Opinion ID: 778184
Heading Depth: 2
Heading Rank: 1

Heading: Healthcare's Post-Trial Motion for Judgment as a Matter of Law

Text: 32 We review de novo a district court's grant of judgment as a matter of law, Harris v. Niagara Mohawk Power Corp., 252 F.3d 592, 597 (2d Cir.2001), applying the same standard that the district court was required to apply, LeBlanc-Sternberg v. Fletcher, 67 F.3d 412, 429 (2d Cir.1995). Judgment as a matter of law is appropriate only where a party has been fully heard on an issue and there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue. Fed.R.Civ.P. 50(a)(1). The court must draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000); see also Chylinski v. Wal-Mart Stores, Inc., 150 F.3d 214, 217 (2d Cir.1998); Samuels v. Air Transp. Local 504, 992 F.2d 12, 14 (2d Cir.1993); Song v. Ives Labs., Inc., 957 F.2d 1041, 1046 (2d Cir.1992). A court may not set aside a verdict unless `the evidence is such that, without weighing the credibility of the witnesses or otherwise considering the weight of the evidence, there can be but one conclusion as to the verdict that reasonable [persons] could have reached.' This Is Me, Inc. v. Taylor, 157 F.3d 139, 142 (2d Cir.1998) (quoting Cruz v. Local Union No. 3, Int'l Bhd. of Elec. Workers, 34 F.3d 1148, 1154-55 (2d Cir.1994)). 14 33 In this diversity jurisdiction case, we look to the law of New York State. See Albert v. Loksen, 239 F.3d 256, 264 (2d Cir.2001); Celle v. Filipino Reporter Enters. Inc., 209 F.3d 163, 175 (2d Cir.2000); Merrill Lynch Interfunding, Inc. v. Argenti, 155 F.3d 113, 121 n. 5 (2d Cir.1998). The Law of Bad Faith 34 The law pertaining to bad faith claims in New York is well-settled and is premised upon time-honored principles of agency, i.e., because insurers typically exercise complete control over the settlement and defense of claims against their insureds,... [they] may fairly be required to act in the insured's best interests. Pavia, 82 N.Y.2d at 452-53, 605 N.Y.S.2d 208, 626 N.E.2d 24. Insurers owe a duty to their insureds under New York law to act in `good faith' when deciding whether to settle ... a claim, and ... may be held liable for breach of that duty. Pinto, 221 F.3d at 398. An insurer's duty to act in good faith is owed also to excess insurance carriers. See Pavia, 82 N.Y.2d at 452, 605 N.Y.S.2d 208, 626 N.E.2d 24; St. Paul Fire & Marine Ins. Co. v. United States Fid. & Guar. Co., 43 N.Y.2d 977, 978-79, 404 N.Y.S.2d 552, 375 N.E.2d 733 (1978); see also Fed. Ins. Co., 158 F.Supp.2d at 294. The duty of good faith reflects the inherent conflict between the primary insurer's desire to settle the claim for as little as possible and the excess insurer's desire to avoid a judgment exceeding the primary policy limit. See Smith v. Gen. Accident Ins. Co., 91 N.Y.2d 648, 653, 674 N.Y.S.2d 267, 697 N.E.2d 168 (1998). A primary insurer discharges its duty of good faith by giving as much consideration to the excess carrier's interests as it does to its own. See Pinto, 221 F.3d at 398; Pavia, 82 N.Y.2d at 453, 605 N.Y.S.2d 208, 626 N.E.2d 24. 35 Bad faith may only be found where the insurer acts in gross disregard of the excess carrier's interests, not where the insurer is merely negligent. See Pinto, 221 F.3d at 399; Pavia, 82 N.Y.2d at 453-54, 605 N.Y.S.2d 208, 626 N.E.2d 24. Gross disregard means a pattern of behavior evincing a conscious or knowing indifference to the probability that an insured would be held personally accountable for a large judgment if a settlement offer within the policy limits were not accepted. Id. at 453-54, 605 N.Y.S.2d 208, 626 N.E.2d 24 (emphasis added). Bad faith does not require a `sinister motive.' Id. at 453, 605 N.Y.S.2d 208, 626 N.E.2d 24. 36 In assessing gross disregard, the jury must first consider and balance a number of medical and non-medical factors, including, among others, the plaintiff's likelihood of success on the liability issue in the underlying action, the potential magnitude of damages and the financial burden each party may be exposed to as a result of a refusal to settle. Id. at 454-55, 605 N.Y.S.2d 208, 626 N.E.2d 24. Other factors indicative of bad faith include the insurer's failure to properly investigate the claim and any potential defenses thereto, the information available to the insurer at the time the demand for settlement is made, and any other evidence which tends to establish or negate the insurer's bad faith in refusing to settle. Id. at 455, 605 N.Y.S.2d 208, 626 N.E.2d 24; see also Pinto, 221 F.3d at 399; Smith, 91 N.Y.2d at 653-54, 674 N.Y.S.2d 267, 697 N.E.2d 168. 37 The jury must also determine whether a causal connection exists between the insurer's bad faith once established and the loss of an actual settlement opportunity. [T]he plaintiff in a bad-faith action must show that the insured lost an actual opportunity to settle the ... claim at a time when all serious doubts about the insured's liability were removed. Pavia, 82 N.Y.2d at 454, 605 N.Y.S.2d 208, 626 N.E.2d 24 (internal quotation marks and citation omitted); see also Pinto, 221 F.3d at 401; Employers Mut. Cas. Co. v. Key Pharms., 75 F.3d 815, 823 (2d Cir.1996); Fed. Ins. Co., 158 F.Supp.2d at 295. 38 The New York Court of Appeals has approved a multifactor approach to bad faith along with PJI 4:67, 15 which is the same instruction used by the district court here in formulating its jury charges. See Smith, 91 N.Y.2d at 653-54, 674 N.Y.S.2d 267, 697 N.E.2d 168; Pavia, 82 N.Y.2d at 454-455, 605 N.Y.S.2d 208, 626 N.E.2d 24. New York State court decisions, as well as decisions of this Court, consistently have employed a multifactor test. See Pinto, 221 F.3d at 399 (No pat formula applies to the wide variety of fact patterns that occur, or readily resolves whether an insurer acted in good faith.... [A] number of factors must be evaluated.) (citation omitted); Vecchione v. Amica Mut. Ins. Co., 274 A.D.2d 576, 578-79, 711 N.Y.S.2d 186 (2d Dep't 2000); Ansonia Assocs. Ltd. P'ship v. Pub. Serv. Mut. Ins. Co., 257 A.D.2d 84, 88, 692 N.Y.S.2d 5 (1st Dep't 1999); Redcross v. Aetna Cas. & Sur. Co., 260 A.D.2d 908, 911, 688 N.Y.S.2d 817 (3d Dep't 1999); see also Fed. Ins. Co., 158 F.Supp.2d at 295 (noting that a multifactor analysis determine[s] if there is a high probability that the excess insurer would be subject to personal liability because of the insurer's actions, and whether the excess verdict reasonably could have been predicted.). 39 We find that the district court correctly presented the law governing New England's bad faith cause of action to the jury by properly explaining gross disregard, by utilizing PJI 4:67 which instructed the jury to analyze New England's claim and Healthcare's actions under a multifactor approach (Tr. at 2176-78), and by appropriately instructing the jurors to assess causation by determining whether, if they found bad faith, Healthcare acted in bad faith at a time or times when it had an actual opportunity to settle the Weinstock action for an amount within the primary policy limit. (Tr. at 2179-83). 40 Clear Liability 41 Because we agree with the legal standards applied by the district court in charging the jury, we necessarily disagree with the clear liability language reintroduced by the district court in deciding Healthcare's post-trial application for judgment as a matter of law. As noted, clear liability was specifically rejected and abandoned by the district court in the charge conference with the following correct observation: Every court which [has] addressed the bad faith analysis since Pavia has cited the probability of success on the issue of liability as one aspect of the multifactor balancing test.... [There is] no case since Pavia in which a court held that a finding of clear liability was given conclusive or totally dispositive weight .... 42 (Tr. at 1998-99). 43 We believe that references by some courts to liability being clear is a (loose) shorthand for a bad faith finding and is used, if at all, in the context of assessing causation following and not during the multifactor bad faith inquiry. 16 See United States Fid. & Guar. Co. v. Copfer, 48 N.Y.2d 871, 873, 424 N.Y.S.2d 356, 400 N.E.2d 298 (1979) (The insured's claim for additional damages resulting from the insurer's alleged `bad faith' must be rejected, however, since there was no showing whatsoever that the insured lost an actual opportunity to settle the negligence claim against him within the coverage limits of his policy by reason of the insurer's purported `bad faith.'); see also Employers Mut. Cas. Co., 75 F.3d at 823 ([A]n insurer is liable under New York law ... only if... the bad faith prejudiced an actual opportunity to settle within the coverage limits of the insurer ....); Pavia, 82 N.Y.2d at 454, 605 N.Y.S.2d 208, 626 N.E.2d 24 (at a time when all serious doubts about the insured's liability were removed, an actual opportunity to settle must have been lost); Vecchione, 274 A.D.2d at 578, 711 N.Y.S.2d 186 (confirming that a bad faith plaintiff must show that the policyholder lost an actual opportunity to settle the claim at a time when all serious doubts as to liability were removed); Ansonia, 257 A.D.2d at 90, 692 N.Y.S.2d 5 (determining that a trier of fact could certainly conclude that the intransigence of the insurer deprived plaintiff of a legitimate opportunity to compromise the action within the limits of the available coverage at a point when there remained no doubt as to liability); Reifenstein v. Allstate Ins. Co., 92 A.D.2d 715, 716, 461 N.Y.S.2d 104 (4th Dep't 1983) (Where it is alleged that an insured lost an actual opportunity to settle the negligence claim against him within the coverage limits of his policy by reason of the insurer's purported `bad faith,' he states a cause of action against the insurer to recover the excess judgment.). 17 Neither Pavia's passing reference to liability being clear nor passing mention of the phrase by other courts supports the imposition of a threshold requirement of clear liability in a bad faith cause of action. 18 Legally Sufficient Evidence of Bad Faith 44 The evidence adduced at trial was legally sufficient to sustain the jury's finding of bad faith. Reasonable jurors could have determined that the Hospital was (at least partially) responsible for delay in David's pediatric care and that, because David was not seen by a pediatrician until approximately 40 minutes after his birth, his respiratory distress continued and caused additional brain damage. Confusion on the part of Dr. Horn may well have arisen from the Hospital's failure to have in place any clear, written rules as to who was responsible for calling a pediatrician. 19 A reasonable jury could also have concluded that the Hospital was at fault for not having a pediatrician available during and immediately after David's cesarean delivery. Lapping testified that the issue that we fought the case over [was] whose responsibility was it to have a pediatrician in the delivery room. (Tr. at 1656). And, a reasonable jury could have concluded that it would have been enormously difficult for the Hospital to prevail on its medical defense(s), i.e., that [the Hospital's] nurses provided the appropriate care until the pediatrician arrived and ... that the infant's injuries were caused in utero.  Appellees' Br. at 17-18. 20 45 A reasonable jury could also have found the Weinstocks were likely to succeed against the Hospital based upon the profoundly disturbing nature of David's injuries 21 and the Hospital's (unenviable) position as the sole remaining defendant at trial following Dr. Horn's settlement. Melito opined that, because Dr. Horn settled before trial, the Hospital's defense was a very, very hard defense to go on with a brain-damaged infant [when] you are the only defendant in the case. It made it a very, very hard case to win. (Tr. at 340). 22 46 A reasonable jury also could have found that the Hospital's potential damages were enormous and that Healthcare was aware that damages could very well exceed the $4 million combined policy limits. Dr. Carfi testified that David's lifetime medical care would cost $10 million, and Dr. Kershner projected $17 million in total economic damages. During the pretrial phase of the malpractice action, Lapping informed Healthcare that he could conceive of [a] $6,000,000 [verdict] being affirmed in [this] case, and Curry made a note in Healthcare's claim file about an $11.4 million verdict in a similar case of a very intelligent child trapped in a completely d[y]sfunctional body. 47 There was legally sufficient evidence that New England (with $3 million in coverage at stake), not Healthcare (with $1 million in coverage at stake), could bear the financial brunt of a big plaintiffs' verdict. New England's very first bad faith letter to Healthcare on June 26, 1992 stated that refusal to settle this case within the $1 million primary policy limit[ ] would unnecessarily expose not only New England's umbrella policy but also Huntington Hospital's uninsured assets above the $3 million limits of the New England policy. The August 6, 1992 letter from New England reminded Healthcare that [s]ettlement discussions obviously cannot go forward unless and until [Healthcare] makes its $1 million primary policy limit[ ] available. The August 13, 1992 letter from New England was similarly direct: New England is willing to engage in settlement negotiations and to offer significant amounts above the $1 million primary policy limit[ ] in an attempt to settle the case. However, New England is being impeded by [Healthcare's] failure to make its $1 million policy limit[ ] available. We therefore once again demand that [Healthcare] do so. 48 There were additional factors presented to the jury which pointed to Healthcare's bad faith, including: (1) Healthcare's refusal to make any settlement offer to the Weinstocks prior to or at any time during the malpractice action, despite a written demand from the Hospital, its insured, and five written demands from New England, its co-insurer; 23 (2) Healthcare's failure to inform the Hospital of an early $500,000 settlement offer; and (3) Healthcare's failure to investigate properly the Weinstock claim. 24 49 The district court's reversal of the jury verdict is all the more surprising because at various points throughout the trial the court itself acknowledged that there was legally sufficient evidence for a reasonable jury to find that Healthcare had acted in bad faith. Denying Healthcare's motion for judgment as a matter of law at the end of New England's case, the district court determined that there is enough evidence... for the jury to determine whether there is clear liability. (Tr. at 1610). Following the jury verdict, the district court found that a reasonable jury could come to this verdict. (Tr. at 2220). Indeed, the district court  couldn't think of a combination of circumstances which could cause a bigger verdict and a more certain verdict  and could not understand how anyone thought the Hospital would prevail. (Tr. at 2218-20) (emphasis added). Legally Sufficient Evidence of Causation 50 The evidence adduced at trial was legally sufficient to sustain the jury's finding of causation, i.e., that Healthcare lost an actual opportunity to settle the Weinstock action within its policy limit between February 1991 and July 30, 1992 and between July 30, 1992 and September 1, 1992. 51 First, a reasonable jury could have found that the Weinstocks would have settled with the Hospital within Healthcare's $1 million policy limit prior to July 30, 1992. Pegalis, the Weinstocks' trial counsel, testified that when the Weinstocks settled with Dr. Horn in February 1991, $500,000 would have settled the case against the Hospital. (Tr. at 777-78). 25 The Weinstocks' settlement demand was not raised above the primary policy limit until July 17, 1992. And, the jury reasonably could have found that, if asked, the Hospital would have consented to settle during this (first) time period. As noted, the head of risk management testified that the Hospital consented to settle 95% of the time that Healthcare suggested it do so. In this instance, however, Healthcare did not offer to settle and did not even inform the Hospital of the Weinstocks' $500,000 settlement demand. 26 52 There was also sufficient evidence from which a reasonable jury could have determined that Healthcare lost an actual opportunity to settle the malpractice action for $1 million between July 30, 1992 and September 1, 1992, when the Hospital's demand to settle the case was in writing. 27 Pegalis testified that, although the Weinstocks raised their settlement demand from $2 million to $4 million during this period, he would have seriously considered a settlement offer of $1 million at the end of the plaintiffs' case, and would have suggested that his clients strongly consider accepting such an offer at the end of the plaintiffs' case. At the close of all the evidence, Pegalis stated that he absolutely would have considered a settlement offer of $1 million and presented it to his clients, even though he was not sure whether he would have recommended that the Weinstocks accept such an offer. 53 The district court acknowledged, on December 12, 2000 when it denied Healthcare's first motion for judgment as a matter of law, that there was legally sufficient evidence that the Hospital would have agreed to settle the Weinstock case prior to July 30, 1992: As far as no consent, there is evidence in this case, in Mr. Head's testimony, much evidence, that he was never consulted, and that he would seriously have considered consenting, if he had been asked to consent. (Tr. at 1610). On December 14, 2000, when the court denied Healthcare's second application for judgment as a matter of law, it said: [The Hospital was] never asked to settle, which is on the plaintiff's side. So, all in all, I think whether Huntington Hospital would have consented had a timely opportunity [been] afforded it, is a question for the jury to decide. (Tr. at 1843-44). In denying the third application for judgment as a matter of law, following the jury verdict for New England on December 20, 2000, the district court stated: I recall that Mr. Head's testimony on that was in certain points almost clear that he would have followed the recommendation of Healthcare, if one had been made. I think the jury could have found very easily that he would have consented. (Tr. at 2217-18). And, even in its written opinion granting Healthcare's renewed motion for judgment as a matter of law, the trial court assumed, at least for the purpose of its opinion, that a reasonable jury could find, as a fact, that prior to and during the Weinstock trial to the conclusion of the plaintiffs' case, Healthcare could have settled the claim against the Hospital for $1 million or less, with the consent of the Hospital. New England, 146 F.Supp.2d at 283. 54 Healthcare argues, unpersuasively in our view, that it could not be found guilty of bad faith at any point after the Weinstocks raised their demand above $1,000,000, Appellees' Br. at 58, and that bad faith is not established if the trier of fact would be forced to speculate whether [the Weinstocks] would have accepted a settlement offer that was not made. Id. at 56-57. As this Court noted in Pinto, plaintiffs' `willingness to settle for the policy limits is one way, but not the only way, to show that an actual opportunity to settle existed.' 221 F.3d at 401 (quoting Hartford Ins. Co. v. Methodist Hosp., 785 F.Supp. 38, 40 (E.D.N.Y.1992)). Of significance here is the fact, among many others, that Healthcare simply never made any settlement offer, thus enabling and requiring the jury to draw inferences regarding lost opportunities to settle from the evidence adduced at the bad faith trial. 28 Healthcare may not use its willful failure to pursue any settlement negotiations as a shield against bad faith liability. See St. Paul Fire & Marine Ins. Co., 43 N.Y.2d at 978-79, 404 N.Y.S.2d 552, 375 N.E.2d 733; see also Young v. Am. Cas. Co., 416 F.2d 906, 910 (2d Cir.1969) (New York law imposes an affirmative duty on an insurer to pursue settlement negotiations). 55 Having determined that the district court's grant of judgment as a matter of law was improper, we reverse and order entry of judgment for New England on the jury's verdict. See Indu Craft, Inc. v. Bank of Baroda, 47 F.3d 490, 498 (2d Cir.1995); Howes v. Great Lakes Press Corp., 679 F.2d 1023, 1029-30 (2d Cir.1982) (We have broad power under Fed. R.Civ.P. 50(b) ... to reverse ... and direct that the jury verdict be reinstated.). 56