American Family Mutual Insurance Co. v. Hansen

Facts

P bought a 1998 Ford Escort on May 18, 2002. She purchased an insurance policy on the car in 2002 from the Heath Burchill American Family Insurance Agency (Burchill), a D captive agent. On April 9, 2007, P went to Burchill's office to add more coverage to the policy on her Ford Escort. P obtained a lienholder statement from Burchill. The document resembles the declaration page of an insurance policy. It lists a policy inception date of August 1, 2002, effective dates of '12-15-2006 UNTIL CANCELLED,' $100,000 per person in underinsured motorist coverage, and 'DAVIS, JENNY' as the named insured. Although P has never been named Jenny Davis, Davis is P's stepfather's and mother's last name. On December 30, 2007, P sustained injuries when she was a passenger in a vehicle owned and operated by her boyfriend. Because her boyfriend carried only $25,000 in insurance, P filed a claim for UIM benefits on April 24, 2008, from D. In contrast to the 2007 lienholder statement issued by Burchill to Hansen, D's own underwriting department produced a declaration page effective from November 26, 2007, to August 1, 2008 (the 'November 2007 declaration page') naming 'DAVIS, WILLIAM & JOYCE'-Hansen's stepfather and mother-as the insureds. Because P would be covered under her parents' policy only if she resided with them, the D claims adjuster assigned to her case made repeated unsuccessful attempts in April and May of 2008 to contact D and determine her residence. P received an offer from her boyfriend's insurer to settle her claim for the policy limits of $25,000. P contacted Burchill and requested a copy of her policy. She received a lienholder statement dated January 13, 2010, identifying 'HANSEN, JENNIFER' as the named insured at the time of the accident. This document listed the same policy number and vehicle description as the 2007 lienholder statement, but now showed effective dates of '12-01-2007 to 08-01-2009.' D sent P a letter requesting verification of P's residence at the time of the accident, in order to determine her eligibility for UIM coverage under her parents' policy. The letter advised P that if she did not respond, the claim would be closed. P's attorney sent D a letter enclosing the January 13, 2010, lienholder statement and requesting permission to settle with P's boyfriend's insurance company. Relying on the certified policy obtained from its own underwriting department, D denied coverage on April 27, 2010. P filed against D asserting claims for breach of contract, common law bad faith, and statutory bad faith for unreasonable delay or denial of benefits under sections 10-3-1115 and -1116. P argued that D had not conducted a reasonable investigation into her insurance claim. D eventually learned that P owned the Ford Escort and had done so since the inception of the policy in 2002. D was voluntarily electing to reform the policy on the Ford Escort to provide coverage to the vehicle's owner. On March 1, 2011, after mediation, the parties settled the contract claim for the maximum policy benefit of $75,000 (the $100,000 UIM policy limit minus the $25,000 Hansen had already received from her boyfriend's insurance company). On March 9, 2011, D filed a motion for determination of a question of law, again arguing that the Davises were the named insureds. On April 12, 2011, the trial court denied the motion, ruling that there were material questions of fact in dispute regarding the identity of the named insured at the time of the accident. The trial court determined that the insurance contract was ambiguous as a matter of law. The trial court held that the identity of the named insured was unclear and therefore ambiguous as a matter of law, and that, accordingly, it would instruct the jury that the contract was to be construed against D. The jury found that (1) P was the named insured; (2) D had delayed or denied payment without a reasonable basis in violation of section 10-3-1115; but (3) the UIM benefit for which payment was delayed or denied without a reasonable basis was $0. There was no common-law bad faith but there was bad faith under the applicable statutes. The trial court awarded P attorney fees and costs pursuant to section 10-3-1116 but did not enter a monetary award. On May 9, 2011, P filed a motion to amend the verdict, requesting that the court award a penalty of two times the covered benefit, or $150,000, under section 10-3-1116. The trial court granted the motion. The trial court issued a final judgment in P's favor for $199,683.28 in attorney fees and costs and a statutory penalty of $150,000 under section 10-3-1116. D appealed. The court of appeals found that 'the preparation and delivery to the claimant of a lienholder statement by the insurance agent which was inconsistent with the declaration pages maintained by the insurance company' created an ambiguity in the insurance policy as to the identity of the named insured. It affirmed and D appealed again. 

Issues

Rule of Law

Holding and Decision

Legal Analysis

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