Bennett v. Slater

• Decision Date: 16 November 1972
• Docket Number: No. 1--672A15,1--672A15
• Citation: 63 A.L.R.3d 670,154 Ind.App. 67,289 N.E.2d 144
• Parties: , 63 A.L.R.3d 670 Alice J. BENNETT, Appellant, v. Raymond J. SLATER and Travelers Insurance Co., Appellees.
• Court: Indiana Appellate Court

Page 144

289 N.E.2d 144

154 Ind.App. 67, 63 A.L.R.3d 670

Alice J. BENNETT, Appellant, v. Raymond J. SLATER and Travelers Insurance Co., Appellees.

No. 1--672A15.

Court of Appeals of Indiana, First District.

Nov. 16, 1972.

George N. Craig, Craig & Craig, Brazil, for appellant.

Keith C. Reese and Thomas P. Ledgerwood of Rocap, Rocap, Reese & Young, Indianapolis, Wallace H. Grosback, Brazil, for appellees.

LOWDERMILK, Judge.

This case arises out of an original personal injury accident between Alice Bennett, plaintiff-appellant, and Raymond Slater, defendant-appellee. The cause was tried in the Clay Circuit Court in 1968, whereupon the jury returned a verdict for $20,000 for injuries sustained by the plaintiff-appellant, Bennett, in an automobile accident. The defendant-appellee, Travelers Insurance Company, was the insurer of defendant-appellee, Slater, and upon the jury verdict paid to the Clerk of the court $10,000.00, which was the policy limit.

The complaint in this cause alleges that Travelers Insurance Company offered plaintiff-appellant the sum of $1,500.00 prior to the trial of the original action, which was refused. The complaint also alleges that the plaintiff-appellant, in return, offered to settle for $10,000.00, or the policy limit. Travelers refused to settle for this sum and allowed the suit to go to trial, whereupon the verdict for $20,000.00 was rendered by the jury. The complaint alleges that Travelers was negligent in handling the claim, in that they negligently failed and neglected to make any reasonable effort to compromise and settle the claim and that, based upon their experience, they should have known that there was a risk of recovery beyond the policy limits and that defendant Travelers, did not give as much consideration to the interests of the insured, defendant Slater, as it gave to its own interests.

The complaint further alleges that the defendant, Slater, refused to be made a party plaintiff and likewise the record shows that service was never obtained upon him, as his whereabouts were unknown. Plaintiff joined defendant Slater, who was an unwilling plaintiff, as a party defendant, pursuant to Indiana Trial Rule 20(A)(1). The complaint in this cause was filed in the Circuit Court of Clay County on the 23rd day of September, 1970. The defendant, Travelers Insurance Company, appellee herein, filed its motion to dismiss for failure of plaintiff to state a claim in her complaint, which motion was sustained.

A motion to correct errors was filed and overruled by the court. Plaintiff-appellant hereinafter brought this appeal.

For purposes of determining the validity of the defendant's motion to dismiss, the allegations in plaintiff's complaint in this action shall be taken as true as is agreed between the parties.

Plaintiff-appellant's motion to correct errors contains the following specifications:

1. That the decision of the court is contrary to law.

2. That the decision is not supported by sufficient evidence.

3. That the court erred in sustaining the motion to dismiss without benefit of the insurance contract between the defendant, Raymond Slater, and Travelers Insurance Company.

The single issue in this case is whether an injured party, appellant herein, would have standing to directly sue the insurer for its negligence where the insured refuses himself to sue.

Plaintiff-appellant contends that an insurer can be held liable for a judgment in excess of the policy limits where the insurer has been guilty of negligence or bad faith in its settlement attempts. The case of Anderson v. St. Paul Mercury Indemnity Co. (7th Cir. 1965), 340 F.2d 406, held that a suit in tort could be brought for the negligent performance by the insurer of the duty to use due care in settlement of a claim. The rule is that a liability insurer, having assumed control of the right of settlement of claims against the insured, may become liable in excess of its policy limit if it fails to exercise due care in representing its insured. Anderson, supra, also holds that the insured, or his trustee in bankruptcy, may bring such an action.

In the case at bar, Slater, the insured, has made no assignment of any claim he might have against Travelers for alleged negligence for failure to settle. Further, no trustee relationship is involved in this case, while Anderson, supra, was directly concerned with giving an insured's trustee in bankruptcy the same rights to bring suit as the bankrupt insured. While we agree that a trustee might maintain an action against the insurer and Anderson, supra, so holds, we distinguish that situation from the facts in this case where plaintiff-appellant has no relationship with defendant Slater other than being a judgment creditor. In our opinion, a judgment creditor is not in the same position as a trustee and Anderson, supra, does not hold and cannot be construed in any way to make a judgment creditor analogous to or in the same position as a trustee.

We must distinguish the case at bar from the case where a judgment has been entered within the policy limits and the insurance company refuses to honor its policy. In a case such as the second outlined above, the insured would have a cause of action against the insurance company to enforce its policy. The case of Shingleton v. Bussey (Fla.1969), 223 So.2d 713, states the rule that a third party beneficiary of this insurance contract is also in position to bring suit for payment under the policy. This suit could be brought directly against the insurer. In the case at bar the injured party, or under the hypothetical situation, the third party beneficiary, is not trying to sue the insurer under the policy. Instead, she is trying to make herself a third party beneficiary to a possible tort action available to the insured. It must be remembered that Travelers, appellee herein, did pay their policy limit of $10,000 as soon as the judgment was rendered against their insured, Slater.

Appellant bases her contention on the case of Thompson v. Commercial Union Ins. Co. of New York (1971), 250 So.2d 259, which was decided by the Supreme Court of Florida. The court was faced with a situation quite similar to the one at bar. The Florida Supreme Court restated the policy of Shingleton, supra, that the insured had a cause of action against his insurer for an excess judgment on the basis of fraud or bad faith of the insurer resulting from settlement attempts. The court stated that a third party beneficiary who sustained damages as a result of the acts of one of the parties to a contract made for his (claimant's) benefit also had a right to sue.

The court, in Thompson, in discussing the right of the claimant to sue the insurer, directly adopted the language of Wigginton, Judge of the Court of Appeals, in Canal Insurance Co. of Greenville, S.C. v. Sturgis (1960), 114 So.2d 469, as follows, to-wit:

'There is much force to the contention made by appellee that irrespective of its provisions, every automobile liability insurance policy should be construed as a third party beneficiary contract entitling a judgment creditor to recover in a direct action against the insured for the excess of his judgment over policy limits in those cases where the insurer is guilty of negligence or bad faith in handling the claim. . . .' (Our emphasis.)

The court, in Thompson, supra, then held, based on the above quoted language, as follows:

'. . . a judgment creditor may maintain suit directly against the tort feasor's liability insurer for recovery of the judgment in excess of the policy limits, based upon the alleged fraud or bad faith of the insurer in the conduct or handling of the suit. . . .' (Our emphasis.)

We have discussed the Thompson, supra, decision for the reason it is the only case cited by plaintiff-appellant which, in our opinion, is analogous to the case at bar. The Thompson case is in the minority with a vast number of cases covering the same subject matter being to the contrary.

Travelers shelters itself under an umbrella of decisions supporting its position that the plaintiff has no standing to sue directly.

Defendant-appellee, Travelers, states that Slater has not assigned his chose in action to anyone and is not in bankruptcy. Defendant contends that plaintiff has not been injured by the alleged negligent conduct and has, in fact, seen her position enhanced. Travelers concedes that Slater might maintain an action against it for negligence, but points out that he has not done so.

Travelers cites the case of Steen v. Aetna Casualty and Surety Co. (1965), 157 Colo. 99, 401 P.2d 254, which dealt with a factual situation similar to the case at bar, and the court determined that the insured...