Bostrom v. Seguros Tepeyac, SA

• Decision Date: 16 October 1963
• Docket Number: Civ. A. No. 4596.
• Citation: 225 F. Supp. 222
• Parties: Maynard BOSTROM v. SEGUROS TEPEYAC, S.A., Compania Mexicana de Seguros Generales.
• Court: U.S. District Court — Northern District of Texas

225 F. Supp. 222

Maynard BOSTROM v. SEGUROS TEPEYAC, S.A., Compania Mexicana de Seguros Generales.

Civ. A. No. 4596.

United States District Court N. D. Texas, Fort Worth Division.

October 16, 1963.

COPYRIGHT MATERIAL OMITTED

A. H. Manus, Jr., Freeport, Ill., for plaintiff.

Wm. Brown, Fort Worth, Tex., for defendant.

BREWSTER, District Judge.

G. A. Stowers Furniture Co. v. American Indemnity Co., Tex.Com.App.1929, 15 S.W.2d 544, opinion approved by Texas Supreme Court, on subsequent appeal, American Indemnity Co. v. G. A. Stowers Furniture Co., Tex.Civ.App. 1931, 39 S.W.2d 956, writ refused, held that an automobile indemnity insurer was liable in a tort action for the amount of a judgment against its insured above the limits of its public liability policy, where it had negligently rejected a proposition to settle the claim involved for a sum within such limits after it had undertaken the defense of the claim. It is a landmark case in this State, and the rule announced in it has come to be generally known as the "Stowers doctrine", although that designation now includes the entire theory of this type of action as made by the Stowers case and the later Texas cases on the question. This present diversity action by Bostrom against Seguros Tepeyac, S.A., Compania Mexicana de Seguros Generales raises the Texas-size questions of whether the facts in this case present negligence for misfeasance or nonfeasance, and, if the latter, whether the Stowers doctrine has been or should be enlarged so as to include that character of negligence. A holding favorable to the plaintiff on the issues involved would give him the right to collect from the defendant a $270,000.00 judgment he has obtained against the insured and his driver, when the automobile public liability policy issued by the defendant provided a limit of $5,000.00 for injuries to any one person.

The following quotation of the theory relied upon by the plaintiff is taken from the pre-trial order approved by the respective attorneys for the parties hereto:

"Plaintiff claims that the defendant, in spite of the fact that it had notice of the collision, causing plaintiff's injuries, and notice of the fact that plaintiff had filed suit against the said insured and his authorized driver, and in spite of the fact that it had notice that its insured had called upon this defendant to defend the suit, nevertheless failed to perform its duty to investigate the collision, failed to perform its duty to defend the suit, failed in its duty to attempt to negotiate a settlement, and that all of said acts were done negligently, whereupon judgment was rendered against the insured and the driver in the amount of TWO HUNDRED AND SEVENTY THOUSAND DOLLARS ($270,000.00), together with costs of suit, for which defendant is liable under the authority of the doctrine familiarly known as Stowers Doctrine; that defendant had a duty to do all of the things enumerated under the pertinent laws."

"This plaintiff is a third party beneficiary of defendant's insurance policy and is entitled to bring suit based on negligence in his own name against this defendant."

The defendant's position is, first, that the plaintiff could not maintain suit against the defendant on the policy to which he was not an actual party; second, that under the terms of the policy it owed no duty to investigate, settle or defend the plaintiff's claim; third, that in any event, it could not be liable in tort because it never entered upon the performance of any duties under the policy in connection with the plaintiff's claim; and fourth, Jernigan's failure to notify it of the proposition for settlement was contributory negligence and a proximate cause of the $270,000.00 judgment.

On February 12, 1962, the plaintiff recovered a judgment for $270,000.00 in a trial in the Dallas Division of this District, before Judge Hughes without a jury, against James L. Jernigan and Alan J. Sullivan, representing damages for personal injuries sustained by him while riding as a passenger in Jernigan's automobile at a time when it was being driven by Sullivan, and when it was covered by a $5,000.00 and $10,000.00 public liability policy issued to Jernigan by the defendant insurance company.

While the plaintiff recovered his judgment in Texas, the collision causing his injuries occurred in Mexico. The entire transaction involving the purchase and issuance of the insurance policy took place in Nuevo Laredo. The coverage extended only to accidents happening in Mexico within the time limit provided; but there was no territorial limit on the place of performance of the defendant's obligations under the policy. The defendant company was chartered by and had its principal place of business in Mexico; but it had a permit to do business in Texas, and had made a deposit of $25,000.00 with the Treasurer of that State under the provisions of the Insurance Code of Texas to secure the payment of claims against it.

In the latter part of November, 1958, the three young men, Jernigan, Sullivan and Bostrom, travelled together in Jernigan's car on a joint pleasure trip to Mexico. They drove directly from Dallas County, where they then resided, to Nuevo Laredo, Mexico, directly across the border from Laredo, Texas. During their short stop in Nuevo Laredo, they proceeded to make the necessary arrangements for their trip into the interior of Mexico. As a part of those arrangements, Jernigan purchased from the defendant company the following three day "Special Automobile Policy for Tourists":

On November 28, 1958, the day following the arrival of the plaintiff and his friends in Mexico, the Jernigan car collided with a common carrier Mexican bus on a public highway in that Republic some distance south of Nuevo Laredo. Sullivan was driving with Jernigan's permission, and the plaintiff was asleep in the back seat of the Jernigan car at the time of the collision. The plaintiff sustained about as serious injuries as a person could endure and live, and they have resulted in his being a permanent quadriplegic.

The defendant received notice of the collision on the date that it occurred. It promptly made an investigation of the accident; and, within eight days thereafter, it settled with Jernigan and the Mexican bus company respectively for damages to his automobile and to its bus. The defendant does not claim that it was without knowledge of the fact that Bostrom was seriously injured in the collision. The least diligence in the investigation would have disclosed that fact from the beginning.

Due to the critical nature of his injuries, Bostrom did not communicate with the defendant company for several months. Letters were written to the defendant for him on September 20, October 10, and December 1, 1959, in connection with his claim. Although requests were made in the letters for a copy of the policy, they were ignored. It was not until July 11, 1960 that the defendant mailed a copy of the policy to the plaintiff or his attorneys. That copy is the same as the policy sued upon in this case. Jernigan testified that it was a copy of all that was delivered to him when he bought the policy. There is no evidence to substantiate the defendant's contention made in some of its letters and on the trial of this case that the policy it delivered to Jernigan included an additional sheet containing specifications of risks excluding liability for injuries to third parties riding as passengers in the insured automobile.

On or about June 24, 1960, which was shortly prior to the filing of his suit, the plaintiff made an offer to Jernigan and Sullivan to settle his claim against them for $5,000.00. The offer was not communicated to the defendant, and it had no knowledge of the existence thereof until after the plaintiff obtained his judgment for $270,000.00. Jernigan and Sullivan could not accept it because they had no means. The plaintiff's suit against Jernigan and Sullivan was filed on July 12, 1960, but the offer of settlement was never withdrawn prior to the time of the judgment in February, 1962. The defendant's letter of July 11, 1960, transmitting a copy of the policy to plaintiff's attorneys, stated that it had made all the payments it was obligated to make and denied all responsibility in connection with the Bostrom claim. By letter dated August 2, 1960, Jernigan advised the defendant of the filing of Bostrom's action in the federal court for damages against Sullivan and him, and called upon it to defend the suit. There was considerable correspondence between the defendant and the attorney for Jernigan and Sullivan during the period between the filing of the case and the trial of it. The defendant consistently denied liability and refused to defend the case.

The defendant never conducted any investigation under the Jernigan policy other than the one made during the eight day period immediately following the accident. It did not participate in any way in the defense of the litigation by Bostrom against Jernigan and Sullivan. There was never any effort on the part of the defendant at any time to negotiate or to effect a settlement of the Bostrom claim.

Execution on the $270,000.00 judgment was returned nulla bona, and nothing has been paid on it. Bostrom has brought this suit seeking to collect the full amount of the judgment from the defendant insurance company. A jury trial has resulted in findings favorable to the plaintiff on the following interrogatories in a special verdict:

"Do you find from a preponderance of the evidence that the defendant insurance company was guilty of negligence in not initiating and attempting to bring about a settlement of the claim of the plaintiff Bostrom against the insured Jernigan, within the $5,000 limit of the public liability policy in question?

"ANSWER: It was negligent.

"Do you find from a preponderance of the evidence that such negligence on the part of the defendant insurance company, if any you have found in answer to Q

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