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Badillo v. Mid Century Insurance Co.6/21/2005
l lawyer, who telephoned the adjuster and again demanded they produce Badillo for a statement. He threatened to file a lawsuit and refuse subsequent settlement offers, if appellants failed to do so. While the adjuster said he would explore the possibility, he never had the chance because Smith's trial lawyer filed the instant action within four hours of their conversation.
Mid Century provided independent counsel for Badillo. At trial, the jury awarded damages in the amount of $1,000,000.00, finding Badillo 60% negligent. His portion thereof, together with interest, resulted in a total judgment against him of $633,202.63. Badillo did not appeal. Mid Century again tendered the policy limits to the victim, which she accepted.
Smith's trial attorney tried to collect from Badillo, but knew it was impossible. When the hearing on assets revealed few, if any, nonexempt assets and insufficient income to pay, Smith's trial attorney suggested Badillo sue appellants for bad faith. He told Badillo he could use the proceeds to satisfy the judgment against him, and even offered to suspend collection attempts until resolution of the bad faith litigation.
Badillo then filed the instant matter. At the close of trial, appellants moved for directed verdict on the bad faith claim and on the punitive damages claim. The court denied the motion as to the bad faith claim, granted it as to the punitive damages claim, and found no evidence of reckless disregard or malice by the insurer. The jury returned a verdict against appellants in the amount of $2,200,000.00, for financial losses, embarrassment, and mental pain and suffering. The trial court entered judgment but refused to award attorney fees or prejudgment interest.
As a result of the majority's holding today, a tortfeasor who paid premiums on a $10,000.00 insurance policy now will receive a judgment on jury verdict of $2,200,000.00, an amount not only 220 times greater than his liability policy, but also an amount nearly four times greater than the award his victim received.
When we first recognized the tort of bad faith failure to settle an insurance claim, we adopted the general rule that " n insurer has an implied duty to deal fairly and act in good faith with its insured and the violation of this duty gives rise to an action in tort...." Christian v. American Home Assurance Company, 1977 OK 141, 25, 577 P.2d 899, 904. The majority's opinion today blurs this duty by awarding the insured driver, a tortfeasor, $2,200,000.00 for a bad faith claim on a $10,000.00 policy, after the insurer not only offered early on to settle for the policy limits, but also after payment of the full policy limits to the third party victim. It is difficult to imagine the acts the majority expects from insurance companies, to avoid a bad faith claim. Indeed, their opinion fosters confusion among attorneys for insurance carriers and for insured parties, alike, in their attempts to decipher exactly what is required of them, now, to settle a claim. This certainty is a fundamental facet of the system that allows the former to remain in the business of providing insurance based upon risk assessment and exposure calculations, and the latter to afford payment of reasonable premiums for insurance coverage.
The majority articulates a standard for bad faith claims against an insurer that "is more than simple negligence, but less than the reckless conduct necessary to sanction a punitive damage award against said insurer." The references to "reasonable" conduct, versus "unreasonable" conduct, vis-à-vis an insurer to its insured, blur the lines of demarcation between actions in negligence and the tort of bad faith.
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