Sherrin v. Northwestern Nat. Life Ins. Co., 92-6107
| Decision Date | 21 September 1993 |
| Docket Number | No. 92-6107,92-6107 |
| Citation | 2 F.3d 373 |
| Parties | Lezlie SHERRIN, Plaintiff-Appellee, Cross-Appellant, v. NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY, Defendant-Appellant, Cross Appellee. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Sandy G. Robinson, Mobile, AL, for appellant.
C.S. Chielpalich, Richard Beckish, Mobile, AL, and Conrad S.P. Williams, III, New Orleans, LA, for appellee.
Appeals from the United States District Court for the Southern District of Alabama.
Before ANDERSON and EDMONDSON, Circuit Judges, and YOUNG *, Senior District Judge.
Defendant-Appellant, Northwestern National Life Insurance Company ["Northwestern"], appeals from the entry of a judgment following a jury verdict for $50,000 in compensatory damages and $150,000 in punitive damages. Plaintiff-Appellee, Lezlie Sherrin, has filed a counterappeal as to certain rulings by the district court. For the reasons that follow, we affirm in part and reverse in part.
This action arises out of the refusal of Northwestern to pay insurance benefits in the amount of $50,000 on the life of Raymond Sherrin, the deceased husband of Appellee, Lezlie Sherrin. The life insurance application, written on December 17, 1987, stated that Ray Sherrin was a non-smoker and had not smoked for the previous 12 months. Northwestern issued a policy on a non-smoking basis in the amount of $50,000, effective January 11, 1988, on Ray Sherrin's life. The policy contained riders covering Lezlie Sherrin and their two children for $25,000 and $5,000, respectively. Ray Sherrin died on February 28, 1989. Because the insured's death occurred within the first two years of the policy, Northwestern undertook an investigation pursuant to the terms of the contract's contestability clause. The investigation revealed that Ray Sherrin was a cigarette smoker at the time of his death and at the time of the application. Benefits were denied under Section 27-14-7 of the Code of Alabama (1975), which permits an insurer to avoid payment on a policy when material misrepresentations are made in the application.
Lezlie Sherrin filed a complaint against Northwestern in federal district court 1 setting forth three counts: (1) breach of life insurance contract; (2) bad faith denial of payment; and (3) misrepresentation and suppression of material facts. Sherrin sought punitive damages as to Counts Two and Three.
The trial record reflects that Lezlie and Ray Sherrin and Danny Little, a Northwestern insurance agent, met to discuss life insurance on December 17, 1987. 2 A conflict in testimony existed as to whether Judy Plovanich, who was Little's office manager at that time, and Joani Baecher, Lezlie Sherrin's sister, were also present. 3 The meeting took place in the dining room of a restaurant owned by the Sherrins.
At trial, Lezlie Sherrin testified that Little filled out the insurance application at issue. She said she believed the life insurance policy was solely to cover her life and that she was covered from the time Little accepted Lezlie Sherrin and Baecher testified that they never heard Danny Little ask Ray Sherrin whether or not he smoked, and that Ray did, in fact, smoke cigarettes during the meeting with Little. Lezlie Sherrin admitted that her husband did not smoke in close proximity to their baby daughter, who was a newborn at the time, but that their daughter was in a baby seat in the restaurant kitchen during the application process. Baecher corroborated this testimony.
her check. She offered no testimony concerning any statements made as to whether her husband, Ray, was also covered. She testified that Ray had not signed the application and that it was possible that she had signed Ray's name. Because she did not read the application, she did not notice that it had been designated as a non-smoking application and that it was primarily on her husband's life, not her own. She also testified that she did not read the life insurance policy prior to her husband's death.
Undisputed evidence revealed that Lezlie Sherrin never advised anyone associated with the insurance investigation that Little had filled out the application incorrectly or that she and Ray Sherrin smoked during the meeting in which the insurance application was completed. Evidence reflected that, during the investigation, Lezlie Sherrin, by letter, informed a Northwestern claims examiner that Ray Sherrin had stopped smoking for a period of time around the time the insurance application was taken. Sherrin claimed that she made this false statement because, after her husband had died, Danny Little had advised her to tell Northwestern's claims examiners that Ray was not a smoker so that her claim for death benefits would not be denied. Sherrin later retracted the false statement and informed the examiner that her late husband had smoked during the twelve-month period prior to the date of the insurance application, and that he had smoked continuously since 1978.
Danny Little denied advising Lezlie Sherrin to lie to Northwestern's claims examiners. Little claimed that Ray Sherrin did not smoke during the application process, that he did not know Ray well, and that he had never seen Ray smoke. 4 Little testified that he had asked Ray whether he had smoked cigarettes "in the last twelve months" and that Ray answered "no." Little also testified that he did not realize it was not Ray's signature on the Northwestern application until he was deposed prior to trial. According to Little and Plovanich, Lezlie Sherrin had held her baby during the application process. Little testified that he had advised the Sherrins that, based on the information on the insurance application, they had coverage as of the day they paid the premium. 5
At the close of the evidence, the district court granted a directed verdict in favor of Northwestern as to the bad faith denial of payment claim. In so ruling, the district court found that there was no evidence that Northwestern knew of Little's alleged misrepresentation at the time they denied the death benefit to Lezlie Sherrin, or that Northwestern had reason at that point to investigate Little's fitness as an agent.
The jury returned a verdict in favor of Lezlie Sherrin as the remaining claims of breach of contract and fraudulent misrepresentation or suppression of material facts. The district court entered judgment based on the jury's interrogatory answers in favor of Plaintiff-Appellee for compensatory damages in the amount of $50,000 plus interest based on the jury's finding of breach of contract and fraud, and an additional $150,000 in punitive damages based on the jury's finding that Little misrepresented the facts concerning the insurance policy which were relied on by Sherrin to her detriment, or that he suppressed material facts concerning the policy of insurance. The court denied Northwestern's motion for judgment notwithstanding
the verdict or to alter and amend the judgment, and this appeal ensued.
Motions for directed verdict and judgment notwithstanding the verdict are subject to de novo review. Accordingly, we apply the same standard the district court must apply in determining whether to grant the motion.
[W]e consider all the evidence, and the inferences drawn therefrom, in the light most favorable to the nonmoving party. If the facts and inferences point overwhelmingly in favor of one party, such that reasonable people could not arrive at a contrary verdict, then the motion was properly granted. Conversely, if there is substantial evidence opposed to the motion such that reasonable people, in the exercise of impartial judgment, might reach differing conclusions, then such a motion was due to be denied....
McKinney v. Pate, 985 F.2d 1502, 1506 (11th Cir.1993) (quoting Carter v. City of Miami, 870 F.2d 578, 581 (11th Cir.1989)).
Allegations of error in rulings on evidentiary matters are subject to an abuse of discretion standard. Bauer Lamp Co., Inc. v. Shaffer, 941 F.2d 1165, 1169 (11th Cir.1991).
We conclude that the evidence was sufficient to deny Northwestern's motions for directed verdict and judgment notwithstanding the verdict as to the breach of contract claim.
The undisputed facts reflect that the Sherrins' insurance application to Northwestern was for life insurance coverage on Ray Sherrin, Lezlie Sherrin, and their children; that Danny Little had the authority to represent to them that their Northwestern insurance coverage would take effect upon payment of their initial premium and did, in fact, make such a representation to Lezlie Sherrin; that Little had the authority to accept the Sherrins' check to Northwestern in payment of the initial premium, and that he did accept the check.
A substantial conflict in the evidence existed as to whether Ray Sherrin or Danny Little answered the question on the insurance application concerning Ray Sherrin's smoking history. The verdict reflects tha the jury rejected Danny Little's version of the meeting in favor of the testimony of Lezlie Sherrin: Little, with the knowledge that Ray Sherrin was a smoker, answered "no" to the question concerning whether Ray had smoked within the last year, and Little made this misstatement without the knowledge or participation of the Sherrins. The jury was properly instructed that, under such circumstances, Northwestern was liable for Little's misrepresentation. Northwestern continued to accept the Sherrins' payment of premiums until Raymond Sherrin died, then denied benefits to Lezlie because the Sherrins held a non-smoking policy on Ray's life although Ray was a smoker at the time the application was taken.
We conclude that the evidence was sufficient to deny Northwestern's motion for directed verdict on Sherrin's breach of contract claim, and that a judgment notwithstanding the verdict was inappropriate when the jury resolved the factual disputes in Sherrin's favor...
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