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Dunlap v. State Farm Fire and Casualty Co.7/5/2005
imits of bodily injury liability coverage under all bonds and insurance policies applicable at the time of the accident total less than the limits provided by the uninsured motorist coverage....
(3) The insurer shall not be obligated to make any payment under this coverage until after the limits of liability under all bodily injury bonds and insurance policies available to the insured at the time of the accident have been exhausted by payment of settlements or judgments....
The overriding purpose of §3902 is to "fully compensate innocent drivers."
Thus, when construing ambiguous portions of the statute, this Court has adopted interpretations that maximize the accident victim's opportunity to be fully compensated. Notwithstanding the goal of full compensation, this Court has limited the insured's recovery in circumstances where the statutory language clearly mandated that result. Thus, for example, an insured may not stack policies to determine whether the tortfeasor's vehicle meets the §3902(b)(2) definition of an underinsured motor vehicle.
The trial court applied settled rules of statutory construction and properly concluded that the exhaustion provision, §3902(b)(3), is clear and unambiguous. The plain meaning of the provision is that UIM carriers are not obligated to pay their insureds until after the insureds exhaust all available liability insurance policies. Thus, State Farm was not obligated to pay the Dunlaps before the Dunlaps either received a policy limits settlement from DART or obtained a judgment after trial.
B. Bad Faith Refusal to Pay
In Tackett v. State Farm Fire & Cas. Ins. Co., this Court held that a first-party claim against an insurer for bad faith denial or delay in claim payments sounds in contract and arises from the implied covenant of good faith and fair dealing. Tackett defined the elements of a bad faith insurance claim:
Where an insurer fails to investigate or process a claim or delays payment in bad faith, it is in breach of the implied obligations of good faith and fair dealing underlying all contractual obligations.... A lack of good faith, or the presence of bad faith, is actionable where the insured can show that the insurer's denial of benefits was "clearly without any, reasonable justification."
The Dunlaps' complaint does not fit neatly within the above-described rubric, as it does not allege that State Farm failed to investigate or pay a claim. What the complaint does accuse State Farm of is a "bad faith" refusal to cooperate, which the trial court treated as a bad faith "refusal to pay" claim. It is in that context that we turn briefly to State Farm's contentions. State Farm argues that its reliance on the "exhaustion" statute, even if misplaced, defeats a bad faith claim. State Farm points out that a bad faith claim requires a showing that its decision lacked any reasonable justification. Here, State Farm says, it relied on the plain language of a statute, which constituted "reasonable justification" as a matter of law. Moreover, and in addition, State Farm asked the Dunlaps to provide Delaware authority supporting their position, and the Dunlaps did not reply. Accordingly, State Farm concludes, there are no facts that could establish that it acted unreasonably.
We agree that, under settled Delaware law, the Dunlaps' complaint does not state a cause of action for a bad faith refusal to pay insurance claim because the complaint does not allege an unjustified failure or delay in the processing or payment of an insurance claim. The question is whether State Farm's refusal to cooperate, under the facts of this case, could be actionable as a breach of the imp
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