Allstate Ins. Co. v. Miller
| Decision Date | 30 July 2009 |
| Docket Number | No. 49760.,49760. |
| Citation | 212 P.3d 318 |
| Parties | ALLSTATE INSURANCE COMPANY, Appellant, v. William MILLER, Respondent. |
| Court | Nevada Supreme Court |
Lewis & Roca, LLP, and Daniel F. Polsenberg and James E. Harper, Las Vegas; Prince & Keating, LLP, and Dennis M. Prince, Las Vegas; Luce Forward Hamilton & Scripps, LLC, and Ronald D. Getchey, San Diego, California, for Appellant.
Vannah & Vannah and Matthew R. Vannah, Las Vegas, for Respondent.
Before the Court En Banc.
This case arises from a bad-faith claim filed by William Miller against his insurer, Allstate Insurance Company. Miller sued Allstate for breach of contract, negligence, and bad faith. In particular, Miller sued Allstate under three theories of bad-faith liability. Miller alleged that Allstate breached the covenant of good faith and fair dealing by failing to file an interpleader complaint, failing to adequately inform Miller of a settlement offer, and refusing to agree to a stipulated judgment in excess of Miller's policy limits. At the conclusion of the trial, the jury returned a verdict in Miller's favor on the bad-faith claim. However, the district court denied Allstate's request to submit special interrogatories to the jury to determine upon which theory of bad faith the jury returned its verdict. Allstate appeals the jury verdict and the district court's denial of Allstate's motion for a new trial and judgment as a matter of law. Allstate challenges the legal sufficiency of Miller's three bad-faith theories and the district court's refusal to submit Allstate's special interrogatories to the jury.
In this appeal, we address an insurer's duties under the implied covenant of good faith and fair dealing and its duty to defend. Specifically, we address an insurer's duty to inform an insured regarding settlement opportunities and its duties regarding interpleading funds and stipulated judgments. We also address the standards that govern our review of a district court's refusal to give special interrogatories when requested by a party in a civil case.
Because a primary insurer's duty to defend includes settlement duties and an insurer must give equal consideration to the insured's interest, we hold that the covenant of good faith and fair dealing includes a duty to adequately inform the insured of settlement offers. This includes reasonable offers in excess of the policy limits. Failure to adequately inform an insured is a factor to consider in a bad-faith claim and, if established, can be a proximate cause of any resulting damages. We conclude that whether Allstate violated its duty to adequately inform Miller of the settlement opportunities that existed in this case presented a question of fact for the jury. Therefore, the district court did not abuse its discretion when it submitted the failure-to-inform theory of bad faith to the jury.
Miller's two alternative theories of bad faith fail. Unless the policy says otherwise, an insurer does not have an independent duty to file an interpleader action on behalf of an insured. Nor is an insurer required to agree to a proposed stipulated judgment between the insured and the claimant if that stipulated judgment is beyond the policy limits. As a result, we conclude that the district court erred when it submitted these issues to the jury.
Finally, we hold that the district court abused its discretion in refusing without explanation to give the jury the special interrogatories that Allstate proposed. Not giving special interrogatories in a case involving multiple claims or theories of liability compromises our ability to review the verdict for error, since it is often impossible to say after the fact whether a jury based its general verdict on a permissible or impermissible theory of liability. See Skender v. Brunsonbuilt Constr. & Dev. Co., 122 Nev. 1430, 148 P.3d 710 (2006). Thus, we further hold that if a party submits special verdicts or interrogatories to the court pursuant to NRCP 49, the district court must approve or deny them on the record, and state its legal basis for doing so. Because the record in this case is silent regarding why the district court rejected Allstate's requested special interrogatories, we conclude that the district court abused its discretion. Therefore, we affirm in part and reverse in part the district court's judgment and remand this matter for further proceedings consistent with this opinion.
Respondent William Miller struck and injured claimant Mark Hopkins. At the time of the accident, Miller's Allstate automobile insurance policy contained a bodily injury liability limit of $25,000.
After receiving a letter from attorney Steven Karen, which stated that he represented Hopkins, Allstate offered to settle Hopkins' claim for the $25,000 policy limit. Karen did not accept the offer on Hopkins' behalf. Allstate also informed Miller that Hopkins' damages already exceeded the $25,000 policy limit, that Miller may be personally liable for any damages above the $25,000 limit, and that he had the right to hire independent legal counsel at his own expense.
About a month later, attorney David Sampson replaced Karen as Hopkins' lawyer. Karen then notified Allstate of his $8,325 attorney fee lien. Later, University Medical Center (UMC) informed Allstate of its $67,564.84 hospital lien. Although Sampson told Allstate that Hopkins would not accept a policy-limit check with the lienholders' names included as joint payees, Allstate still sent him a $25,000 check made jointly payable to Hopkins, Sampson, Karen, and UMC. Sampson rejected the multiple-party joint check and advised Allstate that Hopkins was willing to release Miller from all liability if Allstate would agree to file an interpleader action, pursuant to NRCP 22, to determine the rights of Hopkins, Sampson, Karen, and UMC as to the $25,000.
Allstate initially declined Hopkins' interpleader offer, stating that it could not represent Hopkins in an interpleader action. However, just a few months later, and weeks after Hopkins filed his lawsuit against Miller, Allstate changed its position and agreed to file the interpleader action. By this time, Hopkins' previous settlement offer had expired. Later, Hopkins made the following settlement offer to Miller: if Miller agreed to execute an excess stipulated judgment, Hopkins would release Miller from execution of the judgment if Miller pursued a bad-faith lawsuit against Allstate. Hopkins stated that this would cap Miller's liability. Allstate rejected this proposal and cautioned that without its consent, the stipulated judgment could not bind Allstate. Allstate also explained that if Miller agreed to the stipulated judgment, then issues could arise regarding his insurance policy's cooperation clause.1 Miller did not accept the offer. Subsequently, Hopkins obtained a verdict against Miller totaling $703,619.88.
Miller filed a complaint against Allstate, alleging that Allstate breached its covenant of good faith and fair dealing when it failed to file an interpleader complaint, failed to adequately inform Miller of Hopkins' settlement offer(s), and refused to consent to Hopkins' stipulated excess judgment. After a seven-day trial, Allstate requested that the district court submit to the jury three special interrogatories. Allstate's special interrogatories focused on Miller's three theories of bad faith and asked which theory the jury found persuasive. The district court refused to submit the special interrogatories to the jury. Subsequently, the jury returned a general verdict in favor of Miller for $1,079,784.88. The district court entered a judgment on the verdict for that amount. Allstate filed a motion for a new trial and a renewed motion for judgment as a matter of law, which challenged Miller's three bad-faith theories and the district court's refusal to submit Allstate's special interrogatories. The district court denied these motions. Allstate now appeals.
In this case, Miller alleged three theories of bad-faith liability: (1) Allstate's failure to file an interpleader complaint, (2) its failure to inform Miller of Hopkins' interpleader offer, and (3) its refusal to agree to Hopkins' excessive stipulated judgment. We first address the standards of review that apply to jury verdicts and a district court's denial of a new trial and judgment notwithstanding the verdict before turning to the merits of this appeal.
The standards of review for reversing a jury verdict and reversing a district court's denial of a motion for a new trial are different.
In reviewing a jury verdict, "[t]his court upholds a jury verdict if there is substantial evidence to support it, but will overturn it if it was clearly wrong from all the evidence presented." Soper v. Means, 111 Nev. 1290, 1294, 903 P.2d 222, 224 (1995). As a result, the jury verdict in this case cannot be reversed unless there is a lack of substantial evidence that Allstate violated the implied covenant of good faith and fair dealing.
We review for abuse of discretion both the district court's denial of Allstate's request to submit the special interrogatories and its denial of a motion for a new trial. Lehrer McGovern Bovis v. Bullock Insulation, 124 Nev. ___, ___, 197 P.3d 1032, 1037-38 (2008); Skender, 122 Nev. at 1435, 148 P.3d at 714.
We now turn to the question of whether Allstate had a duty to inform Miller of Hopkins' interpleader offer, and whether Allstate was obligated to file an interpleader action on behalf of Miller. We then address whether Allstate had a duty to accept Hopkins' proposed stipulated excess judgment.
Allstate argues that Miller's failure-to-inform theory, which he bases upon the allegation that Allstate failed to advise Miller about the interpleader offer, is inapplicable to ...
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