Collins v. Auto–owners Ins. Co., Civil Action No. 4:09–696–TLW.

• Decision Date: 08 December 2010
• Docket Number: Civil Action No. 4:09–696–TLW.
• Citation: 759 F.Supp.2d 728
• Court: U.S. District Court — District of South Carolina
• Parties: Calvin Ben COLLINS, Plaintiff,v.AUTO–OWNERS INSURANCE COMPANY, Defendant.

759 F.Supp.2d 728

Calvin Ben COLLINS, Plaintiff,

v.AUTO–OWNERS INSURANCE COMPANY, Defendant.

Civil Action No. 4:09–696–TLW.

United States District Court, D. South Carolina, Florence Division.

Dec. 8, 2010.

Stephen J. Wukela, Wukela Law Firm, Florence, SC, for Plaintiff.Charles R. Norris, Robert W. Whelan, Nelson Mullins Riley and Scarborough, Charleston, SC, for Defendant.

ORDER

TERRY L. WOOTEN, District Judge.

This matter is currently before the Court on Defendant Auto–Owner's (hereinafter “Auto–Owners” or “Defendant”) pending motion for summary judgment. Plaintiff filed the instant action on March 19, 2009 based on diversity jurisdiction pursuant to 28 U.S.C. § 1332. (Doc. # 1). On August 26, 2010, Defendant filed a motion for summary judgment. (Doc. # 48). Plaintiff filed a response in opposition to Defendant's motion for summary judgment on September 24, 2010. (Doc. # 55). On October 4, 2010, Defendant filed a reply to Plaintiff's response in opposition. (Doc. # 57). The Court heard oral argument on this motion from counsel on October 15, 2010. For the reasons set forth in this Order, Defendant's motion for summary judgment is granted as outlined herein.

Procedural History

On May 31, 2002 Plaintiff Calvin Collins (hereinafter “Plaintiff” or “Collins”) was involved in an automobile accident with Mark Frasier who was an uninsured motorist.¹ At the time of the accident between Collins and Frasier, Collins had uninsured motorist (UM) coverage with Auto–Owners. The Plaintiff had three cars insured with Auto–Owners each with $500,000 UM coverage for total UM coverage of $1,500,000.

In 2004, the Plaintiff filed suit against Frasier in Florence County. This lawsuit was assigned Civil Action No. 2004–CP–21–488. In May of 2006, the case was tried before a jury. The trial lasted an entire week and both parties made directed verdict motions which were denied by the state trial court. On Friday, May 19, 2006, the jury returned a verdict for the Defendant Frasier. The Plaintiff then filed an appeal to the South Carolina Court of Appeals. In 2008, the South Carolina Court of Appeals issued an opinion in favor of Frasier. Collins v. Frasier, 378 S.C. 249, 662 S.E.2d 464 (S.C.App.2008). The Plaintiff then filed a petition for writ of certiorari to the South Carolina Supreme Court. The petition was denied.

This lawsuit against Auto–Owners was initially filed in state court in April of 2006, shortly before the trial of Collins v. Frasier. Auto–Owners removed the case to Federal Court based on diversity jurisdiction. In September of 2007, the case was dismissed without prejudice.² After the South Carolina Supreme Court denied certiorari to review the Court of Appeals' decision, this lawsuit was re-filed in Federal Court in March of 2009. The complaint alleges the Plaintiff made a claim with Auto–Owners for payment of UM coverage, that Auto–Owners refused to make full payment under the UM coverage and that Auto–Owners wrongfully denied benefits due under the coverage. The Complaint further alleges that Auto–Owners' “actions and failures to act were unreasonable, negligent, arbitrary, capricious, in bad faith, and in breach of its duty of good faith and fair dealing in the following particulars, to-wit: (a) In failing to promptly and reasonably compromise, settle, or pay the uninsured motorist claim; (b) In failing to evaluate, investigate, and value the uninsured motorist claim honestly, reasonably, and in good faith; (c) In failing to offer the Plaintiff their honest and good faith valuation of the uninsured motorist claim; (d) In failing to promptly admit the amount of uninsured motorist coverage limits applicable.”

Facts

During the Collins v. Frasier litigation, correspondence relevant to the issues in this case was exchanged between counsel for the Plaintiff and counsel for the Defendant Frasier (Attorney Michael Nunn), as well as in-house counsel for Auto–Owners (Attorney Kathleen Lopilato).³ In correspondence dated February 16, 2006, Plaintiff's counsel wrote attorney Nunn noting:

As you will recall, at the outset of this case my clients made a demand of the policy limits of $1.5 million to settle. Auto–Owners did not respond and it was not until your letter of November 17, 2005, that the Carrier conceded that there was, in fact, $1.5 million of coverage. Since that time, you have confirmed that Auto–Owners is offering $100,000.00 to settle this case.

... my client has authorized me to settle the case for $1 million, well within the policy limits.

As you are aware, first party carriers owe a statutory and contractual duty of good faith and fair dealing to their insureds. See Nichols v. State Farm, 279 S.C. 336 (S.C.1983); S.C.Code § 38–9–320. That is to say, Auto–Owners has an obligation to honestly value this case in good faith and to offer my client, their insured, that value.

It is inconceivable to me that Auto–Owners has honestly and fairly valued this case at $100,000.00.

...

As I have indicated to you before, I believe that bad faith failure to settle is actionable, even without a judgment at all in the underlying liability action. See Myers v. State Farm, 950 F.Supp. 148 (D.S.C.1997), (finding judgment against at-fault driver was not a prerequisite to an action against UIM Carrier for bad faith refusal to settle UIM claim). Certainly, if my client obtains a verdict in excess of $100,000.00, we will have no choice but to bring an action for bad faith refusal to pay an insurance claim against Auto–Owners.

Plaintiff indicates that after this correspondence, a memo to Kathleen Lopilato was written by Auto–Owners' adjuster, Lorraine Frederick on March 1, 2006, indicating:

[plaintiff's counsel] has expressed that he feels that we have acted in bad faith for refusing to settle the UM claim of Mr. Collins. As you know, their demand was completely out of the realm of reality and we made the the $100,000 offer as our initial and only offer since they refused to get real about the value of this claim.

On April 5, 2006, Plaintiff's counsel wrote Attorney Nunn another letter:

As you will recall, at the outset of this case my clients made demand of the policy limits of $1.5 million to settle. Auto–Owners did not respond or even admit that there was $1.5 million worth of coverage until after Summary Judgment was denied on September 20, 2005. Since that time Auto–Owners has offered $100,000.00 to settle this case. My clients have countered with an offer of $1.3 million and Auto–Owners has not responded.

As I have indicated to you before, as my client's insurance carrier, Auto–Owners owes my client duties of good faith and fair dealing.

As I have further indicated, I believe that the duty of good faith and fair dealing requires that Auto–Owners honestly value this case and offer their insured that valuation. Auto–Owners has not done so. As a result my client has incurred additional expenses in completing preparation for trial.

Therefore, if Auto–Owners does not tender an offer of their good faith valuation of this case within the next ten (10) days, I will have no choice but to commence an action for bad faith refusal to pay an insurance claim.

In correspondence dated April 21, 2006 and addressed to Attorney Nunn, Plaintiff's counsel indicated:

... I understand that Auto–Owners' failure to respond to my letters of February 16, 2006, and April 5, 2006, is not the result of inadvertence. Therefore, I assume that Auto–Owners has no intent of making any offer beyond $100,000.00 to settle the pending claim.

As I have indicated to you, I believe that Auto–Owners handling of this case is in bad faith. I have prepared the enclosed draft Complaint which I am ready to file.

In correspondence dated April 25, 2006, Attorney Lopilato wrote Plaintiff's counsel the following:

This letter is to acknowledge receipt of your letters of April 5, 2006 and April 21, 2006. Please take this correspondence as our formal response to your demands for settlement in the amounts of $1.5 million and lately $ 1.3 million. As you know, we have made a $100,000 offer. We believe that was a fair and reasonable amount, and we do not believe it would be reasonable to pay your demand amount of $1.3 million.

This is a case of disputed liability and disputed causation. We have acted reasonably in trying to consider all of the facts and discover all of the facts necessary to complete an evaluation in this most complicated claim.

As you know, Mr. Frasier lost consciousness because of a medical condition. We believe that a jury may find that he had a sudden medical emergency and therefore was not liable for this loss. Accordingly, there would be no underinsured motorist coverage owed to the insured if the tortfeasor was not at fault.

Further, even if Mr. Frasier is found to be liable, there is a question as to what injuries are related to the accident. As you know, we have a big disagreement as to whether all of the medical expenses and conditions that Mr. Collins suffers from are a result of this accident. I am not going to reiterate all of the facts that will be issues for trial. It is not bad faith to submit a dispute to a court of law. We are willing to always consider and evaluate the reasonableness of any settlement demand you feel you would like to communicate on behalf of your client.

We regret that you feel it is necessary to proceed with a complaint for bad faith on a case that involves many issues that must apparently be decided by a trier of fact.

Plaintiff's counsel responded to Attorney Lopilato on May 3, 2006:

I am in receipt of your letter dated April 25, 2005, responding to my letters of April 5, 2006 and April 21, 2006. Frankly, I am deeply concerned that Auto–Owners has not yet tendered its honest and good faith evaluation of this claim.

The time for posturing is over. We are not interested in your bargaining position. Under your contract with my client, Auto–Owners owes a duty to offer him your company's honest and good faith...