Brown v. State Farm Mut. Auto. Ins. Ass'n

• Decision Date: 03 August 1971
• Docket Number: Gen. No. 11399
• Citation: 272 N.E.2d 261,1 Ill.App.3d 47
• Parties: Marion Ray BROWN, administrator of the Estate of Jacqueline M. Brown, Deceased, Plaintiff-Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE ASSOCIATION, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

Page 261

272 N.E.2d 261

1 Ill.App.3d 47

Marion Ray BROWN, administrator of the Estate of Jacqueline M. Brown, Deceased, Plaintiff-Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE ASSOCIATION Defendant-Appellee.

Gen. No. 11399.

Appellate Court of Illinois, Fourth District.

Aug. 3, 1971.

Richard K. Bates, Danville, for appellant.

Phillips, Phebus & Tummelson, Urbana, for appellee.

TRAPP, Justice.

The issue upon this appeal is whether an insured's cause of action against his insurer for bad faith in failing to settle within the liability policy limits can be assigned to the insured's judgment creditor. The trial court dismissed plaintiff's suit upon the ground that plaintiff acquired no legal right to bring this action.

Brown, as Administrator, recovered a judgment against Sam Nale, Administrator of Rose Nale, in the amount of $40,000.00. Defendant had issued an automobile liability policy for Nale in the amount of $20,000.00. After extensive discovery, Brown offered to settle with defendant for the policy limit. The offer was refused and no counter offer made. Defendant paid $20,000.00 on the judgment. Brown, as Administrator, brought a citation to discover assets against the estate of Rosemary Nale. The court, in that proceeding, found that the only assets were $5,500.00, and a potential chose in action which Sam Nale, as administrator of Rosemary Nale, had against defendant for 'bad faith' in failing to settle the lawsuit within the Nale policy limits. The Circuit Court ordered Sam Nale, as Administrator, to pay the $5,500.00 on the judgment and to assign to plaintiff herein the 'bad faith' cause of action. Thereafter, the administrator of Rosemary Nale assigned the 'bad faith' cause of action to plaintiff, reserving the right to obtain for the heirs of Rosemary Nale all sums received over $14,500.00, attorneys fees and costs.

Our courts have held that an insurance company may so conduct itself as to become liable for an entire judgment recovered against its insured, irrespective of the policy limits. Olympia Fields Country Club v. Bankers Indem. Ins. Co., 325 Ill.App. 649, 60 N.E.2d 896; Cernocky v. Indemnity Ins. Co. of N. America, 69 Ill.App.2d 196, 216 N.E.2d 198. We have also held that the entry of the judgment against the insured constitutes the damage and that it is not necessary that the insured allege payment of the excess judgment. Wolfberg v. Prudence Mut. Cas. Co. of Chicago, 98 Ill.App.2d 190, 240 N.E.2d 176.

The courts of Pennsylvania, Oregon, California and Kentucky have held that the cause of action is assignable: Gray v. Nationwide Mutual Insurance Company, 422 Pa. 500, 223 A.2d 8; Gedeon v. State Farm Mutual, 261 F.Supp. 122 (D.C.Pa.1966); Groce v. Fidelity Ins. Co., 252 Or. 296, 448 P.2d 554 (1968); Comunale v. Traders and General Ins. Co., 50 Cal.2d 654, 328 P.2d 198 (1958); Brown v. Guarantee Ins. Co., 155 Cal.App.2d 679, 319 P.2d 69; State Farm Mutual v. Marcum, 420 S.W.2d 113 (Ky.1967); Terrell v. Western Casualty and Surety Co., 427 S.W.2d 825 (Ky.1968). Connecticut by statute subrogates the injured party to all rights of the insured: Turgeon v. Shelby Mutual Plate Glass and Casualty Co., 112 F.Supp. 355 (D.C.Conn.1953).

The situation in Texas is somewhat complicated by the fact that under Texas law the insured party must first satisfy the judgment in order to have a right of indemnity against the insurer. Seguros Tepeyac S.A. v. Bostrom, 347 F.2d 168 (USCCA 5th). However, Texas apparently recognizes assignability in principle. In Smith v. Transit Casualty Co., 281 F.Supp. 661 (D.C.Tex.1968), the court stated that while the action sounds in tort, it also violates an implied contractual warranty to exercise care for the insured's interest and is therefore assignable.

Most of the cases cited by the defendant to establish that certain states deny assignability, i.e., Delaware, Washington, New Jersey, Colorado, Missouri, Georgia, New Hampshire, Utah and Kentucky do not, in fact, involve an assignment but rather an attempt at direct suit without assignment. Chittick v. State Farm Mutual, 170 F.Supp. 276 (D.C.Del.1958) did not involve an assignment and a claim based upon subrogation was denied. Murrary v. Mossman, 56 Wash.2d 909, 355 P.2d 985 (1960) did not involve an assignment and the court said, p. 988: 'The appellants are trying to enforce a chose-in-action for Mossman, which Mossman does not believe exists or is unwilling to enforce'. In Biasi v. Allstate Ins. Co., 104 N.J.Super. 155, 249 A.2d 18 (1969), there was no assignment, and the insured refused to join in a suit against the insurance company. In Steen v. Aetna Casualty Co., 157 Colo. 99, 401 P.2d 254 (1965), no actual assignment was mentioned. Wessing v. American Indemnity Co. of Galveston, Texas, 127 F.Supp. 775 (W.D.Mo.1955), involved no claim of assignment. Francis v. Newton, 75 Ga.App. 341, 43 S.E.2d 282 (1947), was a direct garnishment suit with no assignment involved. The court found there was no claim of negligence or bad faith and no evidence to warrant finding of violation of duty by the insurer. In Duncan v. Lumbermen's Mutual Cas. Co., 91 N.H. 349, 23 A.2d 325 (1941), there was no specific authorization for suit by the injured party, and there was also a pending suit by the insured against the insurer. Paul v. Kirkendall, 6 Utah 2d 256, 311 P.2d 376 (1957) held that the matter could not be adjudicated in a garnishment proceeding. The insured was in Arabia at the time of suit, and the court said, p. 378: 'The insured is not here complaining of any act or omission on the part of the garnishee by which he claims to have been damaged'. Tabben v. Ohio Casualty Co., 250 F.Supp. 853 (E.D.Ky.1966) had no allegation of assignment. We have cited above two Kentucky cases where assignability was recognized.

The Tennessee cases cited by defendant are based upon the view of the Tennessee courts that insured's cause of action does not survive, and therefore is nonassignable. Carne v. Maryland Casualty Co., 208 Tenn. 403, 346 S.W.2d 259 (1961); Dillingham v. Tri State Ins. Co., 214 Tenn. 592, 381 S.W.2d 914 (1964). We do not agree as to non-survival of insured's cause of action. Wolfberg v. Prudence Mut. Cas. Co. of Chicago, 98 Ill.App.2d 190, 240 N.E.2d 176, was an action by the estate of an insured. We would find no policy reasons which would favor permitting an insurer to escape liability because of the accident of death of the insured. We think such a holding...