrente testified that when the tape recorder was turned off to turn the tape over, one of the investigators suggested that she might thereafter be followed. However, an examination of the interview as a whole clearly indicates that the investigators gained no more specific knowledge after questioning Corrente than they had at the beginning. No information was given concerning the place of purchase or the current value of either the jewelry or the silverware, though it was generally suggested that the silverware had been purchased at Ross-Simons Jewelers or Tilden-Thurber Jewelers. Thereafter, Fitchburg requested that Corrente sign another statement, and she then hired an attorney who prepared an affidavit that was executed on April 15, 1982. This affidavit set forth the facts surrounding the incident, stated that the articles were gifts from her parents and grandparents, and asserted that the total value of the stolen items was $17,650.50. She stated that she had no receipts for their purchase.
On April 30, 1982, Fitchburg requested that Corrente give a statement under oath at the office of its attorney. Although Corrente received this notice and was advised by her counsel that under the terms of her policy she was required to comply with any reasonable request for a deposition, she refused to do so on the ground that she would not submit herself to an ordeal of the type that she had undergone in her interview with Fitchburg's investigators.
On July 7, 1982, Corrente submitted a "sworn statement in proof of loss." This proof of loss set forth generally the total amount of the claim in the sum of $17,650.50, and deducted the amount of $100 as required by the policy, making a total claim of $17,550.50. The proof of loss did not schedule the items upon which the claim was based, nor did it set forth the place of purchase for any items. It did not set forth the amount of depreciation or the value of said items at the time of the loss. This proof of loss was rejected on July 30, 1982, by counsel for Fitchburg on the ground that Corrente had refused to submit to an examination under oath and because "the amounts claimed in the proof of loss are in excess of the actual loss allegedly sustained and [because she had] failed to prove ownership or proper title to those items." The instant action was commenced that same day.
The complaint consisted of two counts. The first count sought to recover the monetary loss pursuant to the contract. The second count sought punitive damages based upon the company's bad faith in its refusal to honor its contract of insurance.
Fitchburg asserts a number of arguments in support of its appeal. These arguments will be considered in the order of their significance to this opinion rather than in the order in which they are raised in Fitchburg's brief.
We have stated in Bartlett v. John Hancock Mutual Life Insurance Co., 538 A.2d 997 (R.I.1988), that the most practical resolution of discovery and prejudice problems when a bad-faith claim is combined in a single action with a breach-of-contract claim on the policy is that "trial justices, or motion-calendar judges who encounter this situation, exercise their authority pursuant to Rule 42(b) to sever the contract claim from the bad-faith claim and limit discovery to the contract claim until that claim is resolved in plaintiff's favor." Id. at 1002. It is true that we were dealing in Bartlett with a discovery problem. However, we also adopted the rule in Bartlett that had been stated earlier in National Savings Life Insurance Co. v. Dutton, 419 So.2d 1357 (Ala.1982):
'(a) an insurance contract between the parties and a breach thereof by the defendant;
'(b) an intentional refusal to pay the insured's claim;
'(c) the absence of any reasonably legitimate or arguable reason for that refusal (the absence of a debatable reason);
'(d) the insurer's actual knowledge of the absence of any legitimate or arguable reason;
'(e) if the intentional failure to determine the existence of a lawful basis is relied upon, the plaintiff must prove the insurer's intentional failure to determine whether there is a legitimate or arguable reason to refuse to pay the claim.
" " (Emphasis added.) 419 So.2d at 1361.
This definition was added to our earlier definition contained in Bibeault v. Hanover Insurance, 417 A.2d 313 (R.I.1980), where we held that "[t]o show a claim for bad faith, a plaintiff must show the absence of a reasonable basis for denying benefits of the policy and the defendant's knowledge or reckless disregard of the lack of a reasonable basis for denying the claim." Id. at 319 (quoting Anderson v. Continental Insurance Co., 85 Wis.2d 675, 691, 271 N.W.2d 368, 376 (1978)).
In effect, we cited with approval the test adopted by the Supreme Court of Alabama in Dutton that "[i]n the normal case in order for a plaintiff to make out a prima facie case of bad faith refusal to pay an insurance claim, the proof offered must show that plaintiff is entitled to a directed verdict on the contract claim and, thus, entitled to recover on the contract claim as a matter of law." Bartlett, 538 A.2d at 1002 (quoting Dutton, 419 So.2d at 1362).
Since the burden of proof on a bad-faith claim is so formidable, we are of the opinion that whether or not a discovery issue is involved, it is inherently prejudicial for a trial justice to decline to sever that claim from a breach-of-contract claim. In...
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