Bad Faith Dialogue

• Publication year: 1994
• Pages: 9

Bad Faith Dialogue Vol. 7 No. 9 Pg. 9 Utah Bar Journal November, 1994

David A. Westerby, J.

Amy walks into the large conference room. Will is muttering. "What's wrong?" Amy asks.

"I can't believe the insurance company won't just pay their $25,000 limits and be done with it. A case of clear liability. But will they pay? No!! They insist on jerking the Johnsons around." Will jumps up and glares at Amy in mock hostility. "I'm telling you —" He points his finger near her nose. "I'm going to file the biggest bad faith claim you have ever seen!"

"Really?" she asks calmly, turning away. "Who's the insurer?"

"Holy Grail!"

"First party situation?"

"No. The Johnsons were rear ended by Holy Grail's driver, Pinkerson."

"Help me here," Amy begins slowly. "How does a victim have a bad faith claim against the other party's insurer for failure to settle? Holy Grail is Pinkerson's insurer, not the Johnsons'." Amy could smell blood.

Will doesn't blink. "Hey, trust me here. I saw an article in Trial magazine a couple years ago^[1] where a jury awarded bad faith punitives to a rancher from a power company that refused to settle a case of clear liability — where a neglected power line set his ranch on fire. I can't think of the name of the case."

Amy turns slightly to conceal an emerging smile. "The case was Ogden v. Montana Power Company^[2] —" She turns her head slowly back to Will and adds with professorial emphasis, "a Montana case. You have been reading too much ATLA and not enough Utah case law. Besides, my eager friend, that article was written before the Montana Supreme Court changed its opinion and decided the power company could not be held liable for bad faith claims handling." Will watches silently as Amy walks teasingly to the white board and pops the top of the brown DryErase marker. "Watch carefully."

Insurance Bad Faith Claims Handling Litigation in Utah[3]
1	2	3
Insured Sues for Bad Faith Handling of Insureds Direct Policy Benefits Claim (First Party)	Insured Sues for Bad Faith Handling of Victim's Claim against Insured (Third Party)	Victim Sues for Bad Faith Handling of Victim's Claim against Insured
Beck [4] Contractual claim Both direct and consequential damages Not limited to policy limits	Ammerman [5] Tort claim Based on fiduciary relationship between insurer and insured	Ammerman	Broadwater [6]
Pixton[7]	Savage [8]
Insurer Has No Duty to Victim to Deal in Good Faith

You, sir, are in category 3, and you lose," concludes Amy with conviction.

Studying the board, Will doesn't miss a beat. "No, I won't lose. I'll just move into category 2 by taking an assignment of Pinkerson's bad faith claim."

"I see two problems at this stage, Will. The first is a practical problem: How are you going to get Pinkerson to assign his claim when he is so firmly entrenched behind Holy Grail's shield? He believes in Holy Grail, and you are the enemy. The second problem is legal and would apply even after you get your gigantic judgment against Pinkerson. Personal injury claims arising out of tort are generally not assignable.^[9] Now maybe you could try to create an assignment of Pinkerson's interest in the recovery rather than his entire cause of action,^[10] but that would be risky, since Ammerman discourages victims' indirect attacks on insurers.^[11] Amy loved silencing Will with her intellect.

"OK. Maybe you're right about assignment, so let's get creative here. Let's see." Will pauses for inspiration. "Alright," he starts slowly, "I get my monstrous excess judgment against Pinkerson. Holy Grail pays its limits. Pinkerson has no other significant assets." Will picks up steam. "So I do a writ of garnishment on Holy Grail. Since Holy Grail could have settled for limits, it owes Pinkerson for its bad faith claims handling, and we grab that chose in action." He finishes with a flourish and a smile of triumph.

"Bravo! 'A' for effort," Amy cheers with feigned enthusiasm, then drops her volume. "But wrong again. You see, the Supreme Court of Utah has already determined that garnishment is not the right vehicle to determine an insurer's bad faith liability to its insured.^[12] And, lest I disappoint you again, don't pin your hopes on third-party contract beneficiary^[13] or subrogation theories, either.^[14] They're losers too."

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