Laura Dziadek v. The Charter Oak Fire Insurance
2017 U.S. App. LEXIS 15270
| 8th Cir. | 2017Background
- Charter Oak issued a commercial auto policy to Billion Empire Motors; Laura Dziadek was severely injured as a passenger in a loaned vehicle driven by Lori Peterson.
- Billion’s agent notified Charter Oak; Charter Oak claims rep Faith Styles told plaintiff’s counsel in 2009 that Dziadek had no coverage and sent only policy excerpts that did not show UIM coverage for Dziadek.
- Plaintiff’s counsel repeatedly requested the full policy; Styles delayed and initially refused, later producing the full policy in 2011 which showed $1 million UIM coverage; Charter Oak paid $900,000 (policy limit minus $100,000 recovered from Progressive) in February 2012.
- Dziadek sued for deceit, breach of contract, and bad faith; a jury awarded attorney’s fees, other compensatory damages and prejudgment interest, and $2.75 million punitive damages; district court vacated $500,000 emotional-distress award and applied a 10% prejudgment interest rate.
- The Eighth Circuit affirmed: deceit and breach claims survived, the emotional-distress damages were properly nullified for lack of required proof, interest statute applied correctly, and punitive damages were upheld as not excessive.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether deceit claim is barred by independent-duty rule | Deceit is viable despite contract; Charter Oak actively misled counsel about coverage | Independent-duty rule bars tort for mere contract breach | Court: independent-duty rule does not bar deceit; facts support deceit claim |
| Sufficiency of evidence and harm for deceit | Counsel relied on misrepresentations and incurred extra attorney fees; deceit caused measurable harm | No actionable deceit or no damages from any deceit | Court: sufficient evidence of active deception and resulting damages (attorney fees) |
| Breach of contract & prevention doctrine (delay in formalizing UIM claim) | Charter Oak’s deception materially contributed to plaintiff’s delay in asserting UIM claim | Plaintiff could not have formalized claim earlier; breach cured by later payment | Court: prevention doctrine applies; jury could find Charter Oak’s conduct materially contributed to the delay; interest awarded as compensatory damages |
| Punitive damages and constitutional excessiveness | Punitive award justified by willful deceit and recklessness; ratio within limits | Punitive award excessive under State law and Due Process | Court: punitive instruction appropriate; 4.3:1 ratio acceptable under Supreme Court guideposts and state factors |
Key Cases Cited
- Karas v. American Family Insurance Co., 33 F.3d 995 (8th Cir. 1994) (contract-origin torts may nonetheless support independent tort claims)
- Biegler v. American Family Mutual Insurance Co., 621 N.W.2d 592 (S.D. 2001) (upholding deceit verdict against insurer that withheld coverage info)
- Johnson v. Coss, 667 N.W.2d 701 (S.D. 2003) (prevention doctrine: wrongful conduct need only "contribute materially" to nonoccurrence of a condition)
- Hudson v. United Systems of Arkansas, Inc., 709 F.3d 700 (8th Cir. 2013) (standard of review for JMOL; view evidence in plaintiff's favor)
- State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408 (2003) (Supreme Court guideposts for reviewing punitive-damages excessiveness)
- Bierle v. Liberty Mutual Insurance Co., 992 F.2d 873 (8th Cir. 1993) (distinguishes cases lacking evidence of intentional misleading by insurer)