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November 12, 2002


The opinion of the court was delivered by: James Larson, United States Magistrate Judge



The court also hereby issues its findings of fact and conclusions of law with respect to Plaintiff's cause of action under Cal. Bus.&Prof. Code § 17200, the Unfair Competition Act. The court finds that the same actions which led to the jury verdict in this case constitute violations of § 790.03 of the California Insurance Code, the Unfair Insurance Practices Act. Further, the jury found, and this court agrees, that Defendants acted in bad faith. Consequently, Defendants have also violated § 17200 and the court enjoins Defendants from committing any further violations.


After eleven days of trial, on February 4, 2002, a jury of six men and one woman returned a unanimous verdict for plaintiff Joan Hangarter against Defendants Paul Revere Life Insurance Company and UnumProvident Co. The total awarded was $7.67 million, including $5 million for punitive damages, $1,520,849 for past and future unpaid benefits, $400,000 for emotional distress and $750,000 for attorneys' fees. Defendants filed a motion to overturn this verdict, for judgment as a matter of law ("JMOL") or for new trial.

The jury made the following findings in the Special Verdict:

1. After May 21, 1999, the date her benefits were terminated by Defendant, Plaintiff was unable to perform the substantial and material duties of her own occupation in the usual and customary way with reasonable continuity;
2. Plaintiff is entitled to recover her past benefits, up to the present day, as a result of Defendant's breach of contract;
3. The present value of Plaintiff's past disability benefits is $320,849;
4. Defendant breached the duty of good faith and fair dealing to Plaintiff;
5. Plaintiff is entitled to recover the present value of her future policy benefits as a result of Defendant's breach;
6. The present value of Plaintiff's future disability benefits is $1,200,000;
7. Plaintiff suffered mental and emotional damages as a result of Defendant's unreasonable conduct;
8. The amount of damages that will fairly compensate Plaintiff for her mental and emotional distress is $400,000;
9. Plaintiff is entitled to recover her reasonable attorneys' fees and costs incurred in obtaining the benefits due under her policy;
10. The amount the jury wishes to award in attorneys' fees and costs is $750,000;
11. Defendant acted with oppression, fraud or malice in handling Plaintiff's claim and denying her benefits;
12. The amount the jury wishes to award in punitive damages is $5,000,000.

The Special Verdict was signed by the foreperson and the jury was polled in open court and its members affirmed that their verdict was unanimous.


The jury received the following instructions prior to their deliberations:


1. Duties of Jury to Find Facts and Follow Law
2. Instructions to be Considered as a Whole
3. Jury Not to Take Cue from Judge
4. Juror Forbidden to Make Any Independent Investigation
5. Corporations and Partnership — Fair Treatment
6. What Is Evidence
7. What Is Not Evidence
8. Statements of Counsel — Evidence Stricken Out — Insinuations of Questions
9. Direct and Circumstantial Evidence

10. Direct and Circumstantial Evidence — Inferences

11. Weighing Conflicting Testimony

12. Credibility of Witnesses

13. Deposition Testimony

14. Interrogatories

15. Requests for Admissions

16. Charts and Summaries Not Received In Evidence

17. Charts and Summaries In Evidence

18. Stipulated Testimony

19. Discrepancies In Testimony

20. Witness Willfully False

21. Impeachment — Inconsistent Statements or Conduct — Falsus In Uno Falsus In Omnibus
22. Extrajudicial Admissions — Cautionary Instruction

23. Opinion Evidence (Expert Witnesses)

24. Expert Testimony — Qualifications of Expert

25. Weighing Conflicting Expert Testimony

26. Hypothetical Questions

27. Statements Made By Patient To Physician

28. Failure to Deny or Explain Adverse Evidence

29. Burden of Proof and Preponderance of Evidence

30. Contract — A Definition

31. Insurance Policy Defined

32. Insurance — Policy Provisions

33. Insurance — Ambiguity in Policy

34. Plaintiff's Burden to Prove Coverage

35. Breach — Essential Elements

36. Total Disability

37. Transitional Instruction

38. Covenant of Good Faith — Standard

39. Insurance Company's Obligations — Implied Obligation of Good Faith

40. Insurance Company's Obligations

41. Good Faith/Proper Cause

42. Duty to Investigate

43. Ongoing Nature of the Duty of Good Faith and Fair Dealing

44. Good Faith — Equal Consideration

45. Not Given

46. Good Faith — Conduct Before Denial

47. Good Faith — Genuine Dispute

48. Good Faith — Policy Coverage

49. Liability of Corporations — Scope of Authority Not In Issue
50. Act of Agent is Act of Principal — Scope of Authority Not In Issue

51. Effect of Instructions As To Damages

52. Damages/Proof

53. Pleadings or Argument — Not Evidence of Damages

54. Damages — Reasonable — Not Speculative

55. Legal Causation

56. Economic and Non-Economic Damages — Defined

57. General Damages/Breach of Contract

58. Damages/Breach of the Covenant of Good Faith and Fair Dealing

59. Emotional Distress

60. Emotional Distress — Defined

61. Susceptibility of Plaintiff

62. Damages Arising in the Future — Discount to Present Cash Value

63. Damages — Attorney's Fees

64. Future Disability Benefits

65. Residual Disability

66. Punitive Damages — Burden of Proof

67. Punitive Damages — Conduct

68. Clear and Convincing Evidence

69. Punitive Damages — Standard

70. Amount of Punitive Damages

71. Punitive Damages — Interest

72. Chance or Quotient Verdict Prohibited

73. Duty to Deliberate

74. Communication with Court

75. Return of Verdict


Plaintiff's Amended Complaint, filed August 13, 2001, sought the following relief:

[First Cause of Action for violation of Cal.Bus & Prof. Code § 17200, is discussed hereafter].

The Second Cause of Action for Breach of Contract against Paul Revere, UnumProvident and Doe Defendants. Plaintiff sought damages of $8100 per month in unpaid benefits.

The Third Cause of Action for Breach of the Covenant of Good Faith and Fair Dealing against Paul Revere, UnumProvident and Doe Defendants. Plaintiff sought damages of $8100 per month in unpaid benefits and punitive damages.

The Fourth Cause of Action for Intentional Misrepresentation against Paul Revere, UnumProvident and Doe Defendants. Plaintiff sought damages of $8100 per month in unpaid benefits and punitive damages.


Judgment as a matter of law is only appropriate when the evidence permits only one reasonable conclusion, contrary to the jury's verdict. Gilbrook v. City of Westminster, 177 F.3d 839, 864 (9th Cir. 1999), cert denied, 528 U.S. 1061. If conflicting inferences may be drawn from the facts, then the case must go to the jury. Pierce v. Multnomah County, Or., 76 F.3d 1032, 1037 (9th Cir. 1996). In ruling on a motion for JMOL, the court is not to make credibility determinations or weigh the evidence and should view all inferences in the light most favorable to the non-moving party. Winarto v. Toshiba America Electronics Components, Inc., 274 F.3d 1276, 1283 (9th Cir. 2001). As this court said in denying summary judgment in this case, whether an insurer's denial of a claim is unreasonable is a question of fact, unless only one inference may be drawn from the evidence, citing Carlton v. St. Paul Mercury Ins. Co., 30 Cal.App.4th 1450, 1456 (1994).

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, 818-819 (9th Cir. 2001). A district court may not grant a new trial simply because it would have arrived at a different verdict.

Defendants' Motion

Paul Revere claims that the evidence at trial was insufficient to support Plaintiff's claims.

Plaintiff Joan Hangarter is a trim woman in her forties with two children, a boy of nine and a girl of eleven. (Tr. 381:17-20, 24) When she was thirteen she was diagnosed with scoliosis and as an alternative to surgery, her father took her to a chiropractor, who treated her for two years. That experience inspired her to think about becoming a chiropractor herself. (Tr.382:3-11) Plaintiff testified as to the scientific and diagnostic training she received as part of the degree program at Los Angeles College of Chiropractic, where she obtained her Doctor of Chiropractic degree in 1979. She was licensed in California in 1980, after taking national board exams. (Tr. 382:12-383:25) She then opened her practice in Berkeley, Solano Chiropractic. (Tr. 384:3-7) The practice grew rapidly and she loved her patients, many of whom she treated for years, and who in turn brought their children to her for treatment. (Tr. 384:25-385:3) She testified about the types of adjustments she performed on patients and demonstrated on one of her counsel some typical manipulations of the neck and spine.

These manipulations involved her standing over a patient who would be either seated or lying down. To perform the manipulation or adjustment, she would bend over her patient, then pull the patient's arm, neck, spine or rib cage, and perform other maneuvers such as twisting, or pressing, to align the patient's spine. (Tr.386:24-391:17) She described a myofascial release, a procedure to release muscle spasm, which required her to press and pull the contracted muscle and massage it to release the spasm. (Tr. 393:2-22) She also described deep tissue work, a procedure in which she applied pressure with her hands, rubbing deeply, to release painful areas on the spine, (Tr. 393:24-394:10) To obtain the leverage to exert the proper traction, she usually placed her patients on a low table and leaned over them. None of the manipulations were easy to perform. (Tr.395:1-396:5) On a typical day, prior to her becoming disabled, she would treat between 30 and 50 patients. (396:6-10)

In 1989, after almost ten years in practice and when her daughter was two years old and she was pregnant with her son, Plaintiff purchased an individual disability insurance policy from the Paul Revere Life Insurance Company, a defendant in this case.

The purpose of this policy, as the insurance agent explained it to her, was to protect her should she not be able to work as a chiropractor. (Tr. 396:14-400:23, Ex. 1) The agent explained to her that even if she could still do paperwork or other work, if she could not work as a chiropractor, the policy would cover her. (Tr. 406:4-9) The policy also provided that after she had been disabled for 90 days, future premiums would be waived while she remained disabled. After Paul Revere terminated Plaintiff's benefits in this case, the company attached her bank account for the insurance premiums, until the account was drained, at which point the company cancelled her policy. Plaintiff presently has no disability insurance at all. (Tr.417:18-24; 418:1-419:4)

In 1993 Plaintiff 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 she saw an orthopedist, Dr. Isono and sometimes wore a shoulder brace. (Tr. 419:5-25) She did not file any claims for disability coverage and focused on getting better and continuing to work. (Tr. 420:1-9) In 1997 she went to Dr. Linda Berry,*fn1 a chiropractor, because she was having severe pain in her shoulder, arm and neck. (Tr. 420:15-421:6) She also went for physical therapy. Although she continued this treatment for six to eight weeks, it was not helpful. (Tr. 421:19-424:1) She filed a claim for benefits under her disability insurance policy in May 1997, and started receiving payments. (Tr. 424:230-23)

She was in an auto accident in October 1997, which aggravated her pain. (Tr. 237:25-238:8; 424:2-5; 556:12-557:1, 562:15-20, Ex. 3)

Dr. Berry treated Plaintiff from April 1997 to December 4, 2001, and eventually told her that she would probably not ever be able to work again as a chiropractor. (Tr. 563:9-17; 650:5-10) As stated above, Plaintiff had previously been making adjustments on 30-50 patients a day. Each adjustment was physically demanding. Between 1996 and 2000 Plaintiff had 3 Magnetic Resonance Imaging studies ("MRI's") with abnormal findings. The third MRI in May 2000 showed her condition to be growing worse, despite treatment by Dr. Berry and Dr. Isono. Dr. Berry diagnosed her with epicondylitis, cervical intervertebral disk syndrome, and tendinitis. (Tr. 631:22 — 632:1) Her medical records documented the development of severe pain in her right arm, elbow and neck. Dr. Isono offered only surgery to correct the problem, which Plaintiff rejected based on her past negative experience with post-surgery pain medication. (Tr. 434:1-11, 565:9-21). Plaintiff was also leery of cortisone injections, after experiencing heart palpitations and becoming ill from them. (Tr. 564:20-565:7) Plaintiff stopped seeing Dr. Isono and was treated by Dr. Berry, whose chiropractic manipulations gave her some pain relief and enabled her to get around. (Tr. 584:9-15).

Dr. Berry treated Plaintiff's epicondylitis with what she described as the "RICE formula:" This involved rest, ice, compression and exercise-and-elevation. Plaintiff followed this regimen and obtained temporary relief but no permanent relief. (Tr. 645:1-23) Dr. Berry testified that she treated Plaintiff for her tendinitis as well and that Plaintiff had physical therapy. None of these treatments afforded Plaintiff permanent relief. (Tr. 646:23-648:17) Dr. Berry saw Plaintiff a total of 88 times, most often for no fee, as a professional courtesy. She was paid only for the treatments following Plaintiff's auto accident, but not for the work-related injury. (Tr. 646:6-22; 690:14-18) Dr. Berry, Dr. Katz*fn2 and the Kaiser and Novato Hospital records all concurred that Plaintiff was severely impaired.

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