After the accident, Fulbrook's attorney, Thomas Christensen
of the Christensen Law Office (CLO), sent a letter to Allstate seeking to
settle Fulbrook's claim against the Benningtons (the Demand Letter). The
Demand Letter stated that Fulbrook would settle her claim if, within two
weeks from the date of the letter, Allstate (1) paid the full value of the
Benningtons' policy and (2) provided proof that the Benningtons had no
other applicable insurance. Allstate did not accept Fulbrook's settlement
offer prior to the expiration of the deadline provided in the Demand
Letter.
Fulbrook then filed a wrongful death lawsuit against the
Benningtons. Fulbrook and the Benningtons entered an agreement
stipulating to the Benningtons' liability and agreeing that the reasonable
value of Fulbrook's damages was at least $2,500,000. A district court
entered judgment for Fulbrook against the Benningtons in the amount of
$2,500,000.
Several months before the judgment was entered against the
Benningtons, Allstate filed a complaint for declaratory• relief against
Fulbrook and the Benningtons seeking a judicial declaration (1) limiting
its obligation to indemnify the Benningtons for Fulbrook's claim to
$15,000, the Benningtons' insurance policy's limit, and (2) finding that
Allstate acted reasonably. Fulbrook and the Benningtons filed
counterclaims against Allstate for compensatory and punitive damages.
Before trial, the district court dismissed Fulbrook's
counterclaims against Allstate. Allstate then made a motion to have
Christensen disqualified on the grounds that he was a percipient witness,
and the district court ordered that Christensen be excluded from the
courtroom during the testimony of witnesses that would directly relate to
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his expected testimony. However, the district court did not disqualify
Christensen.
During trial, each side called multiple witnesses, including an
expert witness proffered by Allstate, to testify about Allstate's conduct
with regard to Fulbrook's claim, CLO's conduct and motive with regard to
Fulbrook's claim, and the efforts to settle Fulbrook's claim. Fulbrook and
the Benningtons objected to several instructions that the district court
provided to the jury. The jury returned a special verdict in which it found
that Allstate did not breach the duty of good faith and fair dealing or the
duty to cooperate that it owed to the Benningtons. The jury also found
that the Benningtons breached their insurance policy's cooperation clause
by entering into the agreement with Fulbrook. It did not award damages
to any party.
After the jury returned its verdict, the Benningtons and
Fulbrook made motions for judgment notwithstanding the verdict and for
a new trial, which the district court denied, and the Benningtons assigned
their rights against Allstate to Fulbrook. The district court then entered a
final judgment in favor of Allstate on the issues presented in Allstate's
complaint. It amended the judgment to award $15,000 to Fulbrook from
Allstate pursuant to the Benningtons' insurance policy. Fulbrook then
filed a motion for attorney fees and costs, which the district court denied.
Fulbrook and the Benning-tons appeal and raise the following
issues: (1) whether the district court abused its discretion by admitting
evidence of CLO's motive; (2) whether the district court abused its
discretion when instructing the jury; (3) whether the district court abused
its discretion by excluding Christensen from portions of the trial; and (4)
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whether the district court abused its discretion by not awarding attorney
fees or costs to Fulbrook. 1
The district court did not abuse its discretion by admitting evidence of
CLO's motives
Fulbrook and the Benningtons argue that the district court
abused its discretion by admitting evidence of CLO's motives, which
included settlement offer letters sent to insurers in other matters, because
CLO's motives and these letters were irrelevant to the present case. As
part of this argument, they contend that Allstate Insurance Co. v. Miller,
125 Nev. 300, 212 P.3d 318 (2009), prohibits consideration of a claimant's
attorney's motive.
"We review a district court's decision to admit or exclude
evidence for abuse of discretion, and we will not interfere with the district
1 Fulbrook and the Benningtons also raise several other issues that
are without merit. First, they argue that the district court erred by
denying their motions for judgment as a matter of law. The district court
correctly denied these motions because Allstate "presented sufficient
evidence such that the jury could [have] grant[ed] relief to [Allstate]" on
all of the issues the jury considered. Bielar v. Washoe Health Sys., Inc.,
129 Nev. 306 P.3d 360, 368 (2013) (internal quotations omitted).
Second, they argue that the district court abused its discretion by not
granting a new trial after it submitted an allegedly defective special
verdict form to the jury. The special verdict form was not defective
because it addressed the factual issues underlying the Benningtons'
counterclaims and properly excluded Fulbrook's counterclaims that were
dismissed before trial. Thus, the use of the special verdict form was not a
procedural irregularity that would provide grounds for a new trial. See
NRCP 59(a) (identifying grounds for a new trial). Third, they argue that
the district court erred by not allowing a former CLO attorney to rebut
Allstate's expert's testimony. Since the record does not show that this
issue was preserved, it "is deemed to have been waived and will not be
considered on appeal." Old Aztec Mine, Inc. v. Brown, 97 Nev. 49, 52,623
P.2d 981, 983 (1981).
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court's exercise of its discretion absent a showing of palpable abuse." M.C.
Multi-Family Dev., L.L.C. v. Crestdale Assocs., Ltd., 124 Nev. 901, 913,
193 P.3d 536, 544 (2008).
Miller does not prohibit evidence of attorney's motive
Fulbrook and the Benningtons' contention that a claimant's
attorney's motive is not relevant is based on a footnote contained in Miller,
which states that the issue of "whether the district court improperly
excluded. . . evidence regarding [the plaintiffs] attorney's motive" lacked
merit. 125 Nev. at 323 n.5, 212 P.3d at 334 n.5. They argue that the
footnote prohibits the admission of evidence of an attorney's motive.
Fulbrook and the Benningtons' reliance on this footnote, however, is
misplaced because the footnote summarily rejected arguments that were
specific to Miller without addressing the explicit issues raised. Thus, the
footnote in Miller does not provide controlling or persuasive authority
here.
The tort of insurance bad faith requires unreasonable conduct by an
insurer
An insurer owes its insured "two general duties: the duty to
defend and the duty to indemnify." Miller, 125 Nev. at 309, 212 P.3d at
324. Additionally, all contracts include an implied covenant of good faith
and fair dealing. Pemberton v. Farmers Ins. Exch., 109 Nev. 789, 792-93,
858 P.2d 380, 382 (1993). This covenant imposes multiple duties on an
insurer, including a duty to settle a claim within policy limits. See Miller,
125 Nev. at 315, 212 P.3d at 328. "A violation of [this] covenant gives rise
to a bad-faith tort claim." Id. at 308, 212 P.3d at 324. "Bad faith is
established where the insurer acts unreasonably and with knowledge that
there is no reasonable basis for its conduct." Guar. Nat'l Ins. Co. v. Potter,
112 Nev. 199, 206, 912 P.2d 267, 272 (1996).
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CLO's motives were relevant to whether Allstate acted in bad faith
Evidence is relevant if it has "any tendency to make the
existence of any fact that is of consequence to the determination of the
action more or less probable than it would be without the evidence." NRS
48.015. Thus, evidence which demonstrates that an insurer had or lacked
a reasonable basis for its conduct is relevant to a claim of bad faith. See
Miller, 125 Nev. at 308, 212 P.3d at 324.
The conduct of a claimant's attorney is relevant to the issue of
the reasonableness of an insurer's conduct because the attorney's actions
can influence the insurer's conduct. See AAA Nev. Ins. Co. v. Chau, 808 F.
Supp. 2d 1282, 1286-87 (D. Nev. 2010) (finding that a claimant's attorney's
conduct was relevant to whether an insurer acted reasonably in not
accepting a claimant's settlement offer within the two-week time period
provided in the offer), aff'd in part, dismissed in part on other grounds, 463
F. App'x 627, 628 (9th Cir. 2011). An actor's motive is relevant to
evaluating the actor's conduct. See Bongiovi v. Sullivan, 122 Nev. 556,
575, 138 P.3d 433, 447 (2006) (holding that evidence of a party's motive or
intent was admissible when the party's conduct was relevant to a disputed
issue).
Here, evidence of CLO's motive was relevant to CLO's conduct
in pursuing Fulbrook's claim with Allstate. Similarly, CLO's conduct was
relevant to the issue of Allstate's conduct because it provides context for
evaluating Allstate's actions. Because an issue at trial was whether
Allstate acted reasonably in not settling Fulbrook's claim before the
Demand Letter's deadline, evidence concerning the context of Allstate's
conduct can be relevant to determine whether it acted reasonably. See
NRS 48.015 (defining "relevant evidence" as that which makes an "action
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more or less probable than it would be without the evidence"). Therefore,
evidence of CLO's conduct and motive was relevant.
The district court did not abuse its discretion by admitting the
settlement offer letters from other cases
At trial, Allstate proffered settlement offer letters that CLO
sent to insurers regarding other claims that were nearly identical to the
Demand Letter in the instant action. Allstate's expert testified that these
other letters contained unreasonable settlement offers made by CLO.
Because these letters could help reveal whether the Demand Letter's
settlement offer was reasonable, they could make it more or less probable
that Allstate acted reasonably in not accepting the offer of the Demand
Letter to settle Fulbrook's claim. 2 Therefore, the district court did not
abuse its discretion in admitting CLO's other settlement offer letters and
evidence of CLO's motive. 3
2 Fulbrook and the Benningtons' argument that the other settlement
offer letters are irrelevant because they post-dated the Demand Letter is
without merit. It ignores the relevance of the other letters to the issue of
the reasonableness of the Demand Letter. Furthermore, Fulbrook and the
Benningtons did not preserve their arguments that the other settlement
offer letters should have been excluded on the grounds that they (1) lacked
foundation or (2) had an unfair prejudicial effect because the record does
not demonstrate that either Fulbrook or the Benningtons made a specific
objection about either of these issues. NRS 47.040(1); see also In re
Parental Rights as to J.D.N., 128 Nev. , , 283 P.3d 842, 846 (2012)
(requiring that objections to admission of evidence state specific grounds
for the objection). Therefore, the issues of unfair prejudice and lack of
foundation "[are] deemed to have been waived and will not be considered
on appeal." Old Aztec Mine, 97 Nev. at 52, 623 P.2d at 983.
3Although the concurrence raises a valid concern about the improper
use of an attorney's conduct in an unrelated matter as evidence of the
attorney's motive in the present case, this concern does not detract from
the fact that the other demand letters were admitted for a proper purpose
continued on next page...
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The district court did not abuse its discretion in instructing the jury
Fulbrook and the Benningtons argue that the district court
misstated the law when proffering multiple jury instructions. We address
three of these assignments of error. 4
We review a district court's decision to give specific jury
instructions for abuse of discretion. Skender v. Brunsonbuilt Const,
Dev. Co., 122 Nev. 1430, 1435, 148 P.3d 710, 714 (2006). "However, we
review de novo whether a proffered instruction is an incorrect statement of
the law." Miller, 125 Nev. at 319, 212 P.3d at 331 (internal quotations
omitted).
...continued
in this case. See, e.g., United States v. Gutierrez-Castro, 341 F. App'x 299,
301 (9th Cir. 2009) (holding that evidence that could serve an
impermissible purpose was admissible when proffered for a permissible
purpose).
4 Fulbrook and the Benningtons also argue that the district court
erroneously gave Jury Instruction Nos. 34 and 36 and refused to give a
proposed jury instruction. However, these assignments of error were not
preserved because "the record does not contain the objections or exceptions
to [these] instructions [that were] given or refused." Carson Ready Mix,
Inc. v. First Nat'l Bank of Nev., 97 Nev. 474, 476, 635 P.2d 276, 277 (1981).
Thus, they "[are] deemed to have been waived and will not be considered
on appeal." Old Aztec Mine, 97 Nev. at 52, 623 P.2d at 983. Fulbrook and
the Benningtons' challenge to Jury Instruction No. 50 is also without
merit because they failed to demonstrate that this instruction is
inconsistent with Nevada law or that the district court otherwise abused
its discretion by giving this instruction. See Randono v. Nev. Real Estate
Comm'n, 79 Nev. 132, 137, 379 P.2d 537, 539 (1963) (holding, albeit in an
administrative law matter, that the appellant has a burden to
demonstrate an abuse of discretion).
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The district court did not abuse its discretion by giving Jury
Instruction Nos. 23 and 24
Fulbrook and the Benningtons argue that Jury Instruction
Nos. 23 and 24 erroneously include a knowledge component that is not
required by Nevada law.
Jury Instruction No. 23 states: "An insurance company
breaches the implied covenant of good faith and fair dealing by (1) acting
unreasonabl[y] and (2) with knowledge that there is no reasonable basis
for its conduct."
Jury Instruction No. 24 states: "Breach of the implied
covenant of good faith and fair dealing involves the actual or implied
awareness of the absence of a reasonable basis for its conduct."
"A violation of the [implied] covenant [of good faith and fair
dealing] gives rise to a bad-faith tort claim." Miller, 125 Nev. at 308, 212
P.3d at 324. "This court has defined bad faith as an actual or implied
awareness of the absence of a reasonable basis for denying benefits of the
insurance policy." Id. (internal quotations omitted). "Awareness" is
defined as "having knowledge or realization." Random House Webster's
College Dictionary 93 (2nd ed. 1997). Thus, because Miller uses the term
awareness" in its definition of the conduct that constitutes bad faith, it by
definition includes a knowledge component. See Miller, 125 Nev. at 308,
212 P.3d at 324; see also Random House Webster's College Dictionary at
93. Because Miller includes a 'knowledge' component, Jury Instruction
Nos. 23 and 24 are consistent with Nevada law defining bad faith.
Therefore the district court did not abuse its discretion in giving these
instructions, which are correct statements of law.
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The district court did not abuse its discretion by giving Jury
Instruction No. 27
Fulbrook and the Benningtons argue that Jury Instruction
No. 27 misstated the law because it did not account for the legal duty an
insurer owes to a claimant under NRS 686A.310(1)(e) to promptly settle
claims.
Jury Instruction No. 27 states:
An insurance company has no contractual
duty to a third-party claimant.
In this case, Pamela Fulbrook was a third-
party claimant. Allstate owed no contractual duty
to Pamela Fulbrook as a third-party claimant.
NRS 686A.310(1)(e) provides that it is an unfair practice to
] to effectuate prompt, fair and equitable settlements of claims in
which liability of the insurer has become reasonably clear." NRS
686A.310 "expressly grants insureds a private right of action against
insurance companies" engaged in this unfair practice. Turk v. TIG Ins.
Co., 616 F. Supp. 2d 1044, 1052 (D. Nev. 2009). This statute, however,
does not provide a private right of action to third-party claimants. Gunny
v. Allstate Ins. Co., 108 Nev. 344, 346, 830 P.2d 1335, 1336 (1992).
Because Jury Instruction No. 27 states that "Allstate owed no
contractual duty to Pamela Fulbrook as a third-party claimant," it is a
correct statement of law and consistent with Gunny. Therefore, the
district court did not abuse its discretion in giving this instruction.
The district court did not abuse its discretion in excluding Christensen
from portions of the trial
Fulbrook and the Benningtons argue that the district court
abused its discretion by excluding Christensen from portions of the trial
because he was not a necessary witness, as required for the
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disqualification of counsel under Nevada Rule of Professional Conduct
3•7. 5
The exclusion of a witness from the courtroom is reviewed for
an abuse of discretion. Milicevic v. Fletcher Jones Imports, Ltd., 402 F.3d
912, 915 (9th Cir. 2005) (applying this standard when considering the
exclusion of a witness pursuant to Federal Rule of Evidence 615, which is
analogous to NRS 50.155); see also Hallmark v. Eldridge, 124 Nev. 492,
498, 189 P.3d 646, 650 (2008) (observing that "federal court decisions
discussing [an analogous federal rule of evidence] may provide persuasive
authority" to assist in the interpretation of Nevada's evidentiary rules).
As a preliminary matter, the district court excluded
Christensen from parts of the trial but did not disqualify him. Therefore,
to the extent that Fulbrook and the Benningtons' assignments of error are
premised on Christensen's purported disqualification, they are without
merit.
Next, NRS 50.155(1) provides that "at the request of a party
the judge shall order witnesses excluded so that they cannot hear the
testimony of other witnesses." NRS 50.155 does not limit its application to
necessary witnesses.° Thus, unless an exception applies, a district court
Fulbrook and the Benningtons also argue that Christensen was
5
exempt from exclusion pursuant to NRS 50.155(2). Because they failed to
raise this argument before the district court, it "is deemed to have been
waived and will not be considered on appeal." Old Aztec Mine, 97 Nev. at
52, 623 P.2d at 983.
°Since a witness need not be a necessary witness to be excluded from
the courtroom, Fulbrook and the Benningtons' argument that the district
court erred by not making findings of fact on the record about whether
Christensen was a necessary witness is without merit.
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must exclude a witness from the courtroom during testimony given by
other witnesses if a party requests the witness's exclusion. See Givens v.
State, 99 Nev. 50, 54, 657 P.2d 97, 100 (1983) ("NRS 50.155 clearly
establishes a duty on the judge's part to exclude witnesses upon request."),
disapproved of on other grounds by Talancon v. State, 102 Nev. 294, 301 &
n.3, 721 P.2d 764, 768-69 & n.3 (1986).
Here, Allstate identified Christensen as a witness and sought
his exclusion. Therefore, the district court had a duty to exclude
Christensen unless he met an exception articulated in NRS 50.155(2).
Since Fulbrook and the Benningtons did not demonstrate before the
district court that an exception applied, the district court did not abuse its
discretion by excluding Christensen. 7
The district court did not abuse its discretion by refusing to award attorney
fees and costs to Fulbrook
Fulbrook and the Benningtons argue that the district court
abused its discretion by not granting Fulbrook's motion for costs and
attorney fees pursuant to NRS 18.010(2)(a) and NRS 18.020(3) because
Fulbrook recovered $15,000 from Allstate pursuant to the final judgment.
"[We] generally review[ ] a district court's decision awarding or denying
costs or attorney fees for an abuse of discretion." Gunderson v. D.R.
Horton, Inc., 130 Nev. , 319 P.3d 606, 615 (2014).
The statutes under which Fulbrook sought attorney fees and
costs require a party to prevail as a prerequisite to a district court award
7 Fulbrook and the Benningtons' argument that Allstate's attorney
committed misconduct by having Christensen excluded from portions of
the trial is without merit, as they failed to demonstrate any misconduct on
the part of Allstate's counsel.
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of attorney fees or costs. See NRS 18.010(2)(a) (authorizing a district court
to award attorney fees to a prevailing party who recovers less than
$20,000); NRS 18.020(3) (authorizing a prevailing party to recover costs
when more than $2,500 is in dispute). Thus, Fulbrook must be deemed a
prevailing party in order to be entitled to recover attorney fees or costs.
A party may prevail "if it succeeds on any significant issue in
litigation which achieves some of the benefit it sought in bringing suit."
Valley Elec. Ass'n v. Overfield, 121 Nev. 7, 10, 106 P.3d 1198, 1200 (2005)
(internal quotations omitted). Here, Allstate sued Fulbrook and the
Benningtons, seeking a judicial declaration limiting its obligation to
indemnify the Benningtons for Fulbrook's claim to $15,000, pursuant to
the Benningtons' insurance policy, and finding that it acted reasonably in
refusing to accept the settlement offered in the Demand Letter. The
district court granted Allstate's requested judicial declaration and
awarded $15,000 to Fulbrook pursuant to the Benningtons' insurance
policy. Thus, Allstate received the benefit it sought.
In their counterclaims against Allstate, Fulbrook and the
Benningtons each sought compensatory and punitive damages, which the
district court refused to award. Thus, Fulbrook and the Benningtons did
not receive any of the benefits they sought and were unable to prevent
Allstate from obtaining the declaratory relief it sought. Therefore,
Fulbrook and the Benningtons did not prevail, and the district court did
not abuse its discretion by denying Fulbrook's motion for attorney fees and
costs.
Conclusion
The district court did not abuse its discretion by admitting
evidence of CLO's motives because it was relevant to the issue of the
reasonableness of Allstate's conduct. It also did not abuse its discretion in
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giving the challenged jury instructions because they were consistent with
Nevada law. Furthermore, the district court did not abuse its discretion
by excluding Christensen from the courtroom because he was properly
identified as a witness whose exclusion was requested by a party. Finally,
the district court did not abuse its discretion in refusing to award attorney
fees or costs to Fulbrook because she was not a prevailing party. 8
Therefore, we
ORDER the judgment of the district court AFFIRMED.
Parraguirre
Itt,chltm_
.11L(.■•••■•'s J.
Saitta
PICKERING, J., concurring in part, and dissenting in part:
While I concur in the result, I write separately to express my
disagreement with the proposition that demand letters written by the
insured's counsel on behalf of other clients in other, unrelated matters are
admissible as evidence of "motive" in an insurance bad faith suit.
To begin with, there is a split of authority on whether an
insured's attorney's subjective intent to "set up" the insurer is even
admissible in a bad faith case involving the objective reasonableness of the
8 We have considered the parties' remaining arguments and conclude
that they are without merit.
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insurer's conduct. For a general discussion see Dennis J. Wall, Litigation
and Prevention of Insurer Bad Faith, § 5:18 (3d ed. 2014). But to go
further and use a lawyer's conduct on behalf of another client in an
earlier, unrelated matter as evidence of a current client's subjective motive
in a current case cannot be correct. See NRS 48.045 (restricting the use of
other bad act evidence). The cases respondent cites as support for
admitting the demand letters from the other matters the insured's lawyer
handled—Charyulu, Chau, Hicks v. Dairyland Insurance Company, 2:08-
cv-1687-RCJ-PAL, 2010 WL 2541175 (March 3, 2010), and Miel v. State
Farm Mitt. Auto, Ins. Co., 912 P.2d 1333, 1339-40 (Az. App. 1995)—do not
go that far.
It is one thing to say that, in a particular case, an insured's
demand letter imposed such unreasonable conditions that the insurer did
not act in bad faith in not immediately meeting the demand, e.g.,
Charyulu v. California Gas. Indem. Exch., 523 F. App'x 478, 480 (9th Cir.
2013) (in assessing bad faith, "R]he reasonableness of the conduct of the
insurer's counsel must be measured against the corresponding actions of
the plaintiffs counsel in this case"); or that in granting summary
judgment, one district court may properly look to another district court's
determination that a particular demand letter was unreasonable and a
legally insufficient predicate for an insurance bad faith claim as a matter
of law. AAA Nevada Ins. Co. v. Vinh Chau, 808 F. Supp. 2d 1282, 1288 (D.
Nev. 2010), aff'd in part, dismissed in part sub nom. AAA Nevada Ins. Co.
• v. Chau, 463 F. App'x 627 (9th Cir. 2011) (granting summary judgment
because, on the undisputed facts, the insureds' counsel's "demand letter
was itself unreasonable and appears to be nothing more than an attempt
to set up a potential bad faith claim"). But it is another proposition
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altogether to admit, as evidence of an insured's subjective intent to "set
up" his insurer, letters the insured's lawyer sent on behalf of other
insureds to "set up" other insurers in other unrelated cases.
Despite these concerns, "error may not be predicated upon a
ruling which admits or excludes evidence unless a substantial right of the
party is affected." NRS 47.040(1). Even assuming that the other-matter
demand letters should not have come into evidence, there still was no
legally sufficient evidence to support the appellants' bad faith claims. For
that reason and the others expressed by my colleagues, I concur in their
affirmance of the judgment in this case.
cc: Hon. Valerie Adair, District Judge
Israel Kunin, Settlement Judge
Christensen Law Offices, LLC
Prince & Keating, LLP
Eighth District Court Clerk
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Fulbrook v. Allstate Insurance Co. C/W 61567
Combined Opinion