Mowry v. Badger State Mutual Casualty Company

Bradley Mowry (plaintiff), a passenger in a car driven by Steven McCarthy, was seriously injured in a car accident. McCarthy’s parents were insured by Badger State Mutual Casualty Company (Badger) (defendant). Badger investigated the accident and determined that McCarthy was probably responsible for the accident and that Mowry’s damages would likely exceed the insurance-policy limits. However, due to open questions about the car’s ownership, Badger believed that coverage might not exist for the accident. Mowry sued McCarthy, McCarthy’s parents, and Badger to recover damages for Mowry’s injuries. Mowry demanded a settlement for the full insurance-policy limits. Badger, having denied coverage for the accident, rejected the settlement demand. At Badger’s request, the trial on liability and damages was delayed until after the issue of insurance coverage was resolved. The jury found that McCarthy’s parents did indeed own the car, thereby establishing that the accident was covered under the insurance policy. A judgment was entered in favor of Mowry against Badger for the full policy limits and against McCarthy for an amount that far exceeded the policy limits. McCarthy assigned to Mowry the right to pursue any claims against Badger that otherwise would have belonged to McCarthy in connection with Badger’s denial of insurance coverage and the failure of Badger to settle the claims against McCarthy within the policy limits when the opportunity to do so existed. Mowry filed suit against Badger, alleging bad faith and breach of contract. Mowry was awarded damages. Badger appealed.