Maxwell v. Aetna Life Ins. Co., 1

• Decision Date: 12 July 1984
• Docket Number: CA-CIV,No. 1,1
• Citation: 143 Ariz. 205,693 P.2d 348
• Parties: Gordon MAXWELL, as personal representative of the estate of Susan Maxwell, Deceased, Plaintiff-Appellant, Cross-Appellee, v. AETNA LIFE INSURANCE COMPANY, a foreign corporation, Defendant-Appellee, Cross-Appellant. 5550.
• Court: Arizona Court of Appeals

Page 348

693 P.2d 348

143 Ariz. 205

Gordon MAXWELL, as personal representative of the estate of Susan Maxwell, Deceased, Plaintiff-Appellant, Cross-Appellee, v. AETNA LIFE INSURANCE COMPANY, a foreign corporation, Defendant-Appellee, Cross-Appellant.

No. 1 CA-CIV 5550.

Court of Appeals of Arizona Division 1, Department B.

July 12, 1984.

Reconsideration Denied Sept. 24, 1984.

Review Denied Dec. 18, 1984.

Thur & Preston by Calvin C. Thur, Scottsdale, for plaintiff-appellant, cross-appellee.

Black, Robertshaw & Copple, P.C. by Steven D. Copple, Philip C. Thorpe, Phoenix, for defendant-appellee, cross-appellant.

OPINION

GRANT, Judge.

This appeal and cross-appeal arose out of an action by the insureds for the wrongful delay in honoring a disability premium waiver provision in a major medical policy and a disability benefit policy in breach of the insurer's duty of good faith and fair dealing. Judgment was entered after a jury trial in favor of Gordon Maxwell, individually and as the personal representative of the estate of Susan Maxwell (Estate), and against Aetna Life Insurance Company (Aetna). Gordon Maxwell, individually, did not appeal. The Estate appeals from the denial of its motion for new trial on the issue of damages. Aetna cross-appeals from the underlying judgment in favor of the Estate and against Aetna, as well as the denial of its motion for judgment notwithstanding verdict and/or motion for new trial.

The issues on appeal can be grouped as follows:

1. Whether there is sufficient evidence to support the verdicts.

2. Whether the trial court improperly instructed the jury.

3. Whether the trial court improperly admitted certain evidence.

4. Whether defense counsel improperly made prejudicial remarks during closing arguments.

5. Whether the punitive damages verdict may be set aside for juror misconduct.

6. Whether defense counsel committed prejudicial error by referring to a separate wrongful death action.

7. Whether the damages awarded were inadequate as a result of passion and prejudice.

The facts necessary for resolution of the appeal and cross-appeal are as follows: Gordon and Susan Maxwell were married in 1961. In 1973, Aetna issued two policies to the Maxwells. One, the "-Pay-Gard/ Preferred Disability Policy" (Disability policy) covered income loss due to a total temporary or total permanent disability of Gordon Maxwell. The other policy (Major Medical policy) provided major medical benefits to the entire Maxwell family. The Major Medical policy contained a premium waiver provision in the event the insured, Gordon Maxwell, became totally disabled.

In 1974, Gordon Maxwell was employed as a manufacturer's representative serving an area in the upper Midwest, which required extensive automobile travel. While the two insurance policies were in force Gordon was hospitalized and underwent surgery for low back problems in May and August, 1974. Gordon was under the care of Minneapolis, Minnesota, physician Donald Erickson, M.D. Dr. Erickson submitted reports to Aetna on May 30, 1974, September 27, 1974, and November 26, 1974 indicating that Gordon would be "continuously totally disabled (unable to work)" for an "indefinite" period of time. After the 90 day waiting period prescribed by the Disability policy, Aetna began paying disability benefits to Gordon. Aetna paid the disability benefits through January 1, 1975.

Sometime in December, 1974, the Maxwells moved to Phoenix, Arizona. Aetna transferred the Maxwells' claims file to its office in Long Beach, California. In January, 1975 Aetna requested Gordon to submit to an independent medical examination by Dr. Alvin Swenson, M.D. Dr. Swenson conducted an examination on February 21, 1975 and concluded that Gordon could not yet return to full regular work as a salesman driving long distances and carrying heavy samples. The report did indicate that Gordon could handle lighter forms of work, despite a permanent 5 to 10% impairment of the function in his lower back.

Based on this report Aetna maintained that its liability under the Disability policy terminated no later than February 21, 1975--the date of Dr. Swenson's exam. On April 18, 1975 the Maxwells' Major Medical policy apparently lapsed for non-payment of premium. After communication with Aetna, Gordon tendered a check dated June 18, 1975 in the amount of $515.55 for the annual premium on the Major Medical policy. However, the annual premium had risen to $695.99. Aetna gave Gordon the option of paying the $180.44, applying the $515.55 check to a semi-annual premium of $354.95, or canceling coverage. Gordon apparently elected not to reinstate coverage and Aetna returned Gordon's check on July 16, 1975.

In early April, 1975 Gordon accepted a position as a real estate salesman. However, Gordon could not properly carry out his duties due to problems with his back. Gordon ultimately resigned on June 16, 1975 due to the continuing back problems. These facts were communicated to Ed Sambrano of Aetna by a letter mailed by Gordon's employer on July 25, 1975. On July 16, 1975 an inter-office communication from Aetna's Long Beach office to the Phoenix office revealed the reopening of Gordon's file since the insured was totally disabled from his own occupation. Subsequent inter-office memos indicate that Aetna believed that Gordon's employment as a real estate salesman precluded him from being totally disabled.

On July 31, 1975 Dr. Swenson sent Aetna a supplemental report indicating that Gordon was not totally disabled from his occupation as a real estate salesman. The letter stated, however, that Gordon would have to curtail his hours of working due to his injury. This report was based solely on the prior February 21st examination. On August 28, 1975 Dr. Erickson wrote Aetna that Gordon was disabled from his previous occupation of manufacturer's representative. Aetna continued to withhold payment of disability benefits, and did not apply the premium waiver provision of the Major Medical policy.

On October 19, 1975 Susan Maxwell entered the hospital for treatment of a soft drug addiction. She initially underwent a detoxification program. Due to her lack of insurance and limited financial resources Susan did not participate in biofeedback therapy as was recommended.

Shortly after Susan entered the hospital, on October 22, 1975, Gordon and Susan Maxwell filed this action. The complaint alleged, in part, wrongful denial or delay in payment of benefits under the disability policy, and wrongful failure to honor the disability premium waiver provision in the Major Medical policy. The summons and complaint were served on October 22, 1975 upon the Arizona Director of Insurance.

On October 30, 1975 Gordon Maxwell underwent a physical examination by Doctor John R. Green, M.D. Dr. Green concluded that Gordon was continuously disabled from March, 1974 until the date of the exam. The report stated that Gordon "is unable to carry out full time occupation." The Maxwells' attorney forwarded this report to Mary Koolish, an Aetna claims representative on November 14, 1975. The report was received no later than November 19, 1975 and forwarded to Aetna's attorneys, as well as Ed Sambrano in Long Beach.

Due to a lack of insurance, Susan prematurely ended her treatment at the hospital. Susan left the hospital on November 14, 1975--2 to 3 weeks prior to completion of her treatment.

On December 2, 1975 Susan Maxwell committed suicide. The next day, Calvin Thur, the Maxwells' attorney wrote to inform Aetna of the suicide. On December 4, 1975, Don Neff, a senior analyst with Aetna, recommended in an inter-office memo that Aetna should pick up all back benefits and also the waiver of premiums on both policies.

On December 5, 1975 Aetna learned of Susan Maxwell's suicide. At this point Aetna began marking communications concerning the Maxwells as urgent. Thereafter, on February 18, 1976 Aetna retroactively placed the Major Medical policy on disability premium waiver. Aetna then paid 80% of the eligible expenses incurred in Susan's hospital bill during her stay from October 19 to November 14, 1975.

In December, 1977, a separate wrongful death action against Aetna was filed on behalf of Susan Maxwell's estate. The instant action came to trial on January 10, 1980 after the Estate was substituted for Susan Maxwell as a party plaintiff. The trial involved not only the Estate's claim, but Gordon Maxwell's individual claims based on the Disability policy. The jury returned a verdict for Gordon Maxwell, individually, and awarded him $45,000 in compensatory damages and $75,000 in punitive damages. Also, the jury returned a verdict in favor of the Estate in the amount of $1,000 compensatory damages and $1 in punitive damages.

CROSS-APPEAL BY AETNA

I. SUFFICIENCY OF THE EVIDENCE

Aetna argued in its motion for judgment n.o.v., and here on appeal, that the Estate failed to produce sufficient evidence to permit the jury to render a verdict. Specifically, Aetna states that there was insufficient evidence that Gordon was totally disabled within the definition of the Major Medical policy and that Aetna was guilty of intentional, wilful, or wanton misconduct.

On appeal from a denial of a motion for judgment n.o.v. this court views the evidence in a light most favorable to sustaining the verdict. Lerner v. Brettschneider, 123 Ariz. 152, 598 P.2d 515 (App.1979). This court must then review the evidence to determine whether the evidence would permit a reasonable person to reach the challenged verdict. Id.

Aetna first claims the Estate failed to produce sufficient evidence that Gordon was totally disabled under the premium waiver provision of the Major Medical policy. The policy provided for a premium waiver where "injury or such sickness shall totally disable the Insured for 6 consecutive months." The policy contained the following definition:

"Total disability" means that such injury or such sickness ... shall totally and...