Plaintiff, a medical doctor, alleged that she was disabled by the effects of electroconvulsive therapy (ECT) treatments she underwent to treat depression. Northwestern Mutual determined, however, that she was disabled due to depression, and that a 24-month mental illness limitation applied to her claim.
Plaintiff alleged that a report by the insurer’s medical expert regarding ECT was deficient, because it indicated that the expert was unaware of key studies in the ECT field, that the expert misunderstood or was unaware of certain material facts, and that some of his other statements concerning the long-term effects of ECT were ambiguous.
Because Northwestern Mutual did not follow up on these deficiencies, for example, by instructing its medical reviewer to discuss the claim with the plaintiff herself and her medical care providers, the court denied Northwestern Mutual’s summary judgment on plaintiff’s claim for bad faith. The court also rejected a summary judgment challenge to the underlying breach of contract claim based on the statute of limitation.
Plaintiff also asserted claims for negligence, negligent misrepresentation, reformation, specific performance, promissory estoppel, equitable estoppel, and unjust enrichment, and she sought to recover future insurance benefits and punitive damages. The court granted summary judgment to Northwestern Mutual on all of those claims.
The basis for the negligence and estoppel claims was plaintiff’s allegation that an insurance agent had misrepresented, or alternatively had failed to explain, that the coverage she was purchasing had a mental disorder limitation. The court disposed of those claims, because there was no evidence that the agent made either a misrepresentation or a false promise about coverage.
Similarly, because there was no evidence that the agent failed to inform plaintiff of the mental disorder limitation, the court disposed of the negligence claim, stating that “there is a line of cases in South Carolina holding that where an insured fails to read and familiarize himself with a policy, the insured abandons all care and is thus more negligent than the agent.” (Citing Carolina Prod. Maint., Inc. v. U.S. Fid. & Guar. Co., 425 S.E.2d 39, 42 (S.C. Ct. App. 1992); Doub v. Weathersby-Breeland Ins. Agency, 233 S.E.2d 111 (S.C. 1977); Mullen v. State Farm Cas. & Fire Co., 2010 WL 2228369, at *2 (D.S.C. June 1, 2010); Provident Life & Acc. Ins. Co., 166 F.2d 492, 495 (4th Cir. 1948); Pitts v. Jackson Nat. Life Ins. Co., 574 S.E.2d 502, 511 (S.C. Ct. App. 2011)).
The court also rejected the plaintiff’s claim for reformation. Under South Carolina law, reformation of an insurance contract is permitted only if the insured and the insurer both intended that the same coverage apply. George v. Empire & Marine Ins. Co., 545 S.E.2d 500 (S.C. 2001). Because the plaintiff failed to provide any evidence that Northwestern Mutual or the agent was mistaken regarding the 24-month limitation, the court granted summary judgment on that claim.
In disposing of the equitable estoppel claim, the court noted that under South Carolina insurance law, estoppel cannot extend or create coverage. Campbell v. N. Ins. Co. of N.Y., 337 F. Supp. 2d 764, 770 (D.S.C. 2004). This rule is subject to one exception: “the scope of risk under an insurance policy may be extended by estoppel if the insurer has misled the insured into believing the particular risk is within the coverage.” Standard Fire Ins. Co. v. Marine Contracting & Towing Co., 392 S.E.2d 460, 462 (S.C. 1990) (noting that South Carolina has not adopted the doctrine of “reasonable expectations” in construing insurance policies). Because there was no evidence that Northwestern Mutual had misled the plaintiff regarding her insurance coverage, the claim failed.
Plaintiff sought the present payment of future disability benefits as damages for the bad faith claim. Under South Carolina law, a plaintiff may not recover future benefits under an insurance contract. O’Dell v. United Ins. Co. of Am., 132 S.E.2d 14 (S.C. 1963); Odiorne v. Prudential Ins. Co. of Am., 179 S.E. 669, 670 (S.C. 1935). The court held, even in the context of claims for bad faith, that “[i]n this case, as in O’Dell and Odiorne, future benefits payments are speculative and cannot be reduced to a certainty because plaintiff’s life span and the duration of her condition are unknown.”
Finally, the court granted summary judgment on plaintiff’s claims for punitive damages. A plaintiff may recover punitive damages on a bad faith claim if she can “demonstrate the defendant’s conduct was willful, wanton, or undertaken in reckless disregard of plaintiff’s rights.” Kuznik v. Bees Ferry Assocs., 538 S.E.2d 15, 32 (S.C. Ct. App. 2000). Conduct is willful, wanton, or reckless when it is committed with a deliberate intention or in such a manner or under such circumstances that a person of ordinary prudence would be conscious of it as an invasion of another’s rights. Cohen v. Allendale Coca-Cola Bottling Co., 351 S.E.2d 897 (S.C. Ct. App. 1986). It is the present consciousness of wrongdoing that justifies the award of punitive damages against the wrongdoer. Id.
“In any civil action where punitive damages are claimed, the plaintiff has the burden of proving such damages by clear and convincing evidence.” S.C. Code Ann. § 15–33–135. When there is a lack of evidence of conduct which could support a punitive damages award, this issue is appropriate for resolution by the court as a matter of law. See, e.g., Muskin, 873 F.2d at 715; Cohen, 351 S.E.2d 897. The court held that the study of the effects of ECT treatment is pioneering research over which there is ongoing controversy in the medical community. Because there was insufficient evidence that Northwestern Mutual was willful or reckless when it accepted its ECT expert’s report without further investigation, summary judgment was appropriate on this claim.
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