Unpublished Disposition, 914 F.2d 261 (9th Cir. 1988)

MEMORANDUM^* 

OVERVIEW

Plaintiff/Appellant Aetna Casualty and Surety Company ("Aetna"), appeals from a judgment entered August 3, 1988 denying its complaint for declaratory judgment. A jury found Aetna liable for injuries sustained by Defendant/Appellee Richard Beeman ("Beeman") at the hands of Appellant's insured, Defendant/Appellee James Taylor, Jr. ("Taylor"). Aetna was also required to pay costs and attorney's fees.

BACKGROUND

On October 29, 1983 Taylor went to a newspaper distribution center in Casa Grande, Arizona. He shot Ronald Vandever and Richard Beeman. Vandever was killed. Beeman survived.

Beeman and Ernie Taylor, James' brother, were distributors for the Arizona Republic newspaper. Vandever was the distribution manager for the Republic in Casa Grande. There was testimony that approximately a year before the shooting incident Taylor had mistreated Beeman on two occasions. As a result, Vandever had barred James Taylor from the distribution site. Sometime prior to the date of the shooting, the route Ernie and James Taylor shared had been cut. The new driver was to start the day of incident.

On the day of the shooting, Olivia Duran, a Republic employee, was directed by Vandever to call the Taylor home to determine how many papers Ernie Taylor had taken the night before. Ms. Duran testified that she was told that Ernie was sleeping. She told the man who answered the phone that Ron Vandever wanted to know how many papers were taken and that Vandever was at the distribution center.

Approximately thirty to forty minutes passed between the time the phone call was made and the shooting. Taylor was seen sitting in a pickup truck near the distribution center. Beeman and Vandever were in the back of the building guiding an incoming truck in. Taylor came up alongside the truck and fired three shots at Vandever and then three more at Beeman. Witnesses testified that he walked from the scene, stopped under a tree and took the shells out of his gun. He then ran towards his truck and drove off. Taylor was apprehended by the police shortly thereafter.

PROCEDURAL BACKGROUND

Taylor was found guilty of second degree murder and second degree attempted murder. Subsequent to Taylor's criminal conviction, Beeman filed a civil suit against Taylor for damages he sustained from the shooting. Aetna defended Taylor in the tort action under a reservation of rights. The court found in favor of Beeman and entered a judgment in the amount of $106,649.10. Beeman turned to Aetna to satisfy the judgment.

James Taylor, Jr. was an insured under a homeowner's policy issued by Aetna to Taylor's parents. The policy provided coverage for bodily injury and property damage caused by the insured. However, an exclusion clause in the policy stated that coverage was not provided for injury or damage which was "expected or intended by the insured." (CR 46 Exhibit C at 12). Aetna brought the instant diversity declaratory judgment action against both Taylor and Beeman, seeking a declaration that there was no coverage under the policy.¹ 

The question for the jury in this case was whether Taylor "expected or intended" to injure Richard Beeman. Experts testified that Taylor suffered from an organic brain disorder which superimposed by alcohol intoxication affected cognitive thinking, judgment, impulse control and aggression. Aetna's expert testified to the contrary.

Aetna objected to the court's instructions on the following grounds: (1) the instructions did not properly allocate the burden of proof on the issue of Taylor's mental derangement; (2) the instructions told the jury to look only at Taylor's intent and expectations as to Beeman and thereby ignored the evidence concerning Vandever; (3) the instructions misstated Arizona law by substituting the word "impulse" for the word "compulsion." Further, Aetna states that the district court erred in refusing to charge the jury that intentionally wrongful acts were not insurable as a matter of public policy and that there is a presumption that one intends the natural consequences of an act.

Aetna's objections to the instructions were overruled. The jury found that Taylor did not expect or intend to injure Beeman and therefore, Taylor's actions did not fall under the policy exclusion. The district court entered judgment denying Aetna's motion for declaratory judgment and awarded Beeman costs and attorney's fees. Aetna's Motion for New Trial was denied and it timely appealed.

STANDARD OF REVIEW

The test in reviewing jury instructions to which timely objections have been made is "whether, viewing the jury instructions as a whole, the trial judge gave adequate instructions on each element of the case to ensure that the jury fully understood the issues." Del Madera Properties v. Rhodes and Gardner, Inc., 820 F.2d 973, 978 (9th Cir. 1987) (internal quotes omitted). A court's error in instructing the jury in a civil case is not reversible if it is more probably than not harmless. Id. at 979. "The trial judge has substantial latitude in tailoring the instructions, and challenges to the formulation adopted by the court are reviewed for abuse of discretion." United States v. Beltran-Rios, 878 F.2d 1208, 1214 (9th Cir. 1989). The test is whether the jury was misled in any way and if it had an understanding of the issues. Van Cleef v. Aeroflex Corp., 657 F.2d 1094, 1099 (9th Cir. 1981).

This Court reviews the District Court's determination and application of state law de novo. In re McLinn, 739 F.2d 1395, 1397 (9th Cir. 1984) (en banc). When interpreting state law, a federal court is bound by the decision of the highest state court, or in the absence of such a decision, how the highest state court would decide the issue. Dimidowich v. Bell & Howell, 803 F.2d 1473, 1482 (9th Cir. 1986) modified on other grounds, 810 F.2d 1517 (9th Cir. 1987).

A district court's decision concerning a motion for a new trial pursuant to Fed. R. Civ. P. 59 is reviewed for abuse of discretion. Hard v. Burlington Northern R.R., 812 F.2d 482, 483 (9th Cir. 1987)

DISCUSSION

1. Proposed Instruction No. 8--Presumption of Sanity

Aetna's Proposed Instruction No. 8²  would have required Beeman to prove that Taylor lacked the capacity to act in accordance with reason. Aetna argues that a presumption of sanity existed and that this presumption required Beeman to prove to the jury that the presumption of sanity had been overcome. Beeman denies the existence of a presumption of sanity in this case, but even if it did, it was contradicted and thus ceased to exist by the close of trial.

We do not decide whether a presumption of sanity existed in light of the fact that even if a presumption did exist, it was properly refuted and therefore terminated prior to the jury instruction stage. As the court said in Seiler v. Whiting, 52 Ariz. 542, 548-549, 84 P.2d 452, 454-455 (1938) (emphasis added):

In truth there is but one type of presumption in the strict legal meaning of the word, and that is merely a general rule of law that under some circumstances, in the absence of any evidence to the contrary, a jury is compelled to reach a certain conclusion of fact. But a presumption so declared by the law is only raised by the absence of any real evidence as to the existence of the ultimate fact in question. It is not in and of itself evidence, but merely an arbitrary rule imposed by the law, to be applied in the absence of evidence, and whenever evidence contradicting the presumption is offered the latter disappears entirely, and the triers of fact are bound to follow the usual rules of evidence in reaching their ultimate conclusion of fact.

Thus, it is clear under Arizona law that once a presumption is contradicted it disappears. Seiler 84 P.2d at 454-455; Sheehan v. Pima County, 135 Ariz. 235, 238, 660 P.2d 486, 489 (1982). Aetna admits that there was sufficient evidence of Taylor's mental state, not only to create a question of fact for the jury as to mental derangement negating intent but also to support a verdict in Beeman's favor. (Appellant's Opening Brief at 11, 26). Once contradictory evidence is introduced, any alleged presumption of intent disappears and the existence or nonexistence of the presumed fact must be determined as if no presumption had ever existed. Sheehan, 135 Ariz. at 238, 660 P.2d at 489. Thus, even if there was a presumption that Taylor intended the consequences of his acts it disappeared from this case prior to the jury instruction phase of the trial.

2. Proposed Instruction No. 5--Burden of Proof

The burden of proving that the loss fell within the policy exclusion is on Aetna. Vanguard Insurance Co. v. Cantrell, 18 Ariz.App. 486, 503 P.2d 962, 965 (Ariz.App.1972). ("Vanguard had the burden of showing that the subject loss was within a policy exclusion. Having failed to demonstrate that [the insured] intended the injury to Cantrell, [Vanguard] failed to meet its burden.") Exclusionary rules are strictly construed against an insurer. Globe American Casualty Co. v. Lyons, 131 Ariz. 337, 641 P.2d 251, 253 (Ariz.App.1982). Therefore, in this case, Aetna had the burden of proving that Taylor expected or intended to harm Beeman, that is, Aetna had the burden of proving that Taylor was not mentally deranged at the time of the incident.

In its Proposed Instruction No. 5, Aetna attempted to shift this burden to Beeman.³  Aetna argues there is a presumption that a person intends the natural consequences of his voluntary act. It seems to assert that, since the natural consequences of shooting another is to cause injury, the burden of proof as to subjective intent should have been shifted to Beeman.

Some cases hold that intentional commission of an act against another resulting in injury is considered intended and expected by the insured and therefore excluded from coverage. Steinmetz v. National American Ins. Co., 121 Ariz. 268, 589 P.2d 911 (Ariz.App.1978); Clark v. Allstate Ins. Co., 22 Ariz.App. 601, 529 P.2d 1195 (1975). However, a presumption that one intends the consequences of his acts has no application to the interpretation of terms used in insurance contracts. Farmers Ins. Co. of Arizona v. Vagnozzi, 138 Ariz. 443, 675 P.2d 703, 709 (1983). Even if such a presumption was made in insurance cases, when the insured's mental capacity to form such intent is at issue, no such presumption follows. Globe American Casualty Co. v. Lyons, 641 P.2d, 251, 254 (Ariz.App.1981).

In Globe, the Arizona Court of Appeals reversed the trial court's decision that one who intentionally drove into oncoming traffic was presumed to have intended the ordinary consequences of that action. The court held that such a presumption is not appropriate when mental capacity is at issue. Id. at 253. Further, the Supreme Court of Arizona stated in Transamerica Ins. Group v. Meere, 143 Ariz. 351, 694 P.2d 181, 189 (1984) (en banc), that in cases in which mental derangement is at issue the subjective intent will be addressed indicating no such presumption should be made.⁴ 

B. Substitution of the word "impulse" for "compulsion"

Aetna also asserts that its Proposed Instruction No. 5 was a correct recitation of the law because it stated that Taylor must have acted on an "irrational compulsion" to shoot Beeman. The district court instructed that Taylor must have acted on an "irrational impulse." Aetna did not object to the use of "impulse" in place of "compulsion" at trial.⁵  This court will not review the instruction where the grounds for objection are different from those made in the district court. Hargrave v. Wellman, 276 F.2d 948, 950 (9th Cir. 1960). A party must state specific grounds for objection, so as to bring into focus the precise nature of the alleged error. Fed. R. Civ. P. 51; Bertrand v. Southern Pacific Co., 282 F.2d 569, 571-72 (9th Cir. 1960), cert. denied 365 U.S. 816, 81 S. Ct. 697 (1961). Since Aetna did not make the specific objection in the district court, (RT 6/28/88 at 9-15), it is barred from doing so now.

Even if Aetna had properly objected, the terms "impulse" and the use of "compulsion" are sufficiently synonymous to refute the claim of error. The court in Globe, 131 Ariz. 337, 641 P.2d 251, took the Arizona standard from Ruvolo v. American Casualty Co., 39 N.J. 490, 189 A.2d 204, 208-209 (1963), which used the word "impulse" rather than "compulsion." Thus the terms appear interchangeable and the jury was not misled. Van Cleef v. Aeroflex Corp., 657 F.2d 1094, 1099 (9th Cir. 1981).

3. Proposed Instruction No. 2--Public Policy

Aetna asserts that the jury should have been told that providing insurance against intentional injurious conduct offends public policy.⁶  "Intentional acts" exclusion clauses serve to support public policy by forbidding contracts indemnifying a person for a loss resulting from his own willful wrongdoing. Transamerica Ins. Group v. Meere, 143 Ariz. 351, 694 P.2d 181, 186 (1984) (en banc).

However, "to deny coverage for acts caused by an individual lacking the mental capacity to act rationally is inconsistent with a primary purpose for incorporating intentional injury exclusions into insurance policies, i.e., to preclude individuals from benefiting financially when they deliberately cause injury." Globe, 641 P.2d at 253-54. A person who lacks the capacity to conform his behavior to acceptable standards will not be impelled by existence or nonexistence of insurance. Id. at 254. Thus, the failure to give this instruction was not reversible error.

Although Aetna discusses Proposed Instruction Nos. 4 & 6 in its reply brief and in the "issues presented" section of their opening brief it presented no argument concerning these instructions in its opening brief. As a result, Aetna has waived its right to object to Proposed Instructions Nos. 4 & 6.⁷  Fed. R. App. P. 28(a); Monte Carlo Shirt, Inc. v. Daewoo International (America) Corp., 707 F.2d 1054, 1056 n. 2 (9th Cir. 1983), United States ex rel. Greenhalgh v. F.D. Rich, Co., 520 F.2d 886, 890 n. 4 (9th Cir. 1975).

Even if timely, Aetna's objections are without merit. The trial judge gave adequate instructions on each element of the case such that the jury could understand the issues. Del Madera Properties v. Rhodes and Gardner, Inc., 820 F.2d 973, 978 (9th Cir. 1987). The district court did not err in refusing to give appellant's Proposed Instructions Nos. 4 & 6.

5. Intent and Expectations Regarding Vandever

Aetna states that the "instructions as given told the jury to disregard all of the evidence concerning Mr. Taylor and Ron Vandever." (Appellant's Opening Brief at 13). Aetna charges that the Court's instructions "narrowed the issue to that moment in time when Mr. Taylor shot Mr. Beeman." Id.

Aetna's argument clearly lacks merit. The district court appropriately instructed the jury to consider all the evidence.⁸  Aetna cites no place in the record where the court instructed the jury to ignore evidence concerning the shooting of Vandever. The court simply told the jury that it was Taylor's intent toward Beeman which was dispositive. That was a correct instruction. "In order to constitute 'intent' in an intentional acts exclusion or in the definition of occurrence ... the insured must desire to harm the plaintiff." Transamerica Ins. Group v. Meere, 694 P.2d 181, 189 (Ariz.1984) (citing 11 Couch on Insurance 2d Sec. 44:289 (Rev. ed. 1982)).

Beeman seeks an award of attorney's fees and costs on appeal under the authority of A.R.S. Sec. 12-341.01. This statute states in pertinent part that " [i]n any contested action arising out of a contract ... the court may award the successful party reasonable attorney's fees...."

In deciding whether to award attorney's fees under this section, appellate courts consider the same factors as do trial courts:

(1) whether the unsuccessful party's claim or defense was meritorious; (2) whether the litigation could have been avoided or settled and the successful party's efforts were completely superfluous in achieving the result; (3) whether assessing fees against the unsuccessful party would cause an extreme hardship; (4) whether the successful party prevailed with respect to all of the relief sought; (5) whether the legal question presented was novel and whether such claim or defense ha [s] previously been adjudicated in this

jurisdiction; and (6) whether the award would discourage other parties with tenable claims or defenses from litigating or defending legitimate contract issues for fear of incurring liability for substantial amounts of attorney's fees.

Wagenseller v. Scottsdale Memorial Hospital, 710 P.2d 1025, 1049 (Ariz.1985).

After considering these factors, this court declines to award Beeman costs and attorney's fees. Aetna's claims on appeal were not groundless. The issues raised in this appeal are not routine and Beeman's efforts were not completely superfluous.

Appellee also seeks double attorney's fees and costs, and double damages, under the stricter authority of A.R.S. Sec. 12-349 and 12-350, 28 U.S.C. § 1912, 1927; and Fed. R. App. P. 28, 38. Appellee's motion for costs under this authority is also denied.

CONCLUSION

The district court's instructions in this case were proper. As a result, the district court properly denied Aetna's Motion for New Trial. Beeman's request for attorney's fees on appeal is denied. The judgment of the district court is AFFIRMED.