Darlow v. Farmers Ins. Exchange

• Decision Date: 09 December 1991
• Docket Number: No. 91-76,91-76
• Citation: 822 P.2d 820
• Parties: Candelaria V. DARLOW and Daniel L. Darlow, Appellants (Plaintiffs), v. FARMERS INSURANCE EXCHANGE, a California corporation, Appellee (Defendant).
• Court: Wyoming Supreme Court

Page 820

822 P.2d 820

Candelaria V. DARLOW and Daniel L. Darlow, Appellants (Plaintiffs), v. FARMERS INSURANCE EXCHANGE, a California corporation, Appellee (Defendant).

No. 91-76.

Supreme Court of Wyoming.

Dec. 9, 1991.

C.M. Aron of Aron and Henning, Laramie, for appellants.

George E. Powers, Jr. and Rachel Recker Rouse of Godfrey & Sundahl, Cheyenne, for appellee.

Before URBIGKIT, C.J., and THOMAS, CARDINE, MACY and GOLDEN, JJ.

URBIGKIT, Chief Justice.

The issue to be decided by this appeal is whether the conduct of an insurer with its insured constituted bad faith under the rule this court announced in McCullough v. Golden Rule Ins. Co., 789 P.2d 855 (Wyo.1990). The policyholders, appellants Candelaria V. Darlow and Daniel L. Darlow, appeal from a summary judgment entered in favor of appellee, Farmers Insurance Exchange. Appellants claim appellee acted in bad faith by unreasonably delaying or denying auto insurance policy medical payment benefits owed following a two-car collision where both vehicles were insured by the same insurance carrier.

We affirm.

I. ISSUES

Appellants present three issues for review:

[1.] Whether the insurer's delay in payment of first-party medical-payment benefits was unreasonable.

[2.] Whether the trial court erred in holding that insurer bad faith in a first-party case is cured by later payment of the claim.

[3.] In a double-insured auto accident case--that is, the same company insures both drivers--whether an insurer acts in bad faith when it negotiates the insured's third-party claim without informing her of the rights to which she is entitled under her own policy, and without clearly disclosing that the insurer is acting not on behalf of the insured but instead on behalf of the other driver.

Appellee's formulation of the relevant issues on appeal differs:

[1.] In an action for bad faith under McCullough v. Golden Rule Insurance Company, can an insurance company be liable where it has paid its insured's claim promptly and in full?

[2.] Is a claimant seeking recovery under a liability policy entitled to special treatment simply because she is also insured by the same company under a separate policy of insurance?

II. FACTS

The innocuous beginning of this litigation occurred on October 1, 1988. Misty Candelaria Darlow and her husband Daniel Darlow (Darlows) purchased their automobile insurance policy from Farmers Insurance Exchange (Farmers) in Ogden, Utah. The Darlows had moved to Wyoming only two months before the accident so Mr. Darlow could begin law school. Their Wyoming E-Z-Reader Car Policy, in effect at the time of the accident, was actually issued October 28, 1988, but effective on September 23, 1988. The policy was signed by the Laramie agent of Farmers, T.F. Thone. This policy included first-party medical claims coverage. "We will pay reasonable costs for necessary medical services furnished within two years from the date of the accident, because of bodily injury sustained by an insured person." (Emphasis in original.)

Jackson, a juvenile, drove a 1979 Mustang out of a parking lot in Laramie, Wyoming and struck broadside Candelaria Darlow's 1977 Buick. Jackson accepted liability for the accident. Mrs. Darlow's whiplash injuries required emergency room treatment and subsequent physical therapy. ¹

The Mustang driven by Jackson was also insured by Farmers. The policyholders were Ms. Jackson's parents, Marvin and Kathryn Browning of Laramie. Thone had sold the Brownings their policy. This policy provided liability coverage for third-party property damage and bodily injury claims.

Mr. Darlow reported the accident to Thone on Monday, October 3, 1988, after obtaining his name from Jackson's mother. Mr. Darlow completed a form titled "Statement of Facts of Accidents" at Thone's office. This insurance form identified the parties to the accident and indicated that both parties were insured by "FIG" or Farmers Insurance Group. The form reported damage to the Darlows' Buick and the injury to Mrs. Darlow. Farmers processed this form as a third-party liability claim by the Darlows against the Browning policy.

During the meeting, Mr. Darlow did not ask Thone any questions about coverage under the Darlows' policy and no requests for payment of medical bills were made. Thone said that Jackson had admitted liability and that Charles Robert Inman, a Farmers claims representative from Cheyenne, Wyoming, would be the adjuster for their claim. Thone clearly indicated that he was the agent for both parties in this accident, since both were covered by the same company, and his job would be to forward the paperwork. Mr. Darlow informed Thone that his policy was "full coverage" including comprehensive, collision, medical and liability coverage.

Farmers opened a property damage claim file on October 4 and a bodily injury claim file on October 5, 1988. Inman, the claims representative, contacted the Darlows on October 5 by telephone and scheduled an appointment to meet with the Darlows at their home on October 12, 1988.

At the October 12 meeting, Inman informed the Darlows that he represented Jackson and the Brownings in reaching a settlement. The Darlows do not recall such a specific statement. However, the Darlows acknowledge that Inman immediately settled the property damage claim on their vehicle by paying $470.

During the meeting, Inman offered, after discussing Mrs. Darlow's condition, to settle the bodily injury claim for a total of $3,000. However, Inman discouraged the Darlows from settling their claim so soon after the accident. Inman informed the Darlows that until they settled, any medical bills would be paid by their insurance policy. Mr. Darlow acknowledged he had medical coverage since he had reviewed the terms of his insurance policy prior to the meeting.

Inman's next meeting with the Darlows occurred on November 4, 1988. Inman offered the Darlows a revised settlement of $3,500 which the Darlows rejected. The Darlows requested a $5,000 to $10,000 settlement.

At the November meeting, the Darlows gave Inman medical bills to be paid from the Darlows' medical payments coverage. After this meeting, Farmers opened a first-party medical claim file under the Darlows' policy. On November 8, 1988, Farmers requested a proof of loss form be completed by Mrs. Darlow. She completed the form on November 17, 1988 and Farmers received it on November 22. The initial payment of $770.55 for medical bills was made by Farmers on December 16, 1988. Subsequent installment payments were made to total the sum for all medical bills submitted by the Darlows.

Mrs. Darlow sought legal assistance on December 2, 1988 which resulted in a negligence lawsuit against Jackson filed on December 21, 1988. Mrs. Darlow accepted, on May 30, 1989, an offer of judgment under W.R.C.P. 68. On June 12, 1989, Mrs. Darlow filed a satisfaction of judgment acknowledging receipt of $15,035 for settlement of her claims against Jackson. As a result, no third-party claims are at issue in the present action.

The Darlows filed this action on November 21, 1989 alleging bad faith, deceit and duress, and intentional infliction of emotional distress in Farmers' handling of the first-party claims. After more than one year of discovery, Farmers filed a motion in the district court for summary judgment on all claims. The Darlows responded with a cross motion for partial summary judgment on the bad faith claim. The district court granted Farmers' motion and denied the Darlows' motion. The Darlows appeal only from the portion of the summary judgment which denied their bad faith claim. Consequently, we now consider the duty of the insurer under its first-party automobile insurance medical payment benefit coverage when that carrier also had the liability coverage on the other driver involved in the two-car accident.

III. DISCUSSION

A.

This appeal contemplates a grant of summary judgment in favor of Farmers which is only proper if there are no genuine issues of material fact and the insurer as the prevailing party is entitled to judgment as a matter of law. St. Paul Fire and Marine Ins. Co. v. Albany County School Dist. No. 1, 763 P.2d 1255 (Wyo.1988); Teton Plumbing and Heating, Inc. v. Board of Trustees, Laramie County School Dist. No. One, 763 P.2d 843 (Wyo.1988). Where, as in this case, the facts are not in dispute and the questions presented are strictly ones of law, the appellate court accords no special deference to and is not bound by the district court's decision. Albany County School Dist. No. 1, 763 P.2d at 1257-58; Teton Plumbing and Heating, Inc., 763 P.2d at 847.

"[W]e review the judgment in the same light as the district court, using the same information. A party moving for summary judgment has the burden of proving the nonexistence of a genuine issue of material fact. Material fact has been defined as one which, if proved, would have the effect of establishing or refuting an essential element of the cause of action or defense asserted by the parties. Upon examination of a summary judgment, we view the record from the vantage point most favorable to the party opposing the motion, giving him all favorable inferences which may be drawn from the facts."

Doud v. First Interstate Bank of Gillette, 769 P.2d 927, 928 (Wyo.1989) (quoting Garner v. Hickman, 709 P.2d 407, 410 (Wyo.1985)).

Wyoming announced the rule that an insurance company owes a duty of good faith to its policyholders not to unreasonably deny a claim for benefits under the policy in McCullough, 789 P.2d 855. The breach of the duty of good faith and fair dealing gives rise to an independent tort action for bad faith. Id. at 858. The appropriate standard of care to determine bad faith is the objective standard of whether or not the validity of the denied claim was fairly debatable. Id. at 860.

"To show a claim for bad faith, a plaintiff must show the absence of a reasonable Id. at 860 (quoting Anderson v. Continental Ins. Co., 85 Wis.2d 675, ...