American Casualty Co. of Reading, Pa. v. Howard

• Decision Date: 17 February 1951
• Docket Number: No. 6178.,6178.
• Citation: 187 F.2d 322
• Parties: AMERICAN CASUALTY CO. OF READING, PA. v. HOWARD et al.
• Court: U.S. Court of Appeals — Fourth Circuit

187 F.2d 322 (1951)

AMERICAN CASUALTY CO. OF READING, PA. v. HOWARD et al.

No. 6178.

United States Court of Appeals Fourth Circuit.

Argued January 4, 1951.

Decided February 17, 1951.

C. F. Haynsworth, Jr., and J. D. Poag, Greenville, S.C. (James H. Price, Greenville, S.C., on brief) for appellant.

Wesley M. Walker and Thomas A. Wofford, Greenville, S.C., for appellees.

Before PARKER, Chief Judge, and SOPER and DOBIE, Circuit Judges.

DOBIE, Circuit Judge.

The American Casualty Company of Reading, Pennsylvania, (hereinafter called American) sought a declaratory judgment, in the United States District Court for the Western District of South Carolina, under an automobile liability insurance policy issued to Elaine Howard, one of the defendants herein. The District Judge granted the motion of defendants to dismiss. D.C., 80 F.Supp. 983. We reversed this judgment and remanded the case to the District Court, with directions to hear the case and to grant such relief as might be found to be proper. 173 F.2d 924. The District Court, sitting without a jury, then heard the case and filed its opinion, adverse to the contentions of American, which has again appealed to us.

American had issued to Elaine H. Howard its policy of insurance by which American agreed to indemnify the assured and anyone else driving the designated automobile with her consent, against legal liability arising out of any accident in which the automobile was involved to the extent of $5,000.00 for personal injury to, or the death of one person and $5,000.00 for property damage. The indemnification agreement, insofar as it relates to bodily injuries liabilities is designated "Coverage A" and insofar as it relates to property damage liabilities is designated as "Coverage B".

The insurance policy, in the standard form, provided that American shall have "the right to make such investigation, negotiation and settlement of any claim or suit as may be deemed expedient by the company" and under sub-head entitled "Defense, Settlement, Supplementary Payments" the policy provided:

"As respects such insurance as is afforded by the other terms of this policy under coverages A and B the company shall

"(a) defend in his name and behalf any suit against the insured alleging such injury or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent; but the company shall have the right to make such investigation, negotiation and settlement of any claim or suit as may be deemed expedient by the company; * * *."

While the policy of insurance was in force, Elias Howard, with the permission of Elaine H. Howard, was driving the insured vehicle, and he was involved in an accident resulting in fatal injuries to George Roberts.

On May 1, 1947, Elias Howard parked the insured car parallel to and approximately six inches from the curb, headed in a northerly direction, on the righthand side of what is known as the New Buncombe Road, outside the city limits of Greenville, South Carolina, but in a zone restricted by the Highway Department to a speed limit of twenty-five miles per hour. The road at that point consists of an eighteen-foot paved center section, with eleven-foot, eight-inch asphalt shoulders on each side, making a total width from curb to curb of forty-one feet, four inches. Elias Howard reentered his car around Noon and undertook to make a 180-degree turn in order to proceed in a southerly direction back to Greenville. Howard had almost completed his U-turn when his car was struck on its right-hand side by the motorcycle driven by George Roberts, who died shortly after Midnight from injuries received in the collision. The testimony was conflicting as to whether the speed of the motorcycle was excessive and as to whether Howard exercised due care in deciding upon, and in executing, the U-turn. There was no law or traffic regulation which forbade such a turn.

There was evidence that Howard gave a hand signal before starting his U-turn and that he made this turn slowly and carefully, which should have enabled Roberts to observe Howard's car when the motorcycle was some distance from the car. It is clear that this U-turn had almost been completed before the collision, since the motorcycle struck the right-hand side of the car, after the car had almost reached the opposite side of the street. This, coupled with evidence that the motorcycle was proceeding at a very high rate of speed, shows more clearly why American thought it had a good case and believed that $4,000.00 in settlement was all it should offer under its right "to make such settlement * * * as may be deemed expedient by the Company."

The Coroner of Greenville County investigated the accident and ordered an inquest, which was held several days later. Six witnesses testified at the inquest, and the Coroner's jury returned the following verdict: "George Roberts came to his death by careless driving on the part of E. Howard." The Coroner bound Elias Howard over to the Court of General Sessions for Greenville County on a charge of reckless homicide. When the General Sessions Court convened, the Solicitor sent to its grand jury a bill of indictment charging the driver of the automobile with reckless homicide. The grand jury returned a "no bill".

American promptly undertook an investigation of the circumstances surrounding the accident and the investigator consulted with Haynsworth & Haynsworth, a thoroughly reliable, experienced and competent firm of attorneys, who made some suggestions as to a further investigation. A civil action was brought by the Administrator of Roberts, under the South Carolina Lord Campbell's Act, Code 1942, §§ 411, 412, against Elias Howard seeking $50,000.00 damages on account of the alleged wrongful death of Roberts, for the benefit of deceased's surviving relatives, his father, mother, three brothers and a sister. The case was then placed by American in the hands of Haynsworth & Haynsworth, who were thereafter solely responsible for its conduct.

Very shortly thereafter, Haynsworth and Haynsworth wrote to Elias Howard that since the damages sought in this action were $50,000. and since the policy limit was only $5,000., Howard, if he so desired, could retain counsel of his own. Howard then employed as his personal attorneys the law firm of Leatherwood and Walker, who cooperated with Haynsworth & Haynsworth in the defense of this suit.

At several conferences between counsel on both sides, attempts were made to effect an amicable settlement. Offers of $2,500., then $3,000. and later $3,500. and $4,000. were declined by Mr. Hicks, counsel for Roberts' Administrator. On January 22, 1948, a little more than three months after the institution of the suit, Mr. Hicks offered to settle for $5,000., the offer to remain open only until Noon on February 3. It seems that this offer included all liability resting on Elias Howard resulting from the accident. Messrs. Haynsworth and Haynsworth verbally declined this offer of $5,000. for a settlement. On February 9, 1948, Messrs. Leatherwood and Walker, counsel for Elias Howard, by Mr. D. B. Leatherwood, addressed a letter to Haynsworth & Haynsworth, in which he stated that he had been advised by Mr. Hicks that Haynsworth & Haynsworth had declined the offer of January 22, but that Mr. Hicks had agreed with Mr. Leatherwood to extend the time for acceptance until February 20. Mr. Leatherwood then stated that it was possible that a verdict might be rendered against the defendant in the then pending action in excess of $5,000. He thereupon, on behalf of his client, requested Haynsworth & Haynsworth to settle the case upon the basis offered by Mr. Hicks, and advised that otherwise Elias Howard would expect to hold American responsible for whatever verdict might be rendered whether or not in excess of the policy limit. On February 27, Mr. Leatherwood again wrote to Haynsworth & Haynsworth, advising that he had obtained an extension of Mr. Hicks' offer to March 10, again demanded that it be accepted, and advised that if the offer was not accepted he "would consider that the full responsibility for the final outcome of said action was assumed by your Company."

On March 3, 1948, Haynsworth & Haynsworth replied to Mr. Leatherwood's letters, advising him they had earlier declined to accept Mr. Hicks' offer to settle for $5,000., that they felt it was "out of line in view of the very questionable liability in the case," and that they had gone over the matter carefully and felt they were acting in the interests of all parties concerned in declining the Hicks offer.

This action, under the South Carolina Lord Campbell's Act, was duly tried and resulted in a verdict in favor of the plaintiff in the sum of $7,000. No appeal was taken. On this judgment, American paid $5,000. (and costs). The remainder of the judgment, $2,000. was paid by Elias Howard.

On or about August 19, 1948, the Administrator of Roberts instituted a civil action against Elias Howard under the South Carolina Survival Act, Code 1942, § 419, for conscious pain and suffering endured by Roberts before his death. Damages in the sum of $25,000. were sought. Later the complaint was amended to include a claim for property damage.

On September 1, 1948, American commenced the instant civil action for a declaratory judgment, seeking thereby relief from any other or further liability or obligation under its policy contract on the ground that it had agreed to pay $5,000.00 of the verdict for $7,000. in the death case and whatever amount might be determined as property damage. (As has been indicated, American did pay $5,000. and $48.00 costs.) Then on September 24, 1948, Howard brought an action in the State Court against American to recover $2,000., the amount of the judgment in the death case above $5,000., which he had been forced to pay in satisfaction of an execution, and for $1,000. claimed expenses. In the last mentioned action Howard...