F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
APR 22 2003
FOR THE TENTH CIRCUIT
PATRICK FISHER
Clerk
JOLENE CRAWFORD; LEONARDO
SANTIAGO,
Plaintiffs-Counter-Defendants -
Appellees,
No. 01-8029
v. (D.C. No. 97-CV-88-B)
(D. Wyoming)
INFINITY INSURANCE COMPANY,
also known as Infinity Insurance Group,
a Florida corporation,
Defendant-Counter-Claimant -
Appellant.
ORDER AND JUDGMENT*
Before SEYMOUR and PORFILIO, Circuit Judges, and STAGG, District Judge.**
This action is an appeal of a verdict obtained by appellees in a third-party bad faith
action. Appellees, Leonardo Santiago (“Santiago”) and Jolene Crawford (“Crawford”)
were involved in an automobile accident. Crawford subsequently brought suit against
*
This order and judgment is not binding precedent, except under the doctrines of law
of the case, res judicata, and collateral estoppel. The court generally disfavors the citation
of orders and judgments; nevertheless, an order and judgment may be cited under the terms
and conditions of 10th Cir. R. 36.3.
The Honorable Tom Stagg, United States District Judge for the Western District of
**
Louisiana, sitting by designation.
Santiago, who had a $15,000 insurance policy with appellant, Infinity Insurance Company
(“Infinity”). Santiago and Crawford eventually settled the lawsuit without the consent of
Infinity, and judgment was entered against Santiago in excess of the policy limits. As
part of the settlement, Santiago assigned to Crawford 95% of his right to pursue Infinity
for bad faith in failing to defend him and settle the case within the policy limits.
Thereafter, Crawford and Santiago instituted this bad faith litigation. A jury found that
Infinity acted in bad faith in failing to defend and settle Crawford’s underlying personal
injury claim. However, the jury found that only a portion of the stipulated judgment was
fair and reasonable. Infinity’s post-trial motions were denied. For the reasons hereinafter
set forth, we affirm.
I. BACKGROUND
On March 14, 1995, Santiago and Crawford were involved in an automobile
accident in Jackson, Wyoming. The accident was caused in whole or in part by the
negligence of Santiago. On June 23, 1995, attorney Jeffrey Tennyson filed a lawsuit on
behalf of Crawford against Santiago. The summons and complaint were served on
Santiago, and his insurance carrier was notified of the lawsuit. Settlement negotiations
began in August and both parties anticipated that the case would settle with the payment
of the $15,000 policy limit. Tennyson, however, was unwilling to accept the $15,000 in
full and final settlement of the action until such time that he was satisfied that Santiago
did not have significant personal assets which he might be able to contribute toward a
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settlement.
There is a dispute in the testimony regarding what occurred with respect to the
settlement negotiations, but it appears that Tennyson on three separate occasions asked
William Thompson, the Infinity adjuster, for a $15,000 check or draft to be sent to him so
that once Crawford became satisfied that Santiago did not have significant personal
assets, a settlement could be effectuated immediately. Tennyson testified that Thompson
agreed to provide him a check or draft as requested, but the draft was never sent.
When Tennyson did not receive a check by October 12, 1995, he faxed a letter to
Thompson giving him forty-eight hours within which to complete the settlement by
forwarding him a check. Despite the express language of the letter indicating that if a
settlement check was not received in forty-eight hours Crawford would seek a default
judgment against Infinity, Thompson did not comply. Thompson chose to place the draft
in the regular mail. Tennyson waited a period of five days during which he did not
receive the draft or any communication from Thompson. On October 19, 1995, Tennyson
obtained a default against Santiago. Tennyson and Crawford were unwilling to set aside
the default.
After the entry of default, Infinity retained an attorney, Mike Mullikin, who sought
to have the default set aside. Mullikin initially was hired for this sole purpose so that
Infinity could assert the defense of accord and satisfaction. During this period of time,
Infinity did not inform Santiago that it had missed the opportunity to settle within policy
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limits or that default had been entered against him. When the court refused to set aside
the default, Infinity advised Santiago that the case was ongoing nearly six months after
the default was taken. Infinity did not explain to Santiago that he now had personal
exposure to liability or how Infinity intended to protect him from that exposure.1
Santiago retained an independent attorney, Timothy Bommer, who contacted
Infinity, expressly requesting that it tell Santiago whether it intended to fully indemnify
him for the amount of any damages to be set by the district judge at an upcoming hearing
on damages. Infinity refused, claiming it would not compromise its settlement position
with Crawford.
Shortly before the hearing on damages, Santiago, at the advice of Bommer,
terminated Mullikin and entered into a consent agreement with Crawford, including a
stipulated judgment in the amount of $700,000. Crawford did not waive her right to
attempt to collect the judgment against Santiago, although the agreement did require her
to initially attempt to collect the judgment from Infinity before pursuing Santiago. Based
upon the stipulation, the district court assessed Crawford’s damages at $700,000 and
entered judgment in her favor, and against Santiago, for that amount. Thereafter,
Santiago and Crawford filed this bad faith lawsuit against Infinity.
However, Infinity notified its own reinsurer of the potential liability that Infinity
1
might have as a result of its actions. It also internally decided that it would pay any judgment
eventually entered against Santiago, regardless of whether the eventual judgment exceeded
$15,000.
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The bad faith case went to trial before a jury. The jury found: (1) that Infinity
acted in bad faith by failing to defend Santiago and settle his claim; (2) that Infinity’s
breach of the covenant of good faith and fair dealing was a proximate cause of damages
suffered by Santiago; (3) that Santiago’s settlement with Crawford was reasonably
necessary to protect his interests; but (4) that only $300,000 of it was fair and reasonable;
and (5) that Santiago was entitled to $7,500 in economic losses and $10,000 in emotional
distress damages. Judgment was entered, and Infinity filed post-trial motions seeking to
have the verdict set aside and to obtain a new trial. On appeal, Infinity seeks judgment as
a matter of law.
II. LAW AND ANALYSIS
A. Standard Of Review.
This court reviews de novo the denial of a motion for judgment as a matter of law
under Federal Rule of Civil Procedure 50(b), applying the same legal standard as the
district court. See Tyler v. RE/MAX Mountain States, Inc., 232 F.3d 808, 812 (10th Cir.
2000). In evaluating a Rule 50(b) motion, this court examines all the evidence admitted
at trial, construing that evidence and the inferences from it in the light most favorable to
the non-moving party, and should refrain from making credibility determinations and
weighing the evidence. See id. Judgment as a matter of law is appropriate “only if the
evidence points but one way and is susceptible to no reasonable inferences which may
support the opposing party’s position.” Finley v. United States, 82 F.3d 966, 968 (10th
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Cir. 1996). Applying this standard of review, we must determine whether the district
court erred in denying Infinity’s motion for judgment as a matter of law after a trial on the
merits.
B. Discussion Of Law.
1. Third Party Bad Faith.
Under Wyoming law, a bad faith claim is a tort action based on the theory that
insurers owe a duty of good faith to policyholders not to unreasonably deny a claim for
benefits under the policy. See McCullough v. Golden Rule Ins. Co., 789 P.2d 855, 857-
58 (Wyo. 1990). In Wyoming, a cause of action for third party bad faith will lie when a
liability insurer fails in bad faith to settle a third-party claim within policy limits against
its insured. See Jarvis v. Jarvis, 948 P.2d 898 (Wyo. 1997); Herrig v. Herrig, 844 P.2d
487, 490 (Wyo. 1992). Wyoming first recognized this claim in Western Cas. & Sur. Co.
v. Fowler, 390 P.2d 602, 605-06 (Wyo. 1964). The Wyoming Supreme Court has
established the duty of the insurer to its insured as “the duty to exercise intelligence, good
faith, and honest and conscientious fidelity to the common interest of the plaintiff as well
as of the defendant and give at least equal consideration to the interest of the insured, and,
if it fails to do so, it acts in bad faith.” Jarvis, 948 P.2d at 900.
The appellees argue that when Infinity failed to hire a lawyer to defend Santiago
and allowed a default judgment to be issued, it breached its insurance contract, which
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gave Santiago the legal right to assume control of the lawsuit and enter into a consent
judgment with Crawford. They further assert that the jury’s finding that Infinity acted in
bad faith in failing to accept a reasonable settlement offer is supported by the evidence.
Moreover, they claim that it obligates Infinity for that portion of the consent judgment
which was found to have been fair and reasonable, as well as the economic and emotional
losses suffered by Santiago. Infinity counters that, absent a “real” (non-stipulated, non-
collusive) judgment in excess of policy limits, no tort has been committed under
Wyoming law.
Infinity contends that in Wyoming, one of the necessary basic elements, implicit in
Fowler and explicit in Jarvis, is the entry of judgment on the merits against the insured in
an amount in excess of the policy limits.2 However, dicta from Jarvis indicates otherwise.
The Jarvis court, in discussing the failure of the plaintiffs in that case to cite support for
their proposition, pointed out that “the Jarvises fail to cite to any case which found a
2
Infinity attempts to support this argument by citing a Tenth Circuit decision applying
Wyoming law in Marathon Ashland Pipe Line LLC v. Md. Cas. Co., 243 F.3d 1232 (10th
Cir. 2001). Another panel of this court affirmed the summary judgment for the insurer on
the bad faith claim. When discussing the claim for third-party bad faith, the court summarily
affirmed the district court’s grant of summary judgment on the claim, noting that the
Wyoming Supreme Court has held that “such a claim will not accrue until after a judgment
has been entered against the insured in excess of the policy limits.” Id. at 1250. The
Marathon court, however, had no occasion to review what constitutes a “judgment” sufficient
for a third-party claim to accrue under Wyoming law and addressed the merits of the third-
party claim in one paragraph of a lengthy opinion addressing numerous other issues in great
detail. Additionally, the Wyoming Supreme Court has spoken clearly on the question since
the Marathon opinion. See Gainsco Ins. Co. v. Amoco Prod. Co., 53 P.3d 1051 (Wyo. 2002).
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cause of action for third-party bad faith in the absence of an excess judgment or
settlement.” Jarvis, 948 P.2d at 901. Additionally, in declining to extend the third-party
bad faith cause of action to claims below the policy limits, the court explicitly stated, “we
decline to extend a cause of action for bad faith for failure of the insurer to initially settle
a claim which is followed by a judgment or settlement within policy limits.” Jarvis, 948
P.2d at 901-02.
Furthermore, a review of relevant Wyoming jurisprudence reveals that the
Wyoming Supreme Court would not require a “real judgment” and that “simply a
settlement” would suffice for a third-party bad faith tort action.3 Subsequent to the filing
of briefs and oral argument herein, the Wyoming Supreme Court addressed the precise
issue before this court, stated by that court as follows:
The next question is, where a judgment in excess of policy
limits has resulted from a settlement between the insured and
the claimant rather than from a trial, and as part of that
settlement the insured is insulated by a covenant not to
execute or similar device, may the claimant, as the insured’s
assignee, pursue a third-party bad faith claim against the
insurer?
Gainsco Ins. Co. v. Amoco Prod. Co., 53 P.3d 1051, 1059 (Wyo. 2002). The Wyoming
Supreme Court has answered in the affirmative and its answer conclusively resolves the
issues in this appeal.
Infinity does not argue, as appellees contend, that contract principles prevent it from
3
having any liability beyond the $15,000 limits of its policy of insurance with Santiago.
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In Gainsco, Amoco entered into a well and lease service master contract with
Andrews Trucking Company, wherein Andrews agreed to indemnify Amoco against
liability for injury to or death of Andrews’s employees and Andrews’s subcontractors’
employees, even if caused by Amoco’s negligence. Andrews further agreed to insure this
assumption of liability and obtained insurance from Gainsco. Amoco later sued Andrews
under the contract’s indemnity provision. Gainsco provided Andrews a defense and filed
a third-party complaint against a subcontractor. However, Gainsco defended Andrews
under a reservation of rights, denying coverage based on two policy exclusions. When
Amoco informed Gainsco that it would settle within policy limits to avoid exposing
Andrews to an excess judgment, Gainsco refused the offer. Through separate counsel,
Andrews settled with Amoco on the following terms: “(1) Andrews would confess
judgment in the amount of $716,490.80 plus interest and attorneys’ fees; (2) Amoco
would not execute against Andrews, but would only look to Gainsco; (3) Andrews would
assign to Amoco any bad faith claims against Gainsco; and (4) Andrews would dismiss its
indemnity claim against the subcontractor.” Id. at 1055. When confronted with the third-
party bad faith claim issue, the Wyoming Supreme Court, after a thorough analysis of
conflicting views on the topic, concluded that the inclusion of a covenant not to execute
in a settlement agreement between an insured and a claimant4
4
The opinion makes this statement with the proviso of “under the circumstances of the
case now before us.” Id. at 1061. However, the circumstances of Gainsco and the case
before this panel are similar enough for this reservation to be of no concern.
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does not act to negate the fact that a judgment has been
entered against the insured and, therefore, does not bar the
claimant, as assignee of the insured, from pursuing a claim
against the insurer for third-party bad faith. The existence of
the judgment, with or without a covenant not to execute, is a
detriment to the insured sufficient to support an assignable
tort claim. Public policy favors this result in that it allows an
insured to reach a reasonable settlement of a case being
defended under a reservation of rights and it discourages an
insurer from rejecting a reasonable settlement offer. The
insurer is adequately protected by the requirement that such
settlements be reasonable and by its ability to raise the issues
of fraud and collusion.
Id. at 1061.
Infinity’s challenge is simply that Wyoming tort law (as articulated in Jarvis)
requires a judgment after a trial on the merits entered against the insured in excess of
policy limits and that there was none here. In fact, Infinity admits that if a damages trial
had been allowed to proceed, and if a judgment had been entered assessing Crawford’s
damages in excess of $15,000, Infinity would not have disputed the validity of an
assignment, by Santiago to Crawford, of the entirety of his claim for damages. However,
language within Jarvis, although dicta, and more importantly, direct language from
Gainsco, supports the district court’s conclusion that a consent judgment suffices under
Wyoming law for a third-party bad faith tort claim. The settlement between Santiago and
Crawford was sufficient for a third-party bad faith claim to exist. There was no error by
the district court in denying Infinity’s post-trial motions.
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2. Other Arguments Made By Infinity.
Infinity also contends that, even if a reasonable settlement could substitute for the
requirement of an excess judgment, the jury found the settlement unreasonable and
lessened the amount of the stipulated judgment. However, the jury did make a finding of
a “reasonable” amount, and this court concludes that this finding was sufficient to qualify
as a reasonable settlement.
Next, Infinity contends that it did not fail to defend, thus the appellees cannot use a
defense failure as justification for Santiago’s actions. The jury, however, found
otherwise, and after a thorough review of the evidence, we agree with its findings.
Finally, Infinity asserts that the agreement between Santiago and Crawford was
collusive, as Santiago had a financial interest in agreeing to an unreasonable settlement
amount. As succinctly stated by the Wyoming Supreme Court and quoted supra, “[t]he
insurer is adequately protected by the requirement that such settlements be reasonable and
by its ability to raise the issues of fraud and collusion.” The jury made a determination
that the amount was unreasonable and adjusted the settlement figure accordingly. Thus,
this argument, as well as all of Infinity’s other arguments, are without merit.
AFFIRMED.
Entered for the Court
Tom Stagg
District Judge
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