After $6.2M Penalty, Wisconsin’s CUNA Mutual Seeks New Trial

Wisconsin-based CUNA Mutual Insurance Society has filed a motion requesting a new trial with the Federal District Court in Western South Dakota after a jury returned a verdict of $6.2 million against the company for failing to pay a dying woman’s insurance claim.

On June 12, 2009, a twelve-member federal jury from the Western District of South Dakota returned the $6.2 million verdict against CUNA Mutual for bad faith, including punitive damages that required proof of malice, fraud or oppressive conduct, according to attorneys for the plaintiff in the case. [Sharon McElgunn, as Personal Representative of the Estate of Teri Powell, Plaintiff, v. CUNA Mutual Group and CUNA Mutual Life Insurance Company and CUNA Mutual Insurance Society; Civ. 06-5061.]

In its brief, CUNA Mutual claimed the $6 million in punitive damages awarded by the jury “greatly exceeds the limitations imposed by the due process clause of the United States Constitution and must be reduced.”

Teri Powell died shortly after filing her case in 2006, but Powell’s attorneys Mike Abourezk and Alicia Garcia presented her case to the jury on June 1, 2009, with evidence that CUNA Mutual refused to pay Teri Powell’s claim for disability coverage, even after learning Powell was dying of cancer and was in hospice care. The jury also heard evidence of 18 other policyholders whose claims fit the same pattern as Powell’s claim, Abourezk said in a statement released by Powell’s attorneys.

CUNA Mutual stated in the brief, filed Aug. 6, that any alleged misconduct by the insurer “did not rise to the level of reprehensibility required to substantiate the excessive punitive damages award.” The insurance company asserted that “[t]he evidence presented at trial suggested that Powell only suffered economic harm in the form of attorneys’ fees. Plaintiff presented no medical evidence at trial to support the notion that CUNA Mutual’s conduct caused Powell any physical harm. Moreover, plaintiff introduced no evidence at trial to demonstrate that CUNA Mutual’s conduct suggested disregard of the health or safety of others, whether by indifference or recklessness.”

CUNA Mutual also maintained that the jury was allowed to improperly consider and rely “on evidence of CUNA Mutual’s alleged harm to others, such as the spreadsheets and/or the individual appeals files presented at trial. Reliance on such proof of harm to persons other than Powell undermines the award.”

Powell’s attorneys, however, asserted that the spreadsheets, which they say CUNA initially claimed did not exist, presented evidence of how the company denied thousands of other claims.

In their announcement regarding the award, Powell’s attorneys described the case:

“In 2002, Teri Powell retired from teaching high school Spanish in Rapid City, S.D., where she had worked for 27 years. She retired due to rheumatoid arthritis, osteoarthritis, progressive joint disease, spinal scoliosis, hypertension, PTSD and auto immune disease.

“Despite her condition, Powell continued trying to support herself by such jobs as ‘pet sitting,’ or making and selling handmade hats, but didn’t make enough money to support herself. Then in 2005 she learned she had cancer, and had surgery to remove a tumor. A few months later she filed a claim under her disability insurance with CUNA.

“CUNA denied the claim, saying she had filed outside the time allowed by the policy. So Powell went to a lawyer, James Leach, who wrote to CUNA that the policy does not contain any such language. CUNA quickly withdrew its denial, and agreed that Powell had been disabled for a short period of time, but said it needed to investigate whether she was currently disabled.

“Meanwhile, Powell received news that her cancer had returned, and she was terminal.

“On July 17, 2006, Leach wrote to CUNA asking why a benefit determination had not been made, and informing the company that Powell’s cancer had now returned. He told them Powell needed the benefits.

“A week later, on July 24, CUNA denied Powell’s claim.

“Dying of cancer and rejected by CUNA Mutual, Powell looked into a camera two years ago and explained why she was suing her insurance company. …

“Powell died 30 days after she gave that testimony. Two weeks after she died, CUNA issued a letter addressed to Powell at her home address, thanking her for choosing CUNA insurance protection, and advising her that she had been determined eligible for disability benefits.

“Before her death, Powell’s friend, Sharon McElgunn, promised Teri she would continue the case against CUNA Mutual.”

CUNA Mutual, in its brief, said the jury’s compensatory award “bears no reasonable relationship to the pecuniary damages submitted into evidence at trial, nor the medical testimony pertaining to any alleged cause of action for emotional distress.” The insurer requested that the Court reduce “the compensatory damages award to an amount in accord with the $1600 in pecuniary damages established by the evidence in this case.” It also asked the Court to grant a new trial.

Sources: Attorneys Michael Abourezk and Alicia Garcia, www.abourezklaw.com; Defendants’ brief filed with the United States District Court, District Of South Dakota Western Division