Roberts v. Auto-Owners Insurance

374 N.W.2d 905, 422 Mich. 594

• Court: Michigan Supreme Court
• Decided: October 1, 1985
• Docket: 72861, (Calendar No. 2)
• Status: Published

Opinions

Boyle, J.

Our order granting leave to appeal in this case directed the parties to brief the following two issues:

(1) whether the tort of intentional infliction of emotional distress exists in this jurisdiction; and, if so,

(2) whether plaintiffs adequately pled and proved an intentional infliction of emotional distress. [419 Mich 933 (1984).]

Since we conclude that plaintiff failed even to meet the threshold requirements of proof to make out a prima facie claim of intentional infliction of emotional distress, we are constrained from reaching the issue as to whether this modern tort should be formally adopted into our jurisprudence by the well-settled rule that statements concerning a principle of law not essential to determination of the case are obiter dictum¹ and lack the force of an adjudication, McNally v Wayne County Canvassers, 316 Mich 551; 25 NW2d 613 (1947).

I

Plaintiffs Delores and Ralph Roberts brought this action, individually and on behalf of their minor daughter, Christine Rodzos, seeking recovery of certain no-fault benefits from their no-fault insurer, defendant Auto-Owners Insurance Company. The claims arose when Christine was struck by a motor vehicle while riding her bicycle, resulting in her hospitalization for several days and her missing of school for a total of three weeks. Auto-Owners paid plaintiffs’ medical and ambulance bills. The instant lawsuit concerns only plaintiffs’ claim for replacement benefits under MCL 500.3107(b); MSA 24.13107(b). ² In a separate paragraph of the complaint, plaintiffs also claimed damages for "mental anguish” and "exemplary or punitive damages” for Auto-Owners’ conduct, alleged to be "improper and/or outrageous and/or malicious” in the following respects:

On or about July 19, 1979, Plaintiff made application for replacement services benefits; August 28, 1979, forms requested by Defendant were submitted to Defendant on or about September 3, 1979, Defendant stated that Defendant did not have a document for the purpose of presenting replacement services claim; At the time of said September 3, 1979, statement, the Michigan No Fault Insurance Statute including replacement services benefits had been in effect for almost six years; Plaintiffs created and submitted their own document regarding replacement services on or about November 19, 1979, said application apparently being ignored requiring a follow up letter dated December 13, 1979; On or about January 8, 1980, approximately six months after the accident, Defendant submitted letter apparently denying plaintiff’s valid claim; As of date hereof, Defendant has not paid anything at all by way of replacement services benefits.

Before trial, Auto-Owners moved for summary judgment, arguing that mental anguish, exemplary or punitive damages are not available in an action claiming replacement benefits. The motion was denied, as was defendant’s subsequent motion for reconsideration, apparently³ on the ground that plaintiffs’ claim for mental anguish, exemplary or punitive damages was based on the tort of intentional infliction of emotional distress rather than in contract. Auto-Owners renewed the motion at trial, this time alleging plaintiffs’ failure to properly allege the tort theory in the complaint. The motion again was denied.^{4 5}At the close of plaintiffs’ case, Auto-Owners unsuccessfully moved for a directed verdict, claiming a failure of proof on the same issue. The jury subsequently returned a verdict awarding the plaintiffs a portion of the replacement benefits claimed, as well as $2,500 in mental distress damages. Auto-Owners’ motion for a new trial, contesting the validity of the mental distress damage award, also was denied.

In the Court of Appeals, Auto-Owners relied on this Court’s then-recent pronouncement in Kewin v Massachusetts Mutual Life Ins Co, 409 Mich 401; 295 NW2d 50 (1980), contending that mental distress damages are unavailable in what is essentially a breach of contract action. In affirming the judgment of the lower court, the Court of Appeals distinguished Kewin by finding sufficient evidence of tortious conduct — independent of the contract breach — to justify the award of mental distress damages in this case. Roberts v Auto-Owners Ins Co, 135 Mich App 595; 354 NW2d 271 (1983).

We granted leave to consider the viability of plaintiffs’ tort theory on the facts of this case, and directed the parties to brief the issues set forth above.

II

In Kewin, supra, we held that a disability insurance policy did not involve matters of mental concern and solicitude that would justify an award of mental distress damages for its breach.⁵ 409 Mich 416. We further held that exemplary damages are not recoverable for breach of a commercial contract "absent allegation and proof of tortious conduct existing independent of the breach.” 409 Mich 420-421; see also Valentine v General American Credit, Inc, 420 Mich 256, 263; 362 NW2d 628 (1984). Left open, however, was the question raised in this appeal: whether a separate tort claim for intentional infliction of emotional distress can be brought on the basis of an insurer’s dilatory conduct in handling an insured’s claim.⁶

The tort theory forwarded by plaintiffs has been recognized elsewhere to permit recovery of mental distress damages separate and apart from the recovery of contractual damages for breach of an insurance policy. See, e.g., Eckenrode v Life of America Ins Co, 470 F2d 1 (CA 7, 1972); Strader v Union Hall, Inc, 486 F Supp 159 (ND Ill, 1980); Amsden v Grinnell Mutual Reinsurance Co, 203 NW2d 252 (Iowa, 1972); Fletcher v Western National Life Ins Co, 10 Cal App 3d 376; 89 Cal Rptr 78; 47 ALR3d 286 (1970); see, generally, Holmes, Is there life after Gilmore’s death of contract? — Inductions from a study of commercial good faith in ñrst-party insurance contracts, 65 Cornell L R 330, 356-359 (1980). Indeed, although the instant case apparently marks the first appellate affirmance of a mental distress award in this context, our Court of Appeals has previously acknowledged (at least implicitly) the viability of the intentional infliction theory in insurance suits alleging dilatory handling of claims. See Butt v DAIIE, 129 Mich App 211, 218-219; 341 NW2d 474 (1983); Butler v DAIIE, 121 Mich App 727, 735-737; 329 NW2d 781 (1982); Holmes v Allstate Ins Co, 119 Mich App 710, 713-718; 326 NW2d 616 (1982) (workers’ compensation action); Frishett v State Farm Mutual Automobile Ins Co, 3 Mich App 688; 143 NW2d 612 (1966); see also Bolden v John Hancock Mutual Life Ins Co, 422 F Supp 28, 29-31 (ED Mich, 1976).

Those courts which have recognized intentional infliction of emotional distress as a separate theory of recovery have generally embraced the Restatement definition of the tort:

§ 46. Outrageous Conduct Causing Severe Emotional Distress

(1) One who by extreme and outrageous conduct intentionally or recklessly causes severe emotional distress to another is subject to liability for such emotional distress, and if bodily harm to the other results from it, for such bodily harm. [Restatement Torts, 2d, § 46, p 71.]

Four elements are identified in this definition: (1) "extreme and outrageous” conduct, (2) intent or recklessness, (3) causation, and (4) "severe emotional distress.” See, e.g., Ross v Burns, 612 F2d 271, 273 (CA 6, 1980).

We find that plaintiffs herein failed to make the minimum showing of proof of either "extreme and outrageous” conduct or "severe emotional distress” required to withstand defendant’s motion for a directed verdict.

A. Extreme and Outrageous Conduct

An oft-quoted Restatement comment summarizes the prevailing view of what constitutes "extreme and outrageous” conduct:

The cases thus far decided have found liability only where the defendant’s conduct has been extreme and outrageous. It has not been enough that the defendant has acted with an intent which is tortious or even criminal, or that he has intended to inflict emotional distress, or even that his conduct has been characterized by "malice”, or a degree of aggravation which would entitle the plaintiff to punitive damages for another tort. Liability has been found only where the conduct has been so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community. Generally, the case is one in which the recitation of the facts to an average member of the community would arouse his resentment against the actor, and lead him to exclaim, "Outrageous!”

The liability clearly does not extend to mere insults, indignities, threats, annoyances, petty oppressions, or other trivialities. The rough edges of our society are still in need of a good deal of filing down, and in the meantime plaintiffs must necessarily be expected and required to be hardened to a certain amount of rough language, and to occasional acts that are definitely inconsiderate and unkind. There is no occasion for the law to intervene in every case where some one’s feelings are hurt. There must still be freedom to express an unflattering opinion, and some safety valve must be left through which irascible tempers may blow off relatively harmless steam. [Restatement Torts, 2d, § 46, comment d, pp 72-73.]

Another Restatement comment further qualifies the conduct proscribed by this tort:

The conduct, although it would otherwise be extreme and outrageous, may be privileged under the circumstances. The actor is never liable, for example, where he has done no more than to insist upon his legal rights in a permissible way, even though he is well aware that such insistence is certain to cause emotional distress. [Restatement Torts, 2d, § 46, comment g, p 76.]

Further, in a contractual setting, a tort action must rest on a breach of duty distinct from contract. Thus, in Hart v Ludwig, 347 Mich 559; 79 NW2d 895 (1956), we recognized that mere nonfeasance of a contractual obligation cannot give rise to a negligence cause of action in tort:⁷

The action of tort has for its foundation the negligence of the defendant, and this means more than a mere breach of a promise. Otherwise, the failure to meet a note, or any other promise to pay money, would sustain an action in tort for negligence, and thus the promisor be made liable for all the consequential damages arising from such failure.

As a general rule, there must be some active negligence or misfeasance to support tort. There must be some breach of duty distinct from breach of contract. In the case at bar, the utmost shown against the defendant is that there was unreasonable delay on its part in performing an executory contract. [347 Mich 563 (quoting from Tuttle v Gilbert Mfg Co, 145 Mass 169, 174-175; 13 NE 465 [1887]). Emphasis added.]

Moreover, in Kewin, supra, we declined to recognize a separate cause of action for bad-faith breach of an insurance contract, although some of our sister states have chosen to do so. 409 Mich 423.⁸

The foregoing principles do not preclude recovery for an insurer’s intentional infliction of emotional distress. However, our continued adherence to these precepts, combined with the observations noted in the Restatement comments, significantly limits the range of circumstances in which a prima facie showing of outrageousness can be made in the insurance context. The mere failure to pay a contractual obligation, without more, will not amount to outrageous conduct for purposes of this tort. See Bolden, supra, 422 F Supp 31 (defendant’s summary judgment motion granted where plaintiffs claim "does not arise out of any conduct by the insurer other than not paying his claim”); Valentine v General American Credit, Inc, 123 Mich App 521, 527; 332 NW2d 591 (1983) (pleading insufficient where only intentional breach alleged), aff'd 420 Mich 256; 362 NW2d 628 (1984); Van Marter v American Fidelity Fire Ins Co, 114 Mich App 171, 185; 318 NW2d 679 (1982). In addition, an insurer’s request for verification of claims, in the absence of evidence of harassment or similarly egregious conduct, falls short of conduct which we would consider "tortiously outrageous.” See Butt v DAIIE, 129 Mich App 211; 341 NW2d 474 (1983); Holmes v Allstate Ins Co, 119 Mich App 710; 326 NW2d 616 (1982).

The instant plaintiffs rely on the following facts as establishing Auto-Owners’ "extreme and outrageous” conduct: (1) Auto-Owners’ failure to supply plaintiffs with a form for claiming replacement services benefits, even though the statutory no-fault provision relating thereto had been in effect for six years; (2) Auto-Owners’ delay in responding to the claim for replacement services (roughly six months after the accident, and two months after plaintiffs created and submitted their own document claiming replacement benefits); (3) Auto-Owners’ apparent denial of the replacement benefits claim.⁹ Recognizing that tortious conduct apart from breach of the insurance contract is required to make out a claim for intentional infliction of emotional distress, the Court of Appeals nevertheless found that plaintiffs had supplied sufficient evidence of "extreme and outrageous” conduct to justify sending the claim to the jury:

This case involves significantly more than the mere failure to pay benefits. Plaintiffs’ case is based upon allegations of defendant’s intentional attempts to frustrate them from applying for benefits. Plaintiffs allege that defendant was informed of the nature and extent of Christine’s injuries and the costs of the services incurred therefrom but only supplied an application for a small portion of the payable benefits. Defendant claims that six years after the enactment of the no-fault statute it did not have application forms for the benefits plaintiffs requested under the act. This forced plaintiffs to procure counsel to apply for no-fault benefits. Considering the fact that defendant was informed that Christine had a severe facial scar that might necessitate plastic surgery, its conduct in frustrating plaintiffs’ attempts to apply for benefits and define the limits of the policy could properly be considered as extreme and outrageous by a jury. [135 Mich App 598-599.]

We disagree with this assessment of the evidence. While Auto-Owners’ conduct is hardly praiseworthy, plaintiffs alleged no more than the failure by Auto-Owners to facilitate the filing of a replacement services claim, a delay of at most six months in responding to the claim as filed, and the denial of benefits owed. Such conduct may properly be considered unreasonable for purposes of assessing the statutory penalty for overdue payments as well as plaintiffs’ attorney fees against Auto-Owners.¹⁰ However, the record evidence falls "far short of the conduct which is considered tortiously outrageous.” Butt, supra, p 219. There is no indication that Auto-Owners set out to harass these plaintiffs, nor does the evidence disclose a course of conduct that may fairly be characterized as "so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community,” Restatement Torts, 2d, § 46, comment d, p 73. At most, the dilatory handling of plaintiffs’ claim constitutes "bad faith” justifying imposition of the statutory penalties set forth above, but for which this Court has held no separate cause of action can lie. See Kewin, supra, 409 Mich 423.

B. Severe Emotional Distress

The Restatement commentary explains the emotional distress requirement as follows:

The rule stated in this Section applies only where the emotional distress has in fact resulted, and where it is severe. Emotional distress passes under various names, such as mental suffering, mental anguish, mental or nervous shock, or the like. It includes all highly unpleasant mental reactions, such as fright, horror, grief, shame, humiliation, embarrassment, anger, chagrin, disappointment, worry, and nausea. It is only where it is extreme that the hability arises. Complete emotional tranquillity is seldom attainable in this world, and some degree of transient and trivial emotional distress is a part of the price of living among people. The law intervenes only where the distress indicted is so severe that no reasonable man could be expected to endure it. [Restatement Torts, 2d, § 46, comment j, p 77. Emphasis added.]

Further, although bodily injury need not result, the Restatement commentary suggests that "more in the way of outrage” may be required where a claim is based on emotional injury alone. Id., comment k, p 78. .

Plaintiffs’ evidence of severe emotional distress consisted entirely of the following testimony by Ralph and Delores Roberts:

Ralph Roberts — Direct Examination

Q. Have you ever been paid one nickel of this?

A. Not of the — on that paper there.

Q. How does that make you feel? How has that made you feel?

A. Well, it make me kind of disappointed or mad.

Q. Get upset about that?

A. Yes.

Q. Why?

A. Well, they took my payments and that for the insurance.

Q. How have you felt ever since this accident happened to today? Let me say April '79, two and a half years ago, have they paid anything yet?

A. Just this one bill — two bills, the doctor and the ambulance.

Q. Why does it make you mad?

A. (No response.)

Q. Does it make you mad, really?

A. Yes.

Q. Why?

A. Makes me mad, like I said, because they take my money for the payments and I think they should pay off their part.

Q. You haven’t had to go to the hospital, Ralph, over being upset about this, have you?

A. No.

Q. Nobody is claiming that they are having any kind of breakdown or anything of that nature, are they?

A. No.

Q. You are upset and concerned and angry about it, aren’t you?

A. Yes.

Q. And you have been since they refused to pay in the summer of '79, for over two years now; is that right?

A. Yes.

Delores Roberts — Direct Examination

Q. And Ralph has testified you haven’t been paid any replacement services; is that correct?

A. That’s correct.

Q. How does that make you feel?

A. It makes me feel mad.

Q. Why?

A. Because, I figure if we pay the insurance company they should at least stand behind their policy.

Q. How long have you felt this way?

A. I felt this way ever since she’s been injured in this accident and it was reported to Churchill’s.

Q. Would you say, Mrs. Roberts, not to belabor that point, this simply emotionally distresses you?

A. Yes, it does.

Q. And you’ve never had to go to the doctor or anything like that, have you?

A. No, sir.

Although anger may be an indicia of emotional distress, the reaction testified to does not even approach the level of emotional distress contemplated by the Restatement drafters in requiring that "no reasonable man could be expected to endure it.” Rather, plaintiffs’ anger is more consistent with that which normally accompanies the breach of a contractual obligation. There was no evidence of grief, depression, disruption of life style, or of treatment for anxiety or depression. The distress proved by plaintiffs was, as a matter of law, insufficient to support this cause of action.

Ill

Judging from the seventy-six pages of annotations that currently accompany § 46 of the Second Restatement of Torts, it is clear that the tort of intentional infliction of emotional distress has gained widespread acceptance, in a variety of factual contexts, in the courts of our sister states. Because we find that plaintiffs’ proofs failed even to make out a prima facie claim for relief under the Restatement definition, our review both of the policy implications for adopting this tort in general and of the propriety of allowing such recovery in the insurance context must await a case in which those concerns are necessarily presented.

We reverse the judgment of the Court of Appeals and modify the judgment of the trial court by vacating the award of mental distress damages.

Ryan, Brickley, Cavanagh, and Riley, JJ., concurred with Boyle, J.

1 Since we agree with Justice Levin that "unjustified litigation” is a vice, and that "[ojnly by deciding specific cases can this Court give meaning to the words 'intentional and outrageous conduct,’ ” we decline to yield to the temptation of engaging in a full blown discourse on the relative merits of the tort of intentional infliction of emotional distress or of a remedy for containing unfounded hypothetical future cases involving insurance practices. Any "boundaries or guidelines for the bench or bar” which might result from such obiter dictum in this case would yield only transitory and illusory assistance to the bench and bar. We note that recently adopted MCR 2.114 addresses the imposition of sanctions by trial courts. The trial bench and bar’s implementation of this rule will provide this Court with the necessary experience to assess the need for further remedies.

2 The section provides, in relevant part:

"Personal protection insurance benefits are payable for the following:

(b) Work loss consisting of loss of income from work an injured person would have performed during the first 3 years after the date of the accident if he had not been injured and expenses not exceeding $20.00 per day, reasonably incurred in obtaining ordinary and necessary services in lieu of those that, if he had not been injured, an injured person would have performed during the first 3 years after the date of the accident, not for income but for the benefit of himself or of his dependent.”

3 No order denying either the motion for summary judgment or the motion for reconsideration appears in the record on appeal. In denying defendant’s renewed motion for summary judgment at trial, the trial judge indicated his reason for denying the earlier motion:

"The Court: As you’ve indicated, counsel, this matter has been considered by the Court previously, and nothing has happened to change my mind. I found then and find again that the tort of intentional infliction of mental distress was well pled and the Plaintiff may proceed with his proofs. Motion for summary judgment is denied.”

4 See n 3.

5 Recovery of mental distress damages for breach of contract is nevertheless permissible if such damages can "reasonably be said to have been in contemplation of the parties at the time the contract was made.” Kewin, supra, 409 Mich 419.

6 See Kewin, supra, 409 Mich 421. ("We express no opinion on the accuracy of the Court of Appeals observation that Michigan recognizes a tort action for the intentional infliction of mental distress.”)

7 See also Holmes article, supra, p 359. ("Apparently, no court has found outrageous conduct without affirmative conduct. Thus, a mere denial of liability or refusal to pay, even though unreasonable and in bad faith, is not deemed outrageous.”)

8 The receptiveness of our sister state courts to the tort of bad-faith breach of an insurance contract has been mixed. Compare Noble v National American Life Ins Co, 128 Ariz 188; 624 P2d 866 (1981) (tort recognized); Bibeault v Hanover Ins Co, 417 A2d 313 (RI, 1980) (tort recognized), with D’Ambrosio v Pennsylvania National Mutual Casualty Ins Co, 494 Pa 501; 431 A2d 966 (1981) (tort rejected); Spencer v Aetna Life & Casualty Ins Co, 227 Kan 914; 611 P2d 149 (1980) (tort rejected); Lawton v Great Southwest Fire Ins Co, 118 NH 607; 392 A2d 576 (1978) (tort rejected). The adequacy of existing legislative remedies has been a primary factor in refusing to recognize the bad-faith tort. See D’Ambrosio, supra; Spencer, supra; Lawton, supra.

We express no opinion at this time whether existing legislative remedies should similarly preclude recognition of the tort of intentional infliction of emotional distress in the insurance context.

9 Auto-Owners’ "denial” of the replacement services claim actually took the form of a request for further verification:

Letter of January 8, 1980

"Bush, Luce, Henderson & Bankson

Attorneys at Law

412 Mich. Nat. Bank Bldg.

Port Huron, Mi. 48060

"Jan. 8, 1980

"RE: Our insureds Ralph and Doloris [sic] Roberts Claim X7-6004-79 Yours-Christine Rodzos

"ATTN: S. Keith Bankson

"Dear Mr. Bankson:

"This is to acknowledge receipt of your letters of November 19, 1979 and December 13, 1979.

"Under 'Description of Services’ in your affidavit, we would consider only two [sic] and from the doctor and would need mileage verification in support. Under the medical portion of the No-Fault law, we would consider the other items under "Description of Services” in the affidavit only if verified by the doctor. These listed items do not come under the work loss portion of the No-Fault law (see Section #3107, part b). They come under Section #3107 part a.

"Very truly yours,

"District Claim Office

"E.H. Selden

"Claim Representative”

Although the letter is not a model of clarity, inasmuch as the claim for replacement services (under MCL 500.3107[b]; MSA 24.13107[b]) was treated by Auto-Owners as a claim for expenses (under MCL 500.3107[a]; MSA 24.13107[a]), the letter may reasonably be construed as a denial of the replacement services claim as submitted.

After plaintiffs received the foregoing letter, there was no further communication with Auto-Owners until this suit was instituted shortly thereafter. Thus, this was unlike the situation where 6m insurer through ongoing exchanges with the insured has knowledge of the necessity for payment, but adamantly and in bad faith denies liability — facts on which a claim of outrageous conduct might be based. See Eckenrode, supra.

10 In fact, penalties of $57.96 in interest for overdue payment (under MCL 500.3142[3]; MSA 24.13142[3j) and $5,880 in attorney fees (under MCL 500.3148[1]; MSA 24.13148[lj) were assessed against Auto-Owners in the judgment.