T hi s or derand j udgm enti s notbi ndi ng pr ece dentexce ptundert he * doctr i nes of l aw of the ca s e, r es j udi cat a, and col l at er al es t oppel . I tm aybe ci t ed, h o w e v e r, fo r its p e rsu a siv e v a lu e c o n sis ten t w ith F e d . R . A p p . P . 3 2 .1 a n d 1 0 th C i r . R . 32. 1. FI LED Unite d St at e s C ourt o f Appe als

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### O c t ob e r 12, 2007 Elisab eth A. Shumaker Clerk of Court UNI TED S TATES CO URT O F AP PEALS

T E N T H C IR C U IT
P AUL ROES LE R; P AUL ROES LE R, C R N A , IN C .,

P l ai nti ffs - A pp el l ees, N o. 05- 7055

v. E . D . O kl a. T I G I NS UR ANC E CO M P ANY,

D e fe n d a n t - A p p e llan t. ( D . C . N o . 0 2 - C V - 5 7 6 - W)

ORDE R AND J UDGM EN T * B efor e HA RTZ , EBEL , and O’ BRI EN , C i rcui tJudg es.

Paul R oes l er , a C ert i fi ed R egi s t er ed N ur s e A nes thet i s t( doi ng bus i nes s as P au l R o esler C R N A , Inc . ), p u rch ase d p rofessio n al l iabili tyinsu ran ce thro u g h T IG In su ra n c e C o m p a n yin M a y2 0 0 2 . In A u g u st 2 0 0 2 , R o e sle r w a s s u e d fo r h is i nvol vementi n t he J une 1998 ce s ar i an s ect i on bi r th of a s ever el ybr ai n- damaged i nfant . R oes l ernot i fi ed TIG of the s ui ton A ugus t19, 2002. . O n Sept ember27, 2 0 0 2 , T IG in fo rm e d R o e sle r it h a d re sc in d e d h is p o licyb a se d o n h is fa ilu re to-2-

i n c l u d e i n fo r ma t i o n o f t h e s u r g i c a l i n c i d e n ti n h i s i n s u r a n c e a p p l i c a t i o n . On O ct ober17, 2002, R oes l erfi l ed s ui tforbr eac h of contr actand br eac h of the i m pl i ed dutyof good fa i th and fa i rdeal i ng. A j uryfound i n favorof R oes l erand aw ar ded hi m $60, 072 forT I G ’ s br eac h of the i ns ur ance contr actand $2. 31 m il li o n in co m p en sato ryd am ag es fo r T IG ’s ba d fa ith . In a d d it ion , the ju ry a w a rd e d R o e s le r $ 2 .3 m illio n in p u n itiv e d a m a g e s . T IG a p p e a ls c la im in g , i nt er a lia , the di s tr i ctcourterr ed i n deny i ng i t s m ot i on forj udgm entas a mat t erof l aw a n d i t s mo t i o n fo ra n e w t r i a l . Ex e r c i s i n g j u r i s d i c t i o n p u r s u a n tt o 2 8 U. S . C. § 1 2 9 1 , w e c o n c lu d e th e tr ia l c o u rt fa ile d to c o rr e c tly in s tru c t th e ju ry. A ccor di ngl y , w e affi r m i n part , r ever s e i n par t , and r emand forfur ther proceed i ng s. I . BA CKGROUND R o e sle r is a c e rtifie d re g iste re d n u rse a n e sth e tist (C R N A ) a n d th e so le empl oy ee of

Paul R oes l er , C R N A I nc. H e and hi s companyhel d a pr ofes s i onal l i abi l i tyi ns ur ance pol i cyw i th St . Paul Fi r e and M ar i ne I ns ur ance C om panyfr om 1 9 8 9 to 2 0 0 2 . In 2 0 0 2 , S t. P a u l ce a se d o ffe rin g C R N A p ro fe ss io n a l li a b ili ty cover age. R oes l erappl i ed t o T I G fora l i abi l i tyi ns ur ance pol i cyw hi ch pr ovi ded r etr oact i ve cove r age forcl ai m s fr om 1989 forw ar d. R oes l ercons i der ed r etr oact i vi tycr i t i cal beca us e appr oxi m at el yt w entyper centof hi s w or k i nvol ved the del i veryof babi es and mal pr act i ce l i abi l i tycont i nues unt i l t he chi l d tur ns ni net een.A p g ar sc o re is “an ind ex u sed to ev alua te th e c o n d it ion o f a n ew b o rn 1 infan t bas ed o n a ra ti n g o f 0 , 1 , o r 2 fo r ea ch o f th e five c h ara cterist ics o f c o lor, heartr at e, r es pons e t o s t i m ul at i on of the s ol e of the foot , m us cl e t one, and re sp ira tio n w ith 1 0 b e in g a p e rfe c t sc o re .” M e rria m -W e b ste r’s C o lleg iate D ic tio n a ry (1 0 th e d . 1 9 9 8 ). -3- O n J une 22, 1998, R oes l eradmi ni s t er ed ane s thes i a dur i ng the emer gency ces ar ean s ect i on bi r th of fourt een- y ear - ol d A m anda Burt on’ s daught er , T al a. T he babyw as bor n w i th s i gns of s ever e hypoxi a, a l ack of oxy gen i n ut er o w hi ch may r es ul t i n br ai n damage, and s cor ed a bar e m i ni m um on the A pgar t es t s . R oes l er 1 t e s t i fi e d i twa s a n i g h th e wa s “ n e v e rg o i n g t o fo r g e t . ” ( R. Vo l . I V a t1 0 4 5 a . ) He des cr i bed the chi l d’ s condi t i on as “the w or s tone thatI had s een . . . w her e the babyw as s t i l l al i ve. ” ( Id . at10 53 a. ) H e w as aw are att hat t i m e t here w as a pr obl em w i th t he babyand the out come coul d be bad. H e w as corr ect ; T al a had pr ofound, perm anentneur ol ogi cal damage. T w o day s aft erthe B ur t on bi r th, t he hos pi t al as ked R oes l ert o w r i t e a n a rra tiv e o f

th e e v e n ts. A lth o u g h R o e sle r h a d b e e n v e rb a llyc o n su lted p o sts ur geryon pr i orocca s i ons , thi s w as hi s fi r s tr eques tfora w r i t t en narr at i ve. R oes l erknew ther e w as a contr over s yas t o w hethert he otherm ember s of the t eam had t i m el yr es ponded and w hetherD r . C l aypool , t he l eadi ng phy s i ci an, had advi s ed the t eam i tm us tcome t o the hos pi t al i m m edi at el y . R oes l erw r ot e a narr at i ve ad dress i ng tho se point s. I n A ugus t2001, the B ur t ons fi l ed s ui tagai ns tD r . C l aypool and the h o sp ital, b u t d id n o t n a m e R o e sle r a s a d e fe n d a n t. R o e sle r te stified th a t sh o rtlyA t th e ti m e R o esler fil led o u t th e a p p li ca ti o n , the u n d erw ri ters w ere 2 w or ki ng on r evi s i ons t o ques t i on 9. L at erappl i cat i ons phr as ed the ques t i on, ( now # 2) , “A r e y ou aw ar e of a nyfac t s orci r cumst ance s ( i ncl udi ng a r eques tfor r ecor ds fr om a pat i entorthei rfami l y , an A t t or neyorR i s k M anage r ) t hatm i ght g iv e ri s e to a c la im a g a in s t yo u ? ” (R . V o l. V I a t 1 7 3 4 a .) A ttr i al , the t es t i m onyi ndi cat ed R oes l erm ayhave mi s pl ace d the or i gi nal 3 s u p p l e me n t a l a p p l i c a t i o n fo r m, r e q u e s t e d a n o th e ra n d l a t e rs e n ti tt o T I G. -4- b e fo r e th e Au g u s ts u i twa s fi l e d , h e s p o k e wi th Cl a yp o o l a b o u ti t s l i k e l i h o o d . He s t at ed C l aypool t ol d hi m the B ur t ons w oul d pr obabl ys ue the doct orand the hos pi t al , butnotR oes l er . Sever al day s l at er , R oes l err ead i n the new s paperthe su ith ad b ee n fil ed , b u t othe r th an the n am es o f th e p arti es, no d etail s w ere pr ovi ded. I n Sept ember2001, R oes l erm etw i th the hos pi t al ’ s att or ney , L eah K in se y , to d isc u ss h is k n o w led g e o f th e re lev a n t ev e n ts. R o e sle r te stified h e d id notr ece i ve a c opyof the compl ai nt , nordi d he s eek t o obt ai n one. Pr i ort o r ece i vi ng T I G cover age i n M ay2002, R oes l erw as as ked t o fi l l out an ap pli cat i on and a supp l em entaryapp l i cat i on , al so kn ow n as a “n o-kno w n-l oss l ett er . ” The appl i cat i on form , compl et ed i n M ar ch 2002, cont ai ned ques t i on #9 w hich asked: “A re y ou aw are of anyfact s or ci rcum st ances (i ncludi ng a request fo r rec o rds) that m igh t g ive ri se to a claim ag ains t y o u ? ” (R . V o l. V I at 17 2 2 a.) 2 R oes l erchec ked “no. ” T he no- know n- l os s l ett er , compl et ed i n M ay2002, cont ai ned the fol l ow i ng 3 l anguage : E xceptthatw hi ch i s des cr i bed bel ow , I t he under s i gned have no:

. . . .T I G has tw o depart m ent s w i th s epar at e dut i es r egar di ng T I G ’ s i ns ur ance 4 pol i ci es . T he underw r i t i ng depart m entdr aft s and appr oves appl i cat i ons aft eran -5- [B ul l etPoi nt2] know l edge of i nform at i on r el at i ng t o the pr ovi di ng o rwi th h o l d i n g o f

p r o fe s s i o n a l s e r v i c e s wh i c h mi g h tr e s u l ti n a c l a i m; and/ or

. . . . [B ul l etPoi nt6] know l edge ori nform at i on r el at i ng t o the pr ovi di ng o r w ith h o ld in g o f

p a s t p ro fe s s io n a l s e rv ic e s th a t r e s u lte d in . . . a p a t i e n t ’ s d e a th o rn e u r o l o g i c a l i nj u ry. ( Id . at1719a. ) R oes l ers i gned the s uppl ement al appl i cat i on w i thoutm ent i oni ng th e B u rt o n b ir th o r l a w s u it in th e “ E x c e p tio n s ” s e c tio n . T I G i s s ued the r eques t ed pol i cyon M ay22, 2002. T he pol i cycont ai ned a “pr i orknow l edge e xcl us i on” barr i ng cover age forcl ai m s ar i s i ng fr om pr ofes s i onal s ervi ces t hat“coul d r eas onabl yhave be en expe ct ed t o r es ul ti n a C l ai m , I nci dentorSui t , as of the dat e the I ns ur ed appl i ed forthi s pol i cy . ” ( Id . at 1838a. ) B eca us e he r ece i ved a r etr oact i ve pol i cyfr om T I G dat i ng back t o 1989, R oes l erdi d notpur chas e “t ai l ” cove r age ( perm anentcover age forthe per i ods he w a s in s u re d b yS t. P a u l) f ro m S t. P a u l. ( Id . a t 1 7 2 1 a .) L es s t han thr ee mont hs aft erR oes l ers ecur ed hi s pol i cy , on A ugus t12, 2002, the B ur t ons fi l ed s ui tagai ns tR oes l er . I n thi s s econd s ui t , the B ur t ons c la im e d “ A m a n d a B u rt o n w a s n o t ta k e n to th e o p e ra tin g ro o m u n til a f te r 2 a .m ., due t o the l at e arr i val of the ‘ del i veryt eam, ’ i ncl udi ng Paul R oes l er , C R N A . ” ( Id . at 17 7 1 a.) O n M o n d ay , A u g u st 19 , 2 0 0 2 , R o esler teleph o n ed T IG to rep o rt the l aw sui t . H e spok e w i th clai m s adj ust er, JenniferW i l l i am s. W i l l i am s’

4 5e v a lu a tio n o f ri s k . T h e c la im s d e p a rt m e n t d e a ls w ith th e in s u re d u n d e r t h e p o lic y . T hus , the dec i s i on t o defe nd and paycl ai m s , di s cl ai m an i ns ur ed’ s cl ai m or p r o v i d e a d e fe n s e u n d e ra r e s e r v a t i o n o f r i g h t s i s ma d e wi th i n th e c l a i ms depart m ent . T he dec i s i on t o r es ci nd a pol i cyi s w i thi n the j ur i s di ct i on of the u n d erw ri ti n g d ep artm en t. T h e T IG w itn esse s in the claim s d ep artm en t w ere Jen n ifer W il li am , h er su p erv isor, E u g en ia M u lhern , an d M u lhern ’s su p erv isor, L a u re e B a rr e c a . T h e u n d e rw ri te rs w e re J e ff M c D o n a ld a n d M a rk B ro s to w itz . A l tho ug h the decis i on t o resci nd R oesl er’ s poli cyw as m ade b ythe u nd erw ri t ers , i tw as based o n d i scussi on s bet w een the tw o d epart m ents . W i l l i ams s poke w i th R oes l ert w i ce be tw een A ugus t19 and A ugus t30, 5 2002, w hen s he l eftt ow n t o part i ci pat e i n an unr el at ed medi at i on. -6- cont empora neous not es r efl ectthatR oes l ert ol d heraboutthe eve nt s of J une 28, 1 9 9 8 , a n d in s is te d th e c a ll th a t n ig h t w a s n o t a “ s ta t” re q u e s t. ( Id . at1821a. ) T he not es al s o i ndi cat e R oes l ert ol d herhe w r ot e a de t ai l ed r eportof the eve nt s of that ni ght“bec aus e i ts eemed l i ke a s i tuat i on w her e ther e coul d pot ent i al l ybe a l aw s ui t . ” ( Id .) T h e n o te s m a rk th is s ta te m e n t w ith q u o ta tio n s a n d a n a s te ri s k . W il li am s stated s h e d id so b ec au se it“ra ised a re d flag . ” (R . V o l. III at 80 0 a.) W ill iam s te stified sh e a sk e d R o e sle r w h e n h e first le a rn e d th e b a b yw a s b ra in d am ag ed an d n o ted R o esler resp o n d ed , “a b o u t si x m o n ths a g o w h en [th e] d o c[ tor] & h o sp [it al] w ere su ed . ” (R . V o l. V I at 18 2 1 a.) W i l l i ams then s poke w i th L eah K i ns ey , the att or neyr epr es ent i ng the hos pi t al i n the B ur t on l aw s ui t . H ernot es of thi s conver s at i on s t at e K i ns eyhad s poken w i th R oes l er“on s ever al occa s i ons as hi s dep[os i t i on] has been r eques t ed” and “a ddi t i onal l y[K i ns ey ] had cont act[w i th] hi m dur i ng [the] peerr evi ew pr oces s . ” ( Id . at 18 2 3 a.) D u ri n g this i n v esti g ati o n , W il li am s rec o g n ized R o esler’s-7-

r etr oact i ve pol i cyhad bee n w r i t t en r ece nt l y , i n M ay2002, and he ha d not rep o rt ed the in cide n t t o h is fo rm er insu rer. W il li am s sp o k e w ith h er su p erv isor, E ugeni a M ul hern, beca us e s he w as conce rned R oes l er ’ s cl ai m m aynotbe cove r ed u n d e rth e “ p r i o rk n o wl e d g e e x c l u s i o n ” o f th e p o l i c y . M u l h e rn a d v i s e d W i l l i a ms to c o n tac t D o n a ld D o rf m a n , an in su ra n c e a tto rn e yin C a lifo rn ia, to a sk h im to exam i ne the fi l e for po t enti al po l i cycov erage i ssues. O n A ugus t23, 2002, D or fm an e- m ai l ed W i l l i ams a pr el i m i narycover age opi ni on. B as ed on R oes l er ’ s s t at ement s t o W i l l i ams, D or fm an s ugges t ed the “pr i orknow l edge” excl us i on m ayappl yand thatther e maybe gr ounds for re sc iss io n b a se d u p o n m a ter ial n o n d isc lo su re . D o rf m a n a lso sta ted , “T IG w ill w antt o be conf

i dentt hati thas done w hati tr eas onabl ycan do t o corr obor at e the fac t s as r efl ect ed i n the i nt ervi ew not es befor e di s cl ai m i ng and perhaps r es ci ndi ng the pol i cy . ” ( Id .) T h e se p re lim in a ryc o m m e n ts w e re p ro v id e d to Je ff M c D o n a ld of the underw r i t i ng di vi s i on. M cD onal d as ked Laur ee Bar r eca t o cont actatt or ney S a v a n n a h S e llm a n fo r a n o p in io n o n w h e th e r r e s c is s io n w o u ld b e a p p ro p ri a te . D u ri n g W il li am s’ ne x t con v ersa ti o n w ith R o esler sh e info rm ed h im there m aybe s om e ques t i on r egar di ng hi s cover age due t o pos s i bl e mi s r epr es ent at i ons abouthi s know l edge of a pot ent i al l aw s ui t . R oes l err epl i ed thathe di d not m ent i on the i nci denton hi s appl i cat i on beca us e he di d notbel i eve he w oul d be s ued. Sui thad al r eadybeen f i l ed aga i ns tthe doct orand the hos pi t al and he w as nota named par ty . W i l l i ams l eftt ow n aft erthi s conver s at i on on anotherm at t er-8-

a n d M u lh e rn to o k th e le a d o n th e R o e s le r c la im . O n Sept ember3, 2002, M ul hern s poke w i th R oes l erabouthi s appar ent e x p e c tatio n o f

th e law su it ag a in st h im . H e e x p lain e d th e a lleg a tio n s in th e su it w er e gr oundl es s and aga i n expl ai ned thatonce the fi r s tl aw s ui tw as fi l ed w i thout n a m in g h im , h e a ss u m e d h e w o u ld n o t b e su e d . M u lh e rn ’s n o tes a lso in d ica te R oes l ert ol d herhe l earned of Tal a B ur t on’ s br ai n damage “w hen the s ui tw as fi l ed. ” ( R . V ol . V I at1952a. ) M ul hern then t el ephoned D or fm an and r el ay ed the su b sta n c e o f

h e r c o n v e rsa tio n w ith R o e sle r. T h e yd e ter m in e d D o rf m a n w o u ld d raf t qu esti o n s fo r R o esler w h il e M u lhern w o u ld inv esti g ate the firstlaw su it ’s a l l e g a t i o n s a n d e a r l y d i s c o v e r y. T he nextday , M ul hern s poke w i th K i ns ey . K i ns eyexpl ai ned the bas i s of the or i gi nal l aw s ui tand t ol d M ul hern ther e w as no i s s ue w i th the admi ni s tr at i on o f a n esth esia. R athe r, the c lai m inv o lved the tim ing o f th e o p era ti n g roo m cre w ’s r es pons e. A ft erherconver s at i on w i th K i ns ey , M ul hern r et ai ned att or neySt eve P eterso n to rep rese n t R o esler. A tappr oxi m at el ythe s ame t i m e, T I G r ece i ved a l et t erfr om R oes l erfaxe d t o W i l l i ams and M ul hern. T he l et t ers t at ed: W hen I fi l l ed outthe appl i cat i on forcover age, I di d have know l edge of the s ui tbyA m anda Burt on agai ns tthe hos pi t al and the o b ste tricia n ; b u t I d id n o t k n o w , n o r sh o u ld I h a v e k n o w n , tha t I m i ghtbe a pa r tyt o thats ui t . T he al l egat i ons m ade bythe pl ai nt i ff h a d n o th in g to d o w ith m yp e rfo rm a n c e a n d I c o u ld n o t re a so n a b ly for es ee thatI m i ghtbe named as a partyt o the s ui ts om e s i x m onths lat er.-9-

( Id . at1730a. ) H ow ever , appr oxi m at el yone hourl at er , T I G r ece i ved a c opyof the o ri g inal law su itw h ich d id co n tai n an all eg ati o n im p li ca ti n g R o esler. P a ra g ra p h 6 o f

th e C o m p la in t a lle g e d , in tera lia : T he nur s es pr ovi di ng t he i ntr apartum nur s i ng car e and nur s i ng o b ste trica l an e sth e sia c a re b re a c h e d th e ir d u ties w ith re sp e c t to A m anda Burt on’ s i ntr apartum l aborand del i verynur s i ng car e and obs t etr i cal anes thes i a. ( Id . a t1 7 6 8 a . ) Attr i a l , Ro e s l e rc o n c e d e d th e d i s c r e p a n c i e s b e twe e n th e s e two d o c u m e n t s c o u l d r a i s e a l e g i t i m a t e q u e s t i o n r e g a r d i n g h i s v e r a c i ty. O n Sept ember5, M ul hern r eques t ed D or fm an w r i t e a for m al cover age o p inion . H e se n t his op inion o n S ep tem b er 1 2 , 2 0 0 2 , stat ing R o esler’s expl anat i on of w hyhe di d notexpec ta l aw s ui tr ai s ed a “ cr edi bl e fa ctual bas i s for th e in su re d to a v o id th e p rio r k n o w led g e e x c lu sio n b a se d o n a n o bjec tiv e ly r eas onabl e bel i ef thatno pot ent i al cl ai m w as pr es ent ed. ” ( Id . at1749a. ) D or fm an offe r ed t o addr es s the i s s ue of r es ci s s i on s epar at el yi f TIG w i s hed, butatthat poi ntr ecomm ended TI G defe nd w i th a r es ervat i on of r i ght s underthe pol i cy w hi l e i nves t i gat i on cont i nued. T I G r ece i ved Sel l m an’ s form al opi ni on the nextday . E ven though Sel l m an h a d n o t re v iew e d D o rf m a n ’s le tter, sh e a g re e d R o e sle r’s e x p lan a tio n fo r h is a n sw e rs r e g a rd in g h is k n o w led g e o f a p o ten tial la w su it w a s “ p lau sib le” a n d d id nots ugges tt he pr i orknow l edge e xcl us i on be i nvoked ( Id . at 17 5 7 a.) N onethel es s , s he conc l uded R oes l er ’ s ans w ert o bul l etpoi nt6 w as caus e for-10-

re sc iss io n . S h e o p in e d T IG h a d a leg iti m a te d isp u te a s to c o v e ra g e b e c a u se it coul d r eas onabl ybel i eve he i nt ent i onal l ym i s r epr es ent ed hi s “know l edge or i nform at i on r el at i ng t o the pr ovi di ng orw i thhol di ng of pas tpr ofes s i onal s ervi ces th a t re su lted in a p a tien t’s n e u ro lo g ica l inju ry .” B e c a u se R o e sle r k n e w o f T a la B ur t on’ s br ai n i nj uryand s ubs equentl aw s ui tatthe t i m e he a ns w er ed the ques t i on, Sel l m an advi s ed TIG thati tcoul d r eas onabl ybel i eve Roesl eri nt ended t o dece i ve the i ns ur ance companyunderO kl ahoma l aw . H ad TIG know n of the B u rto n in c id e n t, i t co u ld h a v e in d e p e n d e n tlye v a lu a ted th e p o ss ib ili tyo f a c laim b e fo re is s u in g c o v e ra g e a n d , a t th e le a s t, c a rv e d o u t a n e x c e p tio n to th e c la im . B as ed on R oes l er ’ s m i s r epr es ent at i on byfai l i ng t o pr ovi de the B ur t on i nform at i on i n r es pons e t o bul l etpoi nt6, Sel l m an r ecomm ended TI G r es ci nd the pol i cy . She concl uded, ata mi ni m um , T I G had a “ l egi t i m at e di s put e as t o cover age. ” ( Id . at 1 7 5 7 a . ) S e l l m a n a l s o r e c o m m e n d e d T I G c o n t i n u e d e fe n d i n g R o e s l e rfo r3 0 d a ys s o he coul d m ake a l t ernat i ve arr angement s forhi s defe ns e. Att h i s p o i n t , TI G h a d th r e e o p t i o n s . I tc o u l d ( 1 ) d i s a l l o w Ro e s l e r ’ s c l a i m, ( 2) cont i nue defendi ng undera r es ervat i on of r i ght s and l at err es ci nd i f w arr ant ed, or( 3) r es ci nd. O n Sept ember27, w i th no fur theri nves t i gat i on, T I G s entR oes l er a re sc iss io n lette r d ra f ted b yS e llm a n . T h e lette r id e n tifie d R o e sle r’s a n sw e r to B ul l etPoi nt6 as the bas i s forthe r es ci s s i on butal s o r efe r ence d pot ent i al d ifficu lt ies w ith Q u esti o n # 9 an d B u ll et P o int 2. A fter ac k n o w ledg ing R o esler’s expl anat i on forhi s ans w er s t o Q ues t i on # 9 and B ul l etPoi nt2, the l et t erA n in su re r in th e “ se c o n d a ry ” o r “ n o n -a d m itt e d ” m a rk e t ac c e p ts 6 appl i cant s w ho do notm eetnor m al underw r i t i ng gui del i nes . T hes e i ns ur er s do notneed t o m eetthe s tr i ngentr at e r equi r ement s of admi t t ed i ns ur er s r egul at ed by s t at e depa r t m ent s of i ns ur ance . T hr oughoutthe tr i al , T I G offi ci al s conce ded theyknew t he effec tof 7 res ci ssi on w ou l d b e t o v oid al l cov erage for R oesl er back to 198 9. T heyal so knew s ecur i ng new i ns ur ance w oul d be more di ffi cul tbeca us e the appl i cat i on for -11- con t i nu ed as fo l l ow s: H ow ever , y ou l earned thatT al a B ur t on s uffe r ed br ai n damage and w as m ent al l yr et ar ded atthe t i m e y ou l earned of the s ui tagai ns tthe hos pi t al and D r . C l aypool , no l at erthan “e ar l y2002, ” and be for e y ou compl et ed the s uppl ement al decl ar at i on t o y ourappl i cat i on for insu ran ce o n M ay3 , 2 0 0 2 . Y o u fa il ed to rev ea l T ala B u rt o n ’s neur ol ogi cal i nj ur i es i n r es pons e t o the ques t i on w hethery ou had know l edge of

i nform at i on r el at i ng t o pr ofes s i onal s ervi ces that r es ul t ed i n a pat i ent ’ s neur ol ogi cal i nj ury . T hi s ques t i on on the appl i cat i on w as notbas ed on w hethery ou s ubj ect i vel ybel i eved a cl ai m w oul d be as s ert ed, onl yw hethery ou knew of anyneur ol ogi cal inju rie s to a p a tien t. T he omi s s i on of thi s i nform at i on i s a mat er i al m i s r epr es ent at i on u n d e r O k la h o m a la w . S e e Wa g n o n v . S ta te F a rm F ire a n dC a su a lty C o. , 146 F. 3d 764, 768 ( 10th C i r . 1998) ( appl y i ng O kl ahoma l aw ) ( “a m isre p re se n tatio n w ill b e c o n sid e re d m a ter ial if a re a so n a b le i ns ur ance company , i n det erm i ni ng i t s cour s e of a ct i on, w oul d at t ach i m por t ance t o the fa ctm i s r epr es ent ed. ”) I f TIG had know n of the i n c i d e n ti n v o l v i n g M s . Bu r t o n , T I G c o u l d h a v e c o n d u c t e d i t s o wn eval uat i on and i nves t i gat i on of w hethera cl ai m w as l i kel yt o be asse rt ed ag ains t y o u b efo re issuin g the P o li cy ; atthe v eryleast, T IG coul d have c arved outan exc ept i on fr om cover age forthe B ur t on c l a i m. ( Id . a t 1 7 0 7 -0 8 a ). R o e s le r r e c e iv e d th e le tte r w h ile a t w o rk o n O c to b e r 1 , 2 0 0 2 . O n O ctob er 1 4 , 2 0 0 2 , R o esler rec eive d ap p rov al fro m an insu rer in the sec o n d ary m arket fora non- r etr oact i ve pol i cyata pr emi um appr oxi m at el y$6, 000 m or e per

6 ye a rth a n T I G ’ s p o l i c y. 7everyi ns ur eras ked w hethert he appl i canteverhad a pol i cyr es ci nded. -12- R oes l erfi l ed s ui tagai ns tT I G on O ct ober17, 2002, forbr eac h of contr act and bad fai th s eeki ng compensa t oryand puni t i ve damages . Shor t l yther eaf t er , t he B ur t on’ s vol unt ar i l ydi s m i s s ed the l aw s ui tagai ns tR oes l er . O n J anuary4, 2003, aft erthe di s m i s s al of the B ur t on s ui t , T I G m i s t akenl ys entR oes l era R es ervat i on o f R ig h ts le tter in fo rm in g h im T IG w o u ld c o n d u c t h is d e fe n se su bjec t to its cont i nui ng i nves t i gat i on of pos s i bl e mi s r epr es ent at i on. O n A u g u st 1 , 2 0 0 3 , B ro sto w itz s e n t R o e sle r a lette r in fo rm in g h im h is pol i cyhad bee n form al l yr ei ns t at ed and no pr emi um w as r eques t ed. H ow ever , t he B urt on cl ai m w as excl ud ed from the n ew po l i cy . B rost ow i t z t est i fi ed thi s w as a bus i nes s deci s i on i nt ended t o l i m i tdamages i n the eve ntR oes l er ’ s s ui tw as su c c e ss f u l. L e ss th a n six m o n th s a f ter T IG re in sta ted R o e sle r’s p o licy , T IG d e c id e d to cea s e offer i ng pr ofes s i onal l i abi l i tyi ns ur ance t o C R N A s . T her efor e, i tnot i fi ed R o e s le r a n d its o th e r c u s to m e rs th a t it w o u ld n o t b e re n e w in g th e irp o lic ie s . H o w e v e r, itd id o ffe r “ tail” c o v e ra g e fo r its c u sto m e rs a t a c o st o f a p p ro x im a tely $4, 000. R oes l erdecl i ned thi s offe rbeca us e he “ di dn’ tw antt o do bus i nes s w i t h a companythattr eat ed [hi m ] l i ke that . ” ( R . V ol . I V at1040a. ) A s a r es ul t , R oes l er re m a in e d u n in s u re d fo r e v e n ts o c c u rr in g b e tw e e n 1 9 8 9 a n d O c to b e r 1 , 2 0 0 2 . R oes l er ’ s cl ai m s w er e pr es ent ed t o a j uryi n A pr i l 2004. A tthe cl os e of R o esler’s ev iden ce , T IG m o v ed fo r j u d g m en t as a m att er o f law . T h e tri al co u rt“B eca us e thi s i s a di ver s i tyact i on, w e appl yt he s ubs t ant i ve l aw of the 8 forum s t at e . . . . ” A dvantage Hom ebui ldi ng, LLC . v. Mar yland C as . C o. , 470 F. 3d 1003, 1007 ( 10th C i r . 2006) ( ci t at i on and quot at i ons om i t t ed) . I n thi s cas e, we a p p l yOk l a h o ma l a w. -13- den i ed the m oti on . T IG renew ed it s m oti on atthe close of al l evidence an d als o m oved fora new tr i al . T hes e mot i ons w er e al s o deni ed. T he j ur yaw ar ded R o esler $ 6 0 , 0 7 2 fo r T IG ’s bre ac h o f c o n tr ac t. F o r T IG ’s ba d fa ith , the ju ry a w a rd e d R o e sle r $ 2 .3 1 m ill io n in c o m p e n sa to ryd a m a g e s a n d $ 2 .3 m ill io n in p u n itiv e d a m a g e s . T h is tim e ly ap p e a l fo llo w e d . I I . DI S CU S S I ON T I G cl ai m s i ti s ent i t l ed t o j udgm entas a mat t erof l aw on R oes l er ’ s bad fai th clai m becau se i thad a reas on able, go od fai th b asi s t o b el i eve there w as a leg iti m a te d isp u te a s to w h e th e r R o e sle r m a d e a m a ter ial m isre p re se n tatio n o n h is in su ra n c e a p p lica tio n w ith T IG . In th e a ltern a tiv e , T IG m a in tain s it is e n tit led to a new tri al becau se the tr i al cou rterr on eou sl yi nst ruct ed the j urors t hat i tm ust fin d T IG a c ted in b a d fa ith if it fo u n d R o e sle r h a d n o t in ten d e d to d e c e iv e T IG in hi s appl i cat i on. Fi nal l y , T I G cl ai m s i ti s ent i t l ed t o a r emi t t i turora new t r i al beca us e the aw ar d of over$2 m i l l i on foremot i onal di s tr es s i s cl ear l yexce s s i ve. 8 A . J udgm entas a M att erof Law T IG m ai ntai ns t he co urterr ed in den y i ng i t s m oti on for j ud gm ent as a m a tter o f

law o n R o e sle r’s b a d fa ith c laim . “A ju d g m e n t as a m a tter o f law is w arr ant ed onl yi f the evi dence poi nt s butone w ayand i s s us cept i bl e t o noForexampl e, Sel l m an w as one of the l as tw i tnes s es t o t es t i fy . D ur i ng 9 c r o s s - e x a mi n a t i o n , p l a i n t i ff ’ s c o u n s e l a s k e d , “ Di d y o u k n o w th a tt h e c l a i ms p eo p le i n this case h av e a ll test ifi ed theym ad e the d ec isi o n to resc ind this m an ’s i ns ur ance pol i cybefor e theyhi r ed ei thery ou orM r . D or fm an; di d y ou know th a t? ” (V o l. V a t 1 4 5 9 a .) T h is q u e s tio n m is re p re s e n te d th e p re v io u s te s tim o n y . I n fac t , the uncont es t ed t es t i m onyes t abl i s hed r es ci s s i on w as an opt i on bei ng co n side red b u t no fin al de cisi o n h ad b ee n m ad e u n ti l after T IG rec eive d S ell m an ’s -14- r eas onabl e i nfer ence s w hi ch mays uppor tthe oppos i ng party ’ s pos i t i on. ” H errera v . L u fk in In d u s ., In c ., 474 F. 3d 675, 685 ( 10th C i r . 2007) ( ci t at i on and quot at i ons o m itted). W e re v iew the d istri ct co u rt ’s de cisi o n d e n o v o , co n side ri n g the e n ti re re c o rd in th e lig h t m o s t fa v o ra b le to th e n o n -m o v in g p a rt y . Id . “T h e q u e stio n is notw hethert her e i s l i t er al l yno evi dence s uppor t i ng the nonmovi ng partybut w h e th e r t h e re is e v id e n c e u p o n w h ic h a ju ry c o u ld p ro p e rl yfin d fo r t h a t p a rt y . F o r a ju ryto p ro p e rlyfin d fo r a p a rty , the p a rtym u st p re se n t m o re th a n a sc in til la of evi dence s uppor t i ng i t s cl ai m . ” Id . T I G as s ert s the evi dence w as i ns uffi ci entt o s uppor tthe bad fai th and p u n it ive d am ag es a w ard s. R o esler arg u es th ere w as a b u n d an t evid en ce T IG m an u fa cture d the a ll eg ed legiti m ate d ispu te i n b ad fa ith . U n fo rtu n ately , b efo re w e ca n di s cus s the i s s ues and evi dence , w e mustt ake a m om entt o debunk many o f Ro e s l e r ’ s a r g u me n t s wh i c h a r e u n s u p p o r t e d b yl a w o rfa c t . We a r e mi n d f u l we m u st al low all rea so n ab le i n fe ren ce s in fav o r of the n o n -m o v ing p arty . H o w ev er, w e n e e d n o t en d o rse in fe re n c e s p re m ise d o n d e lib e ra te c o n f u sio n , ina c c u ra te hypothet i cal ques t i ons , orm i s s t at ement s of ea r l i ert es t i m onyt o i nduce mi s l eadi ng t es t i m ony fr om a l at er w i tnes s . T her efor e, w e musts epar at e conc oct ed or 9opi ni on. M or eover , the evi dence cons i s t ent l yr evea l ed TIG ’ s cl ai m s depart m ent

empl oy ees pr ovi ded i nputbutt he underw r i t er s m ade the dec i s i on t o r es ci nd R o e s le r’ s p o lic ya f

te r S e llm a n p ro v id e d h e r l e g a l o p in io n . E veryw i tnes s w i th know l edge of t he mat t ers o t es t i fi ed. I n addi t i on, 10 D or fm an’ s fi nal opi ni on, s enton Sept ember12, 2002, s peci fi cal l yr ecogni zed he had notbeen r et ai ned t o opi ne on r es ci s s i on. I ndeed, even though he r ecomm ended mor e i nves t i gat i on befor e r efus i ng t o covert he cl ai m , he further s t a t e d : “ Th e r e a r e a l s o g r o u n d s t o c o n s i d e ra p o l i c yr e s c i s s i o n b a s e d o n t h e s a me fai l ur e t o di s cl os e thi s C s ect i on del i veryas a pot ent i al cl ai m att he t i m e of a p p lica tio n fo r c o v e ra g e . W e c a n a d d re ss th is s e p a ra telysh o u ld y o u w ish to as s es s thi s fur ther . ” ( R . V ol . V I at1750a. ) T he fa ctt hatD or fm an comm ent ed on r es ci s s i on does notl ead t o an i nfer ence he w as r et ai ned t o pr ovi de an opi ni on on the m att er. -15- i rr e l e v a n t“ e v i d e n c e ” f r o m e v i d e n c e a c tu a l l y p r e s e n t e d t o th e j u ry. 1. Sham orI r r el evantE vi dence a) Law yer - Shoppi ng R o esler arg u es e v iden ce o f b ad fa ith ca n b e inferred fro m T IG ’s “law y ersh o p p in g ” b a se d o n Je ff M c D o n a ld ’s r e q u e st th a t B a rre c c a h ire S e llm a n sh o rtly aft erD or fm an r ender ed hi s i nform al opi ni on. R oes l eral l eges i tes t abl i s hed an in fe re n c e T IG w e n t to S e llm a n b e c a u se it d id n o t li k e D o rf m a n ’s a d v ice . T h e re is n o e v id e n c e s u p p o rt in g s u c h a n in fe re n c e . U ncont es t ed evi dence es t abl i s hed D or fm an w as r et ai ned t o opi ne s ol el yon th e p o licyc o v e ra g e iss u e , n o t re sc iss io n . H is in fo rm a l o p in io n a rriv e d v ia e -m a il to W ill iam s o n A u g u st 2 3 , 2 0 0 2 . W ill iam s fo rw a rd e d th e e -m a il t o M c D o n a ld 10 the s ame day . D or fm an’ s i nform al opi ni on, r ender ed befor e know l edge of R oes l er ’ s expl anat i on, s t at ed he be l i eved the B ur t on s ui tw as excl uded fr om-16-

cover age unde rt he pr i orknow l edge e xcl us i on, and s epar at el y , ther e maybe g ro u n d s fo r re sc iss io n o f th e p o licyb a se d u p o n m a ter ial n o n d isc lo su re .” (R . V o l. V I a t 1 8 0 0 a .) H e re c o m m e n d e d f u rt h e r i n v e s tig a tio n . U ncontr adi ct ed t es t i m onyfur theres t abl i s hed i tw as atthi s poi ntT I G hi r ed Sel l m an t o addr es s the r es ci s s i on i s s ue. T hus , atthe t i m e TIG hi r ed Sel l m an, D o r f m a n w a s r e c o m m e n d i n g c o v e r a g e b e d e n i e d . I tw a s o n l y af t erSel l m an w as re ta in e d th a t D o rf

m a n le a rn e d o f

R o e s le r’ s S e p te m b e r 4 , 2 0 0 2 , e x p la n a tio n . W hi l e D or fm an cha nged hi s opi ni on r egar di ng the pr i orknow l edge e xcl us i on, ther e i s no evi dence T I G cont act ed Sel l m an t o r eportD or fm an’ s fi nal concl us i ons orgave a nyotherdi r ect i on t o Sel l m an’ s form al opi ni on, s entthe dayaft er D o rf m a n ’s. In d e e d , S e llm a n a g re e d R o e sle r o ffe re d a “ p lau sib le” p o sitio n a s to hi s pr i orknow l edge of a l aw s ui tagai ns thi m . H ow ever , Sel l m an conc l uded R o e sle r’s a d m iss io n h e k n e w o f B u rto n ’s inju rie s b e fo re h e c o m p lete d h is a p p l i c a t i o n wa s s u ffi c i e n te v i d e n c e o f mi s r e p r e s e n t a t i o n a s t o Bu l l e tP o i n t6 . ( R. V ol . V I at1757a. ) T he t i m i ng and s ubs t ance of the tw o l egal opi ni ons pr ovi de no bas i s forR oes l er ’ s i ns i nuat i on T I G w ent“l aw y er - s hoppi ng” i n bad fa i th orthat th e tw o l e g a l o p i n i o n s w e r e c o n tr a d i c t o ry.

b) Kno w l edg e of Brain Inj ury R oes l eral s o ar gues T I G ’ s bad fa i th i s demonstr at ed byi t s fai l ur e t o r es ol ve w h e th e r R o e sle r k n e w T a la B u rto n su ffe re d b ra in inju rie s p rio r to c o m p letin g h is a p p lic a tio n fo r i n s u ra n c e . T h e e v id e n c e a llo w s n o q u e s tio n o f fa c t o n th is is s u e .P l ai nti ff’s counsel deft l ym anag ed to con fuse M ulhern d uri ng cross 11 exami nat i on byi ns i s t i ng herfai l ur e t o not e w hi ch s peci fi c l aw s ui tR oes l erw as re fe rrin g to d u rin g th e ir c o n v e rsa tio n (th e o n e a g a in st th e h o sp ital o r th e late r su it ag ains t R o esler) raised a q u esti o n o f fac t as t o w h en R o esler k n ew o f B u rt o n ’s i nj ur i es . H ow ever , M ul hern cons i s t ent l yt es t i fi ed R oes l ert ol d herhe knew of B u rto n ’s inju rie s a t th e tim e o f th e law su it ag a in st th e d o c to r a n d th e h o sp ital.

-17- W il li am s’ no tes sp ec ifi ca ll ystat e R o esler told h er h e lea rne d o f T ala B u rt o n ’s inju ri e s w h e n h e h e a rd a b o u t th e la w s u it a g a in s t th e d o c to r a n d th e h o s p ita l. M ul hern’ s not es do notcontr adi ctthi s s t at ement , butm er el ys t at e R oes l ert ol d her he l earned of the i nj ur i es at “the t i m e of the l aw s ui t . ” I n fac t , R oes l ernever 11 d e n ied th is k n o w led g e . W h e n a sk e d a t trial w h yh e a n sw e re d B u llet P o in t 6 in th e n e g a tiv e , R o e s le r d id n o t s a yh e d id n o t k n o w a b o u t T a la B u rt o n ’s inju ri e s . R athe r, h e e x p lai n ed h e b eli ev ed the q u esti o n ask ed w h ethe r h is admi ni s tr at i on of a n e sth e sia c a u se d T a la B u rto n ’s b ra in d a m a g e a n d , b e c a u se h e d id n o t b e liev e it d id , h e d id n o t m e n tio n th e in c id e n t. G iv e n th e u n c o n tes ted e v id e n c e , all r eas onabl e i nfer ence s nece s s ar i l yl ead t o the conc l us i on R oes l erl earned about T al a B ur t on’ s neur ol ogi cal i nj ur i es , att he l at es t , i n A ugus t2001. T her efor e, ther e ca n be no i nfer ence T I G act ed i n bad fa i th bydecl i ni ng t o fur ther i nves t i gat e thi s i s s ue.

c) P os t - Li t i gat i on C onduct R oes l erar gues T I G ’ s pos t - l i t i gat i on conduct– the pos t - r es ci s s i on R e se rv a tio n o f

R ig h ts le tter, re in sta tem e n t o f th e p o licya n d th e o ffe r o f a tail p o licy– is e v id e n c e o f b a d fa ith . H e a ss e rts th is e v id e n c e w a s a p p ro p ria tely-18-

cons i der ed bythe j ury“i n det erm i ni ng the r eas onabl enes s of TIG ’ s i ni t i al deci s i on t o r es ci nd the pol i cyi n l i ghtof i t s att empt aft erl i t i gat i on t o s om ehow ‘c u re ’ i ts c o n d u c t.” (A p p e lle e ’s B r. a t 4 4 .) T hes e pos t - l i t i gat i on act i vi t i es have no r el evanc e t o T I G ’ s al l eged ba d fa ith . H al e v. A . G . Ins . C o. , 138 P. 3d 567, 571- 72 ( O kl a. C i v. A pp. 2006) ( “[T] he anal y s i s i n bad fa i th cas es i ndi cat es the cut off forr el evantevi dence i s the dat e of p a ym e n t o r d e n ial o f

th e c laim .”). T h e d u tyo f g o o d fa ith a n d fa ir d e a lin g e x ists dur i ng the t i m e the cl ai m i s bei ng r evi ew ed. O nce a l aw s ui ti s fi l ed, t o hol d an i ns ur er ’ s acc ept abl e l i t i gat i on t act i cs as evi dence of bad fai th w oul d be t o deny th e in s u re r a c o m p le te d e fe n s e . See Ti m berl ake C on st . C o. v. U . S. F i d. & G ua r. C o. , 71 F. 3d 335, 340 ( 10th C i r . 1995) ( “[s ] uch evi dence s houl d r ar el y , i f eve r , be al l ow ed t o s erve as pr oof of ba d fai th. ”) . “[A ] l l ow i ng l i t i gat i on conductt o s erve as evi den ce of

bad fai th w ou l d u nd erm i ne an i nsurer ’s ri gh tt o co ntes t ques t i onabl e cl ai m s and t o defe nd i t s el f aga i ns ts uch cl ai m s r es ul t i ng i n a chi l l i ng effe ct on insu rers, w h ich c o u ld u n fa ir lyp en ali ze them b yinh ibit ing their l aw y ers fr om zea l ous l yand effec t i vel yr epr es ent i ng thei rcl i ent s w i thi n the bounds perm i t t ed byl aw . ” Si m s v. Trav el ers Ins . C o. , 16 P. 3d 468, 471 ( O kl a. C i v. A pp. 2 0 0 0 ). E ven i f the pos t - l i t i gat i on event s ar e cons i der ed, ther e i s no i nfer ence of bad fa i th. T I G r eadi l yadmi t t ed the dec i s i on t o r ei ns t at e R oes l er ’ s pol i cyw as i n t e n d e d t o mi t i g a t e d a ma g e s a n d , a s s u c h , i s n o te v i d e n c e o f p r i o rb a d fa i th . As-19-

t o the J anuary2003, r es ervat i on of r i ght s l et t er , B arr eca t es t i fi ed s he s entthe l ett erbym i s t ake. E ven s o, atthe t i m e the l et t erw as s ent , the under l y i ng s ui thad a lr e a d yb e e n re s o lv e d a n d n o th in g c o u ld b e g a in e d b yth is m is ta k e .

d) A t t orney Opini on L et t ers Fi nal l y , R oes l err epea t edl yi ns i nuat ed attr i al thatT I G ’ s fai l ur e t o pr ovi de h im th e lette rs f

ro m D o rf

m a n a n d S e llm a n w ith th e lette r o f th e re sc iss io n is evi dence of bad fai th. Forexampl e, i n the exa m i nat i on of J eff M cD onal d, the fol l ow i ng col l oquyoccurr ed: Q . A re y o u p rou d that y o u r co m p an yh as tak en the p o sit ion that they ’re pr oud of how theyt r eat ed [Roesl er ] beca us e theytr eat ed hi m i n good fai th? A . I , I ’ m aw ar e thatw e don’ tfee l w e’ ve ac t ed i n bad fa i th her e. Q . W ell , if y o u r co m p an yis sati sfied they ’ve tr ea ted h im fa ir ly , d o n ’t y o u think o n e o f th e thin g s the ysh o u ld d o is be p rou d to sh o w M r. R oes l erthos e tw o l egal opi ni ons fr om the begi nni ng? T I G C ouns el : O bj ect i on, y ourhonor , ar gum ent at i ve and obj ectunder

T i m ber l ake. C our t : O verrul ed. * * * * A . I ju st, I d o n ’t k n o w th a t w e w e re e v e r a sk e d to d o th a t. Q . W el l , does thi s m an, w ho i s nota l aw y er , does he have t o as k y ou speci fi c l i t t l e qu est i on s aft er y ou ’ve den i ed h i s cl ai m and say , G uy s, di d y ou up i n C hi cago hi r e a c oupl e of l aw y er s thatt ol d y ou thaty ou co u ld, y o u co u ld resc ind this po li cy ; do es h e h av e to a sk that b efo re y o u ’ l l g i v e i tt o h i m? T IG C o u n sel: O bjecti o n , relev an ce y o u r H o n o r.-20-

C our t : O verrul ed. ( Vo l . I I I a t6 6 2 - 6 6 3 a ) . Th e s a me typ e o f q u e s t i o n i n g c o n t i n u e d wi th W i l l i a ms and B arr ecc a. R oes l eral s o t es t i fi ed TIG nevert ol d hi m befor e the l aw s ui ti tw as rely ing o n o p inion s fro m law y ers to re scin d the p o li cy . In c losing , p lai n ti ff ’s couns el t ol d the j urythatgood fai th r equi r ed TIG “t o t el l [R oes l er ] everythi ng. ” (R . V o l. V a t 1 5 4 5 a .) T I G m ai nt ai ns i t s fai l ur e t o pr ovi de R oes l eri t s l aw y er s ’ opi ni ons atthe t i m e of r es ci s s i on i s i r r el evantt o bad fa i th. M or eover , i tcont ends the tr i al court ’ s admi s s i on of couns el ’ s i ns i nuat i ons thr ough thi s l i ne of que s t i oni ng i s an a b u se o f d isc re tio n , o r in th e a ltern a tiv e , p lain e rro r. In re sp o n se , R o e sle r a ss e rts th a t “s im p lyb e c a u se th e re is n o t a la w h o ld in g it i s b a d fa ith fo r a n in su re r n o t to in fo rm a n in su re d a b o u t ev id e n c e it o b tain s f ro m a law y e r, th is d o e s n o t m e a n it i s n o t un rea so n ab le i n o n e c ase o r an o ther to fail to d o so . ” (A p p ell ee ’s B r. at 64 . ) R o e s le r’ s re s p o n s e ig n o re s b a s ic c o n c e p ts o f a tto rn e y -c lie n t p ri v ile g e . T h e a tt o rne y -cli en t pri v il eg e is co d ifi ed at O k la. S tat . ti t. 1 2 , § 2 5 0 2 . It pr ot ect s comm uni cat i ons betw een a n at t orneyand the cl i ent“w ho cons ul t s an att orneyw i th a vi ew t ow ar ds obt ai ni ng l egal s ervi ces ori s r ender ed pr ofes s i onal l egal s ervi ces byan att orney . ” Id . at§ 2502 ( A ) ( 2) . T he cl i entr et ai ns the “pr i vi l ege t o r efus e t o di s cl os e and t o pr eventanyotherper s on fr om di s cl os i ng confi dent i al comm uni cat i ons m ade forthe purpos e of faci l i t at i ng the r endi t i on of pr ofes s i onal l egal s ervi ces t o the cl i ent . ” Id . at § 2 5 0 2 B ; s ee al s o, Scot tv.“A ‘ cl i ent ’ i s a per s on, publ i c off i cer , orcorpor at i on, as s oci at i on, or 12 otheror gani zat i on orent i ty , ei therpubl i c orpr i vat e . . . . ” O kl a. St at . t i t . 12 § 2 5 0 2 2 . A. -21- P et ers on , 126 P. 3d 1232, 1235 n. 3 ( O kl a. 2005) . A s a gene r al m at t er , “the cl i ent has a r eas onabl e expe ct at i on t hat. . . di s cl os ur e of s uch i nform at i on m aybe j udi ci al l ycompel l ed onl yi n acc or dance w i th r ecogni zed e xcept i ons t o the att orney - cl i entand w or k pr oductpr i vi l eges . ” O kl a. St at . A nn. t i t . 5, C h. 1, A pp. 3 -A (R u les o f

P ro f ’l C o n d u c t (S c o p e )). C o n se q u e n tly , T IG h a d n o d u tyto e x p re s s ly w a iv e its p ri v ile g e . A n i ns ur ance company , j us tas anyotheri ndi vi dual orent i ty , has the r i ght t o s eek confi dent i al l egal advi ce. See Si m s v. Trav el ers Ins . C o. , 16 P. 3d at471 12 (do cu m en ts r elati n g to co m m u n icati o n s b etw ee n the in su rer an d it s att o rne y s w ere su bjec t to a tto rn e y -c lien t p riv ileg e ); s ee al s o Tw i n C i ty Fi r e Ins . C o. v. B urke , 63 P .3 d 2 8 2 , 2 8 5 -8 6 (A riz . 2 0 0 3 ); B oone v. Vanl i nerIns . C o. , 744 N . E . 2d 154, 155 n .2 (O h io 2 0 0 0 ); D i on v. Nat i onw i de M ut . Ins . C o. , 1 8 5 F . R. D. 2 8 8 , 2 9 4 ( D. M ont . 1998) . I ti s onl yw hen s uch advi ce be comes a ti s s ue i n a l egal pr ocee di ng thatthe cl i entm aybe r equi r ed t o di s cl os e the advi ce of couns el undera theoryof i m p l i e d w a i v e r . R o e s l e rd o e s n o tc l a i m t h e r e w a s a n y i m p l i e d w a i v e ro f a t t o r n e yc l i e n tp r i v i l e g e a tth e t i m e T I G r e s c i n d e d h i s p o l i c y. T he l ett er s fr om D or fm an and Sel l m an w er e pr i vi l eged c om m uni cat i ons g iv e n in re sp o n se to T IG ’s r e q u e st fo r p ro fe ss io n a l ad v ice . R o e sle r fa ils to i dent i fyanycas e l aw w her e a pa r ty , i ncl udi ng an i ns ur ance company , act edO kl ahoma’ s U nfai rC l ai m s Set t l ementPr act i ces A ct , O kl a. St at . t i t . 36 § 13 1250. 7, pr ovi des a ca s ual tyi ns ur er ’ s not i fi cat i on of a c l ai m deni al m us ti ncl ude “r efe r ence t o [the s peci fi c] pol i cypr ovi s i on, condi t i on, orexcl us i on” thati s t he bas i s fordeni al . T he A ctdoes notaffor d a pr i vat e r i ghtof ac t i on fora vi ol at i on o f its p ro v is io n s . Lew is v. A etna Heal th C ar e, Inc. , 78 F. Supp. 2d 1202, 1206 (N .D . O k la. 1 9 9 9 ). H o w e v e r, “th e In su ra n c e C o d e in g e n e ra l, an d th e A c t in part i cul ar , r efl ecta cl earSt at e pol i cyof r egul at i ng i ns ur ance i n partby pr ohi bi t i ng the bad fai th fai l ur e byi ns ur er s t o paypr om pt l yt he r i ght ful cl ai m s of i ns ur eds . ” Id . T I G compl ai ns thatR oes l ers penta s ubs t ant i al amount of t i m e att r i al 14 fo c u sin g o n Q u e stio n # 9 a n d c o n f u se d th e ju ryb yim p ly in g T IG d e c id e d to r es ci nd bas ed on R oes l er ’ s r es pons e t o Q ues t i on # 9 and B ul l etPoi nt2 as w el l as B u llet P o in t 6 . T h e b u lk o f th e lan g u a g e in th e re sc iss io n lette r su g g e sts R oes l er ’ s ans w ert o B ul l etPoi nt6 i s t he r eas on forr es ci s s i on. H ow ever , t he r es ci s s i on l ett eri s uncl earw hetherR oes l er ’ s ans w er s t o al l t hes e pr ovi s i ons influen ce d T IG ’s de cisi o n . T h ere fo re, R o esler d id n o t un fa ir lyex p lore T IG ’s r efe r ence i n t he l ett ert o Q ues t i on # 9 and B ul l etPoi nt2. O n r emand, T I G can p r e s e n te v i d e n c e c l a r i f y i n g i t s p o s i t i o n a n d t h e j u ryc a n r e a c h i t s o wn con cl usi on s. -22- unr eas onabl yori n bad fa i th byfai l i ng t o vol unt ar i l ys acr i fi ce i t s att orney - cl i ent pr i vi l ege pr i ort o l i t i gat i on. O kl ahoma l aw cert ai nl ydoes noti m pl ys uch ac t i on m i ghtbe nec es s ary . H e makes no at t empt t o expl ai n w hyi tw as unr eas onabl e for T IG to m a in tain its a tto rn e y -c lien t p riv ileg e n o r d o e s h e c laim T IG d id n o t f u lly compl y w i th O kl ahoma l aw r egar di ng not i ce t o hi m of i t s deci s i on. T hus , t he 13 d i s tr i c tc o u r te r r e d i n a l l o w i n g R o e s l e rt o a r g u e T I G ’ s r e t e n t i o n o f i t s a t t o rn e ycl i entpr i vi l ege w as evi dence of bad fai th. 14 2. L egi t i m at e D i s put e/ I nadequa t e I nves t i gat i on H av ing ad d resse d the “ fa cts” w e w il l no t con side r i n su p p o rto f th e jury ’s fin d ing o f T IG ’s ba d fa ith , w e turn to T IG ’s co n tention the d istri ct co u rt-23-

err oneous l ydeni ed i t s m ot i on forj udgm entas a mat t erof l aw . T I G cl ai m s the uncontr overt ed evi dence es t abl i s hed i t s good fai th bel i ef of a l egi t i m at e cove r age di s put e. R oes l erar gues the fa i l ur e t o conductan ade quat e i nves t i gat i on negat es the l egi t i m acyof the cove r age di s put e.

a) Appl i cabl e Law U nderO kl ahoma l aw , “an i ns ur erhas an i m pl i ed dutyt o deal fai r l yand ac t i n good fai th w i th i t s i ns ur ed. ” C h r is tia n v . A m . H o m e A s s u r . C o ., 577 P. 2d 899, 904 ( O kl a. 1977) . I f an i ns ur erfai l s t o ful fi l l thi s duty , the i ns ur ed ca n br i ng a b a d fa ith a c tio n in to rt . Id. I ns ur er s ar e s t atut or i l ybarr ed fr om decl i ni ng cover age on the bas i s of thei ri ns ur ed’ s m i s r epr es ent at i ons and omi s s i ons exce pt i n l i m i t ed ci r cumst ance s . T hos e ci r cumst ance s ar e s etouti n O kl a. St at . t i t . 36, § 3 6 0 9 , w h ich p ro v id e s in p a rt: A l l s t at ement s and des cr i pt i ons i n anyappl i cat i on foran i ns ur ance p o licyo r in n e g o tiatio n s th e re fo r, b yo r in b e h a lf o f th e in su re d , sh a ll b e d e e m e d to b e re p re s e n ta tio n s a n d n o t w a rr a n tie s . M i s r epr es ent at i ons , om i s s i ons , conce al m entof fa ct s , and i ncorr ect sta tem e n ts s h a ll n o t p re v e n t a r e c o v e ryu n d e r th e p o licyu n les s: 1 . F rau d u lent; or 2 . M aterial eith er to the ac ce p tanc e o f th e risk, or to the h az ard as s um ed bythe i ns ur er ; or 3 . T h e i n s u r e ri n g o o d fa i th w o u l d e i th e rn o th a v e i s s u e d th e p o l i c y, orw oul d nothave i s s ued a pol i cyi n as l ar ge an a m ount , orw oul d not have pr ovi ded cove r age w i th r es pectt o the haz ar d r es ul t i ng i n the l os s , i f the true fa ct s had bee n m ade know n t o the i ns ur eras r equi r ed e ith e r b yth e a p p lic a tio n fo r t h e p o lic yo r o th e rw is e . O k la . S ta t. tit. 3 6 , § 3 6 0 9 (A ).-24-

O klahom a defi nes i nsurance m i sr epresent at i on as fol l ow s: A ‘ m i s r epr es ent at i on’ i n i ns ur ance i s a s t at ementas a fa ctof s om ethi ng w hi ch i s untrue, and w hi ch the i ns ur ed s t at es w i th the know l edge thati ti s untrue and w i t h an i nt entt o dece i ve, orw hi ch he s t at es pos i t i vel yas true w i thoutknow i ng i tt o be true, and w hi ch has a ten d e n c yto m isle a d , w h e re su c h fa c t in e ith e r c a se is m a ter ial to the r i s k. Scot ts dal e Ins . C o. v. Tol l i ver , 1 2 7 P .3 d 6 1 1 , 6 1 3 (O k la. 2 0 0 5 ). A n “ o m iss io n ” is

“ an i nt ent i onal om i s s i on t o di s cl os e a factorcondi t i on w hi ch i s m at er i al t o the acc ept ance of the r i s k orthe haz ar d as s um ed. ” Id . at613- 14. A n “i ncorr ect st at em ent” i s “a st at em ent of factw hich i s untrue an d k no w n to be un true, or so car el es s l ym ade thatan i nt entt o dece i ve m ay be i nf er r ed. ” Id . a t 6 1 4 . T I G m ai nt ai ns i tr eas onabl ybel i eved Roesl eri nt ended t o dece i ve the companyw hen he di d notdi s cl os e the B ur t on cas e i n r es pons e t o the ques t i on reg ard ing n eu rolo g ical i njuri es to a p ati en t i n B u ll et P o int 6. T h ere fo re, T IG m a in ta in s it h a d a le g itim a te d is p u te a s to c o v e ra g e v itia tin g a b a d fa ith c la im . T he O kl ahoma Supre m e C our thas r ecogni zed “ [l ] egi t i m at e di s agr eement s can ar i s e conc erni ng the amountof cove r age, caus e of l os s , and br eac h of pol i cy condi t i ons , and the t or tof bad fai th does notpr eventthe i ns ur erfr om r es i s t i ng paym entorr es or t i ng t o a j udi ci al forum t o r es ol ve a l egi t i m at e di s put e. ” Bro wn v. P at el , 1 5 7 P .3 d 1 1 7 , 1 2 6 (O k la. 2 0 0 7 ); see al so C hr i s t i an, 577 P. 2d at905; Tim b e r la k e C o n s tr . C o . v . U .S . F id . & G u a r . C o ., 7 1 F . 3 d 3 3 5 , 3 4 3 (10 th C ir . 1995) ( appl y i ng O kl ahoma l aw ) . I n s uch ca s es , “[r ] es or tt o a j udi ci al forum i s not-25-

pers e bad fai th orunfai rdeal i ng on the partof the i ns ur err egar dl es s of the out come of t he s ui t . ” C hr i s t i an, 5 7 7 P .2 d a t 9 0 5 . “T h e d e c isiv e q u e stio n is w h e th e r t h e in s u re r h a d a g o o d fa ith b e lie f, att he t i m e i ts per f orm ance was r eques t ed , t hati thad j us t i fi abl e r eas on forw i thhol di ng paym entunderthe pol i cy . ” B uz z ard v. F arm ers Ins . C o. , 824 P. 2d 1105, 1109 ( O kl a. 1991) (q u o tatio n o m itt e d ). E v id e n c e lea d in g to d iffe re n t in fe re n c e s re q u ire s th e ju ryto r es ol ve the r eas onabl enes s of i ns ur er ’ s conduct , “bya cons i der at i on of the ci r cumst ance s i n eac h cas e. ” B adi l l o v. M i d- C ent ury Ins . C o. , 121 P. 3d 1080, 1093 ( O kl a. 2005) . A ta mi ni m um , an i ns ur er ’ s cul pabi l i tym us tbe “mor e than s i m pl e negl i gence , butl es s than the r eckl es s conductnece s s aryt o s anct i on a puni t i ve damage aw ar d . . . . ” Id . a t 1 0 9 4 . T h e e x iste n c e o f

a leg iti m a te d isp u te d o e s n o t, by i tse lf, res o lv e a b a d fa ith cl ai m . R ather , “i ts hi ft s t he bur den t o the i ns ur ed t o pr es entaddi t i onal evi dence of bad fai th. ” Si m s v. G r eatA m . Li f e Ins . C o. , 469 F. 3d 870, 891 ( 10th C i r . 2006) ( a p p l yi n g O k l a h o m a l a w ) . “ M o s tc o m m o n l y, th e i n s u r e d a s s e r t s a n i n s u r e r 's fai l ur e t o conductan i nves t i gat i on r eas onabl yappr opr i at e underthe ci r cumst ance s . ” Id . T h is i s ex ac tl yw h at R o esler claim s h ere . T o d efea t T IG ’s aff i r m at i ve defens e, he mustdemonstr at e “( 1) the mannerof [TI G ’ s ] i nves t i gat i on hi nt s ata s ham defens e orotherw i s e s ugges t s thatm at er i al fac t s w er e over l ooked, o r (2) [T IG ] i n tention all yd isr eg ard ed u n d ispu ted fac ts sup p o rt ing the in su red ’s cl ai m . ” Id .; see al so O u lds v . P r in c ip a l M u t. L ife In s . C o ., 6 F. 3d 1431, 1442-26-

(1 0 th C ir . 1 9 9 3 ) ( a p p lyin g O k la h o m a la w ).

b) P ar t i es ’ C ont ent i ons T I G cont ends an eva l uat i on of the evi dence nece s s ar i l yl eads t o the concl us i on i thad a good fai th bel i ef Roesl erm ade a m at er i al m i s r epr es ent at i on w hen ans w er i ng B ul l etPoi nt6. T he undi s put ed evi dence r evea l ed R oes l erknew o f T a la B u rt o n ’s s e v e re n e u ro lo g ic a l inju ry p ri o r t o c o m p le tin g T IG ’s a p p lic a tio n . T her efor e, he knew he had pr ofes s i onal l ypart i ci pat ed i n a pr ocedur e w hi ch r es ul t ed i n s ever e neur ol ogi cal damage pr i ort o hi s negat i ve r es pons e t o B ul l et P o in t 6 in th e su p p lem e n tal a p p lica tio n . T IG w itn e ss e s te stified th e o n ly rea so n ab le resp o n se w o u ld h av e b ee n to rep o rtthe B u rt o n incid en t bec au se e v ery C R N A know s hi s pr ofes s i onal s ervi ces ar e pr ovi ded as partof a t eam, notas an i ndi vi dual . T her efor e, B ul l etPoi nt6 r efe rr ed t o R oes l er ’ s pr ofes s i onal s ervi ces as p art of

a su rgica l t ea m w h ere the p roc ed u re resu lt ed in n eu rolo g ical i njury . In addi t i on, R oes l erhad s t at ed i n w r i t i ng the C om pl ai ntagai ns tthe hos pi t al di d not c o n tain a lleg a tio n s a g a in st h im , b u t w h e n T IG re c e iv e d a c o p yo f th e C o m p lain t a s hor tt i m e l at er , i ts peci fi cal l yr efe rr ed t o the nur s e ane s thet i s t . T I G cont ends no a d d itio n a l in v e s tig a tio n w a s n e c e s s a ry b e c a u s e it w o u ld n o t c h a n g e th e s e fa c ts . T IG c laim s it f

u rth e r d e m o n stra ted g o o d fa ith b yc o n tac tin g a tto rn e y s to s eek l egal i nputon the i s s ues . “[R]e l i ance on the advi ce of couns el can be a defe ns e t o a bad fai th s ui t , [but ] the r el i ance on couns el ' s advi ce mustbe r eas onabl e. ” B arnes v. O kl a. F arm B ur eau M ut . Ins . C o. , 11 P. 3d 162, 174 ( O kl a.-27-

2000) . “The advi ce of couns el i s butone fa ct ort o be cons i der ed i n deci di ng w hetherthe ca r r i er ’ s r eas on fordeny i ng a cl ai m w as ar guabl yr eas onabl e. ” Id . “The ul t i m at e ques t i on i s w hethers uffi ci entevi dence w as pr es ent ed t o s how i ns ur er ' s purpor t ed r el i ance on i t s att or ney ' s advi ce w as unr eas onabl e. ” Id . T IG cl ai m s the uncont es t ed evi dence demonstr at ed i tcons ul t ed tw o at t orney s on i ndepende ntques t i ons of cove r age. T heyfol l ow ed the advi ce of both by a c c e p tin g R o e s le r’ s e x p la n a tio n to h is a n s w e rs to q u e s tio n # 9 a n d B u lle t P o in t 2 . T IG f u rth e r a ss e rts, g iv e n th e fa c ts it k n e w a t th e tim e , itw a s n o t u n re a so n a b le to pr ocee d on Sel l m an’ s opi ni on t hatR oes l er ’ s ans w ert o B ul l etPoi nt6 i ndi cat ed an inten t t o d ec eive w h ich leg all yjusti fied the d ec isi o n to resc ind the p o li cy . T IG m aintains there w as n o ev iden ce itinten ti o n all yo v erloo k ed ev iden ce in R o esler’s favororthatcouns el ’ s advi ce w as unr eas onabl e. R oes l ercont ends T I G fai l ed t o pr oper l yi nves t i gat e bec aus e i tneveras ked h im w hyhe ans w er ed B ul l etPoi nt6 i n the nega t i ve. R oes l ert es t i fi ed he u n d erstoo d the q u esti o n to b e li m it ed to w h ethe r h is pas tpr ofes s i onal s ervi ces ca u sed d ea th o r ne u rolo g ical da m ag e, no t w h ethe r he w as p art of a tea m w h ere s uch a r es ul toccurr ed. A ccor di ng t o R oes l er , beca us e ther e w as no evi dence B u rto n ’s inju rie s w e re c a u se d b yh is a d m in istra tio n o f a n e sth e sia , h is a n sw e r to B ul l etPoi nt6 w as nota mi s r epr es ent at i on norw as hi s i nt erpr et at i on of the q u e s tio n u n re a s o n a b le . R oes l erpoi nt s t o T I G ’ s m odi fi ed appl i cat i on w hi ch w as i n us e af t erhe-28-

compl et ed hi s appl i cat i on, butpr i ort o the r es ci s s i on, as evi dence thatT I G knew ther e coul d be more than one unde r s t andi ng of B ul l etPoi nt6. T he new appl i cat i on as ked w hethert he appl i canthas “att ended a nycas es w her e a medi cal err orw as m ade byy ou oranot herpract i t i oner , w hi ch r es ul t ed i n an i nci dent re p o rt o r i n v e s tig a tio n , th a t yo u h a v e n o t yet re p o rt e d to y o u r i n s u ra n c e c a rr ie r.” (Q u e stio n 1 0 , A p p lica tio n d a ted M a y , 1 0 , 2 0 0 2 , V o l. V I a t 1 7 4 0 a ) (e m p h a sis added) . H e cont ends thi s m odi fi ed l anguage demonstr at es T I G knew B ul l etPoi nt 6 sh o u ld h a v e b e e n m o re sp e c ific if it w a n ted to d isc o v e r fa c ts re g a rd in g c a se s in w hi ch he “ att ended, ” orr es ul t s i nvol vi ng “anotherpr act i t i oner . ” I n es s ence , R oes l ercl ai m s T I G ’ s fai l ur e t o as k hi m a s i m pl e ques t i on cr eat es a ques t i on of fa c t as to w h e th e r T IG in a d e q u a telyin v e stig a ted h is c laim a n d , in tu rn , w h e th e r it u n re a so n a b lyre lied o n S e llm a n ’s a d v ice b e c a u se it d id n o t p ro v id e h e r w ith a ll rel evan tfact s.

c) A dequat e Inves t i gat i on of Int ent T he i nt entunder l y i ng the val i di tyof the cl ai m can be det erm i ned onl yaft er an i ns ur erconduct s “an i nves t i gat i on r eas onabl yappr opr i at e underthe ci r cumst ance s . ” B uzzard , 824 P. 2d at1109. “W hen a ba d fai th cl ai m i s pr emi s ed o n in a d e q u a te in v e stig a tio n , the in su re d m u st m a k e a sh o w in g th a t m a ter ial fa c ts w er e over l ooked orthata more thor ough i nves t i gat i on w oul d have pr oduced r el evanti nform at i on. ” Ti m ber l ake , 71 F. 3d at345. Sever al O kl ahoma cas es have addr es s ed the ade quacyof an i nves t i gat i on i nt o the i ns ur ed’ s know l edge or-29-

m o tiv a tio n in c o m p le tin g a n a p p lic a tio n o r c la im . I n B r uns on v. M i d- Wes t ern Li f e Ins urance Company , the in su re r re f u se d to m a k e m e d ica l p a ym e n ts a lleg in g B ru n so n m a d e fa lse re p re se n tatio n s in h is i ns ur ance appl i cat i on. 547 P. 2d 970, 972, 973 ( O kl a. 1976) . W hi l e fi l l i ng outt he h ea lth insu ran ce ap p li ca ti o n w ith the in su ran ce ag en t, M r. an d M rs. B run so n w ere as ked “w hetherB runs on oranyfami l ym embereverhad orbeen t ol d thatthey had anydi s eas e of ki dney , bl adder , pr os t at e orfemal e or gans , orw er e now pr egnant . ” Idat970. M r s . B runs on and the age ntl aughed a tthe ques t i on r egar di ng M r . B runs on’ s pos s i bl e di s eas e of femal e or gans orpr egnanc yand the ag en t ans w ere d the q u esti o n in the n eg ati v e. L ater, the in su rer d isco v ere d M r. B runs on had bee n tr eat ed forpr os t at i t i s overei ghty ear s pr evi ous l ybuthad not h a d tr o u b le w ith th is c o n d itio n s in c e . A tt r i al , M r . B runs on t es t i fi ed he unde r s t ood thatthe medi cal ques t i ons asked su bsequ ent t o a q uest i on deali ng w i th ail m ents and treatm ents w i thin past fi ve y ear s l i m i t ed l at erques t i ons t o the s ame t i m e per i od. B runs on fur ther t es t i fi ed the age ntdi d notques t i on hi m conce rni ng hi s pr os t at e and he under s t ood th e q u e s t i o n t o d e a l wi th fe ma l e o r g a n s a n d p r e g n a n c i e s . Th e Ok l a h o ma S u p r e me C o u rt a ffirm e d th e d istric t co u rt’s c o n c lu sio n th a t B ru n so n h a d n o t in ten d e d to d e c e iv e th e in s u re r a n d la id th e fa u lt a t th e fe e t o f th e a g e n t. Id . at 9 7 3 . W h ile th is c a se d id n o t ad d re ss b a d fa ith o r re a so n a b le in v e stig a tio n , the c o u rt c lea rly cons i der ed the i ns ur ed’ s expl anat i on of hi s s ubj ect i ve mot i vat i ons w hen-30-

a n sw e rin g th e q u e stio n s to b e o f su b sta n tial w e ig h t. I n H al l v. G l obe Li

f e and Acci dentIns urance Company , M r s . H al l appl i ed fora l i fe i ns ur ance pol i cyforherhus band, nami ng her s el f as benef i ci ary . 968 P. 2d 1263, 1264- 65 ( O kl a. C i v. A pp. 1998) . She chec ked “no” t o the ques t i on w hetherM r . H al l had bee n tr eat ed forci rrhos i s w i thi n the pr ece di ng tw el ve m o n ths b u t t o ld the ag en t th at M r. H all h ad ch ron ic he p ati ti s. U p o n M r. H all ’s death aboutt en mont hs l at er , the dea th cert i fi cat e i dent i fi ed the ca us e of de ath as “hepa t or enal s yndr om e, pr i m arybi l i aryci rrhos i s . ” Id . at12 65 . G l ob e L i fe al so r ece i ved a r eportfr om M er cyH os pi t al , s i gned byM r . H al l ’ s tr eat i ng phy s i ci an, w hi ch had a hand- w r i t t en not e “c i rrhos i s non A orB . ” B as ed on thi s i nform at i on, G l obe deni ed paym entdue t o M r s . H al l ’ s al l eged mi s r epr es ent at i on i n the a p p lic a tio n . M r s . H al l fi l ed a c l ai m forbad fa i th, ar gui ng hers t at ementi n the appl i cat i on “w as a r epr es ent at i on bas ed upon the know l edge of the appl i cant , not a w arr antythatthe i ns ur ed does not , i n fac t , have the s peci fi ed i l l nes s es . ” Id . at 1265. T he courtconcl uded the j urycoul d fi nd G l obe Li fe’ s i nves t i gat i on im p rop erlyfo cu sed o n d eterm ining w h ethe r M r. H all in fac t had cirrho sis m o re than tw el ve mont hs pr i ort o the appl i cat i on and di d noti nves t i gat e the “c r i t i cal fa c t” – M rs . H a ll’ s k n o w le d g e o f M r. H a ll’ s illn e s s . Id . at 12 6 5 -66 . T h e c o u rt c o n c lu d e d th e e v id e n c e c re a te d a ju ry q u e s tio n . Id . at1266. I n C r ew s v. Shel t erG eneral Ins urance Company , the i ns ur erm ade the-31-

d e c isio n to v o id M r. C re w s’ h o m e in su ra n c e p o licyb e c a u se h e a lleg e d ly m is re p re s e n te d h is c ri m in a l h is to ry w h e n h e d e n ie d a p ri o r fe lo n yc o n v ic tio n . 393 F. Supp. 2d at1170 ( W . D . O kl a. 2005) . A ft erC r ew s ’ s hom e w as des tr oy ed by fi r e, he t ol d the adj us t erhe had be en convi ct ed of a fel ony . I n det erm i ni ng w hethert o voi d the pol i cy , t he i ns ur err el i ed “e xcl us i vel yon the i ns ur ance appl i cat i on, M r . C r ew s ’ s ans w ert o [the] cr i m i nal hi s t or yques t i on dur i ng the takin g o f th e re co rde d stat em en t, an d the c o u rtd o cu m en ts i n d icati n g that M r. C r ew s had, i n fac t , been c onvi ct ed of a fel onyi n 1979. ” Id . at1173. N o one a s k e d C re w s to e x p la in th e a p p a re n t in c o n s is te n c yp ri o r t o re s c in d in g h is p o lic y . Id . a t 1 1 7 4 . W hen fi nal l yas ked, C r ew s cont ended hi s ans w eri n the i ns ur ance appl i cat i on w as due t o hi s hones tbel i ef hi s fel onyconvi ct i on r es ul t ed i n a defe rr ed s ent ence , as oppos ed t o a s us pended s ent ence . H e furthert es t i fi ed he nevers aw t he J udgm entand Sent ence thati ndi cat ed he r ece i ved a s us pended se n ten c e , b u t lea rn e d o f h is m ista k e o n lya f

ter th e in su re r' s re sc iss io n o f h is pol i cy . T he di s tr i ctcourtr efus ed t o gr ants um m aryj udgm enti n favorof the i n s u r e rb e c a u s e th e i n s u r e r“ fa i l e d t o i n v e s t i g a t e th e p o s s i b i l i tyth a tM r . Cr e ws m a y h a v e m i s r e p r e s e n t e d h i s c r i m i n a l h i s t o ry w i thoutanyi nt entt o dece i ve. ” Id . at1178. Speci fi cal l y , the di s tr i ctcour ts t at ed: T h e [ in su re r’s ] e m p lo y e e s w h o e x a m in e d w h e th e r (a n d e v e n tu a lly deci ded that ) [the] pol i cys houl d be voi ded . . . t es t i fi ed thatthey m ade no e ffortt o det erm i ne w hetherM r . C r ew s m i s r epr es ent ed-32-

hi m s el f w i th an i nt entt o dece i ve, w hi ch theycoul d have acc om pl i s hed bys i m pl yas ki ng M r . C r ew s aboutthe appa r ent i ncons i s t encybetw een the i ns ur ance appl i cat i on and hi s r ecor ded s t at ement . I ns t ead, t heyfocus ed thei ratt ent i on on the mer e fa ctthat a mi s r epr es ent at i on w as m ade, and then made the as s um pt i on thatthe m isr ep rese n tat ion w as m ad e w il lfu ll yan d inten ti o n all yb ase d o n M r. C r ew s ’ s acknow l edgmentof hi s cr i m i nal hi s t or ydur i ng the r ecor ded s t at ement . Pl ai nt i ffs ar gue that[the i ns ur er ] es s ent i al l yi gnor ed the i nt entt o dece i ve r equi r ementi n contr avent i on of O kl ahoma l aw and to the ird etri m en t. T h eyfu rth er a rgu e tha t had [th e ins u rer] i nves t i gat ed M r . C r ew s ’ s s t at e of mi nd, theyw oul d have be en al er t ed t o the obvi ous fac tthatM r . C r ew s di d notw i l l ful l ym i s r epr es ent hi m s el f. Id . at1178- 79. M os tr ece nt l y , i n Si m s v. G r eatA m er i can Li f e Ins urance Company , the dis tri ctcou rtrevi ew ed the adeq uacyof an i nv est i gati on i nto the insur ed’s cause of d eat h. 46 9 F . 3d at89 2-893 . T here, the insur er w as not r equ i red t o d i rect l yask M rs . S i m s w hyshe did no tbeli eve h er husban d’s death in a si ng l e car cr ash w as a s ui ci de. I ns t ead, t he i ns ur erw as ent i t l ed t o r el yon M r s . Si m s ’ s s w or n ( but r eca nt ed) s t at ementt o the pol i ce r egar di ng herhus band’ s m ent al s t at e thatni ght and the fa cteveryoffi ci al r eportl i s t ed s ui ci de as the ca us e of de ath. “The concl us i ons i n thes e r eport s w er e notm ade a tthe behe s tof G r eatA m er i can - - t he m edi cal exami nerand i nves t i gat i ng offi cerhad no conne ct i on w i th G r eat A m er i can. ” Id . at892. T he i ns ur erw as aw ar e of the fa m i l y ’ s r ej ect i on of s ui ci de, the l ack of

depr es s i on i n M r . Si m s ’ s m edi cal hi s t oryand the fa cthe w as i nt oxi cat ed w hen he l efti n the ca r . A l though the i ns ur ercoul d have f ur ther i nves t i gat ed byas ki ng M r s . Si m s aboutthe obvi ous i ncons i s t encybetw een he rA b r e a c h o f th e d u tyo f

g o o d fa i th a n d fa i rd e a l i n g “ ma yb e s h o wn 15 wi th o u tp r o v i n g c o n d u c to n th e p a r to f a n i n s u r e rt h a twa s i n t e n d e d t o h a r m, i nj ur e ordece i ve i t s i ns ur ed. ” B a d illo , 1 2 1 P .3 d a t 1 0 9 3 n .6 . In c o n tra st, puni t i ve damages ar e ava i l abl e onl yw hen a j ur yfi nds bycl earand convi nci ng evi dence the i ns ur eract ed i n r eckl es s di s r egar d of i t s dutyori nt ent i onal l yand w ith m a lic e . Id . at1105- 06; O kl a. St at . t i t . 23, § 9. 1. T hus , a fi ndi ng of br eac h of the dutyof good fa i th and fa i rdeal i ng does notnece s s ar i l yi m pl ypuni t i ve d a m a g e s a re a p p ro p ri a te . Id . T I G does nots epar at el ys eek a di r ect ed ver di cton the sub m i ssi on of p un i t i ve d am ages t o the j ury . T herefore, w e need no tadd res s -33- s w orn pol i ce s t at ementand herl at ers t at ement s , herr es pons e “w oul d nothave c h a n g e d th e u n d e rly in g fa c ts u p o n w h ich G re a t A m e ric a n w a s e n tit led to re ly : th e m iss in g p e rso n s re p o rt, th e d e a th c e rtific a te, th e m e d ica l ex a m in e r' s re p o rt, and the ac ci dentr eport . ” Id . at 89 3 . A s a re su lt , w e d eterm ined the d istri ct co u rt im p ro p e rl ys u b m itte d th e is s u e o f b a d fa ith to th e ju ry. Id . A ppl y i ng the r eas oni ng of thes e ca s es t o the fa ct s befor e us , w e conc l ude the di s tr i ctcourtdi d noterri n deny i ng T I G a di r ect ed ver di ct . A s i n H a ll , R o e sle r p re se n ted su fficie n t ev id e n c e to c o n c lu d e T IG m a yh a v e fa iled to i nves t i gat e a c r i t i cal fac t . A s i n Cr e ws , R oes l er ’ s under s t andi ng of the ques t i on m ayhave be en cl ar i fi ed had TI G onl yas ked hi m . A l though the i ns ur eri n S i ms w as noti nves t i gat i ng an i ns ur ed’ s i nt entt o dece i ve w her e the mot i vat i on of the i ns ur ed i s t he ul t i m at e ques t i on, atthe veryl eas tT I G w oul d have ha d t o s how s om e i ndepende ntdocument at i on fr om s ever al s our ces ver i fy i ng the fa ct s i tr el i ed u p o n . T h is it ca n n o t d o . T h u s, th e d istric t co u rt c o rre c tlyp re se n ted th e ju ryw ith the ques t i ons r egar di ng t he r eas onabl enes s of TIG ’ s i nves t i gat i on and, i n tur n, w hethera l egi t i m at e di s put e exi s t ed. 15the hei ght ened s t andar d nece s s aryforpuni t i ve damages as appl i ed t o the fa ct s of

thi s cas e. -34- B . J uryI ns truct i ons T IG c la im s tw o ju ry in s tru c tio n s in c o rr e c tly sta te d th e la w o f O k la h o m a . W e re v ie w c h a lle n g e s to ju ry in s tru c tio n s d e n o v o . G ar r i s on v. B akerH ughes O i l f i el d Operat i ons , Inc. , 287 F. 3d 955, 964 ( 10th C i r . 2002) . W e cons i derthe j uryi ns truct i ons “as a w hol e t o det erm i ne w hethertheycoverthe i s s ues pr es ent ed bythe evi dence and ac cur at el ys t at e the [a ppl i cabl e] l aw . ” Uni t ed Stat es v. Sch uler, 458 F. 3d 1148, 1155- 56 ( 10th C i r . 2006) ( quot at i on om i t t ed) . “The appel l at e courtm us tcons i deral l thatthe j ur yhear d and, fr om the s t andpoi ntof the j ury , deci de notw hetherthe cha r ge w as faul t l es s i n everypart i cul arbut w hetherthe j uryw as m i s l ed i n anyw ayand w hetheri thad an unde r s t andi ng of the i s s ues and i t s dut yt o det erm i ne thes e i s s ues . ” Whi t e v. A m . A i r l i nes , Inc. , 915 F .2 d 1 4 1 4 , 1 4 2 0 (1 0 th C ir . 1 9 9 0 ) ( q u o ta tio n o m itte d ). T IG m aintains Instruc ti o n 2 3 im p rop erlyreq u ir ed the ju ryto find if T IG ’s cover age pos i t i on w as w r ong, T I G m us thave a ct ed i n bad fa i th. I tfur ther cont ends I ns truct i on 24, w hi l e s t at i ng the corr ectl aw i n the fi r s ts ent ence , cont ai ns the s ame fl aw as I ns truct i on 23 i n the s econd s ent ence . T I G cont ends thes e fl aw s w er e pr ej udi ci al t o i t s cas e w arr ant i ng a new tr i al . R oes l erm ai nt ai ns a n e w trial is n o t n e c e ss a ryb e c a u se (1 ) T IG d id n o t ra ise th e se o bjec tio n s a t trial, ( 2 ) T I G i n v i t e d t h e e r r o rb ys u b mi t t i n g a p r o p o s e d i n s tru c t i o n wi th th e s a me fl a w,R oes l erhal f- heart edl yar gues t he i ns truct i ons w er e corr ectw hen t aken a s 16 a w hol e, butdoes notpoi ntt o anyi ns truct i on thatcur es t he mi s s t at ementof l aw fo u n d in b o th In stru c tio n 2 3 a n d 2 4 . N o in stru c tio n in fo rm e d th e ju ryit co u ld fi nd T I G had a l egi t i m at e di s put e as t o cover age e ven i f R oes l erdi d nothave a n i nt entt o dece i ve w hen compl et i ng t he appl i cat i on. -35- and ( 3) the err ordi d notpr ej udi ce TI G w hen vi ew ed i n l i ghtof the ent i r e r ecor d. 16 W e d isag ree w ith R o esler. In stru c tio n 2 3 sta ted in re lev a n t p a rt: [I ] f y ou fi nd pl ai nt i ffs . . . di d notm ake a m at er i al m i s r epr es ent at i on in the p o li cyap p li ca ti o n w ith an inten t t o d ec eive , d efen d an t, T IG I ns ur ance C om pany , w as notj us t i fi ed undert he l aw i n r es ci ndi ng the pol i cyi ti s s ued t o pl ai nt i ffs and the r es ci s s i on br eac hed the i m pl i ed dutyof good fa i th and fa i rdeal i ng. ( R . V ol . I at229a. ) I ns truct i on 24 pr ovi ded: A n i ns ur erdoes notbr eac h the dutyof good fa i th t o paya cl ai m by l i t i gat i ng a di s put e w i th i t s i ns ur ed i f ther e i s a l egi t i m at e di s put e as to c o v e ra g e o r th e a m o u n t o f th e c laim a n d th e in su re r’s p o sitio n is r eas onabl e and l egi t i m at e. A n i ns ur erm ayl egi t i m at el yand i n good fai th di s put e a c l ai m bas ed on a mat er i al m i s r epr es ent at i on i n the i ns ur ed’ s appl i cat i on fori ns ur ance s o l ong as t he mi s r epr es ent at i ons w er e made w i th an i nt entt o dece i ve byt he i ns ur ed i n appl y i ng for th e p o l i c y. ( Id . at 2 3 0 a .) O k lah o m a law d o e s n o t re q u ire th e in su re r’s p o sitio n in a d isp u te to b e c o rre c t to a v o id liab ili ty . E v e n if th e ju ryfin d s fo r th e p lain tiff o n th e d isp u te and r ender s a ver di ctforbr eac h of an i ns ur ance contr act , t hi s does notm ean the in s u re r a c te d in b a d fa ith . B ai l ey v . F arm ers Ins . C o. , 137 P. 3d 1260, 1264 ( O kl a. C i v. A pp. 2006) ( “I ns ur er s ar e fr ee t o m ake l egi t i m at e bus i nes s deci s i ons ( and m ista k e s) r e g a rd in g p a ym e n t, as lo n g a s th e ya c t re a so n a b lya n d d e a l fa irlyw ith-36-

th e ir in su re d s.” ); s ee al s o H ays v. Jacks on Nat ’ l . Li f e Ins . C o. , 105 F. 3d 583, 584 ( 10th C i r . 1997) ( B r eac h of contr actcl ai m w r ongl ydi s m i s s ed bec aus e a ge nui ne i s s ue of mat er i al fac texi s t ed w i th r es pectt o i ns ur er ’ s i nt entw hen maki ng rep rese n tat ion . ); O ul ds , 6 F. 3d at1442- 45 ( R ej ect i ng i ns ur er ’ s r es ci s s i on pos i t i on butaff i r m i ng s um m aryj udgm enton bad fa i th cl ai m beca us e “the deni al of a c laim b a se d u p o n a leg iti m a te d isp u te d o e s n o t im p lyb a d fa ith .”); C i ty Nat ’ l B ank & TrustC o. v. Jackso n Nat’ l L i f e Ins. , 804 P. 2d 463, 469 ( O kl a. C i v. A pp. 1990) ( I ns ur er ’ s good fai th bel i ef of m at er i al m i s r epr es ent at i ons of fa ct , i f ac cept ed by the jury , i s suffi ci ent t o av oid l i abil i tyeven i f t he juryreturned a verdi ctagainst In su re r fo r b re a c h o f

c o n tra c t.). H o w e v e r, d ism iss a l o f in su re d ’s b a d fa ith c laim a ffir m e d .) A l tho ug h T IG did not obj ectt o Instruct i on s 23 an d 2 4 at i t s fi rs t o p p o rt u n ity, it d id ra is e s p e c ific o bje c tio n s to b o th in s tru c tio n s to th e tr ia l c o u rt . A s t o I ns truct i on 23, T I G obj ect ed “be caus e eve n i f w e i m pr oper l yr es ci nded the pol i cy , that[does not ] aut om at i cal l ym ean thati tw as i n bad fa i th. . . . [U ] nder O k laho m a law . . . there is a tw o -st ep p roc ess; there ’s a b rea ch an d then there ’s bad fa i th. ” ( R . V ol . V at1508a. ) T I G pr opos ed the i ns truct i on r ead “ i f y ou fi nd pl ai nt i ffs . . . di d notm ake a m at er i al m i s r epr es ent at i on i n the pol i cyappl i cat i on w i th an i nt entt o dece i ve, D efe ndant , T I G I ns ur ance C om pany , w as notj us t i fi ed underthe l aw i n r es ci ndi ng t he pol i cy ” and r emovi ng the r emai nderof the l anguage . T he di s tr i ctcourtoverrul ed the obj ect i on. T I G then pr opos ed theT I G al s o as ked foran i ns truct i on on bad fa i th i nves t i gat i on w hi ch s t at ed: 17 “In order t o recov er for bad faith fo r fai l ure t o invest i gate a cl ai m plai nti ff m ust show that a m ore tho rough i nv est i gati on w ou l d h ave u nco vered ad dit i on al fact s, w h ich w o u ld h a v e re su lted in a fa v o ra b le d e ter m in a tio n fo r th e in su re d .” (R . V o l. V at1509- 10a) ( ci t i ng Tim b e rla ke a n dFu lz ). T h e c o u rt “ o v e rru led ” th e re q u e st. -37- fol l ow i ng l anguage be adde d t o I ns truct i on 24: A n i ns ur erm ayl egi t i m at el yand i n good fai th di s put e a c l ai m bas ed on m at er i al m i s r epr es ent at i ons i n the i ns ur ed’ s appl i cat i on for i nsurance so long as th e r e is e v id e n c e , w h ich if b e liev e d w o u ld s upp orta fi ndi ng t hatthe mi s r epr es ent at i ons w er e made w i th an i n t e n tt o d e c e i v e b y t h e i n s u r e d i n a p p l yi n g fo rt h e p o l i c y. ( Id . at 1 5 0 9 a , ad d iti o n in b o ld .) C o n se q u e n tly , the re is n o q u e stio n T IG c lea rly 17 m a d e th e s p e c ific o bje c tio n s it n o w a rg u e s o n a p p e a l. M or eover , contr aryt o R oes l er ’ s as s er t i on, t he pr opos ed I ns truct i ons 23 and 2 4 , to g e th e r, d o n o t m a k e th e s a m e m is ta k e fo u n d in th e in s tru c tio n s a s g iv e n . H a d th e d istric t co u rt a c c e p ted th e p ro p o se d in stru c tio n s, In stru c tio n 2 3 w o u ld pr ecl ude a f

i ndi ng of bad fai th t r i gger ed s ol el ybya fi ndi ng R oes l erdi d nothave an i nt entt o dece i ve. Pr opos ed I ns truct i on 24 w oul d have e xpl ai ned the c irc u m sta n c e s a llo w in g th e in su re r’s a c tio n s e v e n if th e re w a s n o in ten t to d e c e iv e . W h ile n o t a m o d e l o f c lar ity , the p ro p o se d in stru c tio n s d id n o t in v ite e rr o r. R oes l erfur thercl ai m s the j ur yi ns truct i ons , even i f err oneous , di d not pr ej udi ce TI G . “Faul tyj uryi ns truct i ons r equi r e r ever s al w hen ( 1) w e have a s ubs t ant i al doubtw hetherthe i ns truct i ons , cons i der ed as a w hol e, pr oper l ygui ded th e ju ryin its d e lib e ra tio n s; a n d (2 ) w h e n a d e ficie n t ju ryin stru c tio n is-38-

pr ej udi ci al . ” M cInni s v. F ai r f i el d C om m uni t i es Inc. , 4 5 8 F .3 d 1 1 2 9 , 1 1 4 1 (1 0 th C i r . 2006) ( quot i ng Tow ns end v. Lum berm ens M ut . C as . C o. , 294 F. 3d 1232, 1242 ( 10th C i r . 2002) ) . “Thus, w her e a j ur yi ns truct i on i s err oneous , w e r ever s e i f the j urym i ghthave ba s ed i t s ver di cton the err oneous l ygi ven i ns truct i on. ” C ol em an v. B - G M ai nt . Mgm t . of C ol o. , Inc. , 1 0 8 F . 3 d 1 1 9 9 , 1 2 0 1 (10 th C ir . 1 9 9 7 ). R o esler co n tend s the ce n tr al i ssu e w as th e re aso n ab lene ss o f T IG ’s i n v e s t i g a t i o n , n o tT I G’ s r e a s o n a b l e b e l i e f b a s e d o n th e i n v e s t i g a t i o n i tma d e . He ar gues that , even i f the corr ecti ns truct i on had bee n gi ven, the out come w oul d be the s ame. A ccor di ng t o R oes l er , beca us e the puni t i ve damages aw ar d es t abl i s hes the j uryfound the i nves t i gat i on unr eas onabl e, i tther ebyr ender ed TIG ’ s bel i efs re g a rd in g R o e sle r’s in ten t w ith o u t ju stifica tio n . C o n se q u e n tly , the ju ryw o u ld s t i l l fi nd T I G act ed i n bad fa i th beca us e i tfai l ed t o det erm i ne R oes l er ’ s s ubj ect i ve in te n t v ia a re a s o n a b le in v e s tig a tio n . W e ca nnotagr ee. I ns truct i ons 23 and 24 deni ed TIG the ful l benef i tof the l egi t i m at e di s put e defens e underO kl ahoma l aw . T I G pr es ent ed evi dence fr om w h ich a ju ryc o u ld fin d T IG re a so n a b lyb e liev e d it n e e d n o t f u rth e r in v e stig a te R oes l er ’ s s ubj ect i ve i nt entbeca us e anyr eas onabl e C R N A w oul d have r eport ed the B ur t on i nci denti n r es pons e t o B ul l etPoi nt6. I n addi t i on, i ts ought i ndepende ntl egal advi ce. W e ar e notper s uaded thatthe j ur ynece s s ar i l yfound r eckl es s bad fa i th bas ed s ol el yon T I G ’ s fai l ur e t o i nves t i gat e R oes l er ’ s s ubj ect i ve i nt ent . U ndert he err oneous i ns truct i ons , the j ur yj us tas eas i l ycoul d have foundT IG also claim s the am o u n t of $ 2 m il li o n d o ll ars a s co m p en sato ry 18 d a m a g e s fo r p a in a n d su ffe rin g is e x c e ss iv e . It p o in ts to th e u n c o n tes ted fa c ts thatR oes l ers oughtno m edi cal tr eatm ent , w as outof w or k foronl yt w o w eeks a n d p re s e n te d n o e v id e n c e th e re s c is s io n h a d a ffe c te d h is e a rn in g o r r e p u ta tio n . T IG a rg u e s th e d a m a g e s a re fa r a b o v e a n ya w a rd e d u n d e r c o m p a ra b le c ir c u m s ta n c e s . S e e Wu lf v. C ity o f Witch ita , 883 F. 2d 842, 875 ( 10th C i r . 1989) ( “[A ] r evi ew of aw ar ds gr ant ed i n othercompar abl e ca s es , i ndi cat es t hatt he aw ar d s houl d have be en no gr eat erthan $ 5 0 , 0 0 0 . ”). B ec au se w e re m an d fo r a new tr i al , w e nee d notdeci de thi s i s s ue. H ow ever , w e ca ut i on R oes l ert hatt he ju d g m e n ts h e c ites in h is b rie f to su p p o rt th e a w a rd w e re b a se d o n su b sta n tially m o re e g re g io u s inju rie s. S u c h c a se s a re irre lev a n t to w h e th e r a n a w a rd is exce s s i ve i n t hi s cas e. -39- b a d fa ith b e c a u s e it d e te rm in e d R o e s le r h a d n o t in te n d e d to d e c e iv e T IG . M or eover , puni t i ve damages coul d have be en bas ed on the uns uppor t ed al l egat i ons of l aw y er - s hoppi ng, the i ns i nuat i on R oes l erdi d notknow of the n e u ro lo g ica l d a m a g e p rio r to h is a p p lica tio n , the im p ro p e r a rg u m e n t o f b a d fa ith s t emm i ng fr om fai l i ng t o w ai ve att orney - cl i entpr i vi l ege orpos t - l i t i gat i on conduct . W e conc l ude the err oneous i ns truct i ons w er e pr ej udi ci al ; w e vac at e the v e rd ict a n d re m a n d fo r a n e w trial. 18 I I I . CO NC L US I ON T he di s tr i ctcourtdi d noterri n deny i ng T I G ’ s m ot i on fora di r ect ed ver di ct . H ow ever , the courterr oneous l yi ns truct ed the j uryt hata fi ndi ng of bad fa ith w a s w a rra n ted b a se d so lelyo n a fin d in g th a t R o e sle r d id n o t in ten d to dece i ve the i ns ur erw hen compl et i ng hi s appl i cat i on. T he err ori n i ns truct i on pr ej udi ced TI G and, cons equent l y , w e mustr emand fora new t r i al . W e ther efor e, A F F I R M in p a rt , REVERSE i n partand RE M AND fo r a n ew tr ial in ac co rd-40-

w ith th is O rd e r a n d Ju d g e m e n t. ENT ERE D FOR T HE COURT T err ence L . O ’ B r i en C i r cui tJ udge