Although the insurer's conduct did not amount to bad faith in Young v. Allstate Ins. Co., No. 26887 (Haw. Sup. Ct. Dec. 26, 2008), the court held plaintiff's allegations of intentional infliction of emotional distress (IIED) were sufficient to survive a motion to dismiss.
Plaintiff alleged she was stopped in traffic when a car operated by an Allstate-insured driver rear-ended her, destroying her auto. The insured informed Allstate he had fallen asleep and caused the crash. Plaintiff, who was 84 years old, suffered injuries to her neck, ribs, right knee and thoracic and lumbar spine.
An Allstate representative contacted Plaintiff the day of the accident, promised she was in good hands, would be provided with quality service, and would not need an attorney. In two subsequent letters, Allstate promised to provide quality service to plaintiff.
Plaintiff attempted to resolve her claim against Allstate without the assistance of an attorney. Although she had already incurred over $6,000 in medical expenses, Allstate offered to settle for only $5,300. Plaintiff rejected the offer, but was deeply distressed because she felt Allstate was breaking its promises. She thereafter retained an attorney and sued. The answer alleged plaintiff was negligent and had failed to mitigate her injuries. This caused plaintiff, who was now 87, extreme distress and shame. Ater taking her deposition, Allstate's attorney indicated he would recommed a policy limits settlement of $25,000. Allstate, however, refused to increase its offer. In non-binding arbitration, Plaintiff damages were determined to be $45,000. Allstate never took the arbitration seriously and appealed the decision, requesting a trial de novo.
The jury awarded plaintiff $198,971.71. Fees and costs for the arbitration and pre-judgment interest were also awarded to plaintiff. Allstate offered to settle for $260,000 if plaintiff would release any claim for bad faith. Plaintiff refused and sued Allstate for bad faith and other claims.
Allstate filed a motion to dismiss, arguing it did not owe a duty of good faith and fair dealing because the parties did not have a contractual relationship by virtue of its promises and letters. The trial court agreed. Further, the trial court ruled Allstate's acts were not beyond all bounds of decency nor outrageous. Therefore, the IIED claim was also dismissed.
The Supreme Court affirmed dismissal of the bad faith claim. Plaintiff alleged neither detrimental reliance nor consideration. Accordingly, there was no contract between plaintiff and Allstate, and the bad faith claim failed.
Plaintiff did, however, adequately allege a claim for IIED. In Hawai`i, the tort consists of the following elements: (1) the act allegedly causing the harm was intentional or reckless, (2) the act was outrageous, (3) the act caused, (4) extreme emotional distress to another. Allstate's insured admitted he caused the accident when falling asleep at the wheel. Allstate immediately contacted plaintiff and assured her she would be treated fairly. Nevertheless, Allstate only offered plaintiff a mere $5,300 to settle. Given these facts, reasonable people could differ as to whether Allstate acted without just cause or excuse and beyond all bounds of decency in the underlying case. The court determined that upon reading plaintiff's complaint, average members of the community might exclaim, "Outrageous!" Therefore, the trial court erred in dismissing plaintiff's IIED claim.
