Doe v. Northwestern Mutual Life Insurance Company
Filing
129
ORDER denying 57 Motion for Summary Judgment; granting in part and denying in part 58 Motion for Summary Judgment; granting 59 Motion for Summary Judgment; granting 60 Motion for Summary Judgment; denying 66 Motion for Summary Judgment; granting 67 Motion for Summary Judgment; granting 68 Motion for Summary Judgment Signed by Honorable David C Norton on 6/26/12.(jsch, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
CHARLESTON DIVISION
JANE DOE,
)
)
Plaintiff,
)
)
vs.
)
)
NORTHWESTERN MUTUAL LIFE
)
INSURANCE COMPANY,
)
)
Defendant.
)
______________________________________ )
Civil No. 2:10-cv-2961
ORDER
This matter is before the court on defendant’s seven motions for summary
judgment. Based on the following, the court grants defendant’s motions for summary
judgment on the negligence, negligent misrepresentation, reformation, specific
performance, promissory estoppel, equitable estoppel, and unjust enrichment claims
and plaintiff’s requests for future insurance benefits and punitive damages, but denies
defendant’s motions on plaintiff’s bad faith claim, for damages from emotional
distress, and concerning the statute of limitations for breach of contract and bad faith.
I. BACKGROUND
Plaintiff claims she is disabled from a medical condition caused by
electroconvulsive therapy (ECT) treatments, and that defendant Northwestern Mutual
Insurance Company (Northwestern) has improperly denied coverage for this
condition based on an inappropriately applied twenty-four month limitation period.
On November 15, 2010, plaintiff sued Northwestern for breach of contract, specific
performance, breach of the implied covenant of good faith and fair dealing,
1
reformation, equitable estoppel, promissory estoppel, negligence, negligent
misrepresentation, and unjust enrichment.
In 1996, plaintiff purchased her first disability insurance policy from Mr.
Stephen Riggs, a Northwestern insurance agent. In 2002 and 2003, she purchased
two additional policies pursuant to an Additional Purchase Benefit (APB) rider in the
1996 policy. The 1996 policy did not contain a time limitation on coverage for
mental disorders, but the two subsequent policies only covered mental disorders for
twenty-four months. Because of plaintiff’s current condition, she cannot remember
the substance of any of the conversations she had with Mr. Riggs concerning her
application for and purchase of these policies.
Plaintiff was diagnosed with severe malignant depression on June 24, 2005,
and applied for disability benefits under all three policies that August. On October 6,
2005, Northwestern approved plaintiff’s claim for disability coverage based on
depression. From July 14, 2005 through September 27, 2005, doctors at the Medical
University of South Carolina (MUSC) administered twenty-one bilateral ECT
treatments to plaintiff to treat her depression.1 As discussed in this court’s May 1,
2012 order on defendant’s motions in limine, recent research indicates that bilateral
ECT treatments can cause long-term retrograde memory loss, and some doctors claim
it also can cause long-term anterograde memory loss, though sufficient peer reviewed
studies have yet to conclusively establish the latter.
Plaintiff underwent memory testing in November 2005, February 2006, and
January 2007, and three later occasions. Plaintiff’s treating physicians advised her
1
ECT is a procedure in which electric currents are passed through the brain by way of
electrodes placed on both sides of the head, deliberately triggering a brief seizure. This
procedure is prescribed for patients with severe medication resistant depression.
2
that these tests indicated memory loss. In July 2007, plaintiff notified Northwestern
for the first time that she had a disabling medical condition which was separate and
apart from her depression. In September 2007, due to the twenty-four month
limitation, plaintiff received her last disability payment under the 2002 and 2003
policies. Defendant then advised plaintiff that it was investigating whether it should
resume making payments based on her newly claimed medical condition. On
February 8, 2008, Northwestern sent plaintiff’s husband a letter which informed him
that it had conducted an investigation and determined that plaintiff was disabled due
to depression; therefore the twenty-four month limitation period barred future
coverage on the 2002 and 2003 policies.
On April 16, 2008, Mr. Riggs sent the President of Northwestern a letter “on
behalf of [plaintiff],” which said,
What [Plaintiff] or her agent didn’t know [in purchasing the disability
policies], is that the finest insurance company in the world would
change the future contracts that she was being guaranteed the right to
purchase; which she thought would be identical to the original
contract, not one that would have limitations to coverage that her
original does not have. . . .
[Plaintiff] thought she was purchasing a contract that would protect her
family from economic loss due to a disability; it seems she was wrong.
And I guess I was wrong in believing that the policy I was initially
selling [Plaintiff] would protect her, and Northwestern Mutual Life
would take care of her. I wonder about the ethics of all this, is the best
I can expect from the finest insurance company in America? . . . .
I have represented NML for 26 years and would hate to think I made a
mistake by selling her this contract and the great company which
stands behind it.
Pl.’s Opp. First Mot. Summ. J. Ex. 8.
3
At his deposition, Mr. Riggs explained that in 1996, he could only “sell
[plaintiff] a small policy with the additional purchase option to buy more,” with “no
medical questions asked.” Riggs Dep. 13:16-18. Mr. Riggs noted that when he sold
plaintiff the 1996 policy, he knew that Northwestern “had the right to change” the
terms of their future policies, id. at 25:24-27; 26:13-14; 26:17-27:5, but that prior to
1996, Northwestern had only improved the contractual provisions. Id. at 27:1-9. Mr.
Riggs explained that he did not tell plaintiff that Northwestern had only improved
contractual provisions up to that point in time. Id. 27:8-9. Furthermore, when
plaintiff purchased the 2002 and 2003 policies, Riggs stated that he knew the mental
disorder limitation period was twenty-four months, the limitation was included in the
coverage outline, he always went over the coverage outline with applicants if they
would give him the time, and he had no reason to believe that he did not follow this
standard operating procedure with plaintiff, though he did not remember all the
specifics of the conversation. Id. at 27:24-28:5; 119:1; 122:11-16. Additionally, he
did not believe plaintiff had asked about the mental disorder limitation period. Id. at
27:23-5.
On May 2, 2008, plaintiff’s attorney asked Northwestern to reconsider its
denial of benefits. On October 23, 2008, Northwestern sent a letter affirming its
denial of benefits.
II. STANDARD OF REVIEW
Summary judgment shall be granted “if the pleadings, the discovery and
disclosure materials on file, and any affidavits show that there is no genuine dispute
as to any material fact and that the movant is entitled to judgment as a matter of law.”
4
Fed. R. Civ. P. 56(c). Summary judgment is inappropriate “if the dispute about a
material fact is ‘genuine,’ that is, if the evidence is such that a reasonable jury could
return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986). “[A]t the summary judgment stage the judge’s function is not . . . to
weigh the evidence and determine the truth of the matter but to determine whether
there is a genuine issue for trial.” Id. at 249.
“When the moving party has carried its burden under Rule 56(c), its opponent
must do more than simply show that there is some metaphysical doubt as to the
material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586
(1986). The court should view the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in its favor. Anderson, 477 U.S. at
255. If evidentiary materials eliminate all factual disputes, summary judgment is
appropriate on questions of law. Scott v. Harris, 550 U.S. 372, 381 n.8 (2007).
III. DISCUSSION
A.
Negligent Misrepresentation
To establish liability for negligent misrepresentation, the plaintiff must
show (1) the defendant made a false representation to the plaintiff; (2)
the defendant had a pecuniary interest in making the representation;
(3) the defendant owed a duty of care to see that he communicated
truthful information to the plaintiff; (4) the defendant breached that
duty by failing to exercise due care; (5) the plaintiff justifiably relied
on the representation; and (6) the plaintiff suffered a pecuniary loss as
the proximate result of his reliance upon the representation.
Sauner v. Pub. Serv. Auth. of S.C., 581 S.E.2d 161, 166 (S.C. 2003) (internal
quotations omitted).
Plaintiff has failed to allege facts upon which a reasonable jury could find that
Mr. Riggs made a false representation to plaintiff. Plaintiff does not remember the
5
substance of her conversations with Mr. Riggs nor can she point to any other witness,
document, or evidence demonstrating that Mr. Riggs made a false statement to her.
While it is clear that Mr. Riggs was aware in 2008 that plaintiff believed her coverage
was broader than it was in reality, this is insufficient evidence for a reasonable fact
finder to conclude that Mr. Riggs falsely represented the extent of plaintiff’s
coverage. Mr. Riggs stated that in 1996, he knew that Northwestern could change the
terms of its future policies purchased under the APB. At his deposition, Mr. Riggs
expounded that Northwestern had only improved its contract provisions up to that
point in time, but he said he did not discuss this with plaintiff. Additionally, Mr.
Riggs explained that at the time plaintiff purchased the 2002 and 2003 policies, he
knew that the policies only covered mental disorders for twenty-four months. Mr.
Riggs did not remember the specifics of his 2002 and 2003 conversations with
plaintiff, but believed he would have followed his standard operating procedure of
discussing the guide to the policy provisions, which included the mental disorder
limitation. Riggs Dep. 118:6-119:24; 122:10-16. Thus, the only evidence before the
court is that Mr. Riggs was aware of the correct coverage and there is no evidence
that he gave plaintiff information contrary to his understanding of the policies.
Therefore, summary judgment is appropriate for defendant on this claim.
B.
Promissory Estoppel
“In order to recover under a theory of promissory estoppel, a claimant must
demonstrate: (1) the presence of a promise unambiguous in its terms; (2) reasonable
reliance on the promise; (3) the reliance was expected and foreseeable; and (4) injury
in reliance on the promise.” Craft v. S.C. Comm’n for the Blind, 685 S.E.2d 625, 627
6
(S.C. Ct. App. 2009). Plaintiff’s complaint states that Mr. Riggs promised plaintiff
that through the APB in the 1996 policy, all future policies would be governed by the
terms of that policy. Based on the evidence discussed above, plaintiff has failed to
provide facts upon which a reasonable jury could reach this conclusion; therefore,
summary judgment is granted for defendant on plaintiff’s promissory estoppel claim.
C.
Reformation
Plaintiff claims that the 2002 and 2003 policies should be reformed to delete
the mental disorder limitation period based on mutual mistake. The 1996 APB
clearly and unambiguously states that new policies will be governed by terms
applicable at the date the new policy is issued, i.e., the terms of the 1996 policy will
not govern future policies issued pursuant to the APB. The contract is not
ambiguous, nor subject to multiple interpretations. See S.C. Dep’t of Natural Res. v.
Town of McClellanville, 550 S.E. 299, 302-03 (S.C. 2001). “[W]hen a contract is
clear and unambiguous, the construction thereof is a question of law for the court,”
Bowen v. Bowen, 547 S.E.2d 877, 880 (S.C. Ct. App. 2001), and the court does not
have authority to modify the terms of the contract. Patricia Grand Hotel, LLC v.
MacGuire Enters., 643 S.E.2d 692, 695 (S.C. Ct. App. 2007). There is no evidence
that the 1996 APB was any other than that provided by defendant to the court. 2 At
the hearing on the instant motion, plaintiff’s counsel agreed that there was no
evidence the 1996 policy originally lacked an APB, and there are no reasonable
2
Toney v. Ability Ins. Co., No. 10-2311, 2011 WL 4403295, at *3-6 (D.S.C. Sept. 21, 2011), is clearly
distinguishable from the present case because the plaintiff in Toney was able to show that the
insurance provider sent insureds two different APB forms, thus creating a genuine issue of material
fact regarding which APB should govern. Here, plaintiff has provided no evidence to support a finding
that another APB existed or was ever sent to insureds for 1996 policies. In fact, there is no evidence
whatsoever that any potential witness even believes an APB other than the one provided by defendant
was given to plaintiff.
7
inferences based on the evidence before the court that could lead to a contrary
reasonable conclusion. Mr. Riggs explained that in 1996 he knew that Northwestern
could change the terms of the policy provisions, and those changes would govern
future policies issued under the APB. Additionally, the 2002 and 2003 policies
clearly state that mental disorders will only be covered for a period of twenty-four
months. Mr. Riggs explained that he knew that mental disorders were limited to
twenty-four months of coverage when he sold plaintiff the 2002 and 2003 policies
and probably discussed this limitation with her.
Under South Carolina law, reformation of coverage on an insurance contract
is permitted only if the insured and the insurer both intended that the same coverage
apply. George v. Empire & Marine Ins. Co., 545 S.E. 2d 500 (S.C. 2001). Plaintiff
has failed to provide any evidence that defendant or defendant’s agent was mistaken
regarding the twenty-four month limitation period in the 2002 and 2003 policies or
concerning defendant’s ability to change future policies from the 1996 policy terms.
It is axiomatic to say that a mutual mistake requires that both parties are mistaken.
Since plaintiff has failed to demonstrate any mistake on defendant’s part, summary
judgment is appropriate for defendant on plaintiff’s request for reformation.
D.
Negligence
Plaintiff claims Mr. Riggs was negligent for not pointing out the change in the
2002 and 2003 policies which limited coverage for mental disabilities to twenty-four
months. Plaintiff, however, has failed to provide facts upon which a jury could
reasonably believe that Mr. Riggs failed to inform plaintiff of the mental disorder
limitation.
8
Plaintiff cannot testify that Mr. Riggs did not tell her about the limitations
because she does not remember her conversations with Mr. Riggs. Additionally, Mr.
Riggs remembers very little of the conversations he had with plaintiff and certainly
did not testify that he failed to provide this information to her. While Mr. Riggs did
not believe plaintiff specifically asked about or addressed mental disorders in 2002 or
2003, he stated that it is his standard operating procedure to go through the guide to
policy provisions with applicants if they give him time to do so, that the guide to the
2002 and 2003 policy provisions included the limitation on mental disorders, and that
he had no reason to believe he did not follow his standard operating procedure with
Doe. Riggs Dep. 27:16-28:5; 118:11-119:1; 122:11-16; 135:10-136:4. Mr. Riggs’
statement that in 2008, Doe believed her coverage on her 2002 and 2003 policies was
the same as her 1996 policy by itself is insufficient to prove that Doe’s
misunderstanding was caused by Mr. Riggs’ failure to disclose information to her.
Because Doe failed to provide evidence upon which a reasonable jury could conclude
Mr. Riggs did not tell her about the mental disorder time limitation, this court grants
summary judgment to defendant on plaintiff’s negligence claim.
Additionally,
[T]here is a line of cases in South Carolina holding that where an
insured fails to read and familiarize himself with a policy, the insured
abandons all care and is thus more negligent than the agent. See
Carolina Prod. Maint., Inc. v. U.S. Fid. & Guar. Co., 425 S.E.2d 39, 42
(S.C. Ct. App. 1992). See also Doub v. Weathersby-Breeland Ins.
Agency, 233 S.E.2d 111 (S.C. 1977).
Mullen v. State Farm Cas. & Fire Co., No. 09-2392, 2010 WL 2228369, at *2 (D.S.C.
June 1, 2010); see also Provident Life & Acc. Ins. Co., 166 F.2d 492, 495 (4th Cir.
1948); Pitts v. Jackson Nat. Life Ins. Co., 574 S.E.2d 502, 511 (S.C. Ct. App. 2011).
9
While a policy holder’s duties are less demanding at the reapplication stage
where she already has a relationship with the insurance agent, the only cases
permitting a plaintiff to survive summary judgment without reading the contract even
at this stage have involved disputes over terms that a layman could not be expected to
understand, which is not the case at bar. See Great Am. Ins. Co. v. Mills, No. 061971, 2008 WL 2250256 (D.S.C. 2008); Riddle-Duckworth, Inc. v. Sullivan, 171
S.E.2d 486 (S.C. 1969); see also Orangeburg Sausage Co. v. Cincinnati Ins. Co., 450
S.E.2d 66 (S.C. Ct. App. 1994). “These cases would present marked difficulty for
[plaintiff]” even if she were able to show that defendant had failed to verbally inform
her of the twenty-four month limitation period. Mullen, 2010 WL 2228369, at *2.3
E.
Equitable Estoppel
Under South Carolina insurance law, estoppel cannot extend or create
coverage. Campbell v. N. Ins. Co. of N.Y., 337 F. Supp. 2d 764, 770
(D.S.C. 2004). This rule is subject to one exception: “the scope of
risk under an insurance policy may be extended by estoppel if the
insurer has misled the insured into believing the particular risk is
within the coverage.” Standard Fire Ins. Co. v. Marine Contracting &
Towing Co., 392 S.E.2d 460, 462 (1990).
....
South Carolina has not adopted the doctrine of “reasonable
expectations” in construing insurance policies. The doctrine of
reasonable expectations recognizes “the objectively reasonable
expectations of applicants and intended beneficiaries regarding the
terms of insurance contracts . . . even though painstaking study of the
policy provisions would have negated those expectations.” Allstate
Ins. Co. v. Mangum, 383 S.E.2d 464, 467 (S.C. Ct. App. 1989). This
rule “has never been accepted by the supreme court of this state.” Id.
3
Plaintiff may also be intending to argue that Mr. Riggs failed to adequately explain the 1996 APB to
her, though that argument is not easily ascertained from the complaint. If plaintiff is making that
argument, it too would fail. Mr. Riggs stated in his deposition that he believed he went through the
contract provisions with plaintiff in 1996, and plaintiff provides no evidence to the contrary.
Furthermore, plaintiff would have an even more difficult time overcoming her failure to read the policy
at the first application stage in 1996 when no relationship existed between the applicant and the
insurance agent.
10
Southern Land & Golf Co. v. Harleysville Mut. Ins. Co., No. 03-2189, 2006 WL
2443340, at *3 (D.S.C. Aug. 22, 2006). As previously discussed, plaintiff has failed
to provide any evidence that defendant misled plaintiff about the extent of coverage
under the policies; therefore, summary judgment is granted to defendant on plaintiff’s
equitable estoppel claim.
F.
Statute of Limitations on Breach of Contract and Bad Faith
A reasonable trier of fact could find that Doe made a new claim for disability
coverage due to ECT induced impairments which was denied for the first time in
February of 2008, making plaintiff’s November 2011 filing timely. Therefore,
defendant’s motion for summary judgment based on the statute of limitations is
denied.4
G. Bad Faith & Attorney’s Fees
“The elements of a bad faith refusal to pay action are: (1) the existence of a
contract of insurance between the parties; (2) refusal by the insurer to pay benefits
due under the contract; (3) resulting from the insurer’s bad faith or unreasonable
action; and (4) causing damage to the insured.” Snyder v. State Farm Mut. Auto. Ins.
4
Because the evidence presented by plaintiff is sufficient to satisfy a three year statute of
limitations, the court need not reach the question of whether a six year statute of limitations
applies to insurance contracts generally or under the specific terms of this contract. However,
defendant would face an uphill battle to demonstrate that a six year period is inappropriate in
light of South Carolina insurance regulations and case law. See S.C. Ins. Code § 38-71340(11) (“No legal action may be brought to recover on this policy within sixty days after
written proof of loss has been given as required by this policy. No such action may be
brought after six years from the time written proof of loss is required to be given.”); Johnson
v. Comm. Travelers Mut. Accident Ass’n of Am., 131 S.E.2d 91, 95 (S.C. 1963) (“Having
decided that the contract in question is controlled by and subject to our Insurance Code, any
policy provisions inconsistent therewith are void and the pertinent provisions of the Statute
prevail as much as if expressly incorporated in the policy.”); Comer v. Life Ins. Co. of Ala.,
No. 08-0228, 2010 WL 233857, at *7 (D.S.C. Jan. 14, 2010) (“Accordingly, the court finds
that a six year statute of limitations applies to the breach of contract claim and that the claim
in the case began to run at the time of breach.”).
11
Co., 586 F. Supp. 2d 453, 457 (D.S.C. Feb. 22, 2008). Only the third element is at
issue on summary judgment.
In South Carolina, an insurer cannot be liable for bad faith refusal to
pay proceeds due under an insurance agreement if there exists an
objectively reasonable basis for denying the insured’s claim. See
Varnadore v. Nationwide Mut. Ins. Co., 345 S.E.2d 711, 713-14 (S.C.
1986). Whether such an objectively reasonable basis for denial exists
depends on the circumstances existing at the time of the denial. Id.
Therefore, when conflicting evidence has been presented, a directed
verdict is generally inappropriate, and the issue of bad faith should be
decided by the jury. See Nichols v. State Farm Mut. Auto. Ins. Co.,
306 S.E.2d 616, 619 (S.C. 1983).
State Farm Fire & Cas. Co. v. Barton, 897 F.2d 729, 731 (4th Cir. 1990).
Plaintiff and defendant agree that the relevant date for denial of coverage the
court should consider is defendant’s final denial on October 23, 2008. Considering
the evidence in the light most favorable to plaintiff, a reasonable jury could conclude
that defendant acted in bad faith or unreasonably denied coverage based on
deficiencies in the report of defendant’s only expert on ECT related impairments and
defendant’s failure to investigate further in light of these deficiencies. The expert
report, viewed in the light most favorable to plaintiff, indicates that defendant’s ECT
expert was unaware of key studies in the field (which plaintiff had provided to
defendant), that the expert misunderstood or was unaware of certain material facts
(for instance, the reason Doe’s medical license was reinstated), and that some of his
other statements concerning ECT treatments’ long term effects were ambiguous. As
noted above, defendant did not follow up on these problems.5 Based on the
5
Defendant claims that it was not bad faith to fail to require its expert to speak with Doe or her treating
physicians because these steps would not have provided any material information which could have
changed the expert’s mind or the final outcome. This argument brings to mind the saying, “Don’t
confuse me with the facts, my mind’s made up.” In this court’s May 2012 order, the court discussed
that retrograde amnesia is typically diagnosed by a patient’s self-reports and observations of treating
12
foregoing, plaintiff has established a genuine issue of material fact regarding whether
defendant unreasonably denied her coverage.
H. Specific Performance
Plaintiff seeks specific performance of the 2002 and 2003 policies, as well as
the 1996 APB “for Northwestern’s breach thereof.” Defendant claims this cause of
action should be dismissed because plaintiff has an adequate remedy at law.
In order to grant specific performance,
a court in equity must find: (1) there is clear evidence of a valid
agreement; (2) the agreement had been partly carried into execution on
one side with the approbation of the other; and (3) the party who
comes to compel performance had performed his or her part, or has
been and remains able and willing to perform his or her part of the
contract.
Ingram v. Kasey’s Assocs., 531 S.E.2d 287, 291 (S.C. 2000). “Specific performance
should be granted only if there is no adequate remedy at law, and specific
enforcement of the contract is equitable between the parties.” Id. “Whether an
adequate remedy at law exists hinges on whether the object of the contract is so
peculiar in value as to give rise to an equity for the specific performance of the
contract without referring to its quality or quantity.” 12 S.C. Jur. Equity § 20 (June
2012).
[S]pecific performance is not an absolute right, and a court granting it
must follow established principles and carefully consider all the
circumstances of the particular case. Bishop v. Tolbert, 153 S.E.2d
912, 917 (1967).
Generally, a court will not order specific
performance that would require “continuous direction and supervision
of the court,” but an exception to this rule exists for cases in which the
public has an interest. 81A C.J.S. Specific Performance § 65 (2004).
physicians. Therefore, drawing all reasonable inferences in plaintiff’s favor, an evaluation of plaintiff
or speaking with plaintiff’s treating physicians could have changed the expert’s mind regarding her
condition.
13
Time Warner Cable v. Condo Servs., Inc., 672 S.E.2d 816, 819 (S.C. Ct. App. 2009).
In the present case, plaintiff seeks money due under her Northwestern
insurance policies both retroactively and prospectively. The retrospective payments
are obviously not so peculiar that plaintiff’s remedy at law is inadequate. Plaintiff’s
prospective payments, on the other hand, would require continuous direction and
supervision of the court because it is uncertain whether plaintiff’s condition will
remain constant, i.e., whether her cognitive impairments will resolve as did the
impairments of some of the patients in the ECT study cited in the May 2012 order.6
Even if all of the facts exist as plaintiff alleges, it would still be inequitable for the
court to require Northwestern to indefinitely make future disability payments to
plaintiff because there is insufficient scientific evidence demonstrating that plaintiff’s
condition is permanent. As discussed below in the future payment of benefits section,
if the jury finds that defendant breached the contract, and thereafter defendant fails to
pay plaintiff’s benefits, she can sue defendant for this breach, and if the facts warrant,
punitive damages could be appropriate. Plaintiff fails to suggest to the court any
other remedy unavailable to her at law which would make specific performance
appropriate. Because plaintiff has an adequate remedy at law for retroactive
payments and it would be inappropriate for the court to grant prospective payments
based on the facts of this case, the court grants defendant’s motion for summary
judgment on plaintiff’s specific performance claim.
I.
Unjust Enrichment
The elements to recover for unjust enrichment . . . are: “(1) a
benefit conferred by the plaintiff upon the defendant; (2) realization of
6
Sackeim et al., The Cognitive Effects of Electroconvulsive Therapy in Community Settings,
Neuropsychopharmocology, 2007/Jan.; vol. 32(1): 244-54.
14
that benefit by the defendant; and (3) retention of the benefit by the
defendant under circumstances that make it inequitable for him to
retain it without paying its value.” Myrtle Beach Hosp., Inc. v. City of
Myrtle Beach, 532 S.E.2d 868, 872 (S.C. 2000).
Regions Bank v. Wingard Prop., Inc., 715 S.E.2d (S.C. Ct. App. 2011).
Plaintiff claims that Northwestern misled plaintiff, through plaintiff’s
attorney, into believing that she must continue paying premiums in order to maintain
her claim for benefits for cognitive impairments caused by ECT treatments. On June
13, 2008, a Northwestern representative sent plaintiff’s attorney a letter stating that
premiums should be paid to “protect the owner’s interest in the policy.” Sobiesky
Letter (6/13/2008). Plaintiff’s counsel then contacted Northwestern to determine
whether plaintiff must continue paying premiums on the 2002 and 2003 policies to
maintain the claim that Northwestern was reviewing. See Sobiesky Letter
(9/17/2008). Northwestern sent another letter dated September 17, 2008 explaining,
I would of course urge [plaintiff] to continue the premium payments
while the claim is being evaluated to protect the owner’s interest in the
policies. . . . Whether or not they make the decision to pay current or
future premiums will have no effect on my current review of their
request for additional benefits. My current review does not affect or
protect the interest of the policies unless we are able to approve the
claim.
The September 17, 2008 letter clarified that plaintiff should continue paying
premiums if she wanted to maintain those policies (for example, in order that she
might be able to claim disability benefits if she were later diagnosed with cancer) but
that payment of those premiums would not affect the claim for benefits that was
under review at the time. Plaintiff’s attorney argues that this did not provide
sufficient clarification, but provides no evidence that plaintiff sought further
explanation after the September 2008 letter. A misunderstanding by plaintiff after
15
defendant has explained the benefits of continuing to pay premiums does not make
defendant’s retention of the premiums inequitable. There is no evidence that
defendant delayed in providing clarification to plaintiff’s attorney or otherwise acted
unjustly in receiving plaintiff’s premium payments, which conferred a potentially
valuable benefit to plaintiff. Because plaintiff has failed to show that it would be
inequitable for defendant to retain the premiums, summary judgment is granted on
this claim.
J.
Actual Damages
1.
Future Benefits Payments
Defendant argues that plaintiff should not be able to recover future benefit
payments on an insurance contract based on O’Dell v. United Insurance Co. of
America, 132 S.E.2d 14 (S.C. 1963) and Odiorne v. Prudential Insurance Company of
America, 179 S.E. 669, 670 (S.C. 1935). Plaintiff argues that those cases are not
applicable to bad faith claims. In University Medical Associations of MUSC v.
Unumprovident Corp., 335 F. Supp. 2d 702, 711 (D.S.C. 2004), this court ruled that
O’Dell and Odiorne had not been overruled and are applicable to a claim for bad
faith. In this case, as in O’Dell and Odiorne, future benefits payments are speculative
and cannot be reduced to a certainty because plaintiff’s life span and the duration of
her condition are unknown. As this court’s May 2012 order explained, studies on
ECT related cognitive impairments are on the cutting edge of science, have only
measured effects up to six months, and have shown that some patients’ impairments
improve over time. If in the future defendant were to deny plaintiff coverage
(assuming that a fact finder found for plaintiff at trial), plaintiff could bring another
16
suit for damages, and if the evidence demonstrates that defendant’s denial is in
willful, wanton, or reckless disregard of plaintiff’s rights, an award of punitive
damages may be appropriate.
2.
Emotional Distress
In University Medical Associations of MUSC, 335 F. Supp. 2d at 711, this
court held that emotional damages are available for a bad faith claim. Defendant asks
this court to reconsider its holding in that case. This court reached that holding based
on a published opinion by the Fourth Circuit, State Farm Fire & Cas. Co. v. Barton,
897 F.2d 729, 732-33 (4th Cir. 1990), which has not been overruled; therefore, the
court denies defendant’s motion for summary judgment for damages from emotional
distress.7
K. Punitive Damages
A plaintiff may recover punitive damages on a negligence or bad faith claim if
she can “demonstrate the defendant’s conduct was willful, wanton, or undertaken in
reckless disregard of plaintiff’s rights.” Kuznik v. Bees Ferry Assocs., 538 S.E.2d 15,
32 (S.C. Ct. App. 2000). The court has granted summary judgment on plaintiff’s
negligence claim, therefore plaintiff’s punitive damages request hinges on her claim
for bad faith.
Conduct is willful, wanton, or reckless when it is committed with a
deliberate intention or in such a manner or under such circumstances
that a person of ordinary prudence would be conscious of it as an
invasion of another’s rights. Cohen v. Allendale Coca-Cola Bottling
Co., 351 S.E.2d 897 (S.C. Ct. App. 1986). It is the present
consciousness of wrongdoing that justifies the award of punitive
damages against the wrongdoer. Id.
....
7
Plaintiff has withdrawn her request for damages based on potential income from 401(k) accounts and
damages from tax penalties.
17
Thus, the proper test for punitive damages - that at the time of his act
or omission to act the tortfeasor be conscious, or chargeable with
consciousness of his wrongdoing. Rogers v. Florence Printing Co.,
106 S.E.2d 258, 264 (S.C. 1958).
Bryant v. Muskin Co., 873 F.2d 714, 714 (4th Cir. 1989).
“In any civil action where punitive damages are claimed, the plaintiff has the
burden of proving such damages by clear and convincing evidence.” S.C. Code Ann.
§ 15-33-135. When there is a lack of evidence of conduct which could support a
punitive damages award, this issue is appropriate for resolution by the court as a
matter of law. See, e.g., Muskin, 873 F.2d at 715; Cohen, 351 S.E.2d 897.
A bad faith claim does not necessarily justify a claim for punitive damages.
If an insured can demonstrate bad faith or unreasonable action by the
insurer in processing a claim under their mutually binding insurance
contract, he can recover consequential damages in a tort action.
Actual damages are not limited by the contract. Further, if he can
demonstrate the insurer’s actions were willful or in reckless disregard
of the insured’s rights, he can recover punitive damages.
Nichols, 306 S.E.2d at 619.
Plaintiff has failed to provide evidence which a reasonable jury could
conclude rises to the level of “clear and convincing” evidence that defendant was
conscious of wrongdoing or reckless as to plaintiff’s rights when it denied plaintiff
coverage. As discussed in this court’s May 2012 order, study of the effects of ECT
treatment is pioneering research over which there is ongoing controversy in the
medical community. Because there is insufficient evidence that defendant was willful
or reckless of its potential wrongdoing when it accepted its ECT expert’s report
without further investigation, summary judgment is appropriate on this claim.
18
IV. CONCLUSION
For the foregoing reasons, it is hereby ORDERED that defendant’s: first
motion for summary judgment on the statute of limitations is DENIED, second
motion on the bad faith claim and attorney’s fees is DENIED, third motion on actual
damages is DENIED IN PART concerning damages for emotional distress and
GRANTED IN PART concerning future benefits, fourth motion on reformation is
GRANTED, fifth motion on negligence and negligent misrepresentation is
GRANTED, sixth motion on the equitable claims is GRANTED; and seventh
motion on punitive damages is GRANTED.
AND IT IS SO ORDERED.
________________________________________
DAVID C. NORTON
UNITED STATES DISTRICT JUDGE
June 26, 2012
Charleston, South Carolina
19
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?