Torrez v. State Farm Mut. Auto. Ins. Co., 80-2318.
Decision Date | 08 November 1982 |
Docket Number | No. 80-2318.,80-2318. |
Citation | 705 F.2d 1192 |
Parties | Aureliano TORREZ, Plaintiff-Appellee, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellant. |
Court | U.S. Court of Appeals — Tenth Circuit |
Joseph A. Sommer, Sommer, Lawler & Scheuer, Santa Fe, N.M., for defendant-appellant.
Matias A. Zamora, Santa Fe, N.M. (William E. Snead, Ortega & Snead, Albuquerque, N.M., with him on the brief), for plaintiff-appellee.
Before SETH, Chief Judge, DOYLE, Circuit Judge, and TEMPLAR,* Senior District Judge.
Ignacio Torrez was killed in an automobile accident September 9, 1973 in Otero County, New Mexico. At the time of his death he was a Mexican alien who had been returned from Denver by the immigration authorities about four days prior to his death. At the time of his death he was on his way back to Denver. His death occurred as a result of an accident which was caused by John R. Owens. The Owens car crossed the center line and collided with the automobile in which Torrez was a passenger. At the time of that accident Owens was insured by State Farm and had public liability insurance with State Farm for $15,000. The Torrez estate (Torrez) brought suit against the administrator of Owens' state, David Sierra, in the district court of Santa Fe County, New Mexico, on a wrongful death action.
On March 24, 1975 the plaintiffs, by letter, offered to settle the case for $98,000, or the policy limits, whichever was the lesser amount, provided that the offer was accepted by 5:00 p.m. on March 28, 1975. The offer was not accepted by State Farm.
On May 10, 1975 Torrez obtained a judgment against Owens' estate for $150,000. Following that development, State Farm first offered to pay $15,000, the limit of the policy, together with costs in exchange for a release and discharge of the judgment. This offer was rejected by the Torrez estate.
At the request of the administrator of Owens' estate court approval was given for treating the judgment as a claim against Owens' estate. This was approved and Sierra assigned the right to the $15,000 policy, along with any claim Owens' estate had against State Farm for failing to settle the claim within the policy limits, to appellee Torrez.
The action that is here being considered was brought in the United States District Court for the District of New Mexico on the assigned claims against State Farm. By way of summary judgment, Torrez was granted $15,000 on the first count of his complaint, the amount of the insurance provided in the policy between Owens and State Farm. Following a jury trial a judgment of $135,000 was awarded to Torrez on the second count of his complaint. This was for State Farm's wrongful failure to settle the claim within the policy limits. Thus, Torrez, the assignee, obtained a judgment for the entire $150,000 against State Farm for the wrongful failure to settle the claim. It is that judgment that State Farm has appealed.
The contentions of State Farm are:
I. WRONGFUL FAILURE TO SETTLE WITHIN POLICY LIMITS
State Farm maintains that the only amount that it can be called upon to pay is $15,000, that is the amount for which it insured Owens. State Farm also contends that Torrez was not entitled to recover the $150,000 judgment. The argument is that an essential requirement for such a recovery is the existence of monetary loss to the estate of Owens. Accordingly, State Farm maintains that its refusal to settle the claim was not in bad faith because the estate of the insured had nothing to lose by a judgment in excess of the $15,000 policy. The governing law is that of New Mexico.
What is meant by bad faith? In the New Mexico case of Lujan v. Gonzales, 84 N.M. 229, 501 P.2d 673, 680 (App.Ct.1972) it was said:
Good faith also means that the insurer has a duty to settle a claim if possible. This is sometimes said to be a result of the implied covenant of good faith and fair dealing which is part of the obligation of the insurer to the insured. Also included in the doctrine is the requirement that the insurer may be held liable for a judgment that is entered against the insured in excess of its policy limits where it (the insurer) had unreasonably refused to accept a settlement offer within the policy limits. Commercial Union Assurance Co. v. Safeway Stores, Inc., 26 Cal.3d 912, 164 Cal.Rptr. 709, 610 P.2d 1038 (1980). In American Fidelity & Casualty Co. v. G.A. Nichols Co., 173 F.2d 830 (10th Cir.1949), an insurance company was found to be liable for an excess judgment of $22,360 after refusing to accept a settlement offer of $10,000, the policy limit (Oklahoma law applied).
In the light of our facts and the law which has been briefly mentioned is State Farm's refusal to settle the claim a result of bad faith?
Foundation Reserve Insurance Co. v. Kelly, 388 F.2d 528 (10th Cir.1968) is a New Mexico case which is in accord with the general rule. There an opportunity to settle after the entry of judgment was present. The insurance company did not attempt to settle and this court held that where the undisputed facts of the case show the refusal of the appellant to settle, even after the judgment had been rendered against the insured; that bad faith existed as a matter of law; that an even greater duty rests on the company to settle after a verdict in excess of the policy limitations has been returned against the insured and an offer of settlement within the policy is made.
State Farm has alleged as a defense that there can be no bad faith when there is no proof that there were assets of the insured besides the liability policy which would be subjected to risk by State Farm's failure to settle.
State Farm's good faith argument is subject to question at the outset by a provision of the policy between State Farm and John R. Owens. Under "Conditions" it provides:
Any person or organization or the legal representative thereof, who has secured such judgment or written agreement shall thereafter be entitled to recover under this policy to the extent of the insurance afforded by this policy. No person or organization shall have any right under this policy to join the company as a party to any action against the insured to determine the insured's liability, nor shall the company be impleaded by the insured or his legal representative. Bankruptcy or insolvency of the insured or of the insured's estate shall not relieve the company of any of its obligations hereunder. (emphasis added).
State Farm contends that this clause applies only to its obligation under the policy, which overall is limited to a payment of $15,000.
Appellee (Torrez) would have us interpret the clause as prohibiting the use of the insolvency defense against claims for the face amount of the policy, as well as a defense to any other obligations of State Farm. Therefore, the death and possible insolvency of Owens should not alter State Farm's obligations to its insured, or the insured's assignee, under the policy, because this does not...
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