Bamford, Inc. v. Regent Ins. Co.

822 F.3d 403

BAMFORD, INC., a Nebraska business corporation, Plaintiff–Appellee

v.REGENT INSURANCE COMPANY, both Wisconsin business corporations, Defendant–Appellant

General Casualty Insurance Company of Wisconsin, both Wisconsin business corporations, Defendant.

No. 15–1968.

United States Court of Appeals, Eighth Circuit.

Submitted: Feb. 10, 2016.

Filed: May 13, 2016.

Rebecca Ross, argued, Chicago, IL, (David F. Cutter, Seth M. Erickson, Chicago, IL, Bonnie M. Boryca, Thomas J. Culhane, Heather B. Veik, Omaha, NE, on the brief), for Plaintiff–Appellee.

Robert O. Hippe, argued, Robert G. Pahlke, on the brief, Scottsbluff, NE, for Defendant–Appellant.

Before SHEPHERD, BEAM, and KELLY, Circuit Judges.

SHEPHERD, Circuit Judge.

In May 2009, an employee of Bamford, Inc. (“Bamford”) caused a vehicular accident resulting in third-party injuries. Bamford requested that its insurer, Regent Insurance Company (“Regent”), settle the claims within Bamford's policy limits. Regent did not settle the claims, the case proceeded to trial, and a jury returned a verdict in excess of Bamford's policy limits. Bamford brought this action against Regent, alleging that Regent acted in bad faith in not settling the claims. The jury returned a verdict for Bamford. Regent appeals the district court's¹ denial of its post-verdict motion for judgment as a matter of law or for a new trial. We affirm.

I.

In 2008, Bamford purchased commercial automobile liability insurance from Regent with a total policy limit of $6 million.² In May 2009, Michael Packer (“Packer”), a Bamford employee, was involved in a two-vehicle collision with a vehicle driven by Bobby Davis (“Bobby”). During the accident, a steel pipe stored on the roof of Packer's vehicle became dislodged and ultimately penetrated Bobby's left thigh, through his abdomen and pelvis, and out his right buttock, pinning him inside his vehicle. Bobby was trapped for between thirty and sixty minutes until paramedics arrived and were able to cut the pipe and extract him. He suffered a number of serious injuries and underwent extensive medical treatment to save his life and treat his injuries. Bobby's brother, Geoffrey Davis (“Geoffrey”), was a passenger in Bobby's vehicle and suffered minor injuries.

His claims against Bamford were settled and are not relevant to this appeal. Packer burned to death inside his vehicle.

Regent opened a claim file the day after the accident. An adjuster prepared an internal document known as a large loss notice (“LLN”), which established a $1,000,000 reserve from Bamford's policy to cover claims arising from the accident. Of the reserve, $700,000 was designated for Bobby's injuries. Bobby, Geoffrey, and Bobby's wife, Brenda Davis (“Brenda”), retained attorney Tom Fee (“Fee”) to represent them. In May 2010, based on Fee's communications regarding the nature and extent of Bobby's injuries, Regent moved the Davises' claims to its major case unit. In July 2010, Regent hired Nebraska attorney Brian Nolan (“Nolan”) to provide a valuation of the Davises' claims.

On August 5, 2010, Fee sent Regent a settlement packet offering to settle the Davises' claims for Bamford's policy limit of $6 million. Fee asserted that the claims had a verdict potential between $7.5 and $10 million and stated that if the offer was not accepted by September 13, the settlement amount would increase to $10.6 million. The settlement packet included videotaped interviews of an accident witness and Bobby's emergency room physician, in addition to over 1,000 pages of attachments, such as the police report of the accident, photographs, medical records, an economist's report, tax returns, and a life care plan. Later that month, Regent hired Nolan to defend Bamford against the Davises' claims, and Bamford independently hired Nebraska attorney Daniel Placzek (“Placzek”) to represent its interests in the matter. On August 23, Placzek sent Regent a letter asserting that the Davises' claims presented an exposure risk above Bamford's $6 million policy limit and demanding that Regent settle the claims within the policy limits.

In early September 2010, Nolan informed Regent that he did not think the value of the Davises' claims was close to the policy limits. On September 29, 2010, he valued their claims at less than $1 million. That same month he informed Regent that he was investigating a possible loss-of-consciousness defense, predicated on the theory that Packer, suddenly and unforeseeably, lost consciousness before causing the accident. Nolan explained that such a defense would be a complete bar to liability, but that he needed more information—such as Packer's medical records—to properly evaluate its applicability.

In December 2010, Nolan informed Regent that he had learned that Packer had a history of seizures, but had controlled them with medication. While noting that he still needed more information, Nolan conveyed his belief that the loss-of-consciousness defense had a 25% chance of success. Further, Nolan increased his valuation of the Davises' claims to a settlement value between $1.5 and $1.75 million, based on additional information he had received about Bobby's medical procedures and expenses.

Bamford and the Davises participated in a mediation in December 2010. Regent authorized Nolan to commit as much as $1 million to settlement of the claims. Nolan began negotiations at $500,000, and Fee began at $6 million. Nolan ultimately came up to $775,000, and Fee ultimately came down to $4,995,000. Regent instructed Nolan to offer $1 million and indicated that he would be given authority to offer more if he thought the case would settle. The mediator valued the case at between $2.5 and $3 million and instructed Nolan not to offer $1 million because such an offer would not make significant headway in advancing the mediation.

In February 2011, the Davises filed suit against Bamford and Packer's estate in the United States District Court for the District of Nebraska, alleging several theories of Bamford's liability for their injuries. Brenda's claims were primarily for loss of consortium resulting from Bobby's alleged post-accident impotence. The same month, Regent internally assigned the Davises' claims to an adjuster named Wesley Robin (“Robin”).

On March 14 and March 17, 2011, Nolan sent letters to Robin noting that Fee had asserted that the case was worth more than the policy limits; advising Robin that Nolan had unsuccessfully researched a second possible liability defense based on a theory that Packer had fraudulently concealed his seizure disorder from Bamford (“fraudulent-concealment defense”); and stating that, were the fraudulent-concealment defense applicable, “recovery by plaintiff's counsel for above and beyond the policy limits would have been much less likely to occur.” (Tr. Ex. 32 (March 14 letter); Tr. Ex. 206 (March 17, letter) (excess recovery would have been “much less likely to be at issue.”)). In the March 17 letter, Nolan stated his continued belief that the facts of the case warranted asserting the loss-of-consciousness defense, but noted that Regent would need to continue reassessing the defense's applicability throughout discovery.

In September 2011, Regent sought a second valuation opinion of the Davises' claims, this time from Nebraska attorney Steve Ahl (“Ahl”). Ahl valued the claims between $1.75 and $2.25 million, first verbally in September, and then in a letter in November. Ahl opined that the value of the claims would not approach Bamford's policy limits.

In October 2011, the Davises reinstated their policy limits settlement demand, citing improvements in their case based on depositions of eye-witnesses to the accident. Placzek again demanded, on Bamford's behalf, that Regent settle within the policy limits because of Bamford's exposure risk. Robin worked on preparing an LLN to increase the posted reserve for Bobby's claims from $700,000. During Robin's work on the LLN, he corresponded via email with a Regent supervisor who warned him that a large increase in the reserve would be a “big red flag” to senior management, but conveyed his understanding of Robin's sentiment that “[t]rying to cover up for someone else's mistakes from one year ago is never easy.” (Tr. Ex. 53 at 1–2.) The LLN increased the reserve for Bobby's claims to $1.75 million.

In early November 2011, Nolan increased his valuation to $2 million. Around that time, Robin noted in an email to Regent executives that determining a settlement range was more challenging than in most cases, given the unique nature of Bobby's injuries. Several executives commented on the value of the Davises' claims in subsequent emails. One executive opined that, based on his perception of Nebraska as a conservative state, “nothing is worth more than $2M in N[ebraska].” (Tr. Ex. 55 at 6.) The same executive tempered this sentiment by noting that the loss-of-consciousness defense was problematic in any venue, and that the nature of the injuries would likely elicit sympathy from a jury. He suggested a settlement range between $1.75 and $2 million, based on Nolan and Ahl's recommendations. Another executive suggested that $1.75 million sounded optimistic, and warned that the case “could get worse unless we are all very comfortable with the numbers.” (Id. at 5.) He stressed that they needed to “make sure we look at this with a fresh view and don't get locked into something based on a fact pattern or bias.” (Id. ) In late November Robin prepared a third LLN (his second LLN), which increased the reserve for Bobby's claims to just under $2 million. At that time, Robin conveyed to his supervisors that he estimated a 75% chance the case would settle for $2 million.

In addition to the Regent executive's reaction that “nothing is worth more than $2M in N[ebraska],” the record contains several other instances of individuals—including Robin, Nolan, and Ahl—articulating their perception that Nebraska was a conservative jurisdiction in terms of jury verdicts. In...