22 F. Supp. 3d 1169
D. Kan.2014Background
- Accident: fatal crash caused by Reed traveling left of center; Blann sued Reed’s insurer American Standard for negligent/bad-faith handling of claim.
- Insurance setup: Reed’s estate insured by American Standard; Reed’s mother/personal representative Rogers served as estate representative.
- Early settlement attempts: plaintiff offered $2,000,000; insurer indicated policy limit $50,000 and attempted to delay settlement pending final patrol report.
- Investigation/handling: adjuster Traffas and supervisor Whitmer undertook limited, arguably flawed investigation; failed to evaluate damages, communicate with insured, or pursue optimal settlement.
- Settlement of wrongful death suit: action culminated in a court ex parte trial with judgment against Reed estate for $2,536,676.28; insurer failed to pay.
- Court posture: bench trial under Fed. R. Civ. P. 52(a); court held insurer breached duties of good faith and awarded judgment against insurer for excess over policy limits plus prejudgment interest and attorney’s fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did American Standard breach its good-faith duties? | Traffas’s investigation and communication failures breached duties. | Insurer followed procedures and acted within limits. | Yes; breaches found in investigation and communication. |
| Was insurer's negligence a causally responsible factor for the judgment? | Insurer’s conduct caused damages by poor settlement handling. | Plaintiff’s actions or other factors influenced outcome. | Yes; insurer's negligence contributed to the judgment. |
| Did Rogers’s cooperation excusal apply to preclude recovery? | Insurer’s breaches excused performance; no barred cooperation. | Partial breaches did not excuse insured’s cooperation. | Yes; insured excused due to insurer’s breaches. |
| Is the settlement with Rogers reasonable and enforceable against insurer? | Settlement was reasonable given record and ex parte process. | Settlement tainted by insurer’s failures and lack of communication. | Settlement reasonable; insurer liable for judgment. |
Key Cases Cited
- Glenn v. Fleming, 247 Kan. 296, 799 P.2d 79 (1990) (insurer owes good-faith, negligent duties to insured; breach triggers excess liability)
- Bollinger v. Nuss, 202 Kan. 326, 449 P.2d 502 (1969) (eight-factor framework for good-faith settlement evaluation)
- Covill v. Phillips, 452 F.Supp. 224 (D.Kan.1978) (duty to investigate and evaluate damages; liability if inadequate)
- Smith v. Blackwell, 14 Kan.App.2d 158, 791 P.2d 1343 (1989) (failure to notify insured of within-policy-limits offer deemed grave misconduct)
- Levier v. Koppenheffer, 19 Kan.App.2d 971, 879 P.2d 40 (1994) (duty to inform insured; equal consideration of insured’s interests)
- Coleman v. Holecek, 542 F.2d 532 ((10th Cir.1976)) (insurer should evaluate case without regard to policy limits when settling)
- Associated Wholesale Grocers, Inc. v. Americold Corp., 261 Kan. 806, 934 P.2d 65 (1997) (reasonableness factors for evaluating settlements against insurer)
- Wade v. EM-CASCO Ins. Co., 483 F.3d 657 ((10th Cir.2007)) (causation issues; intervening acts analysis in some contexts)
- Roberts v. Printup, 595 F.3d 1181 (2010) (discusses foreseeability of damages and causation in insurer-negligence context)
- Bussman v. Safeco Ins. Co. of Am., 298 Kan. 700, 317 P.3d 70 (2014) (statutory/fee considerations in bad-faith judgments)