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Galbraith v. Allied Mutual Insurance Co.6/24/2005
On review from the Iowa Court of Appeals.
Plaintiff injured in automobile collision and his spouse as a consortium claimant appeal from adverse summary judgment in bad-faith claim against underinsured motorist insurance carrier. The court of appeals reversed and ordered trial of bad-faith issues. DECISION OF COURT OF APPEALS VACATED; DISTRICT COURT JUDGMENT AFFIRMED.
Timothy G. Galbraith, a personal-injury claimant in the district court, and his wife Margaret Galbraith, as a consortium claimant, appealed from an adverse summary judgment in their action against Allied Mutual Insurance Company (Allied). The Galbraiths allege bad faith by an insurer in delaying payment of underinsured motorist benefits. The district court had granted summary judgment for the insurer, and the court of appeals reversed that decision. After reviewing the record and considering the arguments presented, we vacate the decision of the court of appeals and affirm the judgment of the district court.
Timothy Galbraith was injured on April 23, 1998, when a pickup driven by Wendell Warntjes crossed the centerline of the road and struck the vehicle that Galbraith was operating. Galbraith sustained head injuries in the collision. He later sued Warntjes and Warntjes' wife, who was the co-owner of the vehicle Warntjes was operating. The Galbraiths later amended their petition to assert that Warntjes was acting within the course of his employment with Scott Guy at the time the collision occurred. Guy was added as a defendant to the Galbraiths' claim, as was Allied, based on a claim that the defendants were underinsured. The district court severed the claim against Allied to be tried after the claims against the other defendants were resolved.
The underinsured-motorist provisions in the Galbraiths' policy with Allied provided:
[Allied] will pay all sums which an "insured" is legally entitled to recover as compensatory damages from the owner or operator of an "underinsured motor vehicle" resulting from "bodily injury" to any person caused by an accident.
[Allied] will only pay after an "insured's" rights to the proceeds of all liability insurance bonds or policies have been determined by judgment or settlement agreement.
On April 30, 2001, Allied was informed by the Galbraiths' counsel that the Warntjeses' liability insurer had offered to pay its policy limits of $100,000 to settle the claim. The letter indicated the belief that Guy's policy did not provide coverage for Warntjes and that it was anticipated that no other liability insurance was applicable to this claim through either Guy or the Galbraiths. The April 30 letter contended that the Galbraiths' total damages exceeded $150,000 and demanded payment of Allied's policy limits of $50,000.
Allied then sought to take Guy's deposition concerning the existence of other liability insurance. On May 4 counsel for the Galbraiths wrote counsel for Allied and stated it would be necessary to obtain a sworn statement from Guy in order to settle the claims against the parties other than Allied. That letter further indicated that, if Allied did not tender its policy limits when that settlement was concluded, the Galbraiths' petition against Allied would be amended to assert a bad-faith claim. Before Guy's affidavit had been received and prior to the time the case was settled, the Galbraiths on May 21 moved for leave of court to amend their petition and assert a bad-faith claim against Allied for refusal to tender its policy limits.
While the application for leave to amend was pending, Allied on June 11 offered $25,000 (in addition to $5000 of medical payments already received by the Galbrai
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