Barnes v. Oklahoma Farm Bureau Mut. Ins.

• Decision Date: 18 July 2000
• Docket Number: No. 89,745.,89,745.
• Parties: Julie BARNES, Plaintiff/Appellee, and Michael Barnes, by and through his mother and next friend, Julie Barnes, Plaintiff, v. OKLAHOMA FARM BUREAU MUTUAL INSURANCE COMPANY, Defendant/Appellant.
• Court: Oklahoma Supreme Court

11 P.3d 162

2000 OK 55

Julie BARNES, Plaintiff/Appellee, and Michael Barnes, by and through his mother and next friend, Julie Barnes, Plaintiff, v. OKLAHOMA FARM BUREAU MUTUAL INSURANCE COMPANY, Defendant/Appellant.

No. 89,745.

Supreme Court of Oklahoma.

July 18, 2000.

As Corrected July 25, and August 9, 2000.

Dissenting Opinion Corrected December 19, 2000.

As Corrected January 16, 2001.

James A, Scimeca of Miller, Dollarhide, Dawson & Shaw and Joe E. White, Jr. of the White Law Firm, Oklahoma City, Oklahoma, for Appellee.

Robert B. Mills, Stefan K. Doughty and Margaret K. Myers of Mills & Associates, P.C., Oklahoma City, Oklahoma, for Appellant.

LAVENDER, J.

¶ 1 Appellee, Julie Barnes (Barnes or insured) sued appellant, Oklahoma Farm Bureau Mutual Insurance Company (insurer) in contract to recover underinsured motorist (UIM) benefits and in tort for breach of the implied duty to act in good faith and to deal fairly with her as its insured. The trial judge granted partial summary judgment to Barnes for the $15,000 UIM policy limits and that, by its actions, insurer had waived any claim to subrogation from the tortfeasor. A jury additionally awarded her $10,000 actual and $1.5 million punitive damages on the tort theory of liability, and the trial judge granted her $300,000 in attorney fees. In a prior appeal, the Court of Civil Appeals (COCA) affirmed the partial summary judgment. Barnes v. Oklahoma Farm Bureau Mut. Ins. Co. (Barnes I), 1993 OK CIV APP 168, 869 P.2d 852.¹ In this appeal insurer asserts errors relating to the tort theory of liability and the attorney fee award. The COCA affirmed in all respects. We previously granted certiorari review.

¶ 2 We hold: 1) the jury was presented sufficient evidence to find insurer breached the implied duty of good faith and fair dealing; 2) the trial judge did not err by submitting the issue of punitive damages to the jury or in lifting the statutory cap on such damages; 3) the punitive damage award is not excessive; and 4) adherence to the American Rule regarding the recovery of attorney fees requires reversal of the trial judge's attorney fee award and remand of that issue to the trial court for further consideration. Accordingly, we affirm the judgment based on the jury verdict, but reverse the attorney fee award and remand that matter back to the trial court for further proceedings.

PART I. STANDARD OF REVIEW ON APPEAL.

¶ 3 The review standard regarding legal actions tried to a jury is:

In an action at law, a jury verdict is conclusive as to all disputed facts and all conflicting statements, and where there is any competent evidence reasonably tending to support the verdict of the jury, [an appellate court] will not disturb the jury's verdict or the trial court's judgment based thereon. Where such competent evidence exists, and no prejudicial errors are shown in the trial court's instructions to the jury or rulings on legal questions presented during trial, the verdict will not be disturbed on appeal. In an appeal from a case tried and decided by a jury an appellate court's duty is not to weigh the evidence and determine which side produced evidence of greater weight, i.e. it is not an appellate court's function to decide where the preponderance of the evidence lies— that job in our system of justice has been reposed in the jury. In a jury-tried case, it is the jury that acts as the exclusive arbiter of the credibility of the witnesses. Finally, the sufficiency of the evidence to sustain a judgment in an action of legal cognizance is determined by an appellate court in light of the evidence tending to support it, together with every reasonable inference deducible therefrom, rejecting all evidence adduced by the adverse party which conflicts with it. (citations omitted)²

Florafax Intern., Inc. v. GTE Market Resources, Inc., 1997 OK 7, 933 P.2d 282, 287. The standard applies to cases involving an insurer's alleged breach of the implied duty of good faith and fair dealing. McCorkle v. Great Atlantic Ins. Co., 1981 OK 128, 637 P.2d 583, 586.

¶ 4 Unlike the review standard as to factual questions, issues of law are reviewed de novo and an appellate court has plenary, independent and non-deferential authority to reexamine a trial court's legal rulings. State ex rel. Jones v. Baggett, 1999 OK 68, ¶ 4, 990 P.2d 235; Neil Acquisition, L.L.C. v. Wingrod Investment Corp., 1996 OK 125, 932 P.2d 1100, 1103 fn. 1.

PART II. FACTUAL AND PROCEDURAL BACKGROUND.³

¶ 5 Barnes was injured in a head-on collision with another motorist in January 1991 [Barnes I, 869 P.2d at 853]; her injuries required fairly extensive medical treatment; and Barnes, a physical therapist, missed periods of work due to her injuries.⁴ Shun Donaldson, driver of the other car involved, had liability insurance with a $10,000 per person limit. Two policies provided uninsured/underinsured motorist (UM/UIM) coverage. The one with insurer had a $15,000 per person limit; the other, with State Farm Mutual Automobile Insurance Company (State Farm), a $25,000 per person limit.

¶ 6 By the end of August 1991 Barnes had incurred about $15,000 in medical bills. She also had lost wages over $10,000. A claim was made to recover UIM benefits from insurer and State Farm. In August she also sued Donaldson in tort and the two UIM insurers to recover under both policies. Believing its handling of her claim over the next several months was unreasonable, Barnes supplemented her petition to sue insurer for breach of the implied duty of good faith and fair dealing in March 1992.

¶ 7 In mid-1992 the trial judge granted partial summary judgment to Barnes for the $15,000 UIM policy limit and ruled insurer, by its actions, had waived its subrogation rights under 36 O.S.1991, § 3636(E). However, she did not receive the $15,000 nor was she finally able to accept a $10,000 liability limit settlement offer from Donaldson and his liability carrier until Barnes I became final in 1994, i.e. until all avenues of appellate review concerning the partial summary judgment were exhausted by insurer. Barnes I was decided in October 1993 and certiorari review denied by this Court in February 1994.

¶ 8 That part of the suit for breach of the implied duty of good faith and fair dealing had been stayed pending resolution of the appeal in Barnes I, 869 P.2d at 853. After Barnes I, the case returned to the trial court and the tort theory of liability was tried to a jury in 1997. A main defense of insurer was: its handling of the UIM claim was reasonably based on its counsel's advice concerning the proper interpretation of § 3636(E) and, thus, its behavior in seeking a judicial forum to resolve what it supposedly considered a legitimate dispute as to the meaning of § 3636(E) could not be found tortious. Before jury submission, the trial judge lifted the cap on punitive damages, permissively allowing the jury to award punitive damages in an amount exceeding that awarded for actual damages. He also ruled the issue of whether Barnes was entitled to attorney fees, and the amount thereof, was subject to his post-verdict consideration and was not an issue for jury resolution and ascertainment as an item of damage recoverable as part of her tort theory of liability, as argued by insurer.

PART IIA. INSURER'S TREATMENT OF BARNES' UIM CLAIM.

¶ 9 Initially, Barnes' husband apparently attempted to deal with any insurance claim. Within weeks of the accident, however, she retained counsel to represent her. An adjustor with insurer understood by the end of February 1991 the matter might turn into an UIM claim and in August 1991, he concluded Donaldson's liability seemed clear, i.e. his negligence caused the accident. As set out in Barnes I , the collision occurred while Donaldson was driving left of the center-line. Further, though insurer itself failed to evaluate her claim to determine the complete extent of her injuries or damages and it never placed a total monetary value on the claim, insurer's counsel either conceded to Barnes' counsel, or agreed with him there was no serious question, her damages were, at least, $50,000 (i.e. at least the amount of all available insurance coverage) prior to the time Barnes supplemented her petition to sue for bad faith.⁵

¶ 10 Instead of evaluating her claim to determine the complete extent of her injuries or damages or placing some reasonable value on the claim, insurer essentially took the following stance concerning Barnes' claim. In November 1991 insurer's counsel informed insurer that Donaldson's liability carrier would offer Barnes his liability limits of $10,000 to settle the case on his behalf. Also, although in November insurer did inform Barnes' counsel it would tender the $15,000 UIM limit to Barnes, no check for $15,000 was actually issued until February 1992 and the check was never sent to Barnes or her attorney, but was retained by insurer's counsel. At least in part, the reason(s) the check was never actually sent to Barnes was because of the parties' "dispute" regarding who would be entitled to Donaldson's liability coverage if Barnes accepted the check and because, prior to the check's issuance, Barnes had given notice to insurer under § 3636(E) of a tentative settlement with Donaldson for his $10,000 liability limits. The "dispute" arose over insurer's contention, based on its counsel's advice, that once it paid $15,000 to Barnes, it, rather than her would be entitled to Donaldson's $10,000 in liability coverage via a right of subrogation.

¶ 11 Though multiple specific shortcomings were presented to support Barnes' position that insurer breached its duty of good faith and fair dealing (e.g. failure to properly investigate the UIM claim, failure to make swift/prompt payment and failure to pay undisputed amounts), a central focus of her claim was insurer's response to the § 3636(E) notice of a tentative settlement with Donaldson for his liability policy limits sent to both UIM insurers in ...