Schimizzi v. Illinois Farmers Ins. Co.

Citation928 F. Supp. 760
Decision Date23 May 1996
Docket NumberNo. 3:93-CV-173RM.,3:93-CV-173RM.
PartiesJosephine SCHIMIZZI, M.D., Plaintiff, v. ILLINOIS FARMERS INSURANCE CO., Defendant.
CourtU.S. District Court — Northern District of Indiana



Frederick R. Hovde, Townsend, Hovde and Montross, Indianapolis, IN, for plaintiff.

John P. McQuillan, Daniel A. Gioia, Theresa L. Springmann, Ginamarie Gaudio-Graves, Spangler, Jennings and Dougherty, P.C., Merrillville, IN, for defendant.


MILLER, District Judge.

Following a nine-day trial on Dr. Josephine Schimizzi's complaint against Illinois Farmers Insurance Company for breach of contract and tortious breach of the insurer's duty to deal in good faith with its insured, a jury awarded Dr. Schimizzi $400,000 in compensatory damages and an additional $600,000 in punitive damages. Farmers now seeks judgment as a matter of law, amendment of the judgment, and/or a new trial. Dr. Schimizzi seeks amendment of the judgment to reflect prejudgment interest and seeks an award of attorney fees pursuant to Indiana's frivolous litigation statute.

For the reasons that follow, the court grants Farmers's motion to amend the judgment to the extent the verdict for $50,000 under the insurance policy's medical payments clause exceeds Dr. Schimizzi's properly compensable medical bills. The court also grants Dr. Schimizzi's motion for prejudgment interest because her damages under the uninsured motorist provision and part of her damages under the medical payments provision were fixed and ascertainable before trial. The court denies Dr. Schimizzi's motion for attorney fees because even if the Indiana fee statute applies in this federal action, Farmers's defense was not frivolous. The court also denies Farmers's motion for judgment as a matter of law on Dr. Schimizzi's tort claim and claim for punitive damages, because the evidence was sufficient to allow the jury to find that those claims were proven with respect to Farmers's failure to honor the medical payments provision of the insurance policy, though no tort was shown with respect to the uninsured motorist provision.

The court also, however, agrees that the jury's awards for emotional distress and punitive damages were excessive under the applicable federal standard, which requires the court to consider other awards of those kinds. The court grants Farmers's motion for a new trial on the issue of emotional distress damages, subject to Dr. Schimizzi's acceptance of a remittitur that would reduce her emotional distress award to $25,000, which still would be among this circuit's higher awards for emotional distress. Similarly, the court concludes that the punitive damages award, whether viewed in terms of its ratio to compensatory damages on the tort claim, or in terms of simple dollars, is vastly out of line with other awards of punitive damages for an insurer's breach of its duty of good faith under Indiana law, and excessive under all of the "guideposts" suggested by the United States Supreme Court. Accordingly, the court also grants Farmers's motion for new trial on the issue of the amount of punitive damages, subject to Dr. Schimizzi's acceptance of a remittitur that would reduce her punitive damages award to $135,000, which still would be the highest reported punitive damages award against an insurer for Indiana's tort of breaching the duty to deal with the insured in good faith.

Finally, the court agrees with Dr. Schimizzi that she is entitled to prejudgment interest on her recoveries under the express policy provisions, but disagrees with her contention that she should be awarded attorney fees because Farmers's defense was frivolous.


Dr. Schimizzi is a licensed physician board-certified in family practice, a magna cum laude graduate of the University of Notre Dame, and a graduate of Indiana University School of Medicine. As of May 8, 1987, she was employed in two positions. She was working 30 hours per week at $35 per hour for a hospital-run urgent care facility known as MedPoint, and was serving as interim director of a hospital's Center for Occupational Health. She may have received an offer for full-time salaried employment with MedPoint shortly before the evening of May 8, 1987; the parties disputed this matter at trial. The court presumes the jury found in Dr. Schimizzi's favor on this issue, although it need not have done so to reach its verdict.

On the evening of May 8, 1987, Dr. Schimizzi was a passenger in a car that was driven by Richard LaSalvia. The car was insured by Illinois Farmers Insurance Company ("Farmers") under a policy issued to Mr. LaSalvia, and was struck from the rear by another vehicle. The drivers saw no damage to the LaSalvia vehicle and so parted without exchanging identification, but Dr. Schimizzi's neck soon began to hurt. The pain continued at least to the time of trial in March 1996. Dr. Schimizzi returned to work but found her hours curtailed by her pain. In May 1988, she stopped work altogether and has not worked as a physician since.

Dr. Schimizzi has proceeded on a long course of examinations by physicians, a string of various attorneys, and prolonged dealings with Farmers. The court need not address whether her claimed injuries and disability are real; the jury so found upon more than adequate evidence. There was more than ample evidence to support a finding of lost income and pain and suffering causally related to the collision to support a $250,000 (policy limits) finding for Dr. Schimizzi under the uninsured motorist clause of Mr. LaSalvia's Farmers policy, under which the parties agree Dr. Schimizzi is an insured. There also is more than ample evidence to support a finding of incurred medical expenses causally related to collision to support a finding for the plaintiff under the policy's medical payments clause. There are not enough medical expenses to support the jury's verdict for $50,000 under that clause; that issue is discussed in Part II of this opinion.

Mr. LaSalvia acted as Dr. Schimizzi's attorney in the weeks immediately after the collision, and submitted Dr. Schimizzi's claim to Farmers on May 28, 1987. Farmers mailed a medical payment claim form to Dr. Schimizzi for her signature the following day, but Dr. Schimizzi did not return the form. Farmers's medical claims payment supervisor may have mailed another copy of the medical payment claim form in June or July. If she did so, that form, too, was not returned, and Farmers did nothing further with respect to the form after that.

On June 4, 1987, Farmers told Dr. Schimizzi that her claim was not covered under the policy because it was not a traditional "hit and run". Five days later, Mr. LaSalvia presented a legal argument for coverage, and Farmers agreed to coverage in July, 1987. About that time, Farmers's liability claims manager expressed Farmers's first skepticism: "It is rather odd that a doctor, which our insured passenger is alleged to be, would not know she was hurt until after the insured was leaving the scene of an accident. I also think it is rather odd that our insured, as a practicing attorney, would react in such an unusual manner at the time of an accident. However, their actions are not beyond the relm sic of possibility...." Farmers reserved $500 for the claim.

Mr. LaSalvia quit as Dr. Schimizzi's attorney, and John Hamilton took her case. On September 11, 1987, upon inquiry from Farmers, Mr. Hamilton reported that Dr. Schimizzi was not yet quiescent, and so declined to discuss resolution of the case.

By March 1988, Farmers was aware that Dr. Schimizzi had been working at least part-time at MedPoint, and Farmers's records showed a $5,000 settlement value of the claim. No offer was conveyed to Dr. Schimizzi, and Farmers had no contact with Mr. Hamilton from March to September 1988. Dr. Schimizzi, saddled with too much pain to perform her work, stopped all work at MedPoint in May 1988. Dr. Schimizzi has not worked as a physician since then. Some time around March 1989, Mr. Hamilton withdrew from representing Dr. Schimizzi, who retained attorney Dan Pfeifer. In June 1989, Farmers assigned its file to attorney Terrence Wozniak, who had been retained to represent Mr. LaSalvia in a different suit Dr. Schimizzi had filed through a different attorney. Mr. Wozniak originally took the position with Mr. Pfeifer that there was no coverage because this was not a "hit and run". Mr. Pfeifer sent Mr. Wozniak a copy of Farmers's earlier concession, which Farmers apparently had not provided to Mr. Wozniak.

On August 29, 1989, Mr. Pfeifer sent Farmers a demand for the policy limits, along with narrative records and medical reports which, according to Joseph Schaub (the person in charge of Farmers's local office), somehow got separated from the file. Mr. Pfeifer testified that as best he can recall, he included Dr. Schimizzi's medical bills with that letter, but the exhibits do not bear that out. Farmers did not respond to Mr. Pfeifer's demand for policy limits; on September 1, 1989, Mr. Schaub instructed Mr. Pfeifer to direct further correspondence to Mr. Wozniak. The medical records made their way to Mr. Wozniak; on September 8, 1989, he asked Mr. Pfeifer for better copies of Dr. Feferman's notes, and asked for the records of Drs. Ferlic and Mitros.

In October, 1989, Mr. Pfeifer demanded arbitration pursuant to a provision of the policy. After an initial period of uncertainty about a state judge's ethical ability to serve as an arbitrator, Mr. Pfeifer and Mr. Wozniak agreed on attorney James Olsen as an arbitrator, but that selection did not occur until August 1990. In December 1989, Farmers updated its reserve on Dr. Schimizzi's claim to $3,000, but made no offer to Mr. Pfeifer or Dr. Schimizzi.

Discovery began in connection with the arbitration process. On December 11, 1989, Mr. Pfeifer served interrogatories on Farmers, with answers due January 15. On February 2,...

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