Arellano v. Primerica Life Insurance
235 Ariz. 371
| Ariz. Ct. App. | 2014Background
- In Oct 2006 Mrs. Arellano paid Primerica agents for life insurance for her husband Martin; an initial application (App #1) was completed with assistance; a later meeting with agent Donald resulted in a higher coverage request ($150,000) and a new application (App #2) that Mrs. Arellano was not given or asked to sign.
- EMSI (an underwriting vendor) contacted Mr. Arellano for medical interview; he indicated he already had coverage or was not interested, and EMSI alerted the agent; Primerica did not follow up.
- Mr. Arellano died in March 2007; Primerica denied the death claim citing lack of required tests and relying on App #2, which contained signatures/initials that Mrs. Arellano later claimed were forged.
- Trial court excluded the applications under A.R.S. § 20-1108 because copies were not attached to any issued policy or delivered to the applicant; a second trial produced jury verdicts for Arellano on multiple claims including breach of contract, bad faith, negligence, and punitive damages.
- On appeal the court (1) affirmed exclusion of the applications, (2) held forgery is not a standalone tort in Arizona (vacating that verdict), (3) reduced punitive damages from ~$1.12M to $328,000 (4:1 ratio), and (4) ordered prejudgment interest under Ariz. R. Civ. P. 68(g) for unliquidated claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Admissibility of insurance applications under A.R.S. § 20-1108 | Applications inadmissible because statute bars admission unless a true copy was attached to or made part of the policy delivered | Statute inapplicable because plaintiff relied on an oral temporary contract and no policy was ever issued/delivered | Affirmed exclusion: statute applies to oral contracts and exclusion proper where applicants never received copies |
| Existence of a tort of forgery | Forgery supports independent tort claim and damages | Arizona does not recognize a tort of forgery; judgment as a matter of law should be granted | Reversed: forgery is not a recognized tort under Arizona law/Restatement; forgery verdict vacated |
| Punitive damages constitutionality & amount | Conduct (accepted payment, alleged forgery, failure to notify) justified large punitive award | $1.12M punitive award violates due process; excessive compared to compensatory awards and statutory penalties | Reduced punitive damages to $328,000 (4:1 ratio); original 13:1 ratio excessive though conduct was highly reprehensible |
| Prejudgment interest under Ariz. R. Civ. P. 68(g) vs. A.R.S. § 44-1201.D | Offer of judgment triggered mandatory prejudgment interest on unliquidated claims when judgment was more favorable | § 44-1201.D bars prejudgment interest on unliquidated/punitive damages | Reversed: Rule 68(g) applies; trial court must award prejudgment interest on unliquidated claims as mandatory sanction |
Key Cases Cited
- Conant v. Whitney, 190 Ariz. 290 (broad trial-court discretion in evidentiary rulings)
- Yauch v. S. Pac. Transp. Co., 198 Ariz. 394 (appellate review of evidentiary exclusions)
- Escamilla v. Cuello, 230 Ariz. 202 (statutory interpretation reviewed de novo)
- Blevins v. Gov’t Emps. Ins. Co., 227 Ariz. 456 (use plain statutory language to determine legislative intent)
- Nordstrom, Inc. v. Maricopa Cnty., 207 Ariz. 553 (plain meaning of statutes)
- Gulf Ins. Co. v. Grisham, 126 Ariz. 123 (oral insurance contracts valid and enforceable)
- Marine v. Allstate Ins. Co., 12 Ariz. App. 229 (insurer cannot bind applicant to application misstatements when applicant lacked opportunity to review)
- Greber v. Equitable Life Assurance Soc’y of U.S., 43 Ariz. 1 (insured’s duty to read policy and correct application incorporated therein)
- Sec. Title Agency, Inc. v. Pope, 219 Ariz. 480 (standard for JML review)
- Barnes v. Outlaw, 192 Ariz. 283 (follow Restatement in absence of state authority)
- Nardelli v. Metro. Grp. Prop. & Cas. Ins. Co., 230 Ariz. 592 (due-process limits on punitive damages; appellate gatekeeping)
- Hudgins v. S.W. Airlines Co., 221 Ariz. 472 (single-digit multipliers more likely to comport with due process)
- BMW of N. Am., Inc. v. Gore, 517 U.S. 559 (reprehensibility primary factor in punitive-damages review)
- State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 418 (guideposts for punitive-damages review)
- Trustmark Ins. Co. v. Bank One, 202 Ariz. 535 (juror instruction/verdict clarification principles)
- Levy v. Alfaro, 215 Ariz. 443 (Rule 68 sanctions are mandatory)
- John C. Lincoln Hosp. & Health Corp. v. Maricopa Cnty., 208 Ariz. 532 (definition of unliquidated claim)