RECENT INSURANCE BAD-FAITH CASE (2017)

Victoria White v. Safeway Insurance Company

(New Mexico Second Judicial District Case No. D-202-CV-2011-05632)

 

My grandmother used to have a folksy saying when we were growing up:  “Don’t let a little hangnail turn into an ingrown toe!”  By that, although I had no idea what she meant at the time, but I think she meant that if you don’t deal with things before they become serious, the results can be disastrous.  I guess Nana didn’t oversee the claims department at Safeway Insurance Company.  In this particular case, the hangnail seems to have pretty much killed the patient.  What started out as a case that could have been settled for $50,000 ultimately turned into a verdict of over $4.2 million against Safeway Insurance Company.

The facts of the case are somewhat complicated and nuanced, but essentially stemmed from a motorcycle-car collision.  The driver of the car, Victoria White, collided with the motorcycle rider causing serious injuries.  The motorcycle rider and his family hired counsel early on in the process and learned that Ms. White had an insurance policy with Safeway Insurance that had policy limits in place of $25,000 per person and $50,000 per occurrence.  The dispute arose over whether there should have been $25,000 available to the rider, Manuel Joseph Chavez, as well as $25,000 available to his family for a “loss of consortium” claim, which to non-lawyers, is a type of claim that I think Wikipedia sums up nicely:  “Loss of consortium is a term used in the law of torts that refers to the deprivation of the benefits of a family relationship due to injuries caused by a tortfeasor.”  The Plaintiffs (Manuel as well as his family) contended that there should be an additional $25,000 available, and the insurance company said there wasn’t.  Plaintiffs attorneys would need a copy of the actual policy to make any assessment of this dispute.

Nevertheless, the Plaintiffs made an offer to settle the case for $50,000 composing of $25,000 for the rider and a $25,000 loss of consortium settlement for his family.   Counsel for the motorcycle rider even offered to waive attorney fees if the matter could be settled quickly and efficiently which made sense considering the medical bills were already several times the settlement amount.  The insurance company responded that they would only pay the $25,000 claiming there was no coverage for the additional $25,000.  It came out at trial that it was apparently Safeway’s policy not to provide actual copies of the insurance policy to opposing parties or their attorneys.  Counsel for the plaintiffs repeatedly asked for copies of the full insurance policy which the insurance company refused to provide until well after the settlement offers had expired.  Without a copy of the policy, attorneys for the plaintiffs had no way of verifying whether $25,000 or $50,000 was available which began a series of exceedingly bad decisions by the insurance company.  These decisions included some of the following:

  • Failing to accept the settlement offer extended by plaintiff as the court found this failure did not, as the law requires, fairly balance the interests of the insurance company with their insured (the person named on the policy), Victoria White;
  • Failing to provide certified copies of the applicable insurance policy to the plaintiffs’ attorney despite multiple requests and opportunities to do so;
  • Consulting with Victoria White’s defense attorneys about coverage issues, something that is always inappropriate as the insured’s defense counsel is supposed to have only their client’s interests before them – they are not counsel for the insurance company even if the insurance company pays the bills (always a bit of a fiction);
  • Never informing Ms. White about the settlement offer nor about their refusal to provide copies of the policy to the Plaintiffs’ counsel;
  • Failing to pay interest on the judgment rendered in the underlying liability trial (as opposed to the subsequent bad-faith trial and decision which is what this blog centers on);
  • Fundamentally failing to treat Ms. White’s exposure to excess (i.e. over and above what the insurance policy would cover) as their own – failing to view the insured’s peril as they would view their own.

At the end of the day, the court awarded Safeway’s insured, Victoria White, compensatory damages in the amount of $4,213,035 and an additional punitive damage award in the amount of $8.2 million.  In total, judgment was entered for a total of over $12 million with post-judgment interest accruing at 15% per year.

This was obviously an alarming result considering the insurance company could have merely settled the case early on for $50,000.  Add to all of this the fact that they must have spent hundreds of thousands of dollars on their own attorney fees in the process.  The findings of fact and conclusions of law, a written explanation of the Court’s factual and legal determinations, are available for download below and for attorneys or potential clients who think they may have experienced similar treatment, it is an excellent primer on the law.  The decision was not appealed and although there may have been some negotiations about the final settlement amount, it is likely that the insurance company paid out several million dollars on this case.

The take-away point from this case seems to be that some insurance companies, certainly not all, have institutionally-grafted claims practices that attempt take advantage of their insured and violate New Mexico’s common law and statutory law in that those practices do not fundamentally treat the insured.  Should you find yourself in a situation where you believe your insurance company is not treating you fairly, whether you can articulate the specific legal bases for that conclusion or not, it is always best to meet with attorneys experienced in this area of the law for a quick assessment of your situation.

If you feel like your insurance company isn’t treating you fairly, let us help. Contact us today.

Download the PDF here: 170830 Courts FFCL