Crabb v. National Indem. Co.

• Decision Date: 23 March 1973
• Docket Number: Nos. 11035,11041,s. 11035
• Citation: 87 S.D. 222,205 N.W.2d 633
• Parties: , 63 A.L.R.3d 715 Samuel W. CRABB, Special Administrator of the Estate of John Allan Ripple, Deceased, Plaintiff, Respondent, and Cross Appellant, v. NATIONAL INDEMNITY COMPANY, an insurance corporation, Defendant, Appellant, and Cross Respondent.
• Court: South Dakota Supreme Court

Page 633

205 N.W.2d 633

87 S.D. 222, 63 A.L.R.3d 715

Samuel W. CRABB, Special Administrator of the Estate of John Allan Ripple, Deceased, Plaintiff, Respondent, and Cross Appellant, v. NATIONAL INDEMNITY COMPANY, an insurance corporation Defendant, Appellant, and Cross Respondent.

Nos. 11035, 11041.

Supreme Court of South Dakota.

March 23, 1973.

Costello, Porter, Hill, Banks & Nelson, Rapid City, for defendant, appellant, and cross respondent

Robert Varilek, Rapid City, for plaintiff, respondent, and cross appellant.

HANSON, Justice.

This is an action by a judgment creditor against an insurer to recover the balance remaining unpaid on a wrongful death judgment. The amount sought is in excess of the insured's policy limits.

The defendant insurer, National Indemnity Company, had issued an automobile liability insurance policy to Sylvester Wade, with a limitation on liability of $10,000 for the death or injury of one person. On May 27, 1966, while the policy was in effect, Wade was involved in a motor vehicle-pedestrian accident which resulted in the death of John A. Ripple. Wade was thereafter charged with and found guilty of second degree manslaughter alleged to have been committed while operating a motor vehicle in a negligent manner and while under the influence of intoxicating liquor. The conviction was affirmed by this Court on June 12, 1968, in State v. Wade, 83 S.D. 337, 159 N.W.2d 396.

On November 13, 1967, the plaintiff, Samuel W. Crabb, as special administrator of the Ripple estate, commenced a wrongful Prior to the trial of the wrongful death action plaintiff submitted oral and written offers to settle the action for the policy limit of $10,000. These offers were refused by the insurer.

death action against Wade, seeking damages in the amount of $30,000. National Indemnity retained William G. Porter of Rapid City, as legal counsel. Mr. Porter informed Wade the wrongful death action involved a claim for damages in excess of the policy limits and he had a right to retain personal counsel. At the time Wade was represented in the criminal action by William Rensch as court-appointed counsel. Mr. Rensch was also authorized to communicate and cooperate with Mr. Porter in the defense of the [87 S.D. 226] wrongful death action. In the criminal action Wade was instructed to invoke the Fifth Amendment. It was also decided by Mr. Rensch and Mr. Porter that Wade would not appear and testify in the civil action.

During the trial of the wrongful death action defendant's motion for a directed verdict was denied and the issues were submitted to a jury which returned a verdict for plaintiff in the amount of $20,000. After the trial, defendant's motion for judgment n.o.v. was denied. Thereafter, plaintiff again offered to settle the action within the policy limits. Wade and his counsel both demanded that National Indemnity accept the offer. Upon the advice of its counsel the insurer refused the settlement demand and an appeal was perfected. National Indemnity's intention to appeal was not communicated to Wade or his counsel.

On April 30, 1969, this Court affirmed the wrongful death judgment in Crabb v. Wade, 84 S.D. 93, 167 N.W.2d 546. National Indemnity partially satisfied the judgment by paying $10,000, the limits of its policy, plus interest and costs, on May 23, 1969. On June 26, 1969, Wade assigned all the claims, demands, and causes of action which he might have against the insurer to the Special Administrator of the Ripple Estate.

The present action was instituted by the Special Administrator against National Indemnity to recover the unpaid balance of $10,000 on the judgment rendered in Crabb v. Wade because of the insurer's alleged wrongful refusal to settle the wrongful death action within the policy limits. The issues were submitted to a jury which returned a verdict for the Special Administrator in the amount of $10,000. The defendant insurer appeals from the judgment. The plaintiff also cross appeals from an order denying the allowance of attorney's fees and prejudgment interest.

The principal issue is whether the defendant insurer is liable for the excess judgment because of its refusal to settle within the limits of the insured's liability policy. Cases from other jurisdictions involving this subject range from no liability to absolute liability. Where recovery is permitted it is usually allowed upon the grounds of negligence, or bad faith, or a fusion of the two. This Court in harmony with the majority view, approved recovery under the bad faith rule in Kunkel v. United Security Ins. Co. of New Jersey, 84 S.D. 116, 168 N.W.2d 723. In an extensive opinion on the subject the Court pointed out that good faith is a broad and comprehensive term which has to be determined by the particular facts and circumstances in each case. In considering what constitutes good or bad faith the interests of the insured must be given 'equal consideration' with those of the insurer and in making a decision to settle or try a case 'the insurer must in good faith view the situation as it would if there were no policy limits applicable to the claim'. Various factors were then set forth which should be considered in determining the issue.

Tested by the above standards there is ample evidence in the record, viewed in a light most favorable to the verdict, to sustain There were two eyewitnesses to the accident. They testified a 1962 or 1963 black Chevy II station wagon was being driven fast, and weaved back and forth from one side of the road to the other. As they followed the station wagon on the access road leading to the Main Gate of the Air Base they observed it drift from the center of the road to the right until it appeared to strike a pedestrian. The station wagon did not stop after the accident and Ripple's body was not discovered in the ditch until the next morning. Wade did not appear or testify at the trial of the wrongful death action but he did admit, in his answer, that a 1963 Chevy II black station wagon struck and caused Ripple's death. There was ample proof in the record to show Wade was operating the station wagon and was under the influence of intoxicating liquor at the time of the accident. In comparison, decedent Ripple violated a statutory rule of safety by walking on the right-hand shoulder of the road instead of the left-hand side.

the excess judgment rendered against the insurer in this case. The facts surrounding the accident as reported in Crabb v. Wade, supra, show that decedent Ripple was an airman stationed at the Ellsworth Air Force Base. He was 22 years of age, single, and an exceptionally bright, intelligent, and capable young man. About 9:00 in the evening of May 27, 1966, he was returning to the Base walking north on the right-hand shoulder of the access road leading to the Main Gate. He was wearing suntan trousers and a green jacket. While so walking he was struck and killed by a hit-and-run driver.

In evaluating all of the salient facts, including a review of testimony in the manslaughter trial, Mr. Porter was of the opinion the plaintiff could not prevail in the wrongful death action. In his judgment the decedent Ripple was guilty of negligence more than slight, as a matter of law, and such negligent conduct was a contributing cause of his death. It is now the position of the insurer that it cannot be held liable for the excess for its alleged wrongful refusal to settle within the policy limits as it 'simply and purely' relied upon the professional advice of counsel on a question of local law.

While the insurer's position was recognized in Ferris v. Employers Mutual Casualty Company, 255 Iowa 511, 122 N.W.2d 263, we do not agree that reliance on counsel is the sole decisive test of good faith in the present action. It is merely one factor to be considered. An insurer cannot discharge its entire responsibility to an insured 'by simply employing a competent attorney and abiding by his decision concerning advisability of settlement'. Keeton, 'Liability Insurance and Responsibility for Settlement', 67 Harvard L.Rev. 1168. All the relevant factors bearing on the issue must be considered. Dumas v. Hartford Accident & Indemnity, 94 N.H. 484, 56 A.2d 57; Board of Ed. of Bor. of Chatham v. Lumbermen's Mut. Cas. Co., D.C.N.J., 293 F.Supp. 541; Potomac Insurance Company v. Wilkins Company, 10 Cir., 376 F.2d 425.

Before and during the trial the insurer was advised of the strength of claimant's case on the issues of liability and damages and in the event the issues were submitted to a jury a verdict in excess of the policy limits would no doubt be rendered. This is evidence from the following: (1) the complaint alleged damages in the amount of $30,000 for the wrongful death of a bright young man; (2) the answer admitted the insured's car struck and killed Ripple; (3) the insured Wade had been convicted of manslaughter in connection with the death; (4) the insured was intoxicated and driving recklessly at the time of the accident; (5) the issues of proximate cause and comparative negligence would be submitted to the jury; (6) before trial in a letter to the insurer Mr. Porter summarized the prospect 'So the picture from the insured's point of view is a bleak one if his conduct, and his conduct alone, is to be considered * * * After the judgment in excess of the policy limits had been entered and defendant's motion for judgment n.o.v. had been denied the insurer again flatly refused to consider an offer to settle within the policy limits. At this juncture the insurer sought an independent appraisal and evaluation of the case from an attorney at law in Minneapolis. However, before receiving this opinion the claims manager for the insurer directed Mr. Porter to appeal. The appeal was taken without ever consulting or advising the insured. These are 'added factors' bearing on the issue of bad faith. Wasserman v. Buckeye Union Casualty Co., 29 Ohio App.2d 7, 277 N.E.2d 569.

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