# State Farm Mutual Automobile Insurance Co. v. Shrader

> Wyoming Supreme Court · September 29, 1994 · 882 P.2d 813

URL: https://www.frixlaw.com/law-library/cases/9855201

## Case

- **Full name:** STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a Mutual Company, Appellant (Defendant), v. Donna R. SHRADER and Terry Shrader, Appellees (Plaintiffs); Donna R. SHRADER and Terry Shrader, Appellants (Plaintiffs), v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a Mutual Company, Appellee (Defendant)
- **Court:** Wyoming Supreme Court
- **Decided:** September 29, 1994
- **Citations:** 882 P.2d 813; 1994 Wyo. LEXIS 110
- **Precedential status:** Published
- **Opinion:** Dissent by Thomas
- **Judges:** Thomas, Cardine, MacY, Taylor, Rooney, Ret
- **Cited by:** 100 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9855201

## How later opinions describe it (automated extraction)

- rejecting the position "that an insured must first obtain a determination of the fault and damages caused by an uninsured motorist before filing a direct action against the insurer"

## Opinion text

THOMAS, Justice,
dissenting.
I find I also must dissent from the opinion of the majority of the Court in this case. Essentially, my views are quite like those of Justice Rooney, except for the fact that I would not approve the direct action against the insurer in such an instance.
It is an anathema that, in a jurisdiction in which the very mention of insurance in a trial between individuals can result in a mistrial, the evils justifying that rule can be readily avoided by a first-party action against the insurer. While insurance carriers are used to running uphill in litigation, it does seem oppressive to require them to climb the wall.
Furthermore, strong public policy considerations support the denial of an insurer’s application to intervene in underlying tort litigation. “Clearly the policy of the law is to keep the issue of insurance out of personal injury litigation.” Cromer v. Sefton, 471 N.E.2d 700, 704 (Ind.App.1984) (holding insurer is not permitted to intervene in underlying tort action to litigate coverage issues). W.R.E. 411 reflects this policy by generally prohibiting the introduction of evidence of insurance. As the court noted in Allstate Insurance Co. v. Atwood, 819 Md. 247 , 572 A.2d 154, 159 (1990), permitting insurance companies to intervene and become a party to a tort proceeding leads to multiple problems, including forcing the insured to defend against both the resources of the plaintiff and the insurer.
State Farm Mut. Auto. Ins. Co. v. Colley, 871 P.2d 191, 195 (Wyo.1994).
In the popular’ vernacular, the playing field hardly seems level in this instance. In fact, it seems more vertical with the insurer at the bottom. Truly, the only way to distinguish the policy articulated in Colley is to note that the insurance carrier cannot intervene when it wants to, but it must participate as a party when it does not want to.
*843 I am troubled by the following features of the court’s opinion:
1. Permitting the direct action against the insurer, rather than requiring tort liability to be determined between the insured and the alleged tortfeasor.
2. A statement in the majority opinion, which seems to serve as the fulcrum, is articulated as a holding that “the Shraders established that they were ‘legally entitled’ to seek indemnification for the damages proximately caused by the negligence of the uninsured motorist.” (Emphasis added.) The language of the policy is “legally entitled to collect.”
3. The conclusion that the language of the State Farm policy attempts to restrict the right to bring an action against the uninsured motorist. The policy addresses only resolution of the question between State Farm and the insured, and it seems clear to me it does not violate Wyoming DEPARTMENT OF INSURANCE REGULATIONS, Ch. 23, § 8 (1989).
4. In light of the regulatory authority of the insurance commissioner, I do not think the unequal bargaining power is a factor in this case as the court found in McCullough v. Golden Rule Ins. Co., 789 P.2d 855 (Wyo.1990).
5. I am not satisfied that the accounting of damages provided by the Shraders to State Farm necessarily serves as unchallenged proof of damages in the context of good faith or bad faith.
6. The number of complexities, as illustrated by the majority opinion, arising from the joinder of the several claims is very troublesome.
Perhaps, as much as anything, this case demonstrates the wisdom of the views espoused by Justice Golden and me in our dissenting opinions in McCullough . It demonstrates, almost to the ultimate, the product of permitting an insured to assert the independent bad faith tort cause of action against his own insurer.
The critical error in the majority opinion starts with the support it finds in other jurisdictions for the right of the insured to bring the action for uninsured motorist benefits directly against the insurance company. Our McCullough precedent is invoked to justify the right to bring the first-party bad faith tort action. It then justifies the joinder of those two causes of action. I cannot find among the authorities cited by the majority any jurisdiction in which heretofore these claims have been joined in one trial.
Permitting the action for uninsured motorist benefits to be tried at the same time as the action for first-party bad faith tort puts the insurer in a truly untenable position. From this day forward, in the absence of legislative relief, an insurance carrier will be unable to do anything about uninsured motorist coverage benefits other than to pay the policy limits to its insured. The result in this case is related to neither good faith nor bad faith. It simply establishes that good faith and bad faith are both irrelevant. The risk of being wrong in its determination as to liability or the amount of damages simply subsumes the right of the carrier to test either issue with its insured as long as these claims can be tried together.
I would much prefer resorting to the rule in the more conservative jurisdictions that requires the resolution of the tort liability arising out of the accident prior to the pursuit of contract claims by the insured against the insurer. E.g., Baxter v. Royal Indem. Co., 285 So.2d 652 (Fla.Dist.Ct.App.1973), cert. discharged, 317 So.2d 725 (Fla.1975); Craig v. Iowa Kemper Mut. Ins. Co., 565 S.W.2d 716 (Mo.Ct.App.1978); Pemberton v. Farmers Ins. Exch., 109 Nev. 789 , 858 P.2d 380 (1993); Radlein v. Indus. Fire & Cas. Ins. Co., 117 Wis.2d 605 , 345 N.W.2d 874 (1984). As pointed out in Pemberton , a judgment against the uninsured motorist is not required to establish the insured is legally entitled to collect, but that right can be established by a settlement with the insurance company, a settlement with the uninsured motorist, arbitration with the insurance company, or an action against the insurance company. I recognize statutory provisions were relied upon in some of these decisions, but it may be that the only recourse now open to insurance carriers in Wyoming is to seek legislative relief. If we are to recognize the right of the insured to bring an action direct *844 ly against the insurer for uninsured motorist benefits, then we clearly should require that claim to be resolved before proceeding to deal with the contract claims. I am satisfied any other approach turns out to be so unfair to insurance carriers as to be unreasonable.
With respect to some of the additional concerns I have with the majority opinion— the majority asserts that the policy language attempts to restrict the right of the Shraders to bring an action against the other motorist. I cannot agree the policy rationally can be given that effect. A much more logical construction is that the policy language would only apply if no such action were brought, as in this case. Given the statutory language and the regulations of the insurance commissioner, the policy language cannot possibly have the effect of restricting the right of the insureds to sue the tortfeasor and, consequently, I would not declare the contractual provision void. Instead, it should be given effect if any lawful construction is possible. I submit I have suggested a lawful construction, and the contractual language does result in a condition precedent to the action of the Shraders. It should not be ignored that the insurance commissioner approves the policy language under Wyoming statute. Wyo. Stat. § 31-10-101 (1989).
The majority relies upon the provisions of Wyo.Stat. § 31-10-101 to hold public policy of Wyoming requires a direct action against the insured. The statute clearly is intended to eliminate any unequal bargaining power between the parties since the coverage is required, and the coverage must be written under provisions approved by the insurance commissioner. The majority invokes McCullough , pointing out that the “recovery in tort for the breach of the duty of good faith and fair dealing is premised upon the existence of a special relationship created by the unequal bargaining power that an insurer has over an insured.” State Farm Mut. Auto. Ins. Co. v. Shrader, No. 93-26, and Shrader v. State Farm Mut. Auto. Ins. Co., 882 P.2d 813, 825 (Wyo.1994). I respectfully submit the majority is stacking public policies in this instance, and it should be recognized that the regulatory power attached to uninsured motorist coverage erases the policy justification found in McCullough , in this instance.
I believe the justification for joining the action against the insurer for the uninsured motorist benefits with the claim for first-party bad faith tort is not adequately justified by the precedents injected in the majority opinion, and it seems to me we have gone too far in this case to attempt to penalize an insurance carrier. While, like all of us, insurance companies may have their faults, I do not think they are such bad citizens in our society that we need to create special rules to deprive them of fairness and justice in our legal institutions.
I would reverse the ruling joining the claim for uninsured motorist benefits with the tort claim for first-party bad faith. Those claims must be tried separately to achieve any sort of fairness.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9855201. Public record. Not legal advice.