Pacific Employers Ins. v. PB Hoidale Co.

• Decision Date: 02 September 1992
• Docket Number: Civ. A. No. 87-1384-B.
• Citation: 804 F. Supp. 137
• Parties: PACIFIC EMPLOYERS INSURANCE COMPANY, a California Corporation, Plaintiff, v. P.B. HOIDALE COMPANY, INC.; Employers Mutual Casualty Company; and Lightner-Kanaga Insurance, Inc., Defendants.
• Court: U.S. District Court — District of Kansas

804 F. Supp. 137

PACIFIC EMPLOYERS INSURANCE COMPANY, a California Corporation, Plaintiff, v. P.B. HOIDALE COMPANY, INC.; Employers Mutual Casualty Company; and Lightner-Kanaga Insurance, Inc., Defendants.

Civ. A. No. 87-1384-B.

United States District Court, D. Kansas.

September 2, 1992.

COPYRIGHT MATERIAL OMITTED

Timothy J. Finnerty, McDonald, Tinker, Skaer, Quinn & Herrington, Wichita, Kan. and Debra J. Arnett, Hartley, Nicholson & Hartley, P.A., Paola, Kan., for Pacific Employers Ins. Co.

Jeffery L. Carmichael, Morris, Laing, Evans, Brock & Kennedy, Chartered, Wichita, Kan., for P.B. Hoidale Co., Inc.

Eldon L. Boisseau, Turner & Boisseau, Chartered, Wichita, Kan., for Employers Mut. Cas. Co.

Floyd E. Gehrt and William A. Larson, Gehrt & Roberts, Chartered, Topeka, Kan., for Lightner-Kanaga Ins., Inc.

MEMORANDUM AND ORDER

BELOT, District Judge.

This matter is before the court on the motion of defendant Employers Mutual Casualty Company ("Employers") for judgment as a matter of law or a new trial (Doc. 424); and the motions of Pacific Employers Insurance Company ("Pacific") and P.B. Hoidale Inc. ("Hoidale") for attorney fees. (Docs. 433, 428). The facts have been set forth previously. 789 F.Supp. 1117.

I. Employers' Motion

Employers moves for relief from judgment on the grounds that the verdict is against the weight of the evidence, and that the court committed prejudicial errors of law.

A. Judgment as a Matter of Law

Rule 50 of the Federal Rules of Civil Procedure provides that the court may enter judgment as a matter of law against a party who has been fully heard on a dispositive issue if "there is no legally sufficient evidentiary basis for a reasonable jury to have found for that party with respect to that issue,...."¹ The court must determine whether there is evidence from which a jury could find in favor of the party who has obtained a favorable verdict, Cleveland v. Piper Aircraft Corp., 890 F.2d 1540, 1553 (10th Cir.1989), and may grant the motion "only if the evidence points but one way and is susceptible to no reasonable inferences which may support the opposing party's position." O.E.R., Inc. v. Hickerson, 880 F.2d 1178, 1180 (10th Cir.1989). The court may not weigh the evidence or make credibility determinations, but must view the evidence most favorably to the non-moving party, giving that party the benefit of all reasonable inferences. Hurd v. American Hoist & Derrick Co., 734 F.2d 495, 498-99 (10th Cir.1984).

Employers advances one ground that would entitle it to judgment as a matter of law. According to Employers, all Kansas cases imposing liability on an insurer for its negligent or bad faith defense of its insured have involved facts of undisputed liability on the part of the insured. See Smith v. Blackwell, 14 Kan.App.2d 158, 164, 791 P.2d 1343 (1989), review denied, 246 Kan. 769 (1990); Rector v. Husted, 214 Kan. 230, 241, 519 P.2d 634 (1974); Covill v. Phillips, 452 F.Supp. 224, 231 (D.Kan. 1978). Thus, Employers argues that it cannot be held liable in this case, where Hoidale denied any liability for the Doll accident, and Doll himself admitted that his own negligence contributed to the accident. In essence, Employers urges the court to rule, as a matter of law, that reasonable insurance companies confronted with a claim of "unclear liability" will be free to discount all other factors; to refuse to offer a settlement for anything more than a "nuisance" amount; and to entrust their fate to the uncertainties inherent in trials. The Kansas Supreme Court has never proposed such a touchstone, nor will this court.

Employers places considerable reliance on Doll's candid admission of negligence in bringing about his own injuries. This fact, although relevant, does nothing to diminish the soundness of Doll's "crashworthiness" theory of liability against Hoidale. Employers' conduct throughout the Doll litigation — and to some extent even in this trial — demonstrated either ignorance of the crashworthiness theory, or a heedless certitude of its incompatibility with Kansas law.² Faced with a viable theory of liability against its insured, supported by tangible evidence, Employers might reasonably have been expected to engage Doll in settlement negotiations that evinced an appreciation for the extent of Hoidale's liability exposure.

Assuming that the liability of Hoidale in the Doll action was not "clear," the court nonetheless finds no merit to Employers' argument. As the court stated in Bollinger v. Nuss, 202 Kan. 326, 338, 449 P.2d 502 (1969), "the question of liability depends upon the circumstances of the particular case and must be determined by taking into account the various factors present, rather than on the basis of any general statement or definition." Among the factors to consider is "the strength of the injured claimant's case on the issues of liability and damages; ...." Id. at 338, 449 P.2d 502 (quoting Brown v. Guarantee Ins. Co., 155 Cal.App.2d 679, 689, 319 P.2d 69 (1957)). See also Insurance Co. of N. Am. v. Medical Protective Co., 768 F.2d 315, 321 (10th Cir.1985) (listing factors). "The value of an unlitigated claim must be determined on its own apparent merits, or lack of them, the possibility of liability being established, and on the injuries and their extent being proven." 202 Kan. at 341, 449 P.2d 502 (emphasis added). In the final analysis, the question is whether "the insurer has treated the claim as if it alone were liable for the entire amount," id. at 337, 449 P.2d 502, "as it would if there were no applicable policy limits." Id. at 338, 449 P.2d 502.

B. New Trial

Employers argues for a new trial based on the evidence and on certain adverse rulings.

"A motion for a new trial is not regarded with favor and should only be granted with great caution." United States v. Thornbrugh, 962 F.2d 1438, 1443 (10th Cir.1992). The decision of whether to grant such a motion is committed to the sound discretion of the trial court. E.g., McDonough Power Equip., Inc. v. Greenwood, 464 U.S. 548, 556, 104 S.Ct. 845, 850, 78 L.Ed.2d 663 (1984); Royal College Shop, Inc. v. Northern Ins. Co., 895 F.2d 670, 677 (10th Cir. 1990).

1. Factual Grounds

A motion for new trial on the ground that the verdict is against the weight of the evidence normally presents a question of fact, not of law. Tafoya v. Sears, Roebuck & Co., 884 F.2d 1330, 1342 (10th Cir.1989). In determining whether a new trial is proper on this ground, the court may weigh the evidence for itself and consider the credibility of the witnesses. Laughinghouse v. Risser, 786 F.Supp. 920, 922 (D.Kan.1992); Commons v. Montgomery Ward & Co., 614 F.Supp. 443, 449 (D.Kan.1985); 11 C. Wright & A. Miller, Federal Practice and Procedure § 2806, at 45 (1973). However, this discretionary power should be invoked only in the exceptional case where the evidence preponderates heavily against the verdict. United States v. Suntar Roofing, Inc., 709 F.Supp. 1526, 1529 (D.Kan.1989), aff'd, 897 F.2d 469 (10th Cir.1990). The court should deny the motion if a reasonable basis exists for the jury verdict, McAlester v. United Air Lines, Inc., 851 F.2d 1249, 1260 (10th Cir.1988), and may reverse only if the verdict is clearly, decidedly, or overwhelmingly against the weight of the evidence. Black v. Hieb's Enters., Inc., 805 F.2d 360, 363 (10th Cir.1986).

For the reasons discussed in Part A, the court finds that the jury's finding of bad faith is supported by the evidence, and that a new trial on this ground is unwarranted.

2. Erroneous Rulings

Employers contends that three adverse rulings were erroneous and require a new trial.

A party moving for a new trial based upon an error of law must show not only that error occurred, but that the error affected the substantial rights of the parties. Fed.R.Civ.P. 61; Heyen v. United States, 731 F.Supp. 1488, 1489 (D.Kan. 1990), aff'd, 945 F.2d 359 (10th Cir.1991). Thus, a court should "ignore errors that do not affect the essential fairness of the trial." McDonough Power Equip., Inc. v. Greenwood, 464 U.S. 548, 553, 104 S.Ct. 845, 848, 78 L.Ed.2d 663 (1984).

a. Liability of Employers for Acts of Dan Bachmann

Employers again presses its argument that it is not liable for any acts of negligence committed by the attorney it hired to represent Hoidale.

The court addressed this argument in Employers' motion for summary judgment, 789 F.Supp. at 1122-23, and finds nothing in the "new"³ cases cited by Employers that would alter the court's previous conclusion. Indeed, after a full exposition of the facts at trial, the court is more firmly persuaded of the soundness of its decision.

The evidence established that Bachmann conferred primarily with Jim Hobson of Employers, and that both men were in accord as to the weakness of the Cletus Doll lawsuit against Hoidale and the appropriate legal strategy for the case. At all times, Bachmann "was engaged in the furtherance of Employers' business to such a degree that Employers' had the `right to direct and control' Bachmann's activities." Brinkley v. Farmers Elevator Mutual Ins. Co., 485 F.2d 1283, 1286 (10th Cir. 1973). See also Ash v. Farwell, 37 F.R.D. 553, 554-55 (D.Kan.1965) (insurance company has exclusive right to investigate case, employ and control counsel, and take full control over litigation). By contrast, Bachmann communicated little with Hoidale and failed in particular to relate several matters to Hoidale that might reasonably be expected to hold some interest for one's client: Doll had made settlement offers within the primary policy limits of Hoidale's policy with Employers; Doll was claiming damages in excess of the coverage of this primary policy; and the factual and legal basis for Doll's "crashworthiness" theory of liability against Hoidale.

In addition, notwithstanding any dissenting view that Hoidale might have voiced had it been informed of these matters, the evidence overwhelmingly established that both Bachmann and the...