Lange v. Penn Mut. Life Ins. Co.
| Decision Date | 08 June 1988 |
| Docket Number | No. 87-1761,87-1761 |
| Citation | 843 F.2d 1175 |
| Parties | Linda LANGE, Plaintiff-Appellee, v. PENN MUTUAL LIFE INSURANCE COMPANY, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Leon D. Bess, Evans, Kitchel & Jenckes, P.C., Phoenix, Ariz., for defendant-appellant.
Robert J. Pohlman, Bonn & Pohlman, Chartered, Phoenix, Ariz., for plaintiff-appellee.
Appeal from the United States District Court for the District of Arizona.
Before ANDERSON, NOONAN and THOMPSON, Circuit Judges.
A jury returned a verdict in favor of Linda Lange for $200,000 on her breach of contract claim against Penn Mutual Life Insurance Company. Penn Mutual had refused to pay Lange insurance proceeds from a policy of life insurance on the life of her former husband. The jury also awarded Lange $85,000 on her bad faith claim against Penn Mutual and $327,000 in punitive damages. In post trial proceedings, the district court awarded Lange attorney fees of $149,208.75. This award included an upward adjustment of 1.5 times the "lodestar" fee amount.
Penn Mutual appeals the jury's bad faith and punitive damage awards, and the court's award of attorney fees. We have jurisdiction under 28 U.S.C. Sec. 1291. We affirm the award of damages for bad faith, reverse the punitive damage award, and reduce the attorney fee award to the lodestar amount of $99,472.50. 1
In 1984, while Linda Lange was a resident of Arizona, she applied for and received a policy of life insurance issued by Penn Mutual on the life of her former husband, Dr. Michael Hogan. The policy provided that if Dr. Hogan died as a result of suicide within one year of the date the policy was issued, benefits would be limited to premiums paid. Dr. Hogan died within the year. He was killed when the car he was driving plunged over 300 feet into the Salt River Canyon in Arizona. Tire tracks indicated the car left a two-lane roadway and traversed an unpaved pullout area before going over the canyon's edge. The incident happened at night and the roadway was unlighted.
An investigator from the Arizona Department of Public Safety investigated the accident. He concluded that Dr. Hogan had committed suicide by intentionally driving over the edge of the canyon. This conclusion was based upon physical evidence at the scene and interviews with people who had known Dr. Hogan. An independent accident reconstruction expert, also employed by the State of Arizona, reached a different conclusion. He inspected the scene, reviewed photographs of the tire marks left by Dr. Hogan's car, and concluded that the evidence was consistent with either death by accident or death by suicide.
Dr. Hogan's death certificate, which was issued by the medical examiner of the State of Arizona, initially gave the "manner of death" as suicide. The death certificate was later amended to show the manner of death as "undetermined."
Lange applied for death benefits under the Penn Mutual policy on November 7, 1984. Her claim was denied by Penn Mutual on February 25, 1985. The denial was based upon (1) the original death certificate which listed the manner of death as suicide, and (2) the opinion of the Arizona Department of Public Safety investigator who concluded that Dr. Hogan had intentionally driven his car over the edge of the canyon. Lange then filed suit to recover the policy's proceeds. She later amended her complaint to add a bad faith tort claim based upon the alleged breach by Penn Mutual of an implied covenant of good faith and fair dealing. The lawsuit was originally filed in Arizona state court, and was removed by Penn Mutual to federal court on the ground of diversity of citizenship.
The first issue we address is whether the district court correctly applied Arizona law to Lange's claims. We review the district court's determination of this question de novo. Pereira v. Utah Transport, Inc., 764 F.2d 686, 689 (9th Cir.1985), cert. dism'd, 475 U.S. 1040, 106 S.Ct. 1253, 89 L.Ed.2d 362 (1986).
Although Lange was a resident of Arizona in 1984 when Penn Mutual issued the policy, she moved to Iowa shortly thereafter. She was living in Iowa in February 1985 when Penn Mutual denied her claim for the insurance proceeds. She was still in Iowa when her complaint was filed, and did not move back to Arizona until August 1986. Her trial began in December 1986.
Penn Mutual argues that the district court should have applied the law of Iowa to Lange's claims. It contends that if Lange suffered emotional and financial hardship as a result of Penn Mutual's denial of her claim for the proceeds of the policy, she suffered this injury while she was a resident of Iowa when her claim was denied. Moreover, an Amended Pretrial Order "approved as to form and content" by Lange's attorney, and bearing a September 1986 date, contains a statement that Lange "is currently a resident of the State of Iowa."
Iowa has not as yet recognized an action in tort based upon the bad faith of an insurance company in a first party action. 2 See, e.g., Hoekstra v. Farm Bureau Mut. Ins. Co., 382 N.W.2d 100, 111 (Iowa 1986); Pirkl v. Northwestern Mut. Ins. Ass'n, 348 N.W.2d 633, 635-36 (Iowa 1984). Such an action may be maintained in Arizona. Bates v. Superior Court of Maricopa County, 156 Ariz. 46, 749 P.2d 1367 (1988).
In this diversity case, we apply the choice of law rules of the forum state, Arizona. Van Dusen v. Barrack, 376 U.S. 612, 628, 84 S.Ct. 805, 815, 11 L.Ed.2d 945 (1964). Arizona has adopted the choice of law rules of the Restatement (Second) of Conflicts (1971). Bates, at 48, 749 P.2d at 1369; Bryant v. Silverman, 146 Ariz. 41, 42, 703 P.2d 1190, 1191 (1985).
Section 146 of the Restatement provides:
Sec. 146. Personal Injuries
In an action for a personal injury, the local law of the state where the injury occurred determines the rights and liabilities of the parties, unless, with respect to the particular issue, some other state has a more significant relationship under the principles stated in Sec. 6 to the occurrence and the parties, in which event the local law of the other state will be applied.
In Bates, the Arizona Supreme Court, sitting en banc, held that an insurance company's bad faith refusal to pay medical insurance benefits to an insured qualified as a "personal injury" under Arizona law. Bates, 156 Ariz. at 49, 749 P.2d at 1370 7. It would seem, therefore, that under Restatement Sec. 146 a court should determine in which state the refusal to pay insurance benefits occurred and then examine the provisions of Restatement Sec. 6. But the Bates court did not take this seemingly direct approach. Instead, before analyzing Restatement Sec. 6, it first considered the general tort choice of law principles of Restatement Sec. 145, as well as the specific personal injury principles of Restatement Sec. 146, and then applied the guidelines of both of these sections to the general principles listed in Restatement Sec. 6(2). Bates, at 48-50, 749 P.2d at 1369-1371. We will do the same.
Restatement Sec. 145 provides:
Sec. 145. The General Principle
(1) The rights and liabilities of the parties with respect to an issue in tort are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the occurrence and the parties under principles stated in Sec. 6.
(2) Contacts to be taken into account in applying the principles of Sec. 6 to determine the law applicable to an issue include:
(c) the domicil, residence, nationality, place of incorporation and place of business of the parties, and
(d) the place where the relationship, if any, between the parties is centered.
These contacts are to be evaluated according to their relative importance with respect to the particular issue.
When Penn Mutual initially denied Lange's claim for the insurance proceeds, she was living in Iowa. In Bates the plaintiff allegedly suffered mental and physical distress when the insurance company terminated her benefits. This distress was an injury which the Supreme Court of Arizona stated occurred in Arizona where the plaintiff was then residing. Bates, at 49, 749 P.2d at 1370. But the court in Bates also noted that the insurance company "compounded these difficulties by failing to reconsider its decision, forcing plaintiff to sue the company," and that this also occurred while the plaintiff was residing in Arizona. Id. In our case, the injury which caused Lange to suffer emotional distress and financial hardship occurred not only when Penn Mutual initially refused to pay her claim. It was a continuing injury which occurred as Penn Mutual persisted in its refusal to reconsider the claim and pay it. This course of conduct occurred while Lange was in Iowa and continued after she returned to Arizona in August 1986. Thus, there are two states in which the injury occurred, Iowa and Arizona.
Penn Mutual's home office is in Pennsylvania. It made its initial decision not to pay Lange's claim, and elected to stand pat on that decision, in Pennsylvania. Thus, the conduct causing the injury occurred in Pennsylvania.
Penn Mutual's state of incorporation and principal place of business is Pennsylvania. Lange contends she was a resident of Arizona when she applied for the policy of insurance and that she remained a resident of Arizona notwithstanding her sojourn in Iowa. She points to the facts that when she moved to Iowa she left the majority of her personal belongings in storage in Arizona, paid rent for that storage in Arizona, did not register to vote in Iowa, and wrote a letter in which she stated that she was in...
To continue reading
Request your trial
-
Universe Life Ins. Co. v. Giles
...1474 (11th Cir.1985) (Alabama law); Dempsey v. Auto Owners Ins. Co., 717 F.2d 556 (11th Cir.1983) (Alabama law); Lange v. Penn Mut. Life Ins. Co., 843 F.2d 1175 (9th Cir.1988) (Arizona law); Chadima v. National Fidelity Life Ins. Co., 55 F.3d 345 (8th Cir.1995) (Iowa law); Wolf v. Prudentia......
-
Barten v. State Farm Mut. Auto. Ins. Co.
...applies the guidelines of both of those sections to the general principles listed in Restatement § 6(2). Lange v. Penn Mut. Life Ins. Co., 843 F.2d 1175, 1178–1179 (9th Cir.1988) (citing Bates, 156 Ariz. at 48–50, 749 P.2d at 1369–71 ).Restatement § 145 provides:(1) The rights and liabiliti......
-
Machain v. USA., ALVAREZ-MACHAI
...Because this is an action in tort, not contract, the justified expectations factor does not apply. See Lange v. Penn. Mut. Life Ins. Co., 843 F.2d 1175, 1180-81 (9th Cir. 1988). The remaining §§ 6 factors also favor the application of federal common law. The basic policies underlying intern......
-
Jobe v. International Ins. Co., Civ. 93-0074 PHX CAM.
...it fails to undertake an investigation adequate to determine whether its position is tenable. Id. See also, Lange v. Penn Mut. Life Ins. Co., 843 F.2d 1175, 1182-83 (9th Cir.1988); Linthicum v. Nationwide Life Ins. Co., 150 Ariz. 326, 330, 723 P.2d 675, 679 (1986). The undisputed facts in t......