Opinion ID: 1206072
Heading Depth: 2
Heading Rank: 2

Heading: Issues and Facts

Text: In the present case, the legal standard articulated in Rawlings and Linthicum was not conveyed to the jury. The trial judge instructed the jury that it could award punitive damages if it found, by a preponderance of the evidence, that defendant engaged in wilful or wanton conduct ... which shows reckless indifference to the results of an act or reckless indifference to the rights and welfare of others. The standard articulated in Rawlings requires more than reckless indifference. Filasky v. Preferred Risk Mutual Insurance Co., 152 Ariz. 591, 599 n. 3, 734 P.2d 76, 84 n. 3 (1987); Linthicum, 150 Ariz. at 331, 723 P.2d at 680. [3] Although the trial court's punitive damages instruction was incorrect, Illinois Mutual did not appeal the instruction; it appealed only the sufficiency of the evidence. Therefore, we must review the facts in the light most favorable to Gurule and affirm the jury's verdict if a reasonable juror could conclude that Illinois Mutual either intended to violate Gurule's rights under the policy or consciously pursued a course of conduct knowing that it created a substantial risk of doing so. With these principles in mind, we turn to the facts. Gurule purchased paycheck replacement individual disability insurance from Illinois Mutual in 1974. The policy provided disability benefits for a maximum of five years. During the first two years following injury, one is totally disabled if completely unable to perform each and every duty pertaining to his occupation. Illinois Mutual interprets this definition to mean that an insured is totally disabled if he is unable to perform the substantial and material duties of his job. On February 18, 1981, Gurule, until then a self-employed carpet installer earning $1,400 per month, filed a total disability claim with Illinois Mutual. Stating that he had injured his back and teeth in a January 10, 1981 automobile accident, Gurule claimed benefits beginning on the Monday following the accident. Gurule sought treatment for his injuries from two doctors: Dr. Ross, his dentist, and Dr. Carlson, a family practitioner. Gurule saw Dr. Ross on January 29. He did not seek earlier treatment because he had been sick with the flu. Gurule was first treated by Dr. Carlson on February 17. Dr. Carlson reported that Gurule had a cervical and dorsal sprain and had been continuously disabled since the day of the accident. Dr. Carlson and Gurule reaffirmed Gurule's disability status in April 1981. On April 8, Gurule further injured his back in a second car accident. Illinois Mutual made its first disability payment on April 29, almost one month late under the terms of the policy. In May 1981, Illinois Mutual hired Equifax, an insurance investigation company, to investigate Gurule's claim and to help schedule an independent medical examination. Equifax reported that one of Gurule's neighbors was very emphatic that Gurule could not install carpet, but felt that Gurule might be able to supervise work at his carpet warehouse. Equifax did not talk with Gurule. Also in May, Illinois Mutual wrote Dr. Carlson, asking for answers to a series of questions about the symptoms causing [Gurule's] disability. Illinois Mutual's letter did not define disability or specifically ask for objective evidence of disability. Dr. Carlson's response stated that Gurule was totally disabled, that his condition had been worsened by the second accident, and that Gurule now had symptoms of ulnar root compromise. Gurule filed a continuance of disability report in May, indicating that his injury was aggravated by the second accident and that he had not returned to work. Illinois Mutual paid additional monthly benefits on May 28. During June 1981, Illinois Mutual scheduled an independent medical examination for July 20, 1981 with Dr. John Soscia, an orthopedic specialist. Illinois Mutual told Dr. Soscia that an examination was warranted because of a lack of clinical evidence affirming a possible total disability status.... Pursuant to corporate policy, Illinois Mutual informed Dr. Soscia that [o]ur policy does not provide benefits unless the insured is unable to perform substantially all the duties of his occupation. Illinois Mutual never informed Dr. Carlson of its definition of total disability, nor did it ask Dr. Carlson for objective clinical evidence of disability. Dr. Soscia was not provided with a list of Gurule's job duties, although Illinois Mutual had provided such lists to other doctors who performed independent medical examinations of other claimants. In July 1981, Illinois Mutual received additional reports verifying total and continuous disability from Dr. Carlson and Gurule. Illinois Mutual also received Dr. Wayne Broky's report of an electromyogram (EMG) requested by Dr. Carlson. Dr. Broky stated that Gurule's EMG was normal. He also noted: Injury was two months ago. Symptoms are certainly characteristic of right C-8 nerve root irritation. A repeat test may be of value for comparison in several weeks if symptoms persist or worsen. On July 14, an Illinois Mutual claims adjuster reviewed the entire Gurule claim for her supervisor. Her memorandum concluded: We have recently set up an examination to be performed on July 20th. When I receive the results of this examination, I will immediately refer it to you to discuss with the doctor. There is not much we can do on this claim until we receive the IME [independent medical examination].... [4] Illinois Mutual received Dr. Soscia's report on July 31, 1981. Dr. Soscia's opinion was that Gurule had a lack of objective physical findings. At this time I feel the patient should be able to return to his normal occupation without any difficulty. He has no permanent impairment. Dr. Soscia testified at trial that although he considers subjective evidence when evaluating his own patients, he looks only for objective physical evidence of disability when he performs examinations for insurance companies. However, there was no evidence that this dual standard was requested or expected by Illinois Mutual. After its medical director reviewed Gurule's file, Illinois Mutual terminated Gurule's disability benefits because Dr. Soscia's examination revealed no objective evidence of disability. Dr. Carlson testified at trial that he had supplied Illinois Mutual with some objective evidence, and that he had other objective evidence, x-rays and muscle spasms, to support his total disability diagnosis. Gurule accepted Dr. Soscia's suggestion and returned to work for one day in November 1981. According to a letter from Dr. Carlson to Illinois Mutual, after one day of work Gurule appeared in his office in extreme distress and pain in both his lumbar spine and in his cervical spine, with symptoms radiating into his right arm.... Dr. Carlson advised Illinois Mutual that he had instructed Gurule not to return to work and that he disagree[d] with both Dr. Soscia's findings and conclusions.... Dr. Carlson also advised Illinois Mutual that he had arranged for an additional independent orthopedic consultation. Gurule's attorneys urged Illinois Mutual to reinstate benefits. Instead, Illinois Mutual arranged for another independent medical examination with Dr. Bertram Feingold. Reporting that Gurule was somewhat uncooperative during his examination and suggesting another EMG, Dr. Feingold concluded: I would anticipate that, if the EMG were normal, the patient should be capable of returning, on a graduating basis, to his former work as a carpet installer, and gradually work back into a full eight-hour day and full lifting activities over the next 45 to 60 days. Also, if the EMG were normal, then I would not anticipate there being any objective evidence of permanent impairment as a result of either of the two accidents in question. At this time, however, the patient is capable of a wide variety of light-duty activities which would allow him intermittent standing and sitting, without prolonged walking beyond five to ten minutes. On December 30, 1981, Gurule's attorneys sent to Illinois Mutual office notes from Dr. William Hunter, an orthopedic specialist who had examined Gurule at Dr. Carlson's request. Dr. Hunter had suggested that Gurule be hospitalized for physical therapy. At this point, William Fitzgerald, Illinois Mutual's general counsel, assumed responsibility for Gurule's claim. Mr. Fitzgerald sent Gurule's attorneys a copy of Dr. Feingold's report and explained, As you can see, Dr. Feingold is of the opinion that Mr. Gurule is probably not totally disabled.... Mr. Fitzgerald had not referred Dr. Feingold's report to Dr. Gorsuch, Illinois Mutual's medical director. Dr. Gorsuch testified by deposition that based on Dr. Feingold's report, he would have concluded that Gurule was incapable of performing his occupation as of December 21. On January 22, 1982, Gurule's attorneys threatened to sue if benefits were not reinstated. Mr. Fitzgerald agreed to reinstate benefits as a show of good faith and because of the variance of medical opinions. At trial, Mr. Fitzgerald denied that he reinstated benefits because of objective evidence of disability. He testified that he agreed to reinstate benefits because of the variance of medical opinions and the delay in obtaining the additional EMG suggested by Dr. Feingold. Illinois Mutual obtained results of the EMG suggested by Dr. Feingold on March 22, 1982. The EMG was normal, showing no evidence of permanent injury. Dr. Gorsuch reviewed the EMG results and Dr. Feingold's earlier report and concluded that Gurule could probably return to work on a graduated basis without exacerbating his condition. Dr. Feingold also reexamined Gurule. He concluded that there was no objective evidence of any permanent impairment and that there was no reason why Gurule could not return to his former work. Dr. Feingold also noted, however, that there was some evidence of degenerative disc disease of the cervical spine, and that heavy work such as carpet installation could aggravate this condition. Dr. Feingold therefore advised Gurule to consider some lighter form of work. Illinois Mutual continued to pay benefits through April 1982. On May 3, 1982, in a letter to Gurule's attorneys, Illinois Mutual again terminated benefits after considering five factors: Dr. Soscia's initial report, Dr. Feingold's two reports, the most recent EMG, and Dr. Carlson's continuing certification of total disability. At trial, Mr. Fitzgerald testified that the decision to terminate benefits was based on a review of all the evidence. In its May 3 letter, Illinois Mutual offered to pay benefits for one additional month, so that Gurule gradually could resume working. This lawsuit was filed on July 14, 1982. In August, Illinois Mutual contracted with Protech for in-depth surveillance of Gurule. Mr. Fitzgerald testified in his deposition that after this surveillance was concluded, Illinois Mutual believed it was appropriate to pay benefits through January 1983 for the first 24 months of Gurule's disability. Disability benefits were not, however, paid for this full period. Mr. Fitzgerald explained at trial that benefits were not paid because the company did not receive any additional continuance of disability reports from Gurule or Dr. Carlson. The record does not indicate whether such reports were requested. After two years of disability, the definition of disability in Gurule's policy changes from the insured being unable to perform his occupation, to the insured being unable to engage in any occupation or employment for wage or profit in which he might reasonably be expected to engage with due regard to his education, training, experience and previous standard of living. Based on information in its claims file and information obtained from Gurule's deposition, Illinois Mutual concluded on January 27, 1983 that Gurule was not disabled under the any occupation definition. Illinois Mutual believed Gurule was capable of supervising carpet installation, selling carpet, estimating floor covering costs for commercial bids, or working as a mailman or a mechanic. Illinois Mutual did not research Gurule's potential for actual employment in any of these positions. In fact, although Gurule tried several jobs, he was unable to replace the income he was making before he was injured.