Courson v. Maryland Casualty Company
| Decision Date | 20 March 1973 |
| Docket Number | No. 72-1480,72-1481.,72-1480 |
| Citation | 475 F.2d 1030 |
| Parties | Richard M. COURSON, Appellee, v. MARYLAND CASUALTY COMPANY, Appellant. |
| Court | U.S. Court of Appeals — Eighth Circuit |
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Dennis L. Shackleford, El Dorado, Ark., for appellant.
Richard E. Griffin, Crossett, Ark., for appellee.
Before GIBSON and ROSS, Circuit Judges, and BENSON, Chief District Judge.
Richard Courson (Courson) brought this action against Maryland Casualty Company (Maryland) in the Circuit Court of Ashley County, Arkansas, to recover the sum of $10,000.00 under the uninsured motorist clause of an automobile insurance policy theretofore issued to Courson by Maryland. Maryland removed the case to the United States District Court for the Western District of Arkansas pursuant to the provisions of 28 U.S.C. § 1441. The trial court entered judgment in favor of Courson for the sum of $10,000.00 plus penalty and attorneys fees and Maryland appealed to this Court. We affirm but make one modification to the judgment.
On August 23, 1969, Courson was involved in an automobile collision with a car driven by Earnest Green (Green), an uninsured motorist. The Courson car and the Green car were traveling in opposite directions and a collision occurred shortly after a third car driven by Robert Crane, Jr. (Crane) had entered the highway from a side road at a point between the Courson car and the Green car. Crane was insured by State Farm Mutual Insurance Company (State Farm).
Courson brought suit in state court against both Green and Crane on February 4, 1970, and at that time advised Maryland's claim agent of the suit, "in order that they Maryland may properly defend in behalf of Earnest Green and Robert Crane." (At this point Courson's attorney erroneously believed that Crane was also an uninsured motorist.) On February 6, 1970, Maryland's agent acknowledged receipt of the letter and stated that "We are notifying the Maryland Casualty Company, the insurance carrier for Mr. Courson, this date." On May 4, 1970, Courson's lawyer advised Maryland's claim agent that Green's attorney had advised that Green was uninsured, that the case was set for trial on June 9, 1970, and that he was interested in settling the case. He asked Maryland to contact State Farm, Crane's carrier, to see if some kind of settlement could be made. He received no response from Maryland's claims representative. On May 25, 1970, he again wrote the claims representative, advising him of the impending trial and giving him the name of the attorney for Crane. He further stated that "My investigation reveals that probably the primary liability lies with the uninsured defendant, Earnest Green." He then asked the claims representative to advise him concerning Maryland's intentions in the matter. Again he received no response. Courson's lawyer wrote the claims representative again on June 1, 1970, asking for a response to his earlier letter, but received none.
Prior to trial, Crane and his insurance carrier settled the claim of Courson against Crane for $5,000.00 and Courson executed a release and indemnity agreement without further notice to Maryland and without Maryland's consent. On June 9, 1970, Courson recovered a judgment against Green for $16,000.00 and promptly demanded payment of $10,000.-00 by Maryland under the uninsured motorist clause in the policy Maryland had issued to Courson. Maryland declined on the alternate grounds that (a) the policy was inapplicable under the exclusion provision since the insured made a settlement with another person without the written consent of the insurer; (b) any amount payable under the uninsured motorist clause should be reduced by the amount recovered from Crane's insurance carrier under Ark.Stat.Ann. 66-4006 (Repl.1966) and under the express provisions of the policy; and (c) that in any event, Maryland was entitled to recover or set off the sum of $2,074.55 to which the Arkansas Workmen's Compensation Commission had theretofore determined Maryland was entitled to receive in subrogation, from the settlement of $5,000.00 obtained by Courson from Crane's insurance carrier.1
In United States District Court, after Maryland had interposed these defenses to Courson's action on the uninsured motorist provision in his policy, the trial court retried the issue of negligence of all of the parties to the accident and found that the accident was caused solely by the negligence of the uninsured motorist, Green. It rejected Maryland's defenses and allegations regarding the credits, except its claim for a setoff for the amount which the Arkansas Workmen's Compensation Commission had already found to be owing to Maryland (as compensation carrier) as a result of Courson's settlement with Crane. However, in a supplemental opinion, the court reconsidered the latter setoff, and also disallowed it. The court found that Courson's damages were in the amount of $15,657.36, reduced that amount by the $5,000.00 which Courson received from Crane in settlement, and found that Courson was entitled to $10,657.36. Recognizing that the uninsured motorist policy was limited to $10,000.00, judgment was entered accordingly in that amount, plus 12 percent statutory penalty and attorneys fees.
The uninsured motorist provision of the policy contained the following exclusion:
The trial court held this policy provision to be contrary to public policy and therefore invalid citing MFA Mutual Ins. Co. v. Bradshaw, 245 Ark. 95, 431 S.W.2d 252 (1968), and MFA Mutual Ins. Co. v. Lovins, 248 F.Supp. 108 (E.D.Ark.1965). In Lovins the United States District Court for the Eastern District of Arkansas had determined that a clause providing forfeiture of insurance coverage, by an insured who prosecuted a suit to judgment against an uninsured motorist without the written consent of the insurer, was against the public policy of the state and void. In Bradshaw, supra, 431 S.W.2d at 254, the Supreme Court of Arkansas indicated its agreement with that holding.2 However, in this case the exclusion is claimed to result from settlement with an insured motorist without the consent of the insurer, which is a different situation from that which was present in Lovins and in Bradshaw.
Although the "settlement exclusion," by its very terms is referred to as an exclusion, it is, in fact, a forfeiture. All coverage under the uninsured motorist policy provisions is "excluded" in the event that a settlement is made without the consent of the company. Under the law of Arkansas as in nearly all states, forfeitures are not favored. Home Mutual Fire Ins. Co. v. Riley, 480 S.W.2d 957 (Ark.1972). See generally, 1 R.Anderson, Couch on Insurance 2d § 15:95 (1959). In Riley, supra, 480 S.W.2d at 958-959, the Supreme Court of Arkansas stated the rule as follows:
In this case, Courson gave Maryland every opportunity to participate in the settlement negotiations with Crane and his insurance carrier. His requests for participation were completely ignored and Courson was entitled to assume that if any objection to the settlement was going to be made by Maryland, it would have been communicated prior to the time he attempted to collect on the judgment entered on June 9, 1970. We are satisfied that the Supreme Court of Arkansas would hold this failure to act constitutes sufficient proof of circumstances indicating "an election to waive a forfeiture." Home Mutual Fire Ins. Co. v. Riley, supra, 480 S.W.2d at 958. See also Pickering v. American Employers Ins. Co., 282 A.2d 584 (R.I.1971); Volkswagen Ins. Co. v. Taylor, 201 So.2d 624 (Fla.App.1967); Allstate Ins. Co. v. Pietrosh, 85 Nev. 310, 454 P.2d 106 (1969).
The lower court reduced the amount of damages that it found Green was liable for, by the $5,000.00 settlement sum which Courson received from Crane. However, since the total damages were over $15,000.00, Maryland was still found to be liable for the full amount of the policy limits of $10,000.00. The provisions under which Maryland claims reduction from the policy limits for the settlement are the following:
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