Glenn v. Fleming

• Decision Date: 28 September 1990
• Docket Number: No. 63230,63230
• Citation: 247 Kan. 296,799 P.2d 79
• Parties: Everett GLENN, Appellant, v. Dale FLEMING, Defendant. AETNA CASUALTY & SURETY COMPANY, Appellee, v. Randall WELLER, Defendant.
• Court: Kansas Supreme Court

Page 79

799 P.2d 79

247 Kan. 296

Everett GLENN, Appellant, v. Dale FLEMING, Defendant.

AETNA CASUALTY & SURETY COMPANY, Appellee, v. Randall WELLER, Defendant.

No. 63230.

Supreme Court of Kansas.

Sept. 28, 1990.

Syllabus by the Court

1. A moving party is entitled to summary judgment if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact. The record must also reflect that the moving party is entitled to judgment as a matter of law. On opposing a motion for summary judgment, a party must come forward with something of evidentiary value to establish a material dispute of fact.

2. A supplementary payments provision, a standard clause in a liability insurance policy, is considered and construed to create liability for all interest on the entire amount of any judgment which accrues after entry of the judgment and before the company has paid or tendered or deposited in court the amount of the policy limits, plus interest on the entire judgment. Following Stamps v. Consolidated Underwriters, 208 Kan. 630, 493 P.2d 246 (1972).

3. A wrongful failure to settle arises from an insurer's contractual obligation to defend. Accordingly, an action to enforce that obligation is based on breach of contract.

4. An insured's breach of contract claim for bad faith or negligent refusal to settle may be assigned.

5. Syllabus p 4 and the corresponding portions of Heinson v. Porter, 244 Kan. 667, 772 P.2d 778 (1989), that characterize an assignment of a bad faith claim by a defendant insured to a personal injury plaintiff as the assignment of a tort and, consequently, invalid, are overruled.

6. The settlement practice use of a covenant not to execute, as more fully set out in the opinion, is approved.

Jerry R. Palmer, of Palmer, Marquardt & Snyder, Topeka, argued the cause and was on the briefs for appellant.

H. Lee Turner, of Turner & Boisseau, Chartered, Great Bend, argued the cause, and Donald A. McKinney, of the same firm, was on the briefs for appellee.

SIX, Justice:

This case, arising from a claim of an insurer's bad faith refusal to settle a personal injury lawsuit, is before us on petitions for review of the judgment of the Court of Appeals. Glenn v. Fleming, 14 Kan.App.2d 62, 781 P.2d 1107 (1989). Everett Glenn appeals from a summary judgment entered against him in his garnishment action against Aetna Casualty & Surety Company (Aetna). Glenn attempted to collect a judgment in excess of defendant Dale Fleming's automobile liability insurance policy limits. Fleming was insured by Aetna. The action is grounded on Glenn's claim of Aetna's bad faith in failing to discharge its duty to policyholder Fleming.

We shall consider: (1) summary judgment; (2) the measure for accrued interest running on Glenn's judgment; and (3) insurer-insured relationships arising from an insurer's alleged breach of its duty to settle.

Our consideration of these areas requires us to revisit the question of the validity of an assignment of an insured's rights in a liability insurance policy recently discussed in Heinson v. Porter, 244 Kan. 667, 772 P.2d 778 (1989).

The Issues on Appeal

Glenn urges us on review of the Court of Appeals decision: (1) to alter the impact of Heinson on his right to garnish Aetna; (2) to rectify asserted error by the Court of Appeals in affirming the trial court's ruling on Aetna's motion for summary judgment; and (3) to correct alleged error in the Court of Appeals' ruling that the running of interest on Glenn's judgment against Fleming terminated when Aetna paid the sum of $25,000 into court.

Aetna petitions for review to reverse the Court of Appeals decision regarding accrued interest, contending Glenn is asserting a new contract claim. Aetna argues the claim was not raised in the trial court and, consequently, it may not be considered for the first time on appeal.

We have three questions for resolution:

(1) Whether the trial court erred in granting Aetna's motion for summary judgment;

(2) whether the trial court erred in its ruling as to the amount of interest owing to Glenn; and

(3) whether the Court of Appeals' reliance upon Heinson v. Porter, 244 Kan. 667, 772 P.2d 778, should be affirmed.

We affirm the trial court in granting Aetna's motion for summary judgment. The Court of Appeals did not reach this issue in view of its reliance on Heinson.

We reverse the trial court and the Court of Appeals regarding the amount of interest owing to Glenn.

We overrule Syllabus p 4 and the corresponding portions of Heinson that characterize an assignment of a bad faith claim by a defendant insured to a personal injury plaintiff as the assignment of a tort and, consequently, invalid. We approve the settlement practice use of a covenant not to execute, as more fully set out in the opinion.

Facts

Dale Fleming drove his El Camino pickup to the Garden City Co-op to purchase propane gas. Everett Glenn, an employee of the Co-op, filled the propane tank on the vehicle. After the tank was filled, a vapor fire suddenly occurred. Glenn was severely injured. He required extensive hospitalization and treatment.

Fleming did not report this incident to Aetna. The investigations carried out by Farmland Industries, Inc., (the parent company of the Garden City Co-op) through an independent adjusting agency and an accident investigation firm determined that Glenn had overfilled the tank and that there were no defects in the tank. The independent adjusting agency concluded that the Co-op was solely liable for the accident. The insurance company for the Co-op paid Fleming's medical expenses, lost wages, and property damage.

Glenn filed a personal injury action against Fleming, the Co-op, and the two manufacturers of the clothing he had been wearing. The petition was amended to include products liability claims against the alleged valve manufacturer.

Fleming contacted attorney Randy Weller. Weller contacted Aetna, informing it that Fleming wanted Weller as his attorney. Aetna hired Weller to investigate and defend the suit. The policy limits for this accident were $25,000.

Fleming gave a statement to Aetna reporting that the tank had been overfilled and that maybe static electricity had caused the fire. Fleming mentioned that his propane tank had been checked and that there was nothing wrong with it. He also stated that he did not feel he was in any way responsible for the accident. This information was included in Aetna's first internal report on the lawsuit. The internal report indicated that Fleming would be an average witness because he had difficulty in remembering the details of the incident. The report stated he was very honest and this would help the case.

Glenn's attorney, Jerry Palmer, told Weller and representatives of Aetna that he and Glenn were not really going after Fleming, but wanted to recover a substantial judgment from the "deep-pocket" defendants--the Co-op's insurer and the clothing companies. In August and September of 1982, Glenn and Aetna agreed to proceed informally with discovery, to work together on some of the investigation, and to share information and some costs. This understanding is reflected in various letters and in Aetna's intermediate internal report on the lawsuit.

Glenn's counsel made a November 3, 1982, settlement offer to Weller. The settlement letter stated that Reverend Reith had visited Glenn while Glenn was in the hospital. Reith had heard Glenn, at a time when Glenn was lucid, state that Fleming had struck the propane tank with a wrench, causing the spark which started the fire. Glenn offered to settle the case and dismiss Fleming from the suit for a payment of $25,000, receipt of the valves from the propane tank, and an opportunity to talk to Fleming informally. The offer was open for a period of two weeks. A copy of an affidavit by Reverend Reith was attached.

Weller discussed this letter with Aetna and Fleming. Fleming denied having had a wrench or hitting the tank. Weller advised Aetna that he had questions about the condition of Glenn, who was hospitalized in intensive care, when the statement was allegedly made. Weller reported that nothing he had discovered so far would open the door to the possibility of Fleming's liability.

On November 8, 1982, Weller informed Glenn's counsel that the offer had been passed on to Aetna. Weller stated that Fleming emphatically denied having had a wrench. Weller had no doubt that the tank had been overfilled and that the gas had escaped from a certain valve on the tank. The letter discusses the valves and how best to have them tested.

A representative of Aetna telephoned Glenn's attorney on November 18, 1982, to reject the $25,000 offer and to counteroffer $5,500. A counteroffer confirmation letter noted that Glenn's counsel had not yet had an opportunity to review the photographs of the pickup and propane tank, but that he should have the photographs through the normal course of discovery in mid-December. The $5,500 offer was held open until January 1, 1983.

The counteroffer was rejected by Glenn on December 6, 1982. Palmer stated that he thought Fleming had exposure and believed the initial offer had been fair. The letter also stated Aetna was now in line to pay the entirety of any excess verdict because it had rejected the opportunity to settle the case within its policy limits.

Discovery proceeded on the case. Glenn and Fleming responded to interrogatories. Glenn stated he had no recollection of the facts surrounding the accident, but that the action was initiated because his wife and his minister stated that he had said Fleming struck the tank or valve with a metal tool. Fleming stated that Glenn overfilled the tank and that the released gas ignited.

On January 30, 1984, a consulting engineer reported that he had examined the valves from Fleming's propane tank and discovered that one of them allowed...