Purscell v. Tico Ins. Co., No. 13-2362, 2015 WL 3855253 (8th Cir. June 22, 2015).
Court holds it was not bad faith for insurer to pursue investigation into underlying lawsuit before considering settlement demand.
One fatality and severe injuries resulted when, on the evening of May 19, 2006, Ben Purscell accelerated to 75 m.p.h. and ran a stop sign, crashing into the vehicle of Tim and Amy Carr. Purscell’s passenger, Amy Priesendorf, was ejected from the car and pronounced dead at the scene. Although all surviving passengers suffered injuries, Tim Carr’s injuries were the most severe.
The events leading up to the accident were unusual. Priesendorf, a new co-worker of Purscell, had arrived at Purscell’s home and requested that Purscell give her a ride. Purscell drove Priesendorf to a cemetery where she visited the gravesite of a friend who had been killed as a result of Priesendorf’s drunk driving. On the return trip to Purscell’s home, Priesendorf twice reached her leg over from the passenger seat and pushed down on the accelerator, which ultimately caused the accident with the Carrs. Purscell later learned that Priesendorf had been suicidal after her friend’s death and that Priesendorf’s friends never agreed to drive her places because of her erratic tendencies to reach for the steering wheel and push on the accelerator.
Just three weeks after the accident, the Carrs’ attorney presented a settlement offer to Purscell’s motor vehicle insurer, Infinity Assurance Insurance (“Infinity”), requesting the full limit under Purscell’s policy. Purscell’s policy limited liability to $25,000 per person and $50,000 per accident for bodily injury. Infinity refused to settle with the Carrs prior to completing its investigation into Priesendorf’s intentional conduct, especially due to Purscell’s potential exposure to a wrongful death claim. Just two weeks after proposing the settlement, the Carrs unexpectedly withdrew their offer.
As Infinity anticipated, Priesendorf’s parents filed a wrongful death claim against Purscell. A few weeks later, the Carrs also filed suit against Purscell seeking the full policy limit. The competing claimants then entered negotiations to determine how to distribute the $50,000 policy. Without acknowledging the wrongful death claim, Purscell’s attorney wrote a letter to Infinity directing Infinity to settle the Carrs’ claims using the full policy limit. Infinity responded by informing Purscell of the wrongful death claim and that the claimants were in negotiations in order to settle within the policy limits. Neither Purscell nor his attorney responded to Infinity’s letter.
In an effort to avoid having to file an interpleader action, Infinity sent a second letter to Purscell’s attorney seeking the attorney’s input on how to allocate the policy limit. After again receiving no response, Infinity proceeded to file a petition with the Missouri state court for an interpleader action, submitting the full $50,000 policy limit to the court.
The following year, a jury in Missouri state court determined Purscell and Priesendorf were equally at fault for the Carrs’ injuries and awarded damages of $830,000 and $75,000 to Tim and Amy Carr, respectively. One month later, the Missouri state court approved a settlement of Priesendorf’s parents’ wrongful death claim in the amount of $7,764.50. After subtracting this settlement amount from the $50,000 policy limit, the court apportioned $17,235.50 to Amy Carr and $25,000 to Tim Carr.
Left with the substantial judgment from the Carrs’ lawsuit in excess of his policy limits, Purscell sued Infinity in Missouri state court for bad faith failure to settle and breach of fiduciary duty. Purscell claimed that Infinity should have focused on settling Tim Carr’s claim because his medical expenses clearly exposed Purscell to liability in excess of the policy limits. Purscell asserted that Infinity’s decision to instead pursue a settlement of all three claims was a self-serving attempt to avoid any future bad faith claim. After removing the matter to federal district court, Infinity moved for summary judgment. The court granted the motion, and Purscell filed a timely appeal.
The Eighth Circuit affirmed the district court’s ruling. Under Missouri law, Purscell had the burden of proving that Infinity: 1) reserved the exclusive right to contest or settle any claims; 2) prohibited Purscell from assuming liability or settling any claims without consent; and 3) was guilty of fraud or bad faith in refusing to settle a claim within the policy limits. Specifically, Purscell had to show that Infinity had a reasonable opportunity to settle within the policy limits and was trying to escape its full responsibility under the policy.
The Court determined that the Carrs’ unexpected and quick withdrawal of their early settlement offer did not present a reasonable opportunity for Infinity to settle. Additionally, there was no evidence that Infinity was trying to avoid its responsibility to pay the full policy limit, as evidenced by its submission of the full $50,000 to the Court with its interpleader filing. Rather, the Court concluded that Infinity properly pursued a global settlement due to its knowledge that Purscell was living paycheck to paycheck and wanted protection against any personal exposure.
Further, under Missouri law, Purscell had not made a “sufficiently definite demand” on Infinity to settle with the Carrs, as Purscell never responded to Infinity’s letter to communicate his desire to settle with the Carrs in light of the competing wrongful death claim. While a demand to settle is not a requisite element under Missouri law, it is a factor considered by courts and one that was heavily weighed here by the lower court.
According to the Court, Infinity’s focus on a global settlement was not evidence of bad faith; rather, Infinity acted in Purcell’s best interest by attempting to settle all three claims within the policy limits. Once Infinity realized this would not be possible, the Court concluded Infinity responded appropriately by filing an interpleader action. Thus, without a reasonable opportunity to settle and without a subsequent sufficient demand from Purscell to settle with the Carrs, the Court found no support for Purscell’s bad faith failure to settle claim.
