Bradford v. Kelly, 99

• Decision Date: 30 October 1963
• Docket Number: No. 99,99
• Citation: 260 N.C. 382,132 S.E.2d 886
• Court: North Carolina Supreme Court
• Parties: Mabel R. BRADFORD, Executrix of the Estate of Frank L. Bradford, Deceased, v. Mrs. Doris KELLY.

Page 886

132 S.E.2d 886

260 N.C. 382

Mabel R. BRADFORD, Executrix of the Estate of Frank L Bradford, Deceased, v. Mrs. Doris KELLY.

No. 99

Supreme Court of North Carolina.

Oct. 30, 1963

Van Winkle, Walton, Buck & Wall, by O. E. Starnes, Jr., Asheville, for plaintiff appellee.

Williams, Williams & Morris, Asheville, for intervenor appellant.

SHARP, Justice.

The standard automobile liability insurance policy provides that the insurer may, in its discretion, settle any claim against the insured for which it would be liable under the terms of the policy. When exercised in good faith these provisions are valid and binding on the insured. G.S. § 20-279.21(f) (3); Alford v. Insurance Co., 248 N.C. 224, 103 S.E.2d 8, 70 A.L.R.2d 408; Wynnewood Lumber Co. v. Insurance Co., 173 N.C. 269, 91 S.E. 946. However, it is now settled law in this State that the exercise of this privilege by the insurer will not bar the right of the insured, or anyone covered by his policy, to sue the releasor for his damages where he has neither ratified nor consented to such settlement. Lampley v. Bell, 250 N.C. 713, 110 S.E.2d 316; Beauchamp v. Clark, 250 N.C. 132, 108 S.E.2d 535; Campbell v. Brown, 251 N.C. 214, 110 S.E.2d 897; 38 N.C.L.Rev., 81 and 570; 32 A.L.R.2d 937. As pointed out by Denny, J. (now C.J.) in Lampley v. Bell, supra:

'It seems to be well-nigh the universal holding in this country that where an insurance carrier makes a settlement in good faith, such settlement is binding on the insured as between him and the insurer, but that such settlement is not binding as between the insured and a third party where the settlement was made without the knowledge or consent of the insured or over his protest, unless the insured in the meantime has ratified such settlement.'

The case now confronting us raises this question: What are the rights and liabilities of an insurer which has satisfied the claim of a party injured in a collision with its insured when the insured subsequently institutes an action for his own damages and the defendant from whom it had procured a release, pleads the previous settlement as a bar to the plaintiff's cause of action and in the alternative sets up a counterclaim against the plaintiff for his damages?

Accord and satisfaction is an affirmative defense which must be pleaded. Knnonce v. Motor Lines, Inc., 249 N.C. 390, 106 S.E.2d 576. Therefore Allstate is apprehensive that unless it is allowed to intervene and plead the release, it too would be bound by any judgment which the defendant might obtain against the plaintiff and thus be subjected to a liability it had already discharged. Hall v. Casualty Co., 233 N.C. 339, 64 S.E.2d 160; Campbell v. Casualty Co., 212 N.C. 65, 192 S.E. 906; Squires v. Insurance Co., 250 N.C. 580, 108 S.E.2d 908. Plaintiff is equally apprehensive that her case would be seriously prejudiced if the jury should learn that her testate's insurer, convinced that its insured was the party at fault, had paid the defendant for his damages.

It is the rule with us that in an action for damages founded upon the alleged negligence of the insured, his liability insurance carrier is not a proper party defendant. Taylor v. Green, 242 N.C. 156, 87 S.E.2d 11. The trial judge's refusal to allow Allstate to intervene must be upheld unless the insurance carrier, under the facts of this case, has become a necessary party. Does Allstate presently have such an interest in the subject matter of this litigation that it will either gain or lose by the direct operation and effect of any judgment which defendant might recover against the plaintiff on her counterclaim? Mullen v. Louisburg, 225 N.C. 53, 33 S.E.2d 484; Griffin & Vose, Inc. v. Minerals Corp., 225 N.C. 434, 35 S.E.2d 247; Garrett v. Rose, 236 N.C. 299, 72 S.E.2d 843.

If, upon the hearing of the plea in bar, it is determined that the plaintiff ratified the settlement made by Allstate Insurance Company, as defendant alleges, Allstate has no problem for such a determination would end the case. After parties have compromised and settled their claims growing out of an automobile collision, neither may thereafter maintain a cause of action against the other which arises out of the same collision. Snyder v. Oil Co., 235 N.C. 119, 68 S.E.2d 805; Houghton v. Harris, 243 N.C. 92, 89 S.E.2d 860; Jenkins v. Fields, 240 N.C. 776, 83 S.E.2d 908. Therefore, as plaintiff correctly points out, Allstate's petition to intervene prior to a final determination of the plea in bar is premature.

However, in each of the cases which have come to this Court involving the right of a plaintiff to prosecute his action after a settlement with the defendant by his insurance carrier, the defendant's plea of compromise and settlement has been overruled upon a finding that plaintiff had neither consented to the settlement nor ratified it. Recognizing the possibility of a similar result in this case, both plaintiff and Allstate request the Court to define the status of defendant's counterclaim in the event her plea in bar is not sustained.

These questions arise: Having, by her plea in bar, judicially admitted her acceptance of $559.02 in full settlement of all damages which she suffered as a result of the collision with plaintiff, can the defendant at the same time, by way of an alternative plea, maintain a counterclaim for those same injuries? If plaintiff should move to strike the counterclaim because of the settlement which defendant has plead, would she thereby ratify the settlement and cause the dismissal of her own action?

The novel questions presented by this appeal emanate from the modern requirement that every automobile owner carry liability insurance and from the standard provision in such policies permitting his carrier, in its discretion, to settle any claim against him within the coverage of the policy. Counsel for the respective parties have cited us no factually analagous case from any jurisdiction. Our research discloses that at least two have considered these questions.

In Faught v. Washam, Mo., 329 S.W.2d 588, decided in September 1959, plaintiff's counsel, unknown to the plaintiff, was also representing his insurance carrier. Without plaintiff's knowledge, the attorney plead a release obtained by the carrier from the defendant in bar of the counterclaim which defendant asserted against plaintiff. The defendant thereupon moved to dismiss plaintiff's action. The subsequent procedural course of this case is not clear from the opinion. However, the court held that under 'the peculiar facts of this case,' it was clear that plaintiff had not intended to ratify the settlement. It acknowledge a total lack of precedent 'in which this novel point has been ruled,' and avoided the questions before us by denying defendant's motion to dismiss and ordering that the counterclaim be tried separately. The court did not intimate whether the judgment in the first case tried would be res adjudicata in the trial of the second. Our North Carolina practice and procedure, however, does not permit such a severance. See Allen v. Salley, 179 N.C. 147, 101 S.E. 545.

In 1960, Division No. 2 of the Court of Appeals of Georgia considered the problem in Cochran v. Bell, 102 Ga.App. 617, 117 S.E.2d 645. In that case, plaintiff and defendant both suffered damage in an automobile collision. Plaintiff's insurance carrier paid the defendant in full settlement of his claims against plaintiff and received his release in return. Thereafter plai...