American Family Mutual Insurance Co. v. Hansen

In 2002, Jennifer Hansen bought a car-insurance policy through an insurance agent. The insurance company on the policy was American Family Mutual Insurance Co. (American Family) (defendant). In mid-2007, Hansen returned to the same agent to increase the policy coverage, including underinsured-motorist coverage. The agent gave Hansen a lienholder statement for the new coverage. In the lienholder statement, the named insured was listed as “Davis, Jenny.” Hansen’s surname had never been Davis; Davis was the surname of Hansen’s mother and stepfather. Several months later, Hansen sustained injuries as a passenger in her boyfriend’s car. Hansen submitted an insurance claim to her boyfriend’s insurance company. Hansen also submitted an underinsured-motorist claim to American Family. American Family determined that the policy declaration page listed the named insureds as Hansen’s mother and stepfather, rather than Hansen. Consequently, the policy would not cover Hansen unless at the time of the accident she resided with her mother and stepfather. American Family could not reach Hansen to confirm her residency. In 2009, Hansen’s boyfriend’s insurance company offered to settle Hansen’s claim. Hansen then asked the original insurance agent for a copy of the American Family policy. The agent provided Hansen with another lienholder statement, and this statement listed the named insured as Hansen. Hansen’s attorney sent American Family this lienholder statement and requested permission to settle Hansen’s claim with the boyfriend’s insurance company. American Family then denied coverage. Hansen sued American Family for breach of contract, common-law bad faith, and statutory bad faith. Before trial, American Family reformed the insurance policy to include Hansen, and settled Hansen’s breach-of-contract claim. The case proceeded on Hansen’s bad-faith claims. During the trial, the judge found as a matter of law that the American Family policy was ambiguous and that the jury must construe the policy in favor of Hansen. The jury returned special verdicts, finding no common-law bad faith but finding bad faith under the applicable statutes. After post-trial motions, the judge entered judgment in favor of Hansen for statutory damages, plus court costs and attorney’s fees. American Family appealed. The court of appeals affirmed, holding that the inconsistency between the lienholder statement and the policy declaration page rendered the policy ambiguous. American Family appealed.