Comunale v. Traders & General Ins. Co.
| Decision Date | 17 February 1958 |
| Citation | 321 P.2d 768 |
| Parties | Anthony J. COMUNALE, Plaintiff and Appellant, v. TRADERS & GENERAL INSURANCE COMPANY, a corporation, Defendant and Respondent. * Civ. 22343. |
| Court | California Court of Appeals Court of Appeals |
Newlin, Tackabury & Johnston and Frank R. Johnston, Los Angeles, for appellant.
W. P. Smith and Henry F. Walker, Los Angeles, for respondent.
Appeal from a judgment for defendant, referred to as Traders, notwithstanding the verdict.
The principal question to be decided is whether an insurance company which denied coverage when there was coverage, refused to defend its insured and declined to consider an offer of settlement, is liable to the assignee of the insured for damages sustained in excess of the policy limit. There are other subsidiary questions.
In June 1947 Traders issued its automobile liability policy to Felie Sloan. The term of the policy was from July 9, 1947 to July 9, 1948. Germane provisions of the policy are these:
'Item 3. The insurance afforded is only with respect to such and so many of the following coverages as are indicated by specific premium charge or charges. The limit of each company's liability against each such coverage shall be as stated herein, subject to all the terms of this policy having reference thereto.
'Insuring Agreements
'I Coverage A--Bodily Injury Liability
'To pay on behalf of the insured all sums which the insured shall become obligated to pay by reason of the liability imposed upon him by law for damages, including damages for care and loss of services, because of bodily injury, including death at any time resulting therefrom, sustained by any person or persons, caused by accident and arising out of the ownership, maintenance or use of the automobile.'
'II Defense, Settlement, Supplementary Payments
'As respects such insurance as is afforded by the other terms of this policy
'(a) under coverages A and B the company shall
'1. defend in his name and behalf any suit against the insured alleging such injury or destruction and seeking damages on account thereof; even if such suit is groundless, false or fraudulent; but the company shall have the right to make such investigation, negotiation and settlement of any claim or suit as may be deemed expedient by the company; * * *
'The company agrees to pay the amounts incurred under this insuring agreement, except settlements of claims and suits, in addition to the applicable limit of liability of this policy.'
'Conditions * * *
'3. Limits of Liability--Coverage A. The limit of bodily injury liability stated in the declarations as applicable to 'each person' is the limit of the company's liability for all damages, including damages for care and loss of services, arising out of bodily injury, including death at any time resulting therefrom, sustained by one person in any one accident; the limit of such liability stated in the declarations as applicable to 'each accident' is, subject to the above provision respecting each person, the total limit of the company's liability for all damages, including damages for care and loss of services, arising out of bodily injury, including death at any time resulting therefrom, sustained by two or more persons in any one accident.'
'The insured shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expense other than for such immediate medical and surgical relief to others as shall be imperative at the time of accident.'
The same coverage existed under the policy in favor of Percy Sloan, husband of Felie Sloan, as that of his wife.
On March 27, 1948 Percy Sloan, while driving his brother John's truck to his aunt's home for a social visit, struck Anthony Comunale and Carmela Comunale who were crossing Olympic Boulevard in a marked crosswalk on foot. Anthony Comunale was severely injured.
On March 29, 1948 Percy Sloan telephoned Frank Sloan, Traders' duly appointed and authorized agent (who is not related to Felie or Percy Sloan), through whom he had purchased the policy, and told him the facts about the accident. He asked Frank if he was covered. Frank told him that since he was driving someone else's truck he was not covered and that Traders was not responsible under the policy. Frank for some time.
On November 1948 the Comunales filed
In November 1948 the Comunales filed suit against Percy Sloan. On February 3, 1950 Mr. Leppek, attorney for Percy Sloan, tendered the defense of the accident to Traders, informing if of the trial date. On February 8, 1950 Mr. Leppek delivered copies of the complaint and answer in the action to Traders. Traders requested its local counsel to secure time for investigation, and on February 14, 1950 its local counsel advised it that Mr. Leppek had agreed to let the case go 'off calendar.' On February 24 Traders decided to deny coverage and to refuse to take any part in the defense of the action. On May 15, 1950 Mr. Leppek again tendered the defense of the action to Traders. On May 18, 1950 defendant advised Mr. Leppek there was no coverage for the accident in question; that Percy Sloan had not complied with the terms of the policy by giving immediate notice of the accident; and that it declined to defend or to pay any expense of the defense or to pay any judgment that might be rendered.
Mr. Allport was substituted for Mr. Leppek as attorney for Percy Sloan and conducted the defense at the trial which began on June 7, 1950. During the trial Mr. Allport informed Traders' local counsel the plaintiffs in the personal injury action would accept $4,000 in settlement of the case. Traders declined to consider the offer of compromise which was within the policy limit.
Anthony Comunale recovered judgment in the personal injury action against Percy Sloan in the amount of $25,000. The judgment became final. Comunale, pursuant to the provisions of the policy and section 11580(b)(2) of the Insurance Code, then brought suit against Traders for the policy limit for bodily injuries of $10,000. He recovered judgment against Traders in the amount prayed. The court in that action found that Percy Sloan was covered and protected by the policy with respect to his liability arising out of the accident. The judgment was affirmed on appeal. Comunale v. Traders & General Ins. Co., 116 Cal.App.2d 198, 253 P.2d 495. Traders paid the amount of the judgment in that action. The judgment in favor of Comunale in the personal injury action was thus left unsatisfied to the extent of the difference between the amount paid by Traders and the total amount of the judgment which--in May 1954, with interest--was $19,198. In a second cause of action it was sought to recover $800 as the reasonable amount of attorneys' fees incurred in the defense of the original action. Under stipulation entered into at the opening of the trial this amount was paid by Traders. Percy Sloan's rights under the policy were assigned to Anthony Comunale, who then brought this action against Traders for the excess above the policy limit.
The jury rendered a verdict in favor of plaintiff in the amount prayed for. On motion of Traders the court rendered judgment notwithstanding the verdict that plaintiff take nothing and that Traders have judgment for its costs. Plaintiff appeals.
The assignments of error are: 1. Having breached its contract by refusing to defend, and having declined to consider the offer of compromise, Traders is liable for the amount of the judgment in the personal injury action in excess of the bodily injury limit of the policy. 2. The court erred in granting the motion for judgment notwithstanding the verdict. Traders contends: 1. The action is ex delicto in nature. 2. The claim sued on was not assignable. 3. If the action is in contract, the provisions of the policy with respect to assignment were not complied with. 4. The action is barred by the statute of limitations. 5. The mere failure or refusal to defend the bodily injury action does not impose on an insurer a liability in excess of the policy limit for or on account of an award in excess of the policy limit for such bodily injury damage. 6. There was no proof of bad faith or negligence. 7. There was no proof of damage.
The action is in contract. The refusal to defend constitutes a breach of contract. 1 Traders argues that the covenant to defend is not severable from the agreement to indemnify. We deem this construction of the policy entirely untenable. The understanding of an ordinary person is the standard used in construing a contract of insurance, and any ambiguity in the language must be resolved against the insurer. 2 Construing a similar policy in Financial Indemnity Co. v. Colonial Ins. Co., 132 Cal.App.2d 207, at page 210, 281 P.2d 883, at page 885, the court stated:
'[T]he duty to defend was an absolute one by each insurer and is severable and independent of the undertaking for payment of damages. (See 3 Richards on Insurance, 5th ed., § 421, p. 1390.) * * *
In Grand Union Co. v. General Accident, etc., Assur. Corp., 254 App.Div. 274, 4 N.Y.S.2d 704, affirmed 279 N.Y. 638, 18 N.E.2d 38, the insurer refused to defend the personal injury action on the ground there was no coverage. The court stated (4 N.Y.S.2d 711):
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