Fulbrook v. Allstate Ins. Co.

• Court: Nevada Supreme Court
• Writing for the Court: Parraguirre
• Decision Date: 30 January 2015
• Docket Number: No. 62199,No. 61567,61567,62199
• Citation: Fulbrook v. Allstate Ins. Co., No. 61567, No. 62199 (Nev. Jan 30, 2015)
• Parties: PAMELA FULBROOK, INDIVIDUALLY, AND AS SPECIAL ADMINISTRATOR OF THE ESTATE OF ADASHA EDISON; MICHAEL BENNINGTON AND ELIZABETH BENNINGTON, HUSBAND AND WIFE; AND MICHELLE BENNINGTON, Appellants, v. ALLSTATE INSURANCE COMPANY, Respondent.

PAMELA FULBROOK, INDIVIDUALLY, AND AS SPECIALADMINISTRATOR OF THE ESTATE OF ADASHA EDISON;MICHAEL BENNINGTON AND ELIZABETH BENNINGTON,HUSBAND AND WIFE; AND MICHELLE BENNINGTON, Appellants, v. ALLSTATE INSURANCE COMPANY, Respondent.

No. 61567

No. 62199

SUPREME COURT OF THE STATE OF NEVADA

January 30, 2015

An unpublished order shall not be regarded as precedent and shall not be cited as legal authority. SCR 123.

ORDER OF AFFIRMANCE

These are consolidated appeals from a final judgment and a post-judgment order denying attorney fees and costs in an insurance matter. Eighth Judicial District Court, Clark County; Valerie Adair, Judge.

Appellant Pamela Fulbrook's daughter was killed when she fell from the roof of a car driven by appellant Michelle Bennington. Michelle's parents, appellants Elizabeth Bennington and Michael Bennington, owned the car and insured it through respondent Allstate Insurance Company.

After the accident, Fulbrook's attorney, Thomas Christensen of the Christensen Law Office (CLO), sent a letter to Allstate seeking to settle Fulbrook's claim against the Benningtons (the Demand Letter). The Demand Letter stated that Fulbrook would settle her claim if, within two weeks from the date of the letter, Allstate (1) paid the full value of the Benningtons' policy and (2) provided proof that the Benningtons had no other applicable insurance. Allstate did not accept Fulbrook's settlement offer prior to the expiration of the deadline provided in the Demand Letter.

Fulbrook then filed a wrongful death lawsuit against the Benningtons. Fulbrook and the Benningtons entered an agreement stipulating to the Benningtons' liability and agreeing that the reasonable value of Fulbrook's damages was at least $2,500,000. A district court entered judgment for Fulbrook against the Benningtons in the amount of $2,500,000.

Several months before the judgment was entered against the Benningtons, Allstate filed a complaint for declaratory relief against Fulbrook and the Benningtons seeking a judicial declaration (1) limiting its obligation to indemnify the Benningtons for Fulbrook's claim to $15,000, the Benningtons' insurance policy's limit, and (2) finding that Allstate acted reasonably. Fulbrook and the Benningtons filed counterclaims against Allstate for compensatory and punitive damages.

Before trial, the district court dismissed Fulbrook's counterclaims against Allstate. Allstate then made a motion to have Christensen disqualified on the grounds that he was a percipient witness, and the district court ordered that Christensen be excluded from the courtroom during the testimony of witnesses that would directly relate tohis expected testimony. However, the district court did not disqualify Christensen.

During trial, each side called multiple witnesses, including an expert witness proffered by Allstate, to testify about Allstate's conduct with regard to Fulbrook's claim, CLO's conduct and motive with regard to Fulbrook's claim, and the efforts to settle Fulbrook's claim. Fulbrook and the Benningtons objected to several instructions that the district court provided to the jury. The jury returned a special verdict in which it found that Allstate did not breach the duty of good faith and fair dealing or the duty to cooperate that it owed to the Benningtons. The jury also found that the Benningtons breached their insurance policy's cooperation clause by entering into the agreement with Fulbrook. It did not award damages to any party.

After the jury returned its verdict, the Benningtons and Fulbrook made motions for judgment notwithstanding the verdict and for a new trial, which the district court denied, and the Benningtons assigned their rights against Allstate to Fulbrook. The district court then entered a final judgment in favor of Allstate on the issues presented in Allstate's complaint. It amended the judgment to award $15,000 to Fulbrook from Allstate pursuant to the Benningtons' insurance policy. Fulbrook then filed a motion for attorney fees and costs, which the district court denied.

Fulbrook and the Benningtons appeal and raise the following issues: (1) whether the district court abused its discretion by admitting evidence of CLO's motive; (2) whether the district court abused its discretion when instructing the jury; (3) whether the district court abused its discretion by excluding Christensen from portions of the trial; and (4)whether the district court abused its discretion by not awarding attorney fees or costs to Fulbrook.¹

The district court did not abuse its discretion by admitting evidence of CLO's motives

Fulbrook and the Benningtons argue that the district court abused its discretion by admitting evidence of CLO's motives, which included settlement offer letters sent to insurers in other matters, because CLO's motives and these letters were irrelevant to the present case. As part of this argument, they contend that Allstate Insurance Co. v. Miller, 125 Nev. 300, 212 P.3d 318 (2009), prohibits consideration of a claimant's attorney's motive.

"We review a district court's decision to admit or exclude evidence for abuse of discretion, and we will not interfere with the districtcourt's exercise of its discretion absent a showing of palpable abuse." M.C. Multi-Family Dev., L.L.C. v. Crestdale Assocs., Ltd., 124 Nev. 901, 913, 193 P.3d 536, 544 (2008).

Miller does not prohibit evidence of attorney's motive

Fulbrook and the Benningtons' contention that a claimant's attorney's motive is not relevant is based on a footnote contained in Miller, which states that the issue of "whether the district court improperly excluded . . . evidence regarding [the plaintiff's] attorney's motive" lacked merit. 125 Nev. at 323 n.5, 212 P.3d at 334 n.5. They argue that the footnote prohibits the admission of evidence of an attorney's motive. Fulbrook and the Benningtons' reliance on this footnote, however, is misplaced because the footnote summarily rejected arguments that were specific to Miller without addressing the explicit issues raised. Thus, the footnote in Miller does not provide controlling or persuasive authority here.

The tort of insurance bad faith requires unreasonable conduct by an insurer

An insurer owes its insured "two general duties: the duty to defend and the duty to indemnify." Miller, 125 Nev. at 309, 212 P.3d at 324. Additionally, all contracts include an implied covenant of good faith and fair dealing. Pemberton v. Farmers Ins. Exch., 109 Nev. 789, 792-93, 858 P.2d 380, 382 (1993). This covenant imposes multiple duties on an insurer, including a duty to settle a claim within policy limits. See Miller, 125 Nev. at 315, 212 P.3d at 328. "A violation of [this] covenant gives rise to a bad-faith tort claim." Id. at 308, 212 P.3d at 324. "Bad faith is established where the insurer acts unreasonably and with knowledge that there is no reasonable basis for its conduct." Guar. Nat'l Ins. Co. v. Potter, 112 Nev. 199, 206, 912 P.2d 267, 272 (1996).

CLO's motives were relevant to whether Allstate acted in bad faith

Evidence is relevant if it has "any tendency to make the existence of any fact that is of consequence to the determination of the action more or less probable than it would be without the evidence." NRS 48.015. Thus, evidence which demonstrates that an insurer had or lacked a reasonable basis for its conduct is relevant to a claim of bad faith. See Miller, 125 Nev. at 308, 212 P.3d at 324.

The conduct of a claimant's attorney is relevant to the issue of the reasonableness of an insurer's conduct because the attorney's actions can influence the insurer's conduct. See AAA Nev. Ins. Co. v. Chau, 808 F. Supp. 2d 1282, 1286-87 (D. Nev. 2010) (finding that a claimant's attorney's conduct was relevant to whether an insurer acted reasonably in not accepting a claimant's settlement offer within the two-week time period provided in the offer), aff'd in part, dismissed in part on other grounds, 463 F. App'x 627, 628 (9th Cir. 2011). An actor's motive is relevant to evaluating the actor's conduct. See Bongiovi v. Sullivan, 122 Nev. 556, 575, 138 P.3d 433, 447 (2006) (holding that evidence of a party's motive or intent was admissible when the party's conduct was relevant to a disputed issue).

Here, evidence of CLO's motive was relevant to CLO's conduct in pursuing Fulbrook's claim with Allstate. Similarly, CLO's conduct was relevant to the issue of Allstate's conduct because it provides context for evaluating Allstate's actions. Because an issue at trial was whether Allstate acted reasonably in not settling Fulbrook's claim before the Demand Letter's deadline, evidence concerning the context of Allstate's conduct can be relevant to determine whether it acted reasonably. See NRS 48.015 (defining "relevant evidence" as that which makes an "actionmore or less probable than it would be without the evidence"). Therefore, evidence of CLO's conduct and motive was relevant.

The district court did not abuse its discretion by admitting the settlement offer letters from other cases

At trial, Allstate proffered settlement offer letters that CLO sent to insurers regarding other claims that were nearly identical to the Demand Letter in the instant action. Allstate's expert testified that these other letters contained unreasonable settlement offers made by CLO. Because these letters could help reveal whether the Demand Letter's settlement offer was reasonable, they could make it more or less probable that Allstate acted reasonably in not accepting the offer of the Demand Letter to settle Fulbrook's claim.² Therefore, the district court did not abuse its discretion in admitting CLO's other settlement offer letters and evidence of CLO's motive.³The district court did not abuse its discretion in instructing the jury

Fulbrook and the Benningtons argue that the district court misstated the law when proffering multiple jury instructions. We address three of these assignments of error.⁴

We review a district court's decision to give specific jury...