American Mut. Ins. Co. of Boston v. Bittle

• Decision Date: 02 June 1975
• Docket Number: No. 616,616
• Parties: The AMERICAN MUTUAL INSURANCE COMPANY OF BOSTON v. Caryl E. BITTLE.
• Court: Court of Special Appeals of Maryland

Page 434

26 Md.App. 434

338 A.2d 306

The AMERICAN MUTUAL INSURANCE COMPANY OF BOSTON v. Caryl E. BITTLE.

No. 616.

Court of Special Appeals of Maryland.

June 2, 1975.

Certiorari Denied Sept. 8, 1975.

Francis J. Ford, Rockville, for appellant-cross-appellee.

James E. Davitt, Hyattsville, with whom was David J. Humphreys, Washington D. C., on the brief for cross-appellant-appellee.

Argued before ORTH, C. J., and MENCHINE and MOORE, JJ.

MENCHINE, Judge.

On December 25, 1969 John Edward Bittle was killed and Caryl E. Bittle and James Bittle were injured when their automobile was in collision with the vehicle of Felix A. Frazier. It was snowing, with the road surface lightly covered with snow. The motor vehicle of Felix A. Frazier was being operated in a northerly direction on Route 1; the motor vehicle of John Edward Bittle was being operated in a southerly direction on Route 1. Route 1 at the point of collision is a four-lane highway, providing travel in both directions without a median divider. The vehicle of Frazier crossed the centerline on the highway and came into collision with the Bittle vehicle.

Frazier was insured by American Mutual Insurance Company of Boston (American Mutual) against automobile liability to a policy limit of $50,000.00. In October, 1970 American Mutual offered to the Bittles the full amount of its policy coverage. ¹ The offer was rejected upon the ground that american Mutual had acted in bad faith by refusing earlier to settle pursuant to an ultimatum issued by counsel for the Bittles, demanding that American Mutual pay the full amount of its policy of insurance on or before May 15, 1970, at 5:00 P.M. Suit on behalf of the Bittles had not then been instituted (filed on June 16, 1970.)

In the ensuing trial for the motor tort in the Circuit Court for Charles County, verdicts totaling $207,100.00 had been rendered on February 29, 1972. Subsequent to the entry of judgments, American Mutual paid its policy limits in part payment thereof. Frazier, the insured, at no time had requested or demanded that the insurance company pay the policy limits in his behalf. Indeed, Frazier refused to assign to the Bittles any right personal to him as the insured against American Mutual, even after entry of the judgments against him. ² When Frazier died on June 27, 1972 from natural causes not related to the accident, counsel for the Bittles sought to have his widow obtain Letters of Administration so that suit for the judgment deficit might be instituted by her against American Mutual. She declined.

Thereafter, Caryl E. Bittle applied for and was granted Letters of Administration of the Estate of Felix A. Frazier, deceased, a creditor of Felix A. Frazier, deceased. No assets in the estate were shown. There were no liabilities other than the Bittle judgment claims. Caryl E. Bittle, then acting as administratrix of the estate of Felix A. Frazier, instituted the subject action against American Mutual to recover as damages the difference between the amount of the policy limits and the amount of the judgments with interest from the date of their rendition. From a judgment in that action for $180,215.00 against it in the Circuit Court for Prince George's County, American Mutual has appealed.

American Mutual contends 'the excess liability of an insurer arises out of the relationship between the insured and his insurance company * * * as a shield to protect the policy holder against bad faith abuses of insurance companies,' and that there was no legally sufficient evidence of such bad faith toward its insured as would require submission of the issue to a jury. We agree and shall reverse.

The ultimatum by counsel for the Bittles to American Mutual, demanding settlement 'on or before May 15, 1970 at 5 p. m.,' was the end product of a series of letters from counsel dated March 23, 1970; April 20, 1970; and May 7, 1970.

The letter of March 23, 1970 had stated, inter alia, that: 'the investigating police officer and five eye witnesses to this accident, clearly indicate that Mr. Frazier, your insured, is guilty of gross negligence * * *. There is evidence that your insured had been drinking heavily prior to this accident.' ³ The letter added: 'Our present fee arrangement with the Bittle family has been modified to provide that our fee will be substantially reduced ⁴ if the case can be settled within the terms and conditions herein stated' and demanded 'in full settlement of all claims the amount of $247,000 or the amount of the applicable insurance coverage, if less, upon condition that we be supplied with satisfactory written proof as to the extent of * * * insurance coverage and a financial statement under oath from Mr. Frazier showing the * * * insurance * * * to be the only substantial asset of (Frazier) * * * available to satisfy a judgment against him * * *. The foregoing offer to settle is expressly conditioned upon acceptance no later than 4 p. m. on April 20, 1970, * * *.'

The letter of April 20, 1970, after referring to requested medical examinations of the surviving Bittles by a doctor of American Mutual's selection, stated, inter alia, that: '* * * we feel it reasonable to extend the settlement deadline as referred to and conditioned in our letter of March 23, 1970, up to April 30, 1970, 4 p. m.'

The letter of May 7, 1970, after stating that the requested medical examination of Caryl E. Bittle by Dr. Gordon for the insurer would be refused because 'We believe * * * such an examination is not necessary * * * for the purpose of evaluating settlement possibilities * * *'; then declared that: '* * * we do hereby withdraw the requirement of such a financial statement ⁵ as a condition to a settlement * * * and extend the time for settlement up to and including May 15, 1970, at 5 p. m. If you do not comply with our settlement request by that date and time, all demands will be withdrawn, all offers for settlement will be refused, * * * we will file a lawsuit forthwith * * *. In the event that a judgment exceeds the applicable insurance * * * we will then proceed on an excess claim against you as outlined in our previous letter of March 23, 1970.'

The following facts are undisputed in the record:

1. That it was snowing at the time of the collision and that the roads were lightly covered by snow.

2. That the investigating police officer refused to be interviewed by the representative of the insurer until a date subsequent to that fixed in the ultimatum of counsel for the Bittles.

3. That Frazier, the insured, represented to the insurer:

(a) that he had ingested only a very small quantity of alcohol on the date of the accident;

(b) that he had no conscious recollection of the events immediately preceding and following the collision.

4. That Frazier never requested his insurer to settle the claims against him within the limits of his policy of insurance.

5. That counsel for the Bittles unilaterally had rejected American Mutual's request for a medical examination of Mrs. Bittle.

Under the recited undisputed facts, shown to exist on May 15, 1970, we are compelled to declare as a matter of law that there was no showing of a failure by the insurer of its duty to exercise good faith and due care towards its insured. Cf. State Farm v. White, 248 Md. 324, 236 A.2d 269; Sweeten, Admr. v. National Mutual Insurance Co., 233 Md. 52, 194 A.2d 817; Gaskill v. Preferred Risk Mutual Insurance Company, 251 F.Supp. 66 (D.C.D.Md.1966).

This insured never had sought to have his insurer settle the claims against him. As was said in Ammerman v. Farmers Insurance Exchange, 19 Utah 2d 261, 430 P.2d 576, 578 (1967): 'The privilege of deciding whether to do so should be up to him and not up to some third party to inject his interest into the matter.'

The deadline for settlement fixed by counsel for the Bittles was arbitrary and unreasonable, in that it placed the insurer in a position where it would have been required to accept the conditional settlement offer before it had an opportunity to interview the investigating police officer.

The record shows that the services of a firm of court reporters had been engaged to get the testimony of all of the parties,...