Anne Sloan v. Motorists Mutual ( 2004 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 03-1488
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Anne Sloan; Larry Sloan, *
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Plaintiffs - Appellees, *
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v. *
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Motorists Mutual Insurance Company, *
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Defendant - Appellant. *
___________ Appeals from the United States
District Court for the
No. 03-1688 Eastern District of Arkansas.
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Anne Sloan; Larry Sloan, *
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Plaintiffs - Appellants, *
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v. *
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Motorists Mutual Insurance Company, *
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Defendant - Appellee. *
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Submitted: January 16, 2004
Filed: May 12, 2004
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Before BYE, HEANEY, and SMITH, Circuit Judges.
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BYE, Circuit Judge.
These appeals arise out of an action for underinsured motorist (UIM) benefits.
Motorists Mutual Insurance Company (MMIC), the UIM carrier, appeals the district
court’s order denying its motion to offset a $100,000 jury award by $100,000 the
tortfeasor paid to settle the underlying negligence claim. Anne and Larry Sloan
appeal the district court’s order offsetting the verdict by $12,251.53 for medical
expenses paid by their personal injury protection insurance. We reverse the district
court’s denial of MMIC’s motion and remand with instructions to offset the jury
verdict by $100,000.
I
The Sloans, husband and wife, were insured under an automobile policy issued
by MMIC providing UIM coverage. On December 26, 1995, the Sloans were
involved in a two-vehicle collision in Arkansas. Anne was injured and settled her
negligence claim against the other driver for the tortfeasor’s $100,000 insurance
limits. Thereafter, she brought this action against MMIC to recover against her
$500,000 UIM coverage. Before trial, MMIC moved to exclude any evidence of the
settlement between Anne and the tortfeasor. The district court denied the motion and
at trial Larry testified the tortfeasor had paid $100,000 to settle the negligence claim.
At the close of the evidence, the jury was instructed,
And then the fifth and sixth verdicts ask for you to determine the amount
of damages that you find from a preponderance of the evidence were
sustained by Larry Sloan and then the next by Anne Sloan as a result of
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the occurrence. And, again, the occurrence being the automobile
accident.
Now these are the verdicts that you will be asked to consider. And
although this does not directly impact the decision against the insurance
company – that is under the coverage – these are the questions that you
will be asked to answer, and then I will apply your verdict accordingly
and inject my own decision into the case . . . .
Additionally, the jury was given a verdict form telling it to “[s]tate the amount
of any damages which you find from a preponderance of the evidence were sustained
by Anne Sloan as a result of the occurrence.” The jury awarded $100,000.
The district court denied MMIC’s post-trial motion to offset the jury award by
the settlement amount, concluding the jury had intended to award $100,000 over and
above the $100,000 settlement. The district court granted MMIC’s motion to offset
the verdict by $12,251.53 for medical expenses paid by Anne’s personal injury
protection insurance. On appeal, MMIC argues the district court erred in refusing to
offset the $100,000 damage award by the $100,000 settlement. The Sloans argue the
district court erred by reducing the jury award to account for the paid medical
expenses.
II
This is a diversity action governed by Arkansas substantive law. See Erie R.R.
v. Tompkins, 304 U.S. 64, 78 (1938). We review the district court’s application of
state law de novo. Koch Eng’g Co. v. Gibralter Cas. Co., 78 F.3d 1291, 1294 (8th
Cir. 1996).
The district court based its decision to deny the offset on a line of Arkansas
cases disallowing an offset in cases involving joint tortfeasors if one or more of them
have settled and are disclosed to the jury. See, e.g., Giem v. Williams, 222 S.W.2d
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800, 804-05 (Ark. 1949); Arkansas Kraft Corp. v. Johnson, 519 S.W.2d 74, 78-79
(Ark. 1975). In such cases, an offset is disallowed because it is presumed the jury
only intended to award damages attributable to the remaining tortfeasor. See Giem,
222 S.W.2d at 804-05; Ark. Kraft Corp., 519 S.W.2d at 78-79. The district court
concluded “[a]lthough the above cited cases addressed situations involving joint
tortfeasors, the Court finds the reasoning equally applicable here.” We disagree.
In Giem and Ark. Kraft Corp., the plaintiffs settled with one tortfeasor and
proceeded to trial against a second. 222 S.W.2d at 802; 519 S.W.2d at 76. At trial,
the settlements were revealed to the juries. Giem, 222 S.W.2d at 804; Ark. Kraft
Corp., 519 S.W.2d at 76. In post-trial motions, both trial courts refused to offset the
jury awards because the non-settling tortfeasors had already received the benefit of
the settlements. Giem, 222 S.W.2d at 804-05; Ark. Kraft Corp., 519 S.W.2d at 78-79.
In other words, the juries knew how much the settling tortfeasors had paid to
compensate the plaintiffs and it was presumed the juries reduced the awards against
the non-settling tortfeasors accordingly. Giem, 222 S.W.2d at 804-05; Ark. Kraft
Corp., 519 S.W.2d at 78-79.
By analogy, it could be argued the jury in this case knew how much the
tortfeasor had paid and reduced the total damages awarded to account for the
settlement. We question, however, whether the principle enunciated in Giem and
Ark. Kraft Corp. can be so readily applied in this context. In cases involving joint
tortfeasors, fault must be allocated among the tortfeasors to ensure each pays only its
fair share of a plaintiff’s damages. Courts, in accomplishing this goal, call upon
juries to perform two tasks; first, to determine the total amount of damages, and
second to divide responsibility for those damages among the tortfeasors. Giem and
Ark. Kraft Corp. merely recognize that if juries know how much one tortfeasor has
already paid towards the total damages it is presumed they allocate the remaining
damages accordingly. In cases such as this, however, a jury is called upon to perform
but one function – to set the total amount of a plaintiff’s damages without the need
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to allocate them between the tortfeasor and the UIM insurer. Instead, the trial court
determines the UIM carrier’s responsibility by subtracting the liability limits from the
total damage award to determine the extent to which the tortfeasor was underinsured.
Ark. Kraft Corp. is further distinguishable because the jury instruction there
was markedly different from the instruction given in this case. 519 S.W.2d at 79 n.3.
There the jury was instructed to limit its damage award to “those elements of damages
which you find were proximately caused by the negligence of Arkansas Kraft
Corporation [the remaining tortfeasor].” Id. Here, the jury was not instructed to
limit its award to those damages sustained in excess of $100,000 or to those damages
payable by the UIM carrier.
The dissent argues our review of the district court’s decision to deny the offset
is cabined by the clear error standard of review. The argument, however, overlooks
the district court’s reliance on Giem and Ark. Kraft Corp. as support for its denial.
The district court’s extension of Giem and Ark. Kraft Corp. beyond the context of
joint tortfeasors is a legal question and subject to our plenary review. Because we
conclude the Arkansas Supreme Court would not expand Giem and Ark. Kraft Corp.
to the situation presented by this case, see Jackson v. Anchor Packing Co., 994 F.2d
1295, 1301 (8th Cir. 1993) (noting when a state’s highest court has not decided an
issue it is our task to predict how it would resolve the issue), we reverse the district
court’s denial of MMIC’s motion and remand with instructions to offset the verdict
by the $100,000 negligence settlement.
Additionally, the district court’s refusal to offset the verdict cannot be upheld
because it would require us to ignore the clear language of the jury instruction and
verdict form used in this case. The jury was instructed “to determine the amount of
damages that you find from a preponderance of the evidence were sustained by . . .
Anne Sloan as a result of the . . . automobile accident.” Similarly, the verdict form
told the jury to “[s]tate the amount of any damages which you find . . . were sustained
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by Anne Sloan as a result of the [accident].” Neither the jury instruction nor the
verdict form can be read as asking the jury to reduce the award of damages to account
for the $100,000 settlement. Rather, both instructed the jury to award a sum
representing the damages Anne sustained as a result of the accident without
qualification. Absent evidence to the contrary we presume the jury followed the
instructions it was given. See Harrison v. Purdy Bros. Trucking Co., 312 F.3d 346,
352 (8th Cir. 2002). Here, there is no evidence the jury’s verdict represents anything
less than “the damages . . . sustained by Anne Sloan. . . .” Accordingly, the
presumption controls.
III
We reverse the district court’s denial of MMIC’s motion and remand with
instructions to offset the verdict by the $100,000 negligence settlement. Because the
offset results in a net verdict of zero, we need not reach the Sloans’ appeal.
HEANEY, Circuit Judge, dissenting.
I agree that the majority’s interpretation of the jury instructions and the effect
of the jury’s answers to the district court’s interrogatories is a reasonable one. While
I further agree that we review the district court’s application of state law de novo,
Koch Eng’g Co. v. Gibralter Cas. Co., 78 F.3d 1291, 1294 (8th Cir. 1996), we review
the district court’s determination of the underlying issue–whether the $100,000
verdict was meant to compensate Anne Sloan in addition to her settlement with the
tortfeasor–for clear error, Garver & Garver, P.A. v. Little Rock Sanitary & Sewer
Comm., 781 S.W.2d 24, 30 (Ark. 1989). I find none here, and would thus not disturb
the district court’s decision on this matter.
The jury in this case was informed that Sloan had settled with the other driver
involved in the auto wreck for $100,000. In such an instance, it is obviously
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preferable for the court to instruct the jury in a way that leaves no doubt as to whether
the jury award is meant to be paid in addition to the settlement. See, e.g., id, 781
S.W.2d at 29-30 (“Perhaps it would have been better if the instructions or
interrogatories had directed the jury to fix the amount of damages after first deducting
the settlement amount . . . .”). The district court did not do so here. Instead, it simply
asked the jury to state the amount of damages Sloan had sustained, to which the jury
answered $100,000. The absence of definitive instructions and interrogatories left
the district court and this court in the unfortunate position of trying to ascertain what
the jury really meant by its $100,000 award: was it supposed to represent a global
damages figure (as the majority suggests), or had the jury already discounted its
award by Sloan’s earlier settlement (as the district court found)? The question is open
to both interpretations, neither of which I find particularly more compelling or likely
than the other. I thus cannot say the district court committed clear error in finding the
jury award was intended to compensate Sloan beyond her settlement, and would
affirm the district court. At the very least, Sloan should be afforded the opportunity
for a fair resolution of her claim through a new trial with definitive jury instructions
and interrogatories.
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