Anderson v. St. Paul Mercury Indemnity Co.

• Decision Date: 26 February 1965
• Docket Number: No. 14596.,14596.
• Citation: 340 F.2d 406
• Parties: Joseph D. ANDERSON, Trustee in Bankruptcy for James T. Goldsberry, Plaintiff-Appellee, v. ST. PAUL MERCURY INDEMNITY CO., St. Paul Fire & Marine Insurance Company, and St. Paul Mercury Insurance Company, Defendants, Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

340 F.2d 406 (1965)

Joseph D. ANDERSON, Trustee in Bankruptcy for James T. Goldsberry, Plaintiff-Appellee, v. ST. PAUL MERCURY INDEMNITY CO., St. Paul Fire & Marine Insurance Company, and St. Paul Mercury Insurance Company, Defendants, Appellants.

No. 14596.

United States Court of Appeals Seventh Circuit.

January 19, 1965.

Rehearing Denied February 26, 1965.

Roland Obenchain, Jr., and Jones, Obenchain, Johnson, Ford & Pankow, South Bend, Ind., for appellants.

Marshall F. Kizer, Richard F. Joyce, Plymouth, Ind., for appellee.

Before HASTINGS, Chief Judge, DUFFY, Circuit Judge, and CAMPBELL, District Judge.

CAMPBELL, District Judge.

This is an appeal from a judgment, entered on a jury verdict, by the District Court for the Northern District of Indiana awarding plaintiff-appellee, a Trustee in Bankruptcy, damages against the defendants-appellants, casualty insurance companies, who were the liability insurers on the automobile of a bankrupt.

Briefly the facts are that one Leon Allison instituted suit against James T. Goldsberry in the Superior Court of St. Joseph County, Indiana, for personal injuries sustained in an intersection collision of his automobile with that of Goldsberry. Goldsberry was insured and defendant by the defendants, St. Paul Mercury Indemnity Co., St. Paul Fire & Marine Insurance Co., and St. Paul Mercury Insurance Company, hereinafter jointly referred to as the Insurance Company. The jury returned a verdict upon which judgment was entered against Goldsberry and in favor of Allision for $75,000. No appeal was taken from this judgment. The Insurance Company paid its policy limit of $15,000 to Allison. Goldsberry being unable to pay the $60,000 policy limit excess filed a petition in bankruptcy.

The plaintiff-appellee Trustee in Bankruptcy, hereinafter referred to as the Trustee, instituted the instant action against the Insurance Company. The complaint, in three counts, in summary alleged that Goldsberry's $60,000 debt was caused by his insurer, the Insurance Company's, 1. negligence 2. bad faith and 3. willfulness and gross negligence in failing to settle Allison's claim within his policy limits. As to counts 2 and 3 (bad faith and wilfulness) the jury found for the defendant Insurance Company. As to Count 1, alleging negligent handling of the claim, the jury found for the Trustee, whereupon the judgment now appealed from was entered upon the verdict for the $60,000 policy excess. (Properly computed with interest the exact judgment was for $78,260.)

The Insurance Company, not as the main thrust but rather in support of this appeal, alleges error in sundry evidentiary rulings and instructions to the jury. A review of the rulings and instructions complained of show these assignments of error to be of no merit.

Also without foundation in the record is the contention that the evidence introduced at the trial was insufficient to prove the negligence allegation to justify the verdict and judgment. Briefly, the evidence, viewed as it must be in a light most favorable to the prevailing Trustee, establishes that although the Allison-Goldsberry case was an intersection collision there were strong reasons to attribute negligence to Goldsberry's driving and equally weak indications of contributory negligence by Allison. The language of Judge Major in Royal Transit, Inc. v. Central Surety and Insurance Corporation, 7 Cir., 168 F.2d 345, 347 seems particularly appropriate: — "Any belief entertained by the defendant that it could successfully defend the cause of action there asserted must have sprung from an optimism unrelated to the realities of the situation". In the esoteric words of the Personal Injury Bar, this was "for purposes of settlement negotiations a liability case". The seriousness of Allison's injuries were beyond question and there were both specific and general offers and many indications that Allison, prior to trial, would have settled for a sum less than the policy limits. The policy limits, unobtainable in Indiana by discovery, were never disclosed to Allison's attorney, however, during negotiations prior to trial, Allison's attorney did at one point express a willingness to settle the claim for $9,000 if the policy limits were $10,000. Intra-company correspondence revealed that experienced personnel in the employment of the Insurance Company with commendable clairvoyance appreciated the potential of the claim and the modicum of success that could possibly be augured from a trial of the issues. In sum then, the liability issue was weak, the injuries were substantial and the demands made in the face of such extreme exposure were reasonable. These facts were sufficient to justify a jury in finding as this jury did that the liability insurer in handling the claim was negligently unreasonable in obdurately failing to negotiate a settlement and that its conduct created an undue risk to its insured.

Accepting, as we must, the jury's determination that the Insurance Company was...