Abernethy v. Utica Mutual Insurance Company

• Decision Date: 06 February 1967
• Docket Number: No. 10777.,10777.
• Citation: 373 F.2d 565
• Parties: William L. ABERNETHY, Houston D. Havnaer, Sr., and Abernathy's, Inc., Appellants, v. UTICA MUTUAL INSURANCE COMPANY, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

373 F.2d 565 (1967)

William L. ABERNETHY, Houston D. Havnaer, Sr., and Abernathy's, Inc., Appellants, v. UTICA MUTUAL INSURANCE COMPANY, Appellee.

No. 10777.

United States Court of Appeals Fourth Circuit.

Argued January 11, 1967.

Decided February 6, 1967.

Eddy S. Merritt and Marshall V. Yount, Hickory, N. C., for appellants.

William B. Webb, Charlotte, N. C., (Carpenter, Webb & Golding, Charlotte, N. C., on brief), for appellee.

Before BOREMAN and WINTER, Circuit Judges, and KAUFMAN, District Judge.

WINTER, Circuit Judge:

In this suit, brought by appellants (the "insureds") against their insurer ("Utica") for negligence and bad faith in its failure and refusal to enter into negotiations for a settlement of two death cases against them, to make any offer of settlement therefor, and to accept the offer to settle both cases for $12,500.00, the district judge granted Utica's motion for judgment at the close of the insureds' case. Because we think there was sufficient evidence from which the jury, under applicable North Carolina law, might have concluded that Utica was proved guilty of bad faith, we reverse the judgment and remand the case for a new trial.

Under two policies, Utica insured the insureds for a maximum limit of $30,000.00 against liability for injuries and damages, including death, that might arise through operation of a Ford station wagon. The policies contained customary language requiring Utica to defend the insureds and empowering Utica exclusively to settle litigation filed against the insureds. On the night of February 23, 1961, the station wagon collided with the rear of a Chevrolet automobile which a short time previously had collided with the rear of a furniture van at a time when the van was being towed by a wrecker. There was evidence that both collisions occurred in a patch of heavy fog. As a result of either or both impacts, the front of the truck was driven from an elevation of 15-18 inches above the road to the back of the wrecker — 4½ to 5 feet above the road surface — doing considerable damage to the heavy towing equipment. Extensive damage was also done to the rear of the van.

The Chevrolet, after the second collision, was found under the truck, badly damaged, with its top partially sheared off. Of five passengers in the Chevrolet, four were killed and the fifth seriously injured. The Ford station wagon was damaged in the front. Four passengers in the station wagon were injured, but not severely.

Suits, based upon alleged wrongful death, were filed for each of the deceased passengers in the Chevrolet. Recovery of $100,000.00 in each case was sought. A fifth suit for personal injuries by the surviving passenger of the Chevrolet was also instituted and in it, too, the ad damnum was $100,000.00.

In a consolidated trial, two of the death cases were tried first. Negligence on the part of the insureds was disputed, it being asserted that the deaths were caused solely by the excessive speed of the Chevrolet in a patch of fog, which caused it to collide with great force into the towed van, that the subsequent impact of the station wagon into the Chevrolet was slight, and not the proximate cause of the deaths, and that, in any event, the collision of the station wagon with the Chevrolet was the result of an unavoidable accident. The owners of the furniture van were dismissed by the trial court and the case submitted to the jury solely against the insureds and the owner and operator of the wrecker. The jury returned a verdict for them, which was affirmed on appeal. Lawing, Admr., v. Landis, 256 N.C. 677, 124 S.E.2d 877 (1962).

Next to be tried was the suit by the sole surviving passenger in the Chevrolet. It resulted in a jury verdict of $10,000.00 against all defendants, including, in addition to the insureds, the owner and operator of the furniture van, the owner and operator of the wrecker and the estate of the deceased operator of the Chevrolet. On appeal, the judgment entered was affirmed as to the insureds, but reversed as to all other defendants. Punch v. Landis, 258 N.C. 114, 128 S.E.2d 224 (1962). It is significant that the judgment against the administratrix of the deceased driver was reversed because "Evidence is lacking that any injury to the plaintiff resulted from the first impact." 128 S.E.2d, at 228.

Prior to the trial of any case, Utica promptly engaged counsel to defend the insureds. Being apprehensive of their potential exposure to liability and their limited insurance coverage, however, the insureds also employed counsel to represent their personal interests in the cases. Their counsel participated in both the first consolidated trial of the death cases and in the personal injury trial, which resulted in a verdict against them. Utica, directly or through its counsel, had made no effort to settle any case. After the verdict in the personal injury case, which had the effect of reducing the insureds' coverage to $20,000.00, was affirmed on appeal, their counsel undertook to bring about a settlement of the two remaining death cases. The decedents in these cases were 21-year-old and 19-year-old healthy, high school graduates, who were steadily employed and earning $100.00 and $55.00 per week, respectively, one of whom was the driver of the Chevrolet. In such cases, under North Carolina law, recovery, if negligence is proved, is by the decedent's personal representative and is not conditioned upon the decedent's leaving dependents or beneficiaries of his estate. N.C.G.S. § 28-173; Warner v. Western N.C.R.R., 94 N.C. 250 (1886). Indeed, under North Carolina law, evidence of the decedent's dependents or beneficiaries is irrelevant and inadmissible. McCoy v. Atlantic Coast Line R.R., 229 N.C. 57, 47 S.E.2d 532 (1949).

By communication with counsel representing the estates of the decedents, personal counsel for the insured ascertained that both of the remaining death cases could be settled for the aggregate sum of $15,000.00, and probably could be settled for the aggregate sum of $12,500.00. This offer of settlement was reduced to writing and the information communicated to Utica and its counsel. Notwithstanding the insureds' demand that Utica settle the cases, and the further statement that, if Utica did not settle and judgments in excess of $20,000.00 were rendered, the insureds would assert Utica's liability for any excess, Utica replied that it did not deem the insureds liable and it would offer or pay nothing in settlement. Utica further advised the insureds that they might seek and pay for a settlement of any excess that they feared the plaintiff-estates might recover.

When the trial of the two remaining death cases began, the trial judge conducted a conference in chambers after the jury had been selected but before testimony was presented. The matter of settlement was broached and counsel for Utica stated that he did not have authority to pay $50.00 to settle both cases. At that point counsel for the plaintiff-estates withdrew his offer of settlement for $15,000.00 and said, because he was prepared to proceed with the trial, he would not settle for less than the policy limits, i. e., $20,000.00. During the course of the trial the injured passenger in the Chevrolet testified that his then deceased fellow-passengers conversed and looked at one another after the Chevrolet hit the furniture van but before the Chevrolet was hit by the station wagon, thus negating the inference that the initial impact was the cause of the deaths. This was the first time that this testimony was presented and, upon its presentation, the trial judge suggested to counsel for Utica that he communicate with his client about settlement. Counsel for Utica refused to accede to the request.

The trial proceeded and resulted in a verdict against the insureds of $25,000.00 for the death of the 21-year-old decedent and $22,500.00 for the 19-year-old decedent. On appeal, both judgments were affirmed. Scarlett, Administrator v. Abernethy, 261 N.C. 514, 135 S.E.2d 212 (1964). The insureds' suit against Utica ensued, and the motion granted at the close of the...