Byrnes v. Phoenix Assurance Company of New York, 57-C-160.

• Decision Date: 20 November 1959
• Docket Number: No. 57-C-160.,57-C-160.
• Citation: 178 F. Supp. 488
• Parties: John J. BYRNES, Trustee for Charles Albert Lund, Bankrupt, Plaintiff, v. PHOENIX ASSURANCE COMPANY OF NEW YORK, a foreign corporation, Defendant.
• Court: U.S. District Court — Eastern District of Wisconsin

178 F. Supp. 488

John J. BYRNES, Trustee for Charles Albert Lund, Bankrupt, Plaintiff, v. PHOENIX ASSURANCE COMPANY OF NEW YORK, a foreign corporation, Defendant.

No. 57-C-160.

United States District Court E. D. Wisconsin.

November 20, 1959.

Thomas P. Maroney, Milwaukee, Wis., for plaintiff.

W. A. Sheldon, Kenosha, Wis., for defendant.

GRUBB, District Judge.

The case is before the court on defendant's motion for summary judgment.

This is an action by the trustee for Charles Albert Lund, bankrupt (Lund), for the benefit of creditors. The trustee claims damages in the amount of $73,306.39 plus interest, allegedly resulting from defendant's failure to exercise good faith in failing to settle a personal injury action arising out of a collision between an automobile driven by the bankrupt and another driven by Montgomery Ward Thorne (Thorne) in which Carol Lind (Lind) was a passenger. Defendant (Phoenix) was Lund's insurer, and Hartford Accident and Indemnity Company (Hartford) was the insurer of the Thorne vehicle.

The record before the court on the motion for summary judgment consists of the pleadings, depositions and affidavits, and exhibits attached thereto, and appellant's appendix in Lind v. Lund, 1954, 266 Wis. 232, 63 N.W.2d 313, containing the trial court's decision and portions of the trial record in the State court, admitted by stipulation. The court also notes the bankruptcy records in In re Charles Albert Lund, Bankruptcy File No. 29,765.

Under Wisconsin law, the trustee can prevail only on a showing that defendant acted in bad faith in carrying out its obligations to the insured in respect to the investigation, defense, or settlement of the Lind claim. Berk v. Milwaukee Automobile Ins. Co., 1944, 245 Wis. 597, 15 N.W.2d 834.

As stated in the Berk case, 245 Wis. at page 601, 15 N.W.2d at page 836:

"The test is not whether the defendant acted negligently, but whether it acted in bad faith toward the plaintiff."

Lund and his wife both claimed to have been seriously injured as a result of the accident. They both made claim against Thorne and his insurer. As will be noted from the case of Lind v. Lund, supra, Carol Lind, passenger in the Thorne automobile, was very seriously injured. The Thorne policy limit for injuries to any one person was $15,000, and the Lund policy limit was $10,000.

It will be seen from the above that the Lunds had a definite interest in their own recovery as well as in being protected from liability to Lind. The defendant herein was under a potential liability to Lind and to Mrs. Lund. While both Lund and the defendant herein had substantially the same interests so far as negligence and liability were concerned and so far as being protected against a claim by Lind, during the negotiations there was bound to be some conflict in interest—that of Lund trying to get the best settlement he could for himself and his wife, which desire impeded the defendant's prospect of making settlement of the Thorne claim. Also, the low limits on the policies and the fact that apparently Thorne was beneficiary to some substantial trusts in Chicago made settlement negotiations extremely difficult because Thorne and his insurer were reluctant to settle and give up their right of contribution against Lund and his insurer.

Among the conduct asserted as establishing the lack of good faith of Phoenix is the alleged failure of its attorney to fully disclose to Lund that said attorney represented Phoenix as well as Lund in this claim as well as the alleged failure to fully inform Lund in respect to settlement proposals and possibilities.

The deposition of Charles Albert Lund, at the taking of which Phoenix's attorney, William A. Sheldon, appeared on behalf of Phoenix and Lund, is in direct conflict with the affidavits of Attorney Sheldon and Lund on the question of disclosure and information regarding retainer and settlement. When questioned by Attorney Sheldon as to his execution of the affidavit, Lund answered that he had read and signed it but could not remember the facts recited therein. Lund also stated that he did not know about Mr. Sheldon representing Phoenix and that to his knowledge neither his attorney nor Phoenix discussed the terms of a proposed settlement with Lind.

The court is mindful that Lund was seventy-seven years old and hard of hearing at the time the deposition was taken and that he did not have a good recollection of the events of the litigation of...