Nickerson v. Stonebridge Life Ins. Co., B234271

CourtCalifornia Court of Appeals
Writing for the CourtALDRICH
Citation161 Cal.Rptr.3d 629
PartiesThomas NICKERSON, Plaintiff and Appellant, v. STONEBRIDGE LIFE INSURANCE COMPANY, Defendant and Appellant.
Decision Date29 August 2013
Docket NumberB234271

161 Cal.Rptr.3d 629

Thomas NICKERSON, Plaintiff and Appellant,


Court of Appeal,
Second District, Division 3, California.

Filed August 29, 2013

See 6 Witkin, Summary of Cal.
Law (10th ed. 2005) Torts, § 1566 et seq.

APPEALS from orders and a judgment of the Superior Court of Los Angeles County, Mary Ann Murphy, Judge. Order denying motion for judgment notwithstanding the verdict is affirmed, order granting the new trial motion is vacated, and the judgment is modified and affirmed. (Los Angeles County Super. Ct. No. BC405280)

Shernoff BidartEcheverria Bentley, William M. Shernoff, Howard S. Shernoff, Travis M. Corby, Claremont; The Ehrlich Law Firm and Jeffrey Isaac Ehrlich for Plaintiff and Appellant.

Baute Crochetiere & Wang, David P. Crochetiere, Henry C. Wang; Reed Smithand Margaret A. Grignon, Los Angeles, for Defendant and Appellant.

Amy Bach, Mill Valley; Knapp & Roberts and David L. Abney for United Policyholders as Amicus Curiae on behalf of Defendant and Appellant.


The sole issue raised by both parties to this appeal concerns the punitive damage award, specifically, whether the trial court's remittitur of that award from $ 19 million to $ 350,000 based on a ratio of punitive to compensatory damages of 10:1 comports with due process. Thomas Nickerson sued Stonebridge Life Insurance Company (Stonebridge) challenging the insurer's partial denial of his claim for hospitalization benefits. The trial court ruled that a policy provision limiting coverage was not conspicuous, plain, and clear and was therefore unenforceable, entitling Nickerson to $ 31,500 in additional benefits under the policy. A jury then found that Stonebridge had breached the implied covenant of good faith and fair dealing and awarded Nickerson $ 35,000 in compensatory damages for emotional distress. The jury found Stonebridge acted with fraud and fixed the punitive damage award at $ 19 million. The trial court conditionally granted Stonebridge's new trial motion unless Nickerson consented to a reduction of the punitive damages to $ 350,000. 1 Both parties appeal. After weighing all of the relevant factors and circumstances pursuant to State Farm Mut. Automobile Ins. Co. v. Campbell (2003) 538 U.S. 408, 123 S.Ct. 1513, 155 L.Ed.2d 585 ( State Farm ) and Simon v. San Paolo U.S. Holding Co., Inc. (2005) 35 Cal.4th 1159, 29 Cal.Rptr.3d 379, 113 P.3d 63 ( Simon ), we hold the trial court's remittitur of punitive damages was proper. Accordingly, we affirm.

1. The insurance policy

Stonebridge insured Nickerson under a policy (the policy) providing coverage for hospital confinement, intensive care unit confinement, and emergency room visits. Stonebridge agreed to pay indemnity in the amount of $ 350 per day for each day of confinement in a hospital for a covered injury, $ 350 per day for each day of confinement in a hospital intensive care unit, and $ 150 per visit to a hospital emergency room. Although payment of claims under this policy is related to healthcare services rendered to the insured, the policy is not healthcare insurance that pays for medical expenses. The insured is free to use the funds in any manner he or she wishes, i.e., for rent or a car payment.

The policy's insuring clause for the “Accidental Daily Hospital Confinement Benefit” stated: “We will pay the Daily Hospital Confinement Benefit stated on the Schedule Page for each day of Confinement due to a covered injury, beginning with the first day of Confinement. A Covered Person must be under the professional care of a Physician, and such Confinement must begin within 90 days of the accident causing the injury.” (Capitalization omitted.)

A definitions section contained 10 definitions, including:

“HOSPITAL CONFINEMENT/CONFINEMENT/CONFINED means being an inpatient in a Hospital for the necessary care and treatment of an Injury. Such confinement must be prescribed by a Physician.

“Confinement does not include outpatient care and treatment, including outpatient surgery or outpatient observation received in a Hospital.

“[¶] ... [¶]

“NECESSARY TREATMENT means medical treatment which is consistent with currently accepted medical practice. Any confinement, operation, treatment, or service not a valid course of treatment recognized by an established medical society in the United States is not considered ‘Necessary Treatment.’ No treatment or service or expense in connection therewith, which is experimental in nature, is considered ‘Necessary Treatment.’

“We may use Peer Review Organizations or other professional medical opinions to determine if health care services are:

“1. medically necessary; and

“2. consistent with professionally recognized standards of care with respect to quality, frequency, and duration; and

“3. provided in the most economical and medically appropriate site for treatment.

“If services do not meet these criteria, expenses related to those services will not be deemed ‘Necessary Treatment.’ ”

The policy defined a “Hospital” as an institution that, among other things, is engaged primarily in providing “medical, diagnostic, and major surgery facilities for medical care and treatment of sick and injured persons on an inpatient basis,” excluding any institution or any part of an institution operated primarily as a “convalescent home, convalescent, rest, or nursing facility.”

The policy period began in October 2007, and the policy stated that coverage would continue as long as Nickerson continued to pay his monthly premium.

2. Nickerson's injury and hospitalization

Nickerson served in the United States Marines and therefore is entitled to medical care at Veterans Administration (VA) hospitals at no cost. He was involved in a snowmobile accident in 1997 and became paralyzed from his chest down. He now relies on a wheelchair. Nickerson is single and has worked as a live-in caretaker for other veterans since 2000 in exchange for free rent. His only income is a very small military pension.

Nickerson was sitting in a motorized wheelchair on a lift about to be lowered from his van when he accidently struck the control, causing the wheelchair to lurch forward. He fell from the wheelchair on the lift down to the pavement. The accident occurred on February 11, 2008. He suffered a broken leg and was taken to a VA hospital in Long Beach, first to the emergency room and then to a spinal cord unit, that was equipped to treat paraplegics and quadriplegics. Nickerson's primary care physician, Dr. Hung Nguyen, treated him there together with orthopedic physicians.

Nickerson suffered a comminuted, displaced fracture of his right tibia and fibula, meaning that the leg was broken, splintered, and out of place. A full-leg splint, a so-called Long Beach splint, was put in place extending from his upper thigh to the beginning of his toes. He soon experienced complications from the injury, including heterotopic ossification (formation of bone in a joint), bruising, swelling, blistering, infection, and a risk of gangrene. He remained at risk for blood clots. Nickerson was confined to a hospital bed and received intravenous fluids until around February 29, 2008, although he continued to have some blisters from an infection.

An orthopedic physician approved Nickerson's sitting in a wheelchair again on March 24, 2008. He could tolerate two hours at a time in a wheelchair by May 9, 2008, and an orthopedic physician determined that he would be ready for discharge when he could tolerate three hours at a time in a wheelchair. Dr. Nguyen decided that Nickerson was stable and ready to return home on May 19, 2008, except that he was unable to maneuver into his bathroom without a particular part needed for his wheelchair. After obtaining the needed part, Dr. Nguyen discharged Nickerson from the hospital on May 30, 2008. In all, Nickerson was hospitalized under Dr. Nguyen's care from February 11 until May 30, 2008, a total of 109 days.

3. Nickerson's claim and Stonebridge's handling of his claim

Nickerson submitted a claim to Stonebridge on June 2, 2008, together with a completed form that Stonebridge had provided to authorize the release of his medical records. Stonebridge sent him a letter dated June 18, 2008, stating that the Long Beach VA hospital required him to complete and sign a different authorization form. Rather than complete the form, Nickerson went to the hospital himself, obtained copies of his records and mailed them to Stonebridge. Nonetheless, Stonebridge sent him another letter enclosing the same authorization form along with an Explanation of Benefits form stating that his file was closed until the information requested of him was received. Nickerson completed and returned the form.

Nickerson sought assistance from the California Department of Insurance on July 22, 2008. He explained that he had been in the hospital for 109 days and could not use the bathroom or enter a bedroom because of the Long Beach splint on his leg. After he had sent his medical records to Stonebridge, Nickerson was notified that his file was closed until the insurer received additional information. On August 15, Stonebridge wrote to Nickerson to advise him it was ordering records from the Long Beach VA Hospital.

Stonebridge notified Nickerson in a letter dated August 28, 2008, that it had received the information requested from the Long Beach VA Hospital, and that it was requesting additional information from a medical peer review organization. Stonebridge sent Nickerson's file to the Medical Review Institute of America and requested answers to three questions: (1) “Was the confinement medically necessary for inpatient treatment of the right tibia/ fibula fracture? If so, for how many days?” (2) “Was treatment consistent with professionally recognized standards of care with respect to quality, frequency and duration?” and (3) “Was treatment provided in the most economical and...

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