Hatch v. State Farm Fire and Cas. Co.

• Decision Date: 13 January 1997
• Docket Number: No. 95-78,95-78
• Citation: 930 P.2d 382
• Parties: Frank J. HATCH, III; Wendy Hatch; Frank J. Hatch, IV; and by Frank J. Hatch, III and Wendy Hatch as next friend for their minor children Anna Corinna Hatch; Matthew Hatch; and Michael Hatch, Appellants (Plaintiffs), v. STATE FARM FIRE AND CASUALTY COMPANY, a corporation; Garry Kitchens; and Dennis Murphy, Appellees (Defendants).
• Court: Wyoming Supreme Court

Page 382

930 P.2d 382

Frank J. HATCH, III; Wendy Hatch; Frank J. Hatch, IV; and by Frank J. Hatch, III and Wendy Hatch as next friend for their minor children Anna Corinna Hatch; Matthew Hatch; and Michael Hatch, Appellants (Plaintiffs), v. STATE FARM FIRE AND CASUALTY COMPANY, a corporation; Garry Kitchens; and Dennis Murphy, Appellees (Defendants).

No. 95-78.

Supreme Court of Wyoming.

Jan. 13, 1997.

John E. Stanfield of Smith, Stanfield & Scott, Laramie, John B. "Jack" Speight and Dominique D.Y. Cone of Hathaway, Speight & Kunz, Cheyenne (Speight and Cone participated in the appeal only), representing appellant.

W.W. Reeves and Timothy W. Miller, of Reeves & Murdock, Casper, representing appellee.

Before TAYLOR, C.J., ^* and THOMAS, MACY and LEHMAN, JJ., and O'BRIEN, District Judge.

THOMAS, Justice.

The theme of this case is that Frank J. Hatch, III (Mr. Hatch), Wendy Hatch (Mrs. Hatch), Frank J. Hatch, IV, Anna Corinna Hatch (Corinna), Robert Matthew Hatch and Michael Logan Hatch, (the Hatches or Hatch family) were deprived of their collective right to a fair trial on their claims for benefits under a home fire insurance policy; a duty of good faith and fair dealing in resolving their policy claim; and were subjected to intentional infliction of emotional distress. After this court remanded the Hatches' first appeal, Hatch v. State Farm Fire and Cas. Co., 842 P.2d 1089 (Wyo.1992) (Hatch I ), they lost the jury trial. The Hatches now present a litany of issues all designed to establish some error that deprived them of a fair trial. We hold that there is no merit in any of their claims of error. The directed verdicts for agents Garry Kitchens (Kitchens) and Dennis Murphy (Murphy), and for State Farm Fire and Casualty Company (State Farm) on the issue of punitive damages are affirmed. The judgment in favor of State Farm, entered upon the jury verdict, is affirmed.

The Hatches set out eleven issues in their Appellants' Brief on Appeal to Wyoming Supreme Court as follows:

I. Was it proper for the trial court to instruct the jury on a defense that was not contained or defined in the insurance contract between the Plaintiffs and the Defendant State Farm?

II. Did the trial court properly instruct the jury not to consider the fact that Mr. Hatch was acquitted on criminal arson charges even though State Farm's role in Mr. Hatch's arson prosecution formed part of Mr. Hatch's bad faith claim, even though evidence regarding the criminal trial had been admitted throughout the trial, and even though the court referred to the criminal trial in other instructions?

III. Was it error for the trial court to instruct the jury not to consider the Hatches' damages resulting from State Farm's denial of coverage when the Hatches asserted a cause of action for coverage?

IV. Was it inconsistent with the principles established in Hatch I for the trial court to instruct the jury that it must not award damages resulting from the denial of coverage?

V. When the evidence is presumed to be true and construed in favor of the Hatches, was it proper and consistent with principles established in Hatch I for the trial court to direct a verdict in favor of Defendant Kitchens? Defendant Murphy? Defendant State Farm as to punitive damages?

VI. Is it proper under Rule 32 to edit and re-arrange and revise the deposition of an "unavailable" deponent--as was done in this case--and to eliminate testimony even though no valid objections were made at the time of the deposition and where objections might have been obviated or cured if an appropriate objection had been made when the deposition was taken?

VII. In a case involving bad faith and unfair dealing, was it error for the trial court to eliminate from a 1991 deposition all questions in which the term "good neighbor" was used where no objections on that ground were asserted and where that issue was never raised at the time the deposition was taken and where the deponent is "unavailable" within Rule 32?

VIII. Was it error for the trial court to refuse to admit the Hatches' application for insurance coverage even though the application was relevant to issues of coverage, bad faith, and State Farm's conduct vis-a-vis the Hatches?

IX. In an insurance bad faith case, was it error for the trial court to admit confidential and legally protected evidence of the Hatches' daughter's juvenile record and counseling concerning an event when [sic] occurred three years prior to the fire at issue in this case?

X. Was it error for the trial court to reject the Hatches' claim for attorney fees under Wyo. Stat. Ann. § 26-15-124, which was enacted to protect policyholders from expensive litigation when insurance companies engage in unreasonable conduct and deny their claims. [sic]

XI. In view of all the erroneous or unfair rulings in this case, is it reasonable to conclude that those errors or unfair rulings are harmless when viewed from the standpoint of their cumulative effect?

In the Brief of Appellees, State Farm, Garry Kitchens and Dennis Murphy reframe the issues as follows:

1. Whether the district court should be reversed based on objections waived at trial.

2. Whether Appellants have failed to establish prejudicial error.

3. Whether Appellants' arguments regarding damages are moot in light of the jury's findings against them as to liability.

4. Whether the district court properly instructed the jury on State Farm's arson defenses.

5. Whether the district court correctly directed a verdict on Appellants' intentional infliction of emotional distress claims.

6. Whether the district court abused its discretion in making the three evidentiary rulings challenged on appeal.

7. Whether the district court properly denied Appellants' request for attorneys' fees.

In Hatch I, we summarized the underlying facts in the case in this way:

A fire was discovered in the basement of appellants' house about 2:00 a.m. on August 4, 1987. The fire started in the southwest corner of the house. Gasoline was found in carpet samples after the fire. The nearest source of ignition was a wood-burning stove fifteen feet away which had a hot fire box twelve inches off the floor. Firemen found a gasoline container in the garage, lying on its edge under a chair with the broad side against the garage wall. An explanation for how gasoline was detected in the basement was that the family dog knocked the gas can over and the contents ran through a crack in the garage floor, down the outside of the basement wall, then under the wall and into the basement.

Appellees' [State Farm's] claims specialist, appellee Garry Kitchens responded to notice of the fire; he was replaced five days later. He made no estimates, and did not review any work produced by State Farm's investigation nor participate in any decisions. Kitchen's replacement, appellee Dennis Murphy, continued the investigation of appellants' claim. He stated that his work represented his "best and most conscientious effort" and that his recommendations represented his "honest belief that Mr. Hatch started the fire in his house." Appellant Frank J. Hatch, III was charged with arson. An Albany County jury returned a not guilty verdict.

Hatch I, 842 P.2d at 1091. We considered the summary judgment entered by the trial court in Hatch I, and our dispositive paragraph reads:

Affirmed in part, reversed in part, and remanded for trial on the claim for benefits under the policy and the cause of action for violation of a duty of good faith and fair dealing.

Hatch I, 842 P.2d at 1099 (emphasis added).

The case then was tried to a jury on the three remaining claims asserted by the Hatch family. These included a claim to recover the policy benefits, a claim for bad faith in the claims handling practices of State Farm, and a claim for intentional infliction of emotional distress. The district court directed verdicts for Kitchens and Murphy, and also directed a verdict for State Farm on the claim of intentional infliction of emotional distress and the issue of punitive damages. The jury returned a verdict in favor of State Farm on the remaining claims against it for recovery of the policy benefits and bad faith in the handling of the claim.

In the course of their case in chief, the Hatches offered the discovery deposition testimony of an expert witness, Carrol M. Cloyd (Cloyd), into evidence pursuant to WYO. R. CIV. P. 32 because Cloyd had died before the trial. At the deposition, Cloyd had been qualified as an expert on insurance industry standards for good faith and fair dealing in the investigation and handling of insurance claims. Cloyd then had identified thirteen areas in which, in his opinion, State Farm failed to meet the industry standards for investigation and handling of the Hatches' claim. His testimony was relied upon to demonstrate that State Farm's investigation and handling of the Hatches' claim did not comply with industry standards. After a very deliberate consideration, the court summarized and then excluded ten of the thirteen areas of Cloyd's testimony. The court ruled that the testimony was beyond Cloyd's area of expertise because he had not been qualified to testify on the severity of emotional distress and no foundation had been laid to demonstrate that he was an expert in arson, nor had there been available to him the opinions of other experts in that area when he testified.

Prior to trial and during trial, a major problem arose with respect to the preparation of jury instructions. In a letter sent during the pre-trial period, the district court anticipated problems with the jury instructions because of the extreme acrimony between counsel. The court directed counsel to meet on a particular date to resolve as many jury instructions as possible and produce a joint draft of a verdict form. On the date of the court directed meeting, counsel advised the court by correspondence that they could not agree on anything. Instead, the respective parties separately...