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Dunlap v. State Farm Fire and Casualty Co.7/5/2005
, therefore, concur in, the majority's conclusion that the Superior Court correctly dismissed the Dunlaps' bad faith claim against State Farm under Tackett v. State Farm Fire & Cas. Ins. Co. The majority's opinion, however, ultimately describes a cause of action for the breach of the implied covenant of good faith and fair dealing that is semantically different but not substantively different from a Tackett claim, reverses the dismissal to the extent it is "with prejudice," and remands this case to allow the Dunlaps to amend their complaint. I disagree with the reversal and remand because the implied covenant does not come into play given the undisputed facts before us.
This Court has held that "implying obligations based on the covenant of good faith and fair dealing is a cautious enterprise." We have said that in deference to the principle that, absent grounds for reformation, courts should not rewrite contracts.
The bottom line here is that the Dunlaps wanted UIM coverage even though DART still had primary insurance coverage. If State Farm agreed to this, the policy would be rewritten and changed from uninsured/underinsured motorist coverage to a policy for primary insurance coverage. Because State Farm had no obligation to change the scope of the coverage under the policy, it did not breach the implied covenant when it refused the Dunlaps' request that it do so.
In Tackett, we held that a first-party claim against an insurer for bad faith denial or delay in claim payments sounds in contract, rather than tort. We recognized that first-party insurance contracts, like any other contract, include an implied covenant of good faith and fair dealing. We held that the implied covenant of good faith and fair dealing is breached when "an insurer fails to investigate or process a claim or delays payment in bad faith...." We went on to state that " 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 undisputed facts of this case show that State Farm was asked to consent to a settlement for less than the policy limits without prejudice to the Dunlaps' UIM claim. The statute that provides for UIM insurance relieves State Farm of any obligation to pay "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 settlement or judgments." In almost identical language, the Dunlaps' insurance policy stipulates that UIM coverage cannot be exercised by the insured until the limits of "all bodily injury liability bonds or policies that apply have been used up by payments of judgments or settlements."
While the Dunlaps are not claiming that State Farm failed to investigate, process or delay payment on a claim, an analysis under Tackett of the alleged breach may be made on the premise that the Tackett list is merely representative and not exhaustive. Thus, the Dunlaps have to show that State Farm's refusal to agree to a settlement with DART for less than policy limits clearly lacked any reasonable justification. In this case, the Dunlaps own agreement with State Farm prevents them from doing so. State Farm was reasonably justified in refusing the Dunlaps' request because the subject at issue was expressly covered by the contract. The DART policy had to be "used up" in order for the Dunlaps to have a UIM claim.
Tackett addresses the implied covenant of good faith and fair dealing in the context of an insurance contract. The case does so with a focus upon whether there is a reasonable justification for the insurer
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