American Fidelity & Casualty Co. v. Greyhound Corp., 16684.

• Citation: 258 F.2d 709
• Decision Date: 19 September 1958
• Docket Number: No. 16684.,16684.
• Parties: AMERICAN FIDELITY & CASUALTY COMPANY, Inc., Appellant and Cross-Appellee, v. The GREYHOUND CORPORATION, Appellee and Cross-Appellant. The GREYHOUND CORPORATION, Appellee and Cross-Appellant, v. AMERICAN FIDELITY & CASUALTY COMPANY, Inc., Appellant and Cross-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

258 F.2d 709 (1958)

AMERICAN FIDELITY & CASUALTY COMPANY, Inc., Appellant and Cross-Appellee, v. The GREYHOUND CORPORATION, Appellee and Cross-Appellant.

The GREYHOUND CORPORATION, Appellee and Cross-Appellant, v. AMERICAN FIDELITY & CASUALTY COMPANY, Inc., Appellant and Cross-Appellee.

No. 16684.

United States Court of Appeals Fifth Circuit.

August 18, 1958.

Rehearing Denied September 19, 1958.

COPYRIGHT MATERIAL OMITTED

Herschel E. Smith, Cecyl L. Pickle, Knight, Smith, Underwood & Peters, Miami, Fla., for appellant and cross-appellee.

Willis H. Flick, T. J. Blackwell, Blackwell, Walker & Gray, Miami, Fla., for appellee.

Before RIVES, JONES and WISDOM, Circuit Judges.

JONES, Circuit Judge.

The Greyhound Corporation, the appellee, was insured by American Fidelity and Casualty Company, Inc., the appellant, against liability in the operation of motor vehicles to the extent of $40,000 for any one person killed or injured and $100,000 for personal injuries received in any one accident. As a result of a collision on a Florida highway in which a Greyhound bus was involved a suit for personal injuries resulted in a judgment against Greyhound for $50,000 in favor of Anna Jones and for $17,500 in favor of her husband, T. R. Jones. The judgment was affirmed by the Supreme Court of Florida. Florida Greyhound Lines v. Jones, Fla., 60 So.2d 396. Excess Insurance Co. carried for Greyhound motor vehicle liability insurance coverage exceeding the primary liability of American. Excess brought a declaratory judgment suit against Greyhound for a determination that, because timely notice of the claims of Mr. and Mrs. Jones had not been given as its policy required, it had no liability to discharge that portion of the Jones judgment which exceeded the limits of American's policy. Summary judgment, entered for Excess, was affirmed. Greyhound Corp. v. Excess Insurance Co. of America, 5 Cir., 1956, 233 F.2d 630. In the suit of Excess against Greyhound a third party action was brought by Greyhound against American alleging that American breached the duty it owed Greyhound in failing to give timely notices and information, and that it exercised bad faith in the settlement negotiations with Mr. and Mrs. Jones. Judgment was entered for Greyhound. This Court reversed on the ground that the court's instruction that the insurer's duty in settlement negotiations was to use ordinary care and diligence was error, and it was held that the Florida test of liability is good faith. American Fidelity and Casualty Co., Inc., v. Greyhound Corporation, 5 Cir., 1956, 232 F.2d 89. A new trial was had. During the trial the court struck from the third party complaint all of the claims for relief except the one alleging that American exercised bad faith in the settlement negotiations. The second trial, like the first, resulted in a verdict and judgment for Greyhound and again an appeal has been taken. Twenty specifications of error are made which American condenses into eight questions which are submitted for our consideration.

The first nine of American's specifications of error assert in various ways that the verdict and judgment are contrary to the law and the evidence. American devotes eight pages of its brief to a resume of the facts. Greyhound uses eleven pages for the same purpose. Each of the parties stresses the phases of the evidence deemed most favorable to it. We see no useful purpose that would be served by setting out the facts except to the extent required in discussing the other questions presented. The facts as they are reflected by the evidence in the record and the interpretations placed upon it by briefs and in argument have had our careful consideration. We agree with the conclusion of the district court that the case was one for a jury.

The policy of insurance which American issued to Greyhound contained an indorsement by which Employers Reinsurance Corporation reinsured a part of the liability of American, and under this reinsurance American recouped $30,000 of its ultimate payment of $40,000 applied on the Jones judgment. The court admitted the reinsurance indorsement, along with the policy, in evidence over American's objection that the evidence of reinsurance was improper. We think the evidence was material. In a like situation the Supreme Court of Missouri had before it a case where the insurer had reinsured $5,000 of its $10,000 coverage. A settlement offer within the policy limit was received. The insurer offered to pay $4,500 if the insured would pay the difference. The insured declined and the claimant recovered a judgment for an amount exceeding the policy limit. With respect to admissibility of evidence of reinsurance the court said:

"We think the jury could conclude that the reason defendant did not settle the Burneson suit was because, under no circumstances, would it ever be liable for more than $5,000, and it would prefer to take a gamble on getting a favorable verdict rather than to make a settlement within the limits of the policy. If this was its reason for not accepting Burneson\'s offers, then it was an intentional disregard of the duty it owed the Zumwalt Company and of course defendant did not act in good faith. The policy holder was not interested in what the reinsurer would do. It had a right to look to the defendant who had issued the policy to protect its interest." Zumwalt v. Utilities Insurance Co., 360 Mo. 362, 228 S.W. 2d 750, 754.

The reasoning of the Missouri court is sound. American says that reinsurance has no place among the facts of this case because its claims adjuster and its local attorney had no knowledge of reinsurance. But at American's home office in Richmond it was known that there was reinsurance, and by the head of American's claims department, at its home office, a $5,000 settlement limit was placed.

Prior to the trial depositions were taken, including the deposition of C. J. Forster, General Claims Agent for Greyhound. Counsel for American propounded this question:

"Well, you are contending in this case, Mr. Forster, or your company is, that we acted in bad faith in not settling with the Joneses; is that your contention?"

to which Mr. Forster answered:

"I do not believe that is our contention."

American offered in evidence this question and answer, but no other part, out of the deposition. Objection was made and sustained. Error is assigned and American contends that the claim agent made an admission against interest which should not have been excluded. The Forster deposition was taken on December 1, 1953, prior to the first trial. The third party complaint, as it then stood, alleged, among other things, that American acted negligently in the settlement negotiations. See American Fidelity & Casualty Co. v. Greyhound Corporation, supra. Whatever Mr. Forster may have believed the contention of Greyhound was at the time his deposition was given, it cannot be doubted that when the excerpt from the deposition was offered in evidence Greyhound was contending that American had acted in bad faith. Not only was it so contending, but just before the profert was made the court had stricken all of the claims of the third party complaint except the one which alleged bad faith. It then had no contention available to it other than bad faith. The exclusion of the portion of the deposition tendered by American was not error.

About three weeks before the trial of the Jones suit American wrote Greyhound declining to say definitely whether the Jones claim would involve excess but expressing the belief that it would not. American's letter continued:

"However Mrs. Jones is suing for $75,000 which is, of course, in excess of your limits with the American Fidelity & Casualty Company. We are, therefore, taking this opportunity to invite you or your excess carrier to associate counsel in the trial of this case, with our trial attorneys."

It is perhaps unimportant but it might be noted that, when the letter was written, the complaint had been amended and the suit was for $250,000. Excess Insurance Company declined liability. Counsel for Greyhound were associated with American's attorneys in the trial of the Jones case. After the judgment for Mr. and Mrs. Jones was entered, Greyhound's counsel joined with American's attorneys in the appeal to the Supreme Court of Florida where it was urged that the judgment was excessive. American sought to establish the facts as to the participation by Greyhound, through its attorneys, in the trial and appeal of the Jones case. The trial court excluded the evidence. Asserting error American contends that the Greyhound attorney would not have argued that the verdict and judgment in the Jones case were excessive had he not believed it to be so. This, says appellant, was strong evidence that American did not use bad faith in settlement negotiations. Samuel Johnson observed that, "A lawyer has no business with the justice or injustice of the cause which he undertakes." It is not necessary to endorse this statement in order to dispose of the contention of American. Greyhound claimed that American acted in bad faith in responding to the Jones settlement offer of $25,000 with what it asserted to be a ridiculously inadequate counteroffer of $4,000, in failing to make an offer of $10,000 with information justifying a belief that such offer would be accepted, in failing to make a sufficient investigation, and in other respects. These claims are not inconsistent with the contention that the Jones verdict of $67,500 was excessive, and even if it were otherwise, evidence of the participation by Greyhound counsel in the trial and appeal of the Jones case would not tend to show that American acted in good faith in the settlement negotiations. On the eve of the trial, Greyhound learned of the possibility that American's limit might not be sufficient to pay the Jones claim and its excess insurance carrier disclaimed liability. American offered it the privilege of participating...