Vaught v. Dairyland Ins. Co.

• Decision Date: 10 March 1998
• Docket Number: No. 23354,23354
• Citation: 131 Idaho 357,956 P.2d 674
• Parties: Carolyn Joann VAUGHT and David Brian Vaught, Plaintiffs-Respondents-Cross Appellants, v. DAIRYLAND INSURANCE COMPANY, Defendant-Appellant-Cross Respondent. Boise, November 1997 Term
• Court: Idaho Supreme Court

Page 674

956 P.2d 674

131 Idaho 357

Carolyn Joann VAUGHT and David Brian Vaught, Plaintiffs-Respondents-Cross Appellants, v. DAIRYLAND INSURANCE COMPANY, Defendant-Appellant-Cross Respondent.

No. 23354.

Supreme Court of Idaho,

Boise, November 1997 Term.

March 10, 1998.

Rehearing Denied May 21, 1998.

Evans, Keane, Boise, for appellant. Bruce C. Jones argued.

Hepworth, Lezamiz & Hohnhorst, Twin Falls, for respondent. Jeffrey J. Hepworth argued.

TROUT, Chief Justice.

This case addresses the question of whether an insurer who fails to intervene in a case in which its insured sues an uninsured motorist, is nonetheless bound by the decision in that suit.

I. BACKGROUND

On October 8, 1991, a convoy of approximately 15 Air Force trucks and trailers left from a deployment near Mountain Home, Idaho to return to their home base near Ogden, Utah. The convoy became lost when the lead vehicle failed to take the exit for Utah located at the interstate 84/86 interchange just east of Burley and instead, continued on toward Pocatello. In accordance with Air Force regulations, all the rest of the trucks followed the lead vehicle toward Pocatello. The lone exception appears to have been the last truck in the convoy carrying flashing lights and a warning sign. That truck took the exit to Utah and so was not part of the convoy at the time of the accident.

After realizing the mistake, the commander of the convoy in the lead vehicle decided to make a U-turn using an unpaved, emergency cross-over lane in the median between the east and west bound lanes of the interstate. At the time he made the decision, the commander knew that using the cross-over lane was a violation of Idaho law. There was no radio communication between the trucks in the convoy through which the commander could inform the drivers of his plan, so the commander simply ordered that his driver in the lead vehicle move from the right lane of the interstate to the left lane and then park in the cross-over lane. The rest of the trucks followed the example of the lead vehicle and moved from the right lane into the left lane and parked in the cross-over lane. When the cross-over lane filled, it became necessary for the rest of the trucks to park in the left lane of the interstate. Although the trucks moved as far off the road as possible, substantial portions of the trucks remained in the traffic lane.

At the same time, respondent Carolyn Vaught was driving her van on the interstate from her home in Buhl to Pocatello. Shortly after passing the interstate 84/86 interchange, Vaught noticed a convoy of slow-moving military trucks in the right lane. Vaught moved from the right lane to the left in order to pass the trucks. At the time she changed lanes, Vaught noticed a yellow semi tractor and trailer (phantom semi) behind her a comfortable distance in the left lane. Vaught, who was traveling at 65 miles per hour, passed the military trucks which were traveling at 45 miles per hour spaced 90 yards apart. As Vaught crested a hill about one-half mile from the cross-over lane, she noticed military trucks in her lane as well. Although the stop lights and turn signals of the trucks were activated, Vaught did not observe that the trucks were stopped and so did not disengage her cruise control. Vaught did not realize that the trucks in her lane were stopped until she was about 500 feet from the point of impact. Vaught could not immediately pull into the right lane because of the presence of an Air Force truck driven by Airman Skroback (Skroback truck). Vaught felt she could not safely stop because the phantom semi was now 20 to 30 feet behind her. As the Vaught van and the phantom semi passed the Skroback truck, the phantom semi moved into the right lane and pulled alongside Vaught's van. Upon seeing Vaught's oncoming van in his rear view mirror, Sergeant Mokrzycki, the driver of the last truck in the left lane, braced himself and began pumping his brake pedal to warn her. Vaught, effectively boxed in by the phantom semi, was unable to stop in time and hit the right rear of the trailer Mokrzycki was towing. At impact, the Vaught van was estimated to have been traveling at about 30 miles per hour. The collision caused the rear of Vaught's van to rotate into the right lane where it contacted the rear of the trailer on the phantom semi. The phantom semi did not stop and was never identified.

Vaught suffered physical injuries and both her van and the Air Force vehicle were heavily damaged. Vaught was insured by appellant Dairyland under a policy that provided collision, property damage, medical expenses and uninsured motorist coverage. Vaught filed a claim with Dairyland who paid medical and collision benefits. The Air Force sent Vaught letters demanding payment for damage done to its vehicle. The Air Force demand letters were forwarded by Vaught's attorney to Dairyland. Dairyland investigated the claim and determined that Vaught was at least 50% at fault. Dairyland reached a settlement with the Air Force for the policy limits of $15,000.

On August 6, 1992, Vaught and her husband (the Vaughts) filed suit in federal court against the Department of Defense to recover for damages resulting from the accident. The driver of the phantom semi was not named as a party. On May 6, 1993, the Vaughts made a claim to Dairyland under the uninsured motorist provision of their policy due to the involvement of the phantom semi. Dairyland then approached the Vaughts about intervening in the federal lawsuit; however, the Vaughts refused to stipulate to Dairyland's intervention. Two weeks before the start of the federal trial, Dairyland's attorney again contacted the Vaughts' attorney proposing Dairyland's intervention in the case, which the Vaughts' attorney again declined because he felt that Dairyland's cross-examination of Mrs. Vaught would be damaging to the Vaughts' case. Following a bench trial, the federal magistrate judge issued his findings of fact and conclusions of law in which he apportioned 70% of the liability for the accident to the Air Force, 30% to the phantom semi, and 0% to Mrs. Vaught. Two days later on June 30, 1994, relying on the federal court judgment, the Vaughts filed a complaint against Dairyland alleging breach of the uninsured motorist provision of the policy and demanding payment of the policy limits of $25,000 plus prejudgment interest and attorney fees.

In August 1994, Dairyland offered to settle for $25,000 and in December 1994, offered to arbitrate the dispute. The Vaughts rejected both offers. On January 6, 1995, the Vaughts filed a motion to amend their complaint to include claims for bad faith and punitive damages. The district court granted the motion to add the bad faith claim, but denied the addition of the punitive damages claim. On March 14, 1995, Dairyland filed an offer of judgment for $25,000 including interest and attorney fees. Dairyland then moved for summary judgment on the bad faith claim and on the issue of whether it was bound by the federal court decision. The Vaughts moved for summary judgment on the breach of contract claim. The district court ruled that Dairyland was bound by the federal court decision and granted summary judgment in favor of the Vaughts on the contract claim. The district court also granted summary judgment in favor of Dairyland on the bad faith claim. The district court awarded the Vaughts $25,000 in contract damages, $15,106.84 in prejudgment interest, $35,545.50 in attorney fees, and $1,497.90 in costs.

On appeal, Dairyland claims the district court erred in granting summary judgment on the contract claim based on the federal court decision and erred in awarding costs, attorney fees and prejudgment interest to the Vaughts. In addition, Dairyland appeals the district court's grant of a protective order that precluded Dairyland from deposing the Vaughts' counsel. The Vaughts filed a cross-appeal challenging the district court's grant of summary judgment on the bad faith claim, the denial of the Vaughts' motion to add a punitive damages claim, and the district court's ruling that Dairyland had not waived the attorney-client privilege. The Vaughts also seek attorney fees on appeal.

II. STANDARD OF REVIEW

Summary judgment is proper when "the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." I.R.C.P. 56(c). On review, this Court uses the same standard as the district court and "liberally construes the record in the light most favorable to the party opposing the motion, drawing all reasonable inferences and conclusions in that party's favor." Friel v. Boise City Housing Auth., 126 Idaho 484, 485, 887 P.2d 29, 30 (1994) (citations omitted). If, as in the present case, "the evidence reveals no disputed issues of material fact, what remains is a question of law, over which this Court exercises free review." Id.

The control of discovery is an area within the discretion of the trial court. Service Employees Int'l Union, Local 6 v. Idaho Dept. of Health and Welfare, 106 Idaho 756, 683 P.2d 404 (1984). Therefore, the proper standard for reviewing a trial court's grant of a protective order is abuse of discretion. This Court also uses the abuse of discretion standard to review issues of costs under I.R.C.P. 54(d)(1), Adams v. Krueger, 124 Idaho 74, 856 P.2d 864 (1993), the award of attorney fees under I.C. § 41-1839, Young v. State Farm Mutual Automobile Insurance Co., 127 Idaho 122, 898 P.2d 53 (1995), and the amendment of pleadings, Southern Idaho Production Credit Ass'n. v. Gneiting, 109 Idaho 493, 708 P.2d 898 (1985).

III. EFFECT OF PRIOR FEDERAL PROCEEDINGS

Central to the district court's grant of summary judgment on the Vaught's breach of contract claim was the court's ruling that Dairyland was bound by the decision in the federal tort action....