Harter v. Plains Ins. Co., Inc., s. 20180

Citation579 N.W.2d 625,1998 SD 59
Decision Date10 June 1998
Docket Number20187,Nos. 20180,s. 20180
PartiesCynthia HARTER, Plaintiff and Appellee, v. PLAINS INSURANCE COMPANY, INC., Defendant and Appellant.
CourtSupreme Court of South Dakota

Rodney C. Lefholz, Rapid City, for plaintiff and appellee.

Thomas G. Fritz and Steven J. Morgans of Lynn, Jackson, Shultz & Lebrun, Rapid City, for defendant and appellant.

SABERS, Justice.

¶1 Insured sued Insurer, claiming it acted in bad faith by failing to tender the policy limits of her underinsured motorist policy. The jury awarded Insured $25,000 in compensatory damages and $75,000 in punitive damages. Insurer appeals the trial court's denial of its motions for new trial and judgment notwithstanding the verdict. We affirm.

FACTS

¶2 Cynthia Harter was injured in a traffic accident caused by Jacki Hollingsworth in 1989. Prior to the accident, Harter purchased underinsured motorist coverage from Plains Insurance Co., Inc. (Plains). Underinsured motorist coverage protects the insured when the driver at fault has insufficient insurance to pay the damages incurred by the injured party. In 1992, Hollingsworth's insurance company (All Nations) offered to pay Harter $25,000, the policy limits of Hollingsworth's liability coverage. Soon thereafter, Harter demanded from Plains the policy limits of her underinsured motorist policy. Plains offered to pay Harter $15,000.

¶3 Plains would not allow Harter to release Hollingsworth from further liability, a condition required by All Nations' offer of $25,000. Harter did not respond to the $15,000 offer from Plains and proceeded to trial against Hollingsworth in Meade County. Harter then filed suit against Plains in Pennington County, claiming it acted in bad faith by refusing to pay the balance of $75,000. 1 Plains was successful in causing the trial court to stay the bad faith lawsuit until the suit against Hollingsworth was over.

¶4 Plains then intervened in Harter's suit against Hollingsworth. Before the jury reached its verdict, Plains offered $75,000 to Harter. Harter alleges that the offer was conditioned on dismissal of her bad faith lawsuit. Harter refused the offer. The Hollingsworth jury awarded Harter $275,000 in damages. Plains' motions for judgment notwithstanding the verdict and new trial were denied.

¶5 The bad faith lawsuit against Plains went to trial, where Harter argued that Plains acted in bad faith by 1) failing to properly investigate Harter's claim; 2) failing to waive its subrogation right against Hollingsworth; 3) intervening in the Hollingsworth trial; 4) contesting liability in the Hollingsworth trial; 5) conditioning its offer on dismissal of the bad faith lawsuit; and 6) causing the bad faith lawsuit to be stayed until the Hollingsworth trial was over.

¶6 The names are relevant in this case. In order to aid the reader and avoid confusion, the parties and their attorneys are listed here:

FIRST TRIAL

Plaintiff Harter Rodney Lefholz

Defendant Hollingsworth Samuel Kerr

& All Nations

Intervenor Plains William May

SECOND TRIAL

Plaintiff Harter Rodney Lefholz

Defendant Plains Thomas Fritz &

Steven Morgans

APPEAL

Appellant Plains Thomas Fritz &

Steven Morgans

Appellee Harter Rodney Lefholz

¶7 Plains made a motion to disqualify Lefholz so he could testify as a material witness regarding the investigation and evaluation of Harter's claim and the offers made by Plains. The trial court denied that request. The trial court also denied Plains' motion for mistrial, which motion was based on Plains' claim that Lefholz violated a pretrial ruling during opening statement to the jury by using "emotional overtones" in referring to Plains as "fat and sassy" and as "a company that cares about profits but not about people ... that cares about money but not about keeping promises."

¶8 The jury awarded Harter $25,000 in compensatory damages and $75,000 in punitive damages. Plains' motions for judgment notwithstanding the verdict and new trial were denied. Plains appeals, arguing the trial court erred by:

1) allowing Harter to argue to the jury that Plains acted in bad faith by refusing to waive its subrogation right against Hollingsworth and intervening in the Hollingsworth trial;

2) denying Plains' motion to disqualify Lefholz and name him as a witness;

3) denying Plains' motion for mistrial, which motion was based on Plains' claim that Lefholz made inflammatory remarks in violation of a pretrial ruling; and 4) allowing an award of punitive damages.

By notice of review, Harter claims the trial court erred by

5) refusing to instruct the jury that it could award Harter an amount equal to the Hollingsworth verdict of $275,000, less amounts covered by insurance.

STANDARD OF REVIEW

¶9 Our standard of review on a motion for new trial is well-established:

Whether a new trial should be granted is left to the sound judicial discretion of the trial court, and this Court will not disturb the trial court's decision absent a clear showing of abuse of discretion. If the trial court finds an injustice has been done by the jury's verdict, the remedy lies in granting a new trial. We determine that an abuse of discretion occurred only if no judicial mind, in view of the law and the circumstances of the particular case, could reasonably have reached such a conclusion.

Schuldies v. Millar, 1996 SD 120, p 8, 555 N.W.2d 90, 95 (citation omitted). Likewise, the trial court's ruling on a motion for judgment notwithstanding the verdict is reviewed by the abuse of discretion standard. Treib v. Kern, 513 N.W.2d 908, 914 (S.D.1994). We give great deference to the trial court and the jury with regard to findings of fact and credibility determinations, but we review questions of law de novo, with no deference given to the trial court's legal conclusions. City of Colton v. Schwebach, 1997 SD 4, p 8, 557 N.W.2d 769, 771.

¶10 1. WHETHER THE TRIAL COURT ERRED BY ALLOWING HARTER TO ARGUE THAT PLAINS ACTED IN BAD FAITH IN ASSERTING ITS SUBROGATION RIGHT AND INTERVENING IN THE HOLLINGSWORTH TRIAL.

¶11 The trial court denied Plains' motions in limine to prevent Harter from introducing evidence that Plains acted in bad faith by asserting its subrogation right and intervening in the Hollingsworth trial. The motions were premised on two statutes: SDCL 58-11-9.6, which provides in part:

The issuer of the underinsured motorist coverage is subrogated to any amounts the insurer so pays and, upon payment, has an assignment of the judgment against the other party to the extent of the money paid. Refusal of the issuer of the underinsured motorist coverage to waive its statutory right of subrogation does not constitute bad faith.

(Emphasis added); and SDCL 15-6-24(a):

Upon timely application anyone shall be permitted to intervene in an action:

(1) When a statute of the state confers an unconditional right to intervene; or

(2) When the applicant claims an interest relating to the property or transaction which is the subject of the action and he is so situated that the disposition of the action may as a practical matter impair or impede his ability to protect that interest, unless the applicant's interest is adequately represented by existing parties.

Plains argues that the trial court erred as a matter of law in allowing this evidence and these arguments as contrary to these statutes.

¶12 Harter concedes that Plains' retention of its subrogation right does not constitute bad faith; however, she claims that Plains asserted its right to subrogation, not to seek reimbursement, but to intervene in the Hollingsworth trial and contest liability even though Plains already acknowledged Harter was not at fault. Therefore, Harter claims, asserting its subrogation right and intervening in the trial was evidence of Plains' bad faith in attempting to avoid payment under the policy.

¶13 For us to disturb the evidentiary rulings of the trial court, we must determine that an abuse of discretion has occurred. An abuse of discretion refers to a discretion exercised to an end or purpose not justified by, and clearly against reason and evidence. State v. Peterson, 1996 SD 140, p 8, 557 N.W.2d 389, 391 (citation omitted). Evidentiary rulings made by the trial court are presumed correct. State v. Nguyen, 1997 SD 47, p 9, 563 N.W.2d 120, 122 (citation omitted).

¶14 In denying the motion, the trial court stated:

I will deny the motion on failure to waive subrogation as a bad faith cause of action. The issue is not is it a cause of action, but is it a fact that the jury could consider in determining whether or not bad faith may have occurred? So I'll allow the testimony to be presented.

...

I will deny the motion on the grounds that it's again--it's not an issue of does it--is there a right to or not to [intervene], but rather it's just another choice of conduct on the part of the company and whether it was a right or wrong choice whether they should or should not have done so, that's just part of the mix of the facts surrounding the circumstances so I will deny that motion ... [and] allow testimony under the intervention issue.... I would not necessarily prohibit the introduction of the statute, 2 itself. That may well be a piece of evidence that would be appropriate as evidence in fact[.]

¶15 We agree with Plains that the mere retention of the right to subrogation or mere intervention cannot constitute bad faith. However, neither of these statutory procedures were intended to impair the rights of the insured. Whether an insurance company acted in bad faith in its exercise of these rights is a question of fact for the jury or other trier of fact. Isaac v. State Farm Mut. Auto. Ins. Co., 522 N.W.2d 752, 758 (S.D.1994).

¶16 There is evidence in the record from which the jury could determine that Plains' assertion of its subrogation right and intervention in the Hollingsworth trial were actions taken in bad faith. For example, internal memoranda generated by Plains' adjuster...

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