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Voland v. Farmers Insurance Co.2/11/1997
PELANDER, Presiding Judge.
This case presents an issue of first impression in Arizona: does the implied covenant of good faith and fair dealing require an insurance carrier to pay undisputed portions of uninsured motorist (UM) benefits to its insured/claimant before the latter executes a release or obtains an arbitration award? Concluding that defendants/appellees Farmers and State Farm (the carriers) had no such obligation in this case, the trial court granted summary judgment for them and against their insured, plaintiff/appellant Kim Voland. For the reasons stated below, we affirm.
The parties stipulated to the following facts. In March 1992, plaintiff was injured in an accident caused solely by a negligent uninsured motorist. She made a claim for UM benefits under her State Farm and Farmers auto insurance policies, which had UM limits of $25,000 and $100,000 respectively. In April 1993, plaintiff made a settlement demand for the combined limits of $125,000. By that time plaintiff had submitted to both carriers medical records and bills totalling $5,587.14 and verification for lost wages totalling $5,130.62. Neither carrier disputed that the medical bills were reasonable and causally-related to the accident or that the lost wages were caused by the accident.
By late April 1993, both carriers had determined that the value of plaintiff's UM claim was between $30,000 and $40,000. Farmers' representative (on behalf of both carriers) wrote to plaintiff's counsel in May, stating "we feel this claim has a fair value of $30,000" and offering to settle for that amount. A few days later plaintiff's counsel wrote to the carriers, demanding arbitration under their policies and requesting them to pay plaintiff the $30,000 which they had offered. Relying in his letter on Borland v. Safeco Ins. Co., 147 Ariz. 195, 709 P.2d 552 (App. 1985), and Filasky v. Preferred Risk Mut. Ins. Co., 152 Ariz. 591, 734 P.2d 76 (1987), plaintiff's counsel requested the carriers to send "drafts totalling the amount of $30,000.00," stated "we can arbitrate the difference," and concluded: "Although I believe that your evaluation of this claim at $30,000.00 is without foundation and itself is evidence of bad faith, it is clear that failure to pay the undisputed amount would be bad faith."
At no time during negotiations did the carriers pay the $30,000 plaintiff's counsel had requested, nor did they pay plaintiff for her undisputed medical expenses or lost wage claim. Plaintiff or her counsel, however, never specifically requested the carriers to pay only the amount of the medical bills and lost earnings. After the carriers increased their joint offer to $50,000 and plaintiff reduced her settlement demand to $80,000 in October 1993, the matter proceeded to arbitration in December and the arbitrators awarded plaintiff $60,000. Plaintiff accepted that award, conditioned on her right to bring this action. Plaintiff's complaint alleged both carriers had an obligation "to pay undisputed amounts owed to her" under their policies, and their failure to do so "constitutes breach of contract and bad faith." This appeal followed the trial court's summary judgment ruling which rejected plaintiff's claims.
Because the material facts in this case are undisputed, we determine de novo whether the trial court correctly applied the substantive law to those facts. De Szendeffy v. Threadgill, 178 Ariz. 464, 465, 874 P.2d 1021, 1022 (App. 1994). We will affirm if the trial court's Disposition is correct for any reason. Glaze v. Marcus, 151 Ariz. 538, 540, 729 P.2d 342, 344 (App. 1986).
In Arizona, insurance contracts include an implied covenant of "good faith and fair dealing," whereby each p
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