Schaefer v. American Family Mut. Ins. Co.
| Decision Date | 10 May 1995 |
| Docket Number | No. 92-2769,92-2769 |
| Parties | Greg SCHAEFER, Susie Smith, Colleen Mathison, Peggy Gundersen, Stuart Schaefer and Bridget Schaefer, as children of the deceased, Donald W. Schaefer and Marilyn T. Schaefer, Plaintiffs-Appellants-Petitioners, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Defendant-Respondent. |
| Court | Wisconsin Supreme Court |
For the plaintiffs-appellants-petitioners there were briefs by Michael J. Luebke and Atterbury, Riley & Luebek, S.C., Madison and oral argument by Michael Riley.
For the defendant-respondent there was a brief by Michael S. Anderson, Guy DuBeau and Axley Brynelson, Madison and oral argument by Guy DuBeau.
This is a review of a published decision of the court of appeals, Schaefer v. American Family Mutual Insurance, 182 Wis.2d 380, 514 N.W.2d 16 (Ct.App.1994), which affirmed a judgment of the circuit court for Dane County, Mark A. Frankel, Circuit Judge. In an action claiming damages for loss of inheritance, the circuit court denied plaintiffs' motion in limine seeking to exclude from evidence proof that the plaintiffs (heirs of Donald Schaefer) inherited the proceeds 1 of a $500,000 life insurance policy on the decedent, Donald Schaefer. As a result of the circuit court ruling that the evidence could be admitted at trial, the parties entered into a stipulation on the record agreeing to dismiss the action with prejudice, but preserving plaintiffs' right to appeal the order in respect to that item of damages. Plaintiffs entered into the stipulation believing that, if the insurance proceeds were admitted at trial and if defendant's methodology for computing damages was allowed by the court, they had no claim for lost inheritance.
The sole issue on review is whether evidence of receipt of insurance proceeds by heirs bringing a wrongful death action seeking pecuniary damages for lost inheritance should be excluded at trial on public policy grounds. We conclude there is no public policy reason to exclude evidence of insurance proceeds in claims for lost inheritance. The proper focus of the inquiry is on the nature of the loss and how that loss should be measured when one of the decedent's assets is a life insurance policy, rather than, as the defendant suggests, on whether the Schaefer children benefitted from their parent's premature death. 2
We define lost inheritance as the pecuniary value of the addition to the estate which the decedent in reasonable probability would have accumulated and left to his or her heirs had the decedent lived a natural life span. Relevant evidence may include, but is not limited to, that which is relevant to the decedent's ability to save and to otherwise accumulate money or property, the decedent's earnings in excess of expenses for personal maintenance and support of dependents, and the decedent's disposition toward his or her beneficiaries. To the extent that evidence of the decedent's life insurance policy is relevant to these or other relevant considerations, 3 they are admissible at trial.
We hold that, as a matter of law, evidence that Donald Schaefer owned a life insurance policy when he died is relevant to establishing the decedent's propensity for thrift and savings and relevant to establishing the decedent's earnings in excess of expenses for personal maintenance and support of dependents. Whether the insurance policy at issue is relevant to the damage computation, however, cannot be determined by this court on the record. Furthermore, evidence that plaintiffs received proceeds from the policy's death benefit is not relevant to establishing the claim for lost inheritance because these plaintiffs were not named as beneficiaries to the life insurance policy. Therefore, the policy per se cannot be used to infer the decedent's beneficent disposition toward the plaintiffs. Nor, is the death benefit from a life insurance policy includable in the damage computation because it is neither a form of savings relevant to establishing the decedent's propensity toward thrift, nor a form of investment.
On remand, if plaintiffs can establish to a reasonable certainty that Donald Schaefer intended to divest himself of the life insurance policy and invest the cash value, then the probable value of any increases to the decedent's estate from the investment would be included in the formula, discussed infra section V, used to compute damages. If the decedent had no such intent then the policy, although relevant to the above-stated considerations, would not be used in the damage computation.
We turn first to the facts. Plaintiffs, the adult children and heirs of Donald and Marilyn Schaefer, brought a wrongful death action pursuant to sec. 895.04, Stats., against defendant, American Family Mutual Insurance Company, the uninsured motorist carrier of the deceased. 4 In that action, plaintiffs sought to recover only one item of pecuniary damage: lost inheritance.
Mr. Schaefer was 60 years old at the time of the accident. He had been successful in business and at the time of his death, he and his wife left an estate valued at approximately $1.8 million. 5 The estate included a house, real estate holdings, several insurance policies and other miscellaneous investments. For the purposes of this review, we are concerned only with the life insurance policy Donald Schaefer purchased from TransAmerica in 1984. At the time of his death on May 3, 1990, Mr. Schaefer had paid $55,240.11 in premiums on this policy and it had a cash surrender value of $22,237.19. 6 Because Mrs. Schaefer was the sole beneficiary of the policy, when she died in the same accident with her husband the policy became part of her estate. The Schaefers' wills left their estates to the children in equal shares. Had the Schaefers lived their actuarial life expectancies, Mr. Schaefer would have died in 2008, and Mrs. Schaefer in 2013. 7
During the course of pretrial discovery each party retained an expert economist. The plaintiffs' expert, using an "accumulation of surplus" method to determine the lost value of the Schaefers' estate, 8 calculated the total amount the Schaefers had saved over their working lifetimes, as reflected on their estate tax returns, and divided this sum by the number of years they had worked. This yielded a number, which, in theory, represented the average amount of surplus savings the Schaefers had accumulated annually. Plaintiffs' expert added the $500,000 proceeds from the decedent's TransAmerica life insurance policy to this sum.
Plaintiffs' expert anticipated that the Schaefers' estate would continue to accumulate surplus each remaining year of Mr. Schaefer's work life because he assumed (1) Mr. Schaefer's income would continue to be greater than his expenses, thereby enabling the estate to continue to accumulate surplus savings; and (2) that Mr. Schaefer would continue to prudently invest the surplus. Using the sum which reflected the Schaefers' average annual surplus savings, discounted to present value, plaintiffs' expert adjusted the sum to reflect the social security benefits the couple would receive in the future and their post-retirement consumption. According to plaintiffs' expert, the resulting sum--$262,721--represented the lost value of the estate. 9
American Family's expert adopted the same general methodology--although with different numbers--to calculate the present value of the Schaefer's future earnings. But rather than assume that the net future accumulation--reduced to present value--represented the lost inheritance, this expert proposed a different comparison. First, the present value of Mr. Schaefer's future earnings was determined. This sum was then added to the value of the estate the day before the Schaefers died. American Family's expert then compared the present value difference between the value of the estate at the time of the Schaefers' death and the value of the estate the day before the couple died. This methodology is illustrated below:
APRIL MAY
TransAmerica policy 55,000 499,984
House 69,800 69,800
Life insurance 16,972 16,972
Accidental death 0 63,184
Other investments 1,184,385 1,184,385
--------- ---------
1,326,157 1,834,325
Present value of future
earnings & consumption 140,123 10 0
--------- ---------
Total 1,466,280 1,834,325
(before) (after)
[$368,045]
Comparing the value of the Schaefers' estate the day before and the day after the accident, American Family concludes that, because the inheritable estate was $368,045 greater after the accident, plaintiffs are not entitled to a claim for lost inheritance. Plaintiffs concede, if American Family's damage computation is accepted, then they have no claim for lost inheritance.
We turn now to the parties substantive arguments. At oral argument on plaintiffs' motion in limine plaintiffs conceded the relevance of the evidence they sought to exclude, but argued that it should be excluded, nonetheless, on grounds of public policy. Plaintiffs' public policy argument rests primarily on the assertion that the policy reasons for excluding the receipt of insurance proceeds in the context of lost support should apply to claims for lost inheritance because both are pecuniary, both are calculated from the projected future earnings of the deceased, both are triggered by the wrongful death of the decedent and both are intended to remedy the impact of that death. 11
In the alternative, assuming the insurance proceeds are admissible at trial, plaintiffs object to the methodology employed by American Family's...
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