Opinion ID: 536003
Heading Depth: 1
Heading Rank: 2

Heading: Mississippi Law Applied to this Case

Text: 15 Reserve Life took three and a half years to pay Eichenseer's claim for medical expenses incurred from her hysterectomy. The company at all times based its denial of the claim on a pre-existing condition exclusion. This was supported by a statement of Eichenseer's treating physician in the hospital admitting records, that the patient's pain ha[d] been present in the lower abdomen in period for the last 2-3 years. The same doctor's discharge summary, however, diagnosed acute pelvic inflammatory disease--a condition that would have had to arise suddenly--as well as pre-existing inflammation, cysts and endometriosis. The company's adjuster did not consult with medical experts before denying the claim. Moreover, the company fumbled and mismanaged its claims handling throughout Eichenseer's attempts to seek a non-judicial adjustment. After she filed suit, the company decided to pay her $6,000 plus claim, although it later produced expert testimony corroborating its evaluation that she underwent surgery for a pre-existing condition. 16 The trial court, having analyzed Mississippi bad faith refusal law in detail, found this case governed by the rule that a company must make a reasonable effort to obtain all available medical information. 682 F.Supp. at 1366. The court recognized that this rule derived from two cases decided after Eichenseer's claim was handled. See Allen, 518 So.2d at 1193; Crenshaw, 483 So.2d at 270, 272. 5 Our panel, on appeal, likewise relied on these two cases to establish the clear requirement in Mississippi law which Reserve, two years before the clear requirement was expressed by the Mississippi Supreme Court, violated. 6 17 Justifying the sum of $500,000 in punitive damages, the trial court tried to enforce Mississippi's standards for their assessment. In addition to citing the goals enunciated by Crenshaw, supra, the court considered the degree of the offense, the presence or absence of malice, the motive behind the actions, the injury intended, and the public sense of justice and propriety. See 881 F.2d at 1366 (citing Mutual Life Ins. v. Estate of Wesson, 517 So.2d 521, 532 (Miss.1987), cert. denied, 486 U.S. 1043, 108 S.Ct. 2035, 100 L.Ed.2d 620 (1988)). The court characterized Reserve's failure to pay Eichenseer's claim promptly as egregious. The court also found that Reserve had once before suffered a Mississippi punitive damage award, which, according to the court, did not get the attention of Reserve Life and had little, if any, deterrent effect. 682 F.Supp. at 1373. To its apparent discredit in the court's eyes, Reserve did not tender interest when it finally paid Eichenseer's claim and expressed regret at trial for its decision to pay. Although declining to find malice, the court decided that Reserve was motivated by an intent to save money by denying a claim. Id. The amount of the award was deliberately set higher than Reserve's earlier ($158,000) punitive damage award, but less than the amounts approved in two other Mississippi cases. See Mutual Life Ins. v. Estate of Wesson, 517 So.2d at 533 (court ordered remittitur of $6.5 million on punitive award of $8 million); Crenshaw, 483 So.2d at 277 ($1.6 million punitive award). The court found Reserve's net worth to be $157 million, but it expressed confidence that this award will get the attention of Reserve Life and other insurance company officials. 682 F.Supp. at 1373.