Eichenseer v. Reserve Life Ins. Co.
| Decision Date | 05 September 1989 |
| Docket Number | No. 88-4421,88-4421 |
| Citation | 881 F.2d 1355 |
| Parties | Patricia Stephenson EICHENSEER, Plaintiff-Appellee, v. RESERVE LIFE INSURANCE COMPANY, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
L.F. Sams, Jr., John S. Hill, and Donna M. Barnes, Tupelo, Miss., for defendant-appellant.
Dewitt T. Hicks, Jr., and Thomas L. Kesler, Columbus, Miss., for plaintiff-appellee.
Appeal from the United States District Court for the Northern District of Mississippi.
Before RUBIN, POLITZ and JOHNSON, Circuit Judges:
In the instant diversity action, appellant Reserve Life Insurance Company appeals a final judgment in favor of appellee Patricia Eichenseer on the claim of Eichenseer alleging bad faith and gross negligence on the part of Reserve Life in denying Eichenseer health insurance benefits under a major medical insurance policy issued by Reserve Life. Following a bench trial, the district court awarded Eichenseer $1,000 in extra contractual damages and $500,000 in punitive damages. 682 F.Supp. 1355. Persuaded that the judgment of the district court is consistent with the guarantees enumerated in the United States Constitution, as well as Mississippi law in this area, we affirm.
On January 5, 1983, appellant Reserve Life Insurance Company issued a major medical insurance policy to appellee Patricia Eichenseer. In applying for the above policy, Eichenseer informed Reserve Life insurance agent Sue Wilson that her regular physician was Dr. L.R. Murphree, but that she had not visited Dr. Murphree in recent months. Further, as part of her application for medical insurance with Reserve Life, Eichenseer executed a medical release which authorized Reserve Life to contact Dr. Murphree or any other doctor of Eichenseer to verify the condition of her health. Sue Wilson subsequently contacted Dr. Murphree on behalf of Reserve Life to verify the health condition of Eichenseer, whereupon Dr. Murphree informed Wilson that "everything was fine." After receiving the above information from Dr. Murphree, Wilson collected the appropriate premium payment from Eichenseer and thereafter, informed Eichenseer that she was insured.
Eighteen days after the effective date of the Reserve Life medical insurance policy, Eichenseer was admitted to the hospital by Dr. Murphree for severe abdominal pain. On the hospital admission sheet, Dr. Murphree noted the following:
Ch[i]ef Complaint: Pain [i]n the lower abdomen.
present illness: The pain has been present in the lower abdomen in period for the last 2-3 years. This attack started about three days ago and has become progressively worse. She has occasional headaches. The head is hurting now, some sore throat. Occasional cough which she contributes to smoking. Appetite is terrific. Bowels have not been moving well in the last few days. Nicturia 2-3 times at night.
(emphasis added). Eichenseer remained in the hospital for a total of sixteen days due to her condition. During the course of her stay, a sonogram was performed revealing the possible presence of an adnexal cyst, endometriosis, or pelvic inflammatory disease. Ultimately, Dr. Murphree performed a total hysterectomy on Eichenseer after which Eichenseer was discharged from the hospital on February 1, 1983. On his discharge summary for Eichenseer, Dr. Murphree diagnosed the condition of Eichenseer as acute pelvic inflammatory disease, but noted the presence of peritonitis, chocolate cysts, tubo-ovarian abscesses, chronic cervicitis, and massive adhesions, indicating the presence of endometriosis.
Thereafter, Eichenseer received $6,658.35 in medical bills which she submitted to Reserve Life in late February for payment. Upon receipt on February 28, 1983, of the above bills, Reserve Life established a work sheet for Eichenseer's claim and forwarded the file to the appropriate department for examination. After Eichenseer signed a "proof of claim" form on March 23, 1983, Reserve Life forwarded to Eichenseer on April 21, 1983, payment for those of her hospital bills covered under a Reserve Life policy previously purchased by Eichenseer's parents on which Eichenseer was listed as an insured. Reserve Life, however, formally denied on June 2, 1983, the claim of Eichenseer submitted under the major medical insurance policy purchased by Eichenseer from Sue Wilson in January 1983. Reserve Life denied the above claim on the basis that Eichenseer had suffered in the hospital from a pre-existing illness which was not covered by the terms of the policy. The following is an account of the relevant facts, as found and set forth in the extensive opinion of the district court, which occurred after Reserve Life denied the claim by Eichenseer for health insurance benefits under her major medical policy.
Plaintiff (Eichenseer) called Reserve Life on June 21, 1983, and requested an explanation for the denial. Al Vick, a Reserve Life employee, told Eichenseer that her file was still with the claims department, but that he would call her back once he had been able to find her file.
Unbeknownst to the public, Reserve Life was by mid-1983, experiencing severe organizational problems. Due to the unexpected success of a recently offered insurance policy, numerous claims were being received by Reserve Life in addition to the normal number of claims. The employees, faced with the task of matching claim correspondence with policyholders' files, often lost documents or were unable to find and file them for weeks at a time. Although the company has since computerized its operations, claims submitted in 1983 were often processed manually and mishandled.
Dena Marie Brannon was the Reserve Life employee responsibile for handling Eichenseer's claim. Prior to denying her claim, Brannon had obtained only Dr. Murphree's admission summary and had relied solely on the following statement to support a denial: Although the documents then held also listed as an admitting diagnosis "Acute PID," Brannon interpreted the reports to indicate that Eichenseer had been suffering from her illness since 1980-81. Importantly, Brannon did not consult with either Eichenseer or Dr. Murphree before making this decision and chose not to consult with an in-house physician retained by Reserve Life on a part-time basis.
Although Eichenseer made repeated telephone calls to Reserve Life during the following weeks, she received no relief. On August 22, 1983, after receiving one such call, Reserve Life employees wrote a letter to Dr. Murphree requesting Eichenseer's medical records from his clinic. These records were sent to the insurer in a timely fashion, but were apparently misplaced due to the ongoing organizational crisis.
Eichenseer called Reserve Life again on September 20, 1983, to inquire about the status of her claim. The employee who talked to Eichenseer was unable to find either the file or her clinical records, but when asked if the records had been received, responded by stating that the file was still with the claims department. An exhaustive "stop search" was conducted for the records, but once again ended in failure.
Eichenseer again called Reserve Life on October 24, 1983, and asked Al Vick about her claim. Vick, unable to find the clinical records, told Eichenseer that they had been lost. Eichenseer volunteered to send additional copies to him immediately, and Vick said that would be okay. A package containing these records was sent by registered mail to the insurer by the end of the day.
Al Vick apparently failed to inform Dena Brannon of his conversation with Eichenseer. On October 25, 1983, Brannon wrote Eichenseer a second letter denying her claim on the ground of pre-existing illness. This denial was made despite the absence of the clinical records, and neither Eichenseer nor medical authorities had been consulted in the interim. Eichenseer's plea for officials to check with her out-of-state physician was likewise rejected.
Dr. Murphree's clinical records were received by Reserve Life on October 26, 1983. According to Jerry Jenkins, Dena Brannon's supervisor, no one saw the records except Brannon. Receipt of the records was not acknowledged, and Brannon failed to communicate with Eichenseer for the next five weeks. When asked to explain this performance, Jenkins explained that it was due to mismanagement.
By late 1983, hospital officials had been unsuccessful in their attempts to collect for Eichenseer's hospital stay. Eichenseer's bill was turned over to a local collection agency. She began to receive telephone calls from the agency's employees at work and at home late at night. Already financially troubled, the calls at work forced Eichenseer to lower her production level and incur the wrath of her supervisors for receiving personal calls on company time. Eichenseer informed Reserve Life of her troubles during her periodic telephone calls; interestingly, no mention of this can be found in the telephone memos contained in her claims file.
On December 13, 1983, Dena Brannon wrote Eichenseer acknowledging receipt of Dr. Murphree's clinical records. Brannon stated that Reserve Life could not consider payment of Eichenseer's claim unless and until Dr. Murphree altered the hospital record to clear up the confusion over the "2-3 years" remark. Brannon futher requested that Eichenseer send certified copies of the amended record to Reserve Life in order to allow a medical consultant to review her case.
Eichenseer's response to this letter was twofold. First, she asked Dr. Murphree to comply with Reserve Life's new request. Second, she informed her father of her continuing troubles, and he decided to hire an attorney to represent her.
Dr. Murphree initially declined to alter the hospital records as requested. Convinced that such a change was not ethically permissible, he...
To continue reading
Request your trial
-
McCullough v. Golden Rule Ins. Co.
...by financial responsibility plus, if action was willful and wanton, punitive retribution. Witness recent cases, Eichenseer v. Reserve Life Ins. Co., 881 F.2d 1355 (1989), reh'g denied 894 F.2d 1414 (5th Cir.1990) (medical policy denial caused by abjectively mishandled claim procedure); Unit......
-
In re Air Crash Disaster at Sioux City, Iowa, MDL-817.
...1069 (1990). A categorical bar of claims for punitive damages is simply not supported by the case law. Eichenseer v. Reserve Life Insur. Co., 881 F.2d 1355, 1365 (5th Cir.1989). Defendants argue that the circumstances of this case preclude fair application of punitive damages. Defendants co......
-
Germanio v. Goodyear Tire & Rubber Co.
...to consider the due process challenge to punitive damages upheld an award granted under Mississippi law. Eichenseer v. Reserve Life Ins. Co., 881 F.2d 1355, 1367 (5th Cir.1989), reh. denied en banc, 894 F.2d 1414 (5th Cir.1990). The Eichenseer court confined its analysis to the specific pun......
-
Eichenseer v. Reserve Life Ins. Co.
...for the insurance company to deny coverage; second, if no such reason appears, was the denial motivated by malice or recklessness. Eichenseer, 881 F.2d at 1360. If the jury finds the requisite state of mind, they are entitled to award punitive damages based upon multiple factors: (1) Such a......