Radecki v. Mutual of Omaha Ins. Co.

• Decision Date: 21 August 1998
• Docket Number: No. S-96-1294,S-96-1294
• Citation: 583 N.W.2d 320,255 Neb. 224
• Parties: Tadeusz RADECKI, Appellant and Cross-Appellee, v. MUTUAL OF OMAHA INSURANCE COMPANY, a Nebraska corporation, Appellee and Cross-Appellant.
• Court: Nebraska Supreme Court

Page 320

583 N.W.2d 320

255 Neb. 224

Tadeusz RADECKI, Appellant and Cross-Appellee, v. MUTUAL OF OMAHA INSURANCE COMPANY, a Nebraska corporation, Appellee and Cross-Appellant.

No. S-96-1294.

Supreme Court of Nebraska.

Aug. 21, 1998.

Syllabus by the Court

1. Directed Verdict: Appeal and Error. In reviewing the action of a trial court, an appellate court must treat a motion for directed verdict as an admission of the truth of all competent evidence submitted on behalf of the party against whom the motion is directed; such being the case, the party against whom the motion is directed is entitled to have every controverted fact resolved in its favor and to have the benefit of every inference which can reasonably be deduced from the evidence.

2. Directed Verdict: Evidence. A directed verdict is proper at the close of all the evidence only where reasonable minds cannot differ and can draw but one conclusion from the evidence, that is to say, where an issue should be decided as a matter of law.

3. Jury Instructions: Proof: Appeal and Error. In an appeal based on a claim of an erroneous jury instruction, the appellant has the burden to show that the questioned instruction was prejudicial or otherwise adversely affected a substantial right of the appellant.

4. Insurance: Contracts: Claims: Proof. In order to show a claim for bad faith, a plaintiff must show an absence of a reasonable basis for denying the benefits of the insurance policy and the insurer's knowledge or reckless disregard of the lack of a reasonable basis for denying the claim.

5. Actions: Torts: Insurance: Claims: Liability. If a lawful basis for denial of a claim actually exists, the insurer, as a matter of law, cannot be held liable in an action based on the tort of bad faith.

6. Insurance: Claims. Whether a claim is fairly debatable is appropriately decided by the court as a matter of law, and such a determination is based on the information available to the insurance company at the time the demand is presented.

7. Insurance: Claims: Breach of Contract. Even if an insured had made demand for total disability, a good-faith rejection by the insurer would not constitute renunciation or repudiation of the policy so as to be an anticipatory breach. The duty of good faith and fair dealing does not bar the insurer from seeking a judicial resolution of controverted issues.

8. Jury Instructions: Proof: Appeal and Error. To establish reversible error from a court's failure to give a requested instruction, an appellant has the burden of showing that (1) the tendered instruction is a correct statement of the law, (2) the tendered instruction is warranted by the evidence, and (3) the appellant was prejudiced by the court's failure to give the tendered instruction.

9. Jury Instructions: Appeal and Error. It is not error for a trial court to refuse a requested instruction if the substance of the proposed instruction is contained in those instructions actually given.

10. Breach of Contract: Damages. In a breach of contract case, the ultimate objective of a damages award is to put the injured party in the same position the injured party would have occupied if the contract had been performed, that is, to make the injured party whole.

11. Insurance: Contracts. The parties to an insurance contract may make the contract in any legal form they desire, and in the absence of statutory provisions to the contrary, insurance companies have the same right as individuals to limit their liability and to impose whatever restrictions and conditions they please upon their obligations, not inconsistent with public policy.

12. Trial: Evidence: Appeal and Error. To constitute reversible error in a civil case, the admission or exclusion of evidence must unfairly prejudice a substantial right of a litigant complaining about evidence admitted or excluded.

James E. Harris and Britany S. Shotkoski, of Harris, Feldman Law Offices, Omaha, for appellant.

Patrick G. Vipond and Frederick T. Harris, of Kennedy, Holland, DeLacy & Svoboda, Omaha, for appellee.

CAPORALE, WRIGHT, CONNOLLY, GERRARD, and McCORMACK, JJ.

GERRARD, Judge.

I. INTRODUCTION

Tadeusz Radecki submitted an application to Mutual of Omaha Insurance Company (Mutual of Omaha) for long-term disability benefits, claiming that he was totally disabled due to a major depressive episode. Mutual of Omaha denied Radecki's claim for benefits because it disputed whether he became totally disabled while covered by the policy and because it contended that Radecki's claim was not timely made. Radecki then brought an action against Mutual of Omaha for bad faith and breach of contract, and the case was ultimately tried to a jury. At the close of Radecki's case in chief, the trial court sustained Mutual of Omaha's motion for a directed verdict on the bad faith cause of action because it found that Mutual of Omaha had a reasonable basis for denying the claim as being untimely. The jury returned a verdict in favor of Radecki on the breach of contract cause of action and awarded Radecki damages equal to 24 months of disability benefits. The district court entered judgment on the verdict.

On appeal, Radecki asserts that the trial court erred by, inter alia, directing a verdict in favor of Mutual of Omaha on the bad faith cause of action. On cross-appeal, Mutual of Omaha argues that the trial court erred in overruling its motions for a directed verdict and judgment notwithstanding the verdict on the breach of contract cause of action. Because we determine that Mutual of Omaha did not engage in bad faith as a matter of law and that there was a factual dispute with respect to the breach of contract action which was properly submitted to the jury, we affirm the judgment of the district court.

II. FACTS

Radecki was employed as an associate professor in the department of computer science at the University of Nebraska at Lincoln (UNL) beginning on August 19, 1985. During Radecki's employment at UNL, he was covered by a long-term disability insurance policy issued by Mutual of Omaha. Beginning in April 1989, Radecki was treated by internist James A. Fosnaugh, M.D. Radecki's chief complaints were fatigue and an inability to concentrate. In January 1990, Fosnaugh prescribed an antidepressant for Radecki.

On February 13, 1990, the chairman of the computer science department at UNL recommended to the dean of the college of arts and sciences that Radecki not be reappointed for the 1991-92 academic year. The report noted concerns with Radecki's ability to communicate with students and general teaching ability. The dean of the college of arts and sciences adopted the recommendation, and Radecki was informed of the decision. During the spring of 1991, Radecki devoted himself exclusively to research projects. Radecki testified that he continued to work on research projects for UNL during the summer of 1991.

Radecki saw Fosnaugh again on April 2, 1992. At that time, Fosnaugh indicated that Radecki was as depressed as ever but wished to stop taking the antidepressant medication. At this point, Fosnaugh referred Radecki to a psychiatrist, J. Bastani, M.D. Radecki was first seen by Bastani on April 14 when he was no longer an insured under the policy.

On December 3, 1992, one of the attorneys that previously represented Radecki requested an application for long-term disability benefits from Mutual of Omaha. Radecki ultimately submitted his application to Mutual of Omaha on March 17, 1993. In the application, Radecki indicated that he first became disabled on May 18, 1991, which was the day after UNL's spring semester ended. UNL stated on part B of the application that Radecki was covered by the long-term disability policy through August 31, 1991. Bastani, who completed part C of the application, stated that he did not begin seeing Radecki until April 14, 1992.

On July 2, 1993, Mutual of Omaha denied Radecki's claim. The denial letter stated that because Radecki's appointment with UNL ended on August 31, 1991, his coverage would have ended on midnight as of that date. The letter further stated that the information that Mutual of Omaha had received certified disability only beginning on April 14, 1992. Since disability began after the termination of coverage, Mutual of Omaha declined to approve benefits. The letter went on to quote the policy language regarding proof of loss requirements, as follows:

The claim form is due:

a. Within 90 days after the end of the period for which we are liable; and

b. At least once every 90 days after that period as long as you are totally disabled.

If you do not send us the claim form when due, we will still honor the claim if you send us the claim form as soon as reasonably possible. However, unless you are legally incapable, the claim form must be sent to us no later than one year after items stated in a and b above.

The letter then informed Radecki that he could appeal the decision by providing additional information within 60 days.

Mutual of Omaha received Radecki's appeal on November 10, 1993. Two claims supervisors at Mutual of Omaha independently evaluated Radecki's appeal, and both agreed the denial should be upheld. On November 15, Mutual of Omaha informed Radecki that it was upholding the denial. Mutual of Omaha stated that (1) Radecki did not meet the definition of total disability and did not have verification of total disability and verified treatment by a physician prior to the date his insurance coverage ended and (2) Radecki had not complied with the filing requirement. Mutual of Omaha changed its position from its first denial letter and stated that Radecki last worked on May 17, 1991, rather than August 31, and therefore, that the claim form should have been submitted by February 18, 1992, and in no event after February 18, 1993.

Radecki then filed the instant lawsuit against Mutual of Omaha, claiming breach of contract and bad faith. Both parties obtained further medical reports...