Granados v. Wilson

• Citation: 62 Kan.App.2d 10,505 P.3d 794
• Decision Date: 18 February 2022
• Docket Number: 123,684
• Parties: Nancy GRANADOS, Individually, as Heir-at-Law of Francisco Granados, Decedent, and as Class Representative of all Heirs-At-Law of Francisco Granados, Decedent, Appellee/Cross-appellant, v. John WILSON, Defendant, and Key Insurance Company, Appellant/Cross-appellee.
• Court: Court of Appeals of Kansas

62 Kan.App.2d 10

505 P.3d 794

Nancy GRANADOS, Individually, as Heir-at-Law of Francisco Granados, Decedent, and as Class Representative of all Heirs-At-Law of Francisco Granados, Decedent, Appellee/Cross-appellant,

v.John WILSON, Defendant,andKey Insurance Company, Appellant/Cross-appellee.

No. 123,684

Court of Appeals of Kansas.

Opinion filed February 18, 2022.

James P. Maloney and Kevin D. Brooks, of Foland, Wickens, Roper, Hofer & Crawford, P.C., of Kansas City, Missouri, and James D. Oliver, of Foulston Siefkin LLP, of Overland Park, for appellant/cross-appellee.

Michael W. Blanton, of Gerash Steiner P.C., of Evergreen, Colorado, and Jared A. Rose, of The Law Office of Jared A. Rose, of Kansas City, Missouri, for appellee/cross-appellant.

Before Malone, P.J., Powell and Isherwood, JJ.

Malone, J.:

This appeal arises from the district court's award of a garnishment order for Nancy Granados against Key Insurance Company (Key). John Wilson, who was insured by Key, ran a red light and killed Nancy's husband, Francisco Granados, when his car crashed into Francisco's car. Wilson was under the influence of drugs and alcohol at the time of the crash. Wilson had an automobile liability insurance policy issued by Key with a coverage limit of $25,000 per person and $50,000 per accident.

Nancy filed a wrongful death lawsuit and the district court found Wilson liable, entering judgment in excess of $3 million. Nancy then filed a garnishment action against Key based on Key's bad faith or negligence in handling the claim. The district court entered judgment for Nancy, finding Key failed to properly investigate the accident and breached its duty to communicate the risk of an excess judgment to Wilson. Key appeals, arguing the district court erred in finding it breached its duty to communicate and in finding Key caused the excess judgment. Nancy cross-appeals, arguing the district court erred in finding Key had no affirmative duty to initiate settlement negotiations.

On the record presented here, we hold the district court did not err in finding Key owed no affirmative duty to initiate settlement negotiations with Nancy before she made a claim for damages. We also hold Key's purported negligence or bad faith in handling the claim was not the legal cause of the excess judgment, and the district court erred in finding otherwise. Thus, we reverse the district court's judgment for Nancy in the garnishment action and remand with directions to enter judgment for Key.

FACTUAL AND PROCEDURAL BACKGROUND

On October 4, 2017, Francisco Granados was driving his car in Kansas City, Kansas, when Wilson failed to stop at a red light and hit Francisco's car. Francisco died as a result of the collision. Raymond Elkins, a passenger in Wilson's car, told police that Wilson was taking him home and that he and Wilson each drank a half pint of brandy and had smoked a blunt before leaving.

The next day, Wilson called Key, his insurer, and spoke to Alexandra Soto, a claims adjuster. Wilson told Soto about the accident, stating he did not have a police report but that the police said he ran a stop sign. Wilson said he did not run a stop sign and maintained that he had a green light and the other person hit him. Wilson told Soto that the other person had been ejected from the car and died. Wilson also told Soto that Elkins was in the car with him, and he gave her Elkins' address and phone number.

On October 10, 2017, Soto requested the police report. Soto also left a message with a detective the day she requested the police report asking for more information. Soto then did nothing on the claim for the rest of October.

Key received the police report on November 7, 2017. The police report included no insurance information for Wilson. The police report stated that Wilson was driving under the influence of drugs and alcohol and that he ran a red light and struck the Granados' car. The police report also listed the Granados' insurance carrier, State Farm Mutual Automobile Insurance Company (State Farm), its policy number, and 12 witnesses to the crash. Soto did not enter the information from the police report into Key's claim system until November 22, 2017. On December 19, 2017, Soto finished the liability evaluation and noted that Wilson was at fault.

Nancy received a letter from State Farm, dated December 26, 2017, sent to Francisco's estate asking for any medical claims to be listed on the form. Nancy threw away the form because Francisco had died at the scene, so she believed that there were no medical bills to claim. The letter mentioned nothing about Wilson being insured, or that he was insured by Key.

Nancy hired an attorney on February 28, 2018. Nancy agreed to pay her counsel 33 1/3 percent of all sums recovered unless the case settled for $50,000 or less before suit was filed, in which case all fees would be waived. The agreement also stated that all costs and expenses associated with preparing, investigating, and prosecuting the claims would be deducted from any recovery "whether by suit, settlement, or otherwise" before the calculation of attorney fees.

On March 6, 2018, Soto received a call from an employee at State Farm, which was the first time she ever spoke to the Granados' insurance carrier. State Farm told Soto that State Farm insured Francisco, that it had no information related to an attorney being involved, that it had made no payment under its policy, and that State Farm had sent letters to Nancy, but she had not responded. On April 9, 2018, Soto set a loss reserve of $25,000, the policy limit, because she knew the damages were higher than the limit.

In a letter dated June 4, 2018, Nancy's counsel notified State Farm that he was representing her. Sometime after June 9, 2018, Nancy opened a letter from State Farm, dated May 31, 2018, stating Nancy had "a liability claim against Key Insurance and an underinsured claim against this policy.’ " Nancy testified this was the first time she heard of Key. But the letter did not mention Wilson or provide any contact information for Key. Nancy eventually settled her underinsured motorist claim against State Farm for $25,000.

Wrongful death action

On June 12, 2018, Nancy filed a petition for wrongful death against Wilson, seeking "damages in excess of $75,000." Nancy had made no claim or settlement demand on Wilson before filing the lawsuit. On June 19, 2018, a special process server left a copy of the petition at Wilson's residence. On July 2, 2018, Key received a copy of the petition. On July 23, 2018, an attorney representing Wilson answered the petition. On the same day, Key offered to settle the lawsuit for the policy limit of $25,000.

On July 26, 2018, Nancy's counsel sent a letter to Wilson's attorney, rejecting Key's offer of $25,000 to settle the wrongful death lawsuit. The letter explained that Key should have offered the policy limit "a long time ago" and stated that it had a duty to promptly initiate settlement regardless of Nancy's actions. The letter also stated that an insurance company cannot cure negligence or bad faith by offering the policy limit after suit has been filed. The letter lacked any counteroffer to settle. But on October 2, 2018, Nancy's counsel sent a letter to Wilson's attorney, seeking $2,973,434 to settle the wrongful death claim. The letter stated: "By resolving the case now, the insurance company would also avoid the consequential damages available in a bad faith lawsuit." In May 2019, Key paid out the policy limit of $25,000 to Nancy in exchange for a covenant not to execute against Wilson personally for any judgment.

Nancy moved for summary judgment on the issue of liability, but the district court denied the motion. The case proceeded to a bench trial in September 2019. Both parties were represented by counsel and evidence was offered on the issues of liability and damages. The district court ruled from the bench on October 4, 2019, finding Wilson solely liable for the accident. The district court awarded $4,603,777.52 in total damages. Wilson filed an appeal challenging the damages. The parties later jointly moved to amend the judgment by reducing the noneconomic damages to avoid an appeal. The district court granted the motion, entering a total damage award of $3,353,777.52.

Garnishment proceedings

On December 28, 2019, Nancy filed a request for garnishment against Key, the basis for this appeal. Key moved for summary judgment, asserting that it could not be held liable for any amount beyond the policy limit. Nancy also moved for summary judgment, asserting she may stand in the place of Wilson, the insured, and take what he could enforce from Key based on Key breaching various duties owed to Wilson. The district court denied both motions.

The district court held a two-day bench trial beginning November 24, 2020. Nancy called Leonard Gragson, claims handling manager for Key, as her first witness. Gragson testified in detail about Key's policies in handling accident claims. After outlining these policies, Gragson testified that the handling of this claim did not comply with Key's claim handling standards. Gragson summarized that Soto did not call everyone involved in the wreck after Wilson provided notice, did not call witnesses on the police report, did not contact her supervisor, did not inspect the Granados' car, did not contact the Granados' insurance provider, did not complete the investigation within 30 days, and did not complete an evaluation of liability and damages. Gragson also testified that Soto failed to contact Wilson and notify him of the risks he was facing as a result of the claim.

Soto testified next. She admitted that she did not speak to Elkins the day of the crash, or after, despite learning that he gave a statement to police at the time of the crash. Soto admitted that she did not look for any news stories to learn the identities of those involved in the crash. Soto admitted that she never contacted any of the witnesses listed in the police...