Walter v. Simmons

• Citation: 818 P.2d 214,169 Ariz. 229
• Decision Date: 12 September 1991
• Docket Number: No. 1,CA-CV,1
• Parties: Jack H. WALTER, Plaintiff-Appellee, Cross Appellant, v. F.J. SIMMONS and Others, d/b/a Underwriters at Lloyds, London, Defendant-Appellant, Cross Appellee. 89-401.
• Court: Court of Appeals of Arizona

Page 214

818 P.2d 214

169 Ariz. 229

Jack H. WALTER, Plaintiff-Appellee, Cross Appellant, v. F.J. SIMMONS and Others, d/b/a Underwriters at Lloyds, London, Defendant-Appellant, Cross Appellee.

No. 1 CA-CV 89-401.

Court of Appeals of Arizona,

Division 1, Department A.

Sept. 12, 1991.

[169 Ariz. 231] Thur, Dawson & O'Sullivan by Steven A. Gruenemeier, Scottsdale, for plaintiff-appellee, cross appellant.

Teilborg, Sanders & Parks, P.C. by David J. Damron and Jean E. Huffington, Phoenix, for defendant-appellant, cross appellee.

OPINION

JACOBSON, Judge.

Defendant-appellant F.J. Simmons and Others, d/b/a Underwriters at Lloyds, London ("Underwriters"), appeals from the judgment in favor of plaintiff-appellee Jack H. Walter ("Walter") following a jury verdict finding Underwriters liable for breach of an insurance contract and for breach of the duty of good faith and fair dealing. Walter cross-appeals from the trial court's directed verdict finding Underwriters not liable for punitive damages and from the remittitur imposed by the court.

FACTS

On appeal from the judgment entered pursuant to the jury verdicts, we view the evidence in a light favorable to sustaining the verdicts. Bradshaw v State Farm Mut. Auto. Ins. Co., 157 Ariz. 411, 414, 758 P.2d 1313, 1316 (1988).

On April 19, 1984, Walter was involved in a two-vehicle accident while driving his tractor-trailer truck on the highway near Benson, Arizona. Walter's truck was insured by Underwriters, a group of persons and syndicates operating out of London, England. In accordance with Underwriters' general business practices, the claim was first processed through Texas Specialty Underwriters. Texas Specialty assigned adjustment of the claim to Commercial Claims Service, an adjuster previously approved to handle claims against Underwriters. Commercial Claims Service was owned by David Potts ("Potts"). Because Potts estimated that the value of the claim in this case exceeded $10,000.00, Potts negotiated settlement of Walter's claim directly with one of the Underwriters: Hogg, Robinson-Gardner.

Walter asserted throughout the negotiations that the value of his truck was $42,500.00. Potts told Walter that the value of the truck was between $35,000.00 and $36,000.00. In connection with settling the claim, Potts obtained an estimate of the repairs the truck needed. The final repair estimate for the truck was $36,956.00. Potts also obtained a salvage bid of $12,000.00 for the truck from a friend, Paul Mann, in June 1984. Based on these figures, Potts determined that the cost of repair exceeded the cash value of the truck. In the latter part of June, Potts told Mann that Mann was the high bidder for salvage. Potts subsequently authorized Mann to retrieve the truck from the Kenworth facility in Phoenix where the truck was being stored. Mann retrieved the truck from Phoenix on August 9, 1984, and took it to his shop in Dallas, Texas. Mann later transferred the truck to a body shop.

On August 29, 1984, Potts sent Walter a proof of loss, specifying that the value of the loss was $34,500.00 and that this amount was in full satisfaction of Walter's claim on his policy. Walter refused to sign the proof of loss.

In early September 1984, Walter learned that his truck had been moved from the Kenworth facility in Phoenix. Walter's attorney then contacted Potts, requesting the location of the truck, which Potts refused to divulge. In March 1985, Walter's attorney again requested the location of the truck because negotiations for a settlement with the insurance carrier of the other vehicle involved in the April 1984 accident included salvage rights to the truck. In April 1985, Potts sent a letter to Walter's attorney, informing him that the truck was at Mann's shop in Dallas, Texas. Potts also told Walter's mother that the truck was at a Kenworth facility in Dallas. The truck, however, was not at either of those locations, but was found by friends of Walter's, stripped, in a wrecking yard in Dallas in mid-April 1985.

During these lengthy negotiations, Walter was unable to make payments on his truck and experienced other financial difficulties. In November 1985, the credit union that had a lien on the truck repossessed it. The credit union settled the claim with Potts for $34,500.00.

PROCEDURAL HISTORY

Walter filed suit against Underwriters and Potts alleging three counts: (1) breach of the duty of good faith and fair dealing ("bad faith"), (2) breach of contract, and (3) conversion. A few days prior to trial, Walter voluntarily moved to dismiss the breach of contract and bad faith claims against Potts. These two claims were dismissed against Potts with prejudice. The trial proceeded against Underwriters on all three counts, and against Potts on the conversion count.

After Walter rested his case, Underwriters moved for a directed verdict on the issue of its punitive damages. The trial court granted the motion, ruling that punitive damages could not be imposed on a principal solely for acts of its agent. The court found that, although there was some evidence that would support imposition of punitive damages against Potts, there was no evidence of Underwriters' "evil mind" that would support punitive damages against Underwriters on either of the tort counts. However, the trial court denied Underwriters' motion to dismiss the breach of contract and bad faith claims, ruling that Underwriters' liability on these counts was not wholly derivative from Potts' liability.

The jury returned a verdict finding that Underwriters had breached its duty of good faith and fair dealing, but had not breached the contract. On the conversion count, the jury assessed compensatory damages against Underwriters but not Potts, but assessed punitive damages against Potts. The trial court found these verdicts potentially inconsistent and instructed the jury to reconsider its verdicts. After further consideration, the jury returned its verdicts as follows: (1) in favor of Walter and against Underwriters on the breach of contract count, assessing $7,500.00 in actual damages and $11,250.00 in consequential damages; (2) in favor of Walter and against Underwriters on the bad faith count, assessing damages of $80,000.00; and (3) in favor of Walter and against Underwriters and Potts on the conversion count, assessing $7,500.00 in compensatory and $50,000.00 in punitive damages against Potts but no damages against Underwriters.

Following entry of judgment, Walter filed a motion for partial new trial on the issue of Underwriters' liability for punitive damages. Underwriters also filed a motion for new trial and a motion for judgment notwithstanding the verdict. The trial judge denied these motions, but conditioned the denial of Underwriters' motion for new trial on Walter's accepting a remittitur striking the jury's award of consequential damages in connection with the breach of contract count. The court then entered its second amended judgment, from which Underwriters appealed and Walter cross-appealed.

DISCUSSION

I. Contract Claim

A. Breach of Contract

Underwriters first argues that its obligations under the contract did not arise because Walter failed to file a required proof of loss, and, therefore, its motion for directed verdict on the contract claim was improperly denied. Second, it argues that, in any event, it fulfilled its obligation under the contract by offering and eventually paying the actual cash value of Walter's truck. We disagree.

One of Underwriters' claims managers testified that Underwriters would not settle a case without a proof of loss setting out the final negotiated amount of loss. Although there is conflicting evidence on this issue, there was evidence from which the jury could infer that Walter made an appropriate claim either for the repair or for the actual cash value of his truck, and that Potts would not accept a proof of loss other than the one Potts had completed that required Walter to accept $34,500.00 in full satisfaction of his claim. The jury could conclude from this evidence that the failure to file a completed proof of loss was the result of Potts' actions. Moreover, there is no prejudice to Underwriters in this case because the evidence shows that Underwriters and Potts had notice of Walter's claim and Potts had notice of the specific amount Walter was claiming. Cf. Zuckerman v. Transamerica Ins. Co., 133 Ariz. 139, 146-47, 650 P.2d 441, 448-49 (1982) (insurer estopped from enforcing limitation clause when not prejudiced, when enforcement would work an injustice to the plaintiff, and would not serve purpose for which limitation clause exists).

Walter testified that the cash value of the truck at the time of the accident was $42,500.00. Underwriters eventually paid $34,500.00, $35,000.00 less a $500.00 deductible, to the credit union that repossessed the truck. The jury clearly accepted Walter's valuation of his truck, awarding him the $7,500.00 difference between the amount paid and the amount claimed on the breach of contract claim. Because there is evidence to support it, we will not reverse the jury's verdict on actual damages.

B. Resubmission of Verdicts

Underwriters also argues that the trial court erred in resubmitting the breach of contract verdict to the jury after the jury had returned a verdict in Underwriters' favor. Underwriters contends that, because a breach of an insurer's covenant of good faith and fair dealing does not necessarily require a breach of contract, resubmission of the verdict was an improper comment on the evidence.

Initially, we assume that it might not be inconsistent for the jury to find in favor of Underwriters on the breach of contract claim and in favor of Walter on the breach of the duty of good faith and fair dealing claim. See, e.g., Filasky v. Preferred Risk Mut. Ins. Co., 152 Ariz. 591, 597, 734 P.2d 76, 82 (1987) (delay in paying benefits under contract supports bad faith claim); Rawlings v. Apodaca, 151 Ariz....