Wilson v. Farm Bureau Mut. Ins. Co.
| Decision Date | 12 May 2006 |
| Docket Number | No. 04-0864.,04-0864. |
| Citation | 714 N.W.2d 250 |
| Parties | James B. WILSON, as Administrator of the Estate of Lily M. Wilson, Deceased, Appellant, v. FARM BUREAU MUTUAL INSURANCE COMPANY, Appellee. |
| Court | Iowa Supreme Court |
Sara Riley of Tom Riley Law Firm, P.L.C., Cedar Rapids, for appellant.
Brian C. Ivers of McDonald, Woodward & Ivers, P.C., Davenport, for appellee.
In an underlying tort suit, an insured obtained a jury verdict against an underinsured motorist. Following the verdict, the district court reduced it by the percentage of fault the jury attributed to the insured and entered judgment for the reduced amount. Following entry of the judgment, the insured filed a motion to correct the judgment by increasing it to reflect the jury's determination regarding loss of consortium claims. The court granted the motion and entered an amended judgment.
The insured sued its insurer on a contract claim to recover underinsured motorist benefits in the amount of the amended judgment entry less the underinsured motorist's liability limits pursuant to the insured's underinsured motorist (UIM) coverage. The insured also joined a claim for bad faith against the insurer for its failure to pay the insured's demand for the underinsured benefits. The court granted the insured's motion for summary judgment on its contract claim in part and denied it in part. In granting the motion, the court ruled that a consent-to-be-bound provision under the insured's UIM coverage was contrary to public policy and therefore unenforceable. In denying the motion, the court allowed the insurer to relitigate the issue of damages in the underlying tort suit. The district court granted the insurer's motion for summary judgment as to the insured's bad faith claim.
The insured filed an application for interlocutory appeal, which we granted.
We conclude the insurer is bound by the original judgment entry but not bound by the amended judgment entry. We also conclude that as a matter of law the insurer was not in bad faith in denying the insured's demand. Finally, we conclude the consent-to-be-bound provision is valid and enforceable. We therefore affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.
On November 30, 1999, Lily M. Wilson walked across a road to retrieve her mail from a mailbox that was located across the road from her home. While walking back to her home, Wilson was struck by a vehicle driven by Margie Carter. Later that day, Wilson died of her injuries suffered in the incident.
Wilson had automobile insurance with Farm Bureau Mutual Insurance Company, which included medical pay coverage of $5000 and UIM coverage of $100,000. Carter had automobile insurance through Hartford Insurance Company with liability limits of $100,000 (each person) and $300,000 (each occurrence).
Wilson's policy provided in part the following:
REPORTING A CLAIM—INSURED'S DUTIES
. . . .
4. Other Duties Under . . . Under-Insured Motor Vehicle . . . Coverage[]
The person making claim also shall:
. . . .
d. under the ... under-insured motor vehicle coverage[], send us at once a copy of all suit papers when the party liable for the accident is sued for these damages.
. . . .
Coverage I—Under-Insured Motor Vehicle
. . . .
We will pay damages for bodily injury an insured is legally entitled to recover from the owner or operator of an under-insured motor vehicle. The bodily injury must be caused by an accident and arise out of the ownership maintenance or use of an under-insured motor vehicle.
1. FOR ANY INSURED WHO, WITHOUT OUR WRITTEN CONSENT, SETTLES WITH ANY PERSON OR ORGANIZATION WHO MAY BE LIABLE FOR THE BODILY INJURY.
. . . .
We are not bound by any judgment against any person or organization obtained without our written consent.
[Hereinafter referred to as the consent-to-be-bound provision.]
A. Suit I. In February 2000 Wilson's estate sued Carter for damages to the estate and for loss of consortium suffered by the decedent's surviving children. On July 18 the estate's attorney wrote Farm Bureau notifying it of the estate's intention to make a claim for UIM benefits for the estate under Wilson's policy. Enclosed with the letter was a copy of the amended and substituted petition filed on behalf of the estate against Carter and Carter's answer to the petition. The letter further notified Farm Bureau that the estate's attorney had learned through discovery that Carter's liability limits were $100,000/$300,000, which the attorney believed were insufficient to cover the estate's damages.
On February 6, 2002, a jury returned a verdict in the estate's favor and against Carter as follows: $7906.81 for interest on reasonable burial expenses, $6888.50 for the reasonable value of medical expenses, and $145,000 for loss of consortium suffered by the decedent's surviving children for a total of $159,795.31.
During the trial, the district court submitted an instruction, which neither party objected to, informing the jury that "[t]he fault of the person whose injury or death provides the basis for the consortium claim of Lily Wilson's children does not bar or reduce the consortium recovery." The jury verdict form relating to the consortium claims stated in part: Neither party objected to this verdict form.
The jury found Wilson twenty percent at fault and Carter eighty percent at fault. After the jury returned its verdict, the district court reduced the total jury award, including the loss of consortium award, by twenty percent. The court reduced the loss of consortium award by twenty percent because it believed that it had instructed the jury incorrectly that the decedent's fault does not reduce the consortium claims. See Iowa Code § 668.3(1)(b) (2005) (); id. § 668.3(4) (). This reduced the verdict from $159,795.31 to $127,836.25.
In response to the court's action, the estate filed a motion on February 20 to correct judgment entry. The estate alleged that the instruction, even though an incorrect statement of the law, became the law of the case. For that reason, the estate further alleged, the judgment entry should be corrected to reflect that the consortium damages are not reduced by the decedent's fault. That same day, the district court entered an amended judgment entry for the medical expenses and interest on burial expenses reduced by the percentage of fault attributed to the decedent and for the full loss of consortium damages as the jury had awarded. The total amended judgment as entered was $156,836.25, together with interest as provided by law.
In the meantime, on February 11, Carter's attorney offered the estate Carter's policy limits of $100,000, which the estate conditionally accepted on February 13. The condition was that Carter was to provide proof of inability to pay the excess judgment. Carter subsequently provided such proof, and the estate entered a satisfaction of the judgment in return for payment of $100,000 on March 14.
On March 8 the estate made a demand on Farm Bureau for $56,836.25, which represented the balance of the amended judgment entry minus Carter's $100,000 policy limits. In the demand, the estate agreed to waive pre-and postjudgment interest. Farm Bureau rejected the demand and offered $22,000 in settlement, which the estate rejected.
B. Suit II. On May 9, 2002, the estate sued Farm Bureau for breach of contract for the underinsured damages and for bad faith. The estate later filed an amended and substituted petition. Farm Bureau's amended answer raised several affirmative defenses, the following of which are pertinent to this appeal: (1) the judgment was not obtained with Farm Bureau's written consent, (2) the judgment has no res judicata effect because Farm Bureau was not a party to the underlying tort suit, and (3) the judgment is not an amount the insured was "legally entitled to recover," making the amount fairly debatable.
On January 23, 2004, the estate filed a motion for summary judgment. The estate sought summary judgment on its breach of contract claim but not on its bad faith claim. As to the latter, the estate maintained genuine issues of material fact existed on that issue.
Farm Bureau filed a resistance to the estate's summary judgment motion and a counter motion for summary judgment. Farm Bureau contended that there were genuine issues of material fact as to the estate's breach of contract claim and no genuine issue of material fact as to the estate's bad faith claim.
The district court granted the estate's motion for summary judgment in part and denied it in part. In granting the motion, the court ruled that the consent-to-be-bound provision was contrary to public policy and therefore unenforceable. In denying the motion, the court concluded the amended judgment entry was correct. However, the court also concluded that "Farm Bureau would be unfairly prejudiced if bound by a judgment resulting from erroneous jury instructions, given without objection by Carter's attorney, which became the law of the case." Consequently, the court allowed Farm Bureau to relitigate the issue of damages in the underlying tort suit. Finally, the court sustained Farm Bureau's motion for summary judgment on the estate's bad faith claim.
The estate filed an application for interlocutory appeal and an application to s...
To continue reading
Request your trial
-
Villarreal v. United Fire & Cas. Co.
...claim is that the insurer lacked an objectively reasonable basis for denying the claim. See, e.g., Wilson v. Farm Bureau Mut. Ins. Co., 714 N.W.2d 250, 262–63 (Iowa 2006) (discussing and applying this element); Bellville v. Farm Bureau Mut. Ins. Co., 702 N.W.2d 468, 473 (Iowa 2005) (explain......
-
Thornton v. Am. Interstate Ins. Co.
...whether a worker can receive both forms of benefits at least fairly debatable." Id. at 485 ; see also Wilson v. Farm Bureau Mut. Ins. , 714 N.W.2d 250, 263 (Iowa 2006) ("We agree with Farm Bureau that with no Iowa law on the issue, its duty to consent to be bound by the amended judgment ent......
-
Ben Villarreal Jr., Cleo Martinez, & Lacasa Martinez Texmex, Inc. v. United Fire & Cas. Co., 14-0298
...is that the insurer lacked an objectively reasonable basis for denying the claim. See, e.g., Wilson v. Farm Bureau Mut. Ins. Page 25Co., 714 N.W.2d 250, 262-63 (Iowa 2006) (discussing and applying this element); Bellville v. Farm Bureau Mut. Ins. Co., 702 N.W.2d 468, 473 (Iowa 2005) (explai......
-
The Sherwin-williams Co. v. Iowa Dep't Of Revenue
...our ultimate decision. This court's observation regarding the agency rule was, therefore, dicta. See Wilson v. Farm Bureau Mut. Ins. Co., 714 N.W.2d 250, 260 (Iowa 2006) (refusing to follow reasoning expressed in prior case because it was dicta, stating reasoning was not pertinent to issue ......