Taylor v. State Farm Mutual Automobile Insurance Co.
Arizona Supreme Court
854 P.2d 1134 (1993)
Taylor (plaintiff) held an uninsured-motorist policy with a $15,000 limit from State Farm (defendant) and was later sued by other drivers after an accident, resulting in a judgment against him far above his policy limits. State Farm paid Taylor $15,000 in exchange for a broadly worded release of "contractual" claims, without mentioning any bad-faith claim. Taylor then sued State Farm for bad faith in failing to settle within policy limits; State Farm argued the release barred the claim. The trial court allowed parol evidence on the release's meaning and a jury found for Taylor, but the court of appeals held the release was unambiguous and that admitting parol evidence was error; Taylor sought review.
Whether a trial judge may consider parol or other extrinsic evidence to decide whether contract language is reasonably susceptible to more than one interpretation, rather than requiring the language to be found ambiguous on its face first.