Garnett v. Government Employees Ins. Co.

• Decision Date: 06 May 2008
• Docket Number: No. 103,332.,103,332.
• Citation: Garnett v. Government Employees Ins. Co., 186 P.3d 935, 2008 OK 43 (Okla. 2008)
• Parties: Charles GARNETT, Plaintiff/Appellant, v. GOVERNMENT EMPLOYEES INSURANCE COMPANY, a Maryland Corporation, Defendant/Appellee.
• Court: Oklahoma Supreme Court

186 P.3d 935

2008 OK 43

Charles GARNETT, Plaintiff/Appellant, v.GOVERNMENT EMPLOYEES INSURANCE COMPANY, a Maryland Corporation, Defendant/Appellee.

No. 103,332.

Supreme Court of Oklahoma.

May 6, 2008.

As Corrected May 14, 2008.

CERTIORARI TO THE COURT OF CIVIL APPEALS, DIVISION 3;Tom A. Lucas, Trial Judge, William C. Hetherington, Jr., Trial Judge.

¶ 0 On August 20, 2002, Brady Fain's (Fain) car struck Douglas Hargrove's (the driver) pickup, in which Charles Garnett(the passenger) was a passenger.Government Employees Insurance Company(the insurer) insured both Fain and the driver.The passenger brought suit for payment under the driver's underinsured motorist policy.At the first trial, the insurer's counsel made inflammatory remarks about the passenger's expert medical witness, and the trial court declared a mistrial.The passenger moved for sanctions, and in his motion, disclosed a settlement offer made by the insurer during mediation.The insurer then moved for sanctions against the passenger.The trial court sanctioned the insurer and the passenger's counsel.At the second trial, the jury found for the passenger.The Court of Civil Appeals affirmed.We granted certiorari to address the first impression issue of whether a trial court may sanction a party or attorney for a disclosure of communications made during mediation.We find that, under the facts of this cause, the trial court erred by sanctioning the passenger's counsel.We also find that the trial court did not err by granting summary judgment on the issue of bad faith or by denying the insurer's motion for new trial.

CERTIORARI PREVIOUSLY GRANTED; TRIAL COURT AFFIRMED IN PART/REVERSED IN PART; COURT OF APPEALS OPINION VACATED.

Michael W. Phillips, Oklahoma City, Oklahoma, for Appellant.

Gerard F. Pignato, Brad L. Roberson, Mark B. Houts, Oklahoma City, Oklahoma, for Appellee.

KAUGER, J.

¶ 1 The issues presented are whether the trial court erred by: 1) sanctioning the passenger's counsel for disclosing the amount of a settlement offer made by the insurer during court-ordered mediation; 2) granting partial summary judgment to the insurer on the issue of bad faith; and 3) denying the insurer's motion for a new trial on the grounds of the exclusion of testimony by the investigating officer.We find the trial court erred by sanctioning the passenger's counsel.We otherwise affirm the decisions of the trial court.

FACTS

¶ 2 On August 20, 2002, Douglas Hargrove(the driver) and his passenger Charles Garnett(the passenger) were in the driver's compact pickup truck, stopped at a traffic light on Robinson Street in Norman.Brady Fain's (Fain) car was also idling at the light, just behind the driver's pickup.Mistakenly thinking the light had changed, Fain rear-ended the driver's pickup.The passenger alleged that he struck his head against the back glass of the pickup, and subsequently suffered migraine headaches.Neither Fain nor the driver alleged any injury.Both Fain and the driver were insured by Government Employees Insurance Company(the insurer) at the time of the accident.The passenger retained counsel and made a claim against the insurer for medical expenses and lost wages, pain and suffering, and mental anguish.

¶ 3 On August 23, 2002, Dana Underwood, a claims examiner for the insurer, contacted the passenger in order to obtain a statement, but when she learned that he was represented by counsel, she ended the call.On September 3, 2002, the passenger's counsel sent the insurer a letter of representation in which he stated that an underinsured motorist (UIM) claim would likely be asserted.On September 4, 2002, the insurer assigned Kevin Kahtava to the potential UIM claim.On October 14, 2002, Fain's mother, Marilyn Fain, notified the insurer that it insured her vehicle.The insurer opened a liability file and assigned Randy Williams(liability examiner) to the liability claim.The insurer created separate claim numbers for the UIM and liability claims.On October 16, 2002, the liability examiner notified the passenger's counsel that he was assigned to the liability claim.On November 15, 2002, Jerry Purvis(UIM examiner) took over the UIM file from Kevin Kahtava.On December 31, 2002, the passenger's counsel made a UIM demand to the liability examiner.

¶ 4 On January 14, 2003, the liability examiner received the passenger's demand package, which included $6,510.50 in medical expenses and $716.16 in lost wages.On January 15, 2003, the liability examiner offered the passenger $8,700 to settle the liability claim.On January 17, 2003, after considering the passenger's demand package, the UIM examiner valued the total claim at $11,000 to $13,000, and by subtracting the liability policy limits, valued the UIM claim at $1,000 to $3,000.On January 24, 2003, the UIM examiner offered the passenger $1,000 to settle the UIM claim.The passenger's counsel appears to have misunderstood the offer as $11,000 to settle the UIM claim.

¶ 5 On January 28, 2003, the passenger's counsel contacted the liability examiner and requested the $15,000 limits of the UIM policy.On January 28, 2003, the liability examiner settled the liability claim for the $10,000 policy limit.Throughout these negotiations, the passenger's counsel often mistakenly used the liability claim number when referring to the UIM claim and vice versa.When negotiations on the UIM claim were not fruitful, on March 26, 2003, Denise Thompson, the UIM examiner's supervisor (the supervisor), called the passenger's counsel and offered $2000 to settle the UIM claim.On April 3, 2003, the passenger's counsel counter-offered to settle the UIM claim for $14,000.On May 6, 2003, the supervisor offered $3,000 to settle the UIM claim, the full amount at which the insurer had valued the claim.

¶ 6 The passenger then deemed the $3000 an "undisputed amount" and demanded payment of the $3000 without settlement of the claim.The insurer refused, and on July 10, 2003, the passenger brought an action in district court alleging breach of contract and bad faith for the insurer's refusal to pay the "undisputed amount" and improper "dual representation" for the insurer's alleged leveraging of the liability and UIM claims against each other to prevent a fair valuation of either.The insurer moved for partial summary judgment on the issues of bad faith.The trial court granted the insurer's motions on both issues, leaving only the breach of contract claim to be litigated.

¶ 7 On September 9, 2005, the trial court ordered that the parties attend mediation pursuant to the District Court Mediation Act, 12 O.S. §§ 1821-1825, (the Mediation Act).On September 23, 2005, the parties attended mediation, but could not reach a settlement.On October 17, 2005, before the trial began before District Judge Tom A. Lucas, the passenger submitted motions in limine seeking to prohibit the insurer's counsel from: 1) mentioning collateral sources; 2) eliciting testimony from the investigating officer; and 3) suggesting or implying that the passenger's counsel fostered perjury from the passenger's treating physician.The parties argued the motions in chambers, and the trial court granted all three motions.During opening statements, Gerard F. Pignato, counsel for the insurer, stated that the investigating officer determined that there were no injuries sustained by the passenger.The passenger objected and the trial court sustained the objection and advised the jury to disregard counsel's statements about the investigating officer.Later in the opening statement, the insurer's counsel claimed that the passenger's expert medical witness "churned fees" and agreed to testify as "part of the deal."The trial court called counsel to the bench and advised the passenger's counsel that if he moved for a mistrial, it would be granted.The passenger's counsel so moved, and the trial court declared a mistrial.

¶ 8 On November 28, 2005, the passenger moved for sanctions against the insurer for its attorney's conduct in the first trial.The passenger also based his motion for sanctions on what he considered an unreasonably low settlement offer made by the insurer during mediation, the amount of which he disclosed in the first sentence of his motion for sanctions.On November 30, 2005, the insurer responded by moving for sanctions against the passenger and his counsel, Michael W. Phillips, for revealing the settlement amount offered in mediation, which the insurer alleged violated the Mediation Act.¹On December 21, 2005, District JudgeWilliam C. Hetherington, Jr. awarded $2500 in sanctions to the insurer against the passenger's counsel, and awarded attorney fees to the passenger against the insurer.

¶ 9 The second trial was held on February 1-2, 2006, again before Judge Lucas.At its conclusion, the jury awarded the passenger a total of $15,000 in damages, with credit to the insurer for the $10,000 paid under the liability policy, leaving $5000 to be paid under the UIM policy.On March 7, 2006, the insurer moved for a new trial based on the trial court's rejection of opinion testimony by the investigating officer on the vehicles' speed at the time of impact.The trial court denied the motion, and both parties appealed.

¶ 10We assigned the cause to the Court of Civil Appeals on February 1, 2007.On October 18, 2007, the Court of Civil Appeals, in an unpublished opinion, affirmed the rulings of the trial court on the insurer's motion for partial summary judgment on the issue of bad faith, the parties' motions for sanctions, and the insurer's motion for new trial.The passenger filed his petition for certiorari on November 6, 2007.On January 15, 2008, we granted certiorari.

I.

THE TRIAL COURT ABUSED ITS DISCRETION BY SANCTIONING THE PASSENGER'S COUNSEL.

¶ 11 In the passenger's motion for sanctions against the insurer, he disclosed the amount of a settlement offer made by the insurer during mediation.The insurer then moved...