American Fidelity & Cas. Co. v. L. C. Jones Trucking Co.

• Decision Date: 13 November 1957
• Docket Number: No. 37439,37439
• Citation: 1957 OK 287,321 P.2d 685
• Parties: AMERICAN FIDELITY & CASUALTY COMPANY, a Corporation, Plaintiff in Error, v. L. C. JONES TRUCKING COMPANY, a Corporation, Defendant in Error.
• Court: Oklahoma Supreme Court

Page 685

321 P.2d 685

1957 OK 287

AMERICAN FIDELITY & CASUALTY COMPANY, a Corporation Plaintiff in Error, v. L. C. JONES TRUCKING COMPANY, a Corporation, Defendant in Error.

No. 37439.

Supreme Court of Oklahoma.

Nov. 13, 1957.

Rehearing Denied Jan. 21, 1958.

Application for Leave to File Second Petition for Rehearing

Denied Feb. 18, 1958.

Syllabus by the Court

1. Indemnity insurer may be liable for entire amount of a judgment obtained against the insured regardless of any policy limitation, if the insurer's handling of the claim, including the failure to accept proffered settlement, was done in such a manner as to evidence bad faith.

2. Record examined on the question of insurer's bad faith, and, viewed in the light of all the evidence, together with the inferences fairly to be drawn from it, we cannot say that the jury's finding of insurer's bad faith was erroneous; and, therefore, it must stand on appeal. Having exercised bad faith in rejecting the offers of settlement, insurer became liable to insured for amounts paid by it in excess of the policy limitation in the discharge of the judgment rendered against it.

Appeal from the District Court of Oklahoma County; A. P. Van Meter, Judge.

Action by L. C. Jones Trucking Company, a Corporation, against American Fidelity & Casualty Company, a Corporation, for amount of a judgment paid by plaintiff in excess of coverage of policies of liability insurance issued by defendant to plaintiff. Judgment for plaintiff, and defendant appeals. Affirmed.

Welcome D. Pierson, Oklahoma City, for plaintiff in error.

Sam S. Gill, Oklahoma City, for defendant in error.

JOHNSON, Justice.

The facts material in the consideration of this case are that plaintiff, L. C. Jones Trucking Company, a Corporation, carried an insurance policy with the defendant, American Fidelity and Casualty Company, a Corporation. The defendant, as insurer, agreed to indemnify plaintiff against all liability imposed by law for damages on account of injuries to plaintiff's employees, not in excess of $25,000 as to any one employee.

On June the 14th, 1948, an employee, Jess Eppler, sustained bodily injuries for which he recovered damages in the sum of $31,000 against the insured, L. C. Jones Trucking Company, plaintiff herein. The defendant herein controlled and conducted the defense of that suit in the name and on behalf of the plaintiff herein. The judgment became final, Jones v. Eppler, Okl., 266 P.2d 451, 48 A.L.R.2d 333, and was paid $25,000 by the defendant herein and the balance by plaintiff herein.

Plaintiff brought this action in damages against defendant herein for judgment for $7,135.49, which represents the amount over the policy limit which plaintiff paid on the judgment, charging that defendant acted in bad faith in refusing to accept offers of compromise and settlement for an amount less than the policy limit made by Eppler, and that in the conduct of the defense of the suit the defendant acted in bad faith.

The defendant denied bad faith in the defense of the action and asserted faithful performance of all the terms of the policy. Jury verdict was returned in favor of plaintiff in the sum of $7,135.49. Judgment was entered thereon, and defendant brings this appeal.

It is established by the greatly predominant weight of authority in this country that a public-liability insurer may be liable for the entire amount of a judgment obtained against the insured regardless of any policy limitation, if the insurer's handling of the claim, including a failure to accept a proffered settlement, was done in such a manner as to evidence bas faith. While there is considerable divergence of opinion on the rationale of the recovery, almost all authorities, including Oklahoma, see National Mutual Casualty Co. v. Britt, 203 Okl. 175, 200 P.2d 407, 218 P.2d 1039, and cited cases, agree that the insured may recover on ground of negligence, bad faith or fraud in the insurer's conduct with respect to its responsibility.

The reason for the rule is apparent when the respective rights and liabilities of the parties are considered. Although the contract is primarily one of indemnity, it operates at the same time to create an agency relationship in its provision for the insurer's control over the disposition of claims. Both parties have definite and separate interests in the disposition of such claims.

What weight the insurer must accord to the insured's interest is not determinable by any fixed standard. Some courts have held that where the parties' interests are conflicting, the insurer need not consider the insured's. Yet, in at least one jurisdiction, it has been held that in such a situation the insurer's interest must yield. The predominant majority rule is that both parties' interests must be given the same faithful consideration. The fairest method of balancing the interests is for the insurer to treat the claim as if the insurer alone were liable for the entire amount.

For application of the above philosophy, see National Mutual Casualty Co. v. Britt, supra, and cited cases, Boling v. New Amsterdam Casualty Company, 173 Okl. 160, 46 P.2d 916; American Fidelity and Casualty Company v. G. A. Nichols Co., 10 Cir., 173 F.2d 830; and American Fidelity and Casualty Co. v. All American Bus Lines, 10 Cir., 190 F.2d 234. The last two cases are Oklahoma cases.

The nature and extent of the injuries of Jess Eppler, the plaintiff's employee, are summarized in Jones v. Eppler, supra; therefore, we will not again narrate same herein.

Testimony was offered by both parties relative to their respective claims, but it was established and unquestioned that the defendant had control of the defense and conducted the trial procedures in the case, and that before the verdict and judgment the claim could have been compromised and settled for $15,000 (which settlement the plaintiff wanted to accept); that after the verdict of $31,000 in favor of plaintiff's employee, Eppler, the cause could have been settled for $25,000, but that in every instance the defendant refused to accept the proffered settlement and continued in the prosecution of the defense until after appeal to the Supreme Court of Oklahoma and final judgment.

Upon these facts and others not herein narrated and under these circumstances, the jury found that defendant failed to exercise good faith in handling the claim against plaintiff, which facts now inhere in the verdict and judgment based thereon.

This finding and judgment is reasonably sustained by the evidence, and from our examination of the entire record we think that the verdict and judgment is not contrary to the law governing such cases.

In the case of American Fidelity and Cas. Co. v. All American Bus Lines, supra, the court answered well the contentions of the defendant herein. Therein the court (190 F.2d at page 238) said:

'American does not challenge the settled law in Oklahoma that...