Mcelgunn v. Cuna Mut. Ins. Soc'y

• Decision Date: 22 March 2010
• Docket Number: No. CIV. 06-5061-KES.,CIV. 06-5061-KES.
• Citation: 700 F.Supp.2d 1141
• Parties: Sharon McELGUNN, as personal representative of the estate of Teri Powell, Plaintiff,v.CUNA MUTUAL INSURANCE SOCIETY, Defendant.
• Court: U.S. District Court — District of South Dakota

700 F.Supp.2d 1141

Sharon McELGUNN, as personal representative of the estate of Teri Powell, Plaintiff,v.CUNA MUTUAL INSURANCE SOCIETY, Defendant.

No. CIV. 06-5061-KES.

United States District Court,

D. South Dakota,

Western Division.

March 22, 2010.

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Alicia D. Garcia, Michael Charles Abourezk, Abourezk Law Firm, Rapid City, SD, for Plaintiff.

Conrad C. Nowak, Evan D. Brown, Jennifer K. Gust, Jim Hofert, Linnea L. Schramm, Hinshaw & Culbertson LLP, Chicago, IL, Donald A. Porter, Phillip R. Stiles, Thomas H. Barnes, Costello Porter Hill Heisterkamp Bushnell & Carpenter, Rapid City, SD, for Defendant.

MEMORANDUM OPINION AND ORDER

KAREN E. SCHREIER, Chief Judge.

Defendant, Cuna Mutual Insurance Society, moves for a new trial, or in the alternative, a remittitur of the compensatory damages award and a reduction of the punitive damages award. Plaintiff, Sharon McElgunn, as personal representative of the estate of Teri Powell, resists defendant's motion.

BACKGROUND

Teri Powell purchased a credit disability insurance policy from defendant. Powell became disabled and filed a claim with defendant on January 29, 2006. The insurance policy set forth the deadline for filing a claim as follows: “You must send proof to us within 90 days after your Total Disability stops. If you cannot send proof to us within 90 days, you must do so as soon as you can. Unless you have been legally incapable of filing proof of Total Disability, we won't accept it if it is filed after one (1) year from the time it should have been filed.” Defendant initially denied Powell's claim on the basis that the claim was untimely filed.

Powell then hired an attorney, Jim Leach, to address the denial of her claim. Leach wrote defendant and explained that the claim was timely because Powell was still disabled and the policy says that proof must be sent within 90 days after the disability stops. Leach also explained that under South Dakota law, the late filing of a claim does not bar a claim unless the insurer can show that it has been prejudiced. On April 4, 2006, defendant's Appeals Committee reversed the denial without explanation. Defendant paid benefits to Powell for one year, from May 2002 to May 2003. Powell did not receive any further benefits until after she died.

On June 9, 2006, defendant sent Leach a letter stating that “after 12 months of disability, the definition of disability changes to capability of working any occupation for 20 hours or more per week.” The letter asked various questions about Powell's part-time work, which involved making hats and petsitting. Leach responded to the letter by answering that Powell worked 15-20 hours a week at her home petsitting and making hats.¹ Leach also asked for a copy of the policy with the 20-hour provision. Defendant sent a copy of Powell's policy to Leach, but the policy did not contain a provision disqualifying an insured from being deemed totally disabled if she was capable “of working any occupation for 20 hours or more per week.”

On July 8, 2006, defendant wrote Leach and asked for information that Leach had already provided. Leach responded that he had already sent the requested information and that defendant had acknowledged receipt of it. Nonetheless, Leach provided the same information once again and informed defendant that its delay was particularly hard on Powell because she had recently been diagnosed with a recurrence of cancer. Defendant denied Powell's claim for total disability because she was “capable of returning or ha[s] returned to some type of work.” In September of 2006, defendant was provided with additional medical records that showed Powell was suffering from terminal cancer. Defendant failed to pay Powell's benefits until approximately two weeks after her death on January 7, 2007.

On August 15, 2006, Powell brought suit against defendant for breach of contract and bad faith. The court granted plaintiff's motion to dismiss the breach of contract claim because defendant paid Powell's benefits on January 20, 2007. Thus, only the bad faith insurance claim remained. After an extensive trial, the jury found in favor of plaintiff and awarded compensatory damages in the amount of $200,000 and punitive damages in the amount of $6 million. The court entered judgment in favor of plaintiff. Defendant's motion followed in a timely manner.

DISCUSSION

A. New Trial

Under Rule 59(a), the court may grant a motion for a new trial to all or any of the parties on all issues or on particular issues. See Fed.R.Civ.P. 59(a). The standard for granting a new trial is whether the verdict is “against the great weight of the evidence.” Butler v. French, 83 F.3d 942, 944 (8th Cir.1996). In evaluating a motion for a new trial under Rule 59(a), the court must determine “whether a new trial is necessary to prevent a miscarriage of justice.” Maxfield v. Cintas Corp., No. 2, 563 F.3d 691, 694 (8th Cir.2009). Further guidance is provided by Rule 61, which provides that “[u]nless justice requires otherwise, no error in admitting or excluding evidence-or any other error by the court or a party-is ground for granting a new trial[.] ... At every stage of the proceeding, the court must disregard all errors and defects that do not affect any party's substantial rights.” Fed.R.Civ.P. 61.

A new trial may be necessary because of trial error, verdicts against the weight of the evidence, or damage awards that are excessive or inadequate. Gray v. Bicknell, 86 F.3d 1472, 1480 (8th Cir.1996). When a district court applies the proper legal standard and finds that the verdict is not against the weight of the evidence, the district court's denial of a Rule 59 motion is virtually unassailable. Pulla v. Amoco Oil Co., 72 F.3d 648, 656 (8th Cir.1995).

1. Testimony Regarding Powell's Past Experiences

Defendant argues that testimony about Powell's background, including problems with her feet and the loss of her family members in a flood, was improper under Rule 401, 402, and 403 because it invoked sympathy from the jury and was otherwise irrelevant to the issues in this case. Relevant evidence “means evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence.” Fed.R.Evid. 401. “All relevant evidence is admissible, except as otherwise provided by the Constitution of the United States, by Act of Congress, by these rules, or by other rules prescribed by the Supreme Court pursuant to statutory authority. Evidence which is not relevant is not admissible.” Fed.R.Evid. 402. “Although relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence.” Fed.R.Evid. 403.

The only testimony identified by defendant that involved a relevancy objection was where plaintiff was asked to describe the “physical changes or problems that [Powell] went through over the years[.]” (Unofficial Transcript at 848-49.) ² And plaintiff answered, “Well, in the late ' 90s when we went to movies, we had to be in the back of the theater so she could stand up, move around.” (UTr. at 849.) The other testimony identified by defendant was not objected to based on relevancy.³ The testimony was relevant to this case because it explained the extent of Powell's disabilities and why Powell purchased insurance from defendant. And the extent of Powell's disabilities was relevant for purposes of determining whether defendant acted unreasonably in denying her disability claim.

Moreover, it is unlikely that defendant was prejudiced by this type of testimony on the basis of jury sympathy for Powell or plaintiff. And defendant was insulated from any unfair prejudice because the jury was instructed by the court prior to trial that it was “not [to] allow sympathy or prejudice to influence you.” (Preliminary Instructions to the Jury, Docket 438, at 2.) Thus, the testimony does not support defendant's motion for a new trial.

2. Plaintiff's Testimony

Defendant argues that while the court had previously ruled that medical testimony by lay witnesses was not allowed, the court nonetheless allowed plaintiff to provide medical testimony related to Powell. The testimony identified by defendant involved the following exchange between plaintiff's attorney and plaintiff:

Q. Did you also know at the time that-did you also have any information at the time that [Powell] was struggling financially?

A. Yes.

Q. What kind of problems was she having?

A. She had no money. She wasn't able to do her pet care much. She had doctor bills. She was trying very hard to eat organic food which is very expensive.

Q. Why was she interested in organic food as opposed to something else?

...

A. She was trying to not heal herself, but prolong her life by taking the best care of herself that she could because she couldn't take medications. She didn't have many options.

Q. Do you know anything about-do you know why she chose not to take chemotherapy?

A. She was convinced it would have killed her.

...

Q. Did you ever see her do anything that suggests to you she had trouble taking medications?

...

A. I saw [Powell] with hives many times. She one time was taking a new medication she hadn't tried before and she asked me to stay with her for a few hours because she didn't know what the reaction was going to be. And I saw her gasping for air and that sounds a little dramatic[.]

(UTr. at 862-63.)

Defendant did not object during trial to this testimony on the basis that it was improper medical testimony. And while the testimony touched on Powell's medical condition, it only did so to explain the extent of Powell's financial vulnerability and explained why she was financially vulnerable. Powell's financial vulnerability was...