Unpublished Disposition, 852 F.2d 571 (9th Cir. 1984)Annotate this Case
United States Court of Appeals, Ninth Circuit.
Before POOLE and CANBY, Circuit Judges, and RAUL A. RAMIREZ, District Judge.*
Plaintiff-appellee Joyce M. Jenkins, an assignee of the insured, brought this action against defendant-appellant All Nations Insurance Co. (ANIC), asserting that ANIC acted in bad faith in failing to settle Jenkins' claim against the ANIC insured. The jury returned a verdict in favor of Jenkins and found ANIC liable for the excess judgment to which its insured was exposed, namely $650,000. ANIC appeals the district court's denial of its post-trial motions for judgment n.o.v. and for a new trial.
This action arises from an automobile collision involving an ANIC insured and appellee Jenkins. On December 14, 1983, the insured, in an intoxicated state, drove his automobile the wrong way onto a freeway exit ramp colliding with the automobile containing Jenkins. Jenkins suffered serious, permanent injuries as a result of said collision.
The insured carried motor vehicle liability insurance, issued by appellant ANIC, in the amount of $25,000 per individual and $50,000 per accident. On the day of the accident, the insured notified ANIC of the central details; shortly thereafter, Jenkins sent ANIC medical bills totalling approximately $40,000. By February 2, 1984, ANIC had internally confirmed coverage and had set the reserves for the Jenkins claim at the policy limits.
In February and March of 1984, a series of communications was exchanged between counsel for Jenkins and ANIC representatives. Two letters are of particular significance. By letter dated March 8, 1984, Jenkins reiterated prior unanswered requests for information regarding coverage. In addition, Jenkins demanded an indication whether ANIC would honor her claim or, if not, the defenses upon which ANIC relied. Jenkins requested a response within ten days. By letter dated March 19, 1984, Jenkins made similar demands. Jenkins insisted upon a "prompt answer" and threatened legal steps if no answer was forthcoming.
In response to both of these letters, ANIC requested additional medical information and enclosed copies of the declaration sheet. Notably, ANIC did not confirm its position regarding coverage or otherwise agree to honor Jenkins' claim.
In a final overture, on March 23, 1984, Jenkins sent a letter to ANIC directing its attention to the March 19 communication. No further response from ANIC having been received, on April 5, 1984, Jenkins filed suit against the insured. The next day, upon receipt of service of the complaint, an ANIC representative telephonically offered to pay the policy limits of $25,000 to Jenkins. Jenkins rejected this offer, advising the representative that it was "too late."
Prior to the filing of the lawsuit, the insured had not been notified of any of the above-described correspondence between Jenkins and ANIC.
In reviewing the district court's denial of ANIC's motion for judgment n.o.v., this court applies the same standard as the district court: whether the evidence is such that reasonable persons could only reach a verdict for ANIC. Walker v. KFC Corp., 728 F.2d 1215, 1223 (9th Cir. 1984). The substantive law to be applied in this diversity action is Montana law.
Applying the factors as set forth in the keynote Montana insurer bad faith case, Jessen v. O'Daniel, 210 F. Supp. 317 (D. Mont. 1962), aff'd sub nom National Farmers Union Property & Casualty Co. v. O'Daniel, 329 F.2d 60 (9th Cir. 1964), the following points were uncontroverted: First, Jenkins' injuries were such that any verdict would likely be in excess of the policy limits. Not only was ANIC informed by its own adjuster of the severity of Jenkins' injuries, but they also received medical bills totaling some $40,000. Second, a defense verdict was absolutely foreclosed. At the time of the accident, the insured was intoxicated and driving the wrong way onto an interstate highway. Third, ANIC failed to respond to Jenkins' demands for payment, failed to confirm or deny coverage, and failed to provide pertinent information upon request. Fourth, prior to the commencement of litigation ANIC did not inform the insured of the correspondence received from Jenkins.
At trial, ANIC presented two factual theories to negate a finding of bad faith, each of which was disputed by plaintiff's evidence: First, ANIC contended that without the requested medical reports it was unable to connect Jenkins' injuries with the December 14, 1983 accident. In this regard, two of plaintiff's attorney experts testified to the effect that, in light of the documentation already in ANIC's file, the submission of medical reports was a mere technicality. Second, ANIC contended that it had been "set up" by Jenkins' attorneys into not timely paying the policy limits. Plaintiff's independent attorney expert testified that Jenkins' attorneys had followed accepted legal practices and had done nothing to induce ANIC into not paying the policy limits.
Based on the above, the evidence amply supports a jury verdict in favor of Jenkins.
ANIC contends that, under Montana law, plaintiff's tender of a "firm offer" to settle for policy limits is a prerequisite to insurer liability for bad faith failure to settle. ANIC concludes that the correspondence received from Jenkins did not constitute a firm offer to settle because it failed to clearly indicate that Jenkins would release her claim in return for payment of the policy limits. Furthermore, ANIC contends that such offer to settle was unreasonably withdrawn prior to ANIC's tender of policy limits the day after the complaint was filed.
The Montana courts have not directly addressed the supposed requirement of a firm offer to settle, and those cases indirectly bearing on the issue give conflicting signals. Compare Jessen v. O'Daniel, 210 F. Supp. at 326-327 with Thompson v. State Farm Mut. Auto. Ins. Co., 505 P.2d 423, 429 (Mont.1973). A review of cases from across the nation, however, suggests that the insurer's duty to settle extends beyond responding to firm offers to settle within policy limits and includes a duty to pursue settlement overtures which are less than "letter-perfect." E.g., Maine Bonding & Casualty Co. v. Centennial Ins. Co., 693 P.2d 1296 (Ore.1985) (implicitly disapproving of Baton v. Transamerica Ins. Co., 584 F.2d 907, 913 (9th Cir. 1978) (Ore. law)); Allen v. Allstate Ins. Co., 656 F.2d 487 (9th Cir. 1981) (Ca. law); Coleman v. Holecek, 542 F.2d 532 (10th Cir. 1976) (Kansas law). In short, an insurer's duty includes a duty to pursue settlement negotiations whenever the circumstances indicate that the insurer would pursue such negotiations on its own behalf were its potential liability equal to that of the insured.
The correspondence ANIC received from Jenkins clearly demanded payment of the policy limits on Jenkins' claim. Moreover, ANIC's own claims agent and its litigation supervisor, as well as plaintiff's attorney experts, each testified that they understood the March 19 letter to be an offer to settle within the policy limits. Given the fact that potential liability far exceeded the limits, the distinct advantages for the insured in the pursuit of such a settlement are obvious. Viewed in total, these circumstances are sufficient to give rise to an insurer duty to pursue settlement on behalf of its insured.
ANIC further contends that, as a matter of law, it fulfilled its duty to pursue settlement opportunities by its tender of the policy limits on April 5, 1984, the day after the complaint was filed. Jenkins, in turn, notes that its offer was withdrawn within ten days of the March 19 letter or, at the very latest, on the day the complaint was filed. Jenkins contends that ANIC was given a reasonable period of time to respond to the offer, but failed to do so.
Generally speaking, an insurer's failure to settle is in bad faith only if it had been presented with a reasonable opportunity to settle, including a reasonable length of time within which to respond to any settlement overtures. Grumbling v. Medallion Ins. Co., 392 F. Supp. 717 (D.Ore.1975), aff'd, 545 F.2d 686 (9th Cir. 1976). What constitutes a reasonable length of time will vary with the circumstances. For example, where liability was certain and damages would plainly exceed the policy limits, fifteen days to respond has been considered reasonable. Id. at 721.
In her letter dated March 8, 1984, Jenkins requested a response in ten (10) days. Further, in her letter dated March 19, 1984, Jenkins requested a "prompt answer." Yet ANIC made no attempt at a settlement response until April 5, 1984. Given that, as in Grumbling, liability was certain and damages would plainly exceed the policy limits, this court cannot determine, as a matter of law, that ANIC was not accorded a reasonable length of time within which to respond.
ANIC next objects to the testimony of "legal conclusions" by attorney expert witnesses proffered by plaintiff. Specifically, ANIC objects to expert testimony regarding violations of the Montana Unfair Claims Settlement Practices Act (Settlement Act) and the bad faith of the ANIC in refusing to settle. ANIC contends that plaintiff's attorney experts testified regarding the law to be applied in the case and advised the jury on what ultimate legal conclusions it should reach.
The trial court has broad discretion in admitting expert testimony, and the reviewing court will sustain the trial court's action unless it is manifestly erroneous. Taylor v. Burlington Northern R. Co., 787 F.2d 1309, 1315 (9th Cir. 1986). Moreover, even if the admission of expert testimony constitutes an abuse of discretion, the judgment will not be reversed if the error was harmless, i.e., the admission of the evidence more probably than not had no determinative effect on the verdict. Energy Oils, Inc. v. Montana Power Co., 626 F.2d 731, 737 (9th Cir. 1980).
Federal Rule of Evidence 704 provides that "testimony ... otherwise admissible is not objectionable because it embraces the ultimate legal issue to be decided." The effect of Rule 704, thus, is to remove the proscription against opinions on "ultimate issues" and to shift the focus to whether the testimony is "otherwise admissible." As the Advisory Committee note to Rule 704 explains: "Under Rules 701 and 702, opinions must be helpful to the trier of fact, and Rule 403 provides for exclusion of evidence which wastes time. These provisions afford ample assurances against the admission of opinions which would merely tell the jury what result to reach."
With regard to the expert testimony concerning the Settlement Act, the admission of this testimony was not reversible error for at least two reasons: First, the testimony was helpful to the jury and did not invade the province of the court. Significantly, no claim under the Settlement Act was actually presented to the jury. Rather, plaintiff introduced this evidence only to rebut ANIC's suggestion that the prior inclusion of this claim was part of a plan to "set up" ANIC. The jury, thus, would not otherwise be instructed by the court on the law pertaining to the Settlement Act, nor were any violations thereof "ultimate issues" in the action. Second, the error in admission, if any, was harmless. The issue regarding the Settlement Act was not an element of plaintiff's affirmative case, but only a tangential aspect of defendant's defense. Thus, the objected to testimony concerning the Settlement Act would not in itself be determinative in this action.
With regard to the expert testimony concerning the bad faith of ANIC, the admission of this testimony also was not reversible error for the same general reasons. First, the testimony was helpful to the jury because it elucidated the standards and practices of the handling of personal injury claims by insurance companies. Second, the other evidence tending to show bad faith was so extensive that any error in the introduction of the few legal conclusions would be harmless.
Viewing the record as a whole, the admission of the so-called "legal conclusions", pertaining both to the Settlement Act and the bad faith of ANIC, was not error, and if error, was not the type which would have realistically affected the verdict rendered.
In assessing jury instructions, consideration must be given to the charge as a whole to determine whether it is misleading or incorrectly states the law to the prejudice of the objecting party. Coursen v. A.H. Robins Co., 764 F.2d 1329, 1337, opinion corrected by 773 F.2d 1049 (9th Cir. 1985). A judgment will not be reversed because of a mistake in jury instructions if the instructions fairly and adequately cover the issues presented. Id.
ANIC contends that the jury instructions were erroneous in three respects: First, ANIC contends that the jury instructions contained the wrong legal criteria for a bad faith action. After giving some general background on an insurer's duty to act in good faith, the trial court instructed the jury to consider several of the so-called Jessen factors, along with all the other circumstances, in determining whether ANIC acted in good faith in attempting to settle the claim of Jenkins against Kraemer. These instructions are fully consistent with Montana insurer bad faith law. See Jessen v. O'Daniel, 210 F. Supp. 317.
Second, ANIC objects to the jury instruction that liability may be based on the insurer's negligent failure to settle. ANIC contends that Montana law does not support such liability based on negligence. Actually, Montana is quite clear that negligence can result in insurer liability for failure to settle. Gibson v. Western Fire Ins. Co., 682 P.2d 725 (Mont.1984).
Finally, ANIC contends that the failure to specifically instruct the jury on ANIC's theory of the case constituted error. ANIC had requested jury instructions specifically detailing the following three defense theories: (1) Jenkins never made a firm offer to settle the case, (2) if such an offer was made, ANIC's tender of policy limits was made within a reasonable period of time and (3) Jenkins' attorneys "set up" ANIC into not timely paying the policy limits. The district court declined to so instruct the jury, deciding that the instructions should be "pretty broad rather than specific." Therefore, in presenting ANIC's theory of the case, the district court summarized generally ANIC's assertions that it attempted in good faith to settle the claim and that it gave fair consideration to the interests of the insured at all times.
A defendant is entitled to an instruction concerning its theory of the case if it is supported by law and has some foundation in the evidence. Underhill v. Royal, 769 F.2d 1426, 1433 (9th Cir. 1985). However, the reviewing court examines the instructions as a whole, rather than merely viewing the failure to give any one instruction. Gauthier v. AMF, Inc., 788 F.2d 634, 635, opinion amended, reh denied, 805 F.2d 337 (9th Cir. 1986). The trial court has broad discretion in formulating the instruction and will be reversed only upon a showing of abuse of discretion. Id.
The trial court did not abuse its discretion in giving broad instructions regarding ANIC's theory of the case, as opposed to the specific instructions proposed by ANIC. ANIC's theories were not affirmative defenses requiring individualized instruction, but merely factors tending to negate a finding of bad faith. The trial court adequately informed the jury that ANIC denied acting in bad faith; further specifics were left to the arguments of defense counsel.
The judgment of the district court is AFFIRMED.