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Rogan v. Auto-Owners Insurance Co.8/13/1991
t against Auto-Owners on the issues of coverage and estoppel. A jury trial began on January 4, 1988.
During the course of the trial, the court ruled on several motions made by the parties. First, it allowed the introduction of the stipulated judgment and covenant not to execute in the Gila County lawsuit, but refused to allow any evidence concerning liability or damages and any collateral attack on the judgment. Second, it directed a verdict in favor of Auto-Owners on the issue of punitive damages. Third, it directed a verdict in favor of Auto-Owners on the issue of vicarious or joint liability for claims against LeBaron & Carroll. Fourth, it granted a directed verdict in favor of LeBaron & Carroll on the issues of estoppel, negligence, statute of limitations and vicarious liability for claims against Auto-Owners.
On January 29, 1988, the jury returned verdicts in favor of the plaintiffs and against defendants Auto-Owners and LeBaron & Carroll. The jury concluded that Auto-Owners acted in bad faith in denying coverage for the accident and awarded the Parkers $100,000.00, the Largos $10,000.00 and the motor home plaintiffs $10,000.00 as compensatory damages. Against LeBaron & Carroll, the jury awarded the Parkers $250,000.00 as compensatory damages and $500,000.00 as punitive damages, and awarded the remaining plaintiffs $5,000.00 as compensatory damages.
The parties submitted numerous post-trial motions. The trial court denied the plaintiffs' motion for an additur against Auto-Owners providing for a judgment of $900,000.00; awarded the plaintiffs $200,000.00 in attorneys' fees; granted LeBaron & Carroll a judgment notwithstanding the verdict concerning the judgment in favor of all plaintiffs except the Parkers on the ground that LeBaron & Carroll owed no duty to the other plaintiffs; granted LeBaron & Carroll a new trial on the issue of punitive damages, conditional on a remittitur, which the plaintiffs accepted, decreasing the punitive damages to $200,000.00; granted LeBaron & Carroll a new trial on the issue of compensatory damages in favor of the Parkers, conditional on a remittitur, which the Parkers accepted, decreasing the damages to $10,000.00; granted the plaintiffs judgment notwithstanding the verdict against Auto-Owners in the amount of $600,000.00; denied the plaintiffs' motion for a new trial, and finally, denied Auto-Owners' motions for a new trial and reconsideration. The issue we address in this opinion is whether the trial court erred in granting plaintiffs' judgment notwithstanding the verdict against Auto-Owners for $600,000.00.
Discussion
The trial court granted judgment not-withstanding the verdict against Auto-Owners
for $600,000.00, the amount of the Gila County judgment in excess of the policy limits, on the ground that Auto-Owners failed to produce evidence that created a question of fact as to whether the excess judgment was procured by fraud or collusion. Auto-Owners claims this was error arguing that an insurance company is liable for a settlement or stipulated judgment that exceeds the policy limits only if the settlement or judgment is reasonable, non-collusive and non-fraudulent. Auto-Owners contends that the plaintiffs have the burden to show the reasonableness of the Gila County judgment, and that sufficient evidence existed to show the stipulated judgment was unreasonable. The plaintiffs respond that a finding of bad faith renders an insurer liable for the full amount of any judgment entered against its insured.
An insurer that erroneously denies coverage and refuses to defend its insured does so at its own peril and
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