Gourley v. Prudential Property Ins., 98 CA 0934.

• Decision Date: 14 May 1999
• Docket Number: No. 98 CA 0934.,98 CA 0934.
• Citation: 734 So.2d 940
• Parties: Lydia GOURLEY and Floyd W. Gourley v. PRUDENTIAL PROPERTY AND CASUALTY INSURANCE COMPANY, Gamco Trucking, Inc., Omar D. Spencer and Janet Lynn Broussard.
• Court: Court of Appeal of Louisiana — District of US

734 So.2d 940

Lydia GOURLEY and Floyd W. Gourley v. PRUDENTIAL PROPERTY AND CASUALTY INSURANCE COMPANY, Gamco Trucking, Inc., Omar D. Spencer and Janet Lynn Broussard.

No. 98 CA 0934.

Court of Appeal of Louisiana, First Circuit.

May 14, 1999.

Charles A. Schutte, Jr., Baton Rouge, for Defendant in Intervention-Appellee Prudential Property and Casualty Insurance Company.

Philip J. Dugas, Baton Rouge, for Intervenor-Appellant Samera L. Abide.

Before: FITZSIMMONS, GUIDRY, and PETTIGREW, JJ.

GUIDRY, J.

This is an appeal from a judgment rendered in a case alleging an insurer's bad-faith failure to settle a claim, thereby exposing its insured to a judgment in excess of the insurance policy liability limit. Judgment was entered in favor of appellant, Samera L. Abide, Trustee of the bankruptcy estate of Janet Broussard, and against appellee, Prudential Property and Casualty Insurance Company ("Prudential"), with damages awarded being less than the excess judgment. Appellant has appealed the damages portion of the judgment, while appellee has timely answered and assigned error to the trial court's judgment of liability against Prudential and the trial court's jury instructions. For the following reasons, we amend the judgment and, as amended, affirm.

FACTS AND PROCEDURAL HISTORY

On November 5, 1991, Lydia Gourley ("Ms.Gourley") was traveling south on Louisiana Highway 3034, in East Baton Rouge Parish, Louisiana in her 1989 Mercury Cougar. A 1990 Dodge Shadow, driven by Janet Broussard ("Ms.Broussard"), was also traveling south, immediately ahead of Ms. Gourley's vehicle. Ms. Broussard, who was insured by Prudential, drifted into the path of an eighteen-wheeler traveling in the northbound lane. While Ms. Broussard was able to prevent a head-on collision with the eighteen-wheeler, she was unable to prevent sideswiping the truck. This caused the eighteen wheeler to strike Ms. Gourley's vehicle. As a result of the collision with the eighteen wheeler, Ms. Gourley sustained several injuries, including a fractured ankle, fractured sternum, herniated cervical disk, and vertigo.

Prudential began its investigation on November 6, 1991. Prudential's accident investigation consisted of interviews with Ms. Broussard and Omar Spencer, driver of the eighteen wheeler, and a review of the police accident report. Based upon the information provided, Prudential accepted liability for the accident on December 2, 1991.

On December 20, 1991, Ms. Gourley's attorney contacted Prudential. During this conversation, her attorney verified the nature and extent of Ms. Gourley's injuries. On December 27, 1991, Prudential received a letter which confirmed this conversation and included, as attachments, Ms. Gourley's medical bills and an operative report from her surgeon. The attached information demonstrated that Ms. Gourley's medical bills alone, at that point, totaled $21,-680.00. This was $3,320.00 less than the $25,000.00 liability limit for bodily injuries per person. The letter also acknowledged subrogation claims that would need to be addressed with Ms. Gourley's insurer, who had paid the $5,000.00 medical benefit under her policy.

On March 6, 1992, Prudential received a letter from Ms. Gourley's attorney.¹ This letter advised that the attorney would recommend settlement for the $25,000.00 policy limit in return for a release of Ms. Broussard from the action.

When Prudential did not respond to this letter, Ms. Gourley's attorney sent a third letter. Prudential received this letter on March 23.² This letter included a demand for payment of the $25,000.00 policy limit within fourteen days of the date of the letter (April 2).

After reading this letter, the adjuster sought authority to settle this claim. The adjuster acknowledged that, even though she took the terms of the demand letter seriously, she did not seek to expedite the process for securing authority to settle this claim or contact Ms. Gourley's attorney. Further, she acknowledged that, despite quickly admitting liability for the accident and her early awareness that Ms. Gourley's injuries would very likely expose Ms. Broussard to damages in excess of her policy's liability limits, she had never before initiated the process of attempting to settle for the policy limits. Also, Ms. Broussard was never informed that Ms. Gourley's injuries could exceed her policy's liability limits, exposing her to responsibility for payment of any damages in excess of the policy limits.

When Prudential failed to respond by the deadline given in the March 19 letter, Ms. Gourley and her husband filed a petition for damages. This petition named, among others, Prudential and Ms. Broussard as defendants. The Gourley's filed several supplemental and amending petitions, one of which alleged that Prudential's failure to settle for the policy limits violated La. R.S. 22:1220.

Subsequently, Ms. Broussard filed a bankruptcy petition on August 31, 1994. The appellant, as trustee for the estate of Ms. Broussard, filed a Petition for Intervention on March 13, 1996. This petition alleged that Prudential's failure to settle within policy limits, along with its failure to advise Ms. Broussard of the possibility of damages in excess of the policy limits, was both an arbitrary and capricious failure to fulfill its fiduciary duty toward Ms. Broussard and a violation of La. R.S. 22:1220. Accordingly, the petition sought to hold Prudential liable for any damages in excess of $25,000.00 that may be awarded to the Gourleys.

A Notice of Discharge and Injunction was filed on behalf of Ms. Broussard, pursuant to 11 U.S.C. § 524(A)(2), on August 29, 1996. The trial court issued an order staying actions against Ms. Broussard, individually, on December 9, 1996. Subsequently, the Gourleys amended their petition for damages, asserting their right to damages against Ms. Broussard's estate.

The court held a bench trial on the Gourleys' petition for damages on June 24, 1997. The court issued a judgment for damages in the amount of $144,990.46. This was subject to a credit of $25,000.00, which Prudential deposited into the court registry prior to trial. This left an excess judgment of $119,990.46 for which Ms. Broussard's estate was responsible. The Gourleys then moved to dismiss their La. R.S. 22:1220 claim against Prudential. Judgment in accordance with the court's verdict was signed on June 25, 1997.

The court held a jury trial on the merits of the petition for intervention. After appellant presented its case, appellee moved for a directed verdict. The court granted a directed verdict on the La. R.S. 22:1220 claim, reserving to the appellant and presenting to the jury the question of bad faith excess judgment liability. The jury, using special verdict forms, returned a verdict finding appellee's failure to settle breached its duty to Ms. Broussard, subjecting her to liability in excess of policy limits. The jury, however, limited its damage award to $26,000.00. Prudential received a credit for the $25,000.00 which had been placed into the court registry. Judgment based upon the both the directed verdict and the jury's verdict was signed on October 9, 1997.

Appellant filed a timely motion for judgment notwithstanding the verdict (JNOV) and motion for new trial, which were heard on November 17, 1997. Both motions were limited to the issue of damages awarded by the jury. The trial court issued an order denying both motions on the same day. Judgment based upon the court's decision was signed on December 8, 1997.

Ms. Broussard's estate has appealed the trial court's denial of its JNOV motion, alleging that an insurer's liability for an excess judgment against its insured requires a damage award equaling the damages in excess of the insurance policy limits. Prudential answered the appeal, assigning error to the jury's finding of liability, as well as several jury instructions to which it timely objected during trial.

DISCUSSION

Excess Judgment Liability

Courts have consistently noted that an insurer's excess judgment liability is inherently a question of fact. Smith v. Audubon Insurance Company, 95-2057, pp. 7-8 (La.9/5/96); 679 So.2d 372, 376-377; Cousins v. State Farm Mutual Automobile Insurance Company, 294 So.2d 272, 275 (La. App. 1st Cir.1973), writ denied, 296 So.2d 837 (La.1974). A court of appeal may not set aside a trial court's finding of fact in the absence of manifest error. Rosell v. ESCO, 549 So.2d 840, 844 (La.1989). The issue to be resolved by a reviewing court is not whether the trier of fact was right or wrong but whether the factfinder's conclusion was a reasonable one absent manifest error. Stobart v. State, Through Department of Transportation and Development, 617 So.2d 880, 882 (La.1993). Where the trier of fact has a choice between more than one reasonable view of the evidence, his choice of one or the other of these cannot be wrong. Banks v. Industrial Roofing & Sheet Metal Works, Inc., 96-2840, p. 8 (La.7/1/96); 696 So.2d 551, 556.

A liability insurer, in the absence of bad faith, is generally free to settle or to litigate at its own discretion, without liability to its insured for a judgment in excess of the policy limits. Smith, 95-2057 at 7-9; 679 So.2d at 376-377. However, a liability insurer is the representative of the interests of its insured, and the insurer, when handling claims, must carefully consider not only its own self-interest, but also its insured's interest so as to protect the insured from exposure to excess liability. Smith, 95-2057 at 7-8; 679 So.2d at 376.

In fact, this court has stated that "[t]he insurer is the champion of its insured's interests. The interests of the insured are paramount to those of the insurer, and the insurer may not gamble with the funds and resources of its policyholders." Maryland Casualty Company v. Dixie Insurance Company, 622 So.2d 698, 701 (La.App. 1st Cir.), reh'g granted in part on other grounds, 622 So.2d 704, writ denied, 629 So.2d 1138...