Court Opinion

ID: 9757203
Source: CourtListenerOpinion
Date Created: 2023-08-28 22:24:43.008722+00
Date Added: 2024-06-11T07:28:36.072277
License: Public Domain

JAMES M. SMART, JR., Judge,
concurring.
If Wayne Davis, after becoming a $5.8 million judgment debtor, had pursued his claim for bad faith failure to settle (“BFFS”) pursuant to an agreement with the Johnsons, and had obtained the same compensatory and punitive damage awards against Allstate (and had then paid 90 per cent of the recovery to the Johnsons in accordance with the agreement), the case would seem to me to be relatively straightforward. But I do not see it as straightforward because, although the issue was not raised, I remain unconvinced that the Johnsons were entitled to participate as assignees and thus as co-plaintiffs.
I concur entirely with the court’s opinion. I write separately because, although ordinarily I am very reluctant to comment on an issue not litigated by the parties, I feel a responsibility to future BFFS litigants to suggest that the procedural scenario here may be less than reliable as a pattern for future litigation. In particular, though the parties raise no issue in this regard, I wish to express uncertainty as to the purported assignability of a part of Davis’ unliquidated personal tort claim.
The issue arises out of the fact that because of Allstate’s failures to keep Davis informed and to protect his interests, Davis, with the help of the defense counsel provided by Allstate, ultimately chose to enter into an agreement (not a section 537.065 agreement, though it purports to be under 537.065)1 whereby Davis purported to assign 90% of his claim against Allstate to the Johnsons in return for their *670agreement to hold him harmless from their collection efforts.2
This is where the case becomes something other than straightforward. The Johnsons and Davis sued together as joint plaintiffs. The garnishment claim (Count I) was brought by both Davis and the Johnsons (though it is not clear how Davis had a garnishment claim, and not clear how the garnishment would include the bad faith allegations).3 Next, in Count II, the Johnsons sued Allstate for BFFS, pleading that they had been assigned ninety percent of Davis’ claim, and that, as a result of Allstate’s bad faith, they (that is, the Johnsons) had suffered “injuries, including emotional distress, anguish, and attorney’s fees.” This is mysterious, of course. Allstate had no legal duty to the Johnsons to negotiate with them. Any emotional distress caused to the Johnsons by Allstate’s refusal to settle is not com-pensable.4 Count III purported to be a claim for BFFS, again alleging that both Davis and the Johnsons “suffered injuries, including emotional distress, anguish, and attorney’s fees.” Count IV was a claim for BFFS brought by Davis, again alleging injuries, including “emotional distress, anguish, and attorney’s fees.”
Only two verdict directors were submitted — one for compensatory damages for BFFS, and one for punitive damages. The verdict directors regarded the Johnsons and Davis as the plaintiffs, but the court properly specified in the compensatory verdict director that the jury needed to find that Davis was damaged by Allstate’s bad faith. The two elements submitted in that verdict director were 1) bad faith in fading to settle, and 2) damage to Davis. The trial court informed the jurors that if they found that Allstate beached its duty to Davis, they were to award to the plaintiffs compensatory damages in the amount of $5.8 million (which was tied to the underlying judgment against Davis).
Davis did not attend the trial in person or appear by deposition. There was no testimony as to any damages caused him by Allstate’s bad faith. Davis was represented at trial by attorneys engaged by the Johnsons pursuant to Davis’ agreement with the Johnsons. The Johnsons appeared in person and by attorney and testified.
There was discussion at trial of Allstate’s poor practices in dealing with the Johnsons, and substantial evidence as to how badly the Johnsons were damaged in the collision (perhaps beyond what was necessary to show Allstate’s fault in failing to protect Davis’ interests). Because the Johnsons and Davis were aligned together, the case may have taken on a tone whereby the jury, despite efforts of the court to keep the case focused, could have viewed the punitive damage award as designed to punish Allstate for its actions toward the *671Johnsons5 as well as for its actions and omissions in leaving Davis unprotected.6
Allstate complains that for “public policy” reasons Davis should not be allowed to receive some of the punitive damage judgment when he himself was a tortfeasor and wrongdoer. Allstate also claims that, at the very least, the jury should have been told that Davis would get 10% of anything awarded. The court’s opinion is correct to the effect that these specific arguments were not preserved and are made for the first time on appeal. I wish to add, however, that I suspect that these arguments fail to come to grips with the real issue lurking beneath the surface.
Davis had a claim for BFFS. This was a tort claim that was personal to Davis, and the claim included emotional distress, anguish, and attorney’s fees (all of which he pleaded but did not prove). “Personal torts” involve “injuries to the person, whether to the body, reputation, or feelings.” Travelers Indemnity Co. v. Chumbley, 394 S.W.2d 418, 422 (Mo.App.1965). In its broad sense, the term “personal injury” is coextensive with the class of torts known as “personal torts.” Gremminger v. Missouri Labor & Indus. Rel. Comm’n, 129 S.W.3d 399, 402 (Mo.App.2004). Davis could have kept his personal injury tort claim. I cannot see how it would be contrary to public policy to allow an insured (though that insured may have wantonly caused serious injuries) to submit a claim for compensation arising from the violation of his insurer’s duty of good faith to him.
Also, I fail to see that it would be contrary to public policy to allow a party such as Davis to seek punitive damages for BFFS. Allstate cites no pertinent authority for its argument to the contrary. Punitive damages in such a case would be designed to punish the insurer and to deter that company and others from similar bad faith failures to settle. It would also seem logical for the compensatory and punitive awards to exceed $3 million because that is what Allstate could have paid earlier to redeem its breach of good faith toward Davis.
Allstate implies that a claim for punitive damages for BFFS should be brought only by the underlying tort victim and not by the wrongdoing tortfeasor. I actually would have thought an argument could be made the other way around: that the claim for punitive damages should be prosecuted only by the person who actually was injured (at least allegedly) by the insurer’s bad faith (that is, the insured tortfeasor), not by the parties who were actually enriched by the insurer’s bad faith.
Who owned the claim for punitive damages for BFFS in this case — was it the Johnsons, innocent people with horrible injuries, to whom Allstate owed no duty of good faith — or Davis, not innocent as far as the accident, but the one to whom the duty was owed, who suffered the violation *672of duty? The jurors in this case would have perceived that the claim for punitive damages was owned by both Davis and the Johnsons, as co-plaintiffs, who were launching a united attack against a party whose subsequent malevolent conduct apparently warranted a joint effort.
To begin to understand the questions one might have about the assignability of BFFS claims, we should start by understanding the nature of BFFS claims. BFFS is an action in tort, while bad faith failure to defend (BFFD) is an action in contract. See Bonner v. Auto. Club Inter-Ins. Exchange, 899 S.W.2d 925, 928 (Mo. App.1995). Traditionally, it would seem that a BFFS claim would not be assignable because it is a personal tort claim like legal malpractice or breach of fiduciary duty. See Travelers Indem. Co. v. Chumbley, 394 S.W.2d at 423 (cause of action for personal injury is not assignable); See also Ganaway v. Shelter Mut. Ins. Co., 795 S.W.2d 554, 564 (“It may once have been the law that an insured’s cause of action for bad faith refusal to settle a claim was not assignable.”).
We are not here talking about a breach of a contract duty, such as failure to defend. Nor are we talking about a property tort, which involves injury or damage to property. See Chumbley, 394 S.W.2d at 422. We are talking about a breach of a duty implied in law arising out of the fact that Allstate had the exclusive right to control the defense and settlement of the Johnsons’ claims, leaving Davis vulnerable to a grave threat of excess liability. See Zumwalt v. Utilities Ins. Co., 360 Mo. 362, 228 S.W.2d 750, 754 (Mo.1950).
There is a difference, of course, between an unliquidated personal tort claim and a judgment obtained for such a claim. A judgment for a BFFS claim, of course, would be fully assignable as would any other liquidated chose in action — as property. See Marshall v. N. Assurance Co. of Am., 854 S.W.2d 608, 610 (Mo.App.1993), (public policy reasons prohibiting assignment of a personal injury claim do not apply where the claim has been reduced to a judgment).
There is presumably a trend to treat BFFS tort claims as assignable, and Allstate perhaps has accepted that trend. As far as I understand Missouri law, however, I am not so sure the matter is settled, and this case might tend to illustrate some considerations in that regard.
A key case to consider as to such assign-ability is Ganaway v. Shelter Mut. Ins. Co., 795 S.W.2d 554 (Mo.App.1990). In Ganaway, the plaintiff was a passenger in Scott’s (the insured’s) automobile when an accident occurred, injuring the plaintiff. Id. at 555. The plaintiff filed suit against Scott. Id. at 559. The insurer, Shelter Mutual, chose to raise non-meritorious issues by interpleader, and failed to settle Scott’s claim within policy limits. The plaintiff obtained a judgment against Scott. Id. After obtaining this judgment, an involuntary Chapter 7 petition was filed in bankruptcy court against Scott. Id. Scott’s trustee assigned his unliquidated bad faith claim against the insurer to the tort plaintiff. Id.
The insurer argued that a BFFS claim was not assignable because an unliquidat-ed claim for damages arising out of a tort is not assignable. Id. at 564. The court concluded that even if under the common law, a BFFS claim was not assignable, under the terms of the bankruptcy act the claim was assignable. Id. at 564-65.
Ganaway was discussed in Quick v. Nat’l Auto Credit, 65 F.3d 741, 746-47 (8th Cir.1995) (applying Missouri law) (holding that in that case — where the defendant did not have an exclusive right to control settlement — there was no bad faith claim). *673The court, in obiter dictum, commented on the fact that under Missouri law, BFFS claims were not assignable. Id. at 746. The court in Quick thought that Ganaway involved an exception to nonassignability because Ganaway seemed to rest the as-signability on the statutory authority of the bankruptcy code. Id. at 747.
Then came Freeman v. Basso, 128 S.W.3d 138 (Mo.App.2004). This case did not involve a BFFS claim, but instead involved a bankruptcy assignment of claims for legal malpractice and breach of fiduciary duty. Id. at 142. The court held that the claims of legal malpractice claim and breach of fiduciary duty were unliqui-dated personal tort claims that were not assignable. Id. In so holding, the court attempted to distinguish Ganaway by stating, interestingly, that Ganaway was not contrary to the ruling in Freeman v. Basso because bad faith claims against insurance companies were assignable even prior to Ganaway. Id. at 143. The court cited Magers v. Nat’l Life & Accident Ins. Co., 329 S.W.2d 752, 756 (Mo. banc 1959) and Citicorp Indus. Credit Inc. v. Federal Ins. Co., 672 F.Supp. 1105, 1106-08 (N.D.Ill. 1987) (interpreting Missouri law) in support of this proposition.
The court’s reliance on Magers and Citi-corp was misguided because neither case involved assignment of a BFFS claim, nor even of a personal tort claim of any kind. Magers involved an action to recover cash surrender values of certain policies of industrial life insurance which had lapsed for default in payment of premiums. 329 S.W.2d at 753. And Citicorp was an action brought under a policy of crime insurance to seek indemnity for losses due to forgery. 672 F.Supp. at 1105. In both cases there was no reason to restrict the assign-ability of the contractual claims, which involved only property losses.
Freeman v. Basso recognized the general rule that legal malpractice and breach of fiduciary duty claims, as personal torts, are not assignable in Missouri for policy reasons. See, e.g., Chumbley, 394 S.W.2d at 423. Ganaway had seemed to suggest that perhaps the bankruptcy act made such a claim assignable. 795 S.W.2d at 564. The court in Freeman did not regard the bankruptcy act as creating assignability. The courts in Freeman and Ganaway may also have had different views about how clear it was that “prior to Ganaway, bad faith claims against insurance companies were assignable.” Freeman, 128 S.W.3d at 143; compare with Ganaway, 795 S.W.2d at 564 (“[I]it may once have been the law that an insured’s cause of action for bad faith refusal to settle a claim was not assignable”). Of note is the fact that the court in Freeman v. Basso used the term “bad faith claims” without drawing any distinction between BFFS (a personal tort claim) and BFFD (a contract claim).
The court in Freeman believed that “bad faith claims” have been assignable for some time, and the court presumably saw no reason that “bad faith claims” should not be assignable. As to claims of legal malpractice and breach of fiduciary duty, however, the court believed that assigna-bility would present public policy concerns. See Freeman, 128 S.W.3d at 142. The court did not seem to see any similarity between the unliquidated personal tort claims in Freeman and an unliquidated BFFS claim. Did the court fail to recognize that there are similarities, including the fact that in both kinds of cases, if I understand correctly, a claimant may seek to recover damages for such things as emotional distress, damage to reputation, and expenses related thereto?
In Truck Insurance Exchange v. Prairie Framing, LLC, 162 S.W.3d 64 (Mo.App.*6742005), the insured, a framing company, brought claims of bad faith failure to defend (“BFFD”) as well as claims of BFFS. No issue was raised as to the assignability of either the BFFS claim or the BFFD claim under an agreement with the tort plaintiffs, who perhaps could pursue the BFFD claim by way of a garnishment action anyway. Thus, there was no adjudication of the issue of assignability of the BFFS claim in that case. However, when no concern is expressed by the court as to such a matter, there is a tendency for attorneys involved in subsequent litigation to see the case as providing an established guidepost.
Despite the existence of the foregoing cases, because neither the Court of Appeals nor the Missouri Supreme Court have addressed the matter of public policy differences between assignment of BFFS claims and assignment of other personal tort claims (such as legal malpractice), the answer to the issue of the assignability of BFFS claims seems to me to be less than certain.7
Perhaps there is a tendency to assume that Section 537.065 authorizes the assignment of claims for BFFS. I cannot find such authorization anywhere in the statute. Section 537.065 does not purport to change the common law as to assignability of claims. In fact, the language of section 537.065 suggests that it is not about the assignability of claims at all. The statute provides that, when there is an unliquidat-ed claim for damages against a defendant, that defendant, in return for his payment of a “specified amount,” may obtain an agreement limiting execution of the later judgment. It also allows the recording of such an agreement in the public records. I do not see that it purports to change the common law so as to allow the assignment of unliquidated personal tort claims.
I assume that the holder of a BFFS claim may agree in advance of a BFFS judgment to pay the ultimately-derived net proceeds of the BFFS judgment to the holder of the underlying tort claim, with payment to be made after the BFFS claim is prosecuted in the name of the BFFS claim holder (rather than in the name of the holder of the underlying tort judgment, and rather than in the names of both). I also assume that the parties may agree that the holder of the underlying tort claim may provide the attorney to act in behalf of the BFFS claim holder, while prosecuting the claim in the name of the BFFS holder. And, of course, a judgment for BFFS, once obtained, is absolutely assignable as property; or, as stated above, the net proceeds of the judgment may be paid pursuant to an agreement.
But if there is a purported assignment of an unliquidated personal tort claim for BFFS, any punitive damage claim against the insurer will be brought by a party (the underlying plaintiff) who often will not be able to show that the insurer’s bad faith caused him or her any damage (because, e.g., ninety per cent of $5.8 million is far better compensation than the $50,000 policy limits). When one couples the fact that here Davis presented no evidence of damage (other than the inference of possible damage to his credit or reputation from the fact of the underlying judgment) with the fact that the Johnsons arguably had no damage from Allstate’s bad faith, one has *675a scenario for a punitive damage claim that could raise unanticipated legal implications.
A reviewing court may occasionally act sua sponte in cases involving substantial punitive damage awards where there is plain, obvious error (though unpreserved) and a resultant manifest injustice or miscarriage of justice. See, e.g., Duvall v. Maxey, 249 S.W.3d 216 (Mo.App.2008). This is not such a case. With the law in its current state, I cannot say that the trial court was obligated to intervene here to avoid plain, obvious error. I also understand Allstate’s failure to raise a challenge in this regard. It appears to me, though, that, when properly preserved, the issue of the assignability of BFFS claims may be ripe for adjudication.
The court’s opinion properly disposes of the issues argued on appeal. I write simply to say that the propriety of the procedures employed in this case do not, under the current status of Missouri law, seem so “cut and dried” to me as to set forth a roadmap for attorneys in future litigation.

. There would seem to be no reason to believe that an agreement that does not fit the terms of 537.065 is therefore necessarily illegal or unenforceable. The parties may have designated it as an agreement under 537.065 so that it could be accepted for filing in the public records for the benefit of Davis’ credit rating.

. The agreement was somewhat ambiguous as to whether it was a promise to pay 90% of the net proceeds of a judgment or whether it was an assignment of "90% of [Davis’] bad faith claim” to the Johnsons. The parties obviously understood it to be an actual assignment of 90% of Davis’ personal injury tort claim.

. The pleadings and the jury instructions show that the parties merged an equitable garnishment action with Davis’ tort claim for bad faith failure to settle (BFFS). Perhaps the trend in the law is to allow an equitable garnishment action to include a personal tort claim for BFFS, but I am not sure exactly how the law of garnishment can accommodate such a merger.

.The only compensation for the tort victim in an insurer’s unreasonable delay is found in the statutorily created pre-judgment interest provision — to give some financial incentive to a tortfeasor’s insurer to investigate and settle cases.

. It is interesting to ponder the question of whether Allstate’s bad faith actually damaged the Johnsons in view of the agreement the Johnsons were enabled to enter into because of Allstate’s bad faith. Without Allstate's bad faith, the Johnsons would have received only $50,000. Thus, to the extent that the punitive damages were punishing Allstate for its actions toward the Johnsons, there is an interesting irony in the fact that the Johnsons should be highly grateful that Allstate exercised bad faith toward Davis.

. There is also an irony here in regard to Davis’ damages. Though he pleaded the personal injury of emotional distress, anguish, and attorney’s fees, he did not show up at tried to present evidence of any such damage. It is true that the entering of the judgment against him pursuant to the agreement would imply damage to his credit (though mitigated by the Johnson agreement), but there was no evidence of any other damage.

. There have been cases where the courts avoided the issue of assignability of a BFFS claim, rejecting a purportedly assigned claim for reasons other than non-assignability. See, e.g., Stone v. Farm Bureau Town & Country Ins. Co. of Mo., 203 S.W.3d 736, 748-49 (Mo. App.2006) (assignment of the BFFS claim was rejected because the court concluded that the insurance policy had been cancelled; no discussion whether a BFFS claim is assignable); Bonner, 899 S.W.2d at 928 (rejecting claims as not legitimate BFFS claims).