Miller v. Byrne, s. 93CA1157
| Decision Date | 24 August 1995 |
| Docket Number | Nos. 93CA1157,93CA1880,s. 93CA1157 |
| Parties | Bruce MILLER and The Cloud Base, Inc., Plaintiffs-Appellees and Cross-Appellants, v. Thomas BYRNE, William White, individually and d/b/a Byrne, Kiely & White, a Colorado Partnership and Southern Aviation Insurance Group, Inc., Defendants-Appellants and Cross-Appellees. . II |
| Court | Colorado Court of Appeals |
Quiat, Schlueter, Mahoney, Ross & Barber, Laurin D. Quiat, William J. Barber, Denver, Meyer & Williams, P. Richard Meyer, Robert N. Williams, Jackson, WY, for plaintiffs-appellees and cross-appellants.
Cooper & Kelley, P.C., Paul D. Cooper, Ronald H. Nemirow, John R. Mann, Denver, for defendants-appellants and cross-appellees Thomas Byrne, William White and Byrne, Kiely & White, on the briefs.
Cooper & Clough, P.C., Paul D. Cooper, Rebecca L. Crotty, Denver, for defendants-appellants and cross-appellees Thomas Byrne, William White and Byrne, Kiely & White.
Cooling & Herbers, P.C., Thomas J. Morris, Denver, Cooling & Herbers, P.C., James E. Cooling, Kansas City, MO, for defendant-appellant and cross-appellee Southern Aviation Ins. Group.
Opinion by Judge CASEBOLT.
In this action for bad faith breach of insurance contract, legal malpractice, and breach of fiduciary duty, defendants, Southern Aviation Insurance Group, Inc., (Southern) and Thomas Byrne, William White, and Byrne, Kiely & White (Attorneys), appeal the judgment entered in favor of plaintiffs, The Cloud Base, Inc., (Cloud Base) and its owner, Bruce Miller. Cloud Base and Miller cross-appeal certain rulings of the trial court. We affirm in part, reverse in part, and remand for a new trial.
On April 2, 1988, a passenger on a sightseeing glider flight near Boulder, Colorado, was killed when the glider, which was owned and operated by Cloud Base, crashed. The passenger, a Wyoming resident, was survived by his spouse and two minor children.
At the time of the crash, Cloud Base had liability insurance coverage from Ohio General Insurance Company. Southern was a managing general agent for that carrier. The insurance coverage provided $100,000 in policy limits for any damages for which Cloud Base was responsible.
Southern investigated the cause of the crash. A number of potential causes were identified, including weather conditions, a product defect in the aircraft, pilot error, and possible interference with the glider controls by the passenger.
As part of its investigation, Southern's representative met with the passenger's widow to inform her of the policy coverage and to discuss the crash. At about the same time, the representative discussed the matter with Lisa Sweeney, an attorney representing the widow.
In the summer of 1988, Southern's representative hired the Attorneys to examine liability issues and defend Cloud Base should a lawsuit be filed. Cloud Base retained additional personal counsel. Cloud Base and Miller requested that payment of the policy limits in settlement to the passenger's widow be made if such a settlement offer was received. Southern's representative made a structured settlement offer with a present value of approximately $80,000 to the widow. This offer was not accepted.
Thereafter, Southern's representative and the Attorneys corresponded with Meyer & Williams, another group of attorneys who represented the widow. However, on April 5, 1989, Southern's representative received a letter dated March 28, 1989, from Sweeney, which contained an offer to settle the claim for the policy limits of $100,000. The offer expired by its terms on April 9, 1989. Southern's representative immediately sent a copy by facsimile to the Attorneys and discussed its contents with them.
Southern's representative instructed the Attorneys to seek clarification concerning the offer from Sweeney; however, telephone calls to Sweeney by the Attorneys were not returned. Southern was willing to pay $95,000 in settlement, but not the full limits. Without the direction of Southern's representative, by letter dated April 7, 1989, the Attorneys rejected the settlement offer. No offer of $95,000 was made.
Cloud Base and Miller were not notified by Southern or by the Attorneys of this offer or its rejection until early May of 1989. According to Miller's testimony, either he or Cloud Base would have been willing to pay the balance of $5,000 to add to the authority of $95,000 granted by Southern, had they been aware of the offer.
Thereafter, the passenger's widow was appointed personal representative for her husband's Wyoming estate. As authorized by Wyoming law, she then commenced, through attorneys Meyer & Williams, a suit for wrongful death against Cloud Base and Miller. Upon learning of the suit and receiving authority from Southern, the Attorneys sent an offer to pay the $100,000 policy limits to settle the case to Meyer & Williams. The offer was rejected.
The insurance carrier, Ohio General, went into liquidation in spring of 1990. The Attorneys defended Cloud Base and Miller in the wrongful death action until the fall of 1990. The Attorneys then sought and obtained permission to withdraw as counsel for Cloud Base and Miller.
Thereafter, Cloud Base, Miller, and the passenger's widow negotiated a settlement of the wrongful death claim, wherein Cloud Base and Miller confessed judgment in the amount of $1.2 million and assigned 98 percent of any claim they had against Ohio General, Southern, and the Attorneys to the passenger's widow, in return for a covenant not to execute against Cloud Base and Miller.
This action for breach of fiduciary duty and legal malpractice against the Attorneys and a claim against Southern for bad faith breach of insurance contract was commenced in May 1991. Cloud Base and Miller contended, inter alia, that the Attorneys were negligent and had breached their fiduciary duty by wrongfully rejecting the settlement offer and by failing to advise them of the policy limits settlement offer tendered by the passenger's widow. In addition, Cloud Base and Miller alleged that Southern had unreasonably breached the insurance contract by failing to settle the underlying suit for the policy limits.
Southern and the Attorneys designated Sweeney and, later, Meyer & Williams as non-parties at fault pursuant to § 13-21-111.5, C.R.S. (1987 Repl.Vol. 6A). They contended that Sweeney had orchestrated a vague and sham settlement offer, that she had wrongfully declined to return telephone messages left by the Attorneys seeking clarification and details concerning the settlement offer, and that she and Meyer & Williams had concocted a scheme to "set up" Southern for a bad faith claim by, among other things, intentionally imposing an unreasonably short deadline for the offer.
As to Meyer & Williams, the Attorneys additionally contended that they had failed to reveal that Sweeney was their co-counsel, had failed to coordinate settlement negotiations with her, and had failed to advise the passenger's widow to accept the policy limits offer made in May 1989, after the wrongful death suit was initiated.
The trial court dismissed the negligence claim against the Attorneys as barred by the statute of limitations but allowed presentation of the breach of fiduciary duty claim.
On the first day of trial, the trial court struck the designation of both Sweeney and Meyer & Williams as nonparties at fault. Consequently, the alleged "fault" of these designated persons was not considered by the jury.
After a jury trial, judgment was entered against Southern and the Attorneys, jointly and severally, for $705,000. The jury awarded $200,000 damages for emotional distress against Southern only. This appeal followed.
Southern first argues that the trial court erred by assertedly refusing to follow the pattern jury instructions contained in CJI-Civ.3d 25:1, et seq. (1988) concerning the claim for bad faith breach of the insurance contract. In addition, it contends that the instructions given the jury: (1) were inadequate because they incorrectly used and failed to define the phrase "bad faith"; (2) created prejudicial assumptions by instructing the jury to assume that "bad faith" existed simply if a settlement did not occur; and 3) did not direct the jury to consider the issues of damage, conduct, and causation in one instruction. We agree in part.
The jury instructions given for the "bad faith" claim read as follows:
....
Miller contends that Southern Aviation and [its investigator] exercised "bad faith" in failing to settle [the widow's] claims against Miller within policy limits.
Southern Aviation and [its investigator] deny they acted in "bad faith" towards Miller in failing to settle the claim and deny that their conduct caused damages to Miller.
....
Southern Aviation owes to Miller the duty of good faith and fair dealing. That duty is breached if the company fails to attempt to settle within the policy limits without a reasonable basis.
....
To award any actual damages, you must find by a preponderance of the evidence that the plaintiff incurred actual damages caused by the claimed bad faith breach of a contract of insurance.
No "carrying" instruction delineating the elements of a "bad faith" claim was given. The special verdict form asked the jury to determine whether Southern "exercised 'bad faith' in failing to settle [the widow's] claims against Miller within policy limits," and whether Miller incurred "damages as a result of Southern Aviation's bad faith breach of insurance contract."
CJI-Civ.3d 25:1 (1988) describing bad faith breach of an insurance contract states:
In order for the plaintiff to recover from the defendant on [the] claim of unreasonable breach of an insurance contract, you must find all of the following have been proved:
1. The plaintiff incurred (damages);
2. The defendant acted unreasonably in (insert appropriate...
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