Crackel v. Allstate Ins. Co.

• Decision Date: 28 June 2004
• Docket Number: No. 2 CA-CV 2002-0123.,2 CA-CV 2002-0123.
• Citation: 92 P.3d 882,208 Ariz. 252
• Parties: Erika CRACKEL, now known as Erika Guenther, and Tammie Guenther, now known as Tammie Drannan, Plaintiffs/Appellants/Cross-Appellees, v. ALLSTATE INSURANCE COMPANY, a foreign corporation, Defendant/Appellee/Cross-Appellant, and Blaine S. Gaub, Defendant/Appellee.
• Court: Arizona Court of Appeals

92 P.3d 882

208 Ariz. 252

Erika CRACKEL, now known as Erika Guenther, and Tammie Guenther, now known as Tammie Drannan, Plaintiffs/Appellants/Cross-Appellees, v. ALLSTATE INSURANCE COMPANY, a foreign corporation, Defendant/Appellee/Cross-Appellant, and Blaine S. Gaub, Defendant/Appellee.

No. -0123.

Court of Appeals of Arizona, Division 2, Department B.

June 28, 2004.

Thur & O'Sullivan, P.C., By Calvin C. Thur and Roger O'Sullivan, Scottsdale, for Plaintiffs/Appellants/Cross-Appellees.

Steptoe & Johnson LLP, By Floyd P. Bienstock, Karl M. Tilleman, Bennett Evan Cooper, and Jason Sanders, Phoenix, for Defendant/Appellee/Cross-Appellant.

Chandler, Tullar, Udall & Redhair, By D.B. Udall, Tucson, for Defendant/Appellee.

OPINION

ECKERSTROM, J.

¶ 1 We previously issued an opinion in this matter. On the parties' motions for reconsideration, however, we vacated our prior opinion and now, in light of certain points raised in those motions, issue this new opinion in its stead.

¶ 2 Appellants Erika Guenther and Tammie Drannan sued Allstate Insurance Company and attorney Blaine Gaub for abuse of process. A jury found Allstate liable and awarded Guenther and Drannan compensatory but not punitive damages. The jury found in favor of Gaub. On appeal, Guenther and Drannan argue that the trial court abused its discretion in excluding evidence of Allstate's behavior in several other claims, in excluding portions of a judicial order sanctioning Allstate in the underlying personal injury action Guenther and Drannan had filed against an Allstate insured, and in denying their request to produce several Allstate claims files. They also argue that the trial court improperly instructed the jury on the elements of an abuse-of-process claim. Allstate cross-appeals, asserting that the trial court erred in denying its motion for judgment as a matter of law (JMOL) and that the jury's verdict in favor of Gaub necessarily exonerated Allstate as well. We affirm.

Background

¶ 3 We view the facts and the reasonable inferences therefrom in the light most favorable to upholding the jury's verdicts. S Dev. Co. v. Pima Capital Mgmt. Co., 201 Ariz. 10, ¶ 16, 31 P.3d 123, ¶ 16 (App.2001). On November 28, 1995, Drannan and her infant son were passengers in Guenther's car. Harvey Hamilton drove a car into the back of Guenther's car while Guenther was stopped at a traffic light in Casa Grande. Although Guenther's car suffered little or no damage from the collision, she experienced some pain in her neck and shoulder area from the impact. Drannan, who was six months pregnant, felt a cramping-type pain in her abdominal area and was urged to go to the emergency room to be evaluated. Both women were examined in a hospital emergency room and released. Guenther was diagnosed with a whiplash injury to her neck and spine. The emergency room physician instructed Drannan to see her obstetrician as soon as possible. Neither Guenther nor Drannan sought, or incurred any costs for, treatment beyond the initial evaluations the emergency room physician had recommended. Guenther and Drannan filed a lawsuit against Hamilton in Pinal County Superior Court in February 1997, seeking special damages of approximately $720 in medical expenses Guenther had incurred and the $890 in medical expenses Drannan had incurred in addition to unspecified general damages.

¶ 4 Allstate, Hamilton's automobile liability insurer, adopted a company policy in August 1995 concerning minor-impact, soft-tissue (MIST) claims. Under the policy, automobile accident claims involving property damage of less than $1,000 in which the claimant was represented by an attorney were to be handled by one claims adjuster. Allstate characterized Guenther's and Drannan's claims as MIST claims and assigned them to adjuster Shirlee Kopin for processing. Kopin had copies of the medical bills Guenther and Drannan had incurred and knew that Allstate had already "admitted 100 percent negligence" by Hamilton. Kopin nonetheless instructed Gaub, the attorney Allstate retained to represent Hamilton in the personal injury litigation, to serve on the plaintiffs a joint offer to confess judgment for a total of $101.¹ Kopin believed the offer was fair because, "based on [her] experience and knowledge of the file, [she] thought a defense verdict was a real possibility in this case." Her belief was based in large part on Allstate's position that any injury reportedly caused by "a minor impact" was "suspect."

¶ 5 Altogether, Allstate expended over $4,500 defending Guenther's and Drannan's claims up to and including preparation for arbitration. Allstate took Guenther's and Drannan's depositions in July 1997 and learned that Guenther, Drannan, and Drannan's son had been in another automobile accident about one month before the accident with Hamilton. During their depositions, both Guenther and Drannan said they were still experiencing occasional discomfort from the Hamilton accident. Allstate hired a biomechanical expert to determine whether Guenther's and Drannan's reported discomfort could have been caused by the accident with Hamilton. Although Kopin did not suspect that Guenther and Drannan had been "overtreat[ed]" for their injuries, and neither Guenther nor Drannan had been treated for their injuries in more than nineteen months, Allstate nevertheless required Guenther and Drannan to submit to independent medical examinations (IME) with Dr. John LaWall.

¶ 6 By October, Kopin believed she had collected enough information to "actually evaluate[ ]" Guenther's and Drannan's claims. She assessed Allstate's liability and recommended that Gaub offer Guenther $801 and Drannan $1,001 to settle the claims. Guenther and Drannan rejected the offer. Guenther did so because, by this stage in the case, the amount offered would not have "fairly compensated" her lawyer for his work.

¶ 7 The case proceeded to mandatory arbitration in October. When the arbitrator asked Gaub what the case was worth, he responded that it was worth "zero" and that Guenther and Drannan deserved "nothing." The arbitrator awarded Guenther $2,300 and Drannan $3,400. At trial in this case, Kopin admitted she had believed the awards were "not ... bad," but she had directed Gaub to appeal them because, in part, she believed arbitration awards generally are higher than the actual value of claims. Gaub testified at trial that the decision to appeal the arbitration award could only have been made by Allstate but stated, "Seldom has a plaintiff recovered [from a jury an award] anywhere near the arbitration award." Guenther was "frustrated" and Drannan was apparently "distraught" when Allstate appealed the award.

¶ 8 After Allstate appealed the award, the parties were ordered to attend a settlement conference before Judge O'Neil. Based on their conduct, Judge O'Neil found that Hamilton and Gaub had not participated in the settlement conference in good faith. The court struck Hamilton's answer and ordered the case to be tried solely on the issue of damages. The parties then settled Guenther's and Drannan's claims for the amounts originally awarded them in arbitration.

¶ 9 Guenther and Drannan later filed this action, claiming Allstate had abused legal process in defending the underlying personal injury action. The jury awarded Guenther and Drannan $7,500 each in compensatory damages. The trial court denied their subsequent motion for new trial, and this appeal and cross-appeal followed.

Cross-Appeal

¶ 10 Allstate cross-appeals from the trial court's denial of its motion for JMOL on Guenther's and Drannan's abuse-of-process claim. Because this issue could be dispositive, we address it first, starting with the law of abuse of process and then applying that law to Allstate's JMOL motion.

¶ 11 The elements of an abuse-of-process claim are "(1) a willful act in the use of judicial process; (2) for an ulterior purpose not proper in the regular conduct of the proceedings." Nienstedt v. Wetzel, 133 Ariz. 348, 353, 651 P.2d 876, 881 (App.1982). A party can demonstrate the latter element by "showing that the process has been used primarily to accomplish a purpose for which the process was not designed." Id. In the context of this tort, Arizona interprets "process" as encompassing "the entire range of procedures incident to the litigation process." Id. at 352, 651 P.2d at 880.

¶ 12 Citing this language in Nienstedt, Guenther and Drannan argue that an abuse-of-process claim may be based on the worthiness of the litigation "process as a whole." They maintain that Allstate pursued a stated policy of refusing to compromise claims and engaging in unnecessarily vigorous and expensive litigation in MIST cases, making it financially unfeasible to pursue a claim for modest damages against an Allstate insured. They assert that the court procedures for civil litigation were designed to facilitate a fair resolution of individual disputes and were not intended to provide well-funded litigants like Allstate the means to deter claimants from litigating their claims by making litigation too costly. Drannan and Guenther maintain that Allstate's stated policies, coupled with evidence of Allstate's behavior in the underlying personal injury action, constituted adequate evidence to support an abuse-of-process claim.

¶ 13 Although Allstate concedes that abuse-of-process claims need not be anchored in the strictest definition of court "process," it insists that a plaintiff must nevertheless establish that a litigant initiated a specific compulsory act or proceeding under court authority with improper motives. It argues that a civil defendant's mere decision not to settle, and to thereby require the plaintiff to prove his or her case, even if carried out with improper motives, does not constitute abuse of process. Allstate maintains that such decisions do not involve the initiation of a specific compulsory procedure. Allstate asserts that anchoring the tort on the defendant's motives...