Hansen v. State Farm Mut. Auto. Ins. Co., s. 94CA1891

• Decision Date: 25 July 1996
• Docket Number: 95CA0042,Nos. 94CA1891,s. 94CA1891
• Citation: 936 P.2d 584
• Parties: Linda HANSEN, Plaintiff-Appellee and Cross-Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellant and Cross-Appellee. . V
• Court: Colorado Court of Appeals

Page 584

936 P.2d 584

Linda HANSEN, Plaintiff-Appellee and Cross-Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY,

Defendant-Appellant and Cross-Appellee.

Nos. 94CA1891, 95CA0042.

Colorado Court of Appeals,

Div. V.

July 25, 1996.

Rehearing Denied Sept. 19, 1996.

Certiorari Granted April 21, 1997.

Cook & Lee, P.C., Stephen H. Cook, Boulder, for Plaintiff-Appellee and Cross-Appellant.

Creamer and Seaman, P.C., Thomas J. Seaman, Gregory R. Giometti, Denver, for Defendant-Appellant and Cross-Appellee.

Opinion by Judge ROY.

In this consolidated appeal, defendant, State Farm Mutual Automobile Insurance Company (State Farm), appeals a judgment entered on a jury verdict in favor of plaintiff, Linda Hansen, on her claims for unpaid PIP benefits, bad faith breach of an insurance contract, and attorney fees and interest. We reverse and remand for a new trial.

Plaintiff's claims arose from State Farm's alleged failure to investigate adequately and pay PIP benefits for injuries she suffered in two automobile accidents, one in August 1991 in which she apparently sustained a brain injury, and the other in April 1992.

State Farm refused to pay or delayed payment on a number of bills related to plaintiff's rehabilitation and suspended all payments in July 1992 after she failed to be examined by two physicians designated by State Farm, an orthopedic surgeon and a psychiatrist.

The insurance policy contained the following pertinent provisions:

REPORTING A CLAIM--INSURED'S DUTIES

....

4. Other Duties Under No-Fault, Uninsured Motor Vehicle and Death, Dismemberment and Loss of Sight Coverages.

The person making claim also shall:

....

b. be examined by physicians chosen and paid by us [State Farm] as often as we reasonably may require. A copy of the report will be sent to the person upon written request. If the person is dead or unable to act, his or her legal representative shall authorize us to obtain all medical reports and records.

....

CONDITIONS

....

2. Suit Against Us.

There is no right of action against us:

a. until all the terms of this policy have been met .... (emphasis in original)

Prior to the scheduled examination with the orthopedic surgeon, plaintiff's counsel announced in a letter to State Farm that plaintiff would be accompanied by a nurse paralegal retained by plaintiff's counsel who would observe the examination and take notes. Counsel gave no reason for this condition. The examining physician refused to permit the nurse paralegal to be present during the examination.

Plaintiff's counsel later requested the psychiatrist's curriculum vita, which was not provided by State Farm, and the plaintiff did not appear for an examination by the psychiatrist.

Following the initial problems with the physician examinations, the parties became increasingly intransigent. Plaintiff, through counsel, refused to submit to an examination by an orthopedic physician unless he was board certified, was officed in Boulder County, and did not refuse the third party observation. State Farm, even though it knew that its original physician's partner had no objection to the observer, nevertheless refused to designate any alternate physician.

Relying on the provisions of the insurance contract, State Farm discontinued payment of PIP benefits.

In March 1993, plaintiff commenced this action alleging breach of contract for failure to pay PIP benefits pursuant to § 10-4-701, C.R.S. (1994 Repl.Vol. 4A) and bad faith breach of an insurance contract.

At trial, there was evidence that plaintiff, while she had visited male health care professionals of her own choosing unaccompanied, was fearful of being alone with men she did not know because she had been sexually assaulted as a child. Plaintiff had not provided this information to State Farm prior to the commencement of the action because she and her counsel considered it to be confidential.

The principal issue at trial was whether State Farm's request for an examination by physicians of its choosing was reasonable or whether plaintiff complied with the policy provisions relating to the examinations.

The jury returned a verdict in favor of plaintiff for unpaid PIP benefits of $28,207 plus interest at 18% after July 8, 1992, and for $300,000 for economic and noneconomic damages plus statutory interest calculated after July 8, 1992, for the bad faith breach of insurance contract claim. The trial court awarded plaintiff $86,750 in attorney fees and $11,823.22 in costs. The judgment on the merits and the award of attorney fees and costs have been consolidated for purposes of appeal.

I.

State Farm argues that the trial court erred in not instructing the jury concerning plaintiff's failure to submit to an examination by the orthopedic surgeon or the psychiatrist. We agree and conclude that a new trial is required.

The form of jury instructions is within the sound discretion of the trial court. Hendricks v. Weld County School District No. 6, 895 P.2d 1120 (Colo.App.1995).

Regardless of whether a party's instruction is correct in form, the offering of an instruction which is supported by evidence at trial and the applicable law triggers the trial court's obligation to give a correct instruction. See Short v. Kinkade, 685 P.2d 210 (Colo.App.1983); see also DeBose v. Bear Valley Church of Christ, 890 P.2d 214 (Colo.App.1994) (cert. granted, June 19, 1995); see generally Jordan v. Bogner, 844 P.2d 664 667 (Colo.1993) ("A trial judge is obligated to correctly instruct the jury on the law applicable to the case."); 9A C. Wright & A. Miller, Federal Practice & Procedure Civil 2d § 2556 (2d ed. 1995) (federal practice requires the trial court to instruct the jury properly on the controlling issues in the case even though there has been no request for an instruction or the instruction requested is defective).

As our supreme court stated in Davis v. Cline, 177 Colo. 204, 210, 493 P.2d 362, 365 (1972):

[T]he trial court had a duty to instruct the jury on [plaintiff's theory of the case], a theory amply supported by competent evidence, when requested to do so, even though counsel may have failed to tender an entirely suitable instruction.

Moreover, when a party submits instructions which are incorrect as to form, but otherwise correct, a trial court's refusal to instruct the jury concerning a party's defense constitutes prejudicial error because the jury has no standard against which to judge the defense. Lee v. Great Empire Broadcasting, Inc., 794 P.2d 1032 (Colo.App.1989); see also Trione v. Mike Wallen Standard, Inc., 902 P.2d 454 (Colo.App.1995) (reasonable to conclude that refusal of tendered instruction in two trials which had adverse verdicts constituted prejudicial error).

State Farm contends, citing Jensen v. American Family Mutual Insurance Co., 683 P.2d 1212 (Colo.App.1984), that the trial court should have instructed the jury that compliance with the examination requirement of the insurance contract is a condition precedent to plaintiff being entitled to receive PIP benefits. Therefore, the argument continues, if State Farm's request that plaintiff submit to an independent medical examination was reasonable, and plaintiff refused, no benefits were payable.

In Jensen, a division of this court upheld a provision in a PIP policy which conditioned payment of benefits upon examination by a physician selected by the insurer. There, the jury was given a special verdict form in which it was asked whether the insurer's requests for physical examinations were reasonable and whether the insured had refused to comply. It answered both questions in the affirmative. Such a jury finding, the court held, properly barred recovery. See CJI-Civ.3d 30:1 (1990) (Notes on Use) (if the issue of nonperformance or nonoccurrence of a condition precedent is an issue, a separate instruction is required); see also Allstate Insurance Co. v. Orban, 855 P.2d 9 (Colo.App.1992) (insured's duty to report accident promptly a condition precedent to insurer's duty to perform obligations under policy).

Here, State Farm tendered the following instruction to the trial court:

Compliance with the physical examination requirements of the State Farm insurance policy is a condition precedent to plaintiff's recovery of benefits under the policy. If you find that State Farm's request that plaintiff attend examinations by [the orthopedic surgeon] and/or [the psychiatrist] was reasonable under the circumstances of this case and that plaintiff failed to be examined by [either of the two physicians], then plaintiff is not entitled to recover benefits under her policy of no-fault insurance and your verdict must be in favor of defendant and against plaintiff. On the other hand, if you find that State Farm's request for plaintiff to be examined by [the two physicians] was not reasonable under the circumstances, or that plaintiff complied with State Farm's request to submit to these examinations, then you may consider whether plaintiff is entitled to recover benefits under her policy of no-fault insurance.

Plaintiff's counsel objected on the grounds that the jury "might think this is the only evidence that matters." The court rejected the instruction on the grounds that the instruction contained a conclusory statement. It suggested that State Farm tender an instruction that did not advise the jury as to the effect of plaintiff's failure to comply with the provision. The court gave State Farm's counsel the opportunity to prepare an instruction containing a statement about the policy provision and a summary of Jensen. Counsel declined and stood on the instruction as submitted.

The trial court also rejected a special verdict form submitted by State Farm containing an interrogatory which stated:

Question No. 1: Did the plaintiff, Linda Hansen, comply with the terms of the physical examination requirement of her policy with defendant?

The trial court submitted to the jury a special verdict form containing the...