Free Response to Motion - District Court of Arizona - Arizona

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Thomas L. Hudson, 014485 Danielle D. Janitch, 021838 Mark P. Hummels, 023283 OSBORN MALEDON, P.A. 2929 North Central Avenue, Suite 2100 Phoenix, Arizona 85012-2794 [email protected] [email protected] [email protected] (602) 640-9000 Steven C. Dawson, 006674 Anita Rosenthal, 006199 DAWSON & ROSENTHAL, P.C. 6586 Highway 179, Suite B-2 Sedona, Arizona 86351 [email protected] (602) 494-3800 Gregg H. Temple, 009866 GREGG H. TEMPLE, P.C. 4835 East Cactus Road, Suite 225 Scottsdale, Arizona 85254 [email protected] (602) 808-0508 Attorneys for Plaintiff

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA Brett D. Leavey, Plaintiff, vs. UNUM/Provident Corporation, a foreign corporation, and Provident Life and Accident Insurance Company, a foreign corporation, Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) No. CIV-02-2281 PHX SMM RESPONSE TO DEFENDANTS' MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF RENEWED MOTION FOR JUDGMENT AS A MATTER OF LAW OR, IN THE ALTERNATIVE, MOTION FOR A NEW TRIAL AND/OR REMITTITUR (Oral Argument Requested)

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TABLE OF CONTENTS Page I. II. Introduction..................................................................................................... 1 Overview of the Evidence ............................................................................... 2 A. B. C. Dr. Leavey, Eight Years After Becoming a Dentist, Suffered From Debilitating Depression, Anxiety, and Addiction .................................. 2 When Dr. Leavey Submitted His Disability Claim, Defendants Had in Place a Scheme to Target Claims Like His........................................ 3 Early on Defendants Targeted Dr. Leavey's Claim for Potential Denial and Ultimately Terminated It Pursuant to Their Scheme to Close Legitimate Claims....................................................................... 5 Defendants' Conduct Caused Dr. Leavey to Suffer Severe Physical and Emotional Injury ............................................................................ 7 At Trial, the Jury Rejected Defendants' Excuses and Determined That Dr. Leavey Was the Victim of Extraordinary Bad Faith................ 9

D. E. III.

The Court Should Uphold the Jury's Punitive Damages Award......................10 A. The Court Properly Submitted the Punitive Damages Issue to the Jury......................................................................................................10 1. 2. B. Arizona's Standard for Punitive Damages.................................10 The Evidence Supports the Punitive Damages Award ...............11

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The Jury's Punitive Damages Award Falls Well Within a Constitutionally Acceptable Range and Does Not Violate Defendants' Due Process Rights ..........................................................15 1. 2. 3. The BMW Guideposts Support the Award .................................16 Other Considerations Confirm That Reducing the Punitive Award Would Undermine the State's Legitimate Interests ........20 The Jury Properly Punished the Defendants and They Cannot Complain About an Instruction That They Never Requested .................................................................................21

IV.

The Court Should Deny Defendants' Rule 59 Motion Concerning the Jury's Bad Faith Damages Award ..................................................................22
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A. B.

The Court May Not Reduce the Compensatory Damages Award Unless It Is so Unreasonable as to Shock the Court's Conscience ........22 The Amount of the Bad Faith Award Is Reasonable ............................23

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V. VI.

Defendants' Remaining Grounds for a New Trial Likewise Lack Merit .........25 Conclusion .................................................................................................... 26

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I.

Introduction The Court conducted a fair trial. Both sides presented their theories to the jury,

and on the basis of overwhelming evidence, the jury found in Plaintiff's favor. Defendants' request for post-trial relief ignores this evidence, and instead reargues the very arguments the jury rejected. But in reviewing Defendants' Rule 50 Motion, the Court must view the evidence in the light most favorable to sustaining the jury's verdict. Winarto v. Toshiba Am. Elecs. Components, Inc., 274 F.3d 1276, 1283 (9th Cir. 2001). This requires viewing the "record as a whole," and "draw[ing] all reasonable inferences in" Dr. Leavey's favor. Hangarter v. Provident Life and Accident Ins., 373 F.3d 998, 1005 (9th Cir. 2004) (citation omitted). It further requires "keeping in mind that credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge." Id. (internal quotations and citation omitted); see also Winarto, 274 F.3d at 1283 (the court "may not substitute its view of the evidence for that of the jury.") (citation omitted). Defendants' Rule 59 Motion must be denied unless "the verdict is contrary to the clear weight of the evidence, or is based upon evidence which is false, or to prevent, in the sound discretion of the trial court, a miscarriage of justice." Hangarter, 373 F.3d at 1005 (emphasis added) (citation omitted). Drawing "all reasonable inferences in favor of" Dr. Leavey demonstrates that Defendants have raised no issue that requires any serious consideration by the Court. Indeed, the Ninth Circuit has already found punitive damages appropriate in a case similar to this one, and has held that a punitive to compensatory damages ratio like the one at issue here falls "well within the Supreme Court's suggested range for constitutional punitive damages awards." Id. at 1005, 1015 (applying California law, which uses the same punitive damages standard as Arizona). Similarly, this Court has approved a bad faith compensatory damages award of $5.5 million. See Ceimo v. Gen. Am. Life Ins. Co., No. CV-00-1386, 2003 U.S. Dist. LEXIS 26699 (D. Ariz. Sept. 16, 2003). Thus, Defendants' two principal contentions ­ that the punitive and
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compensatory award should be reduced ­ fly in the face of the facts and the law. The Court should deny Defendants' Motions.1 II. Overview of the Evidence A. Dr. Leavey, Eight Years After Becoming a Dentist, Suffered From Debilitating Depression, Anxiety, and Addiction

In 1989, Dr. Leavey achieved his long-term goal of becoming a dentist. Although he initially enjoyed the satisfaction of helping patients feel better about their smile and appearance, over time he became "a sponge for other people's emotions," and grew increasingly disturbed by his patients' pain. (Ex. 1 at 974; Tr. 1081:41082:17, 1083:7-11, 1085:7-1086:4.) As his mental illness progressed, he began experiencing physical symptoms, including panic attacks, difficulty breathing, headaches, and physical shaking, which left him unable to complete various dental procedures. (Ex. 1 at 974, 984, 987; Tr. 1086:17-1089:20, 1091:17-20.) At night, he continued suffering "incredible anxiety" from the day's pain, panic, and stress. (Tr. 1091:17-19; Ex. 1 at 985, 974, 561, 438.) Although Dr. Leavey took steps intended to eliminate his symptoms, including changing offices and exercising, his depression only deepened. (Tr. 1089:21-1091:1.) Eventually, he stopped caring about his own safety, and contemplated suicide. (Ex. 1 at 98, 565, 985.) While experiencing one of his recurrent headaches, he took Vicodin for pain relief, which "not only" took away his headache, but gave him a sense of "euphoria, [and] the ability to pretty much forget what had happened during the course of that day." (Tr. 1091:12-1092:20.) Finding that Vicodin gave him "freedom" from his anxiety and physical pain ­ and having easy access to the drug as a dentist ­ Dr. Leavey began abusing the drug as "a coping tool." (Id.; Ex. 1 at 561.)

An appendix accompanies this response, with highlighting added for emphasis to certain transcript and exhibit excerpts. The exhibit citations omit all but the ending number from the production number, e.g., Ex. 1 at 128.
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As his use increased, a co-worker who became suspicious reported Dr. Leavey to the Dental Board. Although Dr. Leavey tried to keep working while battling his addiction, the stress exacerbated his drug use. (See Ex. 1 at 103; Tr. 1098:24-1099:3.) After he "stopped caring about [himself] or [his] future" and allowed his drug use to get "out of control," the Dental Board forced him to suspend his license and encouraged him to undergo hospitalized treatment, which he did. (Tr. 1102:9-10.) While hospitalized, Dr. Leavey's health care providers counseled him that he might never be able to return to dentistry. (See Ex. 1 at 18-14, 511-08.) B. When Dr. Leavey Submitted His Disability Claim, Defendants Had in Place a Scheme to Target Claims Like His

Before Dr. Leavey was hospitalized, the Dental Board recommended that Dr. Leavey file a disability claim if he had disability insurance. Fortunately, Dr. Leavey had purchased an own-occupation disability income insurance policy shortly after becoming a dentist, and had faithfully paid his premiums for eight years. (Ex. 4; see Tr. 893:7-24.) Hospitalized and unable to work, Dr. Leavey applied for disability benefits with Provident, his insurance provider. (Tr. 1105:2-19.) Unbeknownst to Dr. Leavey, Provident had developed "a comprehensive system for targeting and terminating expensive claims, such as those stemming from `own occupation' policies where the insured was a disabled professional who had been receiving benefits for months or years." Hangarter, 373 F.3d at 1011; see generally Ex. 23. Although it is highly improper for an insurance company to use its claims department to deliver profit, facing massive losses and internal pressure to stop them, Provident turned to its claims department to do just that ­ going as far as setting artificial claim closing goals. (Tr. 126:13-127:13; Exs. 24, 29, 35, 98; see also Tr. 131:1-138:25, 147:19-148:10, 148:23-149:1, 197:21-201:19, 1004:12-1005:9, 1055:18-1056:14.) Recognizing that such conduct would be "crossing the line," a high-level Provident executive emphasized that everyone involved in the scheme "should be
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careful in the words [they] use and the documentation developed during this project." (Ex. 100 at 6288; see Tr. 638:17-639:8.) Accordingly, rather than outright tell claims handlers to deny legitimate claims, Provident instead took measures designed to "push . . . deep into [its] culture" the practices necessary to achieve the arbitrary claimclosing goals. (Ex. 67 at 2465.) Thus, although lower-level claims department employees were not copied on the executive-level documents, tactics were employed to create the "pressure" necessary to "deliver results" that would "be beneficial to the company." (Tr. 504:4-505:5; see also Tr. 274:10-13, 716:15-717:10, 639:15-640:17, 478:5-15.) Among other extreme measures designed to create the necessary pressure, Provident began requiring claims representatives to develop a "top-ten" list of highdollar Dr. Leavey-type claims to review for termination. (Tr. 240:7-17; Ex. 135.) Another technique ­ the "roundtable review" ­ involved gathering a team of lawyers, doctors, and claims handlers to "triage" the company's most expensive claims. (Ex. 133 at 3199; Tr. 233:8-234:6, 1038:9-22, 1041:10-1042:11, 1050:17-1051:8.) The company initially called these meetings "Legal Review Meetings," in line with its strategy of shielding its misconduct behind artificial legal privileges, but ultimately covered its tracks by destroying all documents generated at the reviews. (Tr. 233:21234:2; Ex. 133 at 3198-3199.) Tellingly, Provident celebrated its roundtables as an effective means to deny claims and repeatedly focused on the reserves released through roundtables. (See, e.g., Ex. 42 at 2190; Ex. 46 at 2201; Tr. 232:23-233:20.) Over time, Provident also began: (1) seeking to influence the independent medical examination (IME) process in an effort to get the desired outcome; (2) misleading its insureds about policy terms in an effort to close claims without challenge; (3) exploiting the "gray area" present in psychiatric claims to its advantage; and (4) terminating claims by sending denial letters to see if the insured would simply go away without challenging the denial. (Ex. 27 at 2107; Tr. 220:10-221:5, 294:25298:5, 1011:10-19, 358:24-359:8.)
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C.

Early on Defendants Targeted Dr. Leavey's Claim for Potential Denial and Ultimately Terminated It Pursuant to Their Scheme to Close Legitimate Claims

As early as March 1999, Provident had identified Dr. Leavey's claim as a potentially "`severe' situation" because "as long as [Dr. Leavey] continues to relapse, he will not be able to retain a license," which will entitle him to benefits. (Ex. 1 at 271.) The next month, a claims representative working in Provident's settlement unit suggested that Provident "could take the position that [Dr. Leavey] is making a choice to change [occupations] that is not related to disability," even though Provident knew that was untrue. (Ex. 1 at 348; cf. Tr. 693:15-694:25.) In 2001, Provident reassigned Dr. Leavey's claim to claims representative Jennifer Conrad, after which the effort to close Dr. Leavey's claim intensified. (See Ex. 1 at 875; Tr. 648:15-24.) In March 2001, Provident then learned that Dr. Leavey had become more definite about changing professions due to his illness, and that his physicians agreed that he could not safely return to dentistry. (Ex. 1 at 885.) Although medically appropriate, a change in profession would make the "severe situation" of Provident's indefinite liability on Dr. Leavey's claim a reality, making the need to terminate the claim more pressing. In April 2001, Provident, for the second time, "roundtabled" Dr. Leavey's claim (id. at 905), which predictably prompted a search for some "gray area" in Dr. Leavey's medical records that Provident could exploit to its advantage. Toward this end, Provident's in-house physician Dr. Brown prepared a "slanted" summary of the records, which he then sent to two IME doctors in an effort to obtain medical evidence to use against Dr. Leavey. (Ex. 1 at 914, 919; see Tr. 294:25-298:5, 622:13623:22 (discussing how Provident's interactions with the IMEs violated accepted insurance industry standards); Tr. 1916:4-11 (the medical referral was "slanted").) When the two examiners both found Dr. Leavey unable to practice dentistry and under appropriate care (as had every other unbiased medical review) (Ex. 1 at 974-966, 988-976; Tr. 727:20-729:15), Dr. Brown continued pressuring them to
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generate a report that would describe some way that Dr. Leavey could return to dentistry. (Ex. 1 at 1007-1008; Tr. 731:7-16; see also Tr. 294:25-297:6 (explaining how such pressure violates insurance company standards).) Eventually, one examiner "speculat[ed]" in response to Dr. Brown's prodding that with six months of intensive treatment, Dr. Leavey might be able to return to dentistry provided he continued with less intense treatment for "another six to nine months" and was subjected to extensive monitoring. (Tr. 1894:5-1895:2; Ex. 1 at 1022-1021.) With the year-end pressure to close claims looming (see Tr. 357:14-358:15), Provident finally had in hand what it needed to deploy another of its illegal claimclosing tactics: an experimental treatment designed to mislead Dr. Leavey about his obligations under the policy. Accordingly ­ although Provident's witnesses uniformly testified at trial that it would have been bad faith to close Dr. Leavey's claim ­ Ms. Conrad prepared a referral form "recommend[ing] [Provident] close [Dr. Leavey's] claim for benefits." (Ex. 1 at 1027.) That same day, Provident sent Dr. Leavey a letter stating "[w]e regret to inform you that upon completion of our review of the data contained in the claim file and the reports received from the [IMEs], you do not qualify for continuing Total Disability benefits under the terms of your policy. . . ." (Ex. 1 at 1030 (emphasis added).) Well aware of the risk of relapse (e.g., Tr. 288:1520, 1903:7-1904:1, 1927:10-16) and Dr. Leavey's past thoughts of suicide while practicing dentistry ­ and knowing that merely discussing dentistry made Dr. Leavey "anxious" and "uncomfortable" (Ex. 1 at 887; see also id. at 564, 681, 678) ­ Provident told him that he had just six months to return to dentistry and should follow "specific treatment recommendations" geared for that return. (Ex. 1 at 1029.)2 The See also Tr. 1753:17-1754:10; Ex. 1 at 438 (medical record received by Provident indicating that Dr. Leavey had experienced "Suicide ideation over the past eight months"); Ex. 1 at 566-558 (IME finding Dr. Leavey disabled, and noting that he "contemplated suicide by overdose" and "became quite emotional several times during the interview especially when discussing his attitudes towards dentistry. . . ."; Ex. 1 at 885 (Field report documenting that when practicing dentistry, Dr. Leavey "was very suicidal and did not want to live.").)
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letter falsely stated that his policy did not cover the risk of relapse, and further emphasized that Dr. Leavey would "once again be responsible for premiums [in six months]" (Ex. 1 at 1028; Tr. 286:22-289:16; see also Ex. 1 at 1060 ("Maximum benefits [had been] paid, policy should terminate.").) During this time, Provident had been setting ever increasing, arbitrary claims termination goals (notwithstanding the underlying actuarial data), creating even greater pressure to close claims by year's end. (Tr. 271:23-274:17.) Provident officially closed Dr. Leavey's claim effective December 7, 2001, and released the reserve in time to affect the year-end financial numbers. (Ex. 1 at 36, Ex. 373 at 16019; Tr. 672:14-16, 956:21-957:20.) D. Defendants' Conduct Caused Dr. Leavey to Suffer Severe Physical and Emotional Injury

Although Dr. Leavey had made great improvements before he received the December letter (Tr. 1115:24-1116:11), Provident's conduct predictably destroyed his hard fought progress, pushing him into a depression that greatly concerned his treating physician. (Tr. 546:25-547:2.) Dr. Leavey immediately experienced "a great deal of anxiety," and grew increasingly "scared" and "distress[ed]" by his situation. (Tr. 1123:1-1124:18.) Financially devastated, Dr. Leavey moved into a small apartment to trim expenses (Tr. 1124:19-1125:4), and then underwent a severe relapse, crushing his hand with a forty-five pound weight in a desperate attempt to obtain narcotics, (Tr. 1125:16-24). That initial relapse was followed by others, during which Dr. Leavey's emotional and physical suffering continued. (See Tr. 1129:221130:3 (admitting to multiple relapses), 668:25-669:4 (relapses cause "very serious" health and emotional consequences).) Dr. Leavey also suffered shame, humiliation, and anxiety when, before his doctors believed he was emotionally and physically

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ready, he was forced to find a job to replace his lost disability income, and suffered repeated failures. (Tr. 1126:2-1128:4.)3 Notwithstanding his condition (and unlike the majority of Provident's insureds) (see Tr. 358:24-359:8), Dr. Leavey decided to challenge the company's deceptive tactics by filing suit. In response, Provident sent a letter in June 2002, pretending that it never closed his claim. (Ex. 10; Tr. 686:12-687:15, 688:10-13.) In sharp contrast to the pre-lawsuit letter, the June letter stated that Dr. Leavey's monthly benefits would resume if he completed the required paperwork. (Compare Ex. 10 with Ex. 1 at 1030; cf. Tr. 707:10-15.) To cover its tracks, Provident (after having undertaken the detailed process of closing Dr. Leavey's claim and releasing the reserve to benefit its year-end financial results), initiated the detailed process of reopening the claim and establishing a new reserve. (Tr. 671:14-675:17, 687:16688:9, 740:11-744:2; see generally id. at 344:9-345:22, 347:24-348:20.) Although Defendants received notice of the lawsuit shortly after they closed Dr. Leavey's claim, they did not produce or disclose any documentation concerning the claim's closure or reopening. Knowing that the central issue in the case was whether they had improperly closed Dr. Leavey's claim, Ms. Conrad and several other Provident employees involved with Dr. Leavey's claim then met for approximately five hours before their depositions. (Tr. 863:9-867:2.) The employees each proceeded to provide a remarkably similar (and false) recollection of events, testifying that Defendants had not closed Dr. Leavey's claim. (Tr. 671:7-13, 736:1223.) They admitted, however, that it would have been highly improper to do so, and characterized the December denial letter as a poorly worded "status report." (Tr. 736:16-737:21.)

Defendants knew that Dr. Leavey would, due to his condition, likely underreport his depression and anxiety due to any relapse. (Tr. 456:12-457:7; 466:25467:5, 534:7-535:4, 552:14-25; cf. Ex. 1 at 980.)
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After Provident testified that it would have been highly improper to close Dr. Leavey's claim (while denying that any such closure had occurred) (Tr. 702:20-706:2, 859:15-863:8; see also Tr. 2031:24-2033:18, 613:21-614:5, 634:12-636:14), Dr. Leavey's counsel fortuitously discovered a document showing that Provident closed Dr. Leavey's claim in December 2001, and had released the reserves. (See Ex. 373; Tr. 956:21-957:20.) Confronted with this evidence, Provident grudgingly acknowledged that it not only had gone through the detailed process of closing Dr. Leavey's claim, but also (in June 2002) had gone through the equally detailed process of reopening it. (E.g., Tr. 671:14-675:17.) Employees explained that they had "forgotten" both about the closure and the subsequent reopen. (Tr. 700:9-701:4, 743:16-18.) This cover up, and the resulting events, caused Dr. Leavey additional anxiety and several relapses over a period of at least four years, including daily anxiety over whether Defendants would stop paying his benefits and throw him back into the same emotional turmoil and depression triggered by the December 2001 termination letter. (See generally Tr. 1128:24-1129:10, 1137:20-1138:6.) Additionally, Dr. Leavey was forced to publicly litigate this case ­ causing him further anguish, strain and embarrassment due to his emotionally fragile and highly private nature. (See generally Tr. 549:3-9; Ex. 1 at 980 (Dr. Leavey appeared "somewhat guarded and private . . .").) E. At Trial, the Jury Rejected Defendants' Excuses and Determined That Dr. Leavey Was the Victim of Extraordinary Bad Faith

At trial, Dr. Leavey presented extensive evidence supporting the above facts. Tellingly, although suggesting at times that there is nothing wrong with measuring "claim metrics," Defendants offered no expert testimony to defend the legitimacy of their comprehensive scheme to target claims for denial. Nor did Defendants dispute that closing Dr. Leavey's claim would constitute bad faith. Instead, after being confronted with evidence proving that Defendants had in fact closed Dr. Leavey's
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claim, Defendants invented a distinction nowhere found in any of their documentation or manuals ­ the difference between a claim being closed "in the payment system" and closed for "handling." (Tr. 739:6-740:6, 678:14-17.) Defendants also accused Dr. Leavey of having acted in bad faith by not pursuing a return to dentistry, and attempted to create an issue concerning "appropriate care," even though: (1) Defendants' witnesses agreed that Dr. Leavey had received appropriate care; (2) Plaintiff never challenged Defendants' right to inquire into the issue of appropriate care; and (3) Defendants never suggested to Dr. Leavey or to his treating physicians that his care was not appropriate until the December 4, 2001 termination letter. Not surprisingly, the jury rejected Defendants' implausible explanations, and found the facts as outlined above. III. The Court Should Uphold the Jury's Punitive Damages Award A. The Court Properly Submitted the Punitive Damages Issue to the Jury

Defendants' contention that the Court should vacate the jury's punitive liability finding pursuant to Fed. R. Civ. P. 50(b) because no reasonable jury could find punitive damages appropriate, or alternatively under Fed. R. Civ. P. 59 because the punitive liability finding is against the "great weight of the evidence" (Mem. at 2-10), is meritless. 1. Arizona's Standard for Punitive Damages

Although the Court is generally familiar with Arizona's punitive damages standards, we note that in the insurance bad-faith context, "a willful and knowing failure to process or pay a claim known to be valid" will suffice for punitive damages. Farr v. Transamerica Occidental Life Ins. Co., 699 P.2d 376, 383 (Ariz. Ct. App. 1984). The requisite evil hand/evil mind necessary for punitive damages may also be shown with evidence of fraud in connection with denying the claim, "[d]eliberate, overt and dishonest dealings," id. at 383-84, and other conduct that "is sufficiently `oppressive, outrageous or intolerable,'" Hawkins v. Allstate Ins. Co., 733 P.2d 1073,
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1080 (Ariz. 1987) (citation omitted); see also Rawlings v. Apodaca, 726 P.2d 565, 578 (Ariz. 1986) (conscious disregard of significant harm to insured as well as "aggravated, outrageous, malicious or fraudulent" conduct warrants punitive damages). Importantly, because few defendants will admit to an evil motive, the Arizona Supreme Court has emphasized that the "clear and convincing" proof necessary for punitive damages often comes "from defendant's expressions, conduct, or objectives," and other "indirect and circumstantial evidence." Thompson v. BetterBilt Aluminum Prods. Co., 832 P.2d 203, 210 (Ariz. 1992) (reversing a directed verdict and explaining how courts should consider circumstantial evidence in light of this standard). 2. The Evidence Supports the Punitive Damages Award

Applying the standard set forth in Thompson, "the record in the instant case reveals several pieces of evidence that, when viewed in the light most favorable to [Dr. Leavey], could give rise to reasonable inferences suggesting a high probability that [Defendants] acted with an evil mind" in terminating Dr. Leavey's disability benefits. 832 P.2d at 211. First, the evidence demonstrated that Defendants engaged in "aggravated, outrageous, malicious or fraudulent" conduct by denying Dr. Leavey's claim pursuant to a pattern of unfair practices. Rawlings, 726 P.2d at 578; Hawkins, 733 P.2d at 1081; cf. Hangarter v. Paul Revere Life Ins. Co., 236 F. Supp. 2d 1069, 1083-86 (N.D. Cal. 2002) (describing Provident's plan to terminate high dollar disability income policies, which warranted punitive damages), aff'd in part, rev'd in part, Hangarter, 373 F.3d 998. Second, the evidence showed that Provident both intended to deprive him of nearly $1 million in future benefits, and "consciously disregarded" the risk of significant injury that their conduct posed to his health and safety. Hawkins, 733 P.2d at 1081. Defendants even conceded that they made no mistake by closing Dr. Leavey's claim, and the evidence showed that they knew that: (1) cutting him off would likely cause a relapse; (2) a relapse would cause him to suffer serious physical
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and emotional injury; and (3) the relapse could cause him to commit suicide, or at a minimum shorten his life. The Provident employee that authored the December letter also admitted that she knew it might cause Dr. Leavey to become "extremely upset," but did nothing to prepare him for the blow. (Tr. 770:2-10, 757:5-7.) This and other evidence makes this a paradigm case for punitive damages. As the Arizona Supreme Court has held, it is error to enter a directed verdict on a punitive damages claim where evidence supports the inference that the defendant unfairly adjusted the claim in accordance with "a pattern of similar unfair practices." Hawkins, 733 P.2d at 1081; cf. Zilisch v. State Farm Mut. Auto. Ins., 995 P.2d 276, 279 (Ariz. 2000) (arbitrary claim payment goals warrant punitive damages); Thompson, 832 P.2d at 212 (reversing a directed verdict because court failed to properly draw inferences in plaintiff's favor). Similarly, both this Court and the Ninth Circuit have held that punitive damages are warranted in cases involving evidence that an insurance company "committed fraud in denying benefits" and "targeted highincome policies" for denial. Verhulst v. Paul Revere Life Ins. Co., No. CV-03-0858, 2005 U.S. Dist. LEXIS 21941, at *21 (D. Ariz. Sept. 26, 2005); Hangarter, 373 F.3d at 1014 (holding that such evidence "could support a jury's finding that Defendants had a `conscious course of conduct, firmly grounded in established company policy' that disregarded the rights of insureds") (citation omitted); Amadeo v. Principal Mut. Life Ins. Co., 290 F.3d 1152, 1164-65 (9th Cir. 2002) (applying California law, which uses the same punitive damages standard as Arizona). Defendants' arguments to the contrary ignore these decisive cases and improperly construe the record in their favor, contrary to Thompson's teaching. Cf. Hyatt Regency Phoenix Hotel Co. v. Winston & Strawn, 907 P.2d 506, 518-19 (Ariz. Ct. App. 1995); Ace v. Aetna Life Ins. Co., 139 F.3d 1241, 1246 (9th Cir. 1997) (holding a punitive damage award should be overturned "only" after "consideration of the record as a whole"). For example, Defendants' argument that the December 2001 letter amounts to nothing more than "express[ing] concern about Dr. Leavey's need
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for appropriate care," (Mem. at 4), ignores that the letter uses the issue of "appropriate care" as a basis for denying benefits. Furthermore, before terminating Dr. Leavey's benefits, Defendants said nothing to Dr. Leavey or his treating physicians about appropriate care, and received no new information that would justify their sudden interest in the topic (other than information indicating that they may be on the hook for Dr. Leavey's benefits indefinitely). Similarly, Defendants' contention that "there is no evidence that defendants knew of [Dr. Leavey's] allegedly fragile state when" they sent the letter (Mem. at 5), is mere wishful thinking. Defendants' attempt to minimize the evidence showing that they targeted Dr. Leavey's claim for denial pursuant to their scheme (Mem. at 6) ignores that Defendants implemented their improper practices "across all sites" (Tr. 478:5-15), and undertook other efforts to "push . . . deep into [its] culture" the practices necessary to achieve the arbitrary claim-closing goals. (Ex. 67 at 2465.) Thus, although lower-level claims department employees were not copied on executivelevel documents regarding claims-closing strategies, these tactics were shared with low-level employees in other ways to create the "pressure" necessary to achieve Provident's arbitrary goals ­ goals that were not only met, but exceeded. (Tr. 274:1013, 504:4-505:5; see also Tr. 716:15-717:10, 639:15-640:17, 478:5-15.) Cf. Thompson, 832 P.2d at 211 (noting that a "jury was not bound to accept" employees' denials concerning company pressure to behave illegally). 4 Moreover, Dr. Leavey's claim exactly fit Defendants' profile, which targeted psychiatric claims because of their "`gray' area," which offers "a greater chance of some type of resolution." (Ex. 27 at 2107.) In accordance with these practices, It is hardly surprising that Provident employees denied succumbing to corporate pressure to illegally close claims because it is well understood that "while people are remarkably susceptible to situational pressures, they are even more remarkably insensitive to and unaware of the extent to which these pressures are determining their behavior." Zimbardo and Ruch, Essentials of Psychology and Life (10th ed.) at 497. Cf. Jolly v. Superior Court, 540 P.2d 658, 662 (Ariz. 1975) (employees are often "less than candid" with investigators about their employers).
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Defendants then: (1) identified Dr. Leavey's claim as posing a "severe situation;" (2) subjected it to a multitude of the improper practices they had developed; and (3) closed it without any justification. Construed in Dr. Leavey's favor, this evidence conclusively demonstrates beyond any reasonable doubt that Dr. Leavey's claim did not miraculously escape Defendants' company-wide practices aimed at claims exactly like his. Defendants' suggestion that they may not, as a matter of law, be punished for seeking to manipulate the judicial system by attempting to cover up their wrongful conduct is baseless. Hollock v. Erie Ins. Exch., 842 A.2d 415 (Pa. Super. Ct. 2004) (holding that insurer's trial conduct amounted to "a blatant attempt to undermine the truth finding process") (citation omitted); Tucson Airport Auth. v. Certain Underwriters at Lloyd's, 918 P.2d 1063, 1066 (Ariz. Ct. App. 1996) (the duty of good faith and fair dealing continues throughout litigation process). Unlike in Saucedo v. Salvation Army, 24 P.3d 1274 (Ariz. Ct. App. 2001), where the employee's flight "had very little relevance to whether the [Defendant] motorist committed the tort with an evil mind," Provident's cover-up occurred in tandem with the wrongful conduct at issue in this lawsuit. S. Union v. Sw. Gas Corp., 281 F. Supp. 2d 1090, 1094 (D. Ariz. 2003), aff'd in part and vacated in part by 415 F.3d 1001 (9th Cir. 2005). This not only breached Provident's continuing duty of good faith, which caused Dr. Leavey to suffer additional injuries, but revealed that its earlier violation was done with an evil mind because there would be no need to conceal an innocent breach. See, e.g., Thompson, 832 P.2d at 209 (concealment of misconduct is evidence of an evil mind). 5 Gurule v. Ill. Mut. Life and Cas. Co., 734 P.2d 85 (Ariz. 1987) and Linthicum v. Nationwide Life Ins. Co., 723 P.2d 675, 682 (Ariz. 1986), likewise both show why the Court properly submitted the issue of punitive damage to the jury. In Gurule, punitive damages were denied because the "facts strongly suggest[ed] . . . that [the insurance company] tried to play fairly with [the insured]." 734 P.2d at 92. In Linthicum, punitive damages were denied because there was no evidence that the insurance company engaged in "aggravated, outrageous, oppressive or fraudulent" conduct. 723 P.2d at 682. These cases thus stand in stark contrast to this one.
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In the end, there was ample clear and convincing evidence showing that Defendants: (1) engaged in a "pattern of . . . unfair practices" to concoct an illegitimate reason for terminating Dr. Leavey's benefits, Hawkins, 733 P.2d at 1081; (2) while "knowing that [its conduct] created a substantial risk of significant harm," Rawlings, 726 P.2d at 578, to Dr. Leavey; and (3) then compounded the harm to Dr. Leavey by "concealment of [its conduct]," Thompson, 832 P.2d at 209. Accordingly, the Court should deny Defendants' motion for judgment as a matter of law and alternative motion for new trial with respect to punitive liability. Cf. Johnson v. Paradise Valley Unified Sch. Dist., 251 F.3d 1222, 1229 (9th Cir. 2001) (reversing district court's grant of JMOL and conditional new trial because under the Ninth Circuit's "stringent standard" disfavoring new trials based on the insufficiency of the evidence, the verdict must be "against the great weight of the evidence" or it must be "quite clear that the jury has reached a seriously erroneous result."). B. The Jury's Punitive Damages Award Falls Well Within a Constitutionally Acceptable Range and Does Not Violate Defendants' Due Process Rights

Under the guise of due process, Defendants seek to protect their ill-gotten gains and effectively eliminate the punitive and deterrent effect the jury intended to achieve with its award. But Defendants' argument that due process considerations require the Court to reduce the $15 million punitive damages award (Mem. at 15-21) ignores the facts and disregards controlling precedent. The constitutional question raised by a punitive damages award is whether the award is so large as to amount to an arbitrary deprivation of property without notice. BMW of N. Am. v. Gore, 517 U.S. 559 (1996); State Farm v. Campbell, 538 U.S. 408 (2003). To assess this constitutional question, courts apply the guideposts set forth in BMW, while being mindful "of the state interests that a punitive award is designed to serve," 517 U.S. at 568. If a court concludes that the award amounts to an unfair deprivation of property, the court may reduce the award, but only to the maximum amount due process considerations permit. Leatherman Tool Group v. Cooper Indus.,
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285 F.3d 1146, 1151 (9th Cir. 2002). In making these determinations, the Court is bound by the jury's findings of fact. Zhang v. Am. Gem Seafoods, 339 F.3d 1020, 1043 n.14 (9th Cir. 2003); see also Leatherman Tool, 285 F.3d at 1150. Furthermore, if "fair procedures were followed, a [punitive damages] judgment that is a product of that process is entitled to a strong presumption of validity." TXO Prod. Corp. v. Alliance Res. Corp., 509 U.S. 443, 457 (1993) (plurality opinion); see also BMW, 517 U.S. at 586-87 (Breyer, O'Connor and Souter, concurring). 1. The BMW Guideposts Support the Award

In BMW, the Supreme Court developed three guideposts to gauge whether a defendant had received "adequate notice" of the potential sanction: (1) the reprehensibility of the defendant's conduct; (2) the harm or potential harm suffered by the plaintiff as compared to the punitive damages award; and (3) other civil penalties that could be imposed. 517 U.S. 559; see also Zhang, 339 F.3d at 1042. a) Reprehensibility: "The most important indicium of the

reasonableness of a punitive damages award is the degree of reprehensibility of the defendant's conduct." State Farm, 538 U.S. at 419 (quoting BMW, 517 U.S. at 575). Consideration of the five "reprehensibility" factors shows that Defendants' conduct falls at the high end of the reprehensibility spectrum. See id. at 419. Indeed, this case involves far more than mere economic harm, and, as in Hangarter, "[t]he evidence, viewed in [Dr. Leavey's] favor, can support the conclusion that Defendants' conduct was in reckless disregard of the rights and the physical well-being of [Dr. Leavey]; was threatening to an individual who was economically vulnerable; was part of a general corporate policy and not an isolated incident; and caused harm in a deceitful manner." Hangarter, 373 F.3d at 1014 (emphasis added). First, viewed in Dr. Leavey's favor, this case involved far more than mere "economic" harm. Provident not only caused Dr. Leavey to suffer the "very serious" physical and emotional consequences associated with his relapse ­ including his crushed hand ­ he suffered a variety of other ongoing non-economic harms due to
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Defendants' conduct. (See supra 7-10); cf. 2-8 Eric Mills Holmes, Holmes' Appelman on Insurance 2d § 8.7 (2d ed. 1996) (a "policyholder can suffer injury not only to his economic well-being but to his emotional and physical health as well" from a denial of coverage). Defendants' argument that Dr. Leavey suffered only "normal emotional reactions to . . . [a] collateral contract dispute" (Mem. at 16) simply ignores the evidence of severe physical and emotional harm. Second, viewed in Dr. Leavey's favor, Defendants' conduct evinced an indifference to or a reckless disregard for Dr. Leavey's health and safety. Defendants knew: (1) that Dr. Leavey faced a high risk of relapse; (2) that a relapse could cause him to commit suicide or shorten his life; and (3) that he could suffer adverse health consequences from returning to work before medically ready to do so. Defendants recklessly disregarded these risks, putting their own interests above Dr. Leavey's health and safety. Defendants' contention that they merely wanted the best treatment for Dr. Leavey cannot be squared with the evidence. Third, Defendants engaged in conduct threatening to an economically vulnerable individual. Defendants concede this point, but seek to downplay its significance. But Hangarter reveals the flaw in their analysis. Viewed in Dr. Leavey's favor, the evidence showed that Defendants disregarded the harm Dr. Leavey would and did suffer due to his financial vulnerability. Fourth, viewed in Dr. Leavey's favor, Defendants' "conduct involved repeated actions" that were not "an isolated incident," and fifth, that conduct "was the result of intentional malice, trickery, or deceit." State Farm, 538 U.S. at 419. Defendants tried to deceive Dr. Leavey by misleading him about his obligations and coverage under his policy in an effort to wrongly deny him the benefits owed. When Defendants' effort to trick Dr. Leavey into going away failed, Defendants tried to cover their tracks by misleading him again. Defendants engaged in such egregious conduct as part of an overall scheme to target policies like Dr. Leavey's. Defendants' effort to distance themselves from their indefensible claims practices directed at Dr. Leavey and others
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cannot be squared with the evidence. This case stands at the high end of the reprehensibility scale, involving conduct more egregious than the conduct present in Hangarter.6 b) Ratio: After State Farm, the Ninth Circuit developed "a

rough framework" for the ratio analysis. Planned Parenthood v. Am. Coalition of Life Activists, 422 F.3d 949, 962 (9th Cir. 2005). "[W]here there are significant economic damages . . . but behavior is not particularly egregious, a ratio of up to 4 to 1 serves as a good proxy for the limits of constitutionality." Id. As behavior becomes more "egregious . . . a single-digit ratio greater than 4 to 1 might be constitutional" even with "significant economic damages . . . ." Id. Moreover, "[i]n most cases, the ratio will be within a constitutionally acceptable range, and remittitur will not be justified on this basis." Id. at 954 (quoting BMW, 517 U.S. at 583); cf. Zhang, 339 F.3d at 1044 ("We are aware of no Supreme Court or Ninth Circuit case disapproving of a single-digit ratio . . . and we decline to extend the law" by so doing.). In this case, because of the reprehensibility of Defendants' conduct, a ratio of up to 9:1 would not raise any due process issue.7 The actual ratio of approximately 3 to 1 thus falls "well within the Supreme Court's suggested range for constitutional punitive damages awards," Hangarter, 373 F.3d at 1015, and would do so even if this In sharp contrast to State Farm, where most of the evidence concerning corporate practices "bore no relation to third-party automobile insurance claims, the type of claim underlying the [plaintiffs'] complaint against the company," 538 U.S. at 415, Defendants' corporate practices focused precisely on the kind of high-dollar, own-occupation policy owned by Dr. Leavey and the kind of psychiatric disability suffered by him. See also Campbell v. State Farm, 98 P.3d 409, 418 (Utah 2004) (ratio of 9:1 appropriate on remand in case involving conduct less reprehensible than here); McClain v. Metabolife Int'l, 259 F. Supp. 2d 1225, 1235 (N.D. Ala. 2003) (reducing punitive award to maximum 9:1 ratio identified as acceptable in State Farm), rev'd on other grounds 401 F.3d 1233 (11th Cir. 2005); Trinity Evangelical Lutheran Church v. Tower Ins., 661 N.W.2d 789, 803 (Wis. 2003) (affirming punitive damage award that yielded a 7:1 ratio); Bocci v. Key Pharms., 76 P.3d 669, 674-76 (Or. Ct. App. 2003) (finding 7:1 ratio appropriate).
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case did not involve "particularly egregious behavior," Planned Parenthood, 422 F.3d at 962. Furthermore, the ratio would become even smaller, and significantly so, in light of the potential harm to Dr. Leavey (death/shortening of life), or the potential harm to other Arizona residents. See TXO Prod. Corp., 509 U.S. at 460. The $15 million punitive award passes constitutional scrutiny.8 Defendants' contention that the Constitution requires a punitive award of no more than a 1:1 ratio not only ignores the Ninth Circuit's post-State Farm framework, but also that the Ninth Circuit specifically rejected that exact argument in Hangarter. 373 F.3d at 1015. Similarly, Defendants' contention that they should be punished less because they also caused Dr. Leavey to suffer emotional injuries makes no sense in this case for two reasons. First, Dr. Leavey suffered that harm due to Defendants' indifference to and reckless disregard of his health and safety, which weighs in favor of enhancing the ratio, not reducing it. Second, this case involves far more than pure emotional harm, and there is no reason to believe that the portion of the compensatory award that includes emotional distress damages (whatever it is) duplicated the punitive award. Cf. McClain, 259 F. Supp. 2d at 1230 ("It is impossible to detect what portion, if any, of the compensatory damages . . . was for physical pain and suffering and what portion, if any, was for distress. For this reason, it is not possible to discount the punitive awards by a retrospective finding that they overlap awards for distress."). Given that due process prohibits only a "grossly excessive" award, leaving to the States "considerable flexibility in determining" whether "the damages See also Rhone-Poulenc Agro, S.A. v. DeKalb, 345 F.3d 1366, 1370-72 (Fed. Cir. 2003) (upholding a $50 million punitive award amounting to a 3.33 to 1 ratio in a case that did not involve any "`disregard for the health and safety of others, a pattern of misconduct, or the exploitation of a financially vulnerable target'") (citation omitted), cert. denied, DeKalb v. Bayer, 540 U.S. 1183 (2004); Eden Elec., Ltd. v. Amana, 370 F.3d 824, 829 (8th Cir. 2004) (upholding a $10 million punitive award that amounted to a ratio slightly more than 4.5:1 in a case involving purely economic harm that "did not evince a disregard for the health or welfare of others, and the fraud involved only a single incident and a single victim"), cert. denied, 125 S. Ct. 1322 (2005).
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awarded [were] reasonably necessary to vindicate the State's legitimate interests in punishment and deterrence," the jury's award of punitive damages was well within constitutional parameters. BMW, 517 U.S. at 568 (emphasis added). c) Comparable Civil and Criminal Penalties: Although

this is the least important factor, it is significant that Defendants' conduct could subject them to losing their licenses, costing Defendants hundreds of millions of dollars. See Ariz. Rev. Stat. § 20-220(A)(1) and (4). Moreover, for eighteen years, Arizona courts have warned insurance companies that their ill-gotten gains may be disgorged for bad faith conduct. Hawkins, 733 P.2d 1073, 1080-81. There can be no doubt that Defendants were on notice of this civil remedy, and thus cannot complain that they were deprived of due process by being punished for targeting Dr. Leavey's claim for denial given that the jury's sanction amounts to a small fraction of the hundreds of millions of dollars of their ill-gotten gains. (Exs. 5, 6, 24, 30, 53, 70, 72, 73, 76, 134; Tr. 228:24-229:2.) 2. Other Considerations Confirm That Reducing the Punitive Award Would Undermine the State's Legitimate Interests

Other considerations confirm that reducing the award would improperly undermine the State's legitimate interests in punishment and deterrence. As Arizona courts have emphasized, "the goals of punishment and deterrence would be circumvented if the financial position of the defendant allowed it to comfortably absorb the award." Hawkins, 733 P.2d at 1080; cf. BMW, 517 U.S. at 591 (it is not "unlawful or inappropriate" to consider a defendant's wealth in setting punitive damages) (Breyer, J., concurring). Arizona courts have also emphasized that punitive damages should be used to remove the profitability from illegal conduct. Hyatt Regency, 907 P.2d at 520. Although these goals must be achieved within the limits of

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the Constitution, the award here passes constitutional muster, and is necessary to provide at least minimal deterrent effect.9 Lastly, and importantly, the Court accorded Defendants numerous procedural protections, including instructing the jury that the evidence must "be clear and convincing" and that it should consider the relationship between the degree of reprehensibility and the harm suffered by the Plaintiff. The jury's assessment of punitive damages is thus entitled to a "strong presumption of validity." TXO, 509 U.S. at 457 (plurality opinion). 3. The Jury Properly Punished the Defendants and They Cannot Complain About an Instruction That They Never Requested

Defendants (wrongly) claim they are entitled to a new trial, arguing that the Court should have instructed the jury to punish Defendants "only for the specific conduct directed at Leavey" due to certain statements made in closing argument. (Mem. at 21.) The jury, however, properly punished Defendants for what they did to Dr. Leavey. Although Defendants may not like it, when a defendant's broader conduct, including out-of-state conduct has "a nexus to the specific harm suffered by the plaintiff," as in this case, it is relevant to "demonstrat[ing] the deliberateness and culpability of the defendant's action in the State where it is tortious." State Farm, 538 U.S. at 422. Moreover, "a recidivist may be punished more severely than a first offender . . . [because] repeated misconduct is more reprehensible than an individual instance of malfeasance." Id. at 423 (quoting BMW, 517 U.S. at 577); BMW, 517 U.S. at 576-77 ("evidence that a defendant has repeatedly engaged in prohibited conduct while knowing or suspecting that it was unlawful would provide relevant Arizona courts have found punitive awards of 3% to 5% of net worth appropriate to fulfill the State's punitive goals, Hawkins, 733 P.2d at 1084, as have other courts after State Farm, e.g., Eden Elec, Ltd. v. Amana Co., 258 F. Supp. 2d 958, 975 (N.D. Iowa 2003). The award here is less than .03% of Defendants' net worth. (Ex. 5 (Defendants' net worth exceeds $8 billion).)
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support for an argument that strong medicine is required to cure the defendant's disrespect for the law"). Defendants have demonstrated all too well their willingness to violate the law when it serves their interests. More fundamentally, Defendants failed to object to the purportedly improper argument, and failed to propose the jury instruction that Defendants now claim should have been given. They cannot, therefore, raise this argument. See Fed. R. Civ. P. 51(d)(1)(B); Sanghvi v. City of Claremont, 328 F.3d 532, 541 (9th Cir. 2003) (failure to object to jury instruction); Kaiser Steel Corp. v. Frank Coluccio Constr. Co., 785 F.2d 656, 658 & n.2 (9th Cir. 1986) (failure to object to closing argument). Defendants have no basis to complain about a lack of due process. IV. The Court Should Deny Defendants' Rule 59 Motion Concerning the Jury's Bad Faith Damages Award Defendants' attack on the compensatory damages award (Mem. at 10-14) likewise fails.10 A. The Court May Not Reduce the Compensatory Damages Award Unless It Is So Unreasonable as to Shock the Court's Conscience

Under Arizona law, the Court may not set aside a jury's award as excessive unless it is "unreasonable, outrageous, and beyond all measure." Gonzales v. Ariz. Pub. Serv. Co., 775 P.2d 1148, 1154 (Ariz. Ct. App. 1989). "The amount of an award for damages is a question peculiarly within the province of the jury, and the award will not be overturned or tampered with unless . . . the verdict was . . . the result of passion or prejudice." Sheppard v. Crow-Barker Paul No. 1 Ltd. P'ship, 968 P.2d 612, 622 (Ariz. Ct. App. 1998). The Court must "allow substantial deference to a jury's finding of the appropriate amount of damages." Del Monte Dunes v. City of Monterey, 95 F.3d 1422, 1435 (9th Cir. 1996). The Court should be especially reluctant to second guess the jury's damages verdict in a case, such as this, in which Plaintiff incorporates his argument at Tr. 1944:9-1945:13 in response to Defendants' renewed Rule 50(b) Motion concerning bad faith. (Mem. at 1 n.2.)
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the award is intended to compensate for intangible, noneconomic loss. Brayman v. 99 West, Inc., 116 F. Supp. 2d 225, 231 (D. Mass. 2000), aff'd, 26 Fed. Appx. 24 (1st Cir. 2002). A reviewing court, therefore, should not alter a damages verdict unless the amount is so unreasonable as to shock the conscience of the court. Sheppard, 968 P.2d at 622. As the Ninth Circuit has explained, "[i]t is not enough that we might, as the triers of fact, have awarded less." Barzelis v. Kulikowski, 418 F.2d 869, 870 (9th Cir. 1969). B. The Amount of the Bad Faith Award Is Reasonable

Although Defendants pretend that this case involves only "emotional" harm for a short duration, the Court correctly instructed the jury that Dr. Leavey could recover "the amount of money which will reasonably and fairly compensate [Dr. Leavey] for any injury . . . caused by [Provident]," including "[t]he mental, physical, emotional pain and suffering experienced," as well as that "which will reasonably probably be experienced into the future." (Tr. 2161:24-2162:1 (emphasis added).) The jury is, of course, presumed to have followed these instructions, Benna v. Reeder Flying Serv., Inc., 578 F.2d 269, 274 (9th Cir. 1978), and Defendants unwillingness to recognize these other harms reveals the flaw in their analysis. In fact, the evidence showed that Provident "devastated and confused" Dr. Leavey and plunged him into a "depression" that greatly concerned his doctor. (Tr. 546:25-547:2.) Provident even timed its bad faith denial to maximize harm to Dr. Leavey, as it caught Dr. Leavey as he was gaining ground, for the first time, in his long battle against addiction and depression. Provident destroyed this hard-fought progress, causing multiple relapses, during which Dr. Leavey suffered emotional and physical harm. (See supra at 7-9.)11 Although generous, the $4 million award for these non-economic damages was not grossly excessive given these circumstances. Indeed, other courts, including this Contrary to Provident's claim otherwise, its attempts to cover up wrongdoing, which first surfaced with the June 2002 letter reinstating benefits, did not "end" Dr. Leavey's suffering. (Mem. at 11.) The cover-up only added to Dr. Leavey's injuries, compounding them for four long years.
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one, have upheld similarly large non-economic compensatory damage awards, and in some instances those awards did not include both the physical and emotional injury that Dr. Leavey endured. See, e.g., Ceimo, 2003 U.S. Dist. LEXIS 26699 (upholding $5.5 million award); Weathers v. Am. Family Mut. Ins. Co., 793 F. Supp. 1002, 1012 (D. Kan. 1992) (upholding $3.5 million emotional distress award where the insurer denied a $200,000 fire-loss claim); Hunio v. Tishman Constr. Corp., 18 Cal. Rptr. 2d 253, 264-65 (Cal. Ct. App. 1994) (affirming $2 million award for age discrimination); Sw. Bell Tel. Co. v. Wilson, 768 S.W.2d 755, 763 (Tex. App. 1988) (affirming award of $1.5 million for mental anguish for tortious collection practices); Tompkins v. Cyr, 202 F.3d 770, 786 (5th Cir. 2000) (upholding $2.8 million award for mental anguish inflicted against abortion protesters); Prozeralik v. Capital Cities Commc'ns, 635 N.Y.S.2d 913 (N.Y. App. Div. 1995) (upholding $3.5 million award for emotional distress in defamation case); Ricci v. Key Bancshares of Maine, 662 F. Supp. 1132, 1140 (D. Me. 1987) (upholding $6 million emotional distress award); Monaco v. HealthPartners of S. Ariz., 995 P.2d 735 (Ariz. Ct. App. 1999) (upholding $1.5 million award).12 Defendants' effort to downplay the damages they caused simply ignores that this case involves far more than ordinary emotional injury. It includes a combination of significant and serious emotional and physical injury, far greater than that found in an ordinary bad faith case.13 Indeed, although Defendants argued that they should not The existence of smaller awards based on different facts does not render Dr. Leavey's damages award grossly excessive. Smith v. Kmart Corp., 177 F.3d 19, 3132 (1st Cir. 1999); Wakefield v. United States, 765 F.2d 55 (5th Cir. 1985). Moreover, Provident's suggestion that the only proper comparators are "reported Arizona bad faith case[s]" casts too narrow a net to provide any representative sample. Defendants' focus on the medical records does them no good because (as they knew when they denied his claim), Dr. Leavey would, given his mental illness, likely underreport the devastation he experienced from the claim termination. (Tr. 456:12-457:7, 466:25-467:5, 534:7-535:4, 552:14-25; cf. Ex. 1 at 980 (noting that Dr. Leavey was not always forthcoming with his physicians).)
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be held liable for the extraordinary suffering Dr. Leavey endured because of his sensitive state (Mem. at 13), the law says otherwise. Under the so-called "eggshell plaintiff" rule, Provident is liable for all damages it caused, "even if the plaintiff was more susceptible than a normally healthy person would have been, and even if a normally healthy person would not have suffered similar injury." Gasiorowski v. Hose, 897 P.2d 678, 684 (Ariz. Ct. App. 1994). It is thus precisely because Dr. Leavey had begun doing so well before his relapse that the compensatory damages award comes nowhere close to being "unreasonable, outrageous, and beyond all measure." Gonzales, 775 P.2d at 1154. V. Defendants' Remaining Grounds for a New Trial Likewise Lack Merit 1. Defendants' contention that the jury's bad faith award is also against the

"clear weight of the evidence" (Mem. at 10) simply ignores the evidence. 2. Defendants' contention that the jury's damages award is the product of

passion and prejudice (Mem. at 22-23) is baseless. The jury paid close attention to the evidence, asked questions, and carefully deliberated over a seven-day period. The verdict, which the evidence amply supports, represents a dispassionate jury dutifully discharging its constitutional function. Additionally, it is well settled that "[t]he amount of the award alone is not sufficient evidence to prove the jury acted with passion or prejudice." Hawkins, 733 P.2d at 1084. As for the so-called "bad company" evidence, the Court properly admitted that evidence because it detailed Defendants' institutional practices that affected Dr. Leavey's claim, and thus was appropriately considered by the jury for bad faith and punitive damages. Cf. Zilisch, 995 P.2d at 280-81; Hangarter, 373 F.3d at 1019-20. When relevant evidence motivates a jury to render a substantial verdict, there is no improper "passion and prejudice." Defendants' complaints about closing argument improperly takes some statements out of context while misconstruing others, and ignores that alleged lawyer misconduct warrants a new trial only when it "so permeated the trial as to lead to the
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conclusion the jury was necessarily influenced by passion and prejudice in reaching its verdict." Cooper v. Firestone Tire & Rubber Co., 945 F.2d 1103, 1107 (9th Cir. 1991).14 Defendants also never objected to these comments during closing argument, and thus, must show that counsel's statements amounted to "fundamental error" impacting "the integrity or fundamental fairness of the proceedings . . . ." Bird v. Glacier Elec. Coop., 255 F.3d 1136, 1148 (9th Cir. 2001) (finding fundamental error where closing argument in tribal court blatantly appealed to racial bias). As counsel's comments were entirely appropriate closing argument, they do not approach this level of error. 3. Defendants' request to grant a new trial based on "the interests of

justice," does nothing more than invite the Court to commit clear error. (Mem. at 23.) VI. CONCLUSION For the above reasons, the Court should deny Defendants' Rule 50 and Rule 59 motions. Defendants received a fair trial and the jury's verdict is supported by the evidence and the law. DATED this 22nd day of December, 2005. OSBORN MALEDON, P.A.

By s/Thomas L. Hudson Thomas L. Hudson Danielle D. Janitch Mark P. Hummels 2929 North Central Avenue, Suite 2100 Phoenix, Arizona 85012-2794 Attorneys for Plaintiff

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For example, Defendants' state that Leavey's counsel "compared" them to a "snake," when in fact he appropriately explained that an insurance company should 28 allow an unprofitable block of policies to wind its way through the system. (Tr. 2010.) Case 2:02-cv-02281-SMM Document 261 26 Filed 12/22/2005 Page 29 of 30
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I hereby certify that on December 22, 2005, I electronically transmitted the attached document and Separate Appendix to Response to Defendants' Memorandum of Points and Authorities in Support of Renewed Motion for Judgment as a Matter of Law or, in the Alternative, Motion for a New Trial and/or Remittitur to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Stephen M. Bressler Ann-Martha Andrews Scott Michael Bennett Lewis and Roca, LLP 40 North Central Avenue Phoenix, Arizona 85004-4429 [email protected] [email protected] [email protected] Attorneys for Defendants s/Brenda Wendt
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Case 2:02-cv-02281-SMM

Document 261 27 Filed 12/22/2005

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