Ace

Sherrie Ace (“Ace”), a resident of Alaska, sued Aetna Life Insurance Company (“Aet- *1243 na”) in Alaska state court alleging that Aetna acted in bad faith in denying her claim for long-term disability benefits. Aetna removed the case to federal court pursuant to 28 U.S.C. §§ 1332 ,1441.

The jury ruled for Ace on her bad faith claim and awarded her $27,009 for the wrongful denial of disability benefits and $100,000 for emotional distress. It also awarded her $16.5 million in punitive damages. The court then granted Aetna’s post-trial motion for judgment as a matter of law on punitive damages and for a conditional new trial, 1 but denied its motions for judgment and for a new trial on the bad faith claim. It entered judgment for Ace in the amount of $127,009. Both parties appeal from the adverse rulings on their motions. Aetna also asserts error in the instructions to the jury with respect to emotional distress damages.

We have jurisdiction pursuant to 28 U.S.C. § 1291 , and we affirm in part, reverse in part and remand.

FACTS

A. Sherrie Ace’s Accident

Ace was employed by the State of Alaska as a senior loan examiner. As a state employee, Ace participated in an Aetna group…