Burnham v. Commercial Cas. Ins. Co. of Newark, N. J.

• Decision Date: 09 October 1941
• Docket Number: 28387.
• Citation: 10 Wn.2d 624,117 P.2d 644
• Parties: BURNHAM v. COMMERCIAL CASUALTY INS. CO. OF NEWARK, N. J.
• Court: Washington Supreme Court

117 P.2d 644

10 Wn.2d 624

BURNHAM v. COMMERCIAL CASUALTY INS. CO. OF NEWARK, N. J.

No. 28387.

Supreme Court of Washington

October 9, 1941

Department 1.

Action by C. A. Burnham against the Commercial Casualty Insurance Company of Newark, New Jersey, for damages resulting from alleged negligence of defendant in the investigation preparation, and trial of an action against the plaintiff who carried an automobile liability policy with defendant. From a judgment for plaintiff for $17,098.20, the defendant appeals.

Judgment reversed and cause remanded, with directions to dismiss the action.

MAIN J., dissenting

Appeal from Superior Court, Thurston County; D. F Wright, judge.

Ryan, Askren & Mathewson, of Seattle, and Henderson, Carnahan & Thompson, of Tacoma, for appellant.

George F. Yantis and Wm. M. Lowry, both of Olympia, and Carl H. Skoog, of Tacoma, for respondent.

MILLARD Justice.

Under date of May 22, 1936, defendant, a foreign corporation, entered into a contract of insurance with plaintiff under the terms of which defendant obligated itself to assume all liability not exceeding $5,000 for personal injuries to one person by reason of the ownership and/or use of a Dodge sedan owned by plaintiff. The insurer further agreed to investigate at its own cost any accident reported to it and to settle any claim as the insurer deemed advisable; and if action were brought against the assured on account of an accident, to defend such action in the name and on behalf of the assured unless or until the insurer elected to effect settlement thereof.

April 10, 1937, while driving his Dodge sedan across the Deschutes river bridge in Thurston county, plaintiff's sedan collided with a Chevrolet sedan owned and operated by Arthur L. Johnson. As a result of that collision Johnson sustained a serious compound fracture of his left leg which permanently and seriously impaired the usefulness of that leg.

On or about September 11, 1937, Johnson instituted an action to recover against Burnham for the injuries he had sustained. The trial of that action resulted in disagreement of the jury. Judgment was entered July 12, 1938, in the amount of $21,400 upon verdict of the jury rendered in favor of Johnson on the second trial of the action. Defendant insurer had charge of the two trials of the action. It paid the amount of the insurance policy--five thousand dollars--and refused to conduct an appeal. On Burnham's appeal the judgment was affirmed. Johnson v. Burnham, 198 Wash. 500, 88 P.2d 833.

In January, 1940, plaintiff assured instituted this action against defendant insurer to recover the difference between the face of the policy of insurance and the amount of the judgment recovered against the assured in Johnson v. Burnham, supra. This action is based on the alleged negligence of defendant in the investigation, preparation and trial of the case of Johnson v. Burnham, supra, and the alleged bad faith of defendant insurer in not attempting to secure a settlement with Johnson at a time when one could have been effected, and defendant's rejection of proposals of Johnson's counsel for settlement of the action. Defendant's motion for a nonsuit at conclusion of plaintiff's case was denied. Defendant stood upon its motion and did not introduce any evidence. Trial of the cause to the court sitting with a jury resulted in verdict in favor of plaintiff in the amount of $17,098.20. From judgment entered on the verdict, motion for judgment notwithstanding the verdict having been overruled, defendant appealed.

The alleged negligence and bad faith of appellant upon which respondent bases his right of recovery are failure to timely investigate the accident, rejection of Burnham's request to call material witnesses in trial of Johnson v. Burnham, supra, and refusal to settle the case or to enter into negotiations to effect settlement of the case.

It is prerequisite to recovery by respondent for alleged negligence of appellant in investigation, preparation and trial of the case of Johnson v. Burnham, supra, that respondent sustain the burden of proving the negligence alleged and that as a result of such negligence respondent suffered certain damages. Sterios v. Southern Surety Co., 122 Wash. 36, 209 P. 1107.

If appellant negligently failed to investigate the accident in which Johnson was injured until some months thereafter, respondent's recovery because of such negligence would, of course, be conditioned upon whether there was proof that any delay in making an investigation resulted in respondent's deprivation of the benefit of any evidence which would have been available.

Did respondent sustain the burden of proving appellant did not act upon reasonable grounds in proceeding as it did but that negligently and/or in bad faith appellant rejected respondent's request to call three witnesses and thereby deprived respondent of the benefit of material evidence?

Did counsel for appellant insurer in good faith refuse to compromise Johnson's claim against Burnham? Unless the refusal was in bad faith-- a mistake of judgment is not bad faith--it can not be a basis of recovery by respondent against appellant. The authorities uniformly hold that an insurance company is not liable beyond the limits of its policy for failure to compromise a claim against its assured when its determination is made in good faith.

The facts are as follows: Six months subsequent to the above-mentioned automobile collision in which he sustained serious injuries, Johnson commenced an action against Burnham. The cause was tried to one jury which disagreed. The second trial to a jury resulted in verdict and judgment in favor of Johnson. That judgment was affirmed on Burnham's appeal ( Johnson v. Burnham, 198 Wash. 500, 88 P.2d 833).

Respondent orally notified appellant's two agents (Messrs. Kibbe and Morris) at Tenino immediately following the accident. A report to his company of the accident was made by Morris, who, a day or so after the accident (in company with Burnham), visited the scene of the collision and made a rough diagram of the marks and breaks in the bridge where the automobile accident happened. A copy of that drawing was sent to appellant. Some time later Mr. Kibbe, agent for appellant, accompanied respondent to the bridge and made an investigation. On or about the time of the first trial of the action by Johnson against Burnham, Mr. Kibbe accompanied Mr. Burnham and an attorney representing Mr. Burnham and insurer (appellant in case at bar) to the scene of the accident. The attorney made a diagram of the bridge and interrogated a Mr. Mulhall who was present at the bridge during this investigation.

Respondent testified that he requested counsel who represented him and insurer (appellant in case at bar) in trial of Johnson v. Burnham, supra., to offer in evidence the testimony of L. J. Johnson, P. C. Kibbe and Guy Cooper, who would have testified that any one could stop a car going twelve or fifteen miles an hour within fifteen or twenty feet. The request was denied. Respondent testified that he was not aware of any facts which were ascertainable 'that they didn't find out about.' There were no eyewitnesses to the accident who were not interviewed and called. The physical facts relative to the condition of the bridge were visible to the jury. The diagram made by an agent of appellant insurer of the bridge the morning after the accident was made available to the jury. There were no facts, according to respondent's testimony, which were not ascertained by appellant. Burnham insisted at all times that the negligence of Johnson, not Burnham's negligence, was the cause of the accident. The jury did not accept Burnham's story.

Immediately prior to the second trial of Johnson v. Burnham, supra--in the first trial the jury disagreed--one of appellant's attorneys informed respondent that Johnson's attorney was very anxious to settle for four thousand dollars. Respondent told appellant's attorney, who also represented respondent at that time, that he thought the insurance company should compromise the claim as Johnson was seriously injured. Appellant's attorney replied that appellant insurer would pay two thousand dollars; that Johnson's attorney 'could take it or leave it, just as he pleased.'

Appellant's attorney testified that Johnson's attorney indicated 'that they might settle for $3,500.' Appellant's attorney, who knew that Johnson was seriously injured, after the disagreement of the jury in the first trial informed Johnson's attorney by letter that he thought that the worst thing that could possibly happen on the second trial would be a disagreed jury and that, if Johnson's attorney were interested in the matter, appellant's attorney would endeavor to secure a settlement of two thousand dollars from appellant insurer. Johnson's attorney replied that he had submitted the offer to his client without comment and that his client was not interested.

Except for the investigation described above appellant did not attempt to consult any witnesses until immediately prior to the commencement of the first trial. That first trial resulted in disagreement of the jury. Appellant's agents made an immediate investigation of the accident. While there is some doubt whether they transmitted at once their report of the result of that investigation to appellant's home office, there is an absence of evidence that the investigations made by appellant's agents and by appellant's counsel failed to produce all material evidence concerning the accident. Respondent very frankly stated that he was not aware of any ascertainable facts which were not discovered by appellant insurer. Respondent failed to show that there was any proof that any delay of appellant in making an...