Bennett v. Conrady

• Decision Date: 12 January 1957
• Docket Number: No. 40167,40167
• Citation: 180 Kan. 485,305 P.2d 823
• Parties: Hazel BENNETT, Appellant, v. Paul P. CONRADY and the United National Indemnity Company, Appellees. Muriel CHILDS, Appellant, v. Paul P. CONRADY and the United National Indemnity Company, Appellees. Edith REIDA, Appellant, v. Paul P. CONRADY and the United National Indemnity Company, Appellees.
• Court: Kansas Supreme Court

Page 823

305 P.2d 823

180 Kan. 485

Hazel BENNETT, Appellant, v.Paul P. CONRADY and the United National Indemnity Company,

Appellees.

Muriel CHILDS, Appellant, v.Paul P. CONRADY and the United National Indemnity Company,

Appellees.

Edith REIDA, Appellant, v.Paul P. CONRADY and the United National Indemnity Company, Appellees.

No. 40167.

Supreme Court of Kansas.

Jan. 12, 1957.

Syllabus by the Court

1.The record is examined in a consolidated action wherein judgments by three out of five plaintiffs for personal injuries arising out of a two car collision had been obtained against a common defendant.Prior to trial or judgments actions of the other two plaintiffs were compromised and settled by defendant's insurance carrier for less than the policy limits of $5,000 per person, or $10,000 per accident.The insurance carrier requested an order of the trial court to determine how the remaining balance of its policy limits should be applied to the three judgments.As is more fully set out in the opinion, it is held, the trial court did not err in ordering the balance of $2,000 with interest thereon at six per cent paid into court to be prorated among the three judgments.

2.The terms of an insurance policy will be construed in their plain, ordinary and usual sense.

3.The insurer of a liability or an indemnity insurance policy shall be liable for the full amount of its insured's resulting loss, even if that amount exceeds the limits of the policy, for negligence or bad faith in defending or settling actions against such insured.

4.In the settlement of claims an insurance company shall be held to that degree of care and diligence which a man of ordinary care and prudence shall exercise in the management of his own business.

5.Because of possible conflict of interest between an insurance company and its insured in the defense or settlement of claims against the insured there is a mutual fiduciary relationship whereby each owes the other the duty to exercise reasonable care in conducting such defense or settlement.

Paul R. Wunsch, Kingman, argued the cause, and Dalton T. Holland, Harper, and Charles H. Stewart, Kingman, were with him on the briefs for appellants.

J. B. Patterson, Wichita, argued the cause, and A. W. Hershberger, Richard Jones, Wm. P. Thompson, H. E. Jones, Jerome E. Jones, and William E. Palmer, Wichita, were with him on the briefs for the appellees.

ROBB, Justice.

This is an appeal by three plaintiffs in a consolidated case from an order of the trial court directing an insurance carrier of the common defendant to pay a certain sum together with interest thereon into court to be distributed pro rata in satisfaction of judgments obtained by the plaintiffs.The parties will continue to be denominated as stated above.

Our attention is first directed by the insurance carrier to its contention that plaintiffs are not entitled to the relief they are seeking.While this was not pursued to any great length we do not want to ignore it and will give it brief attention.The insurance carrier voluntarily entered its appearance, as will be set out more fully in subsequent portions hereof, and the trial court made a final order which in substance disposed of any further claims of plaintiffs just the same as though there had been an execution and garnishment issued on the judgment against the defendant.

Originally there were five claims for damages for personal injuries arising out of a collision on October 20, 1953, between the station wagon in which the claimants were passengers and a truck driven by the defendant.Before any actions were filed, the insurance carrier in a letter dated September 23, 1954, notified all parties of its undisputed $10,000 maximum liability under defendant's policy and although it did not admit any liability on the part of defendant, it offered to pay $10,000 in settlement of all claims for personal injuries arising from the collision.The letter then further stated,

'In order to do this, of course, it will be necessary that all of the various claimants agree concerning the division of the $10,000 among them.'

The insurance carrier at the same time also notified defendant of this offer to the claimants.

As soon thereafter as possible the five claimants filed separate actions against Paul P. Conrady in the following sequence: Eldred E. Fisher, Hazel Bennett, Muriel Childs, Edith Reida, and Kenneth Ray Graves.The Fisher and Graves' cases were consolidated in a pre-trial proceeding but the other three plaintiffs refused to consolidate at that time.The attorneys for Fisher and Graves submitted offers to settle their cases for $4,000 each.The insurance carrier relayed this offer to the defendant and his attorney, direction to settle on that basis was immediately given, the insurance carrier paid $4,000 in each case, full releases were obtained and journal entries of dismissal with prejudice were filed therein.

Later the three cases here under consideration were consolidated and final judgment was obtained in the Bennett case for $6,953.24, in the Childs' case for $8,529.40, and in the Reida case for $4,142.64.No appeals were taken from those judgments.

Subsequently the insurance carrier entered an appearance and requested direction by the trial court as to the manner in which payment of the $2,000 balance of its policy limits should be made on the judgments for the reason that the same exceeded such policy limits.

Plaintiffs filed an answer thereto wherein they denied that the balance in the insurance carrier's hands was $2,000 and stated that the three plaintiffs were entitled to a division of the policy limits of $10,000; that any payments made were made without legal or contractual authority, they were not binding on these plaintiffs, and the insurance carrier was not entitled to any credit therefor because (1) such settlements constituted equitable preference and were contrary to public policy (2) there was no authorization under the policy to so settle and if there existed such authority the terms were not complied with (3) such settlements were not made in good faith (4) there was no legal authority to settle less than all of the multiple claims or to take into account against plaintiffs' judgments compromised claims not reduced to judgment because judgments of plaintiffs have priority over other claims not reduced to judgment and (5) such settlements were made to defeat these plaintiffs, they were excessive and were out of proportion in view of the policy limits.

The answer further alleged that in view of the original offer by the insurance carrier before any actions were filed, plaintiffs should have been advised of such settlements as otherwise the insurance carrier would have no right to have credit against its original policy limits; if plaintiffs' judgments did not have priority then there should be an apportionment of the $10,000 among all those involved in the collision as their respective claims or judgments were in ratio to the total amount of claims and judgments against the defendant; and finally, the interest to be ordered paid should be at the rate of six per cent on $10,000 rather than on $2,000.

A hearing was held wherein oral testimony and exhibits were presented but only those elements needed will be narrated here.The $2,000 together with an additional amount to satisfy interest thereon and the court costs in the cases now being considered were paid by the insurance carrier in compliance with the trial court's order so to do.Plaintiffs appealed and raise a number of specifications of error but the concrete question involved is whether the trial court erred in giving credit to the insurance carrier for the $8,000 paid out in settlement of the claims of Fisher and Graves or, stated in another way, they contend it was error to conclude that only $2,000 should be distributed toward satisfaction of plaintiffs' judgments.

The policy was a standard type providing for bodily injury liability limits of $5,000 for each person and $10,000 for each accident with the further standard provision that the company shall:

'* * * (a) defend any suit against the insured alleging such injury * * * and seeking...