Amsden v. Grinnell Mut. Reinsurance Co.

• Decision Date: 20 December 1972
• Docket Number: No. 55074,55074
• Citation: 203 N.W.2d 252
• Parties: Ray AMSDEN, d/b/a Ray's Diesel Service; a/k/a E. R. Amsden, d/b/a Ray's Diesel Service, Appellant, v. GRINNELL MUTUAL REINSURANCE CO. et al., Appellees.
• Court: Iowa Supreme Court

Page 252

203 N.W.2d 252

Ray AMSDEN, d/b/a Ray's Diesel Service; a/k/a E. R. Amsden, d/b/a Ray's Diesel Service, Appellant, v. GRINNELL MUTUAL REINSURANCE CO. et al., Appellees.

No. 55074.

Supreme Court of Iowa.

Dec. 20, 1972.

Willis & Willis, Lake City, for appellant.

Ruan, Franck and Mundt, Denison, for Grinnell Mut. Reinsurance Co. and Hawkeye-Security Ins. Co., appellees.

Jones, Hoffman & Davison, Des Moines, for National Fire Ins. Co. of Hartford, appellee.

Heard before MOORE, C.J., and LeGRAND, UHLENHOPP, HARRIS and McCORMICK, JJ.

HARRIS, Justice.

Plaintiff insured has appealed a verdict directed in favor of his fire insurance companies. We affirm.

The three defendant insurance companies issued fire insurance policies upon the assets and business earnings of plaintiff's farm implement business. These policies were in force October 15, 1969 when fire destroyed plaintiff's business building and contents. The state fire marshall concluded the fire was the work of an arsonist and undertook an investigation. Plaintiff himself was among those investigated. Plaintiff promptly filed his loss claims but, because of the nature of the property insured and extent of loss, was unable to state the amount of his loss with any degree of accuracy. He promptly brought action on the policy. The filing is urged as fixing the obligations under the policy. However, plaintiff amended the inventory of his loss as late as April 1970.

The fire marshall's investigation cleared plaintiff of any responsibility for the fire in February 1970. The loss was settled and paid July 31, 1970. This was within 60 days after plaintiff and defendants had arrived at an amount agreed as the loss.

This separate action was brought on a theory of outrageous conduct. The plaintiff asserted defendants were guilty of bad faith in failing and refusing to pay the fire loss claim when their duty to do so was clear. This failure was claimed to be coupled with intentional harassment amounting to bad faith. The twice amended petition is perhaps no model of clarity. The action sounds both in contract and tort and it is understandable the pleadings would wander from one field to the other. The petition does sufficiently, if not succinctly, state a cause of action for the intentional infliction of severe emotional distress. We must affirm because plaintiff has wholly failed to prove it.

I. Recovery for the tort of intentional infliction of mental distress is a right of comparatively recent origin. Prosser, Law of Torts, § 11, page 41 (3rd ed. 1964).

'So far as it is possible to generalize from the cases, the rule which seems to have emerged is that there is liability for conduct exceeding all bounds usually tolerated by decent society, of a nature which is especially calculated to cause, and does cause, mental distress of a very serious kind. * * *.' Id. at 48.

Prosser then describes various acts which have been held to qualify under this generalization.

'* * * Similar outrageous bullying tactics on the part of insurance adjusters seeking to force a settlement, * * * have been subjected to the same liability.' Id. at 50.

On the same theory later cases from other states have continued to allow recovery against insurance companies for injuries resulting from outrageous bullying tactics in settling claims. Eckenrode v. Life of America Ins. Co., 470 F.2d 1 (7th Cir. 1972); Fletcher v. Western National Life Ins. Co., 10 Cal.App.3d 376, 89 Cal.Rptr. 78. These authorities explain the basis and limits of liability in such situations and serve as examples of the sort of conduct considerable to be outrageous.

In Fletcher the insured under a disability policy was a manual laborer who earned $289 per week by working 70 to 80 hours. He was the father of eight children, ranging in ages from 8 to 19 years, seven of whom were in school. He had a fourth grade education. He became disabled and clearly entitled under the policy to monthly payments of $150 for a period of 30 years. Another provision in the policy would have paid $150 monthly for only two years in case of sickness. Fully aware of the company's clear liability under the 30 year disability provision, the adjuster undertook to exploit the insured's desperate economic condition. The adjuster's aim was to frighten the insured into accepting less than was due him. This wasl to be accomplished by fabricating a dispute. Although under the policy no dispute existed the purpose was to bully the insured into settling it by agreeing to pay under the two year sickness provision rather than under the 30 year disability provision. The court said:

'We hold, therefore, that the defendants' threatened and actual bad faith refusals to make payments under the policy, maliciously employed by defendants in concert with false and threatening communications directed to plaintiff for the purpose of causing him to surrender his policy or disadvantageously settle a nonexistent dispute is essentially tortious in nature and is conduct that may legally be the basis for an action for damages for intentional infliction of emotional distress. We further hold that, independent of the tort of intentional infliction of emotional distress, such conduct on the part of a disability insurer constitutes a tortious interference with a protected property interest of its insured for which damages may be recovered to compensate for all detriment proximately resulting therefrom, including economic loss as well as emotional distress resulting from the conduct or from the economic losses caused by the conduct, and, in a proper case, pounitive damages.' 10 Cal.App.3d at 401, 89 Cal.Rptr. at 93.

The California court relied on Professor Prosser and on earlier California cases. It noted a similarity between the question presented and the recognized obligations of a liability insurance carrier in settling claims brought against their insured by a third person. California had previously held the liability company had a duty in such situations to act reasonably and in good faith. Crisci v. Security Ins. Co., 66 Cal.2d 425, 58 Cal.Rptr. 13, 426 P.2d 173. The Crisci holding was similar to our holding in Henke v. Iowa Home Mutual Cas. Co., 250 Iowa 1123, 97 N.W.2d 168. We agree with the following observations of the California court in the Fletcher opinion:

'* * *

'The violation of that duty sounds in tort notwithstanding that it may also constitute a breach of contract. (Authorities) We think that, similarly, the implied-in-law duty of good faith and fair dealing imposes upon a(n) * * * insurer a duty not to threaten to withhold or actually withhold payments, maliciously and without probable cause, for the purpose of injuring its insured by depriving him of the benefits of the policy. We think that, as in Crisci the violation of that duty sounds in tort notwithstanding that it also constitutes a breach of contract. (Authorities) (Emphasis in the original)

'* * *

'* * * There is no sound reason why plaintiff's legally recognized interests should receive less protection from interference by the insurer itself, which has a special duty to plaintiff of good faith and fair dealing, nor is there any reason why plaintiff's insurer should be held to a lower standard of conduct than a stranger.

'* * *

'* * * The very risks insured against presuppose that if and when a claim is made, the insured will be disabled and in strait financial circumstances and, therefore, particularly vulnerable to oppressive tactics on the part of an economically powerful entity.' 10...