Childs v. Allstate Ins. Co.

Decision Date03 January 1961
Docket NumberNo. 17729,17729
Citation117 S.E.2d 867,237 S.C. 455
PartiesWilliam L. CHILDS, Respondent, v. ALLSTATE INSURANCE COMPANY, Appellant.
CourtSouth Carolina Supreme Court

Haynsworth, Perry, Bryant, Marion & Johnstone, Greenville, for appellant.

J. Perrin Anderson, Greenwood, for respondent.

STUKES, Chief Justice.

This is an appeal from a judgment obtained by reason of appellant's liability under its policy of automobile insurance, issued to respondent, Sec. II of which is entitled, 'Protection against bodily injury by uninsured automobiles.'

The specific provisions here involved follow:

'Allstate will pay all sums which the insured shall be legally entitled to recover as damages from the owner or operator of an uninsured automobile because of bodily injury sustained by the insured, caused by accident and arising out of the ownership, maintenance or use of such automobile.

* * *

* * *

'Exclusions--What This Section Does Not Cover

'This Section of the Policy does not apply:

* * *

* * *

'2. to bodily injury of an insured with respect to which such insured or his representative shall, without the written consent of Allstate, make any settlement with, or prosecute to judgment any action against, any person or organization who may be legally liable therefor; or

* * *

* * *

'Notice of Legal Action

'If, before Allstate makes payment of loss hereunder, the insured or his representative shall institute any legal action for bodily injury against any other person operating an automobile involved in the accident, a copy of the Summons and Complaint or other process served in connection with such legal action shall be forwarded immediately to Allstate.

* * *

* * *

'Determination of Legal Liability and Amount of Damages.

'The determination as to whether the insured shall be legally entitled to recover damages, and if so entitled the amount thereof, shall be made by agreement between the insured and Allstate.

'In the event of disagreement and upon written demand of either, the matter or matters upon which the insured and Allstate do not agree shall be settled by arbitration in accordance with the rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator(s) may be entered in any Court having jurisdiction thereof. The insured and Allstate each agree to consider itself bound and to be bound by any award made by the Arbitrator(s) pursuant to this section II. * * *'

Respondent was in collision with one Cunningham. Upon report of the accident appellant investigated it and determined that it resulted from the fault of its insured, the respondent, and it settled with Cunningham his claim against the insured for damage to his automobile by paying him the amount thereof, apparently without prior notice to respondent.

Upon appellant's refusal of respondent's claim for damages for personal injuries which he received in the collision, respondent brought action against Cunningham and recovered judgment by default in the sum of $1,500. It is for that amount and costs that the instant action was brought.

Meanwhile there had been correspondence between respondent's attorney and the Claims Manager or appellant. Under date of June 2, 1959, the latter wrote respondent's attorney in part as follows: 'With respect to the questions raised in the second paragraph of your letter of May 28, we have been advised by the Cunninghams that there is no liability insurance on their car. On the other hand, our investigation of the accident indicated that Mr. Childs was responsible for this accident, and hence, could not have any claim under the uninsured motorist coverage. As a result of our investigation of the accident, and our determination of the liability as resting on our insured, we have settled the property damage claim of the Cunninghams.' On September 21 following, the attorney wrote the Claims Manager that action had been instituted in behalf of respondent (against Cunningham) for damages for personal injuries and enclosed copies of the suit papers, which he advised was in accordance with the terms of the policy. The Claims Manager replied under date of October 9 as follows: 'This is to advise you that this suit was instituted without the written consent of Allstate Insurance Company as provided under Paragraph 3 on Page seven of the Allstate Crusader Policy, said paragraph being listed under the Section entitled 'Exclusions--What this section does not cover (2). To bodily injury on insured with respect to which such insured or his representative shall, without the written consent of Allstate, make any settlement with or prosecute to judgment any action against, any person or organization who may be legally liable therefor;' * * * I call attention to the fact that a prosecution to judgment in this action against Mr. Cunningham would relieve Allstate of any obligations under the bodily injury benefit insurance protection of Mr. Childs' policy.'

Afterward, on December 14, the Claims Manager made written refusal of respondent's claim, as follows: 'Since you have prosecuted Mr. Child's action to judgment against Mr. Cunningham, there is no liability on the part of Allstate Insurance Company under Mr. Child's uninsured motorist coverage.

'As pointed out to you in my letter of October 9th, Allstate did not consent to the entering of this suit and the taking of this judgment, and, consequently, you have been in violation of the exclusion of the uninsured motorist coverage of Mr. Child's policy.

'Under the circumstances, Mr. Childs has violated his policies and brought himself under the exclusions set forth therein. We therefore decline to make any payment on this claim.'

Appellant defended the action in hand upon the ground that respondent had not complied with the policy provision for arbitration and pleaded the 'exclusion', above quoted, forbidding action by respondent without written consent of appellant.

Appellant moved successively for nonsuit, directed verdict judgment n. o. v., and new trial upon the grounds set up in its answer, that respondent had made no demand for arbitration and had brought action against Cunningham without the consent of appellant. The trial motions were denied and the case was submitted to the jury which returned verdict for respondent. Appellant's post-verdict motions were also denied. The appeal is from judgment entered upon the verdict.

The first ground is that arbitration under the terms of the policy was a condition precedent to action thereupon.

The purported agreement for arbitration is unenforceable under the decisions of this court. Jones v. Enoree Power Co., 92 S.C. 263, 75 S.E. 452; Harwell v. Home Mut. Fire Ins. Co., 228 S.C. 594, 91 S.E.2d 273. Cf. Hines v. Farr, 235 S.C. 436, 111 S.E.2d 33. Such an agreement is upheld when it provides for arbitration of the amount of the loss but that at hand undertakes to require arbitration of the question of liability and is, therefore, not binding upon the parties. Ibid. The rules enunciated in the foregoing decisions are stated in 29A Am.Jur. 699, Insurance, sec. 1611, as follows:

'In accordance with general principles applicable to all contracts, it is the rule that a provision in an insurance policy that all disputes arising under the policy shall be submitted to arbitrators, or a provision similar in substance and effect, is not binding. On the other hand, the view prevailing in nearly all jurisdictions is that a stipulation not ousting the jurisdiction of the courts, but leaving the general question of liability for a loss to be judicially determined, and simply providing a reasonable method of estimating and ascertaining the amount of the loss, is valid.'

Uninsured automobile coverage is referred to as a recent innovation in supplemental section 4104.5 of Volume 6, part 2, Perm. Ed. of Blashfield's Automobile Law and Practice. It is also briefly treated in supplemental section 4331 of Volume 7 of Appleman, Insurance Law and Practice, and likewise in supplemental section 82.5 to 5A Am.Jur.,...

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  • Indiana Ins. Co. v. Noble, 569A84
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    ...607 (1967); (The result in Levy was later changed by the enactment of a new arbitration statute in Illinois); Childs v. Allstate Ins. Co., 237 S.C. 455, 117 S.E.2d 867 (1961); Heisner v. Jones, 184 Neb. 602, 169 N.W.2d 606 (1969); Ellison v. Safeguard Mut. Ins. Co., 209 Pa.Super. 492, 229 A......
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