HESTON v. INTERNATIONAL MEDICAL GROUP INC (2020)

ORDER GRANTING DEFENDANTS’ MOTION TO STRIKE JURY DEMAND

Defendants International Medical Group, Inc. and Sirius International Insurance Corporation move the court to strike the plaintiff's demand that his claims be tried to a jury because the parties’ insurance contract—as reflected in the Application and Master Policy—requires any “trial of any dispute shall be by the court as factfinder, without a jury.” Heston argues that this provision is unenforceable because (a) he is unsophisticated; (b) he did not look at the documents he was provided and so his waiver of rights was not voluntary or knowing; (c) the waiver is not highlighted or specially flagged; and (4) the insurance contract is a contract of adhesion. Because the court finds no basis for ignoring the contract's requirement that disputes must be decided by a court “without a jury,” the Defendants’ motion is GRANTED. (Docket No. 18). Heston's request for trial by jury is STRICKEN.

I. PROCEDURAL AND FACTUAL BACKGROUND

On February 25, 2020, Heston filed his Amended Complaint against Defendants, seeking money damages and declaratory relief for breach of contract and breach of the covenant of good faith and fair dealing related to an insurance agreement between Heston and Defendants. (Docket No. 8). Heston avers that on April 17, 2019, he completed an online Application for insurance and, upon completing the application, received a copy of the Application. (Docket No. 26-2 at ECF p. 1, ¶ 2). In that Application, the following language appeared: “․ [ ] I (we) agree that Indiana surplus lines law shall govern all rights and claims arising under this insurance, and trial of any dispute shall be by the court as factfinder, without a jury.” (Docket No. 26-5 at ECF p. 7). Nonetheless, Plaintiff's Amended Complaint makes a demand for jury trial. (Docket No. 8 at ECF p. 1). Additional facts are discussed as necessary in the analysis.

II. LEGAL STANDARD

Federal Rule of Civil Procedure 39(a)(2) addresses the demand for a jury trial and provides that:

(a) When a Demand Is Made. When a jury trial has been demanded under Rule 38, the action must be designated on the docket as a jury action. The trial on all issues so demanded must be by jury unless ․ (2) the court, on motion or on its own, finds that on some or all of those issues there is no federal right to a jury trial.

Fed. R. Civ. P. 39(a)(2). The right to a jury trial in federal court is determined as a matter of federal law in diversity as well as other actions. Simler v. Conner, 372 U.S. 221, 222, 83 S.Ct. 609, 9 L.Ed.2d 691 (1963). Nonetheless, state law governs the validity of a contractual bench trial agreement in a case under the court's diversity jurisdiction. IFC Credit Corp. v. United Business & Indus. Fed. Credit Union, 512 F.3d 989, 991 (7th Cir. 2008).

The Seventh Amendment provides a right to jury trial in any civil suit in which the amount in controversy exceeds twenty dollars. U.S. Const., Amend. VIII. However, a party may contract to waive its right to a jury trial without having to show extra negotiation or evidence of voluntariness beyond what is required to make the rest of the contract legally effective. IFC Credit Corp., 512 F.3d at 993. Under Indiana law, a “very strong presumption [exists] of enforceability of contracts that represent the freely bargained agreement of the parties.” Sanford v. Castleton Health Care Ctr., LLC, 813 N.E.2d 411, 420 (Ind. Ct. App. 2004).

III. ANALYSIS

The court has reviewed the record and finds no indication that Heston is an unsophisticated party or that he did not have the opportunity read the waiver language. Heston received an Associate Degree and worked for fifteen years as a quality auditor reviewing manufacturing of water heaters and boilers before becoming the Director of International Operations of his own international missionary non-profit organization. (Docket No. 26-1 at ECF p. 2, ¶¶ 4–6). Heston's affidavit admits that he completed the Application online and that a copy of the completed Application was returned to him. (Docket No. 26-1 at ECF pp. 2–3, ¶¶ 7–9).¹ Heston avers that he did not see “a reference to giving up any rights to anything, including a right to a jury trial. (Id. at ECF p. 3, ¶ 9).² However, the copy of the Application returned to Heston reflects that Plaintiff was provided several notices, including the jury waiver provision, in the section before an acknowledged that he read and agreed with the Application's terms and his signature. (Docket No. 26-5 at ECF pp. 7–9). Plaintiff does not argue that the notice section was not in the Application he completed online; he merely asserts that he “did not see [it].” (Docket No. 26-1 at ECF p. 3, ¶ 9). Plaintiff admits that he did not review the completed Application when it was returned to him. (Id., ¶ 8). Plaintiff also admits that he received a copy of the Certificate, which he understood to be his insurance policy, but then “put it aside.” (Id. at ECF pp. 3, 5, ¶¶ 11, 15).

Heston argues that under Indiana law Defendants’ jury waiver provisions are invalid and unenforceable because they were buried in the insurance provisions. (Docket No. 26 at ECF p. 5). Thus, he argues that his waiver was not knowing and voluntary. A knowing and voluntary waiver requires, according to Heston, consideration of whether the contract involved sophisticated or commercial parties, or whether the contractual provision eliminating a jury was specially negotiated or at least brought to the attention of the “weaker” contracting party by conspicuous typeface or some other means highlighting its existence in the contract. In support, Heston cites a 2006 decision from this district, a 1994 decision from the Northern District of Illinois, and cases from the First and Third Circuits. But, as set forth in the legal standard, in any contract case for which state substantive law provides the rule of decision, the validity of a contract provision eliminating dispute resolution by a jury is governed by that state's laws. IFC Credit Corp., 512 F.3d at 994. This court must therefore reject as incompatible with Seventh Circuit law Heston's cases that are grounded in the principle that federal law invalidates a contractual agreement eliminating jury trials unless there was a knowing and voluntary waiver or Heston's cases regarding contract provisions that are not based on Indiana state law.

With respect to Indiana law, Heston cites to Howell v. State Farm Fire and Casualty Co., 530 N.E.2d 318 (Ind. Ct. App. 1988), but in no way explains its applicability. The case dealt with distinguishing between claims of law, which entitled a party to a jury as a matter of right, and claims of equity, which were not entitled to a jury as a matter of right, not with contractual waiver positions. It is not applicable to this case.

Heston argues that he lacked notice of the purported waiver. For this argument he relies on the Certificate, which he indicates he received after he purchased the policy. (Docket No. 26-1 at ECF p. 3, ¶ 11). His argument is unpersuasive for several reasons. He does not address the Application, which he admitted to filling out and receiving an electronic copy of upon completion. (Docket No. 26-2 at ECF p. 1, ¶¶ 1–2, citing Docket No. 26-5). In Sanford, 813 N.E.2d at 420, the Court of Appeals of Indiana considered the jury trial waiver implications of an arbitration clause in a contract between the parties. The court upheld the arbitration clause and found no violation of the plaintiff's constitutional right to a jury trial. Id. In so doing, the court considered that the plaintiff had a minimal business education (two-year business degree) was granted the opportunity to read the contract, and signed the contract just below the arbitration clause. Id. The agreement to submit a controversy to an arbiter rather than a court necessarily implies an agreement to waive a right to jury trial; thus, the Sanford court's reasoning extends to an explicit contractual waiver of a right to jury trial as well. See IFC Credit Corp., 512 F.3d at 994 (rejecting the disparate treatment of bench-trial and arbitration agreements and the oddity of applying a knowing and intentional waiver standard to a contract when Federal Rule of Civil Procedure 38 does not use such an approach once the case gets to court).

In Sanford, the Indiana Court of Appeals analyzed the enforceability of an arbitration provision under unconscionability principles. Like Heston in this case, the plaintiff in Sanford argued that a contractual provision eliminating a jury trial (an arbitration provision in Sanford), should not be enforced because it was contained in a standardized, adhesion contract drafted by a party with superior bargaining power. 813 N.E.2d at 417. As explained by the court, the doctrine of unconscionability requires proof both that there was a great disparity in bargaining power between the contracting parties with the weaker party having entered the contract unwillingly or without awareness of its terms and the challenged contract provision is “ ‘such as no sensible man not under delusion, duress or in distress would make, and such as no honest and fair man would accept.’ ” Id. (quoting Progressive Constr. & Eng'g Co. v. Ind. & Mich. Elec. Co., 533 N.E.2d 1279, 1286 (Ind. Ct. App. 1989)).

The court finds that neither prong is satisfied here. With respect to the circumstances surrounding Heston entering the insurance contract, he had sufficient opportunity to learn of the bench trial provision and to reject the Defendants’ health insurance product if he believed that provision was not acceptable to him. The Application states that “I (we) understand and agree that ․ the contract of insurance represented by the Master Policy and evidenced by the Certificate of insurance shall be deemed issued and made in Indianapolis, IN.” (Docket No. 26-5 at ECF p. 7). That same paragraph, which is above Heston's signature on the application, reads “claims arising under this insurance, and trial of any dispute shall be by the court as fact finder, without a jury.” (Docket No. 26-5 at ECF p. 7). The Application was dated April 17, 2019. (Id.). Immediately above his signature is a statement that says “By checking this box, I agree ․ I have read and agree to all terms, conditions, and other statements on this page.” (Id. at ECF p. 9).

Heston believes he received the Certificate April 30, 2019. (Docket No. 26-1 at ECF p. 3, ¶ 11). It does not appear that he read the Certificate. (Id. at ECF p. 5, ¶ 15) (“When I received the Certificate, I put it aside.”). Heston's Declaration of Medical Insurance, which he received with the Certificate, indicates his policy was effective April 24, 2019. (Docket No. 26-2 at ECF p. 2, ¶ 5, citing Docket No. 26-4). The Certificate is a 32-page document that describes and is “evidence of” Heston's rights and benefits under the Master Policy.³ The Certificate provided, in bold, underlined, and capitalized letters, a section entitled: “SERVICE OF SUIT: VENUE; CHOICE OF LAW; TRIAL BY COURT.” (Docket No. 26-3 at ECF p. 11). That section made clear that a sentence that read: “[a]ll trials regarding any dispute under this insurance shall be exclusively presented to and determined solely by the court as the trier of fact, without a jury.” (Id. at ECF p. 12). Finally, the Certificate also provided fifteen days from the Initial Effective Date of Coverage (the “Review Period”)⁴ to review the terms outlined in the Certificate and to cancel the coverage in exchange for a full refund if the terms were unsatisfactory. (Id. at ECF p. 13).

The court will not characterize the terms in these paragraphs as hidden from Heston when checked a box on the Application indicated he read and agreed to the terms. Those terms included that the contract was evidenced by the Certificate, which he admits receiving, and a waiver of a jury trial. The court is aware of no cases allowing an insured to avoid the terms of his insurance policy when he failed to take the opportunity to read them. Indeed, under Indiana law, “[i]t is fundamental that an insured has a duty to learn the contents of the policy himself, even though it becomes necessary to have some third person read the contents to him.” Penwell v. W. & S. Life Ins. Co., 474 N.E.2d 1042, 1044 (Ind. Ct. App. 1985).

Even if the court were to decide that the contractual elimination of a jury trial was buried in the fine print or otherwise communicated in an unfair manner, the court cannot conclude that the provision is one no honest or fair person would accept. In IFC Credit Corp., 512 F.3d 989 (7th Cir. 2008), the court explained that the market may price a contract for goods or services where the buyer agrees to a jury waiver lower than a contract where no concession is made. Id. at 993. The point being that trade-offs are a necessary aspect in contract formation. Indiana protects the insured in the insurance context by “apply[ing] some specialized rules of construction in recognition of the frequently unequal bargaining power between insurance companies and insureds.” Justice v. Am. Fam. Mut. Ins. Co., 4 N.E.3d 1171, 1176 (Ind. 2014). Those rules require enforcing only those terms that are clear and unambiguous and resolving any ambiguous terms against the insurer. Id. Heston cannot show any ambiguity in the language at issue here. The Application provided that Heston “agree[d] that Indiana surplus lines law shall govern all rights and claims arising under this insurance, and trial of any dispute shall be by the court as fact finder, without a jury.” (Docket No. 26-5 at ECF p. 7). The Certificate provided that “[a]ll trials regarding any dispute under this insurance shall be exclusively presented to and determined solely by the court as the trier of fact, without a jury.” (Docket No. 26-3 at ECF p. 12).

Finally, Heston argues that the waiver is not enforceable as the insurance contract is a contract of adhesion. However, the mere fact that an insurance contract is sometimes considered a contract of adhesion due to the unequal bargaining power of the parties does not void the jury waiver found therein as such contracts are routinely enforced as written in Indiana. See Sanford, 813 N.E.2d at 411.

IV. CONCLUSION

For the foregoing reasons, the Defendants’ Motion to Strike (Docket No. 18) is GRANTED. Heston's request for trial by jury is STRICKEN.

SO ORDERED.

FOOTNOTES

1.   Heston's counsel's own briefing misrepresents paragraph seven of his declaration, summarizing it to mean “[Plaintiff] did not see the Application for it.” (Docket No. 26 at ECF p. 2, citing Docket No. 26-1 at ECF p. 2, ¶ 7). No reasonable interpretation of Heston's declaration supports that statement.

2.   Heston's counsel's own briefing also misrepresents paragraph nine of his declaration, summarizing it to mean “the health questionnaire completed by Plaintiff contains no mention of a waiver of Plaintiff's right to trial by jury.” (Docket No. 26 at ECF p. 3, citing Docket No. 26-1 at ECF p. 3, ¶ 9) (emphases omitted). Heston's declaration actually says: “I reviewed the application and filled it out as I went along. I did not see at any time a reference to giving up any rights to anything, including a right to a jury trial.” (Docket No. 26-1 at ECF p. 3, ¶ 9). The credibility of a party's briefing is weakened when it misconstrues its own evidence.

3.   Though Heston complains that he never received the Master Policy, he does not dispute that the contractual provision at issue was not present in both the Application and the Certificate that he did receive. The Certificate explains that the insurance contract is the Master Policy, the application, and any riders, and that the Certificate is “a description of and evidence of the Insured Person's rights and benefits under the contract.”) (Docket No. 26-3 at ECF p. 10).

4.   Fifteen days from April 24, 2019 would have been May 9, 2019. Thus, Heston had ten days to review the Certificate and cancel the policy in exchange for a full refund, given that he received it on April 30, 2019.

Matthew P. Brookman, United States Magistrate Judge