Cousins v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 22 April 1974
• Docket Number: No. 9789,9789
• Citation: 294 So.2d 272
• Parties: Beverly COUSINS and Mrs. Sandra Cousins Morgan v. STATE FARM MUTUAL AUTOMOBILE INSURANCE CO.
• Court: Court of Appeal of Louisiana — District of US

Page 272

294 So.2d 272

Beverly COUSINS and Mrs. Sandra Cousins Morgan v. STATE FARM MUTUAL AUTOMOBILE INSURANCE CO.

No. 9789.

Court of Appeal of Louisiana, First Circuit.

April 22, 1974.

Rehearing Denied May 30, 1974.

Writ Refused July 1, 1974.

Horace C. Lane, Baton Rouge, for appellants.

John D. Lambert, New Orleans, for appellee.

Before LANDRY, ELLIS and PICKETT, JJ.

LANDRY, Judge.

Defendant (Insurer) appeals a judgment in favor of its insureds, Mrs. Beverly Cousins and her daughter, Mrs. Sandra Cousins Morgan (Insureds), and their assignees, Mr. and Mrs. David Inabinet (Intervenors), for the amount of an excess judgment rendered in favor of Intervenors against Insureds in a tort action following Insurer's rejection of Intervenors' compromise offer within policy limits. The trial court held Insurer liable upon finding Insurer in bad faith in failing to fully inform Insureds regarding the offer of settlement. Insureds and Intervenors have answered the appeal claiming attorneys' fees and damages denied below. We reverse and render judgment for Insurer.

This action is a sequel to Inabinet v. State Farm Mutual Automobile Insurance Company, et al., La.App., 234 So.2d 827, wherein Intervenors filed suit against Insurer and Insureds for damages sustained in an automobile accident involving a vehicle being driven by Mrs. Inabinet and a car owned by Mrs. Cousins and being driven by Mrs. Morgan, The Cousins vehicle was insured by State Farm in limits of $10,000.00--$20,000.00.

At the time of the accident, Mrs. Inabinet was proceeding easterly on Main Street in the unincorporated town of Lacombe, St. Tammany Parish. Mrs. Morgan was also proceeding easterly along Main Street approximately four to five car lengths behind Mrs. Inabinet, who was proceeding to her residence on the South side of the street. The Inabinet residence was directly across from the post office. The Inabinet car was struck after its driver had partially completed her right turn into the driveway. At the moment of impact, only the rear portion of the Inabinet car was on the traveled portion of the roadway.

Mrs. Inabinet's version of the accident was that she began reducing her speed to 15 or 20 miles per hour as she approached her driveway, and continued doing so until she reached the point where she intended to turn. When about 20 feet from her driveway, she looked in her rear view mirror, detected no traffic behind her and made her turn. Her vehicle was struck when all of its wheels were off of the street with only the rear three feet of the car extending onto the street. She acknowledged she did not give either a hand or mechanical signal of her intent to turn because she saw no traffic to her rear. She estimated her speed at five to eight miles per hour when she began her turn.

Mrs. Morgan explained that as the Inabinet car approached the driveway, Mrs. Inabinet drove over the centerline of the street as if to drive to the post office on the left. Instead, Mrs. Inabinet veered suddenly and sharply to the right into the driveway. She also stated she was about 20 feet to the rear of the Inabinet vehicle when it made its sudden maneuver, and there was nothing she could do to avoid the collision.

John Dupuy, a disinterested witness, was proceeding easterly along Main Street behind Mrs. Morgan after having stopped at a service station situated on a corner two or three blocks west of the scene of the collision. He stated he had to wait at the station to permit Mrs. Morgan to pass. He noted that Mrs. Morgan was going about 40 miles per hour after she passed the service station. He continued to observe Mrs. Morgan's car and saw that when Mrs. Morgan was about 75 feet from the driveway, the Inabinet car was in the driveway with just its rear portion extending over the street. He also noted that when Mrs. Morgan was about 20 feet from the Inabinet car, Mrs. Morgan applied her brakes.

Initial investigation by State Farm indicated an absence of liability on the part of Mrs. Morgan, and only slight damages suffered by the Inabinets, namely, approximately $100.00 to their vehicle. It later developed that Mrs. Inabinet sustained serious injuries to her neck which condition required several operations. Although State Farm and counsel for the Inabinets realized that Mrs. Inabinet's injuries would, if recovered, exceed policy limits, a settlement within policy coverage could not be reached prior to trial on the merits. The Inabinets demanded $9,000.00 as a compromise figure; State Farm offered a maximum of $7,500.00. Confident that the matter could be successfully defended on the merits, State Farm defended itself and its insureds. During the course of the trial, it became evident to the trial judge that if plaintiffs recovered, judgment would considerably exceed policy limits. A recess was called by the trial court during which the court apprised counsel for all parties that if the Inabinets prevailed, judgment would be substantially in excess of the insurance coverage. A settlement offer of $10,000.00 was declined by State Farm and trial resumed. Judgment was rendered in favor of the Inabinets in the sum of $27,072.57, and affirmed on appeal to this court. See Inabinet v. State Farm Mutual Automobile Insurance Company, 234 So.2d 827. Writs were denied by the Suprme Court and the judgment became final.

Insureds filed this action against State Farm for recovery of the excess judgment rendered against them. It is conceded that the defense rendered was competent. Insurer's alleged liability is predicated upon reputed negligence and/or bad faith in: (1) Failing to compromise notwithstanding liability was highly probable, and the evidence at trial indicated liability was clear; (2) failing to fully inform Insureds of the legal ramifications of the case, and the imminent possibility of the Insureds' exposure to personal liability; (3) failing to settle within policy coverage where it was evident that judgment would probably exceed insurance limits because of the nature of Mrs. Inabinet's injuries; (4) failure to fully disclose and explain to Insureds the circumstances of the compromise offers, and the possibility of the Insureds' exposure to excess judgment resulting from Insurer's rejection of all compromise offers.

Prior to trial on the merits, the Insureds assigned and conveyed to Intervenors all of Insureds' rights against Insurer, in consideration of Intervenors' release of Insureds from liability under the excess judgment. Intervenors then joined in this action as plaintiffs. Insurer responded with exceptions of no right and cause of action which assert: (1) That Insureds have no interest in the suit having assigned their rights, and (2) that Intervenors are without interest because their alleged acquisition was null as a prohibited sale of litigious rights, and alternatively, invalid for lack of consideration. All exceptions were referred to the merits by the trial court and ultimately overruled after judgment was rendered in favor of Insureds and Intervenors, said judgment recognizing that Intervenors had succeeded to all of Insureds' rights by virtue of the transfer and assignment.

The trial court found that the attorney for Insurer owed Insureds the duty of due care in defense of the action, including the obligation to keep the Insureds fully informed as to all developments in the case. The court also found that Insureds were somewhat less informed than Insurer, and therein Insurer breached its duty to insureds. The court concluded that whereas Insureds were informed as to the possibility of an excess judgment against them, Insureds were misled by the repeated assurance of counsel that there was no liability on the part of the Insureds. The trial court further found that the false confidence instilled by counsel's failure to fully disclose settlement offers and other relevant details caused Insureds to strenuously oppose all offers of compromise which Insureds were not in a position to fully evaluate.

Although Insurer urges its exceptions before this Court, we pretermit all consideration thereof in view of our finding that Insurer is not liable on the merits.

Insurer's obligation to defend in contained in the following policy language:

'. . . and the company shall defend any suit alleging such bodily injury or property damage and seeking damages which are payable under the terms of this policy, even if any of the allegations of the suit are groundless, false or fraudulent; but the company may make such investigation and settlement of any claim or suit as it deems expedient.'

The policy also...