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Gainsco Insurance Co. v. Amoco Production Co.8/19/2002
liability, the final question for consideration by this Court is whether GAINSCO is further guilty of bad faith, such that it is liable for the full amount of the judgment entered against ANDREWS. GAINSCO not only failed to recognize and honor its contractual obligation to ANDREWS, but also issued a reserva tion of rights letter to ANDREWS. Consequently, ANDREWS faced virtually certain liability to AMOCO far in excess of its coverage provided by GAINSCO. GAINSCO had numerous opportunities to settle, which it persistently rejected.
GAINSCO was fully notified of ANDREWS' intentions. Nothing ANDREWS did in the course of negotiations with AMOCO, culminating in the settlement and assignment of cause of action against GAINSCO to AMOCO could possibly be surprising to GAINSCO. GAINSCO was repeatedly notified. GAINSCO chose to reject every opportunity to accept its responsibility, with full knowledge of the resulting exposure to ANDREWS and the obvious resultant necessity for ANDREWS to negotiate a settlement with AMOCO and assign his rights as against GAINSCO to AMOCO, leading to this bad faith action.
The third party bad faith concept is straightforward enough. It is based on the simple proposition that an insurance company, knowing that it has a liability limit in its policy, should not be permitted simply to permit its insured to be exposed to liability far in excess of the coverage limit, when the insurance company had every opportunity to settle for the limit. The temptation must be obvious, if the insurance company can assume that no matter what happens, its liability is limited to the coverage in the policy. This is especially true when a reservation of rights letter is issued. ANDREWS had very few options--either fight it out in Court, facing certain liability far in excess of the policy limit, or negotiate a reasonable settlement and assign the bad faith claim against GAINSCO to AMOCO in return for a covenant not to execute. As a practical matter, ANDREWS had only one viable option, that being the latter. It matters not in this analysis that AMOCO is a huge corporation and not an individual person, nor that ANDREWS is an individual person as opposed to a vast conglomerate.
GAINSCO had a duty to exercise intelligence, good faith, and honest and conscientious fidelity to the common interest of the plaintiff (AMOCO) as well as of the defendant/insured (ANDREWS) and give at least equal consideration to the interest of ANDREWS. Jarvis v. Farmers Ins. Exchange, 948 P.2d 898 (Wyo. 1997).
To put this analysis back in to the summary judgment context, AMOCO has offered substantial admissible evidence that the stipulated judgment was for a reasonable amount. GAINSCO has offered no evidence at all to the contrary.
[ ] There are several things wrong with this analysis. First, the Contract between Amoco and Andrews, together with the Gainsco policy, clearly limited Andrews' indemnity liability to Amoco to a maximum of $300,000.00. Consequently, Gainsco's rejection of the $297,000.00 settlement offer did not expose Andrews to "liability far in excess of the policy limit . . .." Second, Amoco's evidence of the reasonableness of the settlement went to its settlement with the Abraham Estate, not its settlement with Andrews.
In truth, the record is devoid of any reasonable explanation for two of the four primary terms of the settlement: the judgment amount greatly beyond the risk and dismissal of the third-party complaint against Kobbe. And third, Gainsco was not notified prior to settlement that the third-party complaint would be dismissed. Thus, the settlement prejudiced Gainsco's ability to continue to defend Andrews.
[ ] There can be no ca
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