Pham v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 02 January 2003
• Docket Number: No. 01CA1965.,01CA1965.
• Citation: 70 P.3d 567
• Parties: Steven PHAM, as personal representative of the Estate of Louis Diep Pham; Kinh B. Pham and La T. Bui, natural parents of Louis Diep Pham, deceased; Khanh B. Pham; Bang Le; Minh N. Ha; Vu D. Nguyen; and Kieu T. Thi-Do, Plaintiffs-Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, and Liberty Mutual Insurance Company, Defendants-Appellees.
• Court: Colorado Court of Appeals

70 P.3d 567

Steven PHAM, as personal representative of the Estate of Louis Diep Pham; Kinh B. Pham and La T. Bui, natural parents of Louis Diep Pham, deceased; Khanh B. Pham; Bang Le; Minh N. Ha; Vu D. Nguyen; and Kieu T. Thi-Do, Plaintiffs-Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, and Liberty Mutual Insurance Company, Defendants-Appellees.

No. 01CA1965.

Colorado Court of Appeals, Div. I.

January 2, 2003.

Rehearing Denied January 30, 2003.

Law Firm of William Muhr, Willam W. Muhr, Colorado Springs, Colorado, for Plaintiffs-Appellants.

Seaman and Giometti, P.C., Thomas J. Seaman, Karl A. Chambers, Denver, Colorado, for Defendant-Appellee, State Farm Mutual Automobile Insurance Company.

Lasater & Allen, P.C., Edward Allen, Deana M. Hartley, Littleton, Colorado, for Defendant-Appellee Liberty Mutual Insurance Company.

Opinion by Judge GRAHAM.

Plaintiffs, Khanh Ba Pham, Bang Le, Minh N. Ha, Vu D. Nguyen, Kieu T. Thi-Do, Steven Pham, as personal representative of the estate of Louis Diep Pham, and Kinh B. Pham and La T. Bui, as natural parents of Louis Diep Pham, deceased, appeal the trial court's partial summary judgment in favor of defendants, State Farm Mutual Automobile Insurance Company and Liberty Mutual Insurance Company. We affirm.

In 1995, Erwin Ovidid Guerra drove his vehicle through a traffic signal and collided with a motor vehicle driven by Louis Diep Pham. The individual plaintiffs, who were passengers in the Pham vehicle, were all injured. Louis Pham died from his injuries a few months later. At the time of the accident, Guerra was legally intoxicated. Guerra pleaded guilty to vehicular manslaughter, and his liability has never been disputed.

Guerra had an automobile insurance policy issued by Allstate Insurance Company with limits of $25,000 per person and $50,000 per accident. The Pham vehicle was owned by Pham Enterprises, Inc. and was insured by State Farm with policy limits of $100,000 per person and $300,000 per accident. This policy provided underinsured motorist (UIM) coverage for the passengers and for Pham's parents' wrongful death claims. Khan Pham, Louis Pham, and Ming N. Ha were also insured under other State Farm policies. Vu Duy Nguyen and his wife, Kieu Trang Thi-Do, were insured under a Liberty policy.

In 1996, plaintiffs sued Guerra, claiming that he was negligent. They also asserted claims against a bar where Guerra had consumed alcohol; Guerra's employer, under a theory of respondeat superior; and State Farm for willful and wanton breach of the UIM contract and breach of the implied covenant of good faith and fair dealing. These particular claims against the bar, the employer, and State Farm were eventually dismissed.

Hartford Fire Insurance, the employer's insurer, who provided liability coverage of $1,000,000 under a business automobile policy, denied Guerra's demand for coverage.

Before trial, Allstate settled plaintiffs' claims against Guerra for its full policy limit of $50,000. Plaintiffs notified defendants that Allstate had tendered $50,000, and each insurer consented to the settlement with Allstate. The settlement was distributed as follows: $25,000 to Louis Pham's parents and $5,000 to each of the five passengers.

After the Allstate policy proceeds had been paid to plaintiffs, a stipulated confessed judgment was entered in the amount of $1,558,707.78 in favor of plaintiffs and against Guerra. Plaintiffs agreed that if Guerra stipulated to judgment, they would not execute judgment against him, but instead would sue Hartford for payment of the unsatisfied judgment. This arrangement is known as a "Bashor agreement." See Bashor v. Northland Ins. Co., 29 Colo.App. 81, 480 P.2d 864 (1970), aff'd, 177 Colo. 463, 494 P.2d 1292 (1972).

Plaintiffs again demanded UIM benefits from State Farm and Liberty, contending that because Hartford denied coverage to plaintiffs, the only applicable liability policy was Allstate, which rendered Guerra underinsured because of its minimal policy limits. Plaintiffs argued that when settlement was reached with Allstate, and a final judgment was entered against Guerra, defendants were obligated to pay UIM benefits to its insureds for the difference between the limits of defendants' UIM coverage and the amount Allstate paid plaintiffs. Defendants denied plaintiffs' demand for payment of UIM benefits based on their understanding that plaintiffs were going to proceed against Hartford for payment of the unsatisfied judgment entered against Guerra.

In August 1998, plaintiffs filed a bad faith breach of contract action against Hartford in federal district court. Plaintiffs argued that, because Guerra was in the course and scope of his employment and was acting in furtherance of the business and personal affairs of his employer at the time of the accident, Hartford owed Guerra a duty to indemnify him. That case is still pending.

In December 1998, plaintiffs filed the underlying complaint against defendants seeking payment of UIM benefits under their insurance policies. In October 1999, plaintiffs then amended their complaint to include actions for bad faith breach and willful and wanton breach of the insurance contracts based on defendants' failure to pay UIM benefits to their insureds once settlement was reached with Allstate and judgment was entered against Guerra.

The trial court granted defendants' motions for partial summary judgment on the tortious breach of contract claims, dismissing the two claims without prejudice. Plaintiffs appealed the judgment, but a division of this court issued an order to show cause why the appeal should not be dismissed for lack of a final appealable order. Plaintiffs then provided an order certifying the partial summary judgment as final pursuant to C.R.C.P. 54(b), and this court allowed the appeal to proceed.

I.

We first address State Farm's contention that the trial court erred in certifying the partial summary judgment as final pursuant to C.R.C.P. 54(b). We are not persuaded.

Generally, an entire case must be resolved by a final judgment before an appeal can be brought. Section 13-4-102(1), C.R.S. 2002. A final judgment "ends the particular action in which it is entered, leaving nothing further for the court pronouncing it to do in order to completely determine the rights of the parties involved in the proceeding." D.H. v. People, 192 Colo. 542, 544, 561 P.2d 5, 6 (1977); accord Harding Glass Co. v. Jones, 640 P.2d 1123 (Colo.1982).

However, C.R.C.P. 54(b) creates an exception to the general requirement that an entire case be resolved by a final judgment before an appeal is brought. As relevant here, C.R.C.P. 54(b) provides that:

When more than one claim for relief is presented in an action ... the court may direct the entry of a final judgment as to one or more but fewer than all of the claims ... only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment.

In deciding whether to issue a C.R.C.P. 54(b) certification for a decision disposing of less than all the claims in an action, the trial court must engage in a three-step analysis. See Harding Glass Co. v. Jones, supra. The first two steps are reviewed de novo, but the last step is reviewed for an abuse of discretion. Harding Glass Co. v. Jones, supra.

First, the trial court must find that the decision is a ruling upon an entire claim for relief. See Harding Glass Co. v. Jones, supra. "Claims for relief" are multiple claims in which there is more than one possible recovery and in which a judgment entered on one of the claims would not bar judgment on the other claims. Georgian Health Ctr., Inc. v. Colonial Painting, Inc., 738 P.2d 809 (Colo.App.1987).

Claims for bad faith breach and willful and wanton breach of an insurance contract sound in tort. Daugherty v. Allstate Ins. Co., 55 P.3d 224 (Colo.App.2002). These claims exist independently of the liability imposed by an insurance contract. Daugherty v. Allstate Ins. Co., supra; Flickinger v. Ninth Dist. Prod. Credit Ass'n, 824 P.2d 19 (Colo.App.1991).

Here, because the tortious breach of contract claims are independent of the claims under the insurance policies, the ruling on the tort claims does not bar judgment on the claims under the policies. Thus, the certified partial summary judgment is a ruling upon entire claims for relief.

Second, the decision must be an ultimate disposition of an individual claim. See Harding Glass Co. v. Jones, supra. State Farm argues that the trial court's partial summary judgment order is not an ultimate disposition of the claims because they were dismissed without prejudice. We disagree.

Generally, a trial court's dismissal of an action without prejudice does not constitute a final judgment for purposes of appeal. However, such a dismissal is considered final and appealable if further action by the plaintiff would be barred by the statute of limitations UIH-SFCC Holdings, L.P. v. Brigato, 51 P.3d 1076 (Colo.App.2002).

Claims for bad faith breach and willful and wanton breach of an insurance contract are governed by a two-year statute of limitations. Section 13-80-102, C.R.S.2002. The action accrues on the date on which both the injury and its cause are known or should have been known through the exercise of reasonable diligence. Section 13-80-108, C.R.S.2002; Daugherty v. Allstate Ins. Co., supra.

Here, plaintiffs assert that the tortious breach of contract claims accrued in 1998 when defendants failed to pay UIM benefits after Allstate "paid its policy limits of $50,000 to Plaintiffs and judgment was entered against Guerra." Accordingly, future claims for tortious breach of the insurance contracts would be barred now by the two-year statute of limitations. Thus, the partial summary judgment order is an ultimate disposition of the tortious breach of contract claims.

Finally, the trial court must decide whether there is just reason for delay in entering a...