Cunningham v. Standard Guaranty Insurance Co.

Kenneth and Teresa Cunningham (plaintiffs) were injured in a car accident caused by Joseph James. The Cunninghams filed a negligence action against James seeking both personal-injury and property damages. James had an automobile-insurance policy through Standard Guaranty Insurance Company (SGIC) (defendant), which included $10,000 of liability coverage for personal-injury and property-damage claims. After several months without a settlement, the Cunninghams filed a bad-faith claim against SGIC. A bad-faith claim arises if, as a result of an insurance company’s failure to settle a tort claim against the insured, an excess judgment, meaning a judgment in excess of the policy-limit payment, is entered against the insured in an underlying tort proceeding. Although an excess judgment is a required element of a bad-faith claim, SGIC and the Cunninghams stipulated to try the bad-faith claim while the Cunninghams’ underlying negligence action against James was still pending. The Cunninghams agreed to accept a policy-limit payment in full-settlement of their claims against James if bad-faith was not found. The trial court held that SGIC had acted in bad faith. SGIC appealed, arguing that the trial court lacked subject-matter jurisdiction over the bad-faith claim because the bad-faith claim would not accrue until and unless a final excess judgment was entered in the Cunninghams’ pending negligence action against James. The appellate court reversed, holding that the trial court did not have subject-matter jurisdiction over unaccrued claims. The Cunninghams appealed.