Hangarter v. Provident Life and Acc. Ins. Co.

373 F.3d 998

Joan HANGARTER, Plaintiff-Appellee, v. PROVIDENT LIFE AND ACCIDENT INSURANCE COMPANY, Defendant, and The Paul Revere Life Insurance Company; UnumProvident Corp., Defendants-Appellants.

No. 02-17423.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted February 10, 2004.

Filed June 25, 2004.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Horace W. Green, San Francisco, CA; Evan M. Tager, Washington, DC (argued); Christopher C. Wang, Washington, DC, for the defendants-appellants.

Ray Bourhis, San Francisco, CA; Alice Wolfson, San Francisco, CA; Daniel U. Smith, Kentfield, CA (argued), for the plaintiff-appellee.

Appeal from the United States District Court for the Northern District of California; James Larson, Magistrate Judge, Presiding. D.C. No. CV-99-05286-JL.

Before: GOODWIN, TASHIMA, and CLIFTON, Circuit Judges.

CLIFTON, Circuit Judge:

Joan Hangarter, a chiropractor who operated her own business, obtained an "own occupation" disability insurance policy in 1989 from Paul Revere Life Insurance Company. She filed a claim for total disability in July 1997 based on shoulder, elbow, and wrist pain. Paul Revere paid Hangarter benefits for an eleven-month period and then terminated her benefits based upon the opinion of its medical examiners and claim investigators that Hangarter was not "totally disabled" and continued to work and earn income, making her ineligible for benefits under the policy. Hangarter brought a diversity action alleging violation of Cal. Bus. & Prof.Code § 17200 (the Unfair Competition Act, or UCA), breach of contract, breach of the covenant of good faith and fair dealing, and intentional misrepresentation against Paul Revere and its parent company, UnumProvident Corp. The jury returned a $7,670,849 verdict in Hangarter's favor, $5 million of which was for punitive damages. Raising a multitude of issues, Defendants appeal the district court's post-verdict denial of judgment as a matter of law (JMOL), the jury's award of damages, and a permanent injunction issued by the district court under the UCA.

We affirm the district court's denial of a JMOL and the jury's award of damages. We reverse the district court's permanent injunction under the UCA.

I. BACKGROUND

Joan Hangarter owned her own chiropractic practice in Berkeley, California. On a typical day, she would treat between 30 and 50 patients. In 1989, Hangarter purchased an individual "own occupation" disability insurance policy from Paul Revere. In 1993, Hangarter began to experience severe recurrent shoulder pain. She sought treatment from a chiropractor in her office, Dr. England, who adjusted her daily. In 1995 and 1996, Hangarter also saw an orthopedist, Dr. Isono. As a result of ongoing, severe pain in her shoulder, arm, and neck, Hangarter in 1997 started to see Dr. Linda Berry, a chiropractor, and to attend physical therapy sessions. Although Hangarter continued this treatment for approximately eight weeks, her pain was not alleviated. She filed a claim for benefits under her disability insurance policy in May 1997 and began receiving payments in October 1997. She was also in an auto accident in October 1997, which aggravated her pain.

Though she continued to be treated by Drs. Berry and Isono, Hangarter's condition did not improve. Between 1996 and 2000 Hangarter had 3 Magnetic Resonance Imaging studies (MRIs), which Dr. Isono interpreted as having abnormal findings. The third MRI in May 2000 showed her condition to be growing worse, despite treatment by Drs. Berry and Isono. Dr. Berry diagnosed Hangarter's symptoms as epicondylitis, cervical intervertebral disk syndrome, and tendinitis. Dr. Isono offered only surgery to correct the problem, which Hangarter rejected based on her past negative experience with post-surgery pain medication. Hangarter eventually discontinued seeing Dr. Isono and was treated solely by Dr. Berry, whose chiropractic manipulations gave her some pain relief.

In 1999, Paul Revere employed an "independent medical examiner" (IME), Dr. Aubrey Swartz, to examine Hangarter and her medical records. In contrast to the findings of Drs. Isono and Berry, Dr. Swartz concluded that Hangarter's condition was "normal" and that she would be able to see two chiropractic patients an hour. Dr. Edward Katz, an orthopedic surgeon, at the request of Hangarter's counsel, reviewed her medical records¹ and examined her in July 2001, two years after Dr. Swartz. Dr. Katz disagreed with Dr. Swartz's conclusions. He found 75% range of motion in her neck, spasm and tenderness in the right trapezius muscle, and reduced grip strength in her arm. Dr. Katz also found evidence of cervical disk disease, a depressed biceps reflex on Hangarter's right side along with numbness and tingling of the middle finger of her right hand, an indicator of nerve root compression affecting the sensory portion of the nerve going down the arm. Dr. Katz reviewed the reports of the MRI scans of Hangarter's cervical spine taken in May 1997, finding mild to minimal central canal stenosis, a narrowing of the spinal canal which causes some compression on the spinal canal or the nerve roots. He concluded that Hangarter suffered from lateral epicondylitis, more commonly called tennis elbow, cervical disk disease, and rotator cuff tendinitis, and that her condition was worsening. Drs. Katz, Berry, and Isono testified that Hangarter could not maintain a normal, continuous chiropractic occupation.

While Hangarter was receiving benefits from her policy, she hired Dr. Parissa Peymani to adjust patients while she assisted with office management. Dr. Peymani testified that after she started working, Hangarter stopped seeing all but five to seven of her patients, which Dr. Berry had encouraged her to do to see if her condition was at all improving. Dr. Peymani testified that during the year-and-a-half she worked for her, Hangarter performed adjustments for only 5 out of over 9,000 patient visits. Hangarter ceased employing Dr. Peymani in May 1999, because she could no longer afford to pay her. She then sold her practice.

On May 21, 1999, Paul Revere terminated Hangarter's "total disability" benefits. The letter claimed that Hangarter was ineligible for benefits under the policy as she was not "totally disabled" and was working and earning income. After Paul Revere terminated Hangarter's benefits, it attached her bank account for the insurance premiums, until the account was drained, at which point the company cancelled her policy. Hangarter subsequently brought a diversity action against Defendants alleging violation of § 17200 of the Unfair Competition Act, breach of contract, breach of the covenant of good faith and fair dealing, and intentional misrepresentation. After eleven days of trial, a jury of six returned a unanimous verdict for Hangarter. The total award was $7,670,849, including $5,000,000 for punitive damages, $1,520,849 for past and future unpaid benefits, $400,000 for emotional distress, and $750,000 for attorneys' fees. The district court also issued a permanent injunction under the UCA. Defendants filed a motion for a JMOL or for a new trial, which the district court denied. See Hangarter v. Paul Revere Life Ins. Co., 236 F.Supp.2d 1069 (N.D.Cal.2002). This appeal followed.

II. DISCUSSION

We review the denial of a motion for a JMOL de novo. See Monroe v. City of Phoenix, 248 F.3d 851, 861 (9th Cir.2001). JMOL is appropriate "when `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.'" Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 149, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000) (quoting Fed.R.Civ.P. 50(a)). When reviewing the record as a whole, "the court must draw all reasonable inferences in favor of the nonmoving party," keeping in mind that "`[c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge.'" Id. at 150, 120 S.Ct. 2097 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).

JMOL should be granted only if the verdict is "against the great weight of the evidence, or it is quite clear that the jury has reached a seriously erroneous result." EEOC v. Pape Lift, Inc., 115 F.3d 676, 680 (9th Cir.1997) (citations and quotation marks omitted); see also Mockler v. Multnomah County, 140 F.3d 808, 815 n. 8 (9th Cir.1998) (noting that reversal is warranted only if the verdict is not supported by "such relevant evidence as reasonable minds might accept as adequate to support a conclusion" (internal quotation marks omitted)). A new trial is proper only if "the verdict is contrary to the clear weight of the evidence, or is based upon evidence which is false, or to prevent, in the sound discretion of the trial court, a miscarriage of justice." Silver Sage Partners, Ltd. v. City of Desert Hot Springs, 251 F.3d 814, 819 (9th Cir.2001) (citations and quotation marks omitted). We review a district court's denial of a motion for a new trial for clear abuse of discretion. Saman v. Robbins, 173 F.3d 1150, 1154 n. 4 (9th Cir.1999).

A. Total Disability

1. Jury Instruction

We review de novo jury instructions that are challenged as a misstatement of law. See Mockler, 140 F.3d at 812. Jury instruction errors are subject to harmless error review. See Shaw v. City of Sacramento, 250 F.3d 1289, 1293 (9th Cir.2001).

Defendants argue that the district court's jury instruction on the meaning of "total disability" was a misstatement of California law. The district court's instruction to the jury stated:

TOTAL DISABILITY

Plaintiff's policy defines "total disability" as follows:

"Total Disability" means that because of Injury or Sickness:

a. you are unable to perform the important duties of your Occupation; and

b....