Fletcher v. Western National Life Ins. Co.

Decision Date07 August 1970
Citation47 A.L.R.3d 286,10 Cal.App.3d 376,89 Cal.Rptr. 78
CourtCalifornia Court of Appeals Court of Appeals
Parties, 47 A.L.R.3d 286 U. L. FLETCHER, Plaintiff and Respondent, v. WESTERN NATIONAL LIFE INSURANCE CO. et al., Defendants and Appellants. Civ. 9281.
OPINION

KAUFMAN, Associate Justice.

This controversy arises out of the conduct of defendants Western National Life Insurance Company (hereinafter Western National) and its claims supervisor Tom R. Amason, with respect to a disability insurance policy issued by Western National to plaintiff.

The complaint, as amended, consisted of three counts. The first sought a declaration that plaintiff was entitled to monthly payments of $150 under the 'injury' provision of the policy so long as plaintiff should be totally disabled, up to a maximum of thirty years. The second sought compensatory and punitive damages against both defendants for their alleged fraud in inducing plaintiff to buy the policy. The third sought compensatory and punitive damages against both defendants for their alleged intentional infliction upon the plaintiff of emotional distress. 1

At the commencement of a jury trial, defendant Western National stipulated to judgment in favor of plaintiff on the first cause of action for declaratory relief, and the case proceeded to trial on the second and third causes. At the conclusion of plaintiff's case, the court granted defendants' motions for nonsuit with respect to the second cause of action for fraud in the inducement. 2

The case was submitted to the jury on the third cause of action for intentional infliction of emotional distress. The jury returned a verdict in favor of plaintiff, awarding him $710,000 in damages: $60,000 compensatory damages, $10,000 punitive damages against defendant Amason, and $640,000 punitive damages against defendant Western National. Defendants moved for judgment notwithstanding the verdict and for a new trial. The motions for judgment notwithstanding the verdict were denied, as was defendant Amason's motion for new trial.

Western National's motion for a new trial was conditionally granted on the ground of excessive damages. Plaintiff, however, accepted a remission of the punitive damage award against Western National to the sum of $180,000, and the motion for new trial was thereupon denied. Defendants appeal from the judgment, as modified, and from the order denying their motions for judgment notwithstanding the verdict. (Code Civ.Proc., § 904.1(d).)

Defendants' Contentions

Defendants' contentions are numerous, but, basically group themselves into four major propositions: first, that defendants' motions for judgment notwithstanding the verdict should have been granted because plaintiff failed to prove facts constituting a prima facie case of intentional infliction of emotional distress; second, that, fundamentally, plaintiff's action sounds in contract and that, therefore, punitive damages were impermissible in this case and that, in any event, Civil Code, section 3294 authorizing punitive damages is unconstitutionally vague; third, that prejudicial error is to be found in the jury instructions; and fourth, that the damage awards, both compensatory and punitive, are excessive.

Denial of Judgment Notwithstanding the Verdict

A motion for judgment notwithstanding the verdict may be granted only if a motion for a directed verdict should have been granted. (Code Civ.Proc., § 629; Vargas v. Ruggiero, 197 Cal.App.2d 709, 714, 17 Cal.Rptr. 568, 570.) The court's power to direct a verdict is the same as its power to grant a nonsuit. (Gindraux v. Maurice Mercantile Co., 4 Cal.2d 206, 208--209, 47 P.2d 708, 710; Vargas v. Ruggiero, Supra.) "A nonsuit may be granted only where, disregarding conflicting evidence on behalf of the defendants and giving to plaintiff's evidence all the value to which it is legally entitled, therein indulging in every legitimate inference which may be drawn from that evidence, the result is a determination that there is no evidence of sufficient substantiality to support a verdict in favor of the plaintiff. (Citations.) * * * on any tenable theory of liability." (Vargas v Ruggiero, Supra; Estate of Lances, 216 Cal. 397, 400--401, 14 P.2d 768.)

The Facts

At the time of trial in February 1968, plaintiff was 41 years old, had been married 20 years and was the father of eight children ranging in age from 8 to 19 years, seven of whom were then attending school. Plaintiff has only a fourth grade education, and prior to his disablement, was employed as a scrap operator for a rubber company, which employment required heavy manual labor. He was earning approximately $289 per week by working 70 to 80 hours per week.

In 1963 plaintiff was interested in purchasing several types of insurance protection for himself and his family, including disability insurance, and purchased the subject disability insurance policy from defendant Western National. The policy provided for payments of $150 per month to plaintiff should he become totally disabled because of sickness or injury. In the event of sickness, such payments were limited to a maximum period of two years. In the event of injury, the maximum period of payment was 30 years.

Plaintiff paid the premiums on the policy regularly, and it was in force in January 1965 when he had an accident at work while lifting a 361 pound bale of rubber. He sustained various injuries, generally in the area of his low back and legs. In the course of the medical examinations related to the accident, it was discovered that plaintiff had a hernia for which he was surgically treated. This kept him off work intermittently until June 8, 1965. When he returned to work after the hernia operation, he continued to have trouble with his back and was eventually placed on disability by his physician and terminated by his employer on or about June 28, 1965.

Plaintiff filed a workmen's compensation claim and, as a result, was examined and treated by a considerable number of doctors, including an independent medical examiner. It would unduly prolong this opinion to set forth the findings of each of the physicians. It is fair to say, however, that there was virtually unanimous agreement that plaintiff was disabled because of an injury to his back resulting from the accident of January 1965. Some of the diagnoses were reported to Western National on its proof of loss or continuation of disability forms. Others became known to Western National through an investigation by a private investigator employed by it. Suffice it to say that almost all of the doctors' reports reached Western National's file in one form or another.

Late in 1965 plaintiff was hospitalized for a myelogram after which his attending physician and several consulting physicians recommended surgical fusion of a disc in his spine. These recommendations were based on the doctors' diagnoses of a herniated intervertebral disc with probable irritation of spinal nerves. With respect to this recommended surgery, on March 2, 1966, Western National received from its private investigator a letter from one of the physicians responding to an inquiry by the investigator in which it was stated:

'I am sure that you are well aware of the fact that Mr. Fletcher has a large family and if such surgery were performed subsequently his employment outlook would be very poor to say the least.'

Shortly after the accident in January 1965, plaintiff filed with Western National a proof of loss, and the company promptly commenced monthly payments of $150 to plaintiff. During the period of time plaintiff was off work as a result of the hernia condition, payments were made under the sickness provision of the policy because, under the policy, disability due to hernia was payable as a sickness.

Western National was informed, however, that plaintiff returned to work on June 8, 1965 and that his difficulty thereafter related to his back. On August 25, 1965 plaintiff submitted to Western National another proof of loss containing a report from plaintiff's attending physician to the effect that plaintiff was disabled because of his back condition resulting from the injury in January 1965. Pursuant thereto, monthly payments to plaintiff were resumed, apparently under the injury provision, although plaintiff was not at that time notified under which provision of the policy payments were being continued.

In May 1966, defendant Amason became Western National's claims supervisor, and faced with the bleak prospect disclosed by the report from the private investigator, he, inferably, immediately set about to find some way of minimizing or avoiding plaintiff's claim.

Notwithstanding the innumerable medical reports indicating that the disability was attributable to plaintiff's back condition resulting from his injury in January 1965, the myelogram report, the diagnoses of herniated intervertebral disc and the recommendation of surgical fusion of the disc, Amason concluded that the claim should be paid under the sickness provision of the policy which exposed the company to liability for only two years as opposed to the injury provision which exposed the company to liability for 30 years, a difference in exposure of more than $50,000.

An interoffice memorandum prepared by Amason on May 17, 1966 discloses that he seized upon the diagnosis of one of the consulting physicians 'acute derangement of low back, associated with irritation of the cauda equina, 3 probably associated with injury to a low lumbar intervertebral disc,' and concluded '(a)n equinic condition is a mild form of glanders sometimes seen in man and contracted from horses. Therefore, it would appear we should pay this man under the sickness provision of his...

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