Opinion
Civil Action No. 01-2481-KHV
March 5, 2003.
MEMORANDUM AND ORDER
Van Enterprises, Inc. (Van) filed suit against AVEMCO Insurance Company (AVEMCO) and HCC Benefits Corporation (HCCB) for breach of contract under a stop loss and excess loss insurance policy issued by AVEMCO. On November 8, 2002, after a jury trial, the Court entered judgment in favor of plaintiff in the amount of $439,671.52. This matter is before the Court on Defendant AVEMCO's Motion To Set Aside Judgment Form, To Alter Or Amend And For Judgment (Doc. #93) filed November 19, 2002. For reasons stated below, AVEMCO's motion is overruled.
The parties stipulated to the dismissal of HCCB as a defendant because it acted solely as an agent of AVEMCO. See Pretrial Order (Doc. #34) filed May 22, 2002 at 26.
Factual Background
The Court incorporates the factual background set forth in its Memorandum And Order (Doc. #46) filed October 16, 2002.
In the pretrial order, AVEMCO asserted the following defenses:
(1) Plaintiff failed to disclose Megan Elliott during underwriting as required by the contract, Megan Elliott's condition was material to the underwriting decision in setting premium or lasering Megan Elliott out of the $125,000.00 specifications. Therefore, defendant is not required to pay on the policy.
(2) Plaintiff is estopped to recover on the policy because it has unclean hands. Plaintiff had actual knowledge of Megan Elliott's condition in December, 1999, and January, 2000, yet did not disclose her to defendant's agent's underwriters.
Pretrial Order (Doc. #34) filed May 22, 2002 at 17. In its motion for summary judgment and in opposition to Van's motion for summary judgment, AVEMCO did not raise a separate defense of equitable estoppel. Instead, it argued that it was entitled to rescind the insurance contract based on plaintiff's misrepresentation. On October 16, 2002, the Court overruled the parties' cross motions for summary judgment. See Memorandum And Order (Doc. #46). The Court noted that
genuine issues of material fact exist whether AVEMCO waived its right to rely on the Disclosure Statement because (1) it did not require Van to fully complete the Application, (2) it did not attach the Disclosure Statement to the Application or Policy, (3) it knew of Megan's diagnosis when it issued the Policy on May 12, 2000, and (4) it knew of Megan's diagnosis when it accepted the Plan Document on August 7, 2000. * * *
Based on the entire record, a reasonable jury could conclude that Van and Gallagher did not act with intent to deceive or recklessly with disregard for the truth and/or that AVEMCO knew of Megan's diagnosis before it issued the Policy in May of 2000.
Id. at 28, 31.
Except for the issue of attorneys' fees, the case was tried to a jury from November 5 through 8, 2002. At trial, AVEMCO contended that it had properly rescinded the insurance contract and that it therefore had no obligation to pay the expenses for Megan Elliott. See Instructions To The Jury (Doc. #84) filed November 8, 2002, Instr. No. 10. Specifically, AVEMCO claimed that Van had fraudulently induced it to enter the insurance contract by failing to disclose Megan Elliott in the Disclosure Statement which it submitted to AVEMCO on January 17, 2000. See id. The Court submitted the case to the jury on the sole question whether AVEMCO had established its affirmative defense of fraudulent inducement, and the jury returned a verdict in favor of Van. Based on the jury verdict, the Court entered judgment in favor of plaintiff in the stipulated amount of $439,671.52.
The Court overruled plaintiff's request for attorneys' fees under K.S.A. § 40-256. See Order (Doc. #87) filed November 8, 2002.
AVEMCO now argues that the Court (1) should set aside its judgment and rule on AVEMCO's affirmative defense of equitable estoppel, as stated in the pretrial order and/or (2) enter judgment as a matter of law in favor of AVEMCO, based on the arguments in its summary judgment motion.
Analysis
I. Equitable Estoppel Defense
AVEMCO argues that the Court should set aside the judgment so that it can rule on AVEMCO's affirmative defense of equitable estoppel. Van maintains that AVEMCO waived any estoppel defense because it did not raise the issue in its Rule 50(a) motion at trial or at the instruction conference. The Court agrees that AVEMCO waived its estoppel defense — albeit on different grounds than those outlined by Van.
On November 19, 2002, eleven days after the Court entered judgment on the jury verdict, AVEMCO first informed the Court and plaintiff of its claim that the trial encompassed a separate defense of equitable estoppel which should be tried to the Court. In the pretrial order, the parties agreed that trial of the case would be to a jury, and AVEMCO did not preserve any right to have its defense of equitable estoppel tried to the Court. See Pretrial Order (Doc. #34) filed May 22, 2002 at 31. In its motion for summary judgment and in opposition to Van's motion for summary judgment, AVEMCO did not assert a separate defense of equitable estoppel. Instead, it argued that it was entitled to rescind the insurance contract based on Van's misrepresentation. At trial, AVEMCO did not assert that any issues should be tried to the Court. Indeed, shortly before the case was submitted to the jury, the Court confirmed with counsel for both parties that unless AVEMCO prevailed on its affirmative defense of fraudulent inducement, judgment would be entered in favor of Van in the stipulated amount of approximately $439,000. The Court also confirmed with counsel that the only remaining issue for the Court to determine was whether Van Enterprises was entitled to attorneys' fees under Kansas law. The Court therefore holds that AVEMCO abandoned its estoppel defense at trial.
AVEMCO sought summary judgment on its fraudulent inducement defense but it did not seek summary judgment on its equitable estoppel defense. AVEMCO states that "it was patently obvious that the ultimate decision [on equitable estoppel] was a question of fact and not appropriate for summary judgment." Defendant's Reply To Plaintiff's Response To Defendant's Motion To Set Aside Judgment Form, To Alter Or Amend And For Judgment (Doc. #98) filed December 11, 2002 at 3. AVEMCO's admission is perplexing, in that its defense of fraudulent inducement required proof of an additional element which was not required to establish equitable estoppel, i.e. that Van made its representation recklessly or with knowledge that it was false. See Instructions To The Jury (Doc. #84), Instr. No. 11. Therefore the Court must assume that AVEMCO either strategically or unintentionally abandoned its equitable estoppel defense until after the Court entered judgment against it.
AVEMCO's proposed verdict form lacks any intimation that the Court would later decide an affirmative defense of equitable estoppel. The proposed verdict form stated in part: "Do you find that Defendant knowingly waived its right to rely upon the representations made in the Disclosure Statement by plaintiff?" Defendant's Proposed Verdict Form (Doc. #74) filed November 6, 2002. Because detrimental reliance is an element of both fraudulent inducement and equitable estoppel, an affirmative answer to this question would have precluded AVEMCO from prevailing on either defense. The Court must therefore assume that AVEMCO intended the jury to resolve both defenses, or that it abandoned its equitable estoppel defense.
Here, AVEMCO did not merely fail to inform the Court that the trial encompassed a separate defense of equitable estoppel; it also failed to comply with the procedure set forth in the pretrial order for claims to be tried to the Court. The pretrial order stated:
Findings Of Fact And Conclusions Of Law. In bench trials, plaintiff shall serve and file proposed findings of fact and conclusions of law no later than 15 days before trial, and defendant shall file such proposed findings of fact and conclusions of law no later than 11 days before trial. Such pleadings shall be served by fax or hand delivery in addition to service by mail on the same date that they are filed with the court. The parties shall deliver an extra copy of their proposed findings and conclusions to the trial judge's chambers at the time of filing.
Pretrial Order (Doc. #34) at 33. Neither party filed proposed findings of fact or conclusions of law on AVEMCO's purported defense of equitable estoppel. Accordingly, AVEMCO is not entitled to resurrect its equitable estoppel defense after the Court has entered judgment.
The Court also notes the substantial overlap between AVEMCO's fraudulent inducement defense (which was tried to the jury) and its purported equitable estoppel defense. Both defenses involve questions as to (1) plaintiff's knowledge of Megan Elliott's condition in January 2000; (2) whether AVEMCO justifiably relied on the disclosures in the Disclosure Statement; and (3) whether AVEMCO suffered harm on account of plaintiff's failure to disclose Megan Elliott in the Disclosure Statement. See Pretrial Order (Doc. #34) at 20-23. Given the similarity in the issues to be decided, the Court easily could have given the jury a special verdict form to decide both the fraudulent inducement defense and the factual issues surrounding the equitable estoppel defense. Such a special verdict would have ensured consistency between the jury verdict on the fraudulent inducement defense and the court decision of the equitable estoppel defense. Because AVEMCO did not raise the matter until after trial, this option was not available.
In sum, AVEMCO tried the case on its sole defense of fraudulent inducement. The Court does not recall that AVEMCO counsel ever mentioned "equitable estoppel" at trial or informed the Court that it wished to proceed with a bench trial of a separate defense. AVEMCO cannot resurrect its estoppel defense because it is unhappy with the jury verdict on the sole defense which it chose to submit to the jury.
II. Fraudulent Inducement Defense
AVEMCO argues that it is entitled to judgment as a matter of law on its fraudulent inducement defense for the reasons asserted in its motion for summary judgment. AVEMCO has not supplemented its previous arguments or explained why the Court's ruling on summary judgment is erroneous. The standard for a Rule 50 motion for judgment as a matter of law is the same as a summary judgment motion under Rule 56: "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986). The evidence at trial was substantially the same as the evidence presented in the summary judgment briefs. AVEMCO has not pointed to any additional evidence at trial, or shown why the result on its Rule 50 motion should be different than the result on its summary judgment motion. The Court therefore overrules AVEMCO's motion for substantially the reasons stated in the Court's Memorandum And Order (Doc. #46) filed October 16, 2002.
IT IS THEREFORE ORDERED that Defendant AVEMCO's Motion To Set Aside Judgment Form, To Alter Or Amend And For Judgment (Doc. #93) filed November 19, 2002 be and hereby is OVERRULED.