SCOTTSDALE INSURANCE COMPANY and WELLS TRUCKING, INC., Appellants,
ADDISON INSURANCE COMPANY and UNITED FIRE & CASUALTY COMPANY, Respondents
[Copyrighted Material Omitted]
APPEAL FROM THE CIRCUIT COURT OF LINN COUNTY. The Honorable Gary E. Ravens, Judge.
Wells Trucking, Inc., and its excess insurer, Scottsdale Insurance Company, filed suit against Wells Trucking's primary insurer, United Fire & Casualty Company and its wholly owned subsidiary, Addison Insurance Company, (collectively United Fire), asserting United Fire acted in bad faith in refusing to settle within its policy limits a wrongful death action against Wells Trucking. Scottsdale pleaded alternative theories allowing it to raise the bad faith refusal to settle claim, including: (1) assignment from Wells Trucking; (2) conventional subrogation; (3) equitable subrogation; and (4) a duty of good faith owed directly to Scottsdale. The trial court sustained United Fire's motion for summary judgment on Wells Trucking's and Scottsdale's claims, finding that an excess insurer cannot recover from a primary insurer under a claim of bad faith refusal to settle and that bad faith refusal to settle could not be proven because United Fire settled the claim against Wells Trucking and paid its policy limits and Wells Trucking did not suffer an excess judgment. On appeal, this Court finds that an insurer's ultimate settlement for its policy limits does not negate the insurer's earlier bad faith refusal to settle and that an excess judgment is not essential to a bad faith refusal to settle action. Therefore, because United Fire failed to negate essential elements of a bad faith refusal to settle action, it was not entitled to judgment against Wells Trucking. United Fire was also not entitled to judgment against Scottsdale because Scottsdale could pursue Wells Trucking's claim for bad faith refusal to settle under the theories of assignment, conventional subrogation, and equitable subrogation. The judgment is reversed, and the case is remanded.
Factual and Procedural Background
In August 2007, a Wells Trucking employee was operating a truck pulling a flatbed trailer when he was involved in an automobile accident that resulted in the death of another motorist. An accident reconstruction report prepared by the Missouri State Highway Patrol identified multiple factors that contributed to the accident, including the employee's speed, the employee's failure to drive in the proper lane, and the decedent's failure to yield to the employee's right of way.
At the time of the accident, Wells Trucking had a primary insurance policy with United Fire that had a liability limit of $1 million. Wells Trucking also had an excess insurance policy with Scottsdale with a liability limit of $2 million. The Scottsdale policy specified that it would not apply unless and until the underlying United Fire policy was exhausted. The Scottsdale policy also provided that if Wells Trucking had any rights to recover any payment Scottsdale made under the policy, those rights would be transferred to Scottsdale.
The decedent was survived by his wife and two children. After the accident, the decedent's family and United Fire entered into negotiations to settle any claims the decedent's family might have against Wells Trucking and the employee involved in the accident. The decedent's family eventually filed a wrongful death lawsuit against Wells Trucking and the employee, but settlement negotiations continued. In October 2009, United Fire, Scottsdale, and the decedent's family participated in mediation, which resulted in United Fire and Scottsdale each tendering $1 million to settle the case for a total of $2 million. Wells Trucking then assigned to Scottsdale its rights to pursue a bad faith refusal to settle claim against United Fire and agreed to pursue a bad faith failure to settle claim for the benefit of Scottsdale.
Wells Trucking and Scottsdale filed suit against United Fire for bad faith refusal to settle. Scottsdale raised five alterative theories by which it could bring a bad faith refusal to settle claim: its assignment from Wells Trucking; conventional subrogation;  equitable subrogation; breach of United Fire's direct duty of good faith to Scottsdale; and as a third-party beneficiary of the United Fire policy. Wells Trucking and Scottsdale also asserted that United Fire committed a prima facie tort and requested a declaratory judgment.
In support of their claims that United Fire refused in bad faith to settle the wrongful death action, Wells Trucking and Scottsdale alleged the following:
o United Fire was notified of the decedent's family's potential claims against Wells Trucking.
o United Fire retained defense counsel to represent its interest and the interests of Wells Trucking.
o Between April and July 2008, United Fire was given numerous opportunities and extensions of time by the decedent's family to investigate the wrongful death claim.
o The information, facts, and evidence in United Fire's possession or readily available required United Fire to pay up to its policy limits to settle the wrongful death claim.
o Wells Trucking demanded that United Fire settle within its policy limits.
o United Fire " willfully, deliberately, maliciously and tortiously failed and refused to [settle for its policy limits], and instead made very low and unreasonable settlement offers . . . at a fraction of its $1 million limits, thereby breaching its good faith obligations."
o " Because of United Fire's bad faith failure to settle the [wrongful death claim] within its policy limits, in July 2008, [the decedent's family] was compelled to file a lawsuit . . .."
o After the filing of the lawsuit, the decedent's family provided United Fire several opportunities to settle the claim for its policy limits, including
extensions of time to pay those limits.
o " During that time, . . . the facts, information and evidence in United Fire's . . . possession was by then even more compelling as to Wells Trucking's exposure to a probable judgment well in excess of the $1 million limits of the United Fire policy . . .."
o United Fire " deliberately and willfully failed and refused, in bad faith, to settle" the claim within its policy limits despite demands from Wells Trucking to settle for the policy limits.
o Scottsdale was informed of the lawsuit in September 2008 and, in January 2009, demanded that United Fire settle the lawsuit for up to its policy limits while it still had the opportunity to do so.
o " United Fire ignored that demand in bad faith, and instead continued to only make unreasonable and unrealistic 'low ball' offers of settlement . . . in response to policy limit demands communicated to United Fire's agents . . .."
o In March 2009, the decedent's family provided United Fire another opportunity to settle for its $1 million policy limits and agreed to leave the demand open for several months.
o United Fire again refused to settle.
o The decedent's family eventually withdrew their $1 million settlement demand, raised the demand to $3 million, and refused to ...