American Emp. Ins. Co. v. Crawford, 10080

• Court: Supreme Court of New Mexico
• Citation: 533 P.2d 1203,1975 NMSC 20,87 N.M. 375
• Docket Number: No. 10080,10080
• Parties: AMERICAN EMPLOYERS' INSURANCE COMPANY, a corporation, Petitioner, v. Oscar F. CRAWFORD and John M. Penrose, Respondents.
• Decision Date: 11 April 1975

Page 1203

533 P.2d 1203 87 N.M. 375 AMERICAN EMPLOYERS' INSURANCE COMPANY, a corporation,
Petitioner,
v.
Oscar F. CRAWFORD and John M. Penrose, Respondents. No. 10080. Supreme Court of New Mexico. April 11, 1975.

[87 NM 376]

Page 1204

Girand & Richards, Hobbs, Rodey, Dickason, Sloan, Akin & Robb, Charles B. Larrabee, Rex D. Throckmorton, Albuquerque, for petitioner.

Hinkle, Bondurant, Cox & Eaton, Harold L. Hensley, Jr., Hunker, Fedric & Higginbotham, Roswell, for respondents.

OPINION

OMAN, Justice.

This cause is here on a writ of certiorari directed to the New Mexico Court of Appeals, which affirmed a judgment in favor of plaintiff. Crawford v. American Employers' Insurance Co., 86 N.M. 612, 526 P.2d 206 (Ct.App.1974). We reverse the decision of the Court of Appeals and the judgment of the district court, and remand the case to the district court with directions to set aside its judgment, enter judgment for the defendant and dismiss plaintiffs' complaint with prejudice.

The plaintiff will hereinafter be referred to as Crawford and the defendant as Company. The only question we need consider is whether the trial court correctly denied the Company's motion for a directed verdict in its favor. The Court of Appeals held the trial court did not err in denying this motion. We disagree.

It is the province of the trial court to determine all questions of law, including the legal sufficiency of any asserted claim or defense. If the evidence fails to present or support an issue essential to the legal sufficiency of an asserted claim, the right to jury trial disappears. Loucks v. Albuquerque National Bank, 76 N.M. 735, 740, 418 P.2d 191, 195 (1966); Garcia v. Universal Constructors, Inc., 82 N.M. 70, 475 P.2d 464 (Ct.App.1970). It is fundamental that the evidence adduced must support all issues of fact essential to the maintenance of a legally recognized and enforceable claim. Otherwise, there can be no basis in fact for the claim, and it must be dismissed as a matter of law. This is what the Company sought by its motion for a directed verdict.

[87 NM 377]

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The facts established by the record clearly show that plaintiff was not entitled to recover for two reasons: (1) there was no breach of a duty owed by the Company to Crawford, and (2) the damage suffered by Crawford was not proximately caused by misconduct of the Company.

The essential facts are:

(1) Crawford was engaged in a business venture with a Mr. Penrose.

(2) Penrose and Crawford made arrangements with a Mr. Woolett for the services of Woolett in this venture. Crawford, at all times material to this cause, claimed Woolett was not his employee. He so represented to the Company and even so testified at the trial of the present case.

(3) Crawford had secured from the Company a policy of insurance on an automobile The bodily injury liability under this policy was $100,000 for one person. The other two provisions of this policy with which we are here concerned relate to the Company's duty to defend Crawford against suits for claimed bodily injury and an exclusion from coverage for bodily injury. As to the duty to defend, the policy provides that the Company '* * * shall: (a) defend any suit against the insured alleging such injury * * * and seeking damages on account thereof, even if such suit is groundless, false or fraudulent; but the company may make such investigation, negotiation and settlement of any claim or suit as it deems expedient * * *.'

The exclusion in question provides that there is no coverage under the policy for '* * * bodily injury to * * * any employee of the insured arising out of and in the course of * * * employment by the insured.'

(4) On May 31, 1966, Penrose was driving the automobile and Woolett was a passenger therein. The vehicle was involved in an accident in the State of California.

(5) On May 24, 1967, Woolett filed suit in the Superior Court of California against Crawford, Penrose and others, seeking damages for the serious personal injuries he sustained in the accident. One of the issues presented in the California case was whether Woolett was an employee of Crawford.

(6) Upon being served with suit papers, Crawford promptly tendered the defense of the suit to the Company, which assumed its duty to defend and employed Mr. Friedrich, a well respected California trial attorney, to defend Crawford and Penrose. At this time the Company expressed doubts as to coverage under the policy because of the employee exclusion, even though Crawford, as above stated, at all times insisted Woolett was not his employee.

(7) A possible conflict developed between Crawford and Penrose in connection with the relationship between them. Thereupon, the Company employed Mr. Mann, a highly respected and experienced New Mexico trial attorney, to represent Crawford, who resided in New Mexico. Crawford fully understood that he was being represented by Mr. Mann and Mr. Friedrich.

(8) On July 28, 1967, Crawford executed a 'Reservation of Rights Agreement.' It contained a rather detailed statement of the events leading to its execution; an agreement that the Company's actions in investigating the claimed losses or damages and the circumstances surrounding the accident, in negotiating for settlement, and in furnishing Crawford a complete defense to the suit, should not in any way waive any right the Company 'may now or hereinafter have, under the terms of the policy of insurance'; and that:

'(t)he intent and purpose of this agreement is to permit a full and impartial investigation, explore settlement possibilities and a full and complete defense of all claims brought against INSURED (Crawford) as a result of the hereinabove described automobile accident without in any way incurring any admission of liability on the part of the COMPANY or impairing or waiving any of the rights of any party hereto except [87 NM 378]

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that INSURED waives the right to insist that such handling of the claim by the COMPANY will constitute any admission of liability on the part of the COMPANY to INSURED or anyone claiming through, under or by him and otherwise INSURED does not waive or release any rights he may have under said policy.'

Crawford, at the trial of the case now before us, testified that he did not read the entire Reservation of Rights Agreement. However, he did testify that this instrument was explained to him by Mr. Mann and that he understood it was:

'(a)n ordinary thing, under the circumstances such as these, it was necessary for the insurance company to have this paper signed by me and it would in no way affect their liability under anything that might exist, and also, that it would allow them to proceed to take full defense of the case, and do whatever they considered necessary, without having to consult with me about it.'

The trial court obviously was of the opinion that it was Crawford's duty to read the agreement before he signed it, because it so instructed the jury.

(9) In August of 1969, Woolett's attorney submitted a written offer of settlement for $175,000. This was the only offer of settlement made by Woolett. It was made known to Crawford, but he refused to pay a dime toward any settlement. Subsequently, during the trial in California, Woolett's attorney solicited an offer of settlement from Crawford and Penrose, and Crawford's response was: 'I will not pay that S.B. a dime.'

(10) The Company employed another California attorney, a Mr. Erickson, to represent it on the coverage question. A suit for declaratory judgment was filed on February 12, 1970, by Mr. Erickson on behalf of the Company. The principal issue to be resolved therein was that of whether or not Woolett was an employee of Crawford, which, as above stated, was also one of the issues to be resolved in the tort action filed by Woolett. A temporary restraining order was entered in the declaratory action by which the trial in the Woolett case was stayed, but this restraining order was dissolved on March 22, 1970, and the Woolett case came on for trial on March 31, 1970. A verdict was returned in favor of Woolett against Crawford and Penrose in the amount of $633,000. Judgment on the verdict was entered on April 20, 1970.

(11) The present suit was filed by Crawford and Penrose in the district court of Chaves County, New Mexico, on September 18, 1970. They sought judgment for $100,000 by way of claimed liability of the Company under the policy of insurance, for the amount of the California judgment for claimed bad faith and negligence in handling the...