Maloney v. Benchmark Ins. Co.

628 S.W.3d 667

James MALONEY and Hadley Maloney, Appellants,

v.BENCHMARK INSURANCE COMPANY, Respondent.

WD 83411

Missouri Court of Appeals, Western District.

OPINION FILED: April 27, 2021

Application for Transfer to Supreme Court Denied June 1, 2021

Application for Transfer to Supreme Court Denied October 5, 2021

Mark T. Kempton and Samuel R. Kempton, Sedalia, MO, for appellants.

Mark B. Schaffer, Overland Park, KS, for respondent.

Before Division Four: Cynthia L. Martin, Chief Judge, Presiding, Lisa White Hardwick, Judge and Anthony Rex Gabbert, Judge

Cynthia L. Martin, Judge

James Maloney ("Maloney") and his wife, Hadley Maloney (collectively "Plaintiffs"), ¹ appeal from a judgment entered in favor of Benchmark Insurance Company ("Benchmark") following a jury trial on Plaintiffs’ claim of bad faith failure to settle within insurance policy limits. Plaintiffs allege that the trial court committed legal error in denying their motion for new trial because Benchmark's counsel engaged in intentional misconduct by repeatedly violating the trial court's pretrial rulings on motions in limine , and because Benchmark's counsel suggested an improper adverse inference about a witness's absence during closing argument. Because the trial court did not abuse its discretion in denying the motion for new trial, we affirm.

Factual and Procedural Background²

On April 4, 2015, Karla Coronado ("Coronado") negligently drove her vehicle and caused an accident with a vehicle driven by Maloney. Maloney was injured. At the time of the wreck, Benchmark insured Coronado and her husband. Benchmark possessed the power to settle any claims against Coronado. Andres Perez ("Perez") was assigned to handle Maloney's bodily injury claim against Coronado, and as Benchmark's agent, was responsible for any investigation necessary to assess liability, coverage, and damages. Perez determined that Coronado was 100 percent at fault for the accident.

On April 8, 2015, Perez spoke with Maloney by phone and was told that Maloney went to the emergency room after the accident suffering from neck and shoulder injuries, and cuts on his hands that required stitches. Maloney reported that he had a CT scan of his neck and additional X-rays. Perez claimed that Maloney said he would send Perez all of his medical records, though Perez did not recall sending Maloney a medical authorization form.

On June 16, 2015, Maloney advised Perez by phone that he would need bilateral rotator cuff surgery and that his emergency room bill alone was $12,000. Based on this information, Perez increased the reserves³ on Maloney's claim from $4,200 to $25,000, Coronado's policy limits. Perez asked Maloney for his medical bills and records. Perez's supervisor advised that Perez needed to verify Maloney's need for surgery.

Perez sent letters to Maloney on September 3, 2015, and on November 17, 2015, following up on his request for medical records and bills. The November 17, 2015 letter provided that if Benchmark did not receive Maloney's medical records and bills within ten days, his claim would be closed. Maloney acknowledged that he received both of these letters from Benchmark, and that he did not respond. On November 29, 2015, Perez closed Maloney's claim due to the lack of response from Maloney.

On January 8, 2016, Maloney sent a demand letter to Perez seeking to settle his claim for $25,000, Coronado's policy limits, and advised that the demand would expire in fifteen days. The letter was prepared by Maloney's attorney, though Maloney signed and sent the letter. The letter stated, "Enclosed is a medical record from the hospital and a medical record from my doctor's office showing that I had two torn rotator cuffs from this collision. I need surgery." The letter included nine pages of medical records consisting of seven pages of an emergency room record and a progress summary note written by a nurse practitioner from an orthopedic surgeon's office. The nurse practitioner's note summarized her physical exam of Maloney, and the emergency room records, which included x-rays and MRIs. The summary stated that Maloney required surgery to repair both rotator cuffs, and that including rehabilitation, the process would require him to take six to nine months off of work in his job as a custodian. The nurse practitioner's note indicated it was "pending" as it had not been signed by the treating orthopedic surgeon.

The documents included with Maloney's demand letter did not include the MRI reports or any of Maloney's medical bills. At the time the demand letter was sent, Maloney's attorney had medical bills in his possession that exceeded $25,000 in amount.

On January 14, 2016, Perez rejected Maloney's demand. Perez confirmed receipt of Maloney's demand letter, but advised that he was still in need of Maloney's medical bills. Perez noted in the claim file, "Requesting policy limits, not represented" and "sent medical records indicating he needs surgery for his two torn rotator cuffs" and "no bills received, and yet he is demanding policy limits." Maloney received this correspondence from Benchmark, but did not send Perez any of his medical bills.

On February 26, 2016, Perez sent another letter requesting all of Maloney's medical bills and any additional medical records, and stated that once Benchmark received the documents, it would evaluate Maloney's bodily injury claim. Maloney received this letter but did not respond. On June 30, 2016, Perez sent Maloney another letter asking for his medical bills related to the accident.⁴

On June 20, 2016, Plaintiffs, represented by the same attorney who assisted Maloney in preparing the January 8, 2016 demand letter, filed suit against Coronado in the Circuit Court of Cass County ("Underlying Lawsuit"). In August 2016, Benchmark hired Michael Kirkham ("Kirkham") to defend Coronado's interests in the Underlying Lawsuit. On December 28, 2017, following a bench trial, a judgment was entered against Coronado in the Underlying Lawsuit. The judgment assessed Maloney's damages at $430,000 and Hadley's damages at $10,000, and awarded post-judgment interest at 6.5 percent. On January 4, 2018, Benchmark issued a payment to Plaintiffs in the amount of $25,000, Coronado's insurance policy limits, in partial satisfaction of Plaintiffs’ judgment against Coronado.

The Present Suit--Pretrial Rulings

On January 29, 2018, Plaintiffs, represented by new counsel, filed an equitable garnishment action against Benchmark and Coronado, pursuant to section 379.200,⁵ seeking recovery from Coronado's insurance policy of unpaid post-judgment interest on the judgment in the Underlying Lawsuit and costs. On November 1, 2018, Coronado entered into an agreement with Plaintiffs which assigned Coronado's claims against Benchmark for bad faith failure to settle within policy limits in exchange for Plaintiffs’ agreement not to seek recovery of the judgment in the Underlying Lawsuit from Coronado. On January 8, 2019, Plaintiffs filed an amended petition asserting an additional claim against Benchmark for bad faith failure to settle within policy limits, based on the assignment of that claim from Coronado.

Six weeks before the scheduled October 22, 2019 trial date, Benchmark informed Plaintiffs that it did not intend to call Coronado as a witness at trial. Plaintiffs advised Benchmark that as a result, Plaintiffs would not take Coronado's deposition, and did not intend to call Coronado as a witness at trial. Kirkham, the attorney retained by Benchmark to represent Coronado in the Underlying Lawsuit, was designated by Benchmark as a non-retained expert. Benchmark deposed Kirkham to preserve his testimony for trial.

The parties filed several pretrial motions, including motions in limine , which were heard and ruled on by the trial court⁶ just prior to trial. Relevant to this appeal, Benchmark urged the exclusion of any evidence suggesting that Coronado suffered emotional distress by virtue of Benchmark's failure to settle Maloney's claim within policy limits because damages for emotional distress are not assignable and could not be recovered by Plaintiffs. The trial court sustained this motion in limine. Benchmark also moved for a bifurcated trial pursuant to section 510.263 with respect to Plaintiffs’ claim for punitive damages. The trial court sustained this motion.

The trial court also sustained several motions in limine filed by the Plaintiffs, and thus excluded from trial: (1) evidence or argument referring to the lack of other bad faith claims against Benchmark; (2) evidence that Plaintiffs and their earlier attorney employed an intentional strategy to "set up" Benchmark in order to generate a bad faith failure to settle claim; and (3) evidence of settlement negotiations that "result[ed] in the assignment and agreement to limit recovery" following the judgment entered in the Underlying Lawsuit.

Plaintiffs’ motions in limine also sought to exclude Kirkham's testimony regarding his "employment, defense and evaluation of the underlying claim after [ ] Benchmark rejected" Maloney's January 8, 2016 written demand for Coronado's policy limits because Benchmark did not hire Kirkham until eight months after Benchmark rejected the demand. The trial court partially sustained this motion by excluding Kirkham's testimony to the extent it addressed his involvement after he was retained to represent Coronado. Kirkham's permitted testimony was thus limited to addressing how he would have handled Maloney's claim had he possessed only the information available to Benchmark in January 2016, and even then, remained subject to laying a proper foundation.

Finally, Plaintiffs’ motions in limine sought to exclude the terms of Coronado's assignment of her bad faith failure to settle claim to Plaintiffs, including reference to the fact that the agreement prohibited recovery of the judgment in the Underlying Lawsuit from Coronado. Plaintiffs argued that Benchmark should not be permitted to argue that Coronado sustained no...