Moses v. Halstead

• Decision Date: 28 February 2007
• Docket Number: Civil Action No. 05-2488-KHV.
• Citation: 477 F.Supp.2d 1119
• Parties: Shelby MOSES, Plaintiff, v. Chris HALSTEAD, Defendant, and Allstate Insurance Company, Garnishee.
• Court: U.S. District Court — District of Kansas

477 F.Supp.2d 1119

Shelby MOSES, Plaintiff, v.Chris HALSTEAD, Defendant, and Allstate Insurance Company, Garnishee.

Civil Action No. 05-2488-KHV.

United States District Court, D. Kansas.

February 28, 2007.

William J. Pauzauskie, Pauzauskie Law Office, Topeka, KS, for Plaintiff.

Paul P. Hasty, Jr., Wallace Saunders Austin Brown & Enochs Chtd., Overland Park, KS, for Garnishee.

MEMORANDUM AND ORDER

VRATIL, District Court.

This garnishment action stems from a one-vehicle accident in which plaintiffShelby Moses sustained bodily injuries in a car operated by Chris Halstead.Plaintiff, who owned the car, was in the back seat at the time of the accident.On November 20, 1997, Allstate `Insurance Company("Allstate"), which insured the car, rejected plaintiffs offer to settle all of her claims against Halstead for $25,000 (the policy limits).Plaintiff then sued Halstead in the Circuit Court of Buchanan County, Missouri, and received a jury verdict of $100,000.In partial satisfaction of the judgment, Allstate paid plaintiff the policy limits of $25,000.Plaintiff then registered her judgment in the District Court of Atchison County, Kansas, and requested an order of garnishment, alleging that Allstate had negligently and in bad faith refused to accept her offer to settle for policy limits.Allstate removed the action to this Court on November 18, 2005.The case comes before the Court on Allstate's Motion For Summary Judgment(Doc. # 49) filed September 26, 2006 and Motion To Strike The Opinions Of Plaintiff's Expert Witness(Doc. # 55) filed October 27, 2006.For reasons set forth below, the Court finds that Allstate's motions should be overruled.

Facts

On November 22, 1996, Halstead wrecked plaintiffs car while she rode in the back seat, causing plaintiff severe injuries.Allstate had issued a motor vehicle insurance policy for the car and its initial factual investigation revealed that before the accident, Halstead had rammed a police vehicle in Kansas, then led police on a car chase into Missouri.A few minutes after officers lost sight of the car, Halstead ran off the road and overturned the vehicle.

On January.30, 1997, Allstate referred the matter to counsel, Dick Modin, for a legal opinion whether the insurance policy covered Halstead's conduct.Modin contacted and interviewed some of the police officers involved in the car chase.On February 17, 1997, Modin sent Allstate a memo which stated that he assumed that plaintiff would present evidence that Halstead was driving the vehicle with her consent, so that Halstead would be an insured under the policy.Modin suggested, however, that Halstead's conduct was intentional criminal conduct and was thus excluded from coverage.Doc. # 50-6at 2.Modin based his conclusion on the assumption that Halstead had wrecked the car during a high speed chase with police.He noted that if the chase had ended before the accident, the criminal conduct exclusion would not apply.¹Modin's notes to the file stated that "the odds are against us" and that if contested, Allstate had a 30 per cent chance of winning the coverage issue.²

On March 4, 1997, Allstate sent Halstead a letter which stated that it was denying coverage pending further investigation.See Doc. # 58, Ex. E. Although Allstate knew that Halstead was in the Atchison County jail, it sent the letter to his address in Topeka.SeeId., Ex. F, G;Doc. # 50, Ex. 2.The letter was returned undelivered.

On April 28, 1997, Modin sent Allstate a copy of the statement of Police Corporal Bobby Young.Young's statement indicated that on November 22, 1996, Halstead rammed Young's police car after Young tried to pull him over.Young pursued Halstead's vehicle into Missouri but broke off the chase a few minutes before the accident when he lost sight of the vehicle.

On November 17, 1997, plaintiff sent Allstate a demand for $25,000 in policy limits, plus a statement of medical bills totaling $79,350.38.SeeDoc. # 50, Ex. 1-A.On November 20, 1997, Allstate declined the demand based on lack of coverage.Doc. # 50, Ex. 1.Allstate did not inform Halstead of the settlement offer.

In July of 2000, plaintiff filed suit against Halstead.On July 26, 2000, Allstate sent Halstead a reservation of rights letter stating that it denied coverage but would defend him under the policy.³Allstate hired attorney Tim Mudd to represent Halstead.In August of 2001, Allstate filed a declaratory judgment action seeking a ruling that Halstead's conduct was not covered by the policy.⁴Allstate filed a motion for summary judgment in the declaratory judgment action.After the trial court denied the motion, Allstate dismissed the declaratory judgment action.At that point, Allstate tried to settle plaintiffs claim by making an offer for policy limits.⁵When Allstate could not settle the case, it instructed Mudd to proceed to trial.Mudd did not advise Halstead of other options, such as settling the case by settlement, confession of judgment, a covenant not to execute or related procedure.

On September 9, 2002, the case was tried to a jury which returned a verdict of $100,000.Plaintiff appealed and the Missouri Court of Appeals affirmed.See Doc. # 58, Ex. F, G. Allstate then paid the $25,000 policy limits.SeeExhibit 1, ¶ 16.

Once plaintiff obtained a judgment against Halstead, she became his judgment creditor.She then attempted to collect the judgment from the insurer, Allstate, in this garnishment proceeding.SeeStewart v. Mitchell Transp., Inc.,197 F.Supp.2d 1310, 1316(D.Kan.2002)(automobile accident victim may not sue insurer directly by asserting third-party beneficiary status; only when claimant becomes judgment creditor against tortfeasor may she file direct action against insurer).A proceeding in garnishment is a means of attachment by which monies, credits or effects of a debtor may be reached in the hands of another person.Land Mfg., Inc. v. Highland Park State Bank,205 Kan. 526, 528, 470 P.2d 782(1970)(citingKan. Stat. Ann. § 60-716).Under long standing garnishment law in Kansas, once judgment has entered, the judgment creditor then takes the place of the judgment debtor and may take that which the latter could enforce.Farmco, Inc., v. Explosive Specialists, Inc.,9 Kan.App.2d 507, 515, 684 P.2d 436, 442(1984)(citingNichols v. Marshall,491 F.2d 177, 183(10th Cir.1974)).A judgment creditor in a personal injury case may proceed by garnishment against the tortfeasor's insurer to satisfy within policy limits the judgment obtained against the tortfeasor.Id.,648 P.2d at 442-43.Kansas courts have gone a step farther and have held that a judgment creditor may proceed by garnishment against a tortfeasor's insurer for the unpaid balance of the judgment which is in excess of the policy limits where the insurer refused to settle within policy limits by virtue of negligence or bad faith.Id. at 443.The Kansas courts have found that such claim sounds in contract and is subject to garnishment even though unliquidated.Id.(citingGilley v. Farmer,207 Kan. 536, 485 P.2d 1284(1971)andBollinger v. Nuss,202 Kan. 326, 449 P.2d 502, 508(1969)(in garnishment proceeding injured party steps into shoes of insured party and Court analyzes claim as if insured party was bringing claim)).

Plaintiff filed this garnishment action claiming that Allstate is liable for the entire judgment against Halstead because it acted negligently or in bad faith when it did not timely inform him of plaintiff s offer to settle in November of 1997 and did not settle the liability claim in the face of the coverage dispute.Specifically, the pretrial order summarizes plaintiffs claims as follows:

Allstate: (1) failed to obtain a timely, adequate, and unambiguous reservation of rights with Halstead, and/or repudiated the reservation of rights by filing a declaratory judgment action; (2) failed to use reasonable efforts or measures to resolve the coverage dispute promptly or in such a way to limit any potential prejudice to Halstead; (3) failed to properly consider the substance of the coverage dispute or the weight of legal authority on the coverage issues; (4) failed to exercise diligence and thoroughness in investigating acts pertinent to coverage; (5) failed to make appropriate and timely efforts to inform Halstead of offers to settle, or settle the liability claim in the face of the coverage dispute; (6) failed to follow the advice of Tim Mudd, and/or instructed and caused Mudd to act adverse to Halstead's best interest; (7) took a course of conduct intended to prejudice and sabotage Chris Halstead on the coverage issue; (8) violated the equal consideration rule and (9) failed to follow Dick Modin's advice to procure a valid reservation of rights agreement with Chris Halstead.

SeePretrial Orderat 7-8.⁶

Allstate asserts that it is entitled to summary, judgment' because its failure to settle for policy limits was neither negligent nor in bad faith.Specifically, Allstate argues that when it declined to pay the policy limits demand in November of 1997, it had a reasonable and good faith belief that the policy provided no coverage.

I.Motion To Strike Expert's Opinions

Plaintiff has proffered the expert opinions of Randall Fisher, an attorney, on the standard of care in handling an insurance claim.Defendant asserts that the Court should exclude Fisher's testimony because his opinions (1) would not be helpful to the trier of fact and (2) include inadmissible legal conclusions.

The Court has broad discretion in deciding whether to admit expert testimony.SeeKieffer v. Weston Land, Inc.,90 F.3d 1496, 1499(10th Cir.1996).Rule 702, Fed. R.Evid., provides that a witness who is qualified by knowledge, skill, experience, training or education may testify in the form of opinion or otherwise as to scientific, technical or other specialized knowledge if such testimony will assist the trier of fact to understand the evidence or to determine a...