Hall v. Farmers Alliance Mut. Ins. Co.

• Citation: 179 P.3d 276,145 Idaho 313
• Decision Date: 13 February 2008
• Docket Number: No. 32326.,32326.
• Court: United States State Supreme Court of Idaho
• Parties: Kirby HALL and Linda Hall, husband and wife, and Basil "Sam" Hall and Elaine Hall, husband and wife, Plaintiffs-Appellants-Cross Respondents, v. FARMERS ALLIANCE MUTUAL INSURANCE COMPANY, a Kansas corporation, Defendant-Respondent-Cross Appellant.

179 P.3d 276

145 Idaho 313

Kirby HALL and Linda Hall, husband and wife, and Basil "Sam" Hall and Elaine Hall, husband and wife, Plaintiffs-Appellants-Cross Respondents, v. FARMERS ALLIANCE MUTUAL INSURANCE COMPANY, a Kansas corporation, Defendant-Respondent-Cross Appellant.

No. 32326.

Supreme Court of Idaho, Boise, December 2007 term.

February 13, 2008.

Johnson & Monteleone, L.L.P. for Appellants-Cross Respondents. Sam Johnson argued.

Benoit, Alexander, Harwood, High & Butler, L.L.P. for Respondent-Cross Appellant. Thomas High argued.

W. JONES, Justice.

I. FACTS AND PROCEDURE

This case began on June 21, 1999, when a Polish national named Zdzislow Piekarski repeatedly — and apparently without provocation — rammed his semi into the Halls' modest home, relenting only after Mr. Hall revealed a .44 caliber pistol. Kirby and Linda Hall occupied the house, but it was owned by Basil (deceased) and Elaine Hall. Piekarski's actions caused damage to the Halls' residence.

Fortunately for the Halls, their home was insured under a policy with limits of $63,000 purchased from Farmers Alliance Mutual Insurance Company (Farmers). Farmers assigned the claim to Julie Wilson, its employee, and an Idaho adjuster, Mike Hamon, an employee of the independent adjusting company Idaho Intermountain Claims. Hamon inspected the house on June 25 and estimated that the repairs would cost $8,383.86. On July 6, 1999, however, Wilson learned of damage to sprinkler irrigation pipes, two bedrooms, and the master bedroom. The next day, the Halls received a $1,000 advance payment for temporary living expenses. On July 9, the arrangements to repair or replace the sprinklers were made, but the Halls eventually deemed the repairs unsatisfactory.

The Halls received a check for $7,633.86 on August 13, 1999 as a partial payment for the claim. However, Kirby Hall requested that the contractor return because the house had "shifted." At this time, the Halls had yet to complete claim information paperwork necessary to finalize their claim. Because the Halls remained dissatisfied with their living situation, Farmers hired Briggs Engineering, an independent engineering company, to determine whether additional repairs were necessary. Briggs Engineering, hired in November, determined on December 14 that a few minor repairs were needed. Shortly thereafter, the Halls completed the claim information paperwork.

In April 2000, the Halls made an additional claim for $57,300 for house repairs, based on a March 15, 2000 "proposal and contract" by L & L Builders. Due to the disparate estimates, Wilson arranged for an independent adjuster to re-inspect the home. The adjuster concluded that additional repairs were required, but that the Halls' estimate was excessive. On June 26, 2000, Wilson mailed the Halls a letter informing them that their policy required the Halls' participation in an appraisal resolution process, because they were in conflict as to the correct amount of recovery. The Halls then refused to deal with Wilson, leading Farmers to file a civil complaint against the Halls on January 24, 2001, in which Farmers successfully sought to compel the Halls' participation. Pursuant to the appraisal process¹, each side selected an appraiser. The Halls selected Alvie Jarrett and Straightline Construction, while Farmers hired Maas Cleaning and Restoration. Jarrett and Straightline submitted a bid for $69,590.00, and Maas offered $64,395.71; so, both bids exceeded the Halls' policy limits.²

As a result of the corrected appraisal, Farmers revised its offer to the Halls. It offered the Halls a choice: (1) $36,966.17, the difference between its determination of the actual cash value of the damage and the $7,383.86 it already paid, or (2) $63,000.00, the policy limit, for the replacement value under the policy if the structure was rebuilt. The Halls did not respond to this offer. So, on June 28, 2001, Farmers sent a check for $36,966.17 to the Halls' former attorney. After being informed on July 10 that the check was sent to the incorrect person, Farmers forwarded it to the correct attorney. However, the check again was returned, this time because the former attorney was still identified as a payee on the check. A new check eventually was issued to the correct person.

At trial, the Halls argued that Farmers delayed payment to the Halls by 728 days, and Claiborne, an expert witness, testified that the claim should have taken only 60-90 days to resolve. In addition, the Halls noted that Farmers delayed in sending a structural engineer to inspect the property; that Farmers may have lied when it claimed to be unaware of the Halls' dwelling damage; that Farmers also may have lied when it claimed to be unaware of a bid for the work from L & L Builders; and that Idaho Intermountain Claims responded to the Halls' request to speak to the "highest person in the company" by asking whether they were referring to the tallest person and complaining that their reason to speak to the president may have been simply to "listen to the same complaints of Mr. Hall some more[.]" Farmers claimed on the other hand that the Halls were partially responsible for the delay. For example, Farmers argued that it could not possibly have completed the claim within 60-90 days, because the Halls had yet to submit a proof of claim to Farmers within that time.

On February 14, 2002, the Halls filed a complaint and demand for jury trial against Farmers, alleging breach of insurance contract and the corresponding implied covenant of good faith and fair dealing; the tort of bad faith; and negligence. The trial court dismissed the claims of negligence and bad faith. The Halls moved to amend their complaint to include a punitive damages claim, and the trial court granted the motion after twice denying it. Following trial, the jury returned a Special Verdict for the Halls on April 15, 2005, awarding $18,650.00 as compensatory damages for the breach of contract claim and $660,000.00 as punitive damages.

Farmers filed a motion for judgment notwithstanding the verdict, a new trial, or a remittitur. The trial court refused to grant a judgment notwithstanding the verdict, but offered either (1) to remit the punitive damages from $660,000.00 to $74,600.00, a 4:1 ratio to the compensatory damages awarded, or (2) to permit a new trial on the issue of punitive damages. The district court's legal justification for its ruling was grounded solely on Fourteenth Amendment due process considerations, as it explicitly found that the punitive damages were not excessive apart from the due process dictates.³ The Halls appeal the district court's reduction of the punitive damages award. Farmers cross-appealed the court's refusal to grant a judgment notwithstanding the verdict and its refusal to grant a new trial.

II. ANALYSIS

The trial court correctly denied Farmers' motion for a judgment notwithstanding the verdict based on the insurance contract

"Interpretation of an ambiguous document presents a question of fact. On the other hand, interpretation of an unambiguous document is a question of law." DeLancey v. DeLancey, 110 Idaho 63, 65, 714 P.2d 32, 34 (1986) (internal quotations omitted). Further, "[i]nsurance policies are a matter of contract between the insurer and the insured." AMCO Ins. Co. v. Tri-Spur Inv. Co., 140 Idaho 733, 739, 101 P.3d 226, 232 (2004). So, "[i]ntepretation of an unambiguous insurance contract is a question of law subject to free review." Ryals v. State Farm Mut. Auto. Ins. Co., 134 Idaho 302, 304, 1 P.3d 803, 805 (2000). But, "where there is an ambiguity in an insurance contract, special rules of construction apply to protect the insured." Foremost Ins. Co. v. Putzier, 102 Idaho 138, 142, 627 P.2d 317, 321 (1981). "Under these special rules, insurance policies are to be construed most liberally in favor of recovery, with all ambiguities being resolved in favor of the insured." Id. Finally, "[t]he meaning of the insurance policy and the intent of the parties must be determined from the plain meaning of the insurance policy's own words." National Union Fire Ins. Co. v. Dixon, 141 Idaho 537, 540, 112 P.3d 825, 828 (2005).

The Policy of Insurance provides the requirements for settlement of property losses as follows:

4. Loss Settlement. Covered property losses are settled as follows:

a. [N/A]

b. Building under Coverage A at replacement cost without deduction for depreciation, subject to the following:

(1) If at the time of loss the amount of insurance in this policy on the damaged building is 80% or more of the full replacement cost of the building immediately prior to the loss, the company will pay the cost of repair or replacement, without deduction for depreciation, but not more than the smallest of the following amounts:

(a) the limit of liability under this policy applying to the building;

(b) the replacement cost of that part of the building damaged for equivalent construction and use on the same premises; or

(c) the amount actually and necessarily spent to repair or replace the damaged building.

(2) [N/A]

(3) [N/A]

(4) When the cost to repair or replace the damage is more than $1,000 or more than 5% of the amount of insurance in this policy on the building,

whichever is less, the company will pay no more than the actual cash value of the damage until actual repair or replacement is completed

The parties do not dispute that the "amount of insurance in this policy on the damaged building is 80% or more of the full replacement cost of the building immediately prior to the loss." Section 4(a)(1) requires, therefore, that Farmers would have to pay the cost of repair or replacement, with payment constrained by sections 4(a)(1)(a)-(c). However, the parties also do not dispute that the cost to repair or replace the damage was more than $1,000 or more than 5% of the amount of insurance on the building. The Halls do not claim that they have repaired or replaced their home....