Cindy Tripp v. Western National Mutual Ins.
2011 U.S. App. LEXIS 25961
| 8th Cir. | 2011Background
- Tripp sustained injuries from a rear-end collision; settled with the at-fault driver for $87,500, within the tortfeasor's $100,000 liability limits.
- Tripp had $250,000 underinsured motorist (UIM) coverage with Western; offset rules reduce UIM recovery by the tortfeasor's policy limits, here potentially $150,000 remaining.
- Western initially refused to pay more than $5,000 in medical benefits and later offered only $10,000 to settle the UIM claim.
- Tripp sued Western for breach of contract and bad faith; the jury awarded $150,000 on the contract claim and rejected the bad faith claim.
- The district court awarded attorney’s fees under SDCL 58-12-3, concluding Western’s $10,000 offer was vexatious or without reasonable cause.
- Western appeals, arguing the defense verdict on bad faith precludes any § 58-12-3 fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does a defense verdict on bad faith preclude § 58-12-3 fees? | Brooks allows separate analysis; bad faith result does not bar fees. | A bad faith loss should preclude a fees award under the statute. | A defense verdict does not preclude § 58-12-3 fees; separate analysis warranted. |
| Whether the district court clearly erred in finding Western's refusal to pay vexatious or without reasonable cause? | Western undervalued the claim and conducted little independent investigation. | There was a legitimate contest over coverage and amount. | The district court's finding was not clearly erroneous; the offer was vexatious/no reasonable basis. |
| Is § 58-12-3 fees awardable when the underlying bad faith claim was rejected by a jury? | Fees are tied to contract claim; the bad faith verdict does not control. | Fees should hinge on the bad faith outcome. | Fees may be awarded based on the contract claim independently of the bad faith verdict. |
Key Cases Cited
- Brooks v. Milbank Ins. Co., 605 N.W.2d 173 (S.D. 2000) (fees under § 58-12-3 do not depend on the ultimate bad faith outcome)
- Isaac v. State Farm Mut. Auto. Ins. Co., 522 N.W.2d 752 (S.D. 1994) (bad faith finding does not automatically establish vexatious conduct)
- Kirchoff v. Am. Cas. Co. of Reading, Pa., 997 F.2d 401 (8th Cir. 1993) (§ 58-12-3 does not allow recovery for tort bad-faith fees)
- Luke v. Am. Family Ins. Co., 476 F.2d 1015 (8th Cir. 1973) (good faith is relevant to vexatiousness under § 58-12-3)
- Bertelsen v. Allstate Ins. Co., 796 N.W.2d 685 (S.D. 2011) (vexatiousness is not an element of bad faith)
- Howie v. Pennington Cnty., 563 N.W.2d 116 (S.D. 1997) (reasonable basis required for contesting a claim)
- Eldridge v. Nw. G.F. Mut. Ins. Co., 221 N.W.2d 16 (S.D. 1974) (insurer's inadequate investigation supports fees)
- First Dakota Nat'l Bank v. St. Paul Fire & Marine Co., 2 F.3d 801 (8th Cir. 1993) (insurance company can be liable for vexatious conduct when defenses are unjustified)
- Trouten v. Heritage Mut. Ins. Co., 632 N.W.2d 856 (S.D. 2001) (distinguishes between tort bad faith and contract-fee analysis)