Opinion ID: 664691
Heading Depth: 2
Heading Rank: 2

Heading: The Parties' Cross-Motions for Summary Judgment

Text: 48 Liberty Mutual moved the district court for summary judgment on Count Three of Donald's Complaint, which alleged that Liberty Mutual had acted in bad faith when it failed to pay Donald $5,000 in medical payment benefits to which he was entitled. Donald cross-moved for summary judgment on Count Two (breach of contract) as well as on Count Three of his Complaint. We address the two counts in order.
49 In reviewing a denial of a motion for summary judgment, we apply the same standard that should have been applied by the district court.... We will reverse the decision to deny such a motion only if we find it plain that there is no genuine issue of material fact for trial. Our review of this question is plenary. Pennbarr Corp. v. Insurance Co. of North America, 976 F.2d 145, 149 (3d Cir.1992) (citation omitted). Thus Donald's motion for summary judgment should be granted only if, viewing the facts and the reasonable inferences therefrom in the light most favorable to Liberty Mutual, it is clear that no reasonable jury could find in Liberty Mutual's favor. Harris, 13 F.3d at 1083-84. 50 The parties do not dispute that when he was injured on the University's property, Donald became eligible under the terms of Coverage C for medical payment benefits: He suffered bodily injury (as defined by the contract of insurance) caused by an accident on premises owned by the University (Coverage C(1)(a)), and he did not fall within the enumerated exclusions (Coverage C(2)). Because he incurred emergency medical expenses as a result of this accident, Liberty Mutual was obligated to pay those expenses up to the applicable limit of insurance (Coverage C(1)(b)), provided that certain conditions were met. The parties do not dispute that Donald's accident took place in the coverage territory and during the policy period, and Liberty Mutual apparently never requested Donald to submit to a physical examination, so that two of the conditions were met (Coverage C(1)(a)). Liberty Mutual's only argument against summary judgment on Count Two (aside from its argument, discussed above, that Donald cannot sue to enforce the medical payment provision) is that Donald's expenses, incurred within one year of the date of the accident, were not reported to us [Liberty] within one year of the date of the accident (Coverage C(1)). R. 70 at 3. 51 Liberty Mutual advanced this argument below but did not refer to it before this Court, thereby waiving it. Cf. Maher v. International Brotherhood of Electrical Workers, 15 F.3d 711 (7th Cir.1994). Liberty Mutual was on notice that Donald's appeal not only included the district court's grant of summary judgment in favor of Liberty Mutual but also included its denial of summary judgment in his favor. R. 112 (Amended Notice of Appeal). Donald's opening brief before this Court addressed his claim to summary judgment on Count Two of his Complaint. Appellant's Opening Brief at 9, 11. Liberty Mutual elected to put all its Count Two eggs in one basket, arguing before this Court that Donald could not sue to enforce the medical payment provision of the University's policy. It did not address whether Donald would be entitled to summary judgment if he were allowed to sue on the contract. We consider, therefore, that Liberty Mutual has waived the argument that Donald did not adequately report his expenses within one year of incurring them. We note, however, that the record is clear that Donald did report his expenses--in exactly the form requested by Liberty Mutual--within the required time period. 4 52 Donald is therefore entitled to summary judgment on Count Two of his Complaint.
53 Donald requests this Court to remand Count Three of his Complaint for further proceedings. He does not argue that he himself is entitled to summary judgment on that Count. Appellant's Opening Brief at 19, 22. We review the grant of summary judgment in favor of Liberty Mutual de novo, viewing the facts and the reasonable inferences therefrom in the light most favorable to Donald. Cf. Harris, 13 F.3d at 1083-84. 54 [T]o recover punitive damages [such as Donald seeks herein in Count Three of his Complaint] in a lawsuit founded upon a breach of contract, the plaintiff must plead and prove the existence of an independent tort of the kind for which Indiana law recognizes that punitive damages may be awarded.... Our intent [is] to prohibit the recovery of punitive damages, which is a tort remedy, where no tort [has] been established. Erie Insurance Co. v. Hickman by Smith, 622 N.E.2d 515, 518 (Ind.1993) (citing Miller Brewing Co. v. Best Beers of Bloomington, Inc., 608 N.E.2d 975, 984 (Ind.1993)). 55 Indiana now recognizes a cause of action for the tortious breach of an insurer's duty to deal with its insured in good faith.... Hickman, 622 N.E.2d at 519. Although Donald is not an insured but is rather a third party beneficiary of one of the provisions in the contract of insurance, the same factors that militated in favor of recognizing a duty of good faith and fair dealing between the insurer and its insured in Hickman persuade us that Indiana would impose the same duty upon an insurer and a third party beneficiary of the insurance policy. Cf. id. at 518. Liberty Mutual did, therefore, owe Donald as a third party beneficiary of the insurance contract the same duty of good faith and fair dealing that it would owe its insured in Indiana. 56 We held above that Liberty Mutual breached its contract by refusing to pay medical payment benefits to Donald. This does not entail, however, that Liberty Mutual committed a tort in so doing. That insurance companies may, in good faith, dispute claims, has long been the rule in Indiana.    [A] jury's determination that a claim was, in retrospect, incorrectly denied is not sufficient to establish a breach of the duty to exercise good faith.... Hickman, 622 N.E.2d at 520. In order to demonstrate that Liberty Mutual committed a tort, Donald must show more than the fact that Liberty Mutual denied him benefits to which he was entitled. 57 While the Indiana Supreme Court has not defined the precise parameters of the tort of bad faith dealing by an insurer, it has observed that: 58 The obligation of good faith and fair dealing with respect to the discharge of the insurer's contractual obligation includes the obligation to refrain from (1) making an unfounded refusal to pay policy proceeds; (2) causing an unfounded delay in making payment; (3) deceiving the insured; and (4) exercising any unfair advantage to pressure an insured into a settlement of his claim. 59 Hickman, 622 N.E.2d at 519. In this case Donald argues, first, that Liberty Mutual's refusal to pay him policy proceeds was unfounded and second, that by requiring him to release the University from all liability before Liberty Mutual would forward the $5,000 medical payment benefits, it exercised an unfair advantage to pressure him into settlement of his claim. This appears to fall within the broad description of the tort provided by the Indiana Supreme Court. Id. Hence if Donald can prove by a preponderance of the evidence either that Liberty Mutual's refusal to pay the medical payment benefits was unfounded, or that it acted improperly by requiring him to release the University from liability before it would pay the medical payment benefits, Donald will have demonstrated that Liberty Mutual committed the tort of bad faith dealings by an insurer. 60 Donald is not yet out of the woods. [I]n most instances, tort damages for the breach of the duty to exercise good faith will likely be coterminous with those recoverable in a breach of contract action, Hickman, 622 N.E.2d at 519, and Donald will receive his contract damages as a result of the entry of summary judgment in his favor on Count Two. What Donald wants on Count Three is punitive damages. In Indiana the mere finding by a preponderance of the evidence that the insurer committed the tort will not, standing alone, justify the imposition of punitive damages. Id. at 520. Punitive damages may be awarded only if there is clear and convincing evidence that the defendant 'acted with malice, fraud, gross negligence, or oppressiveness which was not the result of a mistake of fact or law, honest error or judgment, overzealousness, mere negligence, or other human failing....'  Id. (quoting Bud Wolf Chevrolet, Inc. v. Robertson, 519 N.E.2d 135, 137-138 (Ind.1988)). 61 Donald has raised a genuine issue of material fact as to whether Liberty Mutual's offer to forward him $5,000 in exchange for a release of all liability constituted malice, fraud, gross negligence, or oppressiveness. Offering a payment to which the claimant is clearly entitled as the sole consideration for settling a disputed claim can constitute bad faith in Indiana. Vernon Fire & Casualty Insurance Co. v. Sharp, 264 Ind. 599, 349 N.E.2d 173 (1976). In Vernon Fire & Casualty the Indiana Supreme Court held that when the defendant insurers had refused, and would continue to refuse, to pay the plaintiff even the amount which the insurance companies conclude he was entitled to, until the plaintiff obtained a release of [his business manager's separate] claim, id. 349 N.E.2d at 181 (emphasis in original), such behavior constituted a tort, id. at 184, for which punitive damages would be appropriate. Id. at 185. 62 In support of its claim to summary judgment Liberty Mutual argues (1) that Donald was not, at the time it offered to settle, clearly entitled to the medical payment benefits, and (2) that his liability claim against the University was never disputed--Liberty Mutual's position is that the University's lack of liability was clear. These are reasonable inferences from the evidence, but they are not the only reasonable inferences. On Liberty Mutual's motion for summary judgment we must draw all reasonable inferences in Donald's favor. Liberty Mutual has failed to demonstrate that it is entitled to judgment as a matter of law on the issue of its good faith during the settlement discussions. 63 The grant of summary judgment in Liberty Mutual's favor must be reversed.