899 F.2d 875 (9th Cir. 1990), 88-4446, Morrell Const., Inc. v. Home Ins. Co.

Docket Nº:88-4446.
Citation:899 F.2d 875
Party Name:MORRELL CONSTRUCTION, INC., an Idaho corporation, Plaintiff-Appellant, v. HOME INSURANCE COMPANY, a foreign corporation, Defendant-Appellee.
Case Date:April 03, 1990
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 875

899 F.2d 875 (9th Cir. 1990)

MORRELL CONSTRUCTION, INC., an Idaho corporation, Plaintiff-Appellant,

v.

HOME INSURANCE COMPANY, a foreign corporation, Defendant-Appellee.

No. 88-4446.

United States Court of Appeals, Ninth Circuit

April 3, 1990

Argued and Submitted Jan. 8, 1990.

Page 876

Darrel W. Aherin, Aherin, Aherin & Rice, Lewiston, Idaho, for plaintiff-appellant.

Scott D. Hess, Eberle, Berlin, Kading, Turnbow & Gillespie, Boise, Idaho, for defendant-appellee.

Appeal from the United States District Court for the District of Idaho.

Before KOELSCH, BROWNING and BEEZER, Circuit Judges.

BEEZER, Circuit Judge:

Morrell Construction, Inc. appeals the district court's decision granting summary judgment in favor of Home Insurance Co. on Morrell's claim that Home Insurance Co. exercised bad faith by refusing to investigate and pursue settlement negotiations before suit was filed against Morrell by a third party. Because this case involves issues of first impression under Idaho tort law, we certify two questions to the Idaho Supreme Court.

I

On August 21, 1981 a grain storage tank, owned by Pomeroy Grain Growers and built by Morrell, collapsed, killing one individual and causing extensive property damage. Morrell alleges that its potential exposure for the property damage exceeded $500,000. Morrell immediately notified its insurer, Home Insurance Co., of the collapse. It then hired an engineer as well as an attorney to investigate and provide representation. Home Insurance did not investigate the claim, nor did it initiate settlement negotiations with Pomeroy Grain Growers. On March 3, 1982, Home Insurance informed Morrell that property damage liability was excluded under Morrell's policy.

Pomeroy Grain Growers brought suit against Morrell in August of 1983, and Home Insurance retained an attorney to defend Morrell. Pomeroy Grain Growers eventually settled for $125,000 in October of 1985. Morrell's policy limit was only $100,000, and Morrell and Pomeroy agreed that Morrell's liability for the remaining $25,000 would be contingent upon recovery in this action.

Morrell's primary argument in this diversity case is that Home Insurance acted in bad faith by failing to investigate and settle Pomeroy Grain Growers' claim against Morrell before Pomeroy Grain Growers filed suit. The district judge granted Home Insurance's motion...

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