Date: 07-16-1996

Case Style: Earnest BRASHIER v. FARMERS INSURANCE COMPANY, INC., et al.

Case Number: 1996 OK 86

Judge: Opala

Court: Supreme Court of Oklahoma on appeal from the District Court of Oklahoma County

Plaintiff's Attorney:

Brad West and Terry W. West, Shawnee, Oklahoma for Appellee.

Defendant's Attorney:

Greg D. Givens, Robert D. Ramage, Edmonds, Cole, Hargrave, Givens & Witzke, Oklahoma City, Oklahoma

Description:

1 Certiorari was granted on insured's petition to determine whether - qua victor in a tort claim against his UM insurer for bad-faith refusal to pay an insurance loss - the insured was entitled to counsel fee, prejudgment interest and costs. Tendered are three issues: [1] Does the exclusion of UM coverage from the terms of 36 O.S. 1991 § 3629 (B)1 abrogate the common law of tort liability settled by Christian v. American Home Assur. Co.2 insofar as counsel-fee recovery constitutes an element of damages in a bad-faith tort claim? [2] Are the proceeds of UM indemnity to be treated in law as a [925 P.2d 23] personal injury recovery, which qualifies them for 12 O.S. 1991 § 727 3 prejudgment interest? and [3] Are costs recoverable in a bad-faith claim against a UM carrier?

2 We answer the first question in the negative and the second and third in the affirmative.

I.

THE ANATOMY OF LITIGATION

3 Earnest Brashier [Brashier or insured] was injured on July 2, 1990 while riding in a pickup that was hit by a vehicle owned by C & L Trucking. The latter carried an insurance policy with $100,000 liability limits per person. Brashier had UM coverage with Farmers Insurance Co., Inc. and Farmers Insurance Exchange [UM insurer or Farmers], limited to $10,000 per person. C & L Trucking's insurer tendered its policy's limits and Farmers waived subrogation but refused to make any UM payment to Brashier because its adjuster believed the value of Brashier's claim did not exceed $100,000.

4 Brashier sued his UM carrier, alleging breach of its implied-in-law duty of good faith and fair dealing. The jury returned a verdict for Brashier, awarding him $25,000 in compensatory damages and $25,000 in punitive damages. The trial court allowed Brashier (a) counsel fee of $26,387.50, rested on the terms of 36 O.S. 1991 § 3629 (B)4 and Christian (both authorities were cited);5 (b) counsel fee of $5,000, based on Oliver's Sports Center, Inc. v. National Standard Ins. Co.;6 (c) prejudgment interest of $12,328.77, grounded in § 3629 (B); and (d) costs of $1,591.67. Both Brashier and Farmers brought an appeal. The Court of Appeals affirmed the judgment on jury verdict but reversed the trial court's award of counsel fee, prejudgment interest and costs. It held that the legislative exclusion of UM coverage from the benefits to be conferred by § 3629 (B) extends to bad-faith actions for failure to pay a UM-coverage claim. This court granted Brashier's quest for certiorari review of that portion of the appellate court's opinion which reverses the allowance of counsel-fee, prejudgment interest and costs.7

II

THE COUNSEL-FEE AWARD

5 Brashier argues that because he was the prevailing party in a bad-faith claim against his UM insurer for failure to pay under the terms of an insurance policy, he is entitled to a counsel-fee award under the teachings of Christian, as well as under the terms of § 3629 (B), which sources, when combined, serve to support the allowance of counsel fee and prejudgment interest in all insurance litigation other than that for ex contractu recovery of UM coverage. The exclusion of UM coverage, Brashier urges, applies only to actions brought directly against the insurer for recovery of UM proceeds. He argues that because the terms of § 3629 (B) have been used as a basis for awarding counsel fees, costs and interest in other insurance bad-faith actions,8 it should [925 P.2d 24] also apply to his case. The insurer counters that § 3629 (B) excludes not only ex contractu claims under the UM coverage but also ex delicto bad-faith claims for refusal to pay the UM policy limits.

A.

The Teachings of Christian and its Progeny

6 Bad-faith refusal to settle a claim was first recognized as a distinct tort in Christian.9 The claim rests on the insurer's implied-in-law duty to act in good faith and deal fairly with the insured to ensure that the policy benefits are received.10 Christian, which shaped our common law of tort, made counsel fees an element of the insured's damage recovery for insurer's bad-faith refusal to pay the claim.11 A Christian counsel-fee plea is a part of the claim; it does not depend on an insured's prevailing party status.

7 There can be no doubt that Brashier is entitled to a counsel-fee award under the bad-faith tort rubric of Christian. What remains to be determined is the effect of § 3629 (B) upon the viability of his common-law Christian counsel-fee award.

B.

Statutorily-based Counsel-Fee Award

8 By statutory mandate the common law remains in full force unless a statute explicitly provide to the contrary.12 Legislative abrogation of the common law may not be effected by implication.13 Statutory alteration must be clearly and plainly expressed.14 An intent to change the common law will not be presumed from an ambiguous, doubtful or inconclusive text.15 A revered presumption favors the preservation of common-law rights.16 Where the common law gives a remedy, and another is provided by statute, the latter is merely cumulative, unless the statute declares it to be exclusive.17

[925 P.2d 25] 9 Section 3629, first enacted in 1957, required (by its original version) that the insurer furnish proof of loss forms to any person claiming a loss under an insurance contract. On June 3, 1977, before Christian was handed down, subsection B was approved (to be effective Oct. 1, 1977).18 Added by that subsection was the requirement that an insurer submit a written settlement offer within a specified time and a provision for allowance of costs and counsel fee to the prevailing party. Explicitly excluded from this provision was UM coverage. Subsection B was last amended in 1985 to allow the prevailing party's recovery of interest on the verdict (15% annually).19 Neither the prenor post-Christian amendment of § 3629 indicates legislative intent to supplant the common law. Because the statute's exclusion of UM coverage is not all-inclusive, we hold that the terms of § 3629 may be made applicable solely to contract-based UM claims and cannot affect recovery for a bad-faith tort claim against a UM carrier who did not prevail when sued ex delicto for refusal to settle. In short, we view the terms of § 3629 (B) as not inconsistent with the teachings of Christian.

C.

The Teachings of Oliver

10 Brashier argued below and on certiorari that the Oliver "litigation risk factor" (the risk of non-recovery)20 should be considered in awarding him counsel fees. He was allowed that additional counsel-fee recovery of $5,000. It was based on Oliver's teachings. The insurer's certiorari brief is silent on this issue, although its appellate brief urges that the entire counsel-fee award is "excessive and unreasonable."

11 Oliver incorporates the State ex rel. Burk v. City of Oklahoma City21 common-law criteria for measuring the counsel-fee award and teaches that the contingent nature of the litigation is one factor to be considered when setting the amount.22 According to Oliver, the correct procedure for arriving at a reasonable fee is to (a) first determine the compensation based on an hourly rate and (b) then enhance it by adding an amount computed according to the Burk guidelines. A bad-faith counsel-fee award that is rested on the Oliver risk-litigation factor is entirely consistent with the teachings of Christian23 and Burk.24

12 Attached to Brashier's nisi prius counsel-fee application is a detailed list of the hours spent in the prosecution of the litigation. According to counsel for the insured, 258 hours had been expended by four lawyers, each charging different hourly rates, which totaled $32,262.50. Brashier's trial brief pressed for an amount to be added to the sum total of hourly compensation as an Oliver risk-litigation premium. We hold that the trial court's basic counsel-fee award to Brashier of $26,387.50 and an additional allowance of $5,000 for the Oliver factor rest on competent evidence. Gauged by the applicable common-law standards of review, the amount awarded is not excessive.25

[925 P.2d 26] III

THE PREJUDGMENT INTEREST AWARD

13 Brashier argues he is entitled to prejudgment interest authorized by the terms of § 3629 (B) or, in the alternative, by the general statute, 12 O.S. 1991 § 727 (A)(2).26 The insurer counters that because Brashier's quest below was pressed solely in reliance on § 3629, and the Court of Appeals found that statute to be inapplicable to a bad-faith claim, he cannot now change theories on appeal.

14 The applicable statute, 12 O.S. 1991 § 727 (A)(2), provides for prejudgment interest upon a verdict "by reason of personal injuries".27 UM coverage is a first-party indemnity paid by the insurer for bodily injury sustained by the insured, for which the latter is legally entitled to recover from the uninsured, underinsured or hit-and-run motorist.28 In contemplation of law, the UM coverage proceeds stand as a substituted res for personal injury recovery the insured would have received from the uninsured or underinsured tortfeasor. Because the UM recovery represents recompense for one's personal injuries,29 a judgment in a bad-faith claim for loss sustained by a UM insured would entitle the victor to the § 727 (A)(2) prejudgment interest.

15 Brashier's failure to press for prejudgment interest due under § 727 (A)(2) is no bar to its recovery. A legally correct judgment will not be reversed because of the judge's faulty reasoning, erroneous fact finding or consideration of an immaterial issue.30 Because the prejudgment interest award is erroneously rested upon the provisions of § 3629 (B), we reverse that allowance and remand the cause for reassessment of that element of recovery under the provisions of § 727.

IV

COSTS

16 Nisi prius taxable costs fall into two categories: (a) ordinary court costs - items that the clerk may tax de cursu31 and (b) litigation expenses that may have arisen in an equity suit or in an ancillary equitable [925 P.2d 27] proceeding.32 Only those expenditures which are taxable by statute fall within the term "costs".33

17 The insurer concedes that Brashier, qua prevailing party on the jury verdict, is entitled to the statutorily recoverable costs. Brashier attached to his counsel-fee application below a breakdown of costs totaling $1,591.67. We hold that these costs were correctly taxed de cursu against the insurer.

V

SUMMARY

18 The language of § 362934 is not comprehensive enough to abrogate the teachings of Christian and Burk. At the very most, § 3629 disallows recovery of counsel fee by the prevailing party in a contract action to enforce UM coverage. Prejudgment interest is allowed in a bad-faith tort claim under the provisions of 12 O.S. 1991 § 727 (A)(2)35 because UM proceeds constitute in law a substituted res for personal injury recovery. Under the statutory costs regime, 12 O.S. 1991 § 928 ,36 costs may be allowed de cursu to the plaintiff-insured upon a judgment in its favor. That statute allows costs to be taxed "of course" to one in whose favor judgment was entered in an action for the recovery of money. On certiorari previously granted solely on the insured's petition,

19 THE COURT OF APPEALS' OPINION IS VACATED ONLY INSOFAR AS IT REVERSES THE AWARD OF COUNSEL FEE, PREJUDGMENT INTEREST AND COSTS, AND THE TRIAL COURT'S JUDGMENT IS AFFIRMED IN PART AND REVERSED IN PART WITH THE CAUSE REMANDED FOR FURTHER PROCEEDINGS NOT INCONSISTENT WITH TODAY'S PRONOUNCEMENT.

Outcome: ¶19 THE COURT OF APPEALS' OPINION IS VACATED ONLY INSOFAR AS IT REVERSES THE AWARD OF COUNSEL FEE, PREJUDGMENT INTEREST AND COSTS, AND THE TRIAL COURT'S JUDGMENT IS AFFIRMED IN PART AND REVERSED IN PART WITH THE CAUSE REMANDED FOR FURTHER PROCEEDINGS NOT INCONSISTENT WITH TODAY'S PRONOUNCEMENT.

Plaintiff's Experts: Unknown

Defendant's Experts: Unknown

Comments: None