Continental Insurance Company v. Lynham, 6339.

• Decision Date: 17 July 1972
• Docket Number: No. 6339.,6339.
• Citation: 293 A.2d 481
• Parties: The CONTINENTAL INSURANCE COMPANY, Appellant, v. Cameron B. LYNHAM and Adria C. Lynham, Appellees.
• Court: D.C. Court of Appeals

293 A.2d 481

The CONTINENTAL INSURANCE COMPANY, Appellant, v. Cameron B. LYNHAM and Adria C. Lynham, Appellees.

No. 6339.

District of Columbia Court of Appeals.

Argued June 5, 1972.

Decided July 17, 1972.

Joseph T. Lilly, Washington, D. C., with whom W. B. Ewers, Baltimore, Md., was on the brief, for appellant.

Edgar T. Bellinger, Washington, D. C., for appellees. Polly W. Craighill, Washington, D. C., also entered an appearance for appellees.

Before HOOD, Chief Judge, and KELLY

and FICKLING, Associate Judges.

FICKLING, Associate Judge:

The question presented by this appeal is whether, in the circumstances of this case, it was an abuse of discretion for the trial court to award attorney's fee to appellees as a part of costs. After a careful review of the record and pertinent precedents, we have concluded that the trial court abused its discretion.

Appellees are owners of a motor boat which was insured under an "all risk" marine insurance policy issued by appellant. On April 8, 1970, the vessel was found sinking at her dock by employees of the yacht basin. The trial court found that the sinking occurred as a result of a loose cap-nut on the sea-water filter.

Appellees first learned of the sinking upon their return from Europe on April 30, 1970. They immediately notified an agent of appellant and received from him, on May 1, certain forms to be executed. The forms were completed and returned the same day. A few days later appellant's adjuster inspected the vessel and suggested that appellees obtain three estimates of the cost of repairing the engine. However, when several mechanics refused to give estimates until they could examine the engine disassembled, appellant's agent agreed to permit the local Chrysler engine dealer to disassemble the engine, which was a Chrysler, and give an estimate in lieu of any other estimates. After disassembling and examining the engine, the Chrysler dealer concluded that it was impossible to restore it to its condition prior to the sinking and advised that a new engine be used as a replacement. Appellant's adjuster also inspected the engine and agreed that it would be best to replace it. On May 28, 1970, the Chrysler dealer sent appellees an estimate showing the cost of repairing the engine ($1,765) and of replacing it ($2,996.72). Copies of this estimate were promptly forwarded to appellant's agent.

Appellees waited 10 days and received no response from appellant. They then authorized the Chrysler dealer to install the new engine and make other repairs. The repairs were completed on July 12, 1970. On July 13, appellees submitted bills and receipts to appellant for the repairs. Between July 13 and September 16, appellees received no word from appellant, although they made several telephone calls and wrote a letter dated September 1. On September 16, appellees telephoned appellant's agent and were advised that the claim was not yet settled because they had obtained a new engine rather than repairing the old one. Appellees then turned the matter over to an attorney and this suit was brought.

The suit sought recovery of the cost of repairs to the vessel — including installation of the new engine, interest, costs, attorney's fee, and punitive damages. After a non-jury trial the court awarded appellees the damages requested, costs, and attorney's fee of $1,000, but denied the request for punitive damages. This appeal challenges only the award of attorney's fee.

At the outset we note that the trial judge gave no precise explanation for the award of attorney's fee in this case. What we glean from the record is that while the trial court believed "that punitive damages in this case should not be awarded," it also believed that appellant had failed to diligently handle appellees' claim.¹ In other words, the trial judge concluded that silence for approximately 3 months justified an award of attorney's fee.

It is the rule in the District of Columbia that, absent a contract or statutory provision or a showing that the defendant's conduct was willfully and oppressively fraudulent, attorney's fees are not generally allowed as damages or costs. Wolf v. Cohen, 126 U.S.App.D.C. 423, 426, 379 F.2d 477, 480 (1967); Murphy v. O'Donnell, D.C.Mun.App., 63 A.2d 340, 342 (1948). . . . [McIntosh v. Aetna Life Insurance Co., D.C.App., 268 A. 2d 518, 521 (1970).]

The United States Supreme Court has sanctioned this exception to the general rule "when overriding considerations of justice seemed to compel such a result." Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 718, 87 S.Ct. 1404, 18 L.Ed.2d 475 (1967). See, e. g., Vaughan v. Atkinson, 369 U.S. 527, 530, 82 S.Ct. 997, 8 L.Ed.2d 88 (1962) (no investigation and silence as to claim that was "plainly owed").

The pertinent cases speak of conduct which is in bad faith, vexatious, wanton, or oppressive.² Thus, attorneys' fees have been permitted in cases involving unreasonable discontinuation of the defense of an "obviously helpless insured" after a "dubious investigation," Siegel v. William E. Bookhultz & Sons, 136 U.S.App.D.C. 138, 141-143, 419 F.2d 720, 724-725 (1969); the defense of suits which are baseless, Guardian Trust Co. v. Kansas City S. Ry., 28 F.2d 233, 240-246 (8th Cir. 1928); and suits brought to annoy or harass, In re Carico, 308 F.Supp. 815, 817-818 (E.D.Va. 1970); Gazan v. Vadsco Sales Corp., 6 F. Supp. 568 (E.D.N.Y.1934).

Appellees point to no decision, and we have been unable to find one, in which conduct such as that of the insurer in this case has led to the award of attorney's fee. It is true that the insurer has a duty to process and pay claims expeditiously and in good faith, and that evidence as to the reasonableness or good faith of the insurer in refusing to pay is...