Wittmer v. Jones

• Decision Date: 30 September 1993
• Docket Number: 92-SC-710-DG,Nos. 92-SC-707-D,s. 92-SC-707-D
• Citation: 864 S.W.2d 885
• Parties: Loretta WITTMER, Movant, v. Tamara JONES and State Farm Mutual Automobile Insurance Company, Respondents. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Movant, v. Loretta WITTMER and Tamara Jones, Respondents.
• Court: United States State Supreme Court — District of Kentucky

Page 885

864 S.W.2d 885

Loretta WITTMER, Movant, v. Tamara JONES and State Farm Mutual Automobile Insurance

Company, Respondents.

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Movant, v. Loretta WITTMER and Tamara Jones, Respondents.

Nos. 92-SC-707-DG, 92-SC-710-DG.

Supreme Court of Kentucky.

Sept. 30, 1993.

As Modified Oct. 11, 1993.

Phillip G. Abshier, Bamberger & Abshier and James S. Watson, Castlen, Wilkey & Watson, Owensboro, for Wittmer.

Robert V. Bowers, Jr., Bennett, Bowman, Triplett & Vittitow, Owensboro, for Jones.

Lee E. Sitlinger, Sitlinger, McGlincy, Steiner & Theiler, Louisville, for State Farm.

LEIBSON, Justice.

Three recent decisions from this Court recognize a cause of action to recover tort damages against insurance companies upon proof of bad faith failure to pay claims clearly due and payable. These cases are: Stevens v. Motorists Mut. Ins. Co., Ky., 759 S.W.2d 819 (1988), recognizing a statutory bad faith claim by an insured against his own insurer under the Consumer Protection Act (CPA), KRS 367.110, et seq.; State Farm Mut. Auto. Ins. Co. v. Reeder, Ky., 763 S.W.2d 116 (1989), recognizing the existence of a claim by a third-party for damages sustained by reason of an insurance company's violation of the Unfair Claims Settlement Practices Act (UCSPA), KRS 304.12-230 and 235; and, finally, Curry v. Fireman's Fund Ins. Co., Ky., 784 S.W.2d 176 (1989), recognizing an insured's recovery against his own insurer of consequential and punitive damages for bad faith in breach of a business insurance policy based on common law principles. In so doing, Curry overruled our previous decision to the contrary in Federal Kemper Ins. Co. v. Hornback, Ky., 711 S.W.2d 844 (1986). In the present case we are called upon to explain, as best we can, the mechanics involved in applying these three decisions.

Loretta Wittmer and Tamara Jones were involved in a motor vehicle accident on October 19, 1988, in Owensboro, Kentucky. Jones failed to yield the right-of-way after a stop sign and struck Wittmer's vehicle in the side, causing it to careen out of control into a pole. Jones carried liability insurance with State Farm, whose claims representative contacted Wittmer within a few days after the accident and offered to pay her $3,562.66, the cost of repairs to the vehicle using new parts. Wittmer had purchased the car new only three weeks before, and had about 1,000 miles on it. She refused State Farm's offer because she wanted State Farm to replace her vehicle with a new vehicle equivalent to hers before it was damaged. When State Farm refused to offer more than the cost of repair she went to an attorney. Her attorney negotiated with State Farm, eventually demanding "the difference between the fair market value (FMV) immediately before and immediately after" the car was damaged, placing the before FMV at $10,500, which was substantially equivalent to the new car value of Wittmer's vehicle. The after FMV was stated at $4,000, and the difference demanded was $6,500. The lawyer's position was, and remains to this day, that the fact that a vehicle is repaired, no matter how perfectly, necessarily depreciates its FMV when compared to an identical car which has never been wrecked, and State Farm has unreasonably refused to take this factor into account. The problem with the settlement demand letter from Wittmer's lawyer is that, while rejecting cost of repair, the figures set forth for before and after FMV are not attributed to any reliable source, or supporting documents of any kind. They are described simply as "[o]ur computation." Likewise, the letter demands "loss of use" at "$280," an unsubstantiated figure.

Wittmer's principal claim, throughout this litigation, has been that because the UCSPA specifies it is an "unfair claims settlement practice" to "refuse to pay claims without conducting a reasonable investigation based upon all available information (KRS 304.12-230(4))," when State Farm used repair cost rather than obtaining appraisals to fix the difference in FMV, it violated the terms of the Act. However, the facts are that Wittmer's counsel did not obtain and present appraisals in connection with his demand letter. Further, Wittmer's trial expert (whose credibility was arguably impaired since he was a brother-in-law to one of Wittmer's attorneys) testified to a substantially lower before FMV than the new car value presented in Wittmer's demand letter and testified that the difference in FMV was $5,150 rather than the $6,500 claimed in the demand letter.

State Farm's trial witness was the repair shop operator who had provided the repair estimate. He testified the difference in FMV was $3,000 to $3,500. Ultimately the jury fixed the FMV difference at $3,700.

State Farm acknowledges that when a vehicle has been wrecked, even though perfectly repaired, this could make a difference to a knowledgeable buyer. But nobody has ever put a dollar value on this difference. Further, the regulations provided by the Commissioner of Insurance to implement the Act, to provide insurers with guidelines for dealing with the public under the UCSPA, specify that:

"Repair estimates or appraisers' reports may be used to indicate the difference in fair market value." 806 KAR 12:090, Sec. 8(2), 1989. [Emphasis added.]

Wittmer sued Jones in tort, alleging property damage to her automobile and, in the same Complaint, sued State Farm charging violation of the UCSPA, demanding damages sustained by reason of such violation, plus prejudgment interest, attorney's fees and court costs. Jones answered alleging contributory fault as part of her defense. State Farm utilized a different lawyer to defend its insured from the one used to defend the company, and moved to bifurcate the issues to avoid prejudice that might accrue to Jones' defense from having the claims joined for trial. The trial court overruled this motion. Thereafter, notwithstanding the joinder, the jury at trial found Wittmer 30% at fault, and apportioned the $3,700 in damages awarded against Jones accordingly, and awarded "0" damages against State Farm. Against State Farm, in instructions which have not been questioned on this appeal, the trial court listed five different obligations placed upon insurers under the UCSPA as potential violations for the jury to consider. The jury verdict found that there was a violation of the UCSPA even though no damages were awarded.

The only element of damages specified in the instructions on the UCSPA claim for the jury's consideration was:

"Emotional distress and mental anguish suffered by reason of violating the Kentucky Unfair Claims Settlement Practices Act."

State Farm suggests the verdict was "0" because, if anything, there were only "technical violations" of the act. The trial court decided not to instruct on punitive damages finding insufficient evidence to warrant such a claim. The trial court entered judgment on the verdict for State Farm.

Wittmer appealed claiming the instructions were in error because they did not allow the jury to consider prejudgment interest or punitive damages, and the Court of Appeals agreed, reversing and remanding on error in the instructions.

Also, Wittmer claimed the trial court's instruction on damages was not sufficient to cover her "economic loss" from being deprived of a vehicle "for 840 days," the time period from the date of accident until she finally bought a new car. In this, the Court of Appeals affirmed the trial court.

Finally, Wittmer also appealed the verdict and judgment in her claim against Jones, claiming she was entitled to a directed verdict placing 100% of the fault for the accident upon Jones and that jury verdicts for storage costs and loss of use were inadequate as a matter of law. The Court of Appeals affirmed the trial court on this issue.

State Farm moved for discretionary review of the Court of Appeals decision, claiming "the facts offered at trial did not support an instruction on punitive damages" and "the trial court did not err in failing to award prejudgment interest." Wittmer has also filed a motion for discretionary review against Jones, her principal claims being: (1) as a matter of law, Jones was 100% at fault for this accident, and (2) the trial court erred in failing to instruct against State Farm on economic loss from being deprived of her vehicle in addition to emotional distress and mental anguish.

We granted discretionary review because this case raises recurring issues in claims of this nature. For reasons to be stated, we reverse the Court of Appeals in part. We affirm the final judgment of the trial court as to Jones, and also as to State Farm although we disagree with the road the trial court took to get there.

Turning first to the contributory fault issue, giving Jones the benefit of the doubt, as the jury, the trial court, and the Court of Appeals have already chosen to do, we uphold the finding that there was sufficient evidence of negligence to apportion fault against Wittmer. We will not second-guess the trial court and the Court of Appeals in weighing the evidence on contributory fault in what is admittedly a close question. Jones failed to yield the right-of-way after a stop sign, crossed the center line to some degree (however slight), and struck Wittmer's vehicle broadside. But the issue here is not Jones' negligence, but Wittmer's contributory fault. Wittmer called Jones to the stand as a witness and her testimony presented evidence from which the jury could infer Wittmer's contributory fault. Jones admitted entering the intersection without seeing Wittmer's vehicle, claiming she was blinded by the sun until near the center of the intersection. A driver with a duty to yield the right-of-way "will not be heard to say that [she] looked but did not see an approaching car" "plainly visible" if she had been keeping a proper lookout. Couch v. Hensley, Ky., 305 S.W.2d 765, 767 (1957); Vaughn v. Jones, Ky., 257 S.W.2d 583 (1953)....