United States District Court, D. Kansas
MEMORANDUM AND ORDER
J. THOMAS MARTEN, District Judge.
On July 13, 2005, Stephanie Hoyt caused a motor vehicle accident which resulted in her death and serious injuries to her three passengers. At the time of the accident, Hoyt was insured by Geico Indemnity Insurance Company, under a policy which had minimal coverage: $25, 000 per victim, and no more than $50, 000 per accident. One of the passengers, plaintiff-garnishor Rachel Kannaday obtained a judgment against the Hoyt Estate, and now brings the present action against alleging that Geico acted negligently and in bad faith in refusing to settle her claims against the Estate.
The matter was tried to the court, which now enters the following findings of fact and conclusions of law. The court finds that, while it was not free from honest errors of judgment, Geico acted in good faith and without negligence. Geico did not engage in any self-dealing, but sought to pay the full amount of its policy limits. The court finds that Geico's actions did not materially prejudice the Hoyt Estate - which had no assets other than the Geico policy and which in any event was protected by a statutory bar against any recovery.
As it did at the conclusion of the trial, the court again recognizes and salutes the courage and effort displayed by Rachel Kannaday as an individual in her progress in recovering from such serious injuries.
Findings of Fact
1. On July 13, 2005, Stephanie Hoyt attempted to make an improper u-turn on Interstate 35, and was struck broadside by a semi-truck owned by Chris Truck Line and driven by driven by Charles Church. Hoyt was killed instantly. Her three passengers - Genevie Gold, Sharon Wright, and Rachel Kannaday - were seriously injured.
2. Hoyt was insured by Geico. Its policy provided that Geico "will pay damages for which an insured becomes legally obligated to pay because of... bodily injury." The policy further provided that "We [Geico] may investigate and settle any claim or suit." The policy provided such coverage limited to $25, 000 per person, and a maximum of $50, 000 per accident.
3. Hoyt was a college student at the time of the accident. Her estate had zero assets.
4. There is no evidence that the Hoyt's estate had even the slightest prospect of acquiring assets in the future.
5. The day of the accident, Geico claims adjuster Kwirt Roarick sent a fax to Custard Insurance Adjusters, requesting the Kansas Highway Patrol report and photographs.
6. Geico's activity log addressing various events arising from the Hoyt policy ultimately included some 1, 900 entries by April 8, 2009.
7. Between July 14, 2005 and September 27, 2005, Geico claims adjusters attempted to call or spoke with Hoyt's father, Lanny Hamp, on over a dozen occasions. The most important occurred on February 27, 2006, at 4:46p.m., when Geico adjuster Sabrina Brantley told Hamp that attorney Lyndon Vix, of the law firm of Fleeson, Gooing, Coulson & Kitch had just informed her any assets of Hoyt's were protected under the Kansas Non-Claim Statute, because no Estate had been set up within six months of her death.
8. On July 26, 2005, Geico investigator Jim Hill learned that Sharon Wright was in Wesley Medical Center with serious injuries. On July 28, 2005, Geico took a recorded statement from Wright. Wright had sustained a fractured left rib, a fractured chest bone, and a fractured pelvis. Wright also suffered a concussion, required removal of her spleen (due to excessive bleeding), and remained confined to a wheelchair. For almost one month after the accident, Wright could not roll over in bed.
9. On August 5, 2005, Geico learned that Gold had serious injuries, which included a ruptured spleen, left eye nerve damage, right lung collapse, left side weakness (causing walking difficulties), speech difficulties requiring therapy, and psychological issues also requiring therapy. At that time, she was going to physical therapy Monday through Friday, from 9:00 a.m. to 4:00 p.m.
10. On August 8, 2005, Geico learned that Kannaday suffered a fractured pelvis, fractured vertebra, broken left arm, broken left hand, internal damage and, most critically, a spinal cord injury. Kannaday's injuries would prove much more severe than those of Gold or Wright.
11. Between August and November of 2005, Geico obtained and reviewed the medical records of the three passengers. By August 16, 2005, Geico knew that Kannaday's initial hospital bill alone would exceed $140, 000.
12. On August 4, 2005, Custard Insurance Adjusters forwarded Kwirt Roarick the just completed Kansas Highway Patrol report, which presented the first credible evidence of Hoyt's fault in the accident.
13. On August 8, 2005, Jim Hill of Geico learned that Kannaday was insured by a MetLife automobile policy, and that Wright was insured by a Geico policy issued to her mother.
14. On August 10, 2005, Keith Richey, attorney for Wesley Medical Center, forwarded to Geico notice of Wesley Medical Center's hospital liens regarding its services for Kannaday ($158, 929.49) and Wright ($95, 499.26).
15. On August 11, 2005, Roarick called Hamp to tell him that the accident liability would far surpass policy limits. Since his call was not answered and no voice mail was available, Roarick also sent Hamp a letter advising of the insufficient policy limits. The same day, Roarick called Wright and told her of the minimal liability limits. He recommended that Wright place her insurance carrier (also Geico) on notice of a possible UIM claim. Roarick made two telephone calls to Kannaday's voice mail, again stating the policy limits and stating that Kannaday should inform her insurance carrier.
16. On August 23, 2005, Geico paid Kannaday's complete PIP medical benefits of $4, 500.
17. On August 31, 2005, Geico paid the Hoyt policy's $2, 000 death benefit to Hamp, who had already paid Chapel Hill Butler Funeral Home.
18. On September 1, 2005, without prompting, Hill discussed an agreement with Wesley Medical Center, whereby Geico would pay $4, 500 to Wesley Medical Center as secondary PIP benefits for Wright, and Wesley would recover remaining proceeds from a state charitable agency, rather than from Wright or her parents.
19. On September 14, 2005, Gold's attorney, Doug Greenwald, submitted a demand letter on behalf of Genevie Gold to Kwirt Roarick, noting that Gold sustained severe injuries which included traumatic brain injury.
20. Roarick called Kannaday on September 27, 2005, within one week of her release from Wesley, telling her that he would be making settlement offers after he received complete medical records for all injured parties.
21. Also on September 27, Greenwald called Roarick. He stated that Gold had no available automobile insurance coverage, and thus no UIM coverage. Roarick took this information into consideration when deciding to offer policy limits of $25, 000 to Gold on November 4, 2005.
22. Greenwald told Geico on October 5, 2005 that Wesley had a lien of $44, 200.27 for Gold's treatment. Greenwald proposed dividing the $50, 000 maximum equally among the three passengers.
23. Kannaday was the most seriously injured of the passengers. By October, 7, 2005, the Geico claim file indicated that Gold's hospital bill was less than $50, 000; Wright's bill less than $100, 00. Kannaday's bill was then around $160, 000.
24. By October 10, 2005, Geico had paid and exhausted PIP medical and rehabilitation benefits for Gold and Wright. Geico had paid and exhausted Kannaday's PIP medical benefits, but had not yet received her rehabilitation bills.
25. By October 14, 2005, Geico had paid and exhausted medical ($4, 500) and rehabilitation ($4, 500) PIP benefits for Gold, Wright, and Kannaday.
26. On October 22, 2005, Michelle Sherman forwarded to Geico a subrogation notice concerning property damage and injuries to Charles Church and the Chris Truck Line truck. This was followed by Liberty Mutual's subrogation notice of October 31, 2005.
27. On October 25, 2005, Roarick asked Gold for additional medical authorizations, and told Greenwald that he would evaluate how to disburse the policy limits after the had the complete medical records.
28. On November 4, 2005, Roarick received approval authority to pay the $50, 000 per occurrence policy limits for global settlement with all three passengers. The same day, he made offers of $25, 000 to settle the claim of Genevie Gold, $12, 500 to settle the claim of Sharon Wright, and $12, 500 to settle the claim of Rachel Kannaday. At that time, only Gold had made a demand and only Gold was represented by an attorney.
29. Roarick made the November 4, 2005 offer in the belief that Kannaday would have supplemental UIM benefits from her mother's MetLife policy, and Wright would have supplemental UIM benefits from her mother's Geico policy. He believed that each passenger would thus receive $25, 000 through the combination of Geico's liability policy and the UIM coverage.
30. Roarick's conclusion was erroneous. While Roarick's analysis would have been accurate in most states, K.S.A. 40-284(b) mandates a "limits-to-limits" policy comparison for UIM motorist benefits, and denies UIM coverage where the underinsured tortfeasors' policy limits are equal to or more than the claimant's limits. See O'Donoghue v. Farm Bureau Mut. Insurance, 275 Kan. 430, 66 P.3d 822 (2003); Halsey v. Farm Bureau, 275 Kan. 129, 61 P.2d 691 (2003). The only UIM coverage available to Kannaday was a policy which had the same limits as the Geico liability policy issued to Hoyt.
31. Consistent with this mistaken understanding, Geico paid $25, 000 in UIM benefits to Wright under her mother's policy, after the Hoyt policy liability benefits were exhausted in the federal court interpleader.
32. Geico policy is to pay claims as promptly as possible. Where coverage and liability are clear, its policy is to try and settle the case promptly.
33. As a result, the actual contributions received by the passengers resembled Roarick's original intention of benefitting the passengers equally - (a) Gold (through her attorney Greenwald) accepted the November 1, 2006; (b) $25, 000 in UIM benefits were given to Wright; and (c) Kannaday's obligations to Wesley Medical Center by $25, 000, as adjudicated by the initial federal action.
34. After receiving no response to the settlement offer from Kannaday, Geico repeated its $12, 500 offer on December 1, 2005 by written offer. The same day, Geico claims adjuster Sabrina Brantley (who took over the case from Roarick) telephoned Kannaday's mother, Robin Kannaday. Brantley said she would investigate the possibility of Wesley Medical Center waiving its lien in relation to Rachel Kannaday.
35. By December 9, Geico negotiated a lien resolution, under which Wesley agreed to accept $6, 250 of the $12, 500 Wright settlement on its hospital lien of $89, 249.26, and $6, 250 of the $12, 500 Kannaday settlement on its hospital lien of $152, 679.49.
36. On December 20, Brantley forwarded written settlement offers of $12, 500 to Wright and Kannaday, which incorporated the Wesley hospital lien concession.
37. On December 28, Jim Hill wrote to ask Kannaday to contact her Waffle House supervisor to complete lost wage forms, preliminary to receiving PIP lost wage benefits.
38. Beginning on January 14, 2006, the Kansas Non-Claim Statute (K.S.A. 59-2239) jurisdictionally barred the enforcement of claims against the estate assets of Stephanie Hoyt, because six months had passed since her death. Kannaday v. Ball, 44 Kan.App.2d 65, Syl. ¶ 2, 234 P.3d 826 (2011).
39. On January 19, 2006, attorney Paul Hasty sent Kannaday's first demand letter by certified mail, offering to settle her claim for $25, 000, stressing that "Kannaday was, by far, the most seriously injured passenger."
40. At the time of this demand, Hasty had been retained for only a few days, and did not have the medical records of his client. He also did not have the records of Gold or Wright.
41. Geico received Hasty's demand letter on January 23, 2006. The next day Geico supervisor John Horton wrote and called attorney Lyndon Vix of the law firm Fleeson, Gooing, Coulson & Kitch. Horton summarized the claims against the Hoyt Estate, and instructed Vix to negotiate settlements that would distribute the policy's per occurrence limits of $50, 000 in bodily injury proceeds. He asked Vix to respond to Hasty's $25, 000 demand.
42. Vix recognized that Geico's agents had mistakenly assessed the application of UIM coverage available to the three passengers. However, he also recognized that Geico had made a binding offer to Gold, based on that mistake.
43. On January 19, Vix emailed Horton recommending that the policy limits of $50, 000 be interpled into court. The interpled funds would be distributed between Gold, Wright, and Kannaday, subject to medical and hospital liens.
42. On February 1, 2006, Geico decided to follow Vix's advice. On February 15, 2006, Hill called Hasty's office to encourage him to complete and return Kannaday's lost wage application.
43. Hasty returned the call to indicate it had been completed. However, Geico never received a ...