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Gainsco Insurance Co. v. Amoco Production Co.8/19/2002
01 Cal.Rptr. 528, 538 (1984). This is an objective, rather than a subjective, standard. State Farm Fire and Cas. Co. v. Winsor, 5 F.Supp.2d 1258, 1266 (D.Wyo. 1998).
[ ] An objective standard is also used to determine whether an insurer has committed first-party bad faith. Kirkwood v. CUNA Mut. Ins. Soc., 937 P.2d 206, 211 (Wyo. 1997). The question is whether the validity of the denied claim is fairly debatable. First Wyoming Bank, N.A., Jackson Hole v. Continental Ins. Co., 860 P.2d 1094, 1101 (Wyo. 1993). The validity of a claim is fairly debatable if a reasonable insurer would have denied or delayed payment of benefits under the facts and circumstances. Ahrenholtz v. Time Ins. Co., 968 P.2d 946, 950 (Wyo. 1998). To establish a claim for first-party bad faith, a plaintiff must establish (1) the absence of any reasonable basis for denying the claim, and (2) the insurer's knowledge or reckless disregard of the lack of a reasonable basis for denying the claim. Id. at 950-51.
Issue No. 1: Did the district court err as a matter of law when it held that Gainsco's rejection of Amoco's settlement offers amounted to third-party bad faith, because Andrews, who negotiated a unilateral settlement agreement, suffered no damages and thus failed to prove an element of the tort of insurance bad faith?
[ ] Gainsco's position on this issue is straightforward: Third-party bad faith is a tort. State Farm Mut. Auto. Ins. Co. v. Shrader, 882 P.2d 813, 825-26 (Wyo. 1994). " tort is not complete and actionable until all the elements, duty, breach, proximate cause, and damage, are present." Davis v. City of Casper, 710 P.2d 827, 829 (Wyo. 1985) (emphasis added). Because, the argument then goes, Andrews never suffered any damages, Andrews' assignee Amoco has no tort to pursue. Gainsco premises its theory that Andrews was not damaged on two facts. First, the Amoco-Andrews settlement agreement included Amoco's covenant not to execute against Andrews and Amoco's further promise to provide whatever release of lien Andrews might require in the future to transfer property. Second, the Amoco-Andrews settlement agreement limited Amoco's recovery on any indemnity claim to the insurance proceeds. Gainsco then contends that, inasmuch as the Ga insco- Andrews insurance policy requires Gainsco to pay only "those sums that the insured becomes legally obligated to pay as damages," and inasmuch as the settlement agreement leaves Andrews legally obligated to pay nothing as damages, there is nothing for Gainsco to pay.
[ ] Wyoming has recognized as a basic premise that no third-party bad faith cause of action for failure to settle will accrue against an insurer until entry of a judgment against the insured in excess of policy limits. Jarvis v. Farmers Ins. Exchange, 948 P.2d 898, 901-02 (Wyo. 1997); Sabins v. Commercial Union Ins. Companies, 82 F.Supp.2d 1270, 1278 (D.Wyo. 2000). The next question is, where a judgment in excess of policy limits has resulted from a settlement between the insured and the claimant rather than from a trial, and as part of that settlement the insured is insulated by a covenant not to execute or similar device, may the claimant, as the insured's assignee, pursue a third-party bad faith claim against the insurer?
[ ] In Romstadt v. Allstate Ins. Co., 59 F.3d 608 (6 th Cir. 1995), the insured and the claimant settled a personal injury lawsuit that was being defended by the insurer. The settlement, which occurred without the insurer's participation, included a confessed judgment in excess of policy limits and an agreement by the claimant to enter a release and satisfaction of judgment as to the insured. The insured's payment of its policy limits to the claimant did not thw
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