Young v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 22 June 1995
• Docket Number: No. 21792,21792
• Parties: Harold YOUNG and Hazel Young, husband and wife, Plaintiffs-Respondents-Cross Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellant-Cross Respondent. Boise, March 1995 Term
• Court: Idaho Supreme Court

Page 53

898 P.2d 53

127 Idaho 122

Harold YOUNG and Hazel Young, husband and wife, Plaintiffs-Respondents-Cross Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellant-Cross Respondent.

No. 21792.

Supreme Court of Idaho,

Boise, March 1995 Term.

June 22, 1995.

Elam & Burke, P.A., Boise, and Reed McClure, Seattle, Washington, for appellant. William R. Hickman, argued.

Park & Burkett, Boise, for respondents. W. Anthony Park, argued.

JOHNSON, Justice.

This is an automobile insurance case. We conclude that there is no basis to overturn the jury's verdict finding that the insurance company is liable to its insureds for underinsured motorist coverage under the theory of estoppel. We also conclude that the trial court did not abuse its discretion in awarding only part of the contingent fee the insureds agreed to pay their attorney.

I.

THE BACKGROUND AND PRIOR PROCEEDINGS.

In 1986, Harold and Hazel Young wanted to purchase automobile insurance with a yearly premium plan. The Youngs wanted to do this because they spent the winters in Arizona, and their daughter took care of their bills while they were gone. Because the insurance company that insured their vehicles (the existing insurer) could not provide this type of premium plan, the Youngs decided to transfer the insurance on one of their three vehicles to another company.

Harold Young visited a State Farm Mutual Automobile Insurance Company (State Farm) office where an employee (the agent) informed Harold that State Farm offered yearly premium plans. The agent persuaded Harold to transfer the insurance on all three of the Youngs' vehicles to State Farm.

At trial, Harold testified that after the initial discussion with the agent, he went home and obtained a document from his insurance file showing the coverage provided by the existing insurer for the Youngs' three vehicles. He said he delivered this document, including the following item, to the agent:

UNINSURED AND UNDERINSURED MOTORISTS:

BODILY INJURY $50,000 $100,000 $ 9.50

EA PERSON EA ACCIDENT

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Harold also testified that he wanted State Farm to provide the same "full coverage" he had with the existing insurer, but increased to double the amount. He said that when he delivered the insurance document to the agent, he told the agent he "wanted everything doubled." According to Harold, the agent indicated State Farm would double the coverage, although Harold acknowledged that there was no specific reference to underinsured motorist coverage. Harold told the agent that he and his wife would be leaving for Arizona soon, and that anything State Farm mailed to the Youngs would be forwarded to their daughter.

Although the agent had no specific recollection of her meeting with Harold, she testified that it was her custom to discuss and explain all the various types of coverage with all applicants. The agent stated that she would not have relied on information from a previous policy because it might have tied her to a prior agent's mistake.

After Harold delivered the document describing the coverage provided by the existing insurer, the agent drew up policy applications for the Youngs' vehicles. The section listing coverages begins:

THE INSURANCE APPLIED FOR IS ONLY FOR THE COVERAGES INDICATED BY SPECIFIC PREMIUM ENTRY. IF PREMIUM CANNOT BE ENTERED, CHECK BOXES TO INDICATE COVERAGE REQUESTED. THE PREMIUM SHOWN BELOW MUST BE IN COMPLIANCE WITH THE COMPANY'S RULES AND RATES AND IS SUBJECT TO REVISION.

The application included among the coverages listed "UNINSURED MOTOR VEH.," with the designation "U," and "UNDERINS. MOTOR VEH.," with the designation "W." The applications have a premium, $6.60, entered on the line for uninsured motorist coverage, as well as a check in the box under "U." There is neither a premium on the line for underinsured motorist coverage, nor a check in the box under "W."

A few days after his initial meeting with the agent, Harold returned to the State Farm office to sign the policy applications. Harold testified that he did not read the applications before signing them, and that he relied on the agent to provide the coverage he requested.

The Youngs received a "Declarations Page" for each policy. These declarations pages indicated that the coverages included "U," but there was no listing of "W." State Farm insured the Youngs' vehicles for the next three years. The premium notices included this listing among the coverages and limits:

U UNINSURED MOTOR VEHICLE

BODILY INJURY

100,000/300,000 $6.60

The premium notices did not include any listing of "W" or underinsured motorist coverage.

Harold testified that he did not read the contents of the documents he received from State Farm because he had always relied on his existing insurer to continue the coverage he had before. He stated that he believed State Farm would do the same.

In April 1989, Harold went to State Farm's office to renew a lapsed policy for a vehicle that is not involved in this case. At the request of the person who prepared the application, Harold initialed the coverages he was declining, including "UNDERINS. MOTOR VEH.," "W," coverage.

Three months later, the Youngs were in a serious accident with an underinsured motorist while driving one of their vehicles insured by State Farm. State Farm denied the Youngs' underinsured motorist claim. The Youngs sued State Farm for underinsured motorist benefits, basing their claim on theories of estoppel, breach of oral contract, and negligence. Following a trial, the jury returned a verdict for the Youngs based on both estoppel and breach of contract, but did not reach the question of negligence. The trial court denied State Farm's motions for directed verdict, judgment notwithstanding the verdict, and new trial. Pursuant to I.C. § 41-1839, the trial court awarded the Youngs attorney fees representing one-half of the contingent fee they had agreed to pay their attorney. State Farm appealed. The Youngs cross-appealed, contending that the trial court should have awarded them the full amount of the contingent attorney fee.

This Court assigned the case to the Court of Appeals, which reversed the trial court's denial of State Farm's motion for a judgment notwithstanding the verdict. This Court granted the Youngs' petition for review.

II.

THE PAROL EVIDENCE RULE DOES NOT APPLY TO THE ESTOPPEL CLAIM.

State Farm asserts that the parol evidence rule prevents consideration of the conversation between Harold and the agent in connection with the Youngs' estoppel claim. We disagree.

In Lewis v. Continental Life & Accident Co., 93 Idaho 348, 461 P.2d 243 (1969), the Court said:

The [insurance company] argues that, regardless of what arrangements may have been worked out between the county and itself prior to its issuing the group policy, the "plain words" of the printed form master policy must control. It is argued that we must hold that once this written policy was issued, it, according to the traditional precepts of the parol evidence rule, represented the entire, "integrated" contract between the two parties. With these contentions we cannot agree.

Id. at 350, 461 P.2d at 245.

This continues to be the law in this state. As the Court stated in Lewis:

The purpose of the doctrine of estoppel in insurance cases is to enforce the contract as originally agreed upon the parties. We are not writing a new contract. We are only refusing to allow the insurance company to replace the original bilateral agreement with its own unilaterally drafted insurance form.

Id. at 353, 461 P.2d at 248 (footnote omitted).

III.

THERE WAS SUBSTANTIAL EVIDENCE TO SUPPORT THE JURY'S FINDING OF ESTOPPEL.

State Farm asserts that the trial court should have granted its motion for judgment notwithstanding the verdict because there was no substantial evidence to support a finding of estoppel. We disagree.

In Lewis the Court stated:

This Court, recognizing the character of the written insurance "contract," has long held, where a policy holder is induced to enter into contract in reasonable reliance on promises of or agreements with the soliciting representative of that insurance company thereby leaving the insured person or property otherwise unprotected, and the company profits from that change of position, that the insurance company is estopped to deny the liability for which it actually contracted by raising provisions from its own printed policy form.

93 Idaho at 351, 461 P.2d at 246 (footnote omitted). In the present case, the trial court instructed the jury in substantially this manner.

State Farm contends that as a matter of law the Youngs did not satisfy the requirement that the reliance on the oral promises or agreements be reasonable. State Farm argues that the Youngs' reliance on Harold's conversation with the agent was unreasonable as a matter of law in the face of three years of written documentation showing that the Youngs did not have underinsured motorist coverage.

In Foster v. Johnstone, 107 Idaho 61, 685 P.2d 802 (1984), the Court emphasized that for estoppel to apply an insured's reliance on an agent's oral representations must be reasonable under all the circumstances. The reasonableness of the insured's reliance presents a question of fact for the jury. Id. at 68, 685 P.2d at 809.

In Foster the Court focused on the inadequacy of the trial court's instructions on this issue, noting that "where facts exist which tend to indicate the insureds should have been aware that the policy excluded coverage contrary to the representations of the agent, the trier of fact should consider those facts as bearing on the issue of reasonableness." Id. at 67, 685 P.2d at 808. The Court then listed several factors the jury should have had the opportunity to consider:

(1) the length of time between the receipt of the policy and the accident;

(2) the opportunities to verify the coverage under the policy; and

(3) the type of policy involved and the likelihood of the...