Opinion ID: 164951
Heading Depth: 3
Heading Rank: 2

Heading: Regular and Personal Care of a Physician

Text: -12- UNUM also argues, in the alternative, that Rev. Sipp was not “under the regular and personal care of a Physician,” as required by the terms of his disability insurance policy. See App. vol. I, at 98. UNUM contends that Rev. Sipp did not receive mental health treatment from a qualified provider between May 2000 and February 2001, and that after that time he saw a psychiatrist on only one occasion in February 2001, and then waited another eleven months before seeking psychological counseling. The district court rejected UNUM’s suggestion that Rev. Sipp only went to see a psychiatrist when he thought he was in danger of losing his benefits. App. vol. II, at 440 (noting that “[t]here is some indication in the record that Sipp was initially reluctant to seek the help of a psychiatrist and resisted taking psychotropic medications, that his reluctance and resistance were symptoms of his depression and his personal techniques for dealing with it, and that he became aware, eventually, that he needed help with his problems and sought out diagnosis . . . and counseling”). Despite the fact that his visits to psychiatrists were infrequent at best, Rev. Sipp did seek other types of help. He met with a social worker, discussed his problems with a family counselor, and made Dr. Cardasis, his primary care physician in New Mexico, aware of his mental health issues. Significantly, Dr. Cardasis prescribed medication to treat his condition. The insurance policy defines a “physician” as “any licensed practitioner of the healing arts practicing -13- within the scope of his or her license.” App. vol. II, at 258. This definition would include certain licensed social workers, counselors, and psychologists, who are trained in dealing with depression and other mental disorders. We therefore agree with the district court’s finding that Rev. Sipp satisfied the “regular and personal care” component of the definition of total disability. B. Rev. Sipp’s Alternative Breach of Contract Theory In addition to arguing that UNUM committed breach of contract by ceasing disability benefits, Rev. Sipp also argues that UNUM committed breach of contract by refusing to allow him access to various documents. He asserts that UNUM had a contractual duty to provide him with the reports that formed the basis for their denial of benefits. The district court found it unnecessary to consider this alternative breach of contract claim, holding that “having found as a matter of law that Sipp is in fact disabled and that Plaintiffs breached their contract by finding otherwise, [it] need not consider these alternative arguments for breach of contract.” App. vol. II, at 442. On remand, Rev. Sipp may, of course, continue to pursue this theory of liability as an alternative to his other breach of contract theory. C. Rev. Sipp’s Statutory Claim for Unfair Insurance Practices Rev. Sipp argues that the district court should have considered his claim under the New Mexico Unfair Insurance Practice Act (UIPA), N.M. S TAT . A NN . § -14- 59A-16-1 to -30, and/or the New Mexico Unfair Practices Act (UPA), N.M. S TAT . A NN . § 57-12-1 to -22, which would have allowed him the opportunity to recover “extra-contractual damages: punitive damages, statutory treble damages or actual damages otherwise available.” Aplt’s Br. at 20. The inherent authority of a district court to manage its own docket includes the discretion to determine which claims to consider. We review decisions relating to the court’s management of its docket for abuse of discretion. Hartsel Springs Ranch of Colo., Inc. v. Bluegreen Corp., 296 F.3d 982, 985 (10th Cir. 2002). Rev. Sipp argues that he pled a claim for unfair insurance practices in his original complaint, though he admits that the complaint “was far from a model of clarity,” Aplt’s Br. at 23, and that even if the claim was not adequately pled in the complaint, it was pled in the Joint Initial Pre-Trial Report, thus giving UNUM adequate notice. First, he notes that the complaint “contained a Fourth Claim for Relief, captioned: ‘Unfair Insurance Practices,’” and that the amount of damages claimed in the original complaint would have exceeded those allowable under a breach of contract theory, such that “UNUM was aware of statutory and extracontractual claims.” Aplt’s Br. at 21 (citing App. vol. I, at 12-13). In response, UNUM argues that the complaint did not provide sufficient notice of Rev. Sipp’s claim, as it contained only vague allegations of “unfair insurance practices” with no citations to the UIPA or the UPA. UNUM further -15- asserts that Rev. Sipp’s attempt to file an amended complaint suggests that he was aware that the claim was inadequately pleaded in the original complaint. Aples’ Br. at 17 (arguing that “if Sipp felt his claims had been pled under these statutes there would have been no need to file an untimely Motion for Leave to add such causes of action”). Rule 8 of the Federal Rules of Civil Procedure sets forth the requirements for notice pleading, which include (1) a short and plain statement of the grounds upon which the court's jurisdiction depends, unless the court already has jurisdiction and the claim needs no new grounds of jurisdiction to support it, (2) a short and plain statement of the claim showing that the pleader is entitled to relief, and (3) a demand for judgment for the relief the pleader seeks. F ED . R. C IV . P. 8(a). As the Seventh Circuit has observed, “notice pleading requires the plaintiff to allege just enough to put the defendant on notice of facts providing a right to recovery and not to cite to the appropriate statute creating that right.” Brokaw v. Mercer County, 235 F.3d 1000, 1023 n.19 (7th Cir. 2000). Under the heading “Fourth Claim for Relief: Unfair Insurance Practices,” Rev. Sipp’s complaint described the specific conduct that he believed entitled him to relief, including UNUM’s reliance on a telephone conversation with Rev. Sipp’s physician as a basis for denying benefits; UNUM’s implication “that a psychiatric illness is required for coverage, and that [Rev. Sipp] is experiencing a ‘stressful life event’ which is not covered;” and UNUM’s failure “to provide any substantial -16- medical reasons in the letter of termination.” App. vol. I, at 13. The complaint further stated that the above acts “do not comply with insurance trade standards of practice,” and “violate statutory laws and regulations covering insurance practices.” Id. Rev. Sipp’s complaint, while assuredly not a model of clarity, did provide a “short and plain statement of the claim,” F ED . R. C IV . P. 8(a), and alleged facts “sufficient to give the defendant[s] fair notice of what the claim is and the grounds on which it rests.” Lone Star Indus., Inc. v. Horman Family Trust, 960 F.2d 917, 922 (10th Cir. 1992). Furthermore, UNUM’s Notice of Removal suggests that it was aware of Rev. Sipp’s statutory insurance bad faith claim, as the Notice explicitly stated that “[i]n the Complaint, Plaintiff has asserted three separate counts for breach of contract, violations of the New Mexico Unfair Practices Act, a claim for negligent misrepresentation, and a count asserting malicious conduct.” App. vol. I, at 16 (emphasis added). We also note that the Initial Pretrial Report, jointly signed by the parties, included the contention that UNUM’s actions constituted “unfair insurance practice prohibited by 59-16-20, NMSA.” App. vol. I, at 34. Thus, we hold that Rev. Sipp’s allegation satisfied Rule 8(a)(2). Because the parties have cited the acts somewhat interchangeably, we leave it up to the district court to determine whether to reinstate the UPA claim, the UIPA claim, or both statutory actions. -17- D. Rev. Sipp’s Motion for Leave to Amend Rev. Sipp argues that the district court should have allowed him to amend his complaint to add two new causes of action: a claim for bad faith in the claims handling process and a claim for the repudiation of the contract. He also sought leave to amend his complaint “to add a claim under the New Mexico Unfiar [sic] Practitc [sic] Act as well as the Unfair Insrucance [sic] Claims Practice Act,” App. vol. I, at 46, but as we already determined in Section II.C that Rev. Sipp adequately pled (and, fortunately, adequately spell-checked) a statutory unfair practices claim in his original complaint, we need not address it here. Rev. Sipp filed his original complaint in state court on November 20, 2001. The parties agreed that he would be allowed until April 11, 2002 to amend his complaint. He did not amend his complaint within that time frame, but then sought leave to amend his complaint on June 6, 2002. The district court denied Rev. Sipp’s Motion for Leave to File a First Amended Complaint upon finding that “the motion is untimely, that the information necessary to plead the new causes of action was known to Plaintiff at the time the original complaint was filed, that Plaintiff offered no explanation for its delay in seeking this amendment, and that allowing this amendment would be prejudicial to Defendants.” App. vol. I, at 73 (Order Denying Plaintiff’s Motion for Leave to First Amended Complaint, filed July 11, 2002). “We review the district court’s denial of a motion to amend a -18- complaint for abuse of discretion.” Hayes v. Whitman, 264 F.3d 1017, 1026 (10th Cir. 2001); see also F ED . R. C IV . P. 15(a) (“[L]eave [to amend] shall be given freely when justice so requires.”). Several factors are typically considered by the courts in determining whether to allow amendment of a complaint. These include whether the amendment will result in undue prejudice, whether the request was unduly and inexplicably delayed, was offered in good faith, or that the party had sufficient opportunity to state a claim and failed. Las Vegas Ice & Cold Storage Co. v. Far West Bank, 893 F.2d 1182, 1185 (10th Cir. 1990); see also Castleglen, Inc. v. Resolution Trust Corp., 984 F.2d 1571, 1585 (10th Cir. 1993) (citing “a showing of undue delay . . . , or undue prejudice to the opposing party, or futility of amendment, etc.” as reasons to deny leave to amend a complaint). “‘[W]e have often found untimeliness alone a sufficient reason to deny leave to amend.’” Hayes, 264 F.3d at 1029 (quoting Viernow v. Euripides Dev. Corp., 157 F.3d 785, 799 (10th Cir.1998)); see also Las Vegas Ice & Cold Storage, 893 F.2d at 1185 (“Untimeliness alone may be a sufficient basis for denial of leave to amend. Contrary to plaintiff’s assertion, prejudice to the opposing party need not also be shown.”). Denial of leave to amend is particularly appropriate in cases in which the cause(s) of action were available to the plaintiff at the time that the original complaint was filed. Id. (“Where the party seeking amendment knows or should have known of the facts upon which the proposed amendment is based but -19- fails to include them in the original complaint, the motion to amend is subject to denial.”) Rev. Sipp argues that most of the cases in which leave to amend has been denied have involved substantially longer periods of delay, sometimes up to several years. His motion for leave to amend, in contrast, was filed less than a year after the original complaint and only two months after the expiration of the parties’ agreed upon deadline for amending the complaint. While this is a shorter delay than in many of the cases in which leave to amend has been denied, the district court emphasized that the new causes of action were known to Rev. Sipp at the time the original complaint was filed and that Rev. Sipp gave “no justifiable reason for the delay.” App. vol. I, at 74. The court also concluded that UNUM would be prejudiced by the amendment, as “[t]he discovery deadline expire[d] . . . a mere 8 days away” and “[a]llowing the extension would inevitably require reopening discovery and essentially starting this case anew, and would significantly delay the final deposition.” Id. While Rev. Sipp contends that he learned new information through depositions that made UNUM’s degree of culpability more apparent and made him feel that the new claims were stronger than he previously realized, he admits that the claims could have been pled originally or that the amendments could have been requested earlier. Ultimately, it appears that the facts needed to support these -20- claims were known to Rev. Sipp at the time that the original complaint was filed. Taking into account the untimeliness of the motion, the potential prejudice to UNUM, and Rev. Sipp’s concession that the motion could have been made sooner, we hold that the district court did not abuse its discretion when it denied Rev. Sipp’s motion for leave to amend. E. Punitive Damages Rev. Sipp sought punitive damages based on UNUM’s failure to investigate his claim, refusal to provide him with the documents on which they based the denial of benefits, and insinuation that he was forced out of his position as a result of a personal problem with a parishioner. The district court granted UNUM’s cross-motion for summary judgment on punitive damages, concluding “[t]here is simply no evidence that Defendants acted maliciously or recklessly in their claims handling process.” App. vol. II, at 447. Rev. Sipp argues on appeal that the court erred in granting summary judgment on the issue of punitive damages and that punitive damages should have been submitted to a jury. We review de novo a district court’s determination concerning whether sufficient evidence existed to support punitive damages. Youren v. Tintic Sch. Dist., 343 F.3d 1296, 1307 (10th Cir. 2003). The parties disagree regarding the standard for punitive damages in New Mexico insurance cases. According to Rev. Sipp, “Under New Mexico law, -21- punitive damages may be awarded for conduct that is malicious, willful, reckless, wanton, fraudulent, or in bad faith. If sufficient evidence exists to prove any one of the enumerated mental states, the trial court is required to instruct the jury on punitive damages.” Aplt’s Br. at 11 (internal quotation marks and citations omitted). UNUM disagrees, arguing that “a showing of malice or other increased mental culpable state” is required in order for a plaintiff to recover punitive damages for breach of contract. Aples’ Br. at 11. The New Mexico Supreme Court recently clarified the standard for awarding punitive damages in breach of insurance contract cases. See Sloan v. State Farm Mut. Auto. Ins. Co., 85 P.3d 230, 232 (N.M. 2004). Though Sloan establishes a less stringent standard for punitive damages in insurance bad faith cases, the court explicitly distinguishes breach of contract cases and reaffirms the standard set forth in Paiz v. State Farm Fire & Casualty Co., 880 P.2d 300 (N.M. 1994). In Paiz, the court reversed a punitive damage award in a breach of contract case, “disavow[ing] the proposition that in a contract case, including one involving an insurance contract, punitive damages may be predicated solely on gross negligence,” and holding that “[i]n addition to, or in lieu of, such negligence there must be evidence of an ‘evil motive’ or a ‘culpable mental state.’” Id. at 308. As Sloan reiterates that punitive damages can only be awarded in a breach of contract case when there is an “evil motive” or “culpable mental state,” we must -22- now turn to whether such evidence existed in this case. According to Rev. Sipp, evidence of the requisite mental state included: UNUM’s implication that he was forced out of his job as a Senior Pastor after becoming involved in some sort of scandal with “a certain female parishioner,” App. vol. I, at 188; UNUM’s refusal to disclose or produce the psychological reports that formed the basis for the denial of benefits; and UNUM’s failure to adequately investigate Rev. Sipp’s disability claim. While UNUM’s conduct is far from admirable, we agree with the district court’s determination that “the evidence establishes that [UNUM’s] representatives were simply doing their job, without any malicious intent. Whether or not they did their jobs as thoroughly and competently as they could have, [Rev. Sipp] has not shown that their actions rose to the level of malice or reckless conduct so as to justify punitive damages.” App. vol. II, at 448 (internal citation and quotation marks omitted). We note, however, that Rev. Sipp may be entitled to punitive damages under the UPA, should he succeed on that claim. N.M. S TAT . A NN . § 57-12-10 (“Where the trier of fact finds that the party charged with an unfair or deceptive trade practice or an unconscionable trade practice has willfully engaged in the trade practice, the court may award up to three times actual damages or three hundred dollars ($300), whichever is greater, to the party complaining of the practice.”). F. Attorney Fees -23- The district court awarded Rev. Sipp $51,868.80 in attorney fees pursuant to N.M. S TAT . A NN . § 39-2-1, which provides that [i]n any action where an insured prevails against an insurer who has not paid a claim on any type of first party coverage, the insured person may be awarded reasonable attorney’s fees and costs of the action upon a finding by the court that the insurer acted unreasonably in failing to pay the claim. In their cross-appeal, UNUM argues that Rev. Sipp should not have been granted attorney fees because 1) his request for attorney fees was untimely, and 2) an award of attorney’s fees under § 39-2-1 must be predicated on a finding of “unreasonableness” on the part of the insurance company. “We review the award of attorney’s fees for abuse of discretion.” Smith v. Diffee Ford-Lincoln-Mercury, Inc., 298 F.3d 955, 968 (10th Cir. 2002). 1. Timeliness UNUM contends that Rev. Sipp “never pled or requested fees under this statute [§ 39-2-1] until after the case was disposed of on summary judgment, which is certainly not a timely request.” Aples’ Br. at 27. The district court explicitly rejected “Defendants’ argument that the Court should deny attorney fees because a request was not specifically pled under the statute, and is therefore, untimely.” App. vol. II, at 460. Moreover, as Rev. Sipp points out, the New Mexico Court of Appeals has previously rejected a defendant’s challenge to an award of attorney’s fees based on the plaintiff’s failure to cite § 39-2-1 until after -24- the fee petition was before the court. See O’Neel v. USAA Ins. Co., 41 P.3d 356, 365 (N.M. Ct. App. 2002) (awarding fees under § 39-2-1 where “the record reveals that [the plaintiff] did request an alternative award of attorney fees under Section 39-2-1 orally and in writing before the court made its final ruling on attorney fees”). UNUM does not provide any case law in support of its position that Rev. Sipp’s motion for attorney fees was untimely. In the absence of any supporting authority to the contrary, we hold that the district court did not abuse its discretion in finding that Rev. Sipp’s request for attorney’s fees was timely filed. 2. Unreasonableness UNUM’s next argument is that an award of attorney’s fees under § 39-2-1 must be predicated on a finding of unreasonableness. Section 39-2-1 states: In any action where an insured prevails against an insurer who has not paid a claim on any type of first party coverage, the insured person may be awarded reasonable attorney’s fees and costs of the action upon a finding by the court that the insurer acted unreasonably in failing to pay the claim. N.M. S TAT . A NN . § 39-2-1 (emphasis added). According to UNUM, the court found that UNUM was “wrong” without ever making any specific finding regarding whether it was “unreasonable.” Aples’ Br. at 27. On remand, the district court should evaluate making more specific findings as to the reasonableness or unreasonableness of UNUM’s actions and to consider the availability, if any, of attorney fees under the UIPA, N.M. S TAT . A NN . § 59A- -25- 16-30, and/or the UPA, N.M. S TAT . A NN . § 57-12-10(c).