State Farm Mutual Automobile Insurance Co. v. Goddard.
2021 COA 15. No. 19CA1108. Insurance Bad Faith—Directed Verdict—Breach of Contract—Collusion—Irrelevant or Prejudicial Evidence.
February 11, 2021
State Farm Mutual Automobile Insurance Co. (State Farm) insured Griggs under an auto insurance policy (the policy). Griggs injured Goddard and two others in a four-vehicle accident. Goddard and the other injured persons each made a claim under the policy. State Farm made an offer to settle Goddard’s claim, but Goddard did not respond. State Farm settled with the other injured persons.
In the meantime, Goddard sued Griggs. State Farm did not learn of the lawsuit until after its settlement offer. State Farm hired an attorney to defend Griggs against Goddard’s claims. Griggs and Goddard entered into an agreement whereby Griggs admitted liability, agreed to have Goddard’s damages determined in arbitration, and assigned any claims he might have against State Farm to Goddard (the agreement). An arbitrator entered an award against Griggs for $837,193.36. After arbitration, State Farm sued Griggs seeking a declaration that Griggs breached his insurance contract by entering into the agreement with Goddard. Goddard brought a bad faith counterclaim against State Farm. A jury returned a verdict in favor of State Farm.
On appeal, Goddard argued that the district court erred by denying her motion for directed verdict on State Farm’s breach of contract claim because the claim raised exclusively legal questions and it failed on the facts. Whether there has been a breach of contract is a question of fact to be determined by a jury, absent undisputed evidence that compels a jury to find one way or the other. Before an insured is justified in stipulating to a judgment and assigning its claims against its insurer to a third-party claimant, it must first appear that the insurer has unreasonably refused to defend the insured or to settle the claim within policy limits. And whether an insurer has acted unreasonably is a question of fact. Here, whether State Farm appeared to have acted unreasonably in denying Goddard’s policy-limits settlement offer and, consequently, whether Griggs breached the insurance contract by entering into the assignment agreement were questions of fact to be determined by the jury. Further, the relevant facts were vigorously disputed at trial, and a jury found in State Farm’s favor. Therefore, the district court did not err in denying the directed verdict motion.
Goddard further contended that it was error to deny her motion for a directed verdict on State Farm’s collusion affirmative defense because the evidence was insufficient to allow the jury to consider it. Even if this was error, any such error was harmless, because the jury found that Goddard had not proved her counterclaim for bad faith breach of insurance contract and thus did not reach the merits of the collusion defense.
Lastly, Goddard argued that the district court erred by admitting her attorney fees agreement because it was irrelevant and prejudicial. However, the fee agreement was relevant to the causation element of Goddard’s counterclaim for bad faith breach of insurance contract and to State Farm’s collusion affirmative defense, and it was not unfairly prejudicial. Accordingly, the court did not abuse its discretion in admitting it. Further, there was no evidence in the record that other similar firm agreements were admitted, and to the extent Goddard contended that the district court erred by admitting one witness’s testimony about assignment agreements from another case, she did not preserve the issue.
The judgment was affirmed.