Campbell v. State Farm Mutual Automobile Insurance

Citations: 163 Ariz. 287; 787 P.2d 1083; 46 Ariz. Adv. Rep. 37; 1989 Ariz. App. LEXIS 272Docket: No. 2 CA-CV 89-0096

Court: Court of Appeals of Arizona; October 12, 1989; Arizona; State Appellate Court

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Deborah Campbell appeals a jury verdict against State Farm Mutual Automobile Insurance Company in a case related to an insurance policy for a vehicle owned by her late husband, who was killed in an accident involving William Sasenick. William, the son of State Farm's insured George Sasenick, had purchased a 1977 Gremlin but had moved out of George's home prior to the accident. The insurance policy provided coverage only to individuals named in the declarations page and those living with them, which excluded William since he was no longer residing with George at the time of the incident.

Campbell sued William, obtaining a default judgment of $3.6 million, and subsequently assigned his rights under the policy to pursue a bad faith breach of contract claim against State Farm. The insurer denied coverage based on policy provisions regarding the use of non-owned vehicles, arguing that William's lack of residency with George voided his coverage. The trial court ruled that if coverage existed, State Farm could be liable for bad faith. It determined that the case should be presented to the jury to decide whether George understood the implications of the policy renewal regarding William's coverage. The jury was specifically instructed on the matter of William's insurance status at the time of the accident.

William Sasenick was deemed insured by State Farm at the time of the accident, unless State Farm can prove that George Sasenick understood his son would not be covered after leaving home, with the burden of proof resting on State Farm. If State Farm meets this burden, the verdict will favor them; if not, it will favor plaintiffs Deborah Campbell and her children. The jury is instructed to focus solely on George Sasenick's understanding, without interpreting the policy or any other insurance agreements.

On appeal, Campbell challenges several court decisions: 1) denial of her motion for judgment notwithstanding the verdict, which she claims was based on an incorrect interpretation of the Gordinier case and denial of her summary judgment motion due to ambiguity; 2) denial of her motion for a new trial based on the verdict's inconsistency with the evidence; 3) improper jury instructions; and 4) rejection of her proof offers. The court affirmed the lower court's decisions.

In addressing Campbell's first point, the court noted that she misinterpreted Gordinier, which held that standard policy provisions could contradict the reasonable expectations of the insured. The trial court ruled that the jury should assess George Sasenick's subjective understanding of his coverage because he did not read the policy or discuss it with the agent upon renewal. Campbell argues that the exceptions in Gordinier require actual discussions or agreements between the insured and the agent, but the court found no such restriction in the language of the ruling. It concluded that the jury may consider whether there were other reasons for George's understanding of his coverage, aligning with Gordinier's allowance for subjective understanding in determining coverage. The court also indicated that the objective standard applies when assessing policy enforceability under Darner.

The trial court ruled that a specific provision was unenforceable unless certain exceptions applied, which necessitate evaluating an insured's subjective understanding. The court correctly denied Campbell's motion for a directed verdict based on this interpretation. Regarding ambiguity, Campbell argued that the policy failed to clarify when a relative must reside in the same household—either at the policy's issuance or at the time of an accident. The court found the policy clear, stating that coverage depends on the facts at the time of loss, although it acknowledged the need to determine if Deborah Taylor was a resident of her mother's household at the time of the accident.

Campbell also challenged the denial of her motion for a new trial, arguing State Farm did not meet its burden of proof regarding George Sasenick's understanding of the policy provisions at renewal in November 1983. She cited George's testimony indicating a lack of expectations about coverage when William left home and that he did not read the policy or discuss it with his agent. However, George also testified that he understood his children were covered until they left his household and that he expected William to have the same coverage upon renewal. The review of the new trial denial focused on whether the trial court abused its discretion, not on evidence weighing, and it was determined that sufficient evidence supported the jury's verdict.

Lastly, Campbell argued the court erred by refusing her six requested jury instructions, which were based on the exceptions to the reasonable expectations doctrine established in Gordinier.

The court upheld the trial court's decision to reject the jury instructions proposed by Campbell, noting that none of the six instructions addressed the key issue of George's understanding regarding William's coverage under the insurance policy if he left George's household. Additionally, the court agreed with the trial court's rejection of Campbell's offers of proof, which included questioning George's insurance agent about policy requirements and asking a State Farm representative about a father's ability to insure his son. The court emphasized that the relevance of such testimony did not pertain to George's understanding of his coverage at the time the policy was renewed. Consequently, the court found no error in the trial court's decisions and affirmed the ruling, indicating that the appellee would be awarded attorney’s fees on appeal in accordance with Rule 21(c). State Farm's argument for summary judgment was not addressed due to its failure to file a cross-appeal.