Campbell v. State Farm Mut. Auto. Ins. Co.

• Citation: 840 P.2d 130
• Decision Date: 13 August 1992
• Docket Number: No. 910436-CA,910436-CA
• Parties: Curtis B. CAMPBELL and Inez Preece Campbell, Plaintiffs and Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant and Appellee.
• Court: Court of Appeals of Utah

Page 130

840 P.2d 130

Curtis B. CAMPBELL and Inez Preece Campbell, Plaintiffs and Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant

and Appellee.

No. 910436-CA.

Court of Appeals of Utah.

Aug. 13, 1992.

L. Rich Humpherys and Karra J. Porter, Salt Lake City, for plaintiffs and appellants.

Glenn C. Hanni and Robert A. Burton, Salt Lake City, for defendant and appellee.

Before BENCH, GREENWOOD and ORME, JJ.

OPINION

ORME, Judge:

Appellants Curtis B. Campbell and Inez Preece Campbell appeal from the district court's grant of summary judgment in favor of appellee State Farm Mutual Automobile Insurance Company. The pivotal issue raised by this appeal is whether State Farm's eventual payment of the excess judgment rendered against the Campbells in a suit by a third party bars the Campbells' claim that State Farm acted in bad faith by earlier refusing to settle the claim within the policy limits. We hold that it does not bar the Campbells' claim and, accordingly, reverse and remand for further proceedings.

FACTS

We note at the outset that, insofar as any of the following facts are contested, we recount them as the Campbells allege they occurred because, on appeal from a grant of summary judgment, we must view the facts in a light most favorable to the losing party. As stated in Webster v. Sill, 675 P.2d 1170 (Utah 1983), "[d]oubts or uncertainties concerning issues of fact properly presented, or the nature of inferences to be drawn from the facts, are to be construed in a light favorable to the party opposing the summary judgment." Id. at 1172. Moreover, we note that the issue of whether an insurer breached its duty to act in good faith turns on factual issues to be determined by a jury after consideration of all the evidence. Gagon v. State Farm Mut. Auto. Ins. Co., 746 P.2d 1194, 1197 (Utah App.1987), cert. denied, 771 P.2d 325 (Utah 1988).

The Campbells are a retired, elderly couple who, at all relevant times, have been residents of rural Cache County, Utah. Curtis Campbell was the driver of a "non-contact" vehicle involved in an accident on May 22, 1981; Mrs. Campbell rode as a passenger in the vehicle. The accident occurred when Campbell attempted to pass, or had just passed, a caravan of six vans travelling on a two-lane highway through Sardine Canyon in Cache County, Utah. Todd Ospital, the son of John L. and Winnifred P. Ospital (the Ospitals), drove a small car coming the opposite direction. He swerved onto the shoulder of the highway apparently in an attempt to avoid the Campbell vehicle. Ospital lost control of his vehicle, veered over the center line, and collided head-on with a vehicle driven by Robert G. Slusher. Todd Ospital was killed in the accident and Slusher was seriously injured. Campbell's vehicle was unscathed.

Slusher sued both Campbell and Todd Ospital's estate, in the First District Court of Cache County, for the injuries he sustained in the accident. Slusher's claim against Ospital's estate was settled prior to trial. Ospital's estate, however, had asserted a crossclaim against Campbell for wrongful death. Thus, the Slusher and Ospital claims against Campbell remained to be tried. ¹ The cause of the collision was disputed, and Campbell steadfastly denied any responsibility for the accident. At the time of the accident, the Campbells were insured under an automobile insurance policy issued by State Farm.

State Farm assigned Ray Summers to investigate and evaluate the claim. Summers was an experienced claims adjuster who had worked for State Farm in that capacity since 1963. After some initial investigation, Summers concluded that Campbell was at least partly at fault for the accident. All the eyewitnesses to the accident believed that Campbell had been the cause of the accident, and the physical evidence, including photographs of the scene and skidmarks, supported the eyewitnesses' conclusions. In addition, all the evidence pointed to no fault whatsoever on the part of Slusher. Considering his conclusions about Mr. Campbell's fault, Summers was concerned that Campbell was in considerable danger of being exposed at trial to a judgment exceeding his policy limits of $25,000 per person and $50,000 per accident. Summers so concluded for several reasons. First, the accident had resulted in the death of Todd Ospital. Second, Slusher's injuries were obviously very serious, considering that his medical costs had already reached $25,000 and he had sustained some injuries that were permanent. Thus, Summers concluded that the prudent course would be to settle the matter, if possible, because a trial would likely result in an excess judgment against Campbell. To make matters worse, under then-existing law, Campbell would be jointly and severally liable for the whole of any such judgment if he were found at fault to even a small degree. ²

Summers reported his findings and evaluation to his superiors at State Farm. After reviewing Summers' report, one of his supervisors directed Summers to destroy that portion of the report relating to Campbell's culpability, and to redraft that portion to assess no fault against Campbell. Summers claimed that, although he strongly disagreed with this directive, he cooperated because he feared he might lose his job if he did not. Moreover, he asserts that while working on other cases, he had been given similar directions to act in a manner he believed was contrary to the best interests of the insured. Summers has further opined that any claims adjuster would have known that an excess judgment against a retired, older couple such as the Campbells would "cause extreme emotional upset, stress and suffering and could permanently affect their financial security and physical well-being." ³

Thereafter, State Farm resolutely stood by its position of "no liability," in spite of Summers' evaluation of the accident. State Farm retained Wendell Bennett to undertake the defense of Campbell. Prior to trial, State Farm and Bennett continued to reassure the Campbells that there was no evidence to support a finding of liability against Campbell and that there was no danger of the couple being exposed to a judgment beyond their policy limits. Indeed Bennett assured the Campbells there was "plenty" of insurance to cover the risk. While this view was not inconsistent with Campbell's personal view that he was in no way responsible for the accident, neither State Farm nor Bennett ever advised Campbell of the existence of numerous witnesses who would testify against him, or that he would be legally liable for the entire amount of the judgment if he were adjudged even partially at fault.

While awaiting the trial, Slusher and the Ospitals indicated to State Farm on numerous occasions their willingness to settle their claims for the policy limits of $25,000 each. The Ospitals even evidenced a willingness to settle for less than the policy limits, in order to avoid the daily reliving of the death of their son through a long and unpleasant trial. State Farm refused their offers.

Thus, trial was held in September 1983. At trial, Campbell heard for the first time the expert and eyewitness testimony against him. Horrified at this turn of events, Campbell inquired of Bennett why he had not been notified of this adverse testimony. Bennett simply told Campbell "not to worry," and that he would take care of everything. The jury found Campbell 100% at fault for the accident and rendered verdicts totalling $253,957 ⁴ against Campbell. ⁵ Reeling from the shock of the large verdict against him, Campbell asked Bennett what would happen next. Bennett advised Campbell, "put a 'for sale' sign on your place," and stated that State Farm would pay the policy limits, but the rest would be up to Campbell. News of the verdict spread throughout the community, with the help of the local State Farm office, which posted a newspaper account of the verdict to induce other customers to purchase higher policy limits. Campbell felt a corresponding chill in his relationships with both social and business acquaintances. ⁶

Following the trial, State Farm made a motion for a new trial or, in the alternative, a judgment notwithstanding the verdict. This motion was denied. Thereafter, judgments were entered in favor of Slusher and the Ospitals; the judgments reflected $70,000 in offsets against the jury awards. ⁷ State Farm then appealed the judgment against Campbell.

Meanwhile, the Campbells had retained independent counsel to represent them in the matter of the excess judgment. Approximately two months after trial, Slusher, the Ospitals, and Campbell all demanded that State Farm pay the full amount of the excess judgment. In response, State Farm, on November 23, 1983, at last offered Slusher and the Ospitals the policy limits of $25,000 each, but continued to refuse to pay any of the excess judgment. Slusher and the Ospitals, holding judgments totalling approximately $200,000, understandably declined State Farm's offer. The Campbells began providing information to their attorneys concerning what assets they owned which might satisfy the judgment. In an attempt to forestall execution on the Campbells' assets, their attorney met with counsel for Slusher and the Ospitals in January of 1984, to discuss the possibility of a settlement of the excess judgments. In this regard, State Farm points out that a March, 1984, letter from counsel for Slusher confirmed that no attempt would be made to execute on the Campbells' property unless a settlement agreement could not be reached. No such settlement was consummated, however, until nearly one year later, in December of 1984. ⁸

For nearly three years after the September, 1983, judgment was entered, State Farm never offered, or even intimated, that it would be willing to pay anything more than the $50,000 policy limits. Rather, State Farm expressly stated in a May, 1984, letter to Campbell that, if the judgment were affirmed by the Utah Supreme...