Opinion
No. 4-211 / 03-1065.
August 26, 2004.
Appeal from the Iowa District Court for Plymouth County, Gary E. Wenell, Judge.
The plaintiffs appeal from a district court summary judgment ruling that dismissed their first-party bad faith claim against the defendant. REVERSED AND REMANDED.
Warren Bush of Bush Law Office, Wall Lake, for appellants.
James Redmond and Rosalynd Koob of Heidman, Redmond, Fredregill, Patterson, Plaza, Dykstra Prahl, L.L.P., Sioux City, for appellee.
Heard by Mahan, P.J., and Zimmer and Eisenhauer, JJ.
An injured driver and his spouse appeal from the district court ruling that granted summary judgment and dismissed their first-party bad faith claim against their insurance company for failure to timely pay underinsured motorists benefits. We reverse the court's ruling and remand this matter for further proceedings.
I. Background Facts Proceedings.
The summary judgment record reveals the following facts. On April 23, 1998, Timothy Galbraith was driving his pickup truck in a southerly direction on Highway K64 when a northbound pickup driven by Wendell Warntjes crossed the centerline of the road and struck Galbraith's vehicle. The collision caused Galbraith's pickup to roll. Galbraith suffered personal injuries as a result of the accident.
In September 1999 Galbraith and his wife Margaret brought suit against Warntjes and his wife Sherry, co-owners of the vehicle involved in the accident, for personal injury and loss of consortium. The Galbraiths later amended their petition to assert claims against Scott Guy d/b/a S G Construction, Warntjes's employer at the time of the accident, and Allied Mutual Insurance Company (Allied). The claim against Allied was for underinsured motorist benefits under a policy Allied had issued to the Galbraiths. On March 27, 2001, the district court severed the claim against Allied for purposes of trial. The court's order provided that the Galbraith's claim for underinsured benefits would be tried after their claims against the other defendants were resolved.
The petition alleged that, at the time of the accident, Warntjes was engaged in his duties as an employee of Guy.
The policy agreement between the Galbraiths and Allied provided for a maximum of $50,000 in underinsured motorist coverage. The agreement further 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 via a letter from the Galbraiths' attorney, Warren Bush, that Warntjes had tendered his policy limits and the Galbraiths were considering the claim against Warntjes settled. The letter further stated that Guy's commercial policy did not provide coverage for Warntjes, and posited that no coverage would be available under any personal insurance policy held by Guy. The letter asserted that the Galbraiths' damages exceeded the combination of Warntjes's policy limits and the limits of their own underinsured motorist benefits, and made a demand for the full $50,000 in policy limits. On May 4 Allied was informed that Guy's attorney had prepared an affidavit for Guy's signature, which affirmed that Guy did not have "a liability policy that provides coverage in this situation." On May 25 Allied was informed that, once Guy's affidavit was received, the Galbraiths intended to settle with Warntjes, and to release the Warntjeses, Warntjes's insurance carrier, and Guy.
Despite numerous demands from the Galbraiths, Allied declined to tender any underinsured motorist benefits. Allied asserted the cause of the accident, and the liability for and extent of any damages, were fairly debatable. On May 21 the Galbraiths moved to amend their petition to assert a first-party bad faith claim against Allied, based on Allied's refusal to tender benefits. Their proposed amendment asserted that the Galbraiths had verified there was only a single liability policy providing coverage for their claims, that the $100,000 limit of the liability policy had been tendered, that Allied had been provided evidence demonstrating the damages proximately caused by Warntjes, and that those damages "greatly exceeded" the combined total of the liability policy limit and the underinsured motorist coverage. Allied filed a resistance to the motion and it was scheduled for hearing on June 18.
On June 13, Allied filed an offer to confess judgment for $25,000. By letter of June 15, the Galbraiths declined Allied's tender. The letter also confirmed that the Galbraiths had accepted Warntjes's tender of his $100,000 policy limit, and that Guy's affidavit "stating that he had no coverage for this incident" had been received. The Galbraiths' motion to amend came on for hearing as scheduled on June 18 before the Honorable James Scott.
On June 25 Allied tendered the underinsured motorist policy limit. Judge Scott filed a ruling on June 27 which allowed the Galbraiths to assert a bad faith claim against Allied. On June 28 the Galbraiths signed a "Full Settlement and Release Agreement," releasing the Warntjeses, the Warntjeses' insurance carrier, and Guy, in exchange for the receipt of $100,000. On July 3, the Galbraiths' attorney wrote Allied's counsel and indicated his clients were accepting Allied's full tender, but were unwilling to dismiss their right to assert a first-party bad faith claim.
The $50,000 policy limit was reduced by a previously-paid $5,000 medical benefit, resulting in an actual tender of $45,000.
In August 2001 Allied filed a summary judgment motion. Allied contended the bad faith claim should be dismissed because the Galbraiths' claim for underinsured motorist benefits was fairly debatable as a matter of law. Allied asserted that the cause of the accident, and the liability for and the extent of the Galbraiths' damages, were all reasonably debatable. Following hearing, Judge Gary Wenell entered an order which denied Allied's motion. The court concluded it could not say, as a matter of law, that the Galbraiths' claim was fairly debatable. Discovery proceedings continued and the Galbraiths' bad faith claim was eventually scheduled for trial on April 8, 2003.
In March 2003 Allied filed a motion asking the court to reconsider its prior summary judgment ruling. The motion contended that "[t]he issues of both liability and damages in this case were reasonably debatable." Following hearing Judge Wenell granted summary judgment, and dismissed the Galbraiths' bad faith claim.
In its order sustaining Allied's renewed motion for summary judgment, the district court did not address the merits of the bad faith claim, and did not conclude the Galbraiths' claim was "fairly debatable" as a matter of law. Instead, the court focused on the portion of the underinsured motorist provision that provided Allied would not pay underinsured motorist proceeds until the Galbraiths' "rights to the proceeds of all liability insurance . . . policies have been determined by . . . settlement agreement." The district court found settlement did not occur until the Galbraiths signed the written release on June 28. The court concluded the Galbraiths' bad faith claim was not viable "inasmuch as the policy limits were offered to the plaintiffs on June 25, 2001, which is prior to the time provisions of the plaintiffs' insurance policy requires them to pay (June 28, 2001)."
The Galbraiths appeal. They contend the district court erred in finding Allied's tender of its policy limits on June 25, 2001 prohibited the filing of a bad faith action. II. Scope and Standards of Review.
The Galbraiths also argue the district court erred in its finding of facts, as it failed to account for letters exchanged between attorney Bush and the attorneys for the Warntjeses and Guy. However, as Allied correctly notes, these letters were not made a part of the summary judgment record. On appeal we limit our review to those items presented to the district court.
Our review of the district court's summary judgment ruling is for the correction of errors at law. Iowa R. App. P. 6.4; General Car Truck Leasing Sys., Inc. v. Lane Waterman, 557 N.W.2d 274, 276 (Iowa 1996). All facts are viewed in the light most favorable to the party opposing the motion. Bearshield v. John Morrell Co., 570 N.W.2d 915, 917 (Iowa 1997). Summary judgment is appropriate only when no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Iowa R. Civ. P. 1.981(3); City of West Branch v. Miller, 546 N.W.2d 598, 600 (Iowa 1996).
III. Timing of Settlement Agreement.
The underinsured motorist provision of the Galbraiths' insurance policy provides that Allied will not pay underinsured motorist benefits until the Galbraiths' "rights to the proceeds of all liability insurance . . . policies have been determined by . . . settlement agreement." The district found that settlement did not occur until the Galbraiths signed the written release on June 28, 2001, and concluded that Allied was protected from a bad faith claim because it tendered its policy limits three days earlier. The Gailbraiths contend the court's conclusion is contrary to law.
In order to uphold the district court's conclusion it must appear, as a matter of law based upon undisputed facts, that no settlement agreement occurred prior to June 25, the date Allied tendered the underinsured motorist policy limit. If there is a disputed issue of material fact regarding whether an enforceable settlement agreement was reached prior to this date, the district court must be reversed.
A settlement agreement in a personal injury lawsuit need not be reduced to writing to be enforceable. See Wende v. Orv Rocker Ford Lincoln Mercury, Inc., 530 N.W.2d 92, 95 (Iowa Ct.App. 1995). An oral agreement is binding so long as it is "complete in itself and certain." H W Motor Exp. v. Christ, 516 N.W.2d 912, 914 (Iowa Ct.App. 1994) (citation omitted). In this case, the Galbraiths have established, as undisputed facts, that prior to June 25 they accepted Warntjes's tender of his policy limits, received an affidavit from Guy stating he had no insurance policy that would provide coverage in this situation, and were prepared to release the Warntjeses, the Warntjeses' insurance carrier, and Guy. They have further shown that all this information was communicated to Allied prior to June 25. We conclude this is sufficient to create a disputed issue of material fact on the question of whether the settlement agreement was enforceable prior to June 25. Accordingly, the district court erred in granting summary judgment.
IV. Fairly Debatable.
Allied alternatively argues that the district court ruling should be upheld because liability, causation and damages were fairly debatable as a matter of law. See Sampson v. American Standard Ins. Co., 582 N.W.2d 146, 149-50 (Iowa 1998) (establishing first-party bad faith claim requires proof that insurer did not have a reasonable basis for denying the claim, and knew or had reason to know its denial was without a reasonable basis). Even though Allied's arguments to the district court focused almost exclusively on disputes regarding liability, causation and damages, the district court did not revisit its prior ruling on those issues. In lieu of reconsidering its prior conclusion that Allied's liability was not fairly debatable as a matter of law, the court relied on a wholly different ground, one that does not even appear to have been raised by the parties. Assuming without deciding that this issue has been sufficiently preserved, we will address the merits of Allied's contention.
Our review of the issues raised is limited to the parties' filings, as no transcript of either summary judgment hearing appears in the appendix or record.
Upon review of the expanded summary judgment record, we find no basis for concluding that, as a matter of law, Allied had a reasonable basis for denying the Galbraiths' underinsured motorist claim. There is no medical evidence that affirmatively supports Allied's claim that the extent of Timothy Galbraith's injuries was fairly debatable. Allied points to evidence that Timothy Galbraith appeared to be functioning normally at his deposition, and the fact that no serious injuries or deficits were diagnosed by the emergency room doctor immediately after the accident. However, the remaining medical evidence, including independent medical opinions, demonstrates that Timothy Galbraith did suffer significant medical injuries. In addition, the undisputed evidence demonstrates that the Galbraiths' medical and economic damages exceed the $150,000 combined total of Warntjes's liability policy and the underinsured motorist policy limit.
Nor can we credit Allied's assertion that the cause of the accident was fairly debatable as a matter of law, because there was evidence from which a jury could have concluded that Warntjes was confronted with a sudden emergency due to mechanical failure. Allied points to evidence that Warntjes was driving normally prior to the accident, that just before the crash Warntjes was heard to say "I cannot hold it," that Warntjes testified the truck twitched and the steering locked up, and that Warntjes was not cited by police. However, there is no physical evidence of mechanical failure. All the evidence arising from inspection of the Warntjes vehicle indicated the vehicle did not suffer from any mechanical failure or defect. In fact, the record includes an affidavit from Warntjes's own attorney stating, "In my investigation of this matter and my review of the facts I became aware of no reliable, scientific evidence supporting Wendell Warntjes'[s] claim of mechanical failure of his pickup just prior to the collision. . . ."
We have reviewed the totality of the evidence in the summary judgment record, whether we have specifically addressed it or not. Having done so, we cannot say that the Galbraiths' claim for underinsured motorist benefits is fairly debatable as a matter of law. Based on the record below, this question is one for the fact finder. See Kiner v. Reliance Ins. Co., 463 N.W.2d 9, 12 (Iowa 1990) (concluding that question is one for the jury when a reasonable fact finder could conclude that the insurer "failed to 'exercise an honest and informed judgment' on [the insured's] claim").
V. Entitlement to Damages.
Finally, Allied argues the summary judgment ruling should be upheld because the Galbraiths did not establish prior to June 25, and in fact have yet to establish, that they are "legally entitled to recover . . . compensatory damages" from Warntjes. The reasoning forwarded by Allied is that the insureds cannot show they are "legally entitled" to recover absent entry of a judgment against the owner or operator of the vehicle. Like the forgoing issue, this claim was made to, but not addressed, by the district court. Again, assuming without deciding that this issue is adequately preserved, we will address the merits of Allied's argument.
While the burden to prove entitlement to underinsured motorist proceeds lies with the Galbraiths, Funzar v. Allied Property Cas. Ins. Co., 548 N.W.2d 880, 886 (Iowa 1996), there is no requirement that they do so by reducing their claims against Warntjes to judgment. The plaintiffs were "legally entitled to recover" damages from Warntjes if they could prove "the damages [they] would have been entitled to recover had a lawsuit against [Warntjes] been taken to judgment." Waits v. United Fire Cas. Co., 572 N.W.2d 565, 574 (Iowa 1997) (emphasis added). The summary judgment record, which is replete with evidence of Timothy Galbraiths's alleged injuries and Warntjes's alleged fault, is sufficient to create a disputed issue of material fact on this question. Accordingly, Allied's contention is without merit.
VI. Conclusion.
The district court erred when it concluded that, as a matter of law and undisputed fact, the Galbraiths were not entitled to payment of underinsured motorist benefits until three days after Allied had tendered the policy limits. We therefore reverse the district court, and remand this matter for further proceedings not inconsistent with this opinion.