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Lira v. Shelter Insurance Co.12/29/1994
Defendant, Shelter Insurance Company, appeals the judgment entered on a jury verdict in favor of plaintiff, Joel Lira, on a claim for bad faith failure to settle a previous personal injury claim against Lira. We reverse.
Lira was the defendant in a previous personal injury action arising from Lira's negligence in leaving his truck parked in a traffic lane of Interstate 25 in Denver and proceeding to a bar without taking precautions to warn oncoming traffic about his abandoned truck. During pretrial proceedings in the personal injury case, the injured plaintiff in that case offered to settle the claims against Lira for the limits of his policy with Shelter, in the amount of $50,000, with no reference to punitive damages. Shelter, as Lira's insurance carrier, refused, on behalf of Lira, to settle the matter for policy limits. As the trial approached, Shelter submitted a $10,000 offer of judgment.
The jury in the personal injury action returned a verdict against Lira in the amount of $87,300 in actual damages and $87,300 in punitive damages. The trial court reduced Lira's liability for actual damages to $43,650 in accordance with the pro rata liability statute. Section 13-21-111.5, C.S.R. (1987 Repl. Vol. 6A). On appeal, the supreme court also reduced the punitive damages award to $43,650 in accordance with the punitive damages statute. Lira v. Davis, 832 P.2d 240 (Colo. 1992).
Shelter, on behalf of Lira, paid the amount due to satisfy the compensatory damage award plus interest and costs, all of which did not exceed policy limits. Shelter, however, refused to pay the punitive damage award entered against Lira, asserting that such damages were not covered under the policy.
Lira then instituted this suit against Shelter for bad faith breach of insurance contract based on Shelter's failure to settle the underlying action. The only loss alleged by Lira in the bad faith claim was the $43,650 in punitive damages, plus interest, awarded against him in the personal injury case. The jury in this case returned a verdict against Shelter in the amount of $58,000, which was approximately the amount Lira owed in punitive damages, including interest, on the judgment in the underlying action.
Shelter contends that it may not be held liable as an insurer for bad faith failure to settle when the only damages claimed are the outstanding punitive damages against the insured in the underlying suit. We agree.
Initially, we note that, on appeal, the parties disagree as to the basis on which Lira claims Shelter was acting in bad faith. Shelter claims that, in the trial court, Lira relied solely on Shelter's refusal to settle the previous case for policy limits. Lira, however, has set forth a host of acts and omissions by Shelter's representatives which he claims amount to a bad faith handling of the previous case.
The record reflects that Shelter is correct in its interpretation of Lira's claim. One jury instruction specifically informs the jury that it may find for Lira only if it finds that "the defendant acted unreasonably in failing to settle the suit of Davis v. Lira, et al.. for or within policy limits." In addition, on direct examination, the only damages Lira attempted to prove were the outstanding punitive judgment against him based on his willful, wanton, and reckless behavior. Furthermore, on cross-examination Lira admitted that he had not lost his job , had not seen any psychiatrists or psychologists, had not experienced nightmares, and, in fact, had not suffered any negative consequences, other than the punitive damages, as a result of the verdict.
Therefore, the issue before us, a
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