Hillman v. Nationwide Mutual Fire Insurance Co.

Hillman, HILLMAN and Janet John A.

individually Per- Hillman as Janet Representative of the Estate of

sonal minor, Hillman, Ap- a deceased

Julie G.

pellants, FIRE

NATIONWIDE MUTUAL COMPANY,

INSURANCE

Appellee.

No. S-4555. Alaska. Court of

July

I. FACTS AND PROCEEDINGS August 14, 1983, driving On while father, by ATV owned her eleven-year old Julie Hillman collided with an uninsured pickup by truck driven William Amis. Julie days died six later as a result of inju- her ries.

Nationwide had issued an in- automobile father, surance to Julie’s Hill- John man, provided uninsured motorist coverage up $25,000 $50,- per person per However, occurrence. when on 10, 1984, August Hillman, Janet Julie’s mother, inquire contacted Nationwide to coverage about procedures, and claim Mau- Hafford, ry adjustor, Nationwide’s local in- dicated that liability. Nationwide had no This denial was based on one of the “cover- age exclusions” the uninsured motorist 7, 1985, section.1 February On after fur- Schneider, Michael J. Mestas & Schneid- inquiries Hillman, ther by Mrs. Hafford er, P.C., Anchorage, appellants. for legal referred the claim to Nationwide’s Maassen, Burr, Kurtz, Peter J. Pease & “clarify counsel order to this issue of Anchorage, appellee. for your understanding and satis- faction,” When, as he wrote Mrs. Hillman. RABINOWITZ, C.J., Before 1985, in late March Nationwide’s attorney BURKE, MATTHEWS, COMPTON and informed question Hafford that “the MOORE, JJ. coverage appears roughly to be a 50/50

proposition,” Hafford wrote Hillman “seek- ing ... regard further details with to Jul- OPINION However, ie’s accident.” relay he did not MATTHEWS, Justice. attorney’s opinion to Mrs. Hillman. John and Janet Hillman sued their insur- April On the Hillmans filed a er, Nationwide Mutual Fire Insurance Com- complaint against Nationwide for bad faith. pany (Nationwide), for bad faith in the han- following The month Nationwide offered dling of their uninsured motorist claim filed $50,000 the Hillmans “compromise as a after the death of daughter. The payment.” The rejected Hillmans the of- superior granted court Nationwide’s mo- fer, claiming they were entitled to claim, tion to concluding dismiss the policy, plus under the insurance the insurer’s deny coverage decisions to benefits, incidental, medical consequential, and to demand arbitration were reasonable. punitive damages. The appeal Hillmans along this decision with the trial designation court’s following April of Nation- Judge granted Katz prevailing wide as the summary judg- motion for purposes. fee We affirm on the merits but ment and dismissed the Hillmans’ claims. reverse award of attorney’s fees. appealed the decision. pertinent 1. The household, exclusion you stated that living your or a relative but [t]his Uninsured not Motorists insurance does insured for not Uninsured Motorist apply as follows: policy. apply under bodily this It does not injury being by any hit such vehicle. apply bodily It injury does not suffered (Emphasis deleted.) occupying while a motor vehicle owned Judge Michalski’s that the Hill- belief held that the July On to demonstrate that could Nationwide mans failed Hillmans were covered damages. issuing Fire After the Final Mut. v. Nationwide show policy. Hillman 1988) Judgment, court identified Na- Ins. Nation (Hillman I). agreed prevailing We as the and award- tionwide contractual lan interpretation of the partial attorney’s wide’s fees in the ed costs and However, majority of the court guage. $154,899.57. amount of to the uninsured give to effect refused appeal This followed. in exclusion contained owned motor vehicle public policy statutory and policy for II. DISCUSSION at 1251-52. reasons. Id. of the Hillmans’ Bad Faith A. Dismissal established, Nation- coverage was Once Claims proce- pursue the arbitration wide chose to Coverage 1. Denial of policy for determin- by the dure mandated was held on Jan- ing liability.2 Casualty Arbitration Fire & Co. v. In State Farm (Alaska 1989), arbitrators concluded uary Nicholson, 1989. The P.2d 1152 we 777 regard fault with Amis was at companies could be lia 33% held that insurance As for to Julie’s estate. the claims related the tort of bad faith so-called ble for negligent inflic- claims for and Janet’s John in which in “first-party” cases—cases distress, panel agreed of emotional tion compensation from their own seek sureds for negligence accounted that Amis’ 15% they have suf insurers for losses which $92,- awarded the harm. The arbitrators 1156. fered. Id. at Na- Two weeks later 500 to the Hillmans. comprehensively occasion to We had no $50,000, paid the tionwide faith the elements of the tort define motor- maximum amount of the uninsured context in Nichol- first-party in a policy.3 coverage provided ist subsequent son; not done so in we have arbitration, Following the Hillmans’ bad cases, Ins. e.g., Farm Mut. Auto. see State litigation began anew. On June Weiford, v. Co. 1990, Judge granted Nation- Michalski 1992); recogniz- nor do we do so now. summary judg- partial for wide’s motion first-party ing the tort of bad faith ment, dismissing the bad faith claims asso- cases, juris- those aligned Alaska with we denial of ciated with Nationwide’s Gruenberg followed dictions that have and decision to arbitrate. Co., 9 Cal.3d Aetna Insurance (Cal.1973),ap- P.2d 1032 Cal.Rptr. motions, pre-trial Judge Mi- After several apply bad faith as parently the first ease ruling chalski reconsidered an earlier Gruenberg cases.5 ar- first-party summary a tort granted Nationwide’s motion in a manner that seemed remaining the tort judgment on the bad faith ticulated conduct and bad require Dismissal of the claims was unreasonable claims.4 based /, reasoning rejected argu- court’s or conclu- 2.In we no error in the trial Hillman sion. ment that Nationwide had waived its I, arbitration. Hillman 758 P.2d at " 12, 1989, although Judge granted trial court held that ‘Nationwide act- Gonzalez 3. On June partial summary judg- failing ed in bad faith in to disclose the motion for avail- recovering procedure ability sepa- ment and barred the Hillmans of the arbitration in four Hillman,' damages for emotional distress. pieces correspondence arbitration to Mrs. rate consequently re- award was proceed The arbitration arbitration should because the Hill- $55,000. duced to represented ‘simply mans were counsel who attempt made a calculated decision to to obtain brought through system, knowing consisted of is not relief the court 4. What these claims actually required dispute the briefs before us. resolution into focus in through Id. The arbitration.’” court added " litigants ‘none of the that since herein has jurisdictions Gruen- 5. that have followed hands,’ al., Shernoff, tips in berg clean balance favor of sub- ‘[t]he in William M. et are listed mitting appropriate contractually Litigation, issues 5.01 at 5.3 n. 4 § Insurance Bad Faith ” (1984 process.’ Supp.1992). mandated arbitration Id. We found situations, party In third an insurer “Accordingly, faith: when the insurer un- reasonably pay- and in bad faith withholds can be liable for excess insured, it ment of the claim of its is sub- to settle a third when it has failed Gruenberg, ject to tort.” However, against its insured. action P.2d at 1038. agreed courts not on the standard requirement

A was im- imposing liability. similar double such Some courts posed in National American Noble v. impose liability negligent for a failure to Life Ariz. P.2d 866 Insurance action; ap- settle the third others (1981), case on which we relied in another that, practical ply a “bad faith” test Supreme The Arizona Court Nicholson. test; terms, negligence amounts to a adopted expressed by the the standard Wis- group applies fairly a third of courts consin Court Anderson v. Con- requirement subjective strict Co., 85 Wis.2d tinental Insurance divergence faith. A similar of views con- (Wis.1978): N.W.2d 368 cerning wrongdoing the level of neces- The Anderson Court states: sary impose to tort insurers faith, plain- To a claim for a show appears for denial of benefits to exist tiff must show the absence of a reason- among adopted courts that have the tort denying able basis for benefits of the party of first bad faith. policy knowledge and the defendant’s or Although fully faith is not defined disregard reckless of the lack of a rea- jurisdictions, in some courts have consis- denying sonable basis for the claim. It then, tently pay held that a refusal apparent, to benefits that the tort of bad

faith is an intentional interpretation one.... based on a reasonable the alleged

The tort of bad faith can insurance contract is not bad faith. be would, only pleaded if the facts on the Shernoff, Litiga- Insurance Bad Faith standard, objective basis of an show the tion, (footnotes (1992) at 5-6 § 5.02[1] deny- absence of a reasonable basis for omitted). ing claim, i.e., the would a reasonable insurer under the above authorities make it clear circumstances have de- delayed payment nied or of the claim that while the tort of bad faith in first- under the facts and circumstances. may may insurance cases or not re 271 N.W.2d at 376-77. quire decept conduct which is fraudulent or ive,6 it necessarily requires

Under that the the Anderson standard an in- insur company surance may challenge still company’s ance refusal to honor a claim be fairly claims which are debatable. The made without a reasonable basis.7 Neither tort of bad faith arises when the insur- proposition. takes issue this with In company denies, ance intentionally fails stead, argue the summary that process, pay or a claim without a judgment granted should not have been reasonable basis for such action. (a) always reasonableness is a Noble, 624 P.2d at 868. question and, jury of fact for the alterna (b) leading tively,

A say text has this to under and about the the facts circum in first-party standard bad faith cases: stances of a ques- this case there was fact 6. The obligee by Wisconsin Court acting reasonably response have mod- to a Fehring ified the Anderson standard. In v. Re- obligee, by acting promptly claim its and Co., public Insurance 118 Wis.2d remedy perform principal’s duties where (1984), N.W.2d proof the court held that footnote, default is clear.” Id. at 628. In a we that a reasonable insurer would not have acted decision, quoted Dodge Fidelity an Arizona v. as the defendant did under the circumstances Deposit Maryland, Co. 161 Ariz. establishes bad faith. (1989), language P.2d 1240 which uses mirror- ing employed today's opinion: the rule of law Loyal Order Moose v. International Fideli- long surety reasonably response “So as a acts ty (Alaska 1990), Insurance a obligee, surety involving a claim made its analogous case ship does somewhat relation- surety obligee, liability.” between Loyal and its not risk bad faith we stated: tort Order of surety may satisfy duty good Moose, "A faith to its 797 P.2d at 627 n. 8. argue they presented The Hillmans that Nationwide had a rea- tion as to whether showing that evidence Nationwide denied the claim. denying basis for sonable making investigation any before argument that rea the law and Nationwide facts or that question always presents sonableness subsequent, made formal denials of cover- Although questions fact is without merit. age having significant conducted without must be resolved of reasonableness often investigation. They argue also that Na- trial, are we not held at agents guidelines violated its tionwide’s subject summary appropriate never policies, guaran- which are intended to If, viewing procedures. when judgment fair, tee claims han- honest reasonable favorably oppo the evidence most others, dling. Among included violat- summary judgment, nent of a motion for ing policy requiring ad- company local the trial finds that reasonable justors higher to consult with echelons challenged only could conclude claim; denying company before a death way, conduct must be characterized one failing all doubts to resolve summary accordance then policy about in favor of the hold- that conclusion should entered. er; withholding any explana- file Corp., 723 P.2d Pay ’NSave Schneider required holder why tion 1986). sign agreement; obtaining a nonwaiver “paper legal just to file” and opinion a the argue superi- Hillmans that the The also claim; purpose denying for the of the main tacitly accepted court the standard of policy failing provide a holder with a in Savings faith articulated National letter previously promised from Nation- Dutton, Insurance Co. v. 419 So.2d Life attorney regarding coverage; lying wide’s Dutton, (Ala.1982). the In Alabama about that policy to the holder whether that, except in Court held extraor- available; “stonewalling” and letter was circumstances, dinary pro- “if the evidence years the claim for four vindic- duced either side creates a fact issue attorneys.8 the tiveness towards regard validity of the with the claim ... argue Finally, Hillmans that even after the claim must the tort fail and faith] [bad personnel given had its the au- Nationwide jury.” not be Id. should submitted thority coverage the to concede and settle short, test, at 1362. under the Dutton $50,000 policy the lim- underlying case for plaintiff prove plaintiff that is the must its, Regional Attorney its Claims unilateral- “entitled to a verdict on the con- directed do so. ly decided not to and, thus, tract claim entitled to on recover In our none of these facts suffice to the contract claim as a matter Id. view law.” Na- question raise a as to whether factual We need not address whether the a rea- tionwide’s denial of lacked adopted court the Dutton stan denial on an sonable basis. The was based dard. Dutton does not state Alaska explicit policy. ques- in the exclusion position merely law. that rule of Our in was tion this case is whether Nationwide establishes that no rea where insurer treating as the exclusion unreasonable regard its conduct as sonable could question, valid. to this As unreasonable, question of bad faith suggesting to no evidence have directed us need not and should not be submitted to We found that have unreasonableness. jury. only interpretation” “the argu The Hillmans’ alternative that advanced Nation- exclusion was presented I, they ment—that sufficient evi 1250. We wide. Hillman P.2d at question to raise a as to I exclu- dence fact whether also concluded in Hillman that the public statutory Nationwide’s denial of a rea sion on and had was invalid grounds. requires policy more Two of members sonable discussion. the five basis— procedures policies its all these 8. The Hillmans maintain that Nationwide’s Dis- low own Manager Regional Claims respects. trict Claim Attorney concede that Nationwide failed to fol- Instead, disagreed argue, court exclusion tion. of this that the Nationwide’s (dissenting opinion agents invalid. Id. at 1255 on was insisted arbitration order Burke, Moore). joined by discourage proceeding of Justice Justice the Hillmans from also Farm Ins. legitimate See State Mut. Auto. Co. claims with their and because Bass, 231 Ga. S.E.2d aggravation vindictiveness (where (1973) appellate was divided attorneys. interpretation of uninsured motorist However, the covered statute, justified legally “insurer was “only to the the Hillmans extent the unin cannot, litigating issue and as matter was evi sured motorist liable.” Based on law, faith”). Fur- be liable for ... bad police report, dence from initial Nation I, ther, acknowledged as we in Hillman reasonably wide could conclude that Amis minority jurisdictions respectable responsible accid only partially for the reached same conclusion as dissent. subsequent findings ent.10 ar I, 758 P.2d at The facts Hillman bitrators, that Julie was at fault 66% Nationwide did not follow its standard parents and her the accident at fault 85% procedures denying coverage, that it did distress, for their emotional lend additional not forward its letter to the Hill- support to Nationwide’s claim that its de mans, and that its offer was condi- mand for arbitration reasonable. See settling tioned on all of Hillmans’ claims Sullivan v. Allstate Ins. 111 Idaho than their rather uninsured motorist (1986)(a subsequent claims, ques- do not suffice to create fact decision that a arbitrator’s claimant tion as whether Nationwide’s decision to partially negligent was clear evidence basis, deny coverage lacked a reasonable denial of insurer’s was not they have little or no on that relevance faith). Consequently, de conclude, point. therefore, We that there cision to demand arbitration was reason genuine no fact are issues of material as to therefore not in able and bad faith. coverage whether Nationwide’s denial of was reasonable.9 Attorney’s B. Award Fees

2. Demand for Arbitration attorney’s An award of will fees dismissing In the same order if the trial be reversed court’s determina coverage denial, bad faith claim related to tion is an abuse discretion or “manifest Judge Michalski also dismissed the bad ly unreasonable.” Luedtke v. Nabors claim faith based on demand Inc., 1123, Drilling, Alaska 768 P.2d 1138 Judge for arbitration. found (Alaska 1989). Michalski Designation prevail of the that the arbitration not in demand was ing party committed to the “is broad discre “merely because Nationwide exer trial Apex tion of the court.” Control right.” cised its The court reiterated the Inc., Systems, Mechanical, v. Inc. Alaska 7, in its March 310, decision 1991 order dismiss (Alaska 1989). 314 776 P.2d ing the remaining bad faith on The determination will be affirmed claims. appeal “unless it is that the court shown

The Hillmans by issuing contend that Nationwide abused discretion a deci- had no reasonable arbitra- arbitrary, capricious, basis to demand sion which is mani- report 9. This conclusion is consistent State Farm 10. The stated that Julie had "failed Bass, Mutual Automobile Insurance 231 yield entering Co. Long when Lake Road from (1973) Ga. 201 S.E.2d 444 Aetna and Casu- side road." The Hillmans note that the infor Court, alty 437, Surety Superior & Co. v. 161 Ariz. mation to Nationwide when it available insisted cases, (App.1989). both prove insufficient that arbitration was found that courts an insurer was not liable for at at fault. This is but Amis was not all true faith when it denied an insured was entitled to irrelevant. Nationwide arbitra exception basis on the of an uninsured motorist reasonably maintain that Amis tion if it could which was later held also invalid. See Hanson completely at fault. was not America, v. Prudential Insurance 772 Co. F.2d (9th Cir.1985) law). (applying California unreasonable, $275,000 damages. After improperly compensatory moti- festly or in favor trial the returned a verdict vated.” $1,900, plaintiff, awarding some Lease & Assoc. v. Howard S. Constr. Co. in turn had reduced to be 40% 1986) (Alaska 725 P.2d Holly, plaintiff’s comparative neg- Ryman, 654 (quoting City Yakutat v. of (Alaska 1982)). plaintiff’s ligence. Id. at Thus the P.2d only approximately award affirmative issued, Judgment After the Final $1,100. recovery This so small com- ap- Judge Michalski awarded Nationwide sought may what that it parison with proximately partial and costs The properly be considered de minimis. argue The attorney’s fees.11 essentially verdict was a defense verdict.14 when it the trial court abused its discretion easily distin- Owen Jones not be so pre- determined that Nationwide was the There, Jones-Western, a contrac- guished. party. vailing Hillmans claim tor, subcontractor, sued its C.R. Lewis they prevailed on of the three since two $120,000 prog- approximately to recover case, liability, in the issues payments that had ress Jones-Western faith, they “pre- but not on bad were paid con- C.R. Lewis connection with vailing party.” destroyed building struction of a that was 82(a) Rule Civil directs that earthquake completed. by an before it was party.12 prevailing fees awarded to the for ser- subcontractor counterclaimed has prevailing is the one ‘who “[T]he furnished be- vices rendered materials successfully prosecuted defended collapse. held that fore the The trial court action, the against the one who is success- recover was not entitled to Jones-Western “main action and ful on the issue” of the progress payments and that the subcon- “in whose favor the or verdict is decision quantum tractor had a claim meruit ’ ” and the rendered entered.” reasonable value of the services Moore, Day v. prior earthquake. supplied materials 1989) V.M.C., (quoting Adoption approxi- court fixed sum at The trial (Alaska 1974)). 795 n. 14 P.2d $142,000. Thus, mately the subcontractor recognized This court that “it has to an affirmative would have been entitled immutable who is not an rule that the $22,000 except for the recovery of some recovery must be obtains affirmative salvaged it materials fact that some party.” the prevailing considered Owen building earthquake after the on which the Co., Sons, $30,000. Inc. v. 497 Jones & C.R. Lewis Be- placed a of the court value (Alaska 1972). this, P.2d 313-14 We was left with of Jones-Western cause 13 party to the recovery. been cited two cases where We de- affirmative a small recovery an affirmative was as recovery who obtained in Owen Jones scribed prevailing party by recovery to the the based merely held not be “incidental”: “This accounting as an trial court and this decision was affirmed can be classified on the recovery not be a suf- appeal. The cases and incidental which will on are Owen Jones Schwartz, (Alas has recovery who ficient bar a Hutchins being 1986). large consid- Hutchins, sought In claim from plaintiff ka the defended $44,448.57 recovery. The and received an 11. The total consisted of in costs tiff affirmative $110,451.00 $141,676 attorney’s plaintiff in fees. The fees award received in verdict the attorney’s 40% of the total amount of fees nothing was because of that case was reduced to July incurred Nationwide after 1988. plaintiff had made. prior settlements which the at 441. Id. 82(a)(2) R.Civ.P. states: 12. Alaska judgment money is not In actions where the addition, had the defendant in Hutchins 14.In determining accurate criterion the fee an for Rule 68 Civil of under made an offer side, prevailing court to be allowed to the the he that rule under for and therefore award a fee with the shall commensurate attorney’s in- any fees case entitled to was in legal and value of rendered. amount services at 1203. offer. Id. after the date of the curred Inc., Helicopters, Buoy 13. v. ERA (Alaska 1989), plain- is not case in which the Jones, Buza, prevailed party.” plaintiff on the basic prevailing ered a Owen as liability question n. the P.2d at 5. We also noted that and received an affirma- recovery litiga- “main issue” the case below was wheth- on tive based its successful obligation er an the subcontractor had question, tion of that which was substantial progress payments. refund the The sub- distinguishable in amount. Jones is Owen prevailed on this issue. Id. at contractor plaintiffs recovery the because affirmative Accordingly, 314. affirmed trial we the accounting was on a there based minor holding was court’s that the subcontractor issue, theory not on the prevailing party. the Id. plaintiff unsuccessfully tried before the court. reaching In our conclusion in Owen Jones, distinguished we Buza v. Columbia case, present the In the Hillmans are no 1964). Lumber P.2d disappointed that doubt did not re- brought Buza was a suit for of conversion compensatory punitive damages and ceive logs. plaintiff sought of quantity The against company the on $8,000, logs, the of the return worth some Nonetheless, they pre- of bad claim faith. plus punitive compensatory damages against vigorous opposition vailed on their $31,000. plaintiff of After a the trial policy coverage $50,- claim and received logs, no damages. awarded the but We recovery 000 on that claim. This cannot be held, nonetheless, plaintiff the classified as an incidental one unrelated to party, defining prevailing term to litigation main focus of the in this case. mean successfully prose- “who trial We conclude therefore that the court successfully cutes the action or defends in refusing designate erred the Hillmans against it, issue, prevailing the main prevailing party.15 Accordingly as the origi- though even not to the extent of the attorney’s award fees must reversed be Buza,

nal contention.” P.2d at and this case remanded so that award of an fees made in distinguished

In Owen Jones we Buza favor Hillmans. follows: issue in main that case III. CONCLUSION ownership quantity logs, of a plaintiff proved logs his al- superior affirm the We decision though compen- he was not able obtain granting motion punitive damages. sating or summary judgment on the Hillmans’ bad

The instant case differs faith claims. Nationwide’s decisions to recovery appellants only was based on deny coverage then to demand arbitra- accounting salvaged materials light tion were our deci- reasonable. appellee. It was clear that the main sion, there is no reason to consider the issue against appel- had been resolved damages issue.16 lants when the court appellee found that designation of Na- court’s obligation had progress no to refund its prevailing tionwide was an payments under the contract.... abuse of Since the discretion. Jones, (footnote Owen 497 P.2d at 314 prevailed on the three two of issues central omitted). the case a substantial affirma- and won

In present closely issues, our view the case more recovery tive based these Here, Buza party. resembles than prevailing Owen Jones. were The trial court addition, 15. The fact that Nationwide made an offer of we decline to address the Hill- In ques- settlement of is irrelevant to the superior claim that several of the mans’ court's prevailing party tion of who the is since this evidentiary rulings were an abuse of discretion. Myers offer made was not under Civil Rule 68. superior rulings concerning if the court’s Even Inc., v. Snow Supply, White Cleaners & Linen admissibility during the erroneous, of evidence trial were 750, (Alaska 1989) ("no 770 P.2d 753 offers not such error harmless where the compliance with Rule Civil 68 should be jury. was never case submitted to the questions determining considered in costs fees”). attorney’s

1329 by imposed the cove- reflecting The additional duties a new award should make dealing fair were good faith and nant determination. accepted the this court not eliminated when granting decision court’s contracts, a argument that in insurance faith claims summary judgment on sounds in tort. of the covenant breach AFFIRMED. The award of is requirement responsibility is not the “That and REMANDED. fees is REVERSED it- by the terms mandated settle, defend, pay. It is self—to whom, Justice, COMPTON, with imposed by the obligation, deemed to be BURKE, Justice, dissenting part. joins, law, the insurer must act fair- under which comprehensively de- declining to While discharging its con- ly good faith in faith, of the tort of bad fine the elements responsibilities.” Gruenberg v. tractual the im- actually eliminated the court has Company, 9 Cal.3d Aetna Insurance deal- good faith and fair plied covenant of 480, 485, Cal.Rptr. 510 P.2d The court con- ing in contracts. insurance (1973). appropri- summary judgment is cludes that (color- if has a reasonable ate the insurer deal- good faith and fair The covenant liability. able) denying contractual basis party act with both ing requires that the words, insurer enforce a In other fair- good objective faith and subjective denying liability re- contractual basis Drilling, v. Nabors Alaska ness. Luedtke Be- any subjective bad faith. gardless of (Alaska 1992). Inc., It 834 P.2d analysis contrary is the court’s cause rely on contrac- objectively is reasonable by policy, and be- supported law and not therefore, rights, rights. tual Contractual jury could find cause a reasonable position. a a reasonable basis for provide faith, subjective bad Nationwide acted with inquiry. The this does not end our But I dissent. dealing good faith and fair covenant of rights pursued be requires that contractual that the tort of bad The court concludes good subjective faith. in the context of first Mitford (Alaska Lasala, de requirement necessarily claims includes employment at 1983), though the will even refusal to honor the insurer’s firing of Mitford for allowed the contract basis. claim be made without reasonable all, sur- “the circumstances no reason at noted that the Hillmans do not It should be give rise to rounding Mitford’s termination proposition, contrary to accept this for the that he was fired ... an inference conclusion, the Hillmans do.not the court’s sharing him preventing purpose of if basis can exist accept that violating duty thereby profits,” future pur- by improper actions are motivated dealing. In Loyal fair good faith and argue that because poses. The Hillmans Fidelity v. International Moose Order Nation- presented that shows evidence was P.2d Insurance self serv- wide’s denial motivated surety had a 1990), while the we noted that ing, improper purposes, sum- dishonest arbitration, demand contractual mary inappropriate. may not itself for arbitration “the demand supports plaintiff’s con- “Where the record faith, to defeat an or serve be made carri- tention that acts or omissions bad-faith timely and sufficient otherwise motive, purpose or er were for a bad-faith claim.” to a the matter should submitted

for its determination.” Thus the issue hold that a declined to breach We have properly us. before dealing fair good of faith and the covenant employment context of today good faith sounds tort the Until the covenant of However, special of the implied in dealing, and fair which we have contracts. contracts, of a breach every including insurance con- nature of insurance contract dealing fair tracts, good faith and imposed has duties above and be- the covenant of party insurance claims does sound yond express contractual duties. v. in first Guin 1281, v. Ha, (Alaska 1979). Fire Cas. Co. 591 P.2d in tort. State Farm & Nicholson, 1152, (Alaska 777 P.2d 1156-57 that a time limitation on commencement of 1989). only showing suit will be enforced on a of prejudice); Energy Authority Alaska adhesionary aspects of the insurance

contract, Co., including bargaining of lack Fairmont Insurance 845 P.2d 420 insured, strength (Alaska 1993) the contract’s (concluding that the failure terms, standardized the motivation of the to file suit the time of within limitation entering insured for into the transaction contract not does bar claim without a and the nature of the service for which showing prejudice). of executed, distinguish contract is cases, spite of these this court now contract from most other non-insurance long concludes that as as there exists a commercial contracts. These features reasonable contractual basis for a denial of characteristic of the insurance contract liability, sounding a bad faith claim in tort particularly susceptible public make it regardless any will fail of evidence of sub- policy considerations. jective faith. interprets bad The court our Id., Jurika, quoting Louderback & Stan- adoption “seem[ing]” of Gruenberg Limiting dards the Tort Bad Faith require proof objectively of both unfair Contract, Breach 16 U.S.F.L.Rev. subjective conduct and bad faith. Gruen- (1982). holding 200-01 The reason for berg was the first case to hold that a such claims sound in tort is because “an good breach of the covenant of faith and provides remedy action in tort for harm dealing tort, fair giving plain- sounds in though done to insureds no breach of an tiff broader remedies than those in con- express contractual covenant has occurred tract. While in Gruenberg may there damages where contract fail to ade- been evidence of both unfair conduct and quately compensate Id., quot- insureds.” faith, clearly the court articulated “the ing Unigard White v. Mutual Insurance obligation, imposed deemed to be Co., 112 Idaho 730 P.2d 1017-18 law, under which the insurer must act fair- (1986). ly in good discharging faith in Nicholson is consistent with our responsibilities.” contractual 510 P.2d at special that because of the nature of insur- (emphasis added). contracts, they ance particularly are sus- providing Instead protection more ceptible public policy considerations. by adopting proposition an insured Hillman v. Nationwide Mutual Fire Ins. tort, may a bad faith claim sound in fact (Alaska 1988) (in- 758 P.2d providing protection. we are less In the validating uninsured motor vehicle exclu- claims, context of first public sion on the policy); basis of CHI of actually court has limited the covenant of Alaska, Employers Inc. v. Reinsurance good dealing faith by imposing and fair Corp., 1993) (grant- P.2d 1113 requirement twofold ing which it has not re- right an insured the unilateral to select quired any independent other contract. The counsel cases in- covenant where an good rights, dealing meaning- surer has faith and fair despite reserved its is express insurer’s contractual less if existence to select of a contractual counsel); Ass’n, Estes v. Alaska Ins. Guar. basis for denial of is alone suffi- (Alaska 1989) (concluding cient to defeat a bad claim.1 faith 1. This court stated in State Farm proceedings. Mutual Auto further The Hillmans should be Weiford, Insurance Co. v. permitted proceed on a claim based on a (Alaska 1992), may bring that an insured implied a bad good breach of the covenant of faith claim "in tort as well dealing as in contract.” The arising and fair out of the contractual duty good dealing implied faith and relationship, fair distinct from a claim based on the every requires contract the insurer to act They specific tort of bad faith. have set forth subjective good fairness, objective which, faith and un- light facts them, viewed in a most favorable to which, defined, like the tort of bad faith genuine as now raise issues of material fact. permits subjective the insurer to act with damages Contractual implied based on a breach of the faith. If still a correct good statement of dealing covenant of faith and fair Weiford law, proper disposition then the may scope this case damages, narrower in than tort would be to remand yet it to the court for some relief be available to the Hill- to resolve all reasonable doubts holdings. failed contrary previous

This is to our policy hold- about favor Auto example, in Farm Mutual For State er; (3) explain why a failed to nonwaiver Weiford, Insurance Co. (4) a agreement required; was obtained 1992), we reaffirmed denying legal opinion justify in order to per- brought by insured claims “bad faith (5) claim; provide the Hillmans failed to companies against their insurance sons previously promised information from with in con- brought in tort as well as may be (6) attorney; lied about whether a letter punitive the award tract.” We vacated available; (7) attorney stone- from its clearly offer damages “the because years alleged walled for four suspect to note was reasonable. While vindictiveness toward the attor- motive, might the file be reflective bad and, (8) authority con- neys; even after to reasonable, question since the offer “coverage and settle the case was cede independently form the ba- the note cannot granted, Regional Attorney uni- Claims at punitive damages award.” Id. sis for a laterally not settle. decided to However, crux of we noted that “the testimony faith case was Weiford’s bad true,2 Taking assertions as a rea- these George Broatch. Broatch expert, of her by failing sonable could conclude that Farm single that no act of State testified lying investigate, to to the holder faith, cumulative- to but that amounted bad stonewalling years, for four Nation- ‘It—to me it ly Farm’s actions did: State subjective faith. The wide acted with bad I company philosophy. was a matter of improper. grant summary judgment day really any quarrel have with long don’t court concludes that as Yet this ” particularly.’ day handling to of the file contractual Nationwide had a reasonable “that there was liability, Id. at 1267. We concluded of bad denying evidence basis jury find- support evidence to little no dealings sufficient and unfair “have faith.” ing that State Farm acted bad relevance.” reject- is correct in Id. at 1269. court applies this same standard ing assertion that reasonable- the Hillmans’ Again, on question of arbitration. always question of fact for the ness is facts in a summary judgment we view the jury. proper question But the is whether a non-prevailing light most favorable Nation- jury could conclude that Moose, 797 P.2d at party. Loyal Order of unreasonably, objec- wide acted i.e. either claim Nationwide insist- 628. The Hillmans subjective faith. tively unfairly or with bad discourage on arbitration order ed legiti- judg- proceeding Hillmans from reviewing grant summary claims, and because of vindictiveness light facts in the most mate ment we view the attorneys. aggravation with Hillmans’ non-prevailing party. Loy- favorable to the jury could conclude Moose, Again, a reasonable 797 P.2d at 628. The al Order of subjective acted with that Nationwide presented evidence that Nation- Nationwide’s insurance making an faith. Yet because wide denied before provision, policy contained an arbitration investigation of the facts or law. Nation- to demand arbitra- guidelines internal “Nationwide’s decision wide violated its fair, not in and therefore policies guarantee honest and tion was reasonable which ignores Loyal handling. Specifically, faith.” This conclusion reasonable claims (1) Moose, P.2d at to follow internal Nationwide: failed Order of though a sure- adjustors specifically local failed to states that even procedures when arbitration, “the higher compa- ty may echelons in the have a consult with claim; (2) may not itself be denying for arbitration ny before the death demand However, point have not at this of the state- 2. While the Hillmans mans. correctness doubtful, convincing despite presented, evidence of their asser- is now ment in Weiford which, tions, they specific declining “compre- set forth facts court's assertion that it is light Hill- hensively” in the most favorable to the define the elements of the tort of bad viewed mans, genuine fact. raise a issue of faith. faith, made in bad or serve to defeat timely bad-faith

otherwise and sufficient again effec-

claim.” The court’s conclusion

tively good eliminates covenant dealing. fair presented

The Hillmans evidence from jury could conclude Na-

which a reasonable subjective bad faith.

tionwide acted with genuine issues of material fact

There are judgment. preclude summary NIX, Appellant, Debbie M. Maryann Foley, Anchorage, appel- E. for lant. NIX, Appellee. Daniel L. Bailey, Allen M. Law Offices of Allen M. Bailey, Anchorage, appellee. No. S-4916. MOORE, C.J., Court of Alaska. Before WITZ, BURKE, RABINO MATTHEWS and July 1993. COMPTON, JJ.

OPINION MATTHEWS, Justice.

Debbie and Daniel Nix married in were child, 1984 and have one born 1986. petitioned Debbie and Daniel for dissolu- marriage tion and the court entered a decree of dissolution in February required 1990. The decree Dan- pay monthly support iel to Debbie child amount $936. A letter written sometime after the hear- dissolution,1 ing petition signed on their Debbie, only by agreement her states support payments reduce the child to $300 per month until such time that Debbie asks Daniel to increase the amount back $936 per acknowledges month. Daniel that Deb- eventually right. He bie exercised payment support then increased the child per period to the full After a month. $936 time, Support the Child Enforcement 1, 1989. February signed hearing, 1. The letter is dated Both after the dissolution but however, decree, parties agree, that the date entry "1989" before actually and that incorrect the letter was written

Case Details

Case Name: Hillman v. Nationwide Mutual Fire Insurance Co.

Court Name: Alaska Supreme Court

Date Published: Jul 9, 1993

Citation: 855 P.2d 1321

Docket Number: S-4555

Court Abbreviation: Alaska