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Fowler v. State Farm Mutual Automobile Insurance Co.

United States District Court, D. South Carolina, Florence Division

October 14, 2017

Marion Fowler, Esq., as Guardian ad Li tern for Jefferey L. Vanderhall, Assignee, Plaintiff,
v.
State Farm Mutual Automobile Insurance Company, Defendant.

          ORDER AND OPINION

          RICHARD MARK GERGEL UNITED STATES DISTRICT COURT JUDGE.

         This matter is before the Court on Plaintiffs motion for judgment on the pleadings (Dkt. No. 20) and Defendant's motion for judgment on the pleadings (Dkt. No. 21). For the reasons set forth below, the Court denies Plaintiffs motion for judgment and grants Defendant's motion for judgment.

         I. Background

         On August 21, 2011, Jefferey Vanderhall was returning from his job at Homes Motor Lodge in Florence, South Carolina, when he was struck while riding his bicycle by a truck driven by Maurice Washington. Vanderhall v. State Farm Mut. Auto. Ins. Co., 4:14-cv-518-RMG, Dkt. Nos. 61-2 at 2; 75 at 3. Mr. Vanderhall suffered severe injuries from the collision and was unconscious for approximately a week after the accident. On August 23, 2011, Mr. Vanderhall's mother, Teresa Vanderhall, contacted the Hyman Law Firm and a member of the firm came to Mr. Vanderhall's hospital room. Vanderhall, Dkt. No. 78 at 2. Mr. Vanderhall underwent surgery on that day and remained unconscious. Id. The law firm took a picture of Mr. Vanderhall in his hospital bed to document "the severity of his injuries." Id. That same day, Teresa Vanderhall executed a retainer agreement with the Hyman Law Firm on behalf of Jefferey Vanderhall, indicating that she was the "GAL for Jefferey." Id. At the time, Teresa Vanderhall had not been appointed guardian ad litem for Jefferey Vanderhall, who (being unconscious) was an incapacitated person under South Carolina law. Id.

         One day later, on August 24, 2011, William Hatfield, then an attorney with the Hyman Law Firm, wrote Defendant State Farm Insurance Company regarding Mr. Vanderhall. Mr. Hatfield indicated that his firm "represents Jefferey L. Vanderhall" and that Mr. Vanderhall had suffered a severe spinal cord injury from being struck by a vehicle operated by Maurice Washington and owned by its insured, Priscilla J. Ford. Id. Mr. Hatfield's letter stated he would give the carrier "one opportunity to settle this claim by tendering . . . liability limits in exchange for a Covenant Not to Execute provided that said tender is made in writing on or before Friday, September 2, 2011, at noon." Id. at 3. Mr. Hatfield explained that if State Farm refused to tender its limits by the stated deadline, the offer would be withdrawn and Mr. Vanderhall would proceed to sue Maurice Washington for negligence and Priscilla Ford for negligent entrustment. Id.

         State Farm responded to Mr. Hatfield's August 24, 2011 letter on September 1, 2011, indicating it was "willing to settle your client's claim for $25, 000 [the policy limit] in exchange for a covenant not to execute." Id. The letter then stated, "This settlement is inclusive of all economic damages, known and unknown, and any liens, assignments or statutory rights of recovery." That language is standard language in settlement agreements and covenants not to execute in South Carolina. Id.

         Plaintiff asserted the additional language proposed constituted a counter offer and a rejection of Plaintiffs August 24, 2011 offer. Id. On September 27, 2011, he sued Maurice Washington and Priscilla Ford in the Florence County Court of Common Pleas. Vanderhall v. Wilson, 201 l-CP-21-2555. Thereafter, on November 6, 2013, Plaintiff entered into an agreement with Mr. Washington and Ms. Ford that provided (1) a confession of judgment of $7 million; and (2) a covenant not execute against Mr. Washington and Ms. Ford beyond the policy limits, which also provided for their protection from any liens or other claims by third parties. Vanderhall, Dkt. No. 1-1 at 11-13. Plaintiff, as an assignee of Mr. Washington and Ms. Ford, again filed suit in the Florence County Court of Common Pleas, this time against State Farm for claims of breach of the implied covenant of good faith and fair dealing, breach of contract, and related claims. Vanderhall v. State Farm Mut. Auto. Ins. Co., 2014-CP-21-300.

         Defendant thereafter timely removed the action and moved for summary judgment. This Court granted summary judgment for Defendant on March 30, 2015. The Court held (1) that Mr. Hatfield's settlement offer of August 24, 2011 was a legal nullity that cannot constitute a basis for a bad faith claim because Mr. Hatfield had no authority to act on behalf of Mr. Vanderhall at that time, because Mr. Vanderhall was then an unconscious person and Ms. Vanderhall was not his guardian ad litem, and (2) that, even if the settlement offer were valid, Defendant's response to the offer could not constitute bad faith as a matter of law. Vanderhall, Dkt. No. 78. Plaintiff appealed.

         Meanwhile, on June 5, 2015, in his suit against Mr. Washington and Ms. Ford still pending in the Florence County Court of Common Pleas, Mr. Hatfield on behalf of Plaintiff filed a conditional motion to set aside the settlement and $7 million confessed judgment, to appoint a guardian ad litem for Mr. Vanderhall, and to place Mr. Vanderhall's suit against Mr. Washington and Ms. Ford on the active roster, in the event this Court's order were affirmed on appeal. (Dkt. No. 1-8.) Mr. Hatfield's motion for appointment of a guardian ad litem represented that it was made because "the Honorable Richard Gergel ruled that Vanderhall lacks the capacity to sue without a guardian ad litem or settle without court approval." (Id.) It did not disclose that the basis for that ruling was Mr. Vanderhall's one-week period of unconsciousness two-and-a-half years before the motion for appointment of a guardian ad litem. While Mr. Hatfield's motion for appointment of a guardian ad litem for Mr. Vanderhall was pending in state court, in his appeal of this Court's order granting of summary judgment for State Farm on Plaintiffs bad faith claim, Mr. Hatfield represented to the Fourth Circuit that "there is no evidence that Vanderhall lacks the capacity to contract. Now that this is cleared up, Vanderhall asks that this Court accept Vanderhall's undisputed capacity to contract." (Dkt. No. 21-2 at 11 (reply brief of appellant filed on July 13, 2015 in Vanderhall v. State Farm Mut. Auto. Ins. Co., 632 Fed.Appx. 103 (4th Cir. 2015)) (citation omitted).)

         The Fourth Circuit affirmed the final judgment of this Court on December 5, 2015.

Vanderhall, 632 Fed.Appx. at 104. The Fourth Circuit noted, Vanderhall suggests in his brief that the district court considered that his incapacity was due to his slight brain damage or mild retardation; however, our reading of the district court's order reveals no indication that it was relying on any condition or period of time other than the time Vanderhall was unconscious and in a coma.

Id. at n.1. Shortly thereafter, in January 2016, Mr. Hatfield retained psychologist Alexis Sanders to evaluate Mr. Vanderhall's mental competence to support of his state-court motion for appointment of a guardian ad litem. (Dkt. Nos. 39-1 ¶ 7, 1-9 at 3.) Dr. Sanders found that Mr. VanderhalPs intellectual function was "Extremely Low, " a finding consistent with Mr. Vanderhall's school records. (Dkt. No. 1-9 at 3.) On June 14, 2016, the Court of Common Pleas granted Plaintiffs motion to set aside the 2013 settlement agreement and to appoint a guardian ad litem, finding that Mr. Vanderhall is (and has been since birth or early childhood) mentally incompetent and that his incompetence rendered the 2013 settlement agreement void. (Dkt. No. 1-9 at 4.)

         The case then proceeded to a jury verdict on April 11, 2017. Plaintiff was awarded $15, 000, 000 in actual damages and $60, 000, 000 in punitive damages. (Dkt. No. 1-11.) A day earlier, Plaintiff and Mr. Wilson entered into an agreement in which Mr. Wilson assigned his claims against Defendant to Plaintiff, who agreed not to enforce collection of a judgment against Mr. Wilson. (Dkt. No. 24-1.) Plaintiff and Ms. Ford had already entered into a similar agreement on August 11, 2016. (Dkt. No. 24-2.)

         On April 26, 2017 (two weeks after the jury verdict), Plaintiff, again an assignee of Mr. Wilson and Ms. Ford, filed the present action in the Florence Division. The parties are the same, the attorneys are the same, and the claims are the same as the previous bad faith action against State Farm, except that Plaintiff asserts a negligence claim that is identical to the bad faith claim. (Dkt. No. 1.) Plaintiff however has a new theory of the case. Plaintiff asserts State Farm breached its duty of care to its insureds by failing to seek appointment of a guardian ad litem for Plaintiff. (Dkt. No. ...


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