Wilson v. Farmers Ins. Co. of Ariz.

CLAUDE WILSON, Plaintiff-Appellee, v. FARMERS INSURANCE COMPANY OF ARIZONA,a foreign corporation, Defendant-Appellant.

Docket No. A-1-CA-36300

COURT OF APPEALS OF NEW MEXICO

May 23, 2019

This decision of the New Mexico Court of Appeals was not selected for publication in the New Mexico Appellate Reports. Refer to Rule 12-405 NMRA for restrictions on the citation of unpublished decisions. Electronic decisions may contain computer-generated errors or other deviations from the official version filed by the Court of Appeals.

APPEAL FROM THE DISTRICT COURT OF LINCOLN COUNTY, Angie K. Schneider, District Judge

COUNSEL

Adam D. Rafkin, P.C., Adam Daniel Rafkin, Ruidoso, NM for Appellee

O'Brien & Padilla, P.C., Daniel J. O'Brien, Tiffany L. Sanchez, Albuquerque, NM for Appellant.

JUDGES

LINDA M. VANZI, Judge. I CONCUR: JULIE J. VARGAS, Judge. MEGAN P. DUFFY, Judge, specially concurring.

AUTHOR: LINDA M. VANZI

MEMORANDUM OPINION

VANZI, Judge.

{1} Farmers Insurance Company of Arizona (Farmers) appeals the district court's denial of its motion for judgment notwithstanding the verdict, or in the alternative, a new trial. Farmers argues that the jury's punitive damages award was contrary to law because the jury found that Farmers did not act in bad faith in denying Plaintiff Claude Wilson's claim. It also argues that the jury improperly awarded a portion of the compensatory damages to cover Plaintiff's legal fees and costs. Finally, Farmers argues that the district court erred in granting Plaintiff's motion for attorney fees. Unpersuaded, we affirm.

Background

{2} Plaintiff was in an automobile accident involving an underinsured motorist (UIM), which he alleges caused an esophageal hiatal hernia requiring surgical intervention and a head injury that caused cognitive/executive function impairment. Plaintiff settled his claim against the UIM with the UIM's liability insurer for the policy limit of $100,000. Plaintiff then made a demand for $1,400,000 in UIM coverage under his auto policy with Farmers. This demand was equal to the UIM policy limits ($1,500,000) available under the Farmers policy less the $100,000 already paid by the UIM's liability carrier. In support of his demand, Plaintiff claimed $78,678.20 in past medical expenses, $182,575 in future expenses for treatment of cognitive deficits caused by Plaintiff's alleged head injury, and $136,143 in future medication charges. The settlement demand required Farmers to respond within thirty days. At Farmers' request, Plaintiff gave Farmers approximately 1200 pages of pre-accident medical records. Because of the number of records involved, Farmers requested a three-month extension in which to respond to the settlement demand. In spite of the extension, it was not until after Plaintiff filed the present suit four months after the extended deadline that Farmers rejected Plaintiff's demand and offered $66,850 to settle Plaintiff's UIM claim. This offer was in addition to $7,379.66 paid to or on behalf of Plaintiff under his policy.

{3} In his complaint, Plaintiff alleged, generally, that Farmers failed to timely investigate and evaluate his claim or to respond to his settlement offer. Farmers defended against the claims, asserting that Plaintiff's cognitive injuries existed before the accident and were not caused by the accident, that the hiatal hernia was also a preexisting condition that, at most, was aggravated by the accident, and that its $66,850 offer to settle was reasonable. The case ultimately went to trial before a jury. After deliberating, the jury returned a verdict awarding Plaintiff $180,000 in compensatory damages and $150,000 in punitive damages. More detail about the jury's verdict is included in our discussion of Farmers' arguments.

{4} Both parties filed post-trial motions. Farmers filed a motion for judgment notwithstanding the verdict or, in the alternative, for a new trial, arguing that punitive damages were inconsistent with the jury's finding as to bad faith and that the jury erroneously awarded attorney fees as damages. Plaintiff moved for attorney fees and pre-judgment interest. The district court denied Farmers' motion and granted Plaintiff's motion. Farmers appeals the denial of its motion and the grant of Plaintiff's motion.

Discussion

{5} On appeal, Farmers makes three arguments. First, it maintains that there was no basis for the jury's award of punitive damages because the jury found that Farmers had not "act[ed] in bad faith by refusing to pay any part of Plaintiff's claim for reasons that were frivolous or unfounded." Therefore, Farmers argues, the punitive damages awardmust be set aside as a matter of law. Next, Farmers argues that the jury's award of damages for its handling of Plaintiff's claim was inconsistent with the jury instructions, unsupported by evidence, and contrary to law. Finally, Farmers argues that the district court erred in granting Plaintiff's motion for attorney fees and pre-judgment interest thereon. We address each argument in turn.

The Jury's Punitive Damages Award Is Not Contrary to Law

{6} Before we address the merits of Defendant's punitive damages argument, we consider Plaintiff's argument that Farmers waived its objection to the jury's punitive damages award because Farmers failed to raise the issue before the jury was discharged. Plaintiff relies on Thompson Drilling, Inc. v. Romig for the proposition that "the right to object to an improper verdict is waived when not made at the time of the return of the verdict and cannot be reclaimed and revived by resorting to a motion for a new trial or on appeal." 1987-NMSC-039, ¶ 11, 105 N.M. 701, 736 P.2d 979. In that case, our Supreme Court declined to address the appellant's argument that the appellant "was prejudiced by the district court's failure to submit complete jury verdict forms" because the appellant had not objected to the verdict forms or when the verdict was returned. Id. ¶ 10. In another case cited by Plaintiff, the appellant argued that statutory damages must be reversed where the jury had found that the appellant acted "willfully" as to one claim, but not as to other claims, where the claims were based on the same conduct. See G & G Servs., Inc. v. Agora Syndicate, Inc., 2000-NMCA-003, ¶ 40, 128 N.M. 434, 993 P.2d 751. We declined to address the issue, stating that a "litigant who fails to object to an alleged inconsistency in a jury's verdict before the jury is dismissed may be held to have waived any further challenge to the alleged inconsistency." Id. ¶¶ 41-42.

{7} We agree with Farmers that Thompson Drilling and G & G Services are inapposite because they involved incorrect or ambiguous instructions. In contrast, Farmers argues that its arguments raise a pure issue of law. Farmers points to McLelland v. United Wisconsin Life Insurance Co., in which this Court held that a defendant's failure to object to a verdict did not preclude review where the verdict form permitted the jury to award punitive damages in spite of its finding that the defendant had not acted in bad faith. 1999-NMCA-055, ¶¶ 25, 29, 127 N.M. 303, 980 P.2d 86 ("In the absence of a finding of bad faith, the jury could not award punitive damages."). The Court stated that "the issue is whether the verdict is supportable by law" and that "the punitive damages award was not supportable, because the jury could award punitive damages only if it found a bad faith breach of contract by [the appellant]." Id. ¶ 31 (internal quotation marks and citation omitted). It then set aside the jury's punitive damages award. Id. ¶ 32.

{8} Applying McLelland,¹ we conclude that Farmers' failure to raise the issue before dismissal of the jury does not preclude our review of whether the punitive damages award here was contrary to law.

{9} We now turn to Farmers' substantive challenge to the punitive damage award. Farmers contends that the only theory of liability upon which punitive damages could have been based was Plaintiff's bad faith claim and, because the jury found that it had not acted in bad faith in response to question seven of the special verdict, the punitive damages award must be set aside as a matter of law. Farmers' argument rests on the jury's responses to questions on the special verdict form, which we set out in full:

Question No. 1: Did [Plaintiff] suffer a hiatal hernia as a result of the November 6, 2009 accident?

Answer: No (Yes or No)

Please proceed to Question No. 2

Question No. 2: Did [Plaintiff] suffer an aggravation of a pre-existing hiatal hernia as a result of the November 6, 2009 accident?

Answer: Yes (Yes or No)

Please proceed to Question No. 3.

Question No. 3: Did [Plaintiff] suffer a traumatic brain injury, resulting in . . . cognitive, behavioral and emotional deficits as a result of the November 6, 2009 accident?

Answer: No (Yes or No)

Please proceed to Question No. 4.

Question No. 4: Did [Plaintiff] suffer an aggravation of pre-existing cognitive, behavioral and emotional deficits as a result of this accident?

Answer: No (Yes or No)

If the answer is "yes" to any of the above, you are to answer question No. 5.

If the answers are "no" to all of the above, you are not to answer further questions. Your foreperson must sign this special verdict which will be your verdict, and you will all return to open court.

Question No. 5: In accordance with the damage instructions given by the Court, we find the total amount of compensatory damages suffered by [Plaintiff] to be $80,000 (Here enter total amount of damages for the injuries and/or aggravation of pre-existing injuries to [Plaintiff], without any inclusion of punitive or other damages)

Question No. 6: Did [Plaintiff], with intent to deceive Farmers . . ., deal dishonestly with Farmers . . . about a material fact?

Answer: No (Yes or No)

If the answer to Question No. 6 is "Yes", you are not to answer further questions. Your foreperson must sign this special verdict which will be your verdict, and you will all return to open court.

If the answer to Question No. 6 is "N

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