Walters v. Monarch Life Ins. Co., Nos. 93-3232

• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)
• Writing for the Court: Before EBEL; BRIGHT
• Citation: 57 F.3d 899
• Parties: Sam J. WALTERS, D.C., Plaintiff/Counter-Defendant/Appellee/Cross-Appellant, v. MONARCH LIFE INSURANCE COMPANY, Defendant/Counter-Claimant/Appellant/Cross-Appellee.
• Docket Number: 93-3249 and 94-3115,Nos. 93-3232,94-3130
• Decision Date: 06 June 1995

Page 899

57 F.3d 899 Sam J. WALTERS, D.C.,
Plaintiff/Counter-Defendant/Appellee/Cross-Appellant,
v.
MONARCH LIFE INSURANCE COMPANY,
Defendant/Counter-Claimant/Appellant/Cross-Appellee. Nos. 93-3232, 94-3130, 93-3249 and 94-3115. United States Court of Appeals,
Tenth Circuit. June 6, 1995.

Page 900

Lee M. Smithyman (David J. Roberts and Richard W. Hird, with him on the brief), Overland Park, KS, for defendant/counter-claimant/appellant/cross-appellee.

W. James Foland (Thomas A. Sheehan, with him on the brief), Kansas City, MO, for plaintiff/counter-defendant/appellee/cross-appellant.

Page 901

Before EBEL, Circuit Judge, BRIGHT ^* and McWILLIAMS, Senior Circuit Judges.

BRIGHT, Senior Circuit Judge.

Sam J. Walters, a chiropractor and nutritionist, brought this breach of contract action against Monarch Life Insurance Company ("Monarch") after Monarch declined to continue to pay monthly benefits under two disability type policies. Monarch discontinued Walters' benefits on grounds that Walters had wrongfully claimed disability benefits and that as of the time of termination of benefits, September 4, 1991, Walters had not been disabled for a substantial period of time. Monarch denied liability under the policies and cross-claimed seeking return of prior benefits paid. A jury returned a verdict for Walters in the sum of $44,066.13 and denied Monarch's counterclaim.

The trial court entered judgment on that verdict and, pursuant to post-trial motions, denied Monarch a new trial. The trial court further denied Walters additional requested relief that would have increased his damages award to $176,265.73 and denied Walters' demand for reinstatement of the policy. The court also denied Walters' request for attorney's fees. Both parties have appealed. The case is in federal court based on diversity of citizenship and the requisite amount in controversy.

On review of the record and the many issues in controversy, we affirm the judgment and post-trial orders denying additional relief to either party.

I.

Background

Monarch in 1986 issued Samuel Walters a disability income policy providing for $9,500.00 in monthly benefits. In 1985 Monarch had issued a disability overhead expense policy to provide, on Walters' total disability, payments of $20,900.00 per month for fifteen months, with a maximum benefit of $313,500.00. These policies defined total disability as the inability to do the substantial and material duties of the insured's regular occupation, i.e., the insured's usual work when disability begins.

Walters sustained an alleged lower back injury in a parasailing incident at the Lake of the Ozarks in Missouri on June 8, 1988. He then made a claim for total disability as of October 5, 1988. Thereafter, Monarch commenced monthly payments on each policy and waived further policy premiums as provided by the policy's terms.

These benefits continued until September 1991 when Monarch terminated them on grounds that its investigation disclosed that Walters was not totally or residually disabled and had not been so disabled for a substantial period of time. By this time Monarch had paid out the full benefit of the overhead expense policy, $313,500.00 and disability income benefits of $336,834.00, totalling $650,334.00. On September 18, 1991, Monarch also notified Walters that they were removing the premium waiver from his disability income policy.

As a result, Walters brought this action in state court. Monarch removed the action to federal district court, and following extensive discovery, the parties tried the case over a three-week period on the issues of (1) whether Walters sustained any serious injuries in the parasailing accident, (2) whether he in fact became physically disabled, and (3) whether his regular work prior to that incident was that of a chiropractor or that of a health consultant in the areas of nutrition and marketing of nutritional products. Walters contended that his receipt of substantial income during the periods in question did not affect his total disability claim since that claim related to his physical inability to do most of the hard physical effort related to chiropractic manipulation, his alleged regular occupation.

The parties disputed crucial facts as well as inferences to be drawn from the evidence. The district judge submitted the matter to the jury on special interrogatories, with answers as follows:

 VERDICT
                 1. Do you find that plaintiff Sam Walters sustained an injury to his back
                 on or about June 8, 1988?
                 Yes X No
                 ----- -----
                NOTE: If you answered "Yes" to Question 1, proceed to Question 2. If you
                 answered "No," proceed to Question 5.
                 2. Do you find that as a result of that injury in 1988 plaintiff Sam
                 Walters was disabled to the extent that he was unable to perform the
                 substantial and material duties of his regular occupation?
                 Yes X No
                 ----- -----
                NOTE: If you answered "Yes" to Question 2, proceed to Question 3. If you
                 answered "No," proceed to Question 5.
                 3. Do you find that plaintiff Sam Walters is now unable to perform the
                 substantial and material duties of his regular occupation.
                 Yes X No
                 ----- -----
                NOTE: Proceed to Question 4.
                 4. What amount do you find plaintiff Sam Walters is entitled to recover as
                 a result of defendant Monarch Life Insurance Company's breach of the
                 disability insurance contract?
                 $ 44,066.43
                 ----------------
                NOTE: If you answered this question, your deliberations are completed.
                 5. Do you find that plaintiff Sam Walters committed fraud upon defendant
                 Monarch Life Insurance Company in submitting his insurance claims to Monarch
                 Life Insurance Company?
                 Yes No
                 ----- -----
                NOTE: If you answered "Yes" to Question 5, proceed to Question 6. If you
                 answered "No," your deliberations are completed.
                 6. What amount do you find Monarch Life Insurance Company is entitled to
                 recover as a result of plaintiff Sam Walters' fraudulent conduct?
                 $
                 ----------------
                ----------
                

Page 902

2Appellant's App. 895.

II.

Monarch's Appeal

We turn first to Monarch's appeal which asserts that the trial court (1) abused its discretion in denying Monarch leave to amend its complaint, pursuant to Fed.R.Civ.P. 15(a), to assert a claim of rescission; (2) abused its discretion in excluding six items of evidence; and (3) erred in refusing to instruct the jury on residual disability.

A. Denying Leave to Amend

The record discloses that January 31, 1992 marked a deadline for filing motions to amend the pleadings; that August 21, 1992 marked the date of the final pretrial conference, which date became extended to October 2, 1992. Only by way of a revised pretrial order in October 1992 propounded by defendant, did Monarch assert a claim for rescission of the disability policy for false, fraudulent and intentional misrepresentations in the application for insurance.

Page 903

The plaintiff opposed the amendment, the magistrate judge denied the amendment and the district court adopted that order. The order, among other things, stated:

The key fact in the court's consideration is that defendant knowingly delayed raising this issue until the "eve of trial". This case has been set for trial on the court's November 1992 trial calendar since the Scheduling Order was entered on December 30, 1991. Notwithstanding defendant's knowledge of the approaching trial setting and the close of discovery, defendant intentionally withheld disclosure of the potential assertion of a rescission claim until approximately one month before trial. The court finds such conduct does not establish excusable neglect. The motion to amend...