Badillo v. Mid Century Insurance Co.

WINCHESTER, V.C.J.,

with whom OPALA, J., joins, dissenting:

¶ 1 Today, the majority hands down a landmark case that is the first to hold an insurance company violated its duty of good faith and fair dealing to its insured, despite its timely settlement offer of the insured’s policy limits and the third party victim’s subsequent acceptance of that offer. In so doing, the majority discards, without reference, our established precedent that:

“Tort liability arises only where there is a clear showing that the insurer unreasonably, and in bad faith, withholds payment of the claim of its insured. Because withholding payment is a necessary element of a claim for bad faith in refusing to pay a legitimate claim, the actions of an insurer after payment is made cannot be the basis of the bad faith claim. Because disagree *1112 ments can arise concerning the amount of coverage, cause of loss, and breach of policy conditions, the tort of bad faith does not prevent the insurer from resisting payment or resorting to a judicial forum to resolve a legitimate dispute.”

Skinner v. John Deere Insurance Company, 2000 OK 18, ¶ 16 , 998 P.2d 1219, 1223 .

Accordingly, I respectfully dissent.

¶ 2 The facts of this cause are as follows. Mario Badillo, insured driver and appel-lee/counter appellant herein, struck a pedestrian, Loretta Smith, (victim) in a crosswalk with his vehicle. She sustained severe injuries that resulted in medical expenses exceeding $700,000.00. Mid Century Insurance Company, one of the appellants/counter ap-pellees, was the liability insurer of Badillo’s vehicle. Badillo’s insurance contract carried a policy limit of $10,000.00.

¶ 3 Smith’s sister employed lawyers on Smith’s behalf, who contacted Mid Century’s adjuster. At their request, appellants sent them a check for the policy limits, along with a release. They refused the release, absent a statement from Badillo. The claims adjuster refused to produce Badillo for a statement, to protect him from potential criminal liability.

¶ 4 Smith’s attorneys then employed a trial lawyer, who telephoned the adjuster and again demanded they produce Badillo for a statement. He threatened to file a lawsuit and refuse subsequent settlement offers, if appellants failed to do so. While the adjuster said he would explore the possibility, he never had the chance because Smith’s trial lawyer filed the instant action within four hours of their conversation.

¶ 5 Mid Century provided independent counsel for Badillo. At trial, the jury awarded damages in the amount of $1,000,000.00, finding Badillo 60% negligent. His portion thereof, together with interest, resulted in a total judgment against him of $633,202.63. Badillo did not appeal. Mid Century again tendered the policy limits to the victim, which she accepted.

¶ 6 Smith’s trial attorney tried to collect from Badillo, but knew it was impossible. When the hearing on assets revealed few, if any, nonexempt assets and insufficient income to pay, Smith’s trial attorney suggested Badillo sue appellants for bad faith. He told Badillo he could use the proceeds to satisfy the judgment against him, and even offered to suspend collection attempts until resolution of the bad faith litigation.

¶ 7 Badillo then filed the instant matter. At the close of trial, appellants moved for directed verdict on the bad faith claim and on the punitive damages claim. The court denied the motion as to the bad faith claim, granted it as to the punitive damages claim, and found no evidence of reckless disregard or malice by the insurer. The jury returned a verdict against appellants in the amount of $2,200,000.00, for financial losses, embarrassment, and mental pain and suffering. The trial court entered judgment but refused to award attorney fees or prejudgment interest.

¶ 8 As a result of the majority’s holding today, a tortfeasor who paid premiums on a $10,000.00 insurance policy now will receive a judgment on jury verdict of $2,200,000.00, an amount not only 220 times greater than his liability policy, but also an amount nearly four times greater than the award his victim received.

¶ 9 When we first recognized the tort of bad faith failure to settle an insurance claim, we adopted the general rule that “[A]n insurer has an implied duty to deal fairly and act in good faith with its insured and the violation of this duty gives rise to an action in tort....” Christian v. American Home As surance Company, 1977 OK 141 , ¶ 25, 577 P.2d 899, 904 . The majority’s opinion today blurs this duty by awarding the insured driver, a tortfeasor, $2,200,000.00 for a bad faith claim on a $10,000.00 policy, after the insurer not only offered early on to settle for the policy limits, but also after payment of the full policy limits to the third party victim. It is difficult to imagine the acts the majority expects from insurance companies, to avoid a bad faith claim. Indeed, their opinion fosters confusion among attorneys for insurance carriers and for insured parties, alike, in their attempts to decipher exactly what is required of them, now, to settle a claim. This certainty is a fundamental facet of the system that allows the former to remain in the business *1113 of providing insurance based upon risk assessment and exposure calculations, and the latter to afford payment of reasonable premiums for insurance coverage.

¶ 10 The majority articulates a standard for bad faith claims against an insurer that “is more than simple negligence, but less than the reckless conduct necessary to sanction a punitive damage award against said insurer.” The references to “reasonable” conduct, versus “unreasonable” conduct, visa-vis an insurer to its insured, blur the lines of demarcation between actions in negligence and the tort of bad faith.

¶ 11 In 1935, this Court rejected negligence as a basis for recovery when an insurer refused to settle a claim for damages covered by the insured’s policy. Boling v. New Amsterdam Cas. Co., 1935 OK 587, ¶¶ 11, 12 , 46 P.2d 916, 917-918 . Although the bad faith tort was more than negligence, it developed into something less than a specific intent tort. Bad faith requires evidence of dishonest intentions, an advantage that is not conscientious, or an action taken that is unreasonable and unfounded. See, 25 O.S.2001, 9. In contrast, the majority’s standard for bad faith culpability by an insurer provides no concrete guidance for future litigants, but instead foists upon them a subjective standard open to a different interpretation by every person who examines it. Indeed, it already has, as evidenced in the numerous cases from other jurisdictions cited by the majority in today’s pronouncement.

¶ 12 While I believe the majority’s opinion, as well as the objections of appellants and Badillo’s answer, all indicate confusion over what actions of an insurer comprise bad faith, there is no confusion as to one essential element thereof, and it clearly is not present in the instant matter. As I stated herein-above, withholding payment is a necessary element of a claim for bad faith in refusing to pay a legitimate claim. Skinner v. John Deere Insurance Company, 2000 OK 18, ¶ 16 , 998 P.2d 1219, 1223 . In this action, it is undisputed that appellants not only tendered a check in the amount of the policy limits early on, but also that they again tendered that check, and the third party victim accepted it, prior to the filing of Badillo’s bad faith claim. An essential element of appellee’s bad faith claim is not met, and this is plainly evident in the undisputed facts of the instant ease. I would continue to follow the teachings articulated by the Court in Christian and Skinner . This matter never should have gone to the jury, the reasonableness of appellants’ conduct never should have arisen and this appeal never should have ensued. The majority’s opinion further complicates the issues surrounding what acts will give rise to a bad faith claim, and what acts may be taken to avoid such a claim.

¶ 13 The irony and inherent injustice of this result, the distortion of our holding in Christian and its progeny, and the overruling, without mention, of Skinner , all compel me to respectfully dissent. I believe that the uncontested facts fail to support a breach of the duty of good faith and fair dealing under Christian and Skinner . Therefore, I would hold that the trial court should have granted the appellants’ motion for a directed verdict.