Carpenter v. Automobile Club Interinsurance Exchange

• Decision Date: 03 July 1995
• Docket Number: 1674 and 1796,Nos. 94-1673,s. 94-1673
• Citation: 58 F.3d 1296
• Parties: Jackie Kaye CARPENTER, formerly known as Jackie Kaye Warhurst, Appellee/Cross-Appellant, v. AUTOMOBILE CLUB INTERINSURANCE EXCHANGE, Appellant/Cross-Appellee. Crawford & Company, Defendant-Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1296

58 F.3d 1296

Jackie Kaye CARPENTER, formerly known as Jackie Kaye Warhurst, Appellee/Cross-Appellant, v. AUTOMOBILE CLUB INTERINSURANCE EXCHANGE, Appellant/Cross-Appellee Crawford & Company, Defendant-Appellant.

Nos. 94-1673, 1674 and 1796.

United States Court of Appeals,

Eighth Circuit.

Submitted Nov. 14, 1994.

Decided July 3, 1995.

Robert J. Donovan, Marianna, AR, argued, for appellant Automobile Club.

Martin W. Bowen, West Memphis, AR, argued, for Crawford & Co.

B. Michael Easley, Forrest City, AR, argued (J. Brook Lathram and Todd A. Rose, Memphis, TN, on the brief), for appellee.

Before RICHARD S. ARNOLD, Chief Judge, REAVLEY, ^* Senior Circuit Judge, and McMILLIAN, Circuit Judge.

McMILLIAN, Circuit Judge.

Automobile Club Interinsurance Exchange (AAA) and Crawford & Company (C & C) (together appellants) appeal from a final judgment entered in the United States District Court for the Eastern District of Arkansas ¹ upon a jury verdict finding them liable to Jackie Kaye Carpenter (Carpenter) in the amount of $1,825,250. Carpenter v. Automobile Club Interinsurance Exchange, No. H-C-93-65 (E.D.Ark. Mar. 7, 1994). For reversal, appellants argue that the district court erred in denying their motions to dismiss on statute of limitations grounds. They also each advance several arguments individually. Carpenter cross-appeals, contending that the district court erred in failing to give a jury instruction on punitive damages and in denying her claim for interest, calculated at the Arkansas statutory rate, as an element of her damages. For the reasons discussed below, we affirm in part and reverse in part and remand the case to the district court with instructions.

I. BACKGROUND

Shortly before midnight on July 28, 1989, Carpenter backed her car out of the parking lot of a lounge onto the traveled portion of a public street and collided with a passing motorcycle. Jonathan Giles, the driver of the motorcycle was injured. His passenger, William David White, died as a result of injuries sustained in the accident. Both boys were fourteen years of age. Two hours after the accident, Carpenter's blood alcohol level was .13%; however, Carpenter maintained that she had consumed only three beers and that she was not intoxicated at the time of the accident.

Carpenter was insured by AAA. The policy limits were $50,000 per person and $100,000 per occurrence. The policy provisions excluded any award for punitive damages.

On August 2, 1989, Carpenter reported the accident to AAA. AAA immediately retained C & C, an independent claims adjusting firm, to handle claims arising out of the accident. C & C assigned the investigation of the Carpenter matter to one of its agents, David Seay. In mid-August 1989, Seay forwarded a claim to AAA for $900 to cover property damage to Giles's motorcycle. AAA paid that claim immediately. Seay also notified White's parents (the Whites) that C & C had been retained by AAA to investigate the accident.

On September 11, 1989, Clint Saxton, an attorney retained by the Whites to handle their claim for their son's wrongful death, sent Seay a letter demanding payment of the $50,000 policy limits and advising Seay that the Whites intended to sue Carpenter for the difference between the policy limits and their total damages. In October 1989, Saxton sent Seay a second letter repeating the demand for $50,000 and setting a response deadline of October 10, 1989. Saxon's September and October demand letters said nothing about a release of Carpenter from liability if AAA tendered the policy limits. Neither AAA nor C & C responded to Saxton's demand letters. However, Seay did request from the Whites a copy of their son's death certificate and their medical bills.

On October 26, 1989, Seay reported to AAA that he had made a $6,000 offer to Giles's parents to settle Giles's personal injury case, which they rejected because the extent of Giles's injuries was still unknown.

Finally, on January 9, 1990, Saxton, on behalf of the Whites, sent a third demand letter to Seay, enclosing the death certificate and the current medical bills that Seay had requested. The letter repeated the demand to settle the Whites' wrongful death claim for the policy limits, but this time the Whites also offered to release Carpenter from all liability if the $50,000 was paid within ten days from Seay's receipt of the letter. The letter further stated that the Whites would seek compensatory and punitive damages if a lawsuit became necessary.

Seay received this third and final demand letter from Saxton on January 11, 1990. Boone Nance, an attorney representing Carpenter in her criminal cases, also received a copy of this letter. Nance immediately contacted Seay by telephone urging prompt settlement of the Whites' wrongful death claim; that conversation was confirmed in a letter from Nance to Seay, dated January 12, 1990. On January 19, 1990, eight days after receiving the third letter from Saxton, Seay forwarded the letter to AAA. Seay also enclosed Nance's letter dated January 12, 1990, demanding immediate settlement of the Whites' claim against Carpenter.

On January 24, 1990, AAA received Saxton's third demand letter, which had been forwarded by Seay. Prior to that time, however, in December of 1989, AAA had instructed C & C to close both the Giles file and the White file. Moreover, upon receipt of Saxton's third letter, no one from AAA contacted Saxton to see if the Whites' settlement offer was still open. Thus, on January 24, 1990, having received no response from AAA, Saxton filed the Whites' wrongful death claim against Carpenter in Arkansas state court.

AAA hired Jake Brick, an attorney, to represent Carpenter in the Whites' state court wrongful death action. AAA also internally assigned the White matter to Hugh McMullen, a AAA branch claim manager. Contrary to Brick's recommendation, McMullen decided not to implead Giles as a third-party defendant in the Whites' wrongful death action.

Nine months after the Whites filed their wrongful death action, Carpenter pleaded guilty to negligent homicide in her state criminal proceedings. One month later, AAA reassigned the White and Giles matters to Charles Krah, a AAA casualty claim manager. In an internal report known as a "Bodily Injury Evaluation Authority Request," Krah assigned one hundred percent of the fault for the July 1989 accident to its insured, Carpenter. Krah also authorized Brick to offer the Whites the $50,000 policy limits to settle their claim against Carpenter in exchange for their full release of Carpenter. At that point, the Whites rejected AAA's offer. After Brick advised AAA of the Whites' rejection, he again suggested impleading Giles. Krah then authorized Brick to implead Giles in the Whites' wrongful death action against Carpenter. The third-party complaint alleged that Giles was responsible for the accident. Because AAA's policy with Carpenter excluded the award of punitive damages, the third-party action (and the resulting likelihood that Giles would bring cross-claims) exposed Carpenter to personal liability for additional punitive damages. ² Not unexpectedly, Giles's attorney filed a cross-complaint against Carpenter seeking both compensatory and punitive damages.

AAA filed an offer of judgment in the amount of $50,000 to settle the Whites' wrongful death claim. The Whites rejected the offer and the case proceeded to trial. The state trial court, finding that Carpenter had no submissible case against Giles for negligence, dismissed the third-party complaint. The jury awarded the Whites $510,200 compensatory damages and $500,000 punitive damages, and awarded Giles $40,000 in compensatory damages and $500,000 in punitive damages. Carpenter thus was left personally owing the Whites $960,200, plus interest, and owing Giles $500,000, plus interest. AAA appealed the judgment to the Arkansas Supreme Court; however, it neither posted a supersedeas bond to protect Carpenter from execution by judgment creditors while the appeal was pending nor appealed the issue of Giles's negligence. The judgment was affirmed. Warhurst v. White, 310 Ark. 546, 838 S.W.2d 350 (1992).

On June 11, 1993, Carpenter filed the present lawsuit in federal district court against AAA for negligence and bad faith in handling the White and Giles claims, and against C & C for negligence in handling the White claim, arising out of the July 1989 accident. Following a jury trial, the district court entered judgment based upon jury verdicts in favor of Carpenter on all her claims. The district court awarded Carpenter a total of $1,825,250. Interest was awarded at a rate of 4.22%. AAA was adjudged solely liable for $625,000 of the award, resulting from Giles's underlying state court judgment against Carpenter. AAA and C & C were adjudged jointly and severally liable for $1,200,250, resulting from the Whites' underlying judgment against Carpenter. Based upon the jury's finding AAA 90% responsible, and C & C 10% responsible, for this latter portion of the damages, any amount over $120,025 paid by C & C was ordered subject to contribution from AAA. Carpenter v. Automobile Club Interinsurance Exchange, No. H-C-93-65 (E.D.Ark. Mar. 7, 1994). These appeals and this cross-appeal followed.

II. DISCUSSION

A. Appeals

1. C & C's and AAA's Statute of Limitations Argument

Both appellants argue, and Carpenter agrees, that her bad faith and negligence claims were subject to a three-year statute of limitations, Ark.Code Ann. Sec. 16-56-105. The parties dispute, however, the date upon which her claims accrued for purposes of applying this statute of limitations. If Carpenter's claims accrued prior to June 11, 1990, her action is barred. AAA maintains that Carpenter's claims against AAA accrued upon its failure to settle the Whites' claims before the Whites filed their wrongful death action in state court. C & C maintains that Carpenter's claims against C & C accrued on or about January 21,...