Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-03-01688/USCOURTS-ca8-03-01688-0/pdf.json

Parties Involved:
Motorists Mutual Insurance Company
Appellee
Anne Sloan
Appellant
Larry Sloan
Appellant

Document Text:

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 03-1488

___________

Anne Sloan; Larry Sloan, *

*

Plaintiffs - Appellees, *

*

v. *

*

Motorists Mutual Insurance Company, *

*

Defendant - Appellant. *

___________ Appeals from the United States 

District Court for the 

No. 03-1688 Eastern District of Arkansas.

___________

Anne Sloan; Larry Sloan, *

*

Plaintiffs - Appellants, *

*

v. *

*

Motorists Mutual Insurance Company, *

*

Defendant - Appellee. *

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Submitted: January 16, 2004

Filed: May 12, 2004

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Before BYE, HEANEY, and SMITH, Circuit Judges.

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BYE, Circuit Judge.

These appeals arise out of an action for underinsured motorist (UIM) benefits.

Motorists Mutual Insurance Company (MMIC), the UIM carrier, appeals the district

court’s order denying its motion to offset a $100,000 jury award by $100,000 the

tortfeasor paid to settle the underlying negligence claim. Anne and Larry Sloan

appeal the district court’s order offsetting the verdict by $12,251.53 for medical

expenses paid by their personal injury protection insurance. We reverse the district

court’s denial of MMIC’s motion and remand with instructions to offset the jury

verdict by $100,000. 

I

The Sloans, husband and wife, were insured under an automobile policy issued

by MMIC providing UIM coverage. On December 26, 1995, the Sloans were

involved in a two-vehicle collision in Arkansas. Anne was injured and settled her

negligence claim against the other driver for the tortfeasor’s $100,000 insurance

limits. Thereafter, she brought this action against MMIC to recover against her

$500,000 UIM coverage. Before trial, MMIC moved to exclude any evidence of the

settlement between Anne and the tortfeasor. The district court denied the motion and

at trial Larry testified the tortfeasor had paid $100,000 to settle the negligence claim.

At the close of the evidence, the jury was instructed, 

And then the fifth and sixth verdicts ask for you to determine the amount

of damages that you find from a preponderance of the evidence were

sustained by Larry Sloan and then the next by Anne Sloan as a result of

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the occurrence. And, again, the occurrence being the automobile

accident. 

Now these are the verdicts that you will be asked to consider. And

although this does not directly impact the decision against the insurance

company – that is under the coverage – these are the questions that you

will be asked to answer, and then I will apply your verdict accordingly

and inject my own decision into the case . . . .

Additionally, the jury was given a verdict form telling it to “[s]tate the amount

of any damages which you find from a preponderance of the evidence were sustained

by Anne Sloan as a result of the occurrence.” The jury awarded $100,000. 

The district court denied MMIC’s post-trial motion to offset the jury award by

the settlement amount, concluding the jury had intended to award $100,000 over and

above the $100,000 settlement. The district court granted MMIC’s motion to offset

the verdict by $12,251.53 for medical expenses paid by Anne’s personal injury

protection insurance. On appeal, MMIC argues the district court erred in refusing to

offset the $100,000 damage award by the $100,000 settlement. The Sloans argue the

district court erred by reducing the jury award to account for the paid medical

expenses. 

II

This is a diversity action governed by Arkansas substantive law. See Erie R.R.

v. Tompkins, 304 U.S. 64, 78 (1938). We review the district court’s application of

state law de novo. Koch Eng’g Co. v. Gibralter Cas. Co., 78 F.3d 1291, 1294 (8th

Cir. 1996). 

The district court based its decision to deny the offset on a line of Arkansas

cases disallowing an offset in cases involving joint tortfeasors if one or more of them

have settled and are disclosed to the jury. See, e.g., Giem v. Williams, 222 S.W.2d

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800, 804-05 (Ark. 1949); Arkansas Kraft Corp. v. Johnson, 519 S.W.2d 74, 78-79

(Ark. 1975). In such cases, an offset is disallowed because it is presumed the jury

only intended to award damages attributable to the remaining tortfeasor. See Giem,

222 S.W.2d at 804-05; Ark. Kraft Corp., 519 S.W.2d at 78-79. The district court

concluded “[a]lthough the above cited cases addressed situations involving joint

tortfeasors, the Court finds the reasoning equally applicable here.” We disagree. 

In Giem and Ark. Kraft Corp., the plaintiffs settled with one tortfeasor and

proceeded to trial against a second. 222 S.W.2d at 802; 519 S.W.2d at 76. At trial,

the settlements were revealed to the juries. Giem, 222 S.W.2d at 804; Ark. Kraft

Corp., 519 S.W.2d at 76. In post-trial motions, both trial courts refused to offset the

jury awards because the non-settling tortfeasors had already received the benefit of

the settlements. Giem, 222 S.W.2d at 804-05; Ark. Kraft Corp., 519 S.W.2d at 78-79.

In other words, the juries knew how much the settling tortfeasors had paid to

compensate the plaintiffs and it was presumed the juries reduced the awards against

the non-settling tortfeasors accordingly. Giem, 222 S.W.2d at 804-05; Ark. Kraft

Corp., 519 S.W.2d at 78-79. 

By analogy, it could be argued the jury in this case knew how much the

tortfeasor had paid and reduced the total damages awarded to account for the

settlement. We question, however, whether the principle enunciated in Giem and

Ark. Kraft Corp. can be so readily applied in this context. In cases involving joint

tortfeasors, fault must be allocated among the tortfeasors to ensure each pays only its

fair share of a plaintiff’s damages. Courts, in accomplishing this goal, call upon

juries to perform two tasks; first, to determine the total amount of damages, and

second to divide responsibility for those damages among the tortfeasors. Giem and

Ark. Kraft Corp. merely recognize that if juries know how much one tortfeasor has

already paid towards the total damages it is presumed they allocate the remaining

damages accordingly. In cases such as this, however, a jury is called upon to perform

but one function – to set the total amount of a plaintiff’s damages without the need

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to allocate them between the tortfeasor and the UIM insurer. Instead, the trial court

determines the UIM carrier’s responsibility by subtracting the liability limits from the

total damage award to determine the extent to which the tortfeasor was underinsured.

Ark. Kraft Corp. is further distinguishable because the jury instruction there

was markedly different from the instruction given in this case. 519 S.W.2d at 79 n.3.

There the jury was instructed to limit its damage award to “those elements of damages

which you find were proximately caused by the negligence of Arkansas Kraft

Corporation [the remaining tortfeasor].” Id. Here, the jury was not instructed to

limit its award to those damages sustained in excess of $100,000 or to those damages

payable by the UIM carrier. 

The dissent argues our review of the district court’s decision to deny the offset

is cabined by the clear error standard of review. The argument, however, overlooks

the district court’s reliance on Giem and Ark. Kraft Corp. as support for its denial.

The district court’s extension of Giem and Ark. Kraft Corp. beyond the context of

joint tortfeasors is a legal question and subject to our plenary review. Because we

conclude the Arkansas Supreme Court would not expand Giem and Ark. Kraft Corp.

to the situation presented by this case, see Jackson v. Anchor Packing Co., 994 F.2d

1295, 1301 (8th Cir. 1993) (noting when a state’s highest court has not decided an

issue it is our task to predict how it would resolve the issue), we reverse the district

court’s denial of MMIC’s motion and remand with instructions to offset the verdict

by the $100,000 negligence settlement. 

Additionally, the district court’s refusal to offset the verdict cannot be upheld

because it would require us to ignore the clear language of the jury instruction and

verdict form used in this case. The jury was instructed “to determine the amount of

damages that you find from a preponderance of the evidence were sustained by . . .

Anne Sloan as a result of the . . . automobile accident.” Similarly, the verdict form

told the jury to “[s]tate the amount of any damages which you find . . . were sustained

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by Anne Sloan as a result of the [accident].” Neither the jury instruction nor the

verdict form can be read as asking the jury to reduce the award of damages to account

for the $100,000 settlement. Rather, both instructed the jury to award a sum

representing the damages Anne sustained as a result of the accident without

qualification. Absent evidence to the contrary we presume the jury followed the

instructions it was given. See Harrison v. Purdy Bros. Trucking Co., 312 F.3d 346,

352 (8th Cir. 2002). Here, there is no evidence the jury’s verdict represents anything

less than “the damages . . . sustained by Anne Sloan. . . .” Accordingly, the

presumption controls. 

III

We reverse the district court’s denial of MMIC’s motion and remand with

instructions to offset the verdict by the $100,000 negligence settlement. Because the

offset results in a net verdict of zero, we need not reach the Sloans’ appeal. 

HEANEY, Circuit Judge, dissenting.

I agree that the majority’s interpretation of the jury instructions and the effect

of the jury’s answers to the district court’s interrogatories is a reasonable one. While

I further agree that we review the district court’s application of state law de novo,

Koch Eng’g Co. v. Gibralter Cas. Co., 78 F.3d 1291, 1294 (8th Cir. 1996), we review

the district court’s determination of the underlying issue–whether the $100,000

verdict was meant to compensate Anne Sloan in addition to her settlement with the

tortfeasor–for clear error, Garver & Garver, P.A. v. Little Rock Sanitary & Sewer

Comm., 781 S.W.2d 24, 30 (Ark. 1989). I find none here, and would thus not disturb

the district court’s decision on this matter.

The jury in this case was informed that Sloan had settled with the other driver

involved in the auto wreck for $100,000. In such an instance, it is obviously

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preferable for the court to instruct the jury in a way that leaves no doubt as to whether

the jury award is meant to be paid in addition to the settlement. See, e.g., id, 781

S.W.2d at 29-30 (“Perhaps it would have been better if the instructions or

interrogatories had directed the jury to fix the amount of damages after first deducting

the settlement amount . . . .”). The district court did not do so here. Instead, it simply

asked the jury to state the amount of damages Sloan had sustained, to which the jury

answered $100,000. The absence of definitive instructions and interrogatories left

the district court and this court in the unfortunate position of trying to ascertain what

the jury really meant by its $100,000 award: was it supposed to represent a global

damages figure (as the majority suggests), or had the jury already discounted its

award by Sloan’s earlier settlement (as the district court found)? The question is open

to both interpretations, neither of which I find particularly more compelling or likely

than the other. I thus cannot say the district court committed clear error in finding the

jury award was intended to compensate Sloan beyond her settlement, and would

affirm the district court. At the very least, Sloan should be afforded the opportunity

for a fair resolution of her claim through a new trial with definitive jury instructions

and interrogatories.

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