Nationwide Mut. Ins. Co. v. Smith

• Decision Date: 25 August 1966
• Docket Number: 6 Div. 215
• Parties: NATIONWIDE MUTUAL INSURANCE COMPANY v. Harry M. SMITH.
• Court: Alabama Supreme Court

Page 505

194 So.2d 505

280 Ala. 343

NATIONWIDE MUTUAL INSURANCE COMPANY v. Harry M. SMITH.

6 Div. 215.

Supreme Court of Alabama.

Aug. 25, 1966.

Rehearing Denied Jan. 26, 1967.

Jones, McEachin, Ormond & Fulton, Tuscaloosa, for appellant.

deGraffenried, deGraffenried & deGraffenried, Tuscaloosa, for appellee.

HARWOOD, Justice.

This is an excess verdict suit against Nationwide Mutual Insurance Company for alleged negligence in failing to settle a suit within the limits of the casualty insurance policy issued to Joe Rice.

The evidence tends to show the Rice automobile, being driven by Harry Smith for Rice, was in a line of traffic proceeding in a northerly direction on U.S. Highway 11, near the Tuscaloosa-Bibb County line. Smith pulled out of his lane and into the lane used by vehicles traveling in an opposite direction. According to Smith, he was traveling at a speed of 50 to 60 miles per hour at the time.

The scene of the accident was near the crest of a hill, and a double yellow line indicated a no passing zone. Visibility was poor, and the paved road was wet.

The automobile driven by Smith first collided with an automobile of Mrs. Jane Simmons traveling in the same direction. It then struck an automobile being driven by Paul Edward Morris which was proceeding in the opposite direction and then collided with the automobile of William R. Brehm, also traveling in the opposite direction.

At the time of the accident, Mr. Brehm was driving his automobile and his wife, Anita Brehm, and their grandson, were passengers therein.

Mr. and Mrs. Brehm suffered rather serious injuries in the collisions. Mr. Brehm's kneecap was fractured to the extent that it had to be removed. He also suffered some broken teeth, a bruised chest, and other bruises and cuts about the body. Mr. Brehm was hospitalized in Tuscaloosa for some eight days, and was then transferred by ambulance to a hospital in New Orleans where he remained about two weeks. His injuries prevented his resuming his former job at which he received $86.26 salary per week, before deductions. He has not been employed since his injuries, and is 25% Permanently disabled and was yet taking physiotherapy at the time of the trial.

Mrs. Brehm received a broken heel bone and an injury to her ankle necessitating a surgical fusion of the ankle joint. She also received other injuries.

Mr. Brehm testified that his medical expenses to the time of trial had been approximately $2,000.

After the accident, Mr. Brehm entered a suit against Harry Smith, Joe Rice, and Paul Edward Morris. This trial resulted in a verdict and judgment in Brehm's favor against Smith and Rice, damages being assessed at $34,000. The jury found in favor of the defendant Morris. Nationwide has paid $10,000 on the judgment, this amount being the limit of the policy, leaving $24,000 outstanding on the Brehm judgment.

As before stated, the present suit is by the insured Harry Smith, against Nationwide for alleged negligence in failing to settle the Brehm suit for $10,000, such offer of settlement having been made by Brehm prior to and during the progress of the trial. Although the verdict and judgment in the Brehm suit resulted in a $24,000 excess over the amount of the policy, Smith has claimed damages of only $9,999. The trial of Smith's suit resulted in a verdict and judgment for the amount sued for, i.e., $9,999, and this appeal is by Nationwide from such judgment.

The appellant has assigned as error the overruling of its motion for a new trial. Grounds 14 and 15 of the motion are to the effect that the lower court erred in overruling its demurrer to the complaint as amended. It is appellant's contention that grounds 7, 21, and 28, of the demurrer raised the question of the sufficiency of the complaint to aver negligence on the part of the appellant in not accepting the offer of settlement made by Brehm, which offer was within the limits of the policy.

The complaint first avers that a judgment has been rendered against the plaintiff in the Brehm suit, and that such judgment was for injuries and damages suffered by Brehm, and for medical expenses for his wife for injuries received by her, she being a passenger in his automobile at the time of the accident, as a proximate consequence of the negligent operation of an automobile being driven by Harry M. Smith as agent, servant, or employee of Joe Rice; that Joe Rice was owner of a policy of automobile liability insurance with the defendant (Nationwide); the complaint then sets forth the terms of the policy; the complaint further describes the injuries received by Brehm and damages consequent to such injuries, and avers that such facts were known to the defendant on December 3, 4, 5, 6, and 7; that the defendant was promptly notified of the accident and it made a full and complete investigation of all the facts and circumstances and employed the law firm of Jones, McEachin and Ormond of Tuscaloosa to defend the case on behalf of the then defendant Harry M. Smith; that the defendant (Nationwide) owed the plaintiff (Smith) the duty not to negligently fail or refuse to settle the case within the limits of liability fixed by the policy of insurance; that on 3 December 1962, after the case was called for trial, but before the trial was actually entered upon, Brehm offered to settle the case for $10,000, which offer was communicated to the defendant, and was within the limits of the policy; that the defendant negligently failed or refused to settle the case within the limits of the policy, and as a proximate consequence of said negligence a judgment in the amount of $34,000 was rendered against the plaintiff and in favor of Brehm; that Nationwide has paid $10,000 on such judgment with a balance due thereon of $24,000 plus interest, all to the damage of the now plaintiff Smith, etc.

An examination of the complaint shows that it sets forth sufficient facts suggesting or inferring negligence in the settlement of Brehm's case, with a specific averment that the appellant negligently failed or refused to settle Brehm's suit within the limits of the policy. In other words, the complaint does more than merely assume negligence, but sets forth sufficient facts by which negligence is suggested, and then characterizes such acts as negligence. The demurrer was therefore properly overruled. Alabama Baptist Hospital Board v. Carter, 226 Ala. 109, 145 So. 443, and cases therein cited; City of Birmingham v. Cox, 230 Ala. 99, 159 So. 818; see also especially Brown v. City of Fairhope, 265 Ala. 596, 93 So.2d 419.

Ground 74 of appellant's motion for a new trial asserts that the court erred in admitting into evidence over appellant's objection, plaintiff's Exhibit 15. This exhibit is a pretrial status report written by Jones, McEachin and Ormond, on 9 November 1962, and forwarded to appellant in Butler, Pennsylvania. The report related to the status of the suit by Brehm against Smith and Rice. It related to the state of the pleadings, the intention of the attorneys to take depositions of certain witnesses, and requests for written statements.

In overruling appellant's objection to the introduction of this exhibit on the grounds that it was a privileged communication between appellant and its attorneys, the court stated it was admitting the same on the theory that the attorneys for the appellant were, at the time the report was made, also representing Smith.

The ruling of the court was proper.

Section 438, Title 7, Code of Alabama 1940, provides that no attorney shall be competent or compelled to testify in any court for or against his client, as to knowledge acquired from the client, or advice given, Unless called to testify by the client. Smith was a client of Jones, McEachin and Ormond at the time the report was written, having been retained by Nationwide to represent Smith in the Brehm suit. It concerned matters material to the Brehm suit against Smith.

An almost identical question to the one now under consideration was involved in Henke v. Iowa Home Mutual Casualty Company, 249 Iowa 614, 87 N.W.2d 920. The lower court, in an excess verdict suit, at the instance of an insured, had ordered the insurer to produce for inspection communications between it and insurer's attorney concerning litigation in which the insured was defended by the insurer under the terms of the policy. The opinion of the Supreme Court of Iowa in affirming the action of the lower court in the premises contains a full discussion of the problem involved with numerous citations of authorities. The Iowa court concluded:

Neverthless, it is our conclusion that the privilege provided by the law, statutory or common, although quite conclusive as between an attorney and a sole client, does not apply as to communications between the parties involved in a given transaction which has been submitted to an attorney for action or advice by two or more persons for their mutual benefit. Petty v. Superior Court, 116 Cal.App.2d 20, 253 P.2d 28. The duty of the attorney to disclose or protect the interest of each is too great and too well settled for anyone to expect communications which will make impossible further efforts for the benefit of all by the attorney, to be privileged. The rule is based on much firmer ground than waiver, that of duty, loyalty and fairness, as well as on substantial public policy.'

We are in accord with the above holding, and further observe that by analogy the doctrines enunciated in Swell et al. v. Holley, 189 Ala. 121, 66 So. 506, and Parish v. Gates, 29 Ala. 254, would necessarily lead to the same conclusion.

Grounds 20 through 25, 28, and 31, of the motion for a new trial, assert error because of statements made by appellee's counsel in his opening statement to the jury.

These statements were based on assertions as to what counsel expected the evidence to show. Grounds 20 through 25, relate to statements to the effect that counsel for appellee expected the evidence to...