Nelson v. Progressive Corp., s. S-7695

• Decision Date: 26 March 1999
• Docket Number: Nos. S-7695,S-7725,s. S-7695
• Citation: 976 P.2d 859
• Parties: Antone NELSON, Appellant/Cross-Appellee, v. PROGRESSIVE CORP., and/or Progressive Companies and/or Progressive Preferred Insured Company, Appellees/Cross-Appellants.
• Court: Alaska Supreme Court

Page 859

976 P.2d 859

Antone NELSON, Appellant/Cross-Appellee, v. PROGRESSIVE CORP., and/or Progressive Companies and/or Progressive Preferred Insured Company Appellees/Cross-Appellants.

Nos. S-7695, S-7725.

Supreme Court of Alaska.

March 26, 1999.

Peter Gruenstein, Patricia A. Vecera, Gruenstein, Hickey & Stewart, Anchorage, for Appellant/Cross-Appellee.

Gary A. Zipkin, Susan M. West, Guess & Rudd, Anchorage, for Appellees/Cross-Appellants.

Before: MATTHEWS, Chief Justice, COMPTON, EASTAUGH, FABE, and BRYNER, Justices.

OPINION

MATTHEWS, Chief Justice.

I. INTRODUCTION

This appeal arises from a disputed claim on uninsured motorist coverage issued to Antone Nelson by his insurer, Progressive. Nelson was awarded the policy limits at arbitration. In the subsequent bad faith lawsuit, the jury found that Progressive engaged in knowing misrepresentation and awarded compensatory damages, but did not find that Progressive acted in bad faith or that punitive damages were warranted. Nelson raises various claims of error in his bid for a new trial. We affirm because Nelson has waived his right to challenge any inconsistency in the jury's verdict, because the jury's punitive damages finding was not plainly unreasonable, and because we find that the trial court did not abuse its discretion.

II. FACTUAL AND PROCEDURAL BACKGROUND

A. Factual Background

In July 1993 Antone Nelson's left knee was injured when a vehicle driven by an intoxicated motorist collided with Nelson's vehicle at an Anchorage intersection. The intoxicated motorist was uninsured, but Nelson had a policy with Progressive which included uninsured motorist coverage of $100,000 and medical payments coverage of $10,000.

Nelson's claim under his Progressive policy was assigned to adjuster Timothy Intfen. Intfen investigated the claim by requesting damage information from Nelson's present and past treating physicians and his employer. During his investigation, Intfen learned that Nelson had torn his left anterior cruciate ligament (ACL) in a motocross accident in 1984. This injury had required reconstructive surgery.

For more than three months following the collision, Nelson was unable to work. He was seen by two physicians, and engaged in physical therapy. In November 1993 Progressive offered to settle Nelson's uninsured motorist claim for $10,000. Nelson rejected the offer, but did not state a counter-offer. In February 1994 Nelson's knee specialist advised Nelson that he had reached a plateau, and would either have to learn to live with discomfort or have arthroscopic surgery. In March 1994 Nelson informed Progressive that his physician was recommending surgery, and made a settlement offer of $70,000. Progressive counter-offered $18,000, which Nelson rejected, and the parties made little progress toward settlement.

In May 1994 Progressive retained the Stealth Group for surveillance of Nelson's activities, and Comprehensive Medical Review for a review of Nelson's medical records. The Stealth Group documented Nelson's activities over the course of three days in May, and provided Progressive with a seven-page report and videotape. A doctor with the Medical Review company, Dr. Curran, "recommend[ed] that the care Mr. Nelson has received for his left ACL problems, including any future surgery, should be apportioned entirely (100%) to the pre-existing condition of this ligament."

In June 1994 Nelson offered to accept $119,377.50 to settle his claim. Relying upon and providing Nelson with Dr. Curran's medical report, Progressive responded by reiterating its offer of approximately $18,000. Nelson maintained that "the conclusions of the non-examining physician cannot be valid[,]" and repeated his last settlement offer. As the parties had reached an impasse, Progressive invoked the arbitration clause in the policy. Progressive provided Nelson with a copy of what it stated was his complete file.

Both Progressive and Nelson retained counsel for the arbitration. Progressive's counsel instructed the Stealth Group to prepare a condensed version of the surveillance videotape for the arbitration hearing. After viewing the condensed videotape at the hearing, Nelson and his attorney realized that the videotape previously produced to Nelson was incomplete, because certain scenes on the condensed tape did not appear on the tape that Progressive had disclosed earlier.

At arbitration, Nelson was awarded $195,000 plus prejudgment interest. Progressive subsequently paid Nelson's policy limits.

B. Procedural Background

Based on events taking place during the claims settlement process, Nelson filed a bad faith lawsuit against Progressive, seeking both compensatory and punitive damages. A jury trial began before Judge Joan Woodward on February 27, 1996, and lasted approximately three weeks. The jury awarded compensatory damages of $48,000 on Nelson's misrepresentation claim, but that amount was later reduced to $30,134.60 on an unopposed motion for remittitur. The jury found that Progressive did not act in bad faith, and that punitive damages were not warranted. The trial court held that Progressive was the prevailing party for the purpose of Civil Rule 82 attorney's fees. The court awarded Progressive a total judgment of $80,971.37, calculated by offsetting Nelson's judgment of $30,134.60, plus $3,796.04 in prejudgment interest from Progressive's costs of $44,902.01, and attorney's fees in the amount of $70,000.

Nelson now appeals, and Progressive cross-appeals in the event of remand for a new trial.

III. DISCUSSION

A. The Trial Court Did Not Abuse Its Discretion in Denying Nelson a New Trial.

After the jury returned its special verdicts finding that Progressive engaged in knowing misrepresentation but not bad faith, and awarding Nelson $48,000 in compensatory damages but not awarding punitive damages, Nelson orally moved for judgment notwithstanding the verdict (jnov) before the jury was discharged. Nelson argued that a reasonable jury could not have found that punitive damages were not justified on the evidence presented. The superior court denied the motion. The court reasoned that a reasonable jury could have concluded that punitive damages had not been proved by clear and convincing evidence, but nevertheless awarded compensatory damages under a preponderance of the evidence standard.

After the jury was excused, Nelson moved for a new trial, arguing for the first time that the special verdicts on bad faith and knowing misrepresentation were inconsistent. The superior court denied the motion on two grounds. First, it held that Nelson had waived his argument of inconsistent verdicts by failing to challenge any alleged inconsistency before the jury was discharged. And second, the court held that reasonable jurors could disagree as to whether Nelson had proved entitlement to punitive damages by clear and convincing evidence.

On appeal, Nelson argues that the trial court abused its discretion in denying a new trial. ¹ Nelson argues that the special verdicts on intentional misrepresentation and bad faith are inconsistent. Nelson alternatively contends that the jury's decision not to award punitive damages was against the weight of the evidence.

1. Nelson waived his right to challenge any inconsistency in the jury's verdict.

Nelson argues that he did not waive his right to challenge the inconsistency of the special verdict. The superior court applied the "waiver rule" first expressed in City of Homer v. Land's End Marine. ² Under this rule, a litigant waives his right to challenge the consistency of a jury's verdict if he fails to raise the issue and move for resubmission prior to the jury's discharge. ³ The reasons for the rule are to promote the efficient operation of the courts and to prevent jury- shopping by litigants, who would otherwise be able to choose between moving for resubmission to the same jury or, by remaining silent, seeking a new trial before a new jury. ⁴ The waiver rule has been consistently followed by this court. ⁵ Nelson failed to raise the issue of verdict inconsistency before the jury was discharged and thus has waived his right to challenge the verdict on that basis.

After the jury returned its special verdict and before the jury was discharged, Nelson moved for judgment notwithstanding the verdict and asked the court to overturn the jury's verdict on the basis that no reasonable jury could have concluded that punitive damages were not warranted. Nelson's counsel stated:

My proposal to the Court is that the--that we--the Court send the jury back with respect to question No. 6, with appropriate instructions, and--or, I'm sorry, not back with respect to question No. 6, but that enter a judgment notwithstanding the verdict on 6 and proceed to phase two. Now, recognizing that we're probably gonna have an uphill battle there if the jury is so reluctant to award monetary damages with respect to punitive damages, but it is absolutely clear from that verdict that they found conduct that ex--that well exceeds the minimum required for punitive damages, and I would submit to the Court that no reasonable jury could find otherwise in this case, based on the overwhelming evidence. And that is what, more than anything, that verdict means. They found knowing misconduct.

(Emphasis added.) Nelson did not argue that the jury's finding of knowing misrepresentation was inconsistent with its finding that Progressive did not act in bad faith. Nor did Nelson move for resubmission to the jury, requesting that the jury reconsider the claimed inconsistency. Instead, Nelson's motion was a motion for jnov directed toward the court and asking the court to overturn the jury's verdict as a matter of law.

In conclusion on this point, Nelson neither raised an inconsistent verdict argument nor sought resubmission of the inconsistent verdicts before the jury was discharged. Nelson therefore waived his right to challenge any alleged inconsistency in the special...