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American Modern Home Insurance Co. v. Thomas

United States District Court, E.D. Missouri, Eastern Division

August 22, 2019

AARON THOMAS, et al., Defendants.



         On January 3, 2014, a fire occurred in Aaron and Aimee Thomas's apartment. The Thomases made a claim on their renter's insurance policy. Their insurer, American Modern Home Insurance Company, concluded very quickly that there was evidence showing that the Thomases had set the fire themselves and had made misrepresentations about the property destroyed in the fire, but American Modern never denied the claim. Instead, some 25 months after the fire and after the Thomases' repeated inquiries, American Modern filed this declaratory judgment suit, initially against the Thomases and the owner of the apartment building, Thiemann Real Estate, LLC. The case has a long and complicated procedural history; eventually it went to trial before a jury on American Modern's claim for declaratory judgment against the Thomases, on the Thomases' counterclaim for coverage under the policy and vexatious refusal to pay, and on Aimee Thomas's separate counterclaim for intentional infliction of emotional distress.

         After a seven-day trial, the jury returned a verdict in the Thomases' favor on policy coverage and vexatious refusal to pay and awarded them a total of $21, 153.11. The jury returned a verdict in American Modern's favor on Aimee Thomas's claim for intentional infliction of emotional distress. Under Fed.R.Civ.P. 50(b), American Modern renews its motion for judgment as a matter of law on the Thomases' claim for vexatious refusal to pay.[1] Alternatively, American Modern seeks a new trial on both its coverage claim and the vexatious refusal claim. I will deny the motion.

         Judgment as a Matter of Law

         I denied American Modern's motion for judgment as a matter of law at the close of the Thomases' case and again at the close of all the evidence. Fed.R.Civ.P. 50(a). In its renewed motion for judgment as a matter of law, American Modern contends that it is entitled to judgment on the Thomases' claim for vexatious refusal to pay because there was no legally sufficient evidentiary basis upon which a jury could find either that American Modern's failure to pay the Thomases' insurance claim was without reasonable cause or excuse, or that American Modern's attitude in failing to pay the claim was vexatious and recalcitrant.

         A motion for judgment as a matter of law should be granted only if the jury's verdict is utterly lacking in evidentiary support. In re Prempro Prods. Liab. Litig., 586 F.3d 547, 571 (8th Cir. 2009). When deciding a Rule 50 motion, I must construe the evidence most favorably to the prevailing party and draw all inferences in its favor, denying the motion “if reasonable persons could differ as to the conclusions to be drawn from the evidence.” Western Am., Inc. v. Aetna Cas. & Sur. Co., 915 F.2d 1181, 1183 (8th Cir. 1990). I may not make credibility determinations or weigh the evidence. In re Prempro, 586 F.3d at 572 (citing Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000)). Under these standards, American Modern's motion must be denied.

         To prevail on their claim of vexatious refusal to pay under Missouri law, the Thomases had to present sufficient evidence that American Modern refused to pay their claim without reasonable cause or excuse. Nooter Corp. v. Allianz Underwriters Ins. Co., 536 S.W.3d 251, 294-95 (Mo.Ct.App. 2017). Evidence of an insurer's vexatious and recalcitrant attitude supports the submission of such a claim as well as a jury's finding that the refusal to pay was without reasonable cause or excuse. Id. at 295; Hensley v. Shelter Mut. Ins. Co., 210 S.W.3d 455, 467 (Mo.Ct.App. 2007). A vexatious and recalcitrant attitude can be shown by evidence of the insurer's delay or refusal to pay the claim, the inadequacy of its investigation of the claim, and the explanation given for its inaction on the claim. See Hensley, 210 S.W.3d at 465-66.

         At the trial the jury heard testimony from American Modern's witnesses, which showed that they very quickly concluded that the fire was of incendiary origin. The jury also heard Aimee Thomas's description about how the fire started after she covered a pot of oil for frying chicken and then, when she sometime later lifted the lid, the pot burst into flames.[2] Additionally, the jury heard more than sufficient evidence that American Modern's attitude throughout its two-year, pre-lawsuit investigation - as well as during litigation - was vexatious and recalcitrant, thus supporting the jury's verdict that American Modern's refusal to pay the Thomases' claim was without reasonable cause or excuse. When construed in favor of the Thomases, this evidence showed that the official fire investigation was flawed; that American Modern was unreasonable in relying on this flawed investigation; and that when American Modern joined in the investigation, the tactics used against the Thomases became abusive.

         American Modern's vexatious conduct was evidenced in numerous ways. For example, it failed to notify the Thomases when their investigator, John Nordyke, inspected the site of the fire. Nordyke and Fire Marshall Dan Bruno conducted an interview of Aimee Thomas where they told her they knew she was lying and that the fire was intentionally set, and made veiled threats that she could be criminally prosecuted and would lose custody of her daughter if she did not confess to - or implicate her husband in - setting the fire. During that interview Bruno lied to Aimee by telling her that tests had shown the presence of an accelerant, and American Modern's investigator did nothing to expose that lie.

         Evidence also showed that American Modern did not provide required forms to the Thomases for them to complete, and then used the Thomases' failure to timely complete these forms as a reason for its delay in investigating the claim. One of American Modern's agents told Aaron Thomas that he should ask the police for a copy of the police report, and then American Modern considered it suspicious that Aaron had asked the police for the report. Several of the Thomases' requests for information or updates, also considered by American Modern as suspicious, went unanswered. Indeed, contrary to industry standards and practices, months passed with no communication to the Thomases regarding their claim and, when any intermittent communication did come, it was by way of form letters, which, as admitted by American Modern representatives, were sent without review of the claim file. Despite the Thomases being told in these letters that the investigation was ongoing, evidence showed that no real investigation was actually occurring for months at a time and, indeed, at times no one at American Modern knew who was actually conducting the investigation or charged with that duty. From October 2014 to February 2016, the only investigative activity going on was American Modern's requests to obtain the Thomases' financial and telephone records. And the Thomases' insurance expert testified that several of these and other document requests to the Thomases were burdensome and abusive, and appeared intended to intimidate the Thomases. Further, evidence also showed that throughout the entirety of its pre-suit investigation, although American Modern's investigator spoke to the Fire Marshall, he never sought to interview any police officers, firefighters, or other witnesses to the fire other than Aimee and Aaron.

         After two years of this drawn-out investigation, American Modern filed a declaratory judgment action against the Thomases in February 2016.[3] Evidence showed that American Modern knew that the litigation itself could possibly take years to resolve and that the Thomases would most likely have to retain counsel. Although American Modern adduced testimony showing that it thought bringing a lawsuit against the Thomases would actually benefit them by speeding up resolution of their claim, the fact that it brought the lawsuit more than two years after the Thomases filed their claim - with knowledge that additional time would be eaten up with litigation - further supports the jury's finding of vexatious conduct.

         I previously denied American Modern's motions for judgment as a matter of law on the issue of vexatious refusal at trial. Nothing presented at trial or by American Modern in its present motion changes my previous conclusion or serves as a basis for disturbing the jury's verdict. The jury's verdict here is certainly not without evidentiary support. Even if I were to construe the evidence in the light most favorable to American Modern (which, of course, is not the standard), I would conclude that reasonable persons could differ as to the conclusions to be drawn from that evidence. The renewed motion for judgment as a matter of law on the jury's finding of vexatious refusal to pay will be denied.

         Motion for New Trial

         As alternative relief, American Modern seeks a new trial under Fed.R.Civ.P. 59(a)(1)(A), arguing that I made several evidentiary errors, errors relating to the admission and exclusion of expert testimony, and errors in the instructions given to the jury. American Modern also argues that the jury's verdicts against it were against the great weight of the evidence.

         Under Rule 59(a)(1)(A), “[a] new trial is appropriate when the first trial, through a verdict against the weight of the evidence, an excessive damage award, or legal errors at trial, resulted in a miscarriage of justice.” Gray v. Bicknell, 86 F.3d 1472, 1480 (8th Cir. 1996). A miscarriage of justice does not result whenever there are inaccuracies or errors at trial; instead, the party seeking a new trial must demonstrate that there was prejudicial error. Buchholz v. Rockwell Int l Corp., 120 F.3d 146, 148 (8th Cir. 1997). A new trial based on errors in evidentiary rulings or in jury instructions will only be granted where the error likely affected the jury's verdict. Diesel Mach., Inc. v. B.R. Lee Indus., Inc., 418 F.3d 820, 823 (8th Cir. 2005) (evidentiary rulings); Sherman v. Winco Fireworks, Inc., 532 F.3d 709, 720 (8th Cir. 2008) (jury instructions).

         A. Weight of the Evidence

         “[T]he prevention of injustice is the overriding principle in deciding whether to grant a new trial on the ground that the verdict was against the weight of the evidence.” Leichihman v. Pickwick Int'l,814 F.2d 1263, 1267 (8th Cir. 1987). “A motion for new trial is addressed to the judicial discretion of the district court and will not be reversed except for a clear abuse of that discretion.” Id. at 1267-68. “The court should reject a jury's verdict only where, after a review of all the evidence giving full respect to the jury's verdict, the court is left with a definite and firm conviction that the jury has erred.” Ryan v. McDonough Power Equip., Inc.,734 F.2d 385, 387 (8th Cir. 1984). Where ...

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