Wierck v. Grinnell Mut. Reinsurance Co., 89-132
| Citation | 456 N.W.2d 191 |
| Decision Date | 23 May 1990 |
| Docket Number | No. 89-132,89-132 |
| Parties | James A. WIERCK and William A. Wierck, Appellees, v. GRINNELL MUTUAL REINSURANCE COMPANY, Appellant. Toni O. AGUE and LeRoy Ague, Appellees, v. GRINNELL MUTUAL REINSURANCE COMPANY, Appellant. |
| Court | Iowa Supreme Court |
Theodore T. Duffield and Michael D. Huppert of Patterson, Lorentzen, Duffield, Timmons, Irish, Becker & Ordway, Des Moines, for appellant.
Tom Riley, James E. Bennett and Nestor Lobodiak of Tom Riley Law Firm, P.C., Cedar Rapids, for appellees Toni Ague and LeRoy Ague.
Nick Critelli of Nick Critelli Associates, P.C., Des Moines, for appellees James A. Wierck and William A. Wierck.
Considered by McGIVERIN, C.J., and HARRIS, SCHULTZ, CARTER, and LAVORATO, JJ.
A liability insurance company was sued on a claim of bad faith in failing to settle a prior suit brought against a policyholder. The company appeals following a substantial adverse jury verdict. 1 Because we find as a matter of law there was no bad faith, we reverse.
The adverse jury verdict deprives the company of its version of disputed facts, and there were many. See Iowa R.App.P. 14(f)(1) (). Some important matters, however, were not in serious dispute. The insured was clearly liable to the original plaintiffs in an amount likely to exceed the $100,000 policy limits. The case was not settled within the policy limits. The jury award in the underlying case was much in excess of the policy limits. 2 But it takes much more to show bad faith.
William (Al) Wierck farmed near Fairbank, Iowa. He had a number of vehicles insured through Grinnell Mutual Reinsurance Co. (Grinnell). His son, Jim Wierck, lived near Hiawatha, Iowa, and for a time was part owner and operator of a business there. Until the business was discontinued sometime in 1979 the company carried its own insurance policy on a 1978 three-quarter ton Ford pickup truck. That coverage was provided through Iowa National Mutual Insurance Co. The policy was originally written for the business, but after the business failed it was changed to provide personal coverage for Jim Wierck.
While the business was failing Jim applied with Grinnell for his own insurance on the truck. He negotiated with Fearl Cowlishaw, a Grinnell agent who had long done business with Jim's father. The application was forwarded to Grinnell on November 28, 1979. It was made out to be nonbinding; Cowlishaw knew that Jim had previously been convicted of operating a motor vehicle while intoxicated, a fact reflected in the application to Grinnell. Cowlishaw told Jim at the time there was little likelihood that Grinnell would grant coverage.
After Jim's business failed he had trouble making payments on the truck. After much discussion Jim's father, Al, took over possession and payments on the truck and asked Cowlishaw to add the pickup to his own coverage. The trial court found that Cowlishaw knew the truck was the one previously owned by Jim. Before title was actually passed from Jim to Al, Grinnell rejected Jim's original application. Due to a one-car accident involving the truck, actual transfer of title from Jim to Al did not take place until March 13, 1980.
In the fall of 1980, when Jim again became employed, he and his father agreed that Jim would buy back the truck. Before title was transferred from Al back to Jim, Jim was involved in an accident in which he struck a car driven by Toni Ague (and owned by LeRoy Ague). Toni was seriously injured and there was considerable property damage. It is undisputed that at the time of the accident Jim was intoxicated; later he was again convicted of OMVWI. Soon after the accident Toni Ague retained an attorney, John Riccolo. On his advice she declined to discuss the case with Grinnell investigators. Riccolo declined an invitation to submit a settlement offer because Ague was undergoing medical treatment. Suit was filed May 20, 1981. Grinnell assigned the defense of the case to Robert Tilden, an experienced and highly respected Cedar Rapids trial attorney.
At this point the facts become hotly disputed. Eventually there were two trials, first a bench trial and then the jury trial from which this appeal was taken. Grinnell lost them both so its version of the facts is of limited importance. Nonetheless, for reasons we shall explain, Grinnell's version remains significant.
Tilden soon concluded that there was clear liability on the Agues' claim against the Wiercks and advised Grinnell to settle if possible. It is also clear that, after the subject had been broached by Tilden, Grinnell retained independent counsel who brought a declaratory judgment action against the Wiercks to contest coverage under the policy.
The Wiercks make much of the declaratory judgment action in the present case, citing it as the quintessence of "stubbornly" pursued bad faith. The case was tried to a different judge, who determined the action to be without merit. No appeal was taken so that judgment, and the findings which support it, become binding in this case. Grinnell is roundly chastised and accused of bad faith for even bringing the declaratory judgment action. The adverse result in the declaratory judgment action, however, certainly does not amount to bad faith. The action was brought by and on the advice of another experienced and competent trial lawyer, who was surprised by the adverse outcome. Under the circumstances his surprise is certainly not unreasonable. Grinnell knew of the circumstances surrounding coverage of the pickup. James had applied for coverage and been rejected December 31, 1979. A week later the pickup was added to Al's policy. And James was driving the pickup when it was involved in the accident. We agree that it was eminently reasonable for Grinnell to bring the declaratory judgment action, and doing so was no indication of bad faith.
The parties also differed in their version of any settlement negotiations. The jury verdict obliges us to reject Grinnell's version that Tilden's repeated offers to pay policy limits--and more--were frustrated by the Wiercks' attorney's refusal to set an amount at which the case could be settled. It is clear that Tilden was continuously pressed to settle, both by the Agues' attorney as well as the Wiercks' personal attorney. In the Wiercks' view it was incumbent upon Tilden to make an offer of settlement and name a specific amount.
On the other hand the Wiercks cannot show that they or Agues offered to settle for any set amount. They do point out that Riccolo demanded settlement at $300,000 from Ralph Gearhart (Grinnell's attorney...
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