Frank Patterson and Lindsay Dunn won a defense verdict in an important bad faith “set-up” case in El Paso County with exposure of almost $10 million. The jury found for defendant State Farm on all claims after a 7-day jury trial.
Plaintiff Melanie Rountree was insured through State Farm for auto insurance liability policies totaling $1,250,000. She was 100% at fault in causing an auto accident on January 19, 2013. Rountree, while extremely intoxicated, drove her vehicle through a red light and collided with Patrick Kirchhofer’s vehicle, causing serious and permanent injuries to Mr. Kirchhofer, including partial paralysis. Ms. Rountree claimed that State Farm unreasonably failed to timely make an offer to settle, causing a judgment to be entered against Ms. Rountree in the amount of $4,102,526.05. State Farm paid its policy limits plus interest and costs after judgment was entered, leaving an unpaid judgment balance of $3,469,598.25 as of the second trial. Rountree entered into a Bashor Agreement with Kirchhofer and was represented at the bad faith trial by the same lawyers who had represented Kirchhofer. She sought the unpaid amount of the judgment, plus two times the insurance limits (a total of $2.5 million) for unreasonable delay under C.R.S. § 10-3-1115 and 1116, punitive damages of $3,469,598.25, and attorney fees. In closing, the total requested by her attorneys was $9,439,196.50, plus attorney fees in excess of $500,000.00.
State Farm provided Rountree a defense to the Kirchhofer suit and Rountree later hired personal counsel. During the underlying litigation, Kirchhofer’s attorneys sent a letter demanding a settlement offer from State Farm. The letter purposely did not say State Farm’s limits would be accepted as a full and final settlement. Rountree and her attorneys advised State Farm not to offer its policy limits because that would immediately expose Rountree’s personal assets for further negotiations. They still hoped to convince Kirchhofer’s attorneys to accept policy limits for a full release. State Farm agreed to Rountree’s request. When State Farm’s policy limits were not offered by the deadline Kirchhofer’s attorneys revoked their “demand”, claimed it was bad faith and argued State Farm was now exposed to the full damages suffered by Kirchhofer. They demanded $12 million at mediation and $27 million at the injury trial. After the injury trial Rountree entered into the Bashor Agreement, assigning her bad faith claim proceeds to Kirchhofer.
During the bad faith trial, Frank Patterson and Lindsay Dunn convinced the jury that State Farm never had a reasonable opportunity to settle the case for several reasons. First, it was following the request of its insured in not making the policy limits offer. Second, Kirchhofer and his lawyers had no intent to settle for the State Farm policy limits. The lawyers were trying to create a “set-up”, a way to claim bad faith and open the policy limits.
This case is important for insurers because there is a surge of “set-up” cases in Colorado as a result of the punitive provisions of C.R.S. § 10-3-1115 and 1116. This case shows that juries will consider the question whether the insurer had a reasonable chance to settle, and that set-up cases raise real doubts about the plaintiff’s intent to settle.