Hock v. New York Life Ins. Co., 93SC3

• Decision Date: 20 June 1994
• Docket Number: No. 93SC3,93SC3
• Citation: 876 P.2d 1242
• Parties: Gregory John HOCK, Conservator for Ahmed Abdelsamed, Petitioner, v. NEW YORK LIFE INSURANCE COMPANY, Respondent.
• Court: Colorado Supreme Court

Page 1242

876 P.2d 1242

Gregory John HOCK, Conservator for Ahmed Abdelsamed, Petitioner, v. NEW YORK LIFE INSURANCE COMPANY, Respondent.

No. 93SC3.

Supreme Court of Colorado En Banc.

June 20, 1994.

Rehearing Denied Aug. 8, 1994.

Jean E. Dubofsky, P.C., Jean E. Dubofsky, Boulder, for petitioner.

Wood, Ris & Hames, P.C. by Donald B. Gentry, Denver, for respondent.

Justice VOLLACK delivered the Opinion of the Court.

We granted certiorari to review the court of appeals decision in Abdelsamed v. New York Life Insurance Co., 857 P.2d 421 (Colo.App.1992), which concluded that the trial court abused its discretion in several of its evidentiary rulings and remanded the case for retrial on the breach of contract claim and bad faith breach of insurance contract claim, as well as on New York Life Insurance Company's counterclaim for rescission. We hold that the trial court did not abuse its discretion. We therefore reverse the court of appeals and remand with directions to reinstate the trial court's judgment.

I.

A. History of Illness

The petitioner, Ahmed Abdelsamed (Abdelsamed), a self-employed engineering consultant, purchased disability insurance coverage on March 27, 1986, through the Institute of Electrical and Electronic Engineers which had a group disability policy with New York Life Insurance Company (NYL). ¹ The application form, which Abdelsamed completed and submitted on December 12, 1985, required him to provide detailed information regarding his income and the existence of other outstanding insurance policies. Abdelsamed listed his gross annual income for 1985 as $392,000 and stated that he had no other disability insurance. However, in the preceding four months, he had applied for disability insurance from three other companies, and at the time of his application to NYL, he was insured by two of them under policies which would provide him with monthly disability benefits totalling $10,000. ²

Abdelsamed claims that on December 19, 1985, several days after Abdelsamed mailed his application form to NYL, he confirmed in writing a telephone conversation he had had with an employee of NYL. In his letter, Abdelsamed expressed that he wanted to amend his application form to include two other disability policies: Mutual Benefit Life, Class 4-A, $4,000 to Age 65; and Monarch, Class 4-A, $6,000 Life. According to Abdelsamed's letter, NYL's employee had told Abdelsamed that his failure to include the other two policies on the application did not matter as long as the total coverage did not exceed sixty percent of his income.

On March 30, 1986, three days after the policy was issued, Abdelsamed, who was in Egypt working on an engineering contract with ACETO Engineers-Contractors, a private Egyptian company, was hospitalized in Cairo with a "major affective disorder, depressed type." ³ He remained in the psychiatric hospital until August 31, 1986. From September 1986 to January 30, 1987, Abdelsamed was hospitalized for a second time and received psychiatric treatment at a different hospital in Cairo. Upon release, he began his return journey to the United States via Germany. He traveled to Munich, Germany, where he was again admitted to a psychiatric hospital after apparently suffering a psychotic episode during which he allegedly lost his important documents, including his passport, medical records, financial records, and confirmation of his compensation from ACETO.

Abdelsamed returned to the United States. ⁴ On March 19, 1987, less than one week after his arrival, El Paso County District Court Judge Donald E. Campbell committed Abdelsamed to the state hospital in Pueblo, Colorado, based on his determination that Abdelsamed was mentally ill, and a danger to himself and others.

After Abdelsamed was released from the state hospital seventeen days later, he lived in a community shelter for the homeless. Abdelsamed was subsequently deemed eligible for Social Security Disability benefits based upon his psychiatric disability. Since then, Abdelsamed has continued to receive psychiatric care and has not worked.

B. Disability Benefits Claim

In April 1986, while undergoing his first psychiatric hospitalization in Egypt, Abdelsamed filed a claim for disability benefits with NYL. Since Abdelsamed's claim was filed within two years after the policy had become effective, NYL invoked the provision allowing it to undertake a contestability investigation and verify the statements made on the application rather than begin payments on the thirty-first day after Abdelsamed had been hospitalized.

NYL hired investigators in Egypt to verify Abdelsamed's hospitalization and to verify his reported gross income of $392,000 in 1985. NYL requested from Abdelsamed his daily hospital records from the Egyptian hospitals and for authorization to obtain records from the Internal Revenue Service and Small Business Administration to verify his earnings.

NYL's investigators confirmed that Abdelsamed was hospitalized during the specified dates in two psychiatric hospitals in Cairo. Abdelsamed's treating doctors at both hospitals supplied NYL with discharge summaries detailing Abdelsamed's medical diagnosis and prognosis.

NYL informed Abdelsamed that the summary information was insufficient and that NYL would not consider his claim unless he provided NYL with daily hospital records from each hospital. Both hospitals failed to produce the detailed records. ⁵

Abdelsamed subsequently provided NYL with a copy of the district court's order committing him involuntarily to the Colorado State Hospital, and also informed NYL that he had been under continuous psychiatric treatment since his return to the United States. NYL's investigator in Colorado Springs confirmed that Abdelsamed was under a psychiatrist's care, that the federal government had approved his receipt of Social Security Disability benefits, and that he had lived at a homeless shelter. Abdelsamed also provided NYL with official Internal Revenue Service summaries of his 1984 and 1985 tax returns, as well as several one-page hospital discharge summaries.

NYL contended that the documentation was insufficient, and in August 1987, NYL closed Abdelsamed's file pending the receipt of the requested information. Abdelsamed provided no further information, and NYL neither denied nor approved Abdelsamed's claim.

In November 1987, Abdelsamed filed suit in El Paso County District Court against NYL for failing to pay his disability benefits. He sought compensatory and punitive damages for breach of contract, bad faith breach of an insurance contract, and outrageous conduct. NYL counterclaimed for rescission of the contract, claiming that Abdelsamed had misrepresented material facts within his application, namely, his gross income for 1985 and the existence of other disability insurance coverage.

At trial, an analyst with the State of Colorado, Division of Insurance, testified as a non-expert witness that after reviewing Abdelsamed's 1985 tax return she believed his income for that year was $385,840. Furthermore, she testified that, based on her review of the medical records and upon a personal meeting with Abdelsamed, she believed that Abdelsamed was mentally ill. NYL made timely objections to the introduction of this evidence.

NYL's psychiatric expert, who performed a "psychometric" test for cognitive impairment on Abdelsamed prior to trial, testified that Abdelsamed was malingering and feigning mental illness. This expert had been sued in a previous civil matter (the Anderson case) on the basis that his test methods were unreliable. ⁶ In deference to the court in the Anderson case, the district court in the present case ruled that NYL's psychiatric expert could be cross-examined as to whether he had been sued in Anderson, whether the case had been settled, and the nature of the claims against him in Anderson. The district court ruled that NYL's expert, however, could respond to any question by stating he was not permitted to answer the question because it would violate the Anderson court's protective order.

Abdelsamed offered additional evidence to verify his income: an official Internal Revenue Service summary of his tax returns; and year-end summaries, signed by Abdel Majid Salama, the chief executive officer of ACETO, of Abdelsamed's earned income. ⁷

NYL also sought to introduce "other acts" evidence consisting of Abdelsamed's alleged misrepresentations in an application to another insurance company, Mutual Benefit Life Insurance Company (Mutual Benefit). According to NYL, Abdelsamed had informed Mutual Benefit that he did not intend to travel to foreign countries. NYL asserts that this representation was false and was made by Abdelsamed in order to secure insurance which Mutual Benefit might not otherwise have sold to him. NYL also sought to introduce evidence concerning Abdelsamed's claim for theft of computer equipment from the trunk of his car, a claim filed with Royal Globe Insurance Company (Royal Globe). According to NYL, Abdelsamed misrepresented the title to the computer equipment. Abdelsamed filed a motion in limine to exclude the "other acts" evidence and the district court granted his motion.

The jury returned a verdict in favor of Abdelsamed for $209,644 on his breach of contract claim, and for $915,933 on his bad faith breach of insurance contract claim. The jury found against NYL on its rescission counterclaim.

NYL appealed the judgment on several evidentiary grounds. NYL neglected, however, to designate into the record the district court's in limine ruling, including the district court's application of People v. Spoto, 795 P.2d 1314 (Colo.1990), to the "other acts" evidence.

The court of appeals reversed the judgment in favor of Abdelsamed. The court of appeals concluded that the trial court abused its discretion in several of its evidentiary rulings and remanded the case for a new trial on Abdelsamed's breach of contract claim and bad faith breach of...