Craig v. Iowa Kemper Mut. Ins. Co., s. KCD

• Decision Date: 03 April 1978
• Docket Number: Nos. KCD,s. KCD
• Citation: 565 S.W.2d 716
• Parties: Billy Joe CRAIG and Betty A. Craig, Plaintiffs-Appellants, v. IOWA KEMPER MUTUAL INSURANCE COMPANY, Defendant-Respondent. 28153 and KCD 28154.
• Court: Missouri Court of Appeals

Page 716

565 S.W.2d 716

Billy Joe CRAIG and Betty A. Craig, Plaintiffs-Appellants, v. IOWA KEMPER MUTUAL INSURANCE COMPANY, Defendant-Respondent.

Nos. KCD 28153 and KCD 28154.

Missouri Court of Appeals,Kansas City District.

April 3, 1978.

Motion for Rehearing and/or Transfer Denied May 1, 1978.

Application to Transfer Denied June 15, 1978.

Edward J. Murphy, Inc., Butler, Fred S. Selsor, Kansas City, for plaintiffs-appellants and plaintiffs-respondents.

Don B. Roberson, W. James Foland, Kansas City, for defendant-appellant Iowa Kemper Mutual Insurance Co. and for Defendant-Respondent Iowa Kemper Mutual Insurance Co.

Before SHANGLER, P. J., and WELBORN and HIGGINS, Special Judges.

SHANGLER, Presiding Justice.

The plaintiffs Craig brought their petition in four counts on causes of action which arose from the uninsured motorists coverages of the liability policy issued to them by the defendant Kemper Mutual Insurance Company. The parties cross-appeal from adverse judgments entered severally.

These disputes derived from a collision of March 27, 1970 between Ward and Welborn which took the life of the infant Craig, son of the plaintiffs, then a passenger in the Ward automobile driven by the brother of Mrs. Craig. Ward was then an uninsured motorist and Welborn was insured by Allstate.

The parents Craig brought an action for the wrongful death of the child against both Ward and Welborn as joint tortfeasors. At the time of the casualty the plaintiffs Craig were insured under a liability policy issued by the defendant Iowa Kemper which, as required by Sec. 379.203, RSMo 1969, provided uninsured motorist coverage for $10,000 for a single injury or death. The plaintiffs notified the defendant Iowa Kemper that they claimed under that coverage and also under the medical payment provision of the policy. An attempt at negotiation followed but rancor between the attorneys foiled the effort. Iowa Kemper intervened in the litigation between the Craigs and tortfeasors Ward and Welborn but withdrew when Ward denied the Iowa Kemper request to direct the defense. On December 20, 1972, a jury returned a verdict of.$23,500 for plaintiffs Craig against both Ward and Welborn. Iowa Kemper had offered the Craigs $7,500 to settle their claim against uninsured Ward before withdrawal from the litigation. The defendant Welborn filed a timely motion for new trial. The defendant Ward made no complaint of error and the judgment as to him became final.

Within thirty days of judgment (on January 5, 1973), Iowa Kemper offered the Craigs $9,500 in full settlement of their claim under the uninsured motorist coverage. The Craigs, however, demanded the full $10,000 coverage but then, on February 12, 1973, after counsel discovered that the Iowa Kemper policy covered two automobiles, not only one, the Craigs withdrew all offer to settle. Thus it was that on February 14, 1973, the Craigs brought their petition in four separate counts against the defendant Iowa Kemper.

Count I sought recovery under the uninsured motorist coverage on the first Craig automobile for $10,000 plus interest from December 20, 1972 (the date of verdict against Ward and Welborn). Count II sought to stack an additional $10,000 plus interest under the uninsured motorist coverage on the second Craig automobile. Count III sought recovery under Secs. 375.296 and 375.420, RSMo 1969, for statutory penalty and attorney fee for vexatious refusal to pay at least one of the uninsured motorist coverages in consequence of the December 20, 1972 verdict. Count IV sought recovery for actual and punitive damages for the tortious breach of duty by insurer Iowa Kemper to deal with the Craigs as policyholders in fairness and good faith.

After this petition was brought, Iowa Kemper on February 21, 1973, made formal payment of $10,100 to the circuit clerk in the wrongful death action against Ward and Welborn. That sum was meant as full acquittance of the Iowa Kemper liability under uninsured motorist coverage and for the interest accrued on the judgment, as calculated by the insurer.

While the Craig suit against Iowa Kemper pended, the Craigs sought and obtained (from the court with jurisdiction over their wrongful death action against Ward and Welborn) an order to approve a judgment in that cause ¹, apportion damages and approve a partial satisfaction of the judgment. The transaction resulted in a $3,500 partial payment of the judgment by Welborn and reserved to the Craigs the balance of the judgment or $20,000. This prompted Iowa Kemper to counterclaim for subrogation under the provisions of Sec. 379.203 against the Craigs for the $3,500 received by them in that suit as a setoff in the action between them on the uninsured motorist coverage.

The cause proceeded to trial to the court. After evidence, the plaintiffs had judgment for $10,000 plus interest from December 20, 1972 on Count I and for $10,000 without interest on Count II. The defendant had judgment on Count III for penalties for vexatious refusal to pay under the policy. The court had earlier entered summary judgment for the defendant on Count IV for bad faith conduct in the negotiation of settlement process. The court found for plaintiffs Craig on the Iowa Kemper counterclaim for subrogation.

The plaintiffs Craig appeal from the denial of interest on the judgment in Count II, from judgment against them on the Count III vexatious delay claim, and from the adverse summary judgment in the Count IV outrageous conduct claim. The defendant Iowa Kemper appeals on the contentions that the Craig settlement with the uninsured motorist without the consent of the insurer barred recovery under the express terms of the policy, and that the adverse judgment on the counterclaim was error.

I

Appeal by Plaintiffs

A Denial of Interest on the Count II Judgment

The plaintiffs Craig contend the trial court erred in denial of interest on the $10,000 judgment. They argue that the liability of insurer Iowa Kemper under the policy was fixed by the verdict entered against Ward on December 20, 1972 and so interest on that count, as well as on the $10,000 judgment on Count I, properly runs from that date. The defendant Iowa Kemper however, was responsible to the Craigs under the policy to pay only the sums which the insured was legally entitled to recover as damages from an uninsured motorist. At the time judgment was entered against Ward the liability of an insurer for multiple payments to an insured for the uninsured motorist coverage on several cars under a single policy had not yet become a fixed principle of law. The doctrine that uninsured motorist coverage in a single policy, which by the terms are made to apply separately to each vehicle listed shall be stacked in favor of the insured, was not declared until our decision in Cameron Mutual Insurance Company v. Madden (No. 26556 adopted May 5, 1975) and decided on transfer by the Missouri Supreme Court en banc on February 9, 1976 and reported at 533 S.W.2d 538. Therefore, it was only after judgment was entered July 7, 1975 on Count II that the payment of the $10,000 uninsured motorist coverage on the second vehicle became a fixed liability of Iowa Kemper. The right to that recovery was not vested until determined by the trial court. Payment was not due until then, and neither was interest. The judgment on Count II is affirmed.

B Vexatious Refusal Penalty

The plaintiffs Craig next contend that the denial of their claim for statutory damages under Secs. 375.296 and 375.420 was error. These sections provide that in any action against an insurance company "to recover the amount of any loss under a policy" (§ 375.420) ², where the company vexatiously and without reasonable cause refuses to pay, the court or jury may, in addition, allow damages not to exceed ten percent of the loss and a reasonable attorney fee. These statutes were enacted, not as an additional recovery, but that the amount due under the insurance policy shall be paid without arbitrary refusal or recalcitrant delay by the insurer. Willis v. American National Life Insurance Company, 287 S.W.2d 98, 105(11, 12) (Mo.App.1956). By the terms of Sec. 375.420 only those actions ex contractu and not ex delicto even where the tort arises from contract may recover penalties. Zumwalt v. Utilities Ins. Co., 360 Mo. 362, 228 S.W.2d 750, 756(6) (1950). Only an insured can suffer a loss under the statute, and not a third party who claims for a public liability. Corder v. Morgan Roofing Co., 355 Mo. 127, 195 S.W.2d 441, 448(12-14) (1946). That is to say, only where performance under the policy flows directly from the insurer to the insured or his beneficiary do these statutes aid. ³ These actions are most aptly described as first party claims. Couch on Insurance 2d, § 23.11.

The obligation of insurer Iowa Kemper to pay $10,000 ⁴ to the Craigs under Part IV of the policy did not accrue merely because they proved a loss but only after the damage was adjudicated to result from the legal liability of the uninsured motorist (Ward). Thus, the claim of the Craigs did not become a loss under the policy within the terms of Sec. 375.420 and so payable directly from the insurer to the insured until the legal cause for the injury first was fixed on the uninsured motorist. Only then did the claim become a loss under the policy, and so, ex contractu in this case, when final judgment was entered on the verdict of December 20, 1972 against Ward.

The provisions of uninsured motorist coverage reorder the normal postures between an insured and an insurer. They transform, in a singular way, the nominal insured into a third-party claimant and the nominal uninsured motorist into the actual insured. That is because to prove a claim under Part IV coverage the nominal insured must show the legal liability of the uninsured motorist. The insurer, for its part, in effect insures the uninsured motorist to the extent of the policy limits and so seeks to exonerate the...