Boerger v. American General Insurance Co. of Minn.

• Citation: 100 N.W.2d 133,257 Minn. 72
• Decision Date: 18 December 1959
• Docket Number: No. 37734,37734
• Parties: Vern BOERGER, Respondent, v. AMERICAN GENERAL INSURANCE COMPANY OF MINNESOTA, Appellant.
• Court: Supreme Court of Minnesota (US)

Page 133

100 N.W.2d 133

257 Minn. 72

Vern BOERGER, Respondent, v. AMERICAN GENERAL INSURANCE COMPANY OF MINNESOTA, Appellant.

No. 37734.

Supreme Court of Minnesota.

Dec. 18, 1959.

Syllabus by the Court.

A liability insurer, having assumed control of the right of settlement of claims against the insured under a policy which gives it the exclusive right to defend and settle, may become liable in excess of its undertaking under the policy provisions if it fails to exercise 'good faith' in considering offers to compromise the claim for an amount within the policy limits; there must be bad faith on the part of the insurer with resulting injury to the insured before there can be a cause of action against the insurer for the excess over its undertaking.

Held, under the record here, there is evidence to sustain a finding that the insurer did not act in good faith and upon reasonable ground in rejecting the proposed settlement.

Schermer & Gensler, Irvin E. Schermer, Minneapolis, for appellant.

Ahles & Ahles, Phillips & Donohue, St. Cloud, for respondent.

FRANK T. GALLAGHER, Justice.

Appeal from an order denying defendant's motion for judgment notwithstanding the verdict or for a new trial.

The action was commenced by Vern Boerger against the American General Insurance Company of Minnesota, hereafter referred to as the insurance company, and arose out of the following circumstances. Boerger operates a taxicab service in St. Cloud and is insured by the insurance company. At approximately 5:45 p.m. on October 8, 1954, one of his cabs, carrying Delores Anderson as a passenger, and operated by Oren C. Rolstad, an employee, was proceeding west on First Street North, approaching the intersection with Sixteenth Avenue. The weather was rainy and misty and the visibility was not good. Another car, driven by Harold Gaevert, was proceeding south on Sixteenth Avenue toward the intersection with First Street.

The intersection was uncontrolled. There were buildings on each of the four corners. The building to the right of the taxicab as it approached the intersection was set 22 feet from the curb of Sixteenth Avenue. By virtue of this building, a car coming from the north would not be visible to the cab driver if it was more than 100 feet north of the intersection when the cab was 40 feet from the intersection.

It is undisputed that the impact occurred in the northwest quarter of the intersection when the front end of the Gaevert car came into contact with the right rear of the cab. The passenger, Delores Anderson, was killed as a result of the collision.

The deceased was survived by a son, James, who was then 8 years of age. Genevieve Goman, deceased's mother, as trustee for that purpose, commenced a wrongful death action against Boerger, Rolstad, and Gaevert in which she asked for damages of $17,500. The attorney for the insurance company notified Boerger that the amount was in excess of the policy limit (which was $10,000 for death arising out of his liability) and informed him of his right to retain personal counsel, although the insurance company retained exclusive control of the defense of the suit and the final determination of settlement.

Boerger retained an attorney and it was decided between his attorney and the attorney for the insurance company that Boerger's attorney would attempt to negotiate a settlement. This he attempted to do but to no avail, and he indicated to counsel for the insurance company that they might as well prepare for trial.

The attorney for the insurance company in a report to it on December 9, 1954, advised that 'it is practically impossible to expect a jury to find the assured's driver wholly free of negligence in the accident.' On January 21, 1955, after reviewing the case, the claims manager for the insurance company reported to its attorney as follows:

'After reviewing the file, it appears that there is no question but that both parties will be held in by the court. I feel that the largest amount which the jury might award would be $8500.00. It is my further feeling that a reasonable settlement of this case should run in the neighborhood of $5000.00.'

The trial began on June 15, 1955. After the close of the evidence, counsel for Boerger indicated to the attorney for the insurance company that they should again attempt to negotiate a settlement. They were notified, as is pertinent to this appeal, that plaintiff would be willing to settle for $12,000, $10,000 in cash, and $2,000 by a note from Boerger. The attorney for Boerger demanded that the insurance company accept the settlement even though it constituted the limits of its liability. The attorney for the insurance company contacted the company and, upon his recommendation, was given authority to pay $8,000 toward settlement.

The case was submitted to a jury which absolved Gaevert and returned a verdict of $17,500 against Boerger and his driver. Thereafter Boerger brought this action for $5,729 damages against the insurance company on the grounds that it had, through its counsel, acted in bad faith in not settling the case for the limit of its liability. In not doing so Boerger contended that it subjected him to a liability of $5,729 in excess of the $2,000 he would have paid in settlement at the close of the evidence. The question of bad faith was submitted to the jury which...