John Malone, Jr. v. Reliastar Life Insur

In the

United States Court of Appeals

For the Seventh Circuit

Nos. 08-1734 and 08-2377

JOHN R. M ALONE, JR., as Trustee of

the Gordon L. Beeler Irrevocable Trust,

Plaintiff-Appellant,

v.

R ELIAS TAR L IFE INSURANCE C O . and

AXA E QUITABLE L IFE INSURANCE C O .,

Defendants-Appellees.

Appeals from the United States District Court

for the Northern District of Indiana, South Bend Division.

No. 05 C 660—William C. Lee, Judge.1

A RGUED O CTOBER 27, 2008—D ECIDED M ARCH 12, 2009

Before K ANNE, W ILLIAMS, and S YKES, Circuit Judges.

K ANNE, Circuit Judge. This is a case about death. To be

entitled to the death benefit payable under a life insur-

1

Judge Allen Sharp, who presided during the jury trial in this

case, was later replaced in post-trial proceedings by Judge

William C. Lee.

2 Nos. 08-1734 and 08-2377

ance policy, a beneficiary must prove that the insured is

actually, or, in the alternative, perhaps only legally, dead.

There is a difference between the two. As is often the

case in the law, words and concepts so familiar in every-

day life assume esoteric identities when cloaked in legal

rhetoric. It should come as no surprise, then, that not

even death, perhaps the most sobering and forthright

fact in life, is immune from legal definition.

A life insurance beneficiary may prove an insured’s

death in two ways. One avenue is for the beneficiary to

utilize direct or circumstantial evidence to prove, by a

preponderance of the evidence, that an insured is, in fact,

dead. In lieu of proving actual death, however, a benefi-

ciary may seek to prove death by means of a legal pre-

sumption. In other words, although the insured may, as a

matter of fact, be alive, in certain circumstances the law

permits one to presume he is dead. The mechanics of

this presumption are at the center of this case. For

the reasons that follow, we conclude that the district

court incorrectly instructed the jury and employed a

flawed special verdict form. Taken together, these

errors were prejudicial. We remand for a new trial.

I. B ACKGROUND

Gordon Beeler, a husband, father, and businessman,

disappeared on January 31, 1998. At the time of his disap-

pearance, Beeler left behind a wife of almost thirty years,

Kathy; four living children, ranging in ages from twelve to

twenty-two; and a business partner, John Martin. None of

these individuals has seen or heard from Beeler since that

Nos. 08-1734 and 08-2377 3

day in 1998. Beeler was fifty-one years old at the time he

disappeared.

Beeler had obtained no fewer than six different life

insurance policies, three of which are at issue in this

case. AXA Equitable Life Insurance Company 2 issued the

first policy to Gordon Beeler on September 20, 1991. The

policy carries a death benefit of $500,000. ReliaStar Life

Insurance Company 3 issued the other two disputed

policies. Beeler obtained the first, which carries a death

benefit of $600,000, on December 9, 1991. He took out the

second shortly thereafter, on January 29, 1992. The death

benefit of the second policy is $1.5 million. Added together,

these three policies are to pay a total of $2.6 million to

the named beneficiary upon the death of Gordon Beeler.

In November 1999, Kathy Beeler transferred ownership

of these policies to the Gordon L. Beeler Irrevocable

Trust, dated May 26, 1999 (“Beeler Trust”).

Each of the three policies originally named Kathy Beeler

as the sole beneficiary. At the same time that she trans-

ferred policy ownership, however, Kathy Beeler also

amended the policies to name the Beeler Trust as benefi-

ciary. John Malone, Beeler’s former business partner,

2

At the time it issued Policy 41-233-834, one policy at issue,

AXA Equitable Life Insurance Company was operating

under the name of Equitable Variable Life Insurance Company.

3

At the time it issued Policies 7-011-915 and 7-014-919, two

policies at issue, ReliaStar Life Insurance Company was operat-

ing under the name of Northwestern National Life Insurance

Company.

4 Nos. 08-1734 and 08-2377

serves as trustee for the Beeler Trust; it is in the role of

trustee that Malone brought this action. Kathy Beeler and

the Beeler children are the Beeler Trust’s beneficiaries.

The Beeler Trust first sought payment of death benefits

under the AXA policy in a claim filed in November 2003,4

which AXA denied the following February. In January

2004, the Beeler Trust filed similar claims for payment

on the two ReliaStar policies; ReliaStar denied these

claims in correspondence dated March 30, 2004. Both

companies noted that seven years had not yet passed,

which was the time required for the common law pre-

sumption of death to take effect in Indiana.

In February 2005, the Beeler Trust submitted renewed

death claims to both AXA and ReliaStar. In separate

correspondence mailed in April, both companies declined

to pay the benefits under their respective policies. The

4

As we referenced in the opening stanza of this opinion, death

can have many meanings under the law. For probate purposes,

Indiana law presumes a person to be dead after only a five-

year absence. See Ind. Code § 29-2-5-1. Accordingly, in July 2003,

Kathy Beeler filed an affidavit with the St. Joseph Probate

Court requesting that the court admit Beeler’s will to probate.

The court granted this request and declared Gordon Beeler

deceased in an order issued August 11, 2003. The State

of Indiana issued a death certificate that same day. Counter-

intuitive as it may be, these probate proceedings have no

effect on the matter presented to us, which concerns Indiana’s

common law presumption of death, not the state’s probate

law. See Prudential Ins. Co. of Am. v. Moore, 149 N.E. 718, 722

(Ind. 1925).

Nos. 08-1734 and 08-2377 5

insurance companies cited evidence they had obtained

suggesting that Beeler was either still alive or had not

died at the time of his disappearance.

Eight months later, in October, the Beeler Trust filed a

complaint in Indiana’s St. Joseph Superior Court, alleging

that AXA and ReliaStar had breached their respective

contracts and seeking payment of the death benefits

payable thereunder. The defendants promptly removed

the case to the South Bend Division of the Northern

District of Indiana. In June 2006, the Beeler Trust filed

an amended complaint in the federal court, in which it

added a claim for punitive damages, alleging that the

companies had made unfounded refusals to pay death

benefits and had deceived the Beeler Trust, thereby

violating the insurance companies’ duties of good faith

and fair dealing. In an order dated March 21, 2007, the

district court granted summary judgment in favor of the

insurance companies on the plaintiff’s punitive damages

claims, leaving only the breach of contract claims for trial.

At a jury trial held from May 21 to May 29, 2007, the

Beeler Trust presented evidence to demonstrate Beeler’s

death. The plaintiff showed that Beeler had been missing

since the day of his disappearance nine years earlier in

1998. The family, the authorities, and the life insurance

companies had conducted numerous fruitless investiga-

tions in an effort to locate Beeler. Beeler’s last known

communication was a letter to Kathy dated January 31,

1998, and postmarked in Key West, Florida. In the letter,

Beeler informed his wife of many arrangements he had

made to provide financial security for both Kathy and

6 Nos. 08-1734 and 08-2377

their children long into the future. Finally, none of

Beeler’s family or friends had any communication with

Beeler since his disappearance.

The insurance companies argued that Beeler could not

be presumed dead; they claimed that he had left simply

to extricate himself from an increasingly troublesome

family situation. They presented evidence that Beeler’s

last years with his family were far from idyllic. He

engaged in an extramarital affair. He grew distant from

his family and was often absent from family gatherings.

His marriage with Kathy became strained. He spent long

periods of time living away from the family’s primary

home in Granger, Indiana, often staying in hotels or

escaping by himself to their vacation house in Marco

Island, Florida. Near the conclusion of 1997, Beeler

leased an apartment in nearby South Bend, Indiana. In

early 1998, Kathy Beeler filed an action in state court

seeking a formal separation from her husband and a

temporary restraining order to keep him away from the

family’s home. Following a hearing on January 28, the

court granted both requests. Kathy spoke with her hus-

band on the telephone three days later, on the morning

of January 31. She never spoke with him again.

The insurance companies also presented witnesses

who testified that they had seen Beeler since 1998. Several

witnesses testified that they had encountered Beeler in

the months following his disappearance. A friend of the

Beeler family stated that she had seen Beeler in the India-

napolis airport as late as May 2004.

As the trial neared conclusion, the plaintiff entered

objections to both Jury Instruction 22 and the court’s

Nos. 08-1734 and 08-2377 7

proposed special verdict form. We will discuss the con-

tents of both the jury instruction and the verdict form in

the analysis that follows. These two objections, both

denied by the district court, form the primary basis for

the claims raised by the appellant, the Beeler Trust, on

appeal. Following deliberations, the jury returned a

verdict in favor of the defendants. Pursuant to the ques-

tions posed in the special verdict form, the jury found,

specifically, that the plaintiff had not established the

elements necessary to raise the presumption of death.

On February 26, 2008, the district court denied the Beeler

Trust’s Renewed Motion for Judgment as a Matter of Law,

or, In the Alternative, For New Trial. The court subse-

quently denied the Beeler Trust’s motion to reconsider

its February 26 order, as well as its request to certify to the

Indiana Supreme Court the question of whether Jury

Instruction 22 and the special verdict form accurately

stated Indiana’s common law presumption of death.5

II. A NALYSIS

The Beeler Trust appeals the district court’s summary

judgment order on the punitive damages claims, the

court’s formulation of Jury Instruction 22 and the special

verdict form, and the court’s denial of its motion for a

5

Our decision on the merits of the Beeler Trust’s request for a

new trial makes it unnecessary to certify questions to the

Indiana Supreme Court. We therefore affirm the district

court’s order denying the Beeler Trust’s motion for certification.

8 Nos. 08-1734 and 08-2377

new trial. We turn first to its death benefits claims, which

encompass appellant’s arguments regarding Instruction

22 and the special verdict form, as well as the motion for

a new trial. We then briefly discuss the punitive damages

claims.

A. The Death Benefits Claims

On appeal, the Beeler Trust argues that errors in both

the jury instructions and the special verdict form preju-

diced the trial’s outcome. We agree. As we discuss

below, these errors, standing alone, would not merit a

new trial. Taken together, however, they prevented the

jury from considering one of the two ways in which the

plaintiff could prove Gordon Beeler’s death. For that

reason, a new trial is required.

In the state of Indiana, a claimant seeking to prove an

insured’s death may pursue two separate avenues of

proof. Under the first, a claimant may use direct or cir-

cumstantial evidence to prove by a preponderance of the

evidence that the insured is, in fact, dead. Under the

second, a claimant may seek to prove death by means of

a common law presumption. Indiana law dictates that a

person is presumed dead if the following conditions are

met: first, that the individual has been “inexplicably

absent” for a continuous period of seven years; second,

that the individual has not communicated with those

persons who would be most likely to hear from him; and

third, that the missing individual cannot be found “despite

diligent inquiry and search.” Roberts v. Wabash Life Ins. Co.,

Nos. 08-1734 and 08-2377 9

410 N.E.2d 1377, 1382 (Ind. Ct. App. 1980). Once raised,

however, the presumption of death may be rebutted “ ‘by

proof of facts and circumstances inconsistent with, and

sufficient to overcome, such presumption.’ ” Id. (quoting

Equitable Life Assur. Soc. of the U.S. v. James, 127 N.E. 11, 12

(Ind. App. 1920)). It is for the jury to conclude whether

the presumption has been sufficiently rebutted. Equitable

Life, 127 N.E. at 12.

The nature of the errors alleged in this case makes

critical the order of operations relative to the presumption.

We must determine whether facts tending to disprove

death prevent the presumption from ever arising in the

first instance, or whether they serve only to rebut the

presumption once it has arisen. In the vast majority of

cases, such a minute distinction would make no differ-

ence. The ultimate inquiry, after all, is simply whether,

after the evidence is in, the presumption of death survives.

And if the presumption does not survive, rarely does

one care about the cause of its demise—either because

it never arose or because it arose but was then rebutted.

We turn first to the source of the confusion: the use by

Indiana courts of the term “inexplicably absent” as a

prerequisite to raise, in the first instance, the common

law presumption of death.

1. Interpreting “Inexplicably Absent” and Jury Instruc-

tion 22

As stated above, under black-letter Indiana law, a

party seeking to raise the presumption of an individual’s

death must show that the individual has been “inexplica-

10 Nos. 08-1734 and 08-2377

bly absent” for a period of seven years. Roberts, 410

N.E.2d at 1382. The meaning of “inexplicably absent,”

however, is far from black-letter, and its proper inter-

pretation, which the district court attempted to define

in Jury Instruction 22, is at the center of this dispute.

The distinction, as we alluded to earlier, is one of timing.

If a party contesting an individual’s death has evidence

that tends to show that the individual is still living, does

that evidence prevent the presumption from ever

arising because the individual’s absence is not “inexplica-

ble”? Or, alternatively, does the presumption arise from

the individual’s mere absence and lack of tidings, with

such explanatory evidence saved for purposes of rebuttal?

The district court, in Jury Instruction 22, embraced the

former procedure, which we now find to have been in

error.

The purpose of Jury Instruction 22 was to explain to

the jury the ways in which the plaintiff could prove

Gordon Beeler’s death. It went into great detail about the

presumption process, including the prerequisites for

raising the presumption in the first instance. It stated,

correctly, that the person must be “inexplicably absent” for

a continuous period of seven years. The district court then

attempted to define “inexplicably absent.” At the request

of defense counsel, and over the objection of the plaintiff,

the court added the following definition: “As used in these

instructions, the phrase ‘inexplicably absent’ means that

his absence is unexplained by circumstances other

than those suggesting death.”

We review de novo whether jury instructions contain

fair and accurate summaries of the law. Calhoun v. Ramsey,

Nos. 08-1734 and 08-2377 11

408 F.3d 375, 379 (7th Cir. 2005). Reversal is only appro-

priate, however, if the instructions failed to adequately

state the law and the error likely misled or confused the

jury, thereby prejudicing the appellant. Gile v. United

Airlines, Inc., 213 F.3d 365, 374-75 (7th Cir. 2000); see also

Schobert v. Ill. Dep’t of Transp., 304 F.3d 725, 730 (7th Cir.

2002). An erroneous jury instruction is not prejudicial

unless, “considering the instructions as a whole, along

with all of the evidence and arguments, the jury was

misinformed about the applicable law.” Susan Wakeen

Doll Co. v. Ashton-Drake Galleries, 272 F.3d 441, 452 (7th

Cir. 2001).

Keeping these tenets in mind, we turn now to the first

question at hand: whether, under Indiana law, “inexplica-

bly absent” means an absence “unexplained by circum-

stances other than those suggesting death.” We con-

clude that it does not.

Early Indiana cases provided no support for the use of

“inexplicably absent.” In Baugh v. Boles, 66 Ind. 376 (Ind.

1879), an Indiana Supreme Court decision that dealt

peripherally with this issue, the court said:

It has long been an accepted rule of law . . . that where

a person has left his usual place of abode, and no

intelligence concerning him has been received by his

relatives, or by those who would probably hear from

him, if living, after the lapse of seven years . . . such

person would be presumed to be dead.

Id. at 384. The court made no mention of an inexplicable

absence.

12 Nos. 08-1734 and 08-2377

The phrase is also conspicuously absent from several

subsequent decisions by Indiana’s intermediate ap-

pellate court. In Metropolitan Life Insurance Co. v. Lyons, 98

N.E. 824 (Ind. App. 1912), the court stated that the pre-

sumption of death arose from an “unexplained absence” of

seven years. Id. at 825. But there is a marked difference

between an absence that is “inexplicable,” i.e., incapable of

explanation, and one that is merely “unexplained.” The

defendants quote repeatedly from Lyons the passage

that reads: “If the person alleged to be dead has been

absent from his home for seven years, a presumption

of death may arise; but proof of absence alone will not give

rise to this presumption.” Id. (emphasis added). Yet, in

so doing, the defendants fail to note the sentence that

follows:

If, in addition to the absence of such person for the

required time, it is shown that he left for a tempo-

rary purpose of business or pleasure, and that he

had not returned, and that those most likely to hear

from him have received no word or tidings from

him, the presumption of death arises, after an

absence of seven years.

Id. at 825-26. In other words, the court simply enunciated

the remaining prerequisites for the presumption to arise,

see Roberts, 410 N.E.2d at 1382, which remain uncon-

tested by either party. It is clear that the “something

more” required by Lyons was not an inexplicable absence.

The Indiana appellate court addressed this question

directly in Equitable Life Assurance Society of the United

States v. James, 127 N.E. 11 (Ind. App. 1920). In that case,

Nos. 08-1734 and 08-2377 13

in which a man was suspected of forgery and was sup-

posedly seen by two witnesses following the date of his

disappearance, the insurance company argued that “there

[was] no state of facts from which such a presumption

could have arisen; that such a presumption arises

only from an unexplained absence; and that where the

absence is explained, or the person has been seen during

the period of his absence, the presumption does not

arise.” Id. at 12. The court disagreed. It held that the

common law presumption arises “after a continuous

absence for a period of seven years, of one who left his

home for a temporary purpose, and from whom no

tidings have been received.” Id. Explanation for the

absence, said the court, was rebuttal evidence. Id. The

court found that the plaintiff’s evidence was sufficient

to raise the presumption, and that the explanatory evi-

dence of the individual’s absence was available only

for rebuttal. Id.

Perhaps most persuasive are the facts from Roberts v.

Wabash Life Insurance Co., 410 N.E.2d 1377 (Ind. Ct. App.

1980), the case in which an Indiana court first used the

“inexplicably absent” language. Id. at 1382. In Roberts,

firefighters discovered a dead body while extinguishing

a fire in a barn owned by Clarence Roberts. Id. at 1379.

The charred remains were initially thought to be those

of Roberts himself. See id. Further investigation, however,

suggested that the body was not Roberts. See id. at 1380-81.

In fact, the evidence indicated that Roberts might have

killed a man and then burned the body in the barn in

an effort to fake his own death, with the intent of

avoiding creditors and potential charges of fraud. Id. at

14 Nos. 08-1734 and 08-2377

1383. His wife, claiming Roberts to be dead or presumed

dead, contested the insurance company’s refusal to pay

on Roberts’s life insurance policies. Id. at 1381-82.

Using language notably similar to that found in Jury

Instruction 22, the trial court in Roberts concluded that

the presumption of death had never arisen because Rob-

erts’s disappearance was “explainable by a reasonable

hypothesis other than his death.” Id. at 1383. The Indi-

ana Court of Appeals disagreed. After stating that a

prerequisite to raising the presumption of death was an

“inexplicabl[e]” absence of seven years, id. at 1382, the

court found that requirement satisfied, stating that the

plaintiffs had “introduced evidence of the basic facts

which gave rise to the presumption of death,” id. at 1383.

It reached this conclusion despite evidence of murder,

arson, fraud, and financial ruin, all of which clearly

made Roberts’s disappearance anything but “inexpli-

cable,” at least in the literal sense of the word. But the

court looked to that evidence only to rebut the presump-

tion once it was raised, not to prevent it from ever aris-

ing. Thus, the Indiana appellate court’s application of the

“inexplicably absent” standard has differed from

the phrase’s common meaning since the first day of the

standard’s existence.

Indeed, adopting the definition of “inexplicably absent”

found in Jury Instruction 22 would effectively eliminate

the presumption of death. The purpose of the presump-

tion is to provide relief to those who might not be able to

prove a person’s death with direct or circumstantial

evidence. See Green v. Shalala, 51 F.3d 96, 100 (7th Cir. 1995).

Nos. 08-1734 and 08-2377 15

If, to raise the presumption, a party were required to

prove that an individual’s absence was, as the district

court stated, “unexplained by circumstances other than

those suggesting death,” then the presumption would

no longer be necessary: armed with such evidence, the

party would likely be able to prove the individual’s death-

in-fact. The result would be that no party actually

needing the presumption would be able to raise it. See

Green, 51 F.3d at 100 (noting that such a high standard

“places an untenable burden on the claimant to disprove

every possible explanation for the missing person’s ab-

sence”). Although the Indiana Supreme Court has not

addressed this issue, the Wisconsin Supreme Court has

recognized this problem when discussing its own

state’s presumption of death:

[T]he rule is satisfied by a lack of intelligence or

tidings for seven years, even if a reason for the

absence is shown. Were it otherwise the presump-

tion would never attach where any reason for

leaving is given, and, in such case, no recovery

could ever be had except upon proof of actual

death.

Ewing v. Metro. Life Ins. Co., 210 N.W. 819, 820 (Wis. 1926).

We conclude, based on our analysis of Indiana law, that

the Roberts requirement of an inexplicable absence for

the common law presumption of death to arise is, at

worst, the result of inartful drafting or, at best, a term of

art with a far different interpretation than its common

meaning. Because the Roberts court cited the Equitable

Life decision as support for its test, see 410 N.E.2d at 1382,

we look to both of those decisions to reach what we feel

16 Nos. 08-1734 and 08-2377

is the appropriate interpretation of Indiana law on this

point. Under this interpretation, the common law pre-

sumption of death arises if the party seeking to prove a

person’s death presents evidence demonstrating (1) that

person’s continued absence for a period of seven years;

(2) that person’s failure to communicate with those indi-

viduals who would be most likely to hear from him; and

(3) the inability to find that person, despite diligent

inquiry and search. Cf. Roberts, 410 N.E. at 1382; Equitable

Life, 127 N.E. at 12. Evidence offered to explain an individ-

ual’s absence goes toward the rebuttal of the presump-

tion, not to prevent the presumption from first arising.

Equitable Life, 127 N.E. at 12.6

Given such an interpretation, the definition contained

in Jury Instruction 22 was an incorrect statement of law. To

raise the presumption, a party need not show that an

individual’s absence “is unexplained by circumstances

other than those suggesting death.” As we mentioned

previously, however, such an error, by itself, does not

merit a new trial. A party must show prejudice as well.

Schobert, 304 F.3d at 730.

In almost every situation, the timing issue that we

have just calibrated would make no difference in the

outcome of a trial. What matters, obviously, is whether

the presumption of death exists at the end of the in-

6

Such an interpretation of the Roberts test brings Indiana in

line with the approach adopted by the Seventh Circuit in an

analogous situation. See Green, 51 F.3d at 100-01 (interpreting

the presumption of death in the context of Title II of the

Social Security Act).

Nos. 08-1734 and 08-2377 17

quiry. Whether it was terminated because it never

first arose, or whether it arose but was eliminated by

rebuttal evidence should make no difference. Turning to

this case, it would generally be irrelevant why the jury

concluded that the presumption of death was inap-

plicable and did not entitle the Beeler Trust to relief.

What made it important here, however, and what ulti-

mately prejudiced the plaintiff, was the interplay of the

error in Jury Instruction 22 with a second error in the

jury’s special verdict form. We turn our discussion

now to this second error.

2. The Two Avenues of Proving Beeler’s Death and the

Special Verdict Form

Federal Rule of Civil Procedure 49 permits a court to

submit to the jury either a general or special verdict

form. A special verdict form requires the jury to return

specific findings on issues of disputed fact raised by the

parties during trial. Fed. R. Civ. P. 49(a). In the special

verdict form, the court must present to the jury “all

material issues raised by the pleadings and evidence.”

U.S. Fire Ins. Co. v. Pressed Steel Tank Co., 852 F.2d 313,

318 (7th Cir. 1988). We review a district court’s formula-

tion of questions on a special verdict form for an abuse

of discretion. Id. at 316.

The special verdict form at issue here was significantly

flawed. It posed a series of three questions. A short para-

graph after each question instructed the jury how to

proceed based upon its answer to the preceding question.

18 Nos. 08-1734 and 08-2377

The first question listed the elements necessary to

raise the presumption of death and asked the jury to

determine whether the Beeler Trust had proven these

elements by a preponderance of the evidence. If the

jury answered no, meaning that the claimant had failed

to raise the presumption of death, the form instructed

the jury not to consider the remaining two questions.

According to the special verdict form, such a response

ended the jury’s inquiry: the defendants had prevailed.

If the jury found that the Beeler Trust had successfully

raised the presumption of death under Question 1, the

form instructed the jury to proceed to Question 2. The

second question asked whether the defendants had

presented evidence sufficient to rebut the presumption.

If the jury found insufficient evidence to rebut the pre-

sumption, the special verdict form again instructed the

jury that its inquiry was over. The result, however, was

now different: an unrebutted presumption of death

meant that the plaintiff had won.

Recall now the two evidentiary avenues available to

prove death. In addition to proving death by means of a

legal presumption, claimants may also prove death the

more traditional way: by direct or circumstantial evidence

of the ultimate fact of the insured’s death. According to

the verdict form’s instructions, if the jury determined,

under Question 2, that the defendants had rebutted the

presumption—meaning that the plaintiff had failed to

prove death using the presumption avenue—the jury

was to proceed to the final question. There, the court

asked the jury to decide whether the plaintiff, using

Nos. 08-1734 and 08-2377 19

direct or circumstantial evidence, had proven by a pre-

ponderance of the evidence that Gordon Beeler was in

fact dead.

We find the problem with the special verdict form in

the instructions that follow Question 1. The jury answered

Question 1 in the negative, meaning that it concluded

that the Beeler Trust had failed to meet the elements

necessary to raise the presumption of death. The jury then

did as the form instructed and ended its deliberations. It

never considered Question 3, which asked the jury to

consider whether the plaintiff had proven death by the

alternative path, through direct and circumstantial evi-

dence of death-in-fact. Because the jury should have

considered whether the plaintiff had satisfied this alter-

native means of proof, the erroneous instruction

following Question 1 was a legal error that constituted

an abuse of the district court’s discretion.

The district court’s confusion on this point is under-

standable. In Roberts, the court found that the plaintiff

had introduced the basic facts necessary to give rise to

the presumption of death, which the defendant had

subsequently rebutted. 410 N.E. at 1383-84. Once the

presumption was rebutted, the court said that the

plaintiffs “were then obligated to prove, by direct and

circumstantial evidence and the reasonable inferences to

be drawn therefrom, the ultimate fact of Clarence Rob-

erts’ death.” Id. at 1384. In the facts of Roberts, therefore, the

presumption was rebutted, which triggered consideration

of the alternative avenue of proof. But it would be illogical

to require those same facts in every case.

20 Nos. 08-1734 and 08-2377

It would make no sense to conclude that the alternative

avenue of direct and circumstantial evidence can be

considered only when the presumption dies by rebuttal.

There is no reason to distinguish those cases where the

plaintiff fails to assert facts sufficient to give rise to the

presumption in the first instance from those where the

presumption arises but is later rebutted. What matters,

as we mentioned above, is the question of the presump-

tion’s ultimate survival. If the presumption does not

survive, the reason for its demise should make no dif-

ference to whether a jury must consider the alternative

question of direct and circumstantial proof of death.

Here, however, because of the special verdict form’s

construction, the trial’s outcome potentially hinged on

that improper distinction.

Defendants advance arguments of waiver. They claim

that the Beeler Trust rested its entire case on the presump-

tion of death, that it never presented any evidence to

prove Beeler’s actual death, and that the lawyers never

made any arguments to the jury under this alternative

means of proof. See Fed. R. Civ. P. 49(a)(3). We need not

decide here whether waiver of one avenue of proof in

these situations is possible; for even if waiver were possi-

ble, the plaintiff did not do so here. Furthermore, the

court clearly intended to allow the jury to consider both

means of proof; having made that decision, the court was

then obligated to present to the jury an accurate state-

ment of the law in its instructions and verdict form.

Indiana courts have recognized that the same facts that

one must prove to raise the presumption of death also

Nos. 08-1734 and 08-2377 21

serve as circumstantial evidence of death-in-fact. See

Roberts, 410 N.E.2d at 1383 (“[T]he lengthy disappearance

of Clarence Roberts, his failure to communicate with

friends and family, and the fruitless search for Roberts

amounted to circumstantial evidence of death . . . .”). The

intermediate appellate court gave a more thorough

review of this idea in Lyons:

“Any facts or circumstances relating to the charac-

ter, habits, conditions, affections, attachments,

prosperity, and objects in life, which usually

control the conduct of men, and are the motives of

their actions, are competent evidence from which

may be inferred the death of one absent and un-

heard from, whatever has been the duration of

such absence. A rule excluding such evidence

would ignore the motives which prompt human

actions, and forbid inquiry into them in order to

explain the conduct of men.”

98 N.E. at 826 (quoting Tisdale v. Conn. Mut. Life Ins. Co., 26

Iowa 170, 176 (Iowa 1868)). Clearly, then, the plaintiff in

this case, by virtue of the evidence it advanced to demon-

strate the presumption of death, also presented circum-

stantial evidence that would allow the jury to infer that

Gordon Beeler was actually dead. Thus, we reject the

defendants’ arguments that the plaintiff presented no

circumstantial evidence of death-in-fact and was there-

fore barred from presenting that question to the jury.

A review of the trial transcripts also demonstrates the

plaintiff’s cognizance of this alternative means of proof,

as well as the court’s willingness to permit the jury to

consider the death-in-fact question. In the instructions

22 Nos. 08-1734 and 08-2377

conference, plaintiff’s counsel requested a change to

Jury Instruction 22, noting that “if we don’t convince

the jury that the presumption applies, we can still prevail

in the case if the jury concludes that even without the

presumption the facts support their concluding that he

is dead as a matter of fact.” The court recognized this

and adjusted the instructions accordingly.

3. Prejudicial Effect of the Combined Errors

Taken in isolation, neither error was prejudicial. Given a

properly constructed special verdict form, a jury would

presumably have reached the death-in-fact question,

notwithstanding the erroneous definition of “inexplicably

absent” contained in Jury Instruction 22. As we have

discussed, Instruction 22 made the timing of the presump-

tion procedure important; but if both Question 1 and

Question 2 directed the jury to consider Question 3, this

issue would have become irrelevant. The jury would

have considered whether the plaintiff had proven actual

death by circumstantial evidence regardless of whether

the presumption never arose or whether it arose but

was later rebutted, thereby making the incorrect defini-

tion of “inexplicably absent” harmless.

Similarly, if Jury Instruction 22 had not contained the

erroneous definition of “inexplicably absent,” it is likely

that the error in the special verdict form would not have

been prejudicial. By moving the timing question to the

forefront of its deliberations, the erroneous definition

served to logjam the jury’s decision. It raised an

impermissibly high hurdle to raise the presumption of

Nos. 08-1734 and 08-2377 23

death in the first instance. Without that instruction, it is

certainly possible that the jury would have proceeded

to Question 2, which, unlike Question 1, left open the

possibility of advancing to Question 3.

Considered together, however, these errors were any-

thing but harmless. The inaccurate statement of law

contained in Jury Instruction 22, combined with the

procedure set forth in the special verdict form, made

the mechanics of the presumption procedure para-

mount and, as a result, prevented the jury from ever

considering the plaintiff’s alternative means of proving

Beeler’s death. A new trial is required.

B. The Punitive Damages Claim

The Beeler Trust also appeals the district court’s grant of

summary judgment in favor of the defendants on the

Beeler Trust’s punitive damages claims. We review de

novo the district court’s decision to grant summary judg-

ment. Alexander v. Wis. Dep’t of Health & Family Servs.,

263 F.3d 673, 680 (7th Cir. 2001). Summary judgment is

appropriate when, drawing all reasonable inferences

in favor of the appellant, there remains no genuine issue

as to any material fact, thereby making judgment as a

matter of law appropriate. See Fed. R. Civ. P. 56;

Alexander, 263 F.3d at 680.

The Indiana Supreme Court has recognized that an

insurance company’s tortious breach of its duties of good

faith and fair dealing can serve as the basis for an insured’s

punitive damages claim. See Erie Ins. Co. v. Hickman ex rel.

24 Nos. 08-1734 and 08-2377

Smith, 622 N.E.2d 515, 519 (Ind. 1993). The court also

noted, however, that such a claim “does not arise every

time an insurance claim is erroneously denied.” Id. at 520.

A “good faith dispute” regarding the existence of a valid

claim will not permit recovery of punitive damages, even

if the insurance company is ultimately determined to

have erroneously denied payment of benefits. Id.

As the appellant correctly notes, however, an insur-

ance provider’s duty of good faith extends beyond deci-

sions to pay or deny benefits. See Monroe Guar. Ins. Co. v.

Magwerks Corp., 829 N.E.2d 968, 976 (Ind. 2005). Indiana

courts have declined to determine the full extent of this

duty, but they have noted that a provider may not make

an unfounded refusal to pay benefits nor cause an un-

founded delay in making payment. See Erie Ins. Co., 622

N.E.2d at 519. Evidence of bad faith in refusing to

pay benefits or causing unfounded delays must demon-

strate “a state of mind reflecting dishonest purpose, moral

obliquity, furtive design, or ill will.” Magwerks Corp., 829

N.E.2d at 977 (internal quotation marks omitted).

After reviewing the record, we conclude that this is

nothing more than a good faith dispute over coverage.

The plaintiff has not demonstrated evidence of bad faith

on the part of the insurance providers sufficient to

survive summary judgment on a claim for punitive dam-

ages.

III. C ONCLUSION

For the aforementioned reasons, we A FFIRM the district

court’s grant of summary judgment in favor of the defen-

Nos. 08-1734 and 08-2377 25

dants on the Beeler Trust’s claim for punitive damages.

However, due to the errors in Jury Instruction 22 and the

jury’s special verdict form, we V ACATE the judgment

entered by the district court at the conclusion of the jury

trial and R EMAND for a new trial. Our decision makes

certification of questions to the Indiana Supreme Court

unnecessary; thus, we A FFIRM the district court’s order

denying the Beeler Trust’s motion for certification.

3-12-09