Houchin v. Hartford Life Insurance Company
Filing
87
ORDER granting in part and denying in part 21 Motion for Summary Judgment. Signed by Honorable Timothy D. DeGiusti on 2/8/2016. (mb)
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
ANITA HOUCHIN,
Plaintiff,
v.
HARTFORD LIFE INSURANCE
COMPANY,
Defendant.
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Case No. CIV-14-522-D
ORDER
Plaintiff Anita Houchin (“Houchin”) alleges Defendant Hartford Life Insurance
Company (“Hartford”) engaged in fraud and bad faith concerning an insurance policy
under which she was the named beneficiary. Before the Court is Hartford’s Motion
for Summary Judgment [Doc. No. 21], to which Houchin has filed her response in
opposition [Doc. No. 36]. The matter is fully briefed and at issue.
BACKGROUND
The following facts are undisputed and viewed most favorably to Houchin.
Dorothy Kendrick, Houchin’s mother, elected to receive a $1,000 complimentary
Accidental Death and Dismemberment (“AD&D”) insurance policy (the Policy) from
First National Bank & Trust Company, which was insured by Continental Casualty
Company. Hartford subsequently became the new insurance carrier and, by a letter
dated January 5, 2007, notified Ms. Kendrick of the change. In its letter, Hartford
suggested Ms. Kendrick’s coverage was too low and that she could increase the
amount of her coverage, “with no questions asked.” The letter stated Ms. Kendrick
was eligible for up to $300,000 in additional coverage. The Coverage Increase
Request Form provided four spaces with corresponding amounts of additional
coverage to choose from: $300,000, $150,000, $75,000, and $25,000. Ms. Kendrick
checked the space next to the $25,000 amount and named Houchin as beneficiary.1
Beneath Ms. Kendrick’s signature read the proviso: “Benefits reduce 50% at age 70
or older.”2 Ms. Kendrick was 81 years old when she elected the additional coverage.
A Certificate of Insurance was sent to Ms. Kendrick to reflect the new terms
of coverage. Underneath the heading “Schedule,” the certificate stated the Basic
(Non-Contributory) Principal Sum Amount of her coverage was $1,000 and the
Voluntary (Contributory) Principal Sum Amount was $25,000. The certificate noted
the premium was $8.25 and would be billed quarterly beginning April 1, 2007.
Beneath the schedule, the certificate stated:
1
Houchin assisted her mother in completing the form and believed she elected
to receive $75,000 and her premiums were going toward that amount.
2
The Accident Insurance Enrollment Form under which Ms. Kendrick elected
to receive the complimentary $1,000 of coverage contained the same provision.
2
30 DAY RIGHT TO EXAMINE CERTIFICATE: We urge you to
examine this certificate closely. If you are not satisfied, return it to us
within 30 days of your Effective Date. In that event, we will consider it
void from the certificate Effective Date and any premium paid will be
refunded. Any claims paid during the initial 30 day period will be
deducted from the refund.
***
Accidental Death and Dismemberment Reduction on and after Age 70:
On the date You attain age 70, Your amount of Principal Sum will
reduce by 50%. If You are age 70 or over You will not be eligible for a
Principal Sum Amount that is more than 50% of the Principal Sum
Amount(s) shown above.
***
Injury means bodily injury resulting directly from accident and
independently of all other causes which occurs while the Covered
Person is covered under this Policy; Loss resulting from: a) sickness or
disease, except a pus-forming infection which occurs through an
accidental wound; or b) medical or surgical treatment of a sickness or
disease; is not considered as resulting from injury.
(Emphasis added). Neither Ms. Kendrick nor Houchin returned the certificate or
disputed the amount of coverage afforded.
Several years later, Ms. Kendrick was rushed to the hospital after experiencing
breathing problems apparently caused by aspirating something into her right lung.
The ambulance report, which recorded Ms. Kendrick’s state as she was being
transported from her nursing home, said she may have aspirated and her upper airway
“had a lot of congestion.” Ms. Kendrick was admitted to Mercy Hospital in Ardmore,
OK, where medical reports showed she had respiratory distress and had not been able
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to walk for about a year. Ms. Kendrick was diagnosed as having, inter alia,
aspiration, right lung pneumonia, ischemic cardiomyopathy (weakened heart muscle),
acute systolic congestive heart failure, and acute renal failure (abrupt loss of kidney
function).
Ms. Kendrick passed away the same day. Her death certificate listed the
cause(s) of death as (1) respiratory and cardiac failure due to (2) aspiration
pneumonitis3 and acute renal failure due to (3) congestive heart failure, the first two
events transpiring the day of her death. The manner of death was listed as “natural,”
as opposed to “accidental” or any of the other available options listed on the
certificate. Houchin submitted an insurance claim to Hartford. On the claim form,
Houchin stated the amount of available insurance was $25,000. On her loss statement,
Houchin described the accident as “Mother choked somehow and aspirated and
pneumonia occurred all at once.”
As part of her investigation, Hartford claims analyst April Madden examined
(1) Houchin’s claim form, (2) the death certificate, (3) the ambulance records, and (4)
3
According to the A.D.A.M. Medical Encyclopedia provided by the U.S.
National Library of Medicine and the National Institute of Health, “aspiration
pneumonitis” is a breathing condition in which there is swelling or an infection of the
lungs that occurs when food, saliva, liquids, or vomit is breathed into the lungs or
airways leading to the lungs, instead of being swallowed into the esophagus and
stomach.
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Ms. Kendrick’s admission and discharge records from Mercy. Madden did not
interview anyone from the nursing home and did not submit the medical records to
a medical consultant for review. Madden also testified she was unaware whether Ms.
Kendrick had aspirated vomit. Based on her investigation, Madden concluded Ms.
Kendrick’s death was caused by sickness and not an “injury” as that term was defined
under the Policy. Hartford, accordingly, denied Houchin’s claim and sent the
following letter, which stated in part:
As set forth above, the Policy defines Injury as bodily injury caused by
an accident and the accident must result directly and independently of
all other causes[.] Loss resulting from sickness or disease[] is not
considered as resulting from injury. It has been established that Dorothy
Kendrick’s death was due to respiratory and cardiac failure, aspiration
pneumonitis, acute renal failure and congestive heart failure. Because
Dorothy Kendrick’s death was due to sickness or disease, it is not
considered as a result of injury. . . . Accordingly, her loss does not
constitute a covered loss under the terms of the Policy, therefore, no
Accidental Death benefits are payable.
Madden conceded that the pneumonia in Ms. Kendrick’s lungs was caused by
aspiration. And, although she concluded Ms. Kendrick’s death was due to “sickness,”
she could not cite any information evidencing Ms. Kendrick was sick prior to the
aspiration, nor could she identify what other possible illness could have caused her
death. Houchin did not appeal the denial of her claim. Instead, she sued Hartford in
Oklahoma County District Court, where she alleged Hartford breached the implied
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covenant of good faith and fair dealing by, inter alia, “failing to properly investigate
Plaintiff’s claims and to obtain additional information both in connection with the
original refusal and following the receipt of additional information.” The Petition also
alleged Hartford’s solicitation letter to Ms. Kendrick was false and misleading in that
it promised coverage for tragic accidents, although it:
wholly fail[ed] to disclose that a person’s current health condition,
current age, or susceptibility to accidental death as a result of their
existing health status would in any way affect their eligibility for
coverage for such tragic accidents. The letter indicates that benefits
reduce 50% at age 70, but Mrs. Kendrick was already over 70 years old
and the letter still represented that she would increase her coverage to
$75,000 by payment of $8.25. The letter is written to express that a
person was eligible for the coverage without regard to their current
health or age and yet [Hartford] knows that they routinely deny life
benefits under this policy based upon pre-existing health conditions that
might make a person more susceptible to dying following an accident.
. . . At the time that Hartford sent these solicitation materials to Mrs.
Kendrick and her family . . . Hartford knew that they routinely denied
these accidental life benefits to persons that did not enjoy optimum
health.
Hartford defends its denial of Houchin’s claim and contends it is entitled to
summary judgment on four grounds: (1) Houchin’s fraud claim is barred by the twoyear statute of limitations, (2) Houchin cannot, as a matter of law, prove the elements
of fraud, (3) Hartford’s investigation does not indicate bad faith, and (4) in light of
the foregoing, Houchin has shown no entitlement to punitive damages.
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STANDARD OF DECISION
Summary judgment is appropriate if the moving party demonstrates there is “no
genuine dispute as to any material fact” and it is “entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56(a); Callahan v. Unified Gov’t of Wyandotte County, 806 F.3d
1022, 1027 (10th Cir. 2015). An issue is “genuine” if sufficient evidence exists on
each side “so that a rational trier of fact could resolve the issue either way” and “[a]n
issue of fact is ‘material’ if under the substantive law it is essential to the proper
disposition of the claim.” Adler v. Wal Mart Stores, Inc., 144 F.3d 664, 670 (10th
Cir.1998) (citations omitted).
The nature of the showing depends upon whether the movant bears the burden
of proof at trial with respect to the particular claim at issue. If the non-moving party
bears the burden of proof, the movant need not “support its motion with affidavits or
other similar materials negating the opponent’s claim.” Celotex Corp. v. Catrett, 477
U.S. 317, 323 (1986) (emphasis in original); Mares v. ConAgra Poultry Co., Inc., 971
F.2d 492, 494 n. 2 (10th Cir. 1992). Rather, the movant can satisfy its obligation
simply by pointing out the absence of evidence on an essential element of the nonmovant’s claim. Adler, 144 F.3d at 671; Hornady Mfg. Co., Inc. v. Doubletap, Inc.,
746 F.3d 995, 1001 (10th Cir. 2014).
The nonmoving party may not rest upon the mere allegations or denials of its
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pleadings. Rather, it must go beyond the pleadings and establish, through admissible
evidence, there is a genuine issue of material fact that must be resolved by the trier
of fact. Salehpoor v. Shahinpoor, 358 F.3d 782, 786 (10th Cir. 2004). Unsupported
conclusory allegations do not create an issue of fact. Finstuen v. Crutcher, 496 F.3d
1139, 1144 (10th Cir. 2007). However, even if the non-movant produces some
evidence, summary judgment may be granted if that evidence is “not significantly
probative.” Hornady, 746 F.3d at 1001 (quoting Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 249-50 (1986)).
The Court views the evidence and draws inferences in the light most favorable
to the non-movant. Callahan, 806 F.3d at 1027. At the summary judgment stage, the
Court’s function is not to weigh the evidence and determine the truth of the matter
asserted, but to determine whether there is a genuine issue for trial. Tolan v. Cotton,
__ U.S. __, 134 S.Ct. 1861, 1866, 188 L.Ed.2d 895 (2014).
DISCUSSION
Because this case was removed from state court based on diversity jurisdiction,
Oklahoma law applies to determine the substantive rights of the parties. Royal
Maccabees Life Ins. Co. v. Choren, 393 F.3d 1175, 1180 (10th Cir. 2005) (“A federal
court sitting in diversity must apply state law as propounded by the forum’s highest
court.”) (citing Rancho Lobo, Ltd. v. Devargas, 303 F.3d 1195, 1202 n. 2 (10th Cir.
8
2002)).
I.
FRAUD
“[F]raud is a generic term embracing the multifarious means which human
ingenuity can devise so one can get advantage over another by false suggestion or
suppression of the truth.” Croslin v. Enerlex, Inc., 2013 OK 34, ¶ 11, 308 P.3d 1041,
1045 (citations omitted). The elements of actionable fraud are (1) a false
misrepresentation, (2) made as a positive assertion which is either known to be false
or is made recklessly without knowledge of the truth, (3) with the intention that it be
acted upon, and (4) which is relied upon by the other party to her own detriment.
Bowman v. Presley, 2009 OK 48, ¶ 13, 212 P.3d 1210, 1218. The statute of
limitations for fraud actions is two years; a claim for fraud accrues when a plaintiff
ascertains or discovers each element of the claim. See 12 OKLA. STAT. § 95(A)(3);
Horton v. Hamilton, 2015 OK 6, ¶ 18, 345 P.3d 357, 363 (“A claim for fraud accrues
when a person discovers the fraud. A party discovers fraud when he or she ascertains
each element of the claim.”) (citation omitted).4 All elements of fraud must be
4
“To grant summary judgment on the affirmative defense that a statute of
limitations ran on a claim, the evidentiary material must show when the plaintiff knew
or in the exercise of reasonable diligence would have discovered the act which gave
rise to the claim.” Horton, 345 P.3d at 360 (citing Redwine v. Baptist Med. Ctr. of
Okla., Inc., 1983 OK 55, ¶ 9, 679 P.2d 1293, 1295). “Otherwise, when the statute of
limitations begins to run is a question of fact if reasonable people would reach
(continued...)
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present; absence of any one is fatal to the plaintiff’s claim. McCain v. Combined
Commc’n Corp. of Okla., Inc., 1998 OK 94, ¶ 11, 975 P.2d 865, 867.
“Fraud is never presumed and each of its elements must be proved by clear and
convincing evidence.” Bowman, 212 P.3d at 1218 (citations omitted); Combs v.
Shelter Mut. Ins. Co., 551 F.3d 991, 999 (10th Cir. 2008). The “clear and convincing”
standard is “the highest standard of proof that the law imposes in civil cases.”
Kupersteinn v. Hoffman-Laroche, 457 F. Supp. 2d 467, 471 (S.D.N.Y. 2006); see also
Liberty Mut. Fire Ins. Co. v. J.T. Walker Indus., Inc., No. 2:08-2043, 2014 WL
6773517, at *3 (D.S.C. Dec. 2, 2014) (clear and convincing standard is “the highest
burden of proof known to the civil law.”). “Also, the reliance referred to must be
justifiable.” State ex rel. S.W. Bell Tel. Co. v. Brown, 1974 OK 19, ¶ 19, 519 P.2d
491, 495. “[T]he gist of fraudulent misrepresentation is the production of a false
impression . . . and damage sustained as the natural and probable consequence of the
acts charged.” Id. (citations omitted).
Although fraud is generally a question of fact, Croslin, 308 P.3d at 1046,
summary judgment is appropriate where, under the uncontroverted facts, a plaintiff
fails to demonstrate the viability of her claim. See, e.g., Bormann v. Applied Vision
4
(...continued)
‘conflicting opinions thereon.’” Id.
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Systems, Inc., 800 F.Supp. 800, 811 (D. Minn. 1992)(“Although reliance is generally
a question of fact, this Court is not precluded from granting summary judgment where
plaintiffs fail to demonstrate a genuine issue of material fact as to this essential
element.”) (citations omitted); Alta Health Strategies, Inc. v. Kennedy, 790 F. Supp.
1085, 1093 (D. Utah 1992) (“[A]llegations of fraud do not lend themselves readily
to resolution by way of summary judgment. . . . . Even so, [s]ummary judgment is
appropriate when conclusory allegations of fraud stand alone, unsupported by specific
evidence pertinent to a claim of common law fraud.”) (citations and internal quotation
marks omitted).
The Court, construing all evidence and reasonable inferences therefrom in
favor of Houchin, concludes that summary judgment is appropriate because her
evidence fails to raise a genuine issue of material fact on at least one of the essential
elements of a fraud claim, and her evidence is not significantly probative in light of
the “clear and convincing” evidentiary standard as required by Oklahoma law. First,
there is no evidence of an actionable misrepresentation. Hartford’s solicitation letter
stated Ms. Kendrick was eligible to receive additional coverage up to $300,000. She
elected, and received, additional coverage of $25,000. Although Houchin testified
this was a mistake, albeit unilaterally, there is no evidence she sought to correct the
decision or Hartford was aware the amount of additional coverage was not what she
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had requested. Moreover, notwithstanding Houchin’s complaints regarding the 50%
reduction of benefits once an insured reaches age 70, her claim seeks damages for
Hartford’s denial of benefits because Ms. Kendrick’s death did not meet the
definition of “injury” under the Policy, not for any reduction in coverage. Houchin’s
grievances regarding the nature of Hartford’s solicitation letter are belied by her own
actions in this lawsuit, rendering them incongruous. Because Houchin has failed to
show any misrepresentation or detrimental injury as required by Oklahoma law,
summary judgment as to her fraud claim will be granted.
Having found that, as a matter of law, Houchin has failed to establish a triable
issue as to all the requisite elements for fraud, the Court declines to address whether
the claim is barred by the statute of limitations.
II.
BAD FAITH
To establish a bad-faith claim, Houchin must show (1) she was covered under
the Policy issued by Hartford and it was required to take reasonable actions in
handling the claim, (2) Hartford’s actions were unreasonable under the circumstances,
(3) Hartford failed to deal fairly and act in good faith toward Houchin in its handling
of her claim, and (4) Hartford’s breach or violation of the duty of good faith and fair
dealing was the direct cause of any damages sustained by Houchin. Badillo v. Mid
Century Ins. Co., 2005 OK 48, ¶ 25, 121 P.3d 1080, 1093; Automax Hyundai South,
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L.L.C. v. Zurich American Ins. Co., 720 F.3d 798, 810 (10th Cir. 2013). Under the
tort of bad faith, “[t]he insurer does not breach the duty of good faith by refusing to
pay a claim or by litigating a dispute with its insured if there is a ‘legitimate dispute’
as to coverage or amount of the claim, and the insurer’s position is ‘reasonable and
legitimate.’” Oulds v. Principal Mut. Life Ins. Co., 6 F.3d 1431, 1436-37 (10th Cir.
1993) (citing Thompson v. Shelter Mut. Ins., 875 F.2d 1460, 1462 (10th Cir. 1989));
Sims v. Great Am. Life Ins. Co., 469 F.3d 870, 891 (10th Cir. 2006).
Stated another way, “[t]he insurer will not be liable for the tort of bad faith if
it ‘had a good faith belief, at the time its performance was requested, that it had a
justifiable reason for withholding payment under the policy.’” Oulds, 6 F.3d at 1436
(citing McCoy v. Okla. Farm Bureau Mut. Ins. Co., 1992 OK 43, 841 P.2d 568, 572,
Manis v. Hartford Fire Ins. Co., 1984 OK 25, 681 P.2d 760, 762) (paraphrasing in
original); Sims, 469 F.3d at 891. An insurer’s conduct does not meet this standard if
(1) the manner of investigation hints at a sham defense or otherwise suggests that
material facts were overlooked, or (2) the insurer intentionally disregarded undisputed
facts supporting the insured’s claim. Oulds, 6 F.3d at 1442. “Thus, in order to
establish such a claim, the insured must present evidence from which a reasonable
jury could conclude that the insurer did not have a reasonable good faith belief for
withholding payment of the insured’s claim.” Id. at 1436 (citing McCoy, 841 P.2d at
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572).
The mere allegation that an insurer breached the duty of good faith and fair
dealing does not automatically entitle a plaintiff to a jury trial. Id. (citing City Nat’l
Bank & Trust Co. v. Jackson Nat’l Life Ins., 1990 OK CIV APP 89, 804 P.2d 463,
468). A jury question arises only where relevant, material facts are in dispute or the
undisputed facts permit different conclusions as to the reasonableness and good faith
of the insurer’s conduct. Id. “On a motion for summary judgment, the trial court must
first determine, under the facts of the particular case and as a matter of law, whether
insurer’s conduct may be reasonably perceived as tortious.” Id. at 1436-37. “Until the
facts, when construed most favorably against the insurer, have established what might
reasonably be perceived as tortious conduct on the part of the insurer, the legal gate
to submission of the issue to the jury remains closed.” Id. “To hold otherwise would
subject insurance companies to the risk of punitive damages whenever litigation
arises from insurance claims.” Oulds, 6 F.3d at 1437 (quoting Manis, 681 P.2d at
762).
Applying these standards here, the Court finds genuine issues of material facts
preclude summary judgment on Houchin’s bad faith claim. Houchin has presented
evidence that would permit different conclusions as to the reasonableness and good
faith of Hartford’s investigation. Madden agreed that the pneumonia in Ms.
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Kendrick’s lung was caused by aspiration. Although Madden denied the claim on the
basis Ms. Kendrick’s death was caused by “sickness,” as opposed to “injury,” she was
unable to identify what other “sickness” she believed caused the aspiration. She did
not interview anyone at the nursing home to determine what Ms. Kendrick aspirated
or any of the factual circumstances surrounding the incident. In fact, she admitted she
did not know whether Ms. Kendrick had vomited. Nor did Madden seek consultation
from a medical expert.5
Hartford relies heavily on this Court’s decision in Morrison v. Stonebridge Life
Ins. Co., No. CIV-11-1204-D, 2015 WL 137261 (W.D. Okla. Jan. 9, 2015). Morrison,
however, is distinguishable. In that case, evidence was relied upon by the insurer
which suggested a cardiac arrest suffered by Mr. Morrison may have preceded his fall
and head injury, or at the very least the cardiac arrest contributed to his injuries, thus
providing for a no-coverage decision based on the lack of an exclusive accidental
injury. Mr. Morrison had a significant history of heart disease. Moreover, in Morrison
the decedent’s treating physician indicated that the pre-existing heart condition
played a role in bringing about his death. Citing the Tenth Circuit case Flores v.
5
This is not to say that an insurer must consult with a medical expert in
evaluating every claim brought under a AD&D policy, but only that under the facts
of this case, such failure is probative as to whether a genuine issue of material fact
exists regarding Houchin’s bad faith claim.
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Monumental Life Ins. Co., 620 F.3d 1248 (10th Cir. 2010), this Court reasoned that
if death resulted because an accident aggravated the effects of a pre-existing disease,
or the disease aggravated the effects of the accident, with both acting as concurring
causes of death, there would be no coverage under the policy in question there. In the
present case, Hartford points to no specific evidence of which it was aware at the time
of the coverage decision that points to a pre-existing condition that was a concurring
cause of the aspiration.
Viewing these facts in the light most favorable to Houchin, as the Court must,
Houchin has made a minimally sufficient showing from which a reasonable juror
could find Hartford did not undertake an appropriate and thorough investigation, and
did not have a reasonable basis to deny the claim. Therefore, Hartford is not entitled
to summary judgment on Houchin’s bad faith claim.
III.
PUNITIVE DAMAGES
Similarly, the Court finds Houchin has demonstrated genuine issues of material
facts regarding whether Hartford’s conduct may warrant an award of punitive
damages. Under Oklahoma law, an insurer may be subjected to punitive damages for
breach of its duty to deal fairly and in good faith with its insured only if a jury finds
by clear and convincing evidence that the insurer’s breach was either reckless or
intentional and with malice. 23 OKLA. STAT. §§ 9.1(B)(2), (C)(2). The record herein
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contains minimally sufficient facts and evidence that, viewed most favorably to
Houchin, could support a reasonable finding that Hartford recklessly disregarded her
rights to fair treatment, reasonable investigation, and timely payment on her claim.
Therefore, Hartford is not entitled to summary judgment on the issue of punitive
damages.
CONCLUSION
For the reasons stated, Hartford’s Motion for Summary Judgment [Doc. No. 21]
is GRANTED IN PART and DENIED IN PART as set forth herein.
IT IS SO ORDERED this 8th day of February, 2016.
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