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Jones v. Great American Life Insurance Co.

United States District Court, W.D. Arkansas, Fort Smith Division

January 30, 2015

JUDY C. JONES, individually and as sole trustee of family trust of Harold L. and Judy C. Jones Family Trust, dated 10/1/1999, Plaintiff,


P.K. HOLMES, III, Chief District Judge.

Plaintiff Judy C. Jones, individually and as trustee for the Harold L. and Judy C. Jones Family Trust ("the Trust"), brought this action against Defendants Great American Life Insurance Company ("GALIC") and John David Bean. Jones alleged that Bean, an agent of GALIC, cancelled her now-deceased husband's term-life insurance policy without authorization. GALIC answered and filed a crossclaim against Bean, alleging that Bean was not its agent, and that if GALIC was found to have wrongfully terminated the life insurance policy, Bean was responsible and should be liable to GALIC. Bean has failed to appear, answer, or otherwise respond to either the complaint or the crossclaim, despite being properly served. (Docs. 18 and 19 (affidavits of service)). Accordingly, the Clerk of Court entered default against Bean on Jones's complaint on August 5, 2014 (Doc. 29) and on GALIC's crossclaim on October 6, 2014 (Doc. 38). Currently before the Court are the motions of GALIC (Doc. 22) and Jones (Doc. 24) for default judgment and damages against Bean, along with supporting documents, including Court-ordered briefs on the damages issues. (Docs. 33-36).[1]

I. Analysis

An entry of default by the clerk does not always automatically entitle the plaintiff to a default judgment. Instead, it is within the Court's discretion to determine whether a default judgment should be entered. Fed.R.Civ.P. 55(b). As a consequence of default a defaulting party is deemed to have admitted the factual allegations in the complaint. See Fed.R.Civ.P. 8(b)(6) ("An allegation-other than one relating to the amount of damages-is admitted if a responsive pleading is required and the allegation is not denied. If a responsive pleading is not required, an allegation is considered denied or avoided."); Murray v. Lene, 595 F.3d 868, 871 (8th Cir. 2010) ("Upon default, the factual allegations of a complaint (except those relating to the amount of damages) are taken as true...."). While the factual allegations are taken as true, complaining parties must prove the allegations regarding the amount of damages to a reasonable degree of certainty. See Everyday Learning Corp. v. Larson, 242 F.3d 815, 818-19 (8th Cir. 2001) (noting that even where a default judgment is entered and liability is established, a plaintiff must still prove his or her actual damages to a reasonable degree of certainty).

Jones alleges the following facts in her claim (Doc. 12) against Bean, which the Court takes as true: Jones is the trustee of the Harold L. and Judy C. Jones Family Trust, which was beneficiary of a life insurance policy with a face amount of $250, 000 on the life of Harold Jones. Jones was also Harold's spouse. The policy was obtained through Bean, who was an agent for GALIC at the time it was obtained. The Joneses made timely payments on the policy. Harold became ill in 2011 and was diagnosed with cancer in June 2012. Harold was ill throughout the Thanksgiving holidays in 2012. Harold was admitted to Baptist Medical Center in Little Rock, Arkansas, on December 6, 2012. He was intubated and mechanically ventilated beginning on December 15, 2012. From that point until his death on December 25, 2012, Harold was never alert, oriented, or interactive, and his mental state was such that he could neither understand nor execute documents. On December 17, 2012, while Harold was intubated, Bean called GALIC. Bean identified himself as Harold Jones and asked whether his life insurance policy was still active. GALIC represented that the policy was active, and Bean asked to cancel it. GALIC faxed the cancellation forms to "Harold Jones" at Bean's office fax number. Bean then signed the forms as "Harold Jones" and faxed them back. GALIC cancelled the policy. Harold never asked Bean to cancel his policy.

GALIC alleges the following facts in its crossclaim (Doc. 14) against Bean, which the Court takes as true: Bean called GALIC pretending to be Harold Jones and asked to cancel Harold's policy. Bean submitted cancellation forms to GALIC with Harold Jones's signature on them, and GALIC cancelled the policy based on those forms.

Because Bean is in default, he has admitted the above factual allegations. In her brief on default damages, Jones has explained that while her complaint raises four causes of action under Arkansas law-outrage, fraud, breach of fiduciary duty, and tortious interference with a contract-the only one under which she can recover individually is outrage. (Doc. 35, p. 2). Jones has also sued on behalf of the Trust, and believes she may recover in that capacity for fraud, breach of fiduciary duty, and tortious interference with a contract, though she concedes the Trust is entitled to only one award regardless of the theory of recovery. GALIC has sued Bean on the basis that Bean's actions constitute fraud and he is liable to them for damages sustained as a result of that fraud. The Court will address Jones's individual claims, then Jones's claims as trustee, then GALIC's claims.

Regarding Jones's cause of action for outrage raised in her individual capacity, to prevail against Bean, Jones must show that (1) Bean intended to inflict emotional distress by cancelling Harold's policy or knew or should have known that emotional distress was the likely result of cancelling Harold's policy; (2) cancelling Harold's policy was extreme and outrageous, beyond all possible bounds of decency, and utterly intolerable in a civilized community; (3) cancelling Harold's policy caused Jones distress; and (4) Jones's emotional distress was so severe that no reasonable person could be expected to endure it. Crockett v. Essex, 19 S.W.3d 585, 589 (Ark. 2000). Arkansas takes a strict approach to outrage cases, and the tort is not intended to "open the doors of the courts to every slight insult or indignity one must endure in life." Id. (citing Travelers Ins. Co. v. Smith, 991 S.W.2d 591, 595 (Ark. 1999).

Where an employer angrily and abruptly discharged an employee, yelling at him and accusing him (apparently falsely) of laziness and neglect, which resulted in the employee's hospitalization and eventual eviction, there was no cause of action in Arkansas for outrage, despite the bad conduct, because the employer believed the employee was in good health and knew nothing about the employee's previous heart condition or that he was easily upset. Givens v. Hixson, 631 S.W.2d 263 (Ark. 1982); cf. Tandy Corp. v. Bone, 678 S.W.2d 312, 316 (Ark. 1984) (citing employer's ignorance in Givens and speculating that "[i]f the employer in [ Tandy Corp. ] had been completely ignorant of Bone's condition, it may be that Bone would not have a case of extreme outrage.").

Jones is not entitled to default judgment on her outrage cause of action because her allegations fall short of establishing that Bean intended to cause emotional distress or knew or should have known that emotional distress was the likely result of cancelling Harold's policy. Nothing in the factual allegations in Jones's complaint indicates Bean knew or should have known of Harold's terminal cancer. Jones alleges that Bean helped Harold obtain the policy in 2001, and Harold did not become ill until 2011. Jones does not allege that Bean knew anything of Harold or Harold's condition during the intervening years. Absent some allegation along these lines, the behavior alleged in the complaint does not establish liability on the tort of outrage. For example, had Harold been in good health, then the reasonably foreseeable consequence of Bean's conduct would be the inconvenience Harold would face in reestablishing his policy. If Bean knew Harold had terminal cancer, and if he did in fact unilaterally and fraudulently cancel the policy, then his conduct is as reprehensible as any the Court has seen in a civil case. These issues would doubtless have been discovered and resolved had Bean been present in this litigation. But because in default judgment the Court proceeds on the alleged facts, and because those alleged facts are silent regarding what Bean knew or reasonably could be expected to know regarding the likelihood of emotional distress, Jones is unable to prove her individual cause of action for outrage. Accordingly, her motion for default judgment in her individual capacity will be denied.

Turning to the causes of action Jones brings as trustee, the Court finds that Jones's allegations easily satisfy the elements of tortious interference with a contract. To establish liability on this cause of action, Jones must demonstrate:

(1) the existence of a valid contractual relationship or a business expectancy; (2) knowledge of the relationship or expectancy on the part of the interfering party; (3) intentional interference inducing or causing a breach or termination of the relationship or expectancy; and (4) resultant damage to the party whose relationship or expectancy has been disrupted.

Ballard Grp., Inc. v. BP Lubricants USA, Inc., 436 S.W.3d 445, 454 (Ark. 2014). Jones's allegations demonstrate that a valid contract or business expectancy existed between GALIC and the Trust (which was the beneficiary of Harold's life insurance policy). Jones has also alleged facts sufficient to show that Bean knew of the expectancy. Not only did Bean help Harold obtain the policy in 2001, but Bean confirmed with GALIC on December 17, 2012 that the policy had not been cancelled. Pretending that he was Harold, Bean then immediately acted to cancel the policy, intentionally terminating the relationship or expectancy. As a result of Bean's act, GALIC cancelled the policy, and so when Harold died on December 25, 2012, the Trust did not receive the $250, 000 face value of the policy. Accordingly, Jones's motion for default judgment on behalf of the Trust will be granted. Because Jones has established tortious interference with a contract, and because she represents that the Trust is entitled to recover only one award, even if it establishes each of the causes of action it has raised, the Court need not analyze the Trust's other causes of action.

Regarding damages, Jones seeks $250, 000 plus prejudgment and post-judgment interest and exemplary damages. Laying aside for the moment the issue of exemplary damages, the appropriate amount of compensatory damages for the tortious interference begins at $250, 000. Bean's interference with the contract caused GALIC to cancel Harold's term-life insurance policy, which otherwise would have resulted in $250, 000 being paid to the Trust after Harold's death. Prejudgment interest in Arkansas is not recoverable unless damages can be exactly determined at the time of the occurrence of the event which gives rise to the cause of action. Woodline Motor Freight, Inc. v. Troutman Oil Co., Inc., 938 S.W.2d 565, 567-68 (Ark. 1997) (reviewing development of prejudgment interest law in Arkansas). Harold was still alive when Bean interfered with the contract and the policy was canceled. The $250, 000 amount was not established until after Harold died. Had he lived longer, the incorrect cancellation might have been discovered and the amount of damages Bean ...

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