Robinson v. State Farm Fire & Cas. Co., 90-367

• Decision Date: 03 July 1991
• Docket Number: No. 90-367,90-367
• Citation: 583 So.2d 1063
• Court: Florida District Court of Appeals
• Parties: Matthew ROBINSON, et al., Appellants, v. STATE FARM FIRE & CASUALTY COMPANY, Appellee. 583 So.2d 1063, 16 Fla. L. Week. D1762

Page 1063

583 So.2d 1063

Matthew ROBINSON, et al., Appellants, v. STATE FARM FIRE & CASUALTY COMPANY, Appellee.

No. 90-367.

583 So.2d 1063, 16 Fla. L. Week. D1762

District Court of Appeal of Florida Fifth District.

July 3, 1991.

Rehearing Denied Aug. 5, 1991.

Ronald L. Harrop, September L. Fernandez and David B. Falstad of Gurney & Handley, P.A., Orlando, for appellants.

John R. McDonough and David W. Henry of McDonough, O'Neal & O'Dell, Orlando, for appellee.

GRIFFIN, Judge.

Appellant seeks review of a summary final judgment rendered in favor of the appellee in this action for bad faith. We reverse.

This suit arose out of an automobile accident that occurred on August 14, 1976. James Lockley, appellee State Farm's insured, ran a stop sign, severely injuring seventeen year old Matthew Robinson. At the time of the accident, Lockley was driving a 1975 Pontiac which he had agreed to purchase from a local dealership four days before the accident and which he had picked up the day before the accident. Title to the vehicle was still in the name of the dealership when the accident occurred.

Robinson and his father filed suit against Lockley, the dealership and State Farm. In its answer, State Farm admitted it provided $15,000 coverage for a 1971 Ford Galaxy owned by Lockley. State Farm also admitted that if the dealership owned the Pontiac, then State Farm did cover Lockley for the accident, although their insurance was excess over any insurance the dealership may have had. State Farm denied it provided coverage if Lockley were the owner of the 1975 Pontiac, relying on the definition of "newly acquired automobile" ¹ in its policy. State Farm asserted that coverage did not exist because State Farm did not insure all the automobiles owned by Lockley when he acquired the Pontiac and because Lockley had not applied for insurance on the Pontiac within thirty days following delivery. State Farm's claim that it did not insure all of Lockley's vehicles was based on Lockley's ownership of an uninsured pickup truck; however, Lockley claimed the pickup was inoperable. State Farm concedes an inoperable vehicle did not have to be insured in order to meet the "insures all automobiles" requirement of the "newly acquired automobile" definition. ²

The record reflects that Lockley filed a claim with State Farm on August 16, 1976, two days after the accident. State Farm had in its files a statement dated August 18, 1976 signed by Lockley. In this statement Lockley stated that the truck had been inoperable for about three months due to drivetrain problems and he had cancelled the insurance on the truck because it could not be driven. The record shows that Lockley's truck, which he traded in to buy the Pontiac, was towed in to the dealership on the day Lockley contracted to buy the Pontiac.

On September 21, 1976, thirty-eight days ³ after being notified by Lockley of this accident, State Farm denied coverage to Lockley. ⁴ When this case finally was tried, after some nine years of litigation, the only evidence ever adduced on the operability issue was the testimony of Lockley that the truck was not operable. The apparent theory of State Farm in denying coverage was that Lockley had a history of insuring only one vehicle at a time, whether the second vehicle was operable or not. Lockley did not deny that, for a period of time, he had insured only the truck even though the Galaxy was operable. He testified that he had put the coverage on the truck because it was the vehicle he used "all the time" but transferred his insurance coverage back to the Ford when the truck broke down and he "put [his Ford Galaxy] back on the road". Thereafter, he decided to trade the truck for the Pontiac.

Concerning the failure of Lockley to apply for coverage within thirty days, State Farm contended that Lockley's filing of a claim was not equivalent to requesting the extension of coverage to the newly acquired (wrecked) vehicle. At trial, State Farm did not seek to have this coverage defense presented to the jury.

In addition to denying coverage, State Farm also failed to provide a defense to Lockley, and he was eventually defaulted. ⁵ One month prior to trial, State Farm had rejected the Robinsons' offer of a policy limits settlement of $15,000, offering only $500 to settle all claims. During the course of the ensuing jury trial, State Farm increased its offer to $10,000, but that offer was not accepted. The jury awarded the Robinsons judgments totaling $120,000 and State Farm was found to insure the Pontiac.

The judgment entered against State Farm was limited to $15,000, following the procedure utilized prior to the enactment of legislation prohibiting joinder of insurers. The Robinsons thereafter filed the instant proceeding, an action to recover the excess of the judgment amount over policy limits, based on: (1) State Farm's bad faith in failing to properly investigate the coverage, liability and damages issues; (2) State Farm's failure to provide Lockley with a defense; and (3) State Farm's refusal to settle the Robinsons' claims within policy limits. Summary judgment was granted in favor of State Farm on two grounds: (1) the bad faith action against State Farm had to have been brought in the underlying automobile negligence law suit; and (2) the lower court's refusal to grant the Robinsons' motion for summary judgment on the coverage issues in the underlying negligence action established, as a matter of law, that State Farm could not have acted in bad faith. ⁶

We cannot affirm based on the first ground. What little currency this "splitting the cause of action" argument might have had, based principally on Schimmel v. Aetna Casualty & Surety Co., 506 So.2d 1162 (Fla. 3d DCA 1987), has evaporated with the supreme court's recent decision in Blanchard v. State Farm Mutual Automobile Insurance Co., 575 So.2d 1289 (Fla.1991). More intriguing is the conclusion that State Farm cannot be exposed to the trial of a bad faith claim where the trial judge presiding in the earlier lawsuit to adjudicate the coverage issue had ruled that sufficient factual issues remained in dispute to preclude the trial court from summarily entering a judgment finding coverage. In other words, if the trial court could not look at the record and rule that coverage existed as a matter of law then (also as a matter of law) State Farm could not have acted in bad faith. We reject this conclusion.

The trial court interpreted Judge Daniel's order to mean the coverage issue was "not frivolous" or "wholly lacking in merit", which it then equated to a "reasonable and legitimate" disagreement as to coverage. Denial of a plaintiff's motion for summary judgment does not necessarily mean a defense is "not frivolous"; nor does finding an issue to be "not frivolous" mean it is "reasonable and legitimate." In Florida, the trial judge may not award a summary judgment unless no material fact is in dispute. Holl v. Talcott, 191 So.2d 40 (Fla.1966). Under this standard, "the facts must be so crystallized that nothing remains but questions of law." Moore v. Morris, 475 So.2d 666 (Fla.1985). If credibility of a witness is disputed, summary judgment is improper. Ritchey v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 361 So.2d 438 (Fla. 2d DCA 1978).

The trial judge in the original suit did issue a speaking order on the cross motions for summary judgment but, notably, did not expressly identify any factual issue of operability of the truck. ⁷ The trial judge instead focused on the thirty-day application limitation:

Lockley testified at a deposition that he notified State Farm within thirty days of the accident and his purchase of the Pontiac but was told "they didn't think they could cover it." Thus, this case is distinguished from Lowe v. State Farm Mutual Auto Insurance Co., 420 So.2d 313 ⁸ (Fla. 5th DCA 1982) where there was no dispute that the insurer had not been notified until nearly five months after the purchase and subsequent accident. Here, there is a disagreement as to whether Lockley applied for coverage within the required thirty day period.

If the facts are viewed in the light most favorable to Lockley and he applied for coverage, State Farm's anticipatory repudiation obviated the necessity that Lockley tender payment. Hospital Mortgage Group v. First Prudential Development Corp., 411 So.2d 181 (Fla.1982).

* * * * * *

Genuine issues of material fact and conflicting inferences exist in this case as to whether or not Lockley met the policy conditions in order to have insurance on the Pontiac as an after acquired vehicle. Thus, both defendant, State Farm's and plaintiffs' motions for summary judgment are barred on the issue of insurance coverage.

It is impossible to stretch this interlocutory denial of a motion for summary judgment into a conclusion that State Farm met its duty of good faith as the liability insurer of James Lockley. It makes no sense that an insurer who asserts a coverage issue that, for any reason, withstands summary judgment, but ultimately fails, would be excused from all of the good faith obligations imposed on the insurer who admits coverage.

The cases relied on by the trial court for its conclusion that there was no bad faith as a matter of law were incorrectly applied to the issue in the present case. United States Fire Insurance Co. v. Clearwater Oaks Bank, 421 So.2d 783 (Fla. 2d DCA 1982) involved a discovery issue in a first-party insurance case. The court took pains to distinguish a cause of action for bad faith due to an insurer's failure to settle a third-party claim against the insured within policy limits, and a pure (first-party) contractual claim where the parties "simply disagree over whether the claim is covered by a policy". In Allstate Insurance Co. v. Swanson, 506 So.2d 497 (Fla. 5th DCA 1987), this court merely analogized the rule against allowing discovery in first-party breach of contract cases to a third-party insurance case...