State Farm Mutual Automobile Insurance Company, a Mutual Company, Appellant (defendant) v. Donna R. Shrader And…

Summary

The court held that insureds may bring a direct action against their insurer to determine uninsured-motorist liability and damages without first obtaining a judgment against the uninsured motorist, and that uninsured-motorist coverage is first-party coverage subject to the insurer's duty of good faith and fair dealing. It further held that the trial court improperly failed to bifurcate the contract and bad-faith claims when settlement negotiations were admissible for the bad-faith claim but prejudicial to the contract claim, and that a fiduciary-duty instruction was legally erroneous. The court reversed and remanded for a new trial on all issues, including punitive damages. Justice Macy would have preserved the verdict except for the punitive-damages ruling, while Justices Rooney and Thomas would have required separate resolution of the tort issues and limited or rejected the direct action; Justice Rooney also would have upheld the punitive-damages directed verdict.