Dirks v. Farm Bureau Mut. Ins. Co., 89-1560
| Decision Date | 20 February 1991 |
| Docket Number | No. 89-1560,89-1560 |
| Parties | Wayne D. DIRKS and Nancy D. Dirks, individually and as next friend of Crystal N. Dirks and Amber D. Dirks, Appellants, v. FARM BUREAU MUTUAL INSURANCE COMPANY, Appellee. |
| Court | Iowa Supreme Court |
James E. Shipman and Martha L. Shaff of Simmons, Perrine, Albright & Ellwood, Cedar Rapids, for appellants.
William H. Roemerman and James L. Sines of Crawford, Sullivan, Read, Roemerman & Brady, Cedar Rapids, for appellee.
Considered by McGIVERIN, C.J., and HARRIS, NEUMAN, SNELL and ANDREASEN, JJ.
Plaintiffs Wayne and Nancy Dirks, individually and as next friend of their children, Crystal N. Dirks and Amber D. Dirks, sued defendant Farm Bureau Mutual Insurance Company, their own insurer, for failure to pay them underinsured motorist benefits to which plaintiffs believed they were entitled under their auto insurance policies. After trial, the jury awarded plaintiffs damages, including punitive damages on plaintiffs' first-party bad faith claim against defendant.
Farm Bureau filed a motion for judgment notwithstanding the verdict on the bad faith claim. The district court granted the motion, ruling that, as a matter of law, Farm Bureau's actions did not constitute bad faith. Plaintiffs appealed that and other rulings. We affirm.
I. Background facts and proceedings. On May 2, 1986, a motorcycle operated by Wayne Dirks collided with a car driven by Brian Comley. Wayne was seriously injured in the accident.
Wayne's wife, Nancy, reported the accident to Farm Bureau's claims representative, John Barnts. Barnts investigated whether Wayne had an insurance policy on the motorcycle with Farm Bureau and, after communications with his superiors, advised Nancy that no coverage existed.
Later evidence showed that Wayne had no insurance policy on his motorcycle but he did have auto policies with Farm Bureau on an auto and a truck owned by him. These policies contained underinsured motorist provisions.
Shortly after the accident, plaintiffs sought legal advice from attorney Adrian Knuth regarding how to proceed. With Knuth's assistance, plaintiffs filed a lawsuit against Comley for injuries resulting from the accident. That suit was ultimately settled for $20,000, which was Comley's liability insurance policy limits.
Following settlement of the lawsuit against Comley, plaintiffs sent Farm Bureau a letter demanding coverage under the underinsured motorist provisions of their auto insurance policies. Three weeks later, having received no response from Farm Bureau, plaintiffs filed this lawsuit naming Farm Bureau and its former agent, Douglas Rahe, as defendants. Plaintiffs sought proceeds for underinsured motorist benefits allegedly owed them under their auto insurance policies and actual and punitive damages resulting from Farm Bureau's alleged failure to fulfill its responsibilities as provided by the policies. Plaintiffs' theories of recovery included breach of contract, negligence, gross negligence, breach of fiduciary duty and bad faith.
Plaintiffs' lawsuit against Farm Bureau and Rahe proceeded to trial. At the close of plaintiffs' case, both defendants made directed verdict motions encompassing all issues involved in the case. The district court granted Rahe's directed verdict motion in its entirety and removed him as a defendant. Plaintiffs have not appealed that ruling.
The court also granted Farm Bureau's directed verdict motion on the issues of negligence, gross negligence and breach of fiduciary duty. Only plaintiffs' contract and first-party bad faith claims against Farm Bureau remained after the court's ruling on defendants' directed verdict motions. At this point in the trial, Farm Bureau also conceded that plaintiffs were entitled to underinsured motorist benefits up to $250,000 under the auto policies if the jury awarded plaintiffs damages in excess of the $20,000 they had already recovered from Comley's insurer.
At the close of all evidence, Farm Bureau renewed its directed verdict motion; that motion was overruled by the court and the case was submitted to the jury. The court stated, however, that it doubted whether the bad faith claim should be submitted to the jury.
The jury returned a verdict in favor of plaintiffs on the contract claim. It found that plaintiffs had sustained $1,102,000 in actual damages and that Comley was 80% at fault for those damages. The jury also found that Farm Bureau had acted in bad faith in failing to fulfill its contractual obligations and awarded plaintiffs punitive damages.
After considering both parties' post trial motions, the district court entered judgment on the contract claim in favor of plaintiffs for $250,000, the underinsured motorist policy limits. In addition, the court granted Farm Bureau's motion for judgment notwithstanding the verdict on the first-party bad faith claim, finding that Farm Bureau was entitled to judgment in its favor on that claim as a matter of law. See Iowa R.Civ.P. 243.
Both sides have appealed on numerous grounds. We only discuss, however, the central issue in this case: did the trial court err in granting defendant's motion for judgment notwithstanding the verdict on the bad faith claim? We conclude that all other issues raised by the parties are either without merit or unnecessary to discuss. Additional facts necessary to the resolution of the bad faith claim are stated below.
II. Dirks' bad faith claim. After a jury verdict awarding plaintiffs punitive damages for Farm Bureau's alleged bad faith denial of underinsured motorist benefits, the district court granted Farm Bureau's motion for judgment notwithstanding the verdict on the bad faith claim. Plaintiffs appeal, contending that the court erred in granting Farm Bureau's motion for judgment notwithstanding the verdict.
Initially, we mention the standards necessary to resolve this issue. Iowa Rule of Civil Procedure 243 explains when a motion for judgment notwithstanding the verdict may be granted. Rule 243 provides, in part:
Any party, may, on motion, have judgment in his favor despite an adverse verdict ...:
....
(b) If the movant was entitled to have a verdict directed for him at the close of all the evidence, and moved therefor, and the jury did not return such verdict, the court may then either grant a new trial or enter judgment as though it had directed a verdict for the movant.
Our previous case law has discussed rule 243 in an effort to clarify when judgment notwithstanding the verdict is proper. We have stated that if there is substantial evidence to support each element of plaintiffs' claim, defendant's motion for judgment notwithstanding the verdict should be denied. Valdez v. City of Des Moines, 324 N.W.2d 475, 477-78 (Iowa 1982). Conversely if there is no substantial evidence in support of each element of plaintiffs' claim, judgment notwithstanding the verdict in defendant's favor is appropriate. Id. at 478.
We also must set forth the standard for a first-party bad faith claim. We have previously held that a bad faith denial to pay insurance benefits occurs when a plaintiff shows "the absence of a reasonable basis for denying benefits of the policy and defendant's knowledge or reckless disregard of the lack of a reasonable basis for denying the claim." Dolan v. AID Ins. Co., 431 N.W.2d 790, 794 (Iowa 1988).
In an effort to make the bad faith concept more understandable to the jury, the trial court separated our definition of bad faith into the following elements and instructed the jury that in order for plaintiffs to prove their claim of bad faith denial of benefits, they must prove all of the following propositions:
1. Plaintiffs made a claim for underinsured motorist coverage.
2. Defendant denied plaintiffs' claim.
3. There was no reasonable basis for denying the claim.
4. Defendant knew there was no reasonable basis for denying the claim or acted in reckless disregard of whether there was any reasonable basis for denying the claim.
5. The denial was the reason plaintiffs did not receive underinsured motorists benefits.
On appeal, neither party challenges the validity of this instruction. Thus, for purposes of this appeal, we will assume that this instruction properly states Iowa law. Therefore, using this instruction, we need only determine whether there is substantial evidence to support a finding that each element of this instruction is satisfied.
A. Did plaintiffs make a claim for underinsured motorist benefits? The collision between Wayne Dirks and Comley occurred on May 2, 1986. On May 5, the first working day after the accident, Nancy reported the accident to Farm Bureau's local claims agent, John Barnts. Plaintiffs contend they made a claim for underinsured motorist benefits at this time. Farm Bureau contends that there is no substantial evidence to support the jury's finding that Nancy's report of the accident constituted an assertion of her family's claim for underinsured motorist benefits.
Farm Bureau concedes that Nancy's actions met the insured's reporting requirements of the auto insurance policies. Those duties included notifying Farm Bureau of the accident and giving the names and addresses of all persons involved, the hour, date, place and facts of the accident, and the names and addresses of witnesses. When Nancy complied with these policy requirements, she had made a claim for benefits as required by the express terms of the auto policies with Farm Bureau.
Farm Bureau still asserts that Nancy did not make a claim...
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