Taylor v. State Farm Mutual Automobile Insurance Co.

854 P.2d 1134 (1993)

Facts

This insurance bad faith action arises out of an accident that occurred sixteen years ago. Three vehicles were involved. P's insurer, State Farm, retained attorney Leroy W. Hofmann to defend P. P also personally retained attorney Norman Bruce Randall, who filed a counterclaim for P's damages. The other defendant agreed to a stipulated judgment and covenant not to execute. This left P the only party vulnerable to the claims. A verdict against P was rendered for approximately $2.5 million in excess of his insurance policy limits. The court of appeals affirmed these judgments. P sued D for bad faith seeking damages for the excess judgment, claiming, among other things, that State Farm improperly failed to settle the matter within policy limits. D moved for summary judgment, asserting that P relinquished his bad faith claim when, in 1981, he signed a release drafted by attorney Randall in exchange for State Farm's payment of $15,000 in uninsured motorist benefits. P also moved for partial summary judgment, seeking a ruling that, as a matter of law, the release did not preclude his bad faith claim. The judge denied both motions, finding that the release was ambiguous and that therefore parol evidence was admissible at trial to aid in interpreting the release. A second judge, who presided at trial, denied D's motion for directed verdict based on the release. Having been instructed on the interpretation of the release, the jury returned a verdict in favor of P for compensatory damages of $2.1 million. The court also awarded P $300,000 in attorney fees. The court of appeals reversed, holding that the release agreement was not ambiguous and therefore the judge erred by admitting parol evidence to vary its terms. P appealed.