Cudd v. Great American Insurance Company, Civ. A. No. 8038.

• Decision Date: 21 February 1962
• Docket Number: Civ. A. No. 8038.
• Citation: Cudd v. Great American Insurance Company, 202 F.Supp. 237 (W.D. La. 1962)
• Parties: Robert C. CUDD v. GREAT AMERICAN INSURANCE COMPANY.
• Court: U.S. District Court — Western District of Louisiana

202 F. Supp. 237

Robert C. CUDD v. GREAT AMERICAN INSURANCE COMPANY.

Civ. A. No. 8038.

United States District Court W. D. Louisiana, Monroe Division.

February 21, 1962.

George M. Snellings, Jr., McHenry, Snellings, Breard & Sartor, Monroe, La., for plaintiff.

W. D. Cotton, Cotton & Bolton, Rayville, La., Nathan M. Calhoun, Falkenheiner & Calhoun, Dale, Richardson & Dale, Vidalia, La., for defendant.

BEN C. DAWKINS, Jr., Chief Judge.

Plaintiff brought this damage action for personal injuries sustained in a highway accident which occurred on the night of December 4, 1959, on a road in Concordia Parish. At the time, he was riding as a passenger in an automobile owned by Monroe Machinery Company and driven by Paul Dykes. The car collided with a truck stopped partly on the highway and owned by Atchley Electric Service of Ferriday, Louisiana. Defendant, Great American Insurance Company, was the public liability insurer of the truck. It was sued directly and alone under the Louisiana Direct Action statute, LSA-R.S. 22:655.

The case was tried to a jury which returned a verdict for plaintiff in the sum of $16,462.90. Against the amount of this verdict, defendant now seeks to have credited the sum of $5,250, which was received by plaintiff in return for his execution of a "Covenant Not to Sue and Limited and Restricted Release" in favor of Marquette Casualty Company, the public liability insurer of the automobile in which plaintiff was riding, Monroe Machinery Company, its owner, and Paul Dykes, the driver. The instrument contained an express reservation of rights against Atchley Electric Service, P. R. McSwain, and Great American Insurance Company.

Simply put, the issue is: Where several persons are involved in an automobile accident which gives rise to a cause of action in tort, is payment made to the injured party (plaintiff in the action) in return for a so-called "Covenant Not to Sue and Limited and Restricted Release" in favor of an alleged tortfeasor (and his insurer) not made a party to the suit, to be credited against the amount of recovery awarded in the jury's verdict where, upon insistence of counsel for plaintiff, evidence of the settlement was withheld from the jury?

We have considered carefully the respective briefs, and authorities cited, and have conducted extensive independent research. Our conclusion is that the jury's verdict should be reduced by $5,250, the amount of the settlement, thereby leaving a balance of $11,212.90 for which judgment will be rendered. Although the facts are not in dispute, there is substantial disagreement as to the law. We will proceed, therefore, to a detailed consideration of the problem, fully canvassing the authorities.

In Chandler v. F. Strauss & Son, 194 So. 133 (2nd Cir., LaApp., 1939), an injured plaintiff was partially indemnified by his own insurer pursuant to the terms of a collision insurance policy containing a $50 deductible clause. There the Court refused to allow a credit against the judgment, reasoning that the tort-feasor was not concerned with, and therefore could not benefit from, the settlement between the injured plaintiff and his own insurer. Similar results were reached in Messina v. Bomicino, 27 So.2d 397 (1st Cir., La. App., 1946), and Alpaugh v. Krajcer, 57 So.2d 700 (Orleans La.App., 1952), cert. den., June 2, 1952, the distinction between those cases and this one being that there each plaintiff received indemnity from his own insurer and not from a joint tort-feasor or the latter's insurer. In other words, the plaintiff there received payment pursuant to a contractual obligation as to which the defendant tortfeasor had no interest. In accord is Consolidated Freightways v. Moore, 38 Wash.2d 427, 229 P.2d 882 (1951). Likewise, credits have been denied for payments made pursuant to medical payments clauses in liability policies even though the loss is partially or wholly made good by the other insurer. De Roode v. Jahncke Service, Inc., 52 So.2d 736 (Orleans La.App., 1951); Duree v. State, 96 So.2d 854 (1st Cir., La.App., 1957); Distefano v. Delta Fire & Cas. Co., 98 So.2d 310 (1st Cir., La.App., 1957); Warren v. Fidelity Mutual Ins. Co., 99 So.2d 382 (1st Cir., La.App. 1957); Dumas v. United States Fidelity & Guaranty Co., 125 So.2d 12 (3rd Cir., La.App., 1960); and, contra, Hawayek v. Simmons, 91 So.2d 49, 61 A.L.R.2d 1254 (Orleans La.App., 1956). Similar results have obtained in cases of workmen's compensation payments made to the injured plaintiff; there the tort-feasor is liable for the full amount of damages suffered and has no interest in how the proceeds of the judgment are distributed. See, e. g., United Gas Corp. v. Guillory, 207 F.2d 308 (5th Cir., 1953).

These principles also prevail in the majority of other jurisdictions, the controlling factor being that there is no logical or legal reason why a wrongdoer should receive the benefit of insurance obtained by the injured party for his own protection. It is a collateral contractual arrangement which has no bearing upon the extent of liability of the wrongdoer. Siebrand v. Gossnell, 234 F.2d 81 (9th Cir., 1956); Taylor v. Jennison, 335 S.W. 2d 902 (Ky., 1960); Leon v. United States, 193 F.Supp. 8 (E.D.N.Y., 1961); 15 Am.Jur., Damages, Sec. 201, p. 617; 25 C.J.S. Damages § 99, p. 647; 13 A.L.R. 2d 355 and the 1960 A.L.R. Supplemental Service for additional cases. In accord are Davis v. Kansas Electric Power Co., 159 Kan. 97, 152 P.2d 806 (1944); Finley P. Smith, Inc. v. Schectman, 132 So.2d 460 (Fla.App., 1961); Wells v. Thomas Garland, Inc., 39 S.W.2d 409 (Mo.App., 1931); Allen v. Zickos, 37 Ala.App. 361, 68 So.2d 841 (1953); Monsanto Chemical Co. v. American Bitumuls Co., 249 S.W. 2d 428 (Mo.Sup.Ct., 1952); Ward v. Mitchell, 216 Miss. 379, 62 So.2d 388 (1953); Overland Const. Co. v. Sydnor, 70 F.2d 338 (6th Cir., 1934); Donohue v. Acme Heating, etc., 214 Minn. 424, 8 N.W.2d 618 (1943); Moultroup v. Gorham, 113 Vt. 317, 34 A.2d 96 (1943); and Powers v. Ellis, 231 Ind. 273, 108 N.E.2d 132 (1952). The minority position is stated in Sedlock v. Trosper, 307 Ky. 369, 211 S.W.2d 147, 13 A.L.R.2d 349, and Mink v. Majors, 39 Tenn.App. 50, 279 S.W.2d 714 (1954), but the soundness of its reasoning was questioned in Taylor v. Jennison, supra.

Another rule prevails, however, where the injured plaintiff obtains judgment against one joint tort-feasor after having received partial indemnity for the loss from a settlement or release granted to a second joint tort-feasor or his insurer. Here, the injured party's judgment properly is reduced by the amount he received in settlement from the other tortfeasor. This result is consistent with the fundamental principle of the law of damages that one injured by wrongful or negligent acts or omissions shall have fair and just compensation commensurate with the loss sustained in consequence of the defendant's act, so as adequately to pay him for the injury sustained. Which is to say, the injured party is entitled to recover full indemnity for his loss, and to be placed as nearly as possible in the condition which he would have occupied had he not suffered the injury complained of in the action. However, the law should not put him in a better position than he would have been had the wrong not been done, or, stated another way: he should receive adequate compensation, but no more.

This is the rule adopted by the Uniform Contribution Among Joint Tort-Feasors Act, see Pa.Stat.Ann., Title 12, §§ 2085, 2086 (Purdon, 1958 Supp.), and Pilosky v. Dougherty, 179 F.Supp. 148 (E.D.Pa., 1959), and followed by a majority of courts.

In Mayle v. Criss, 169 F.Supp. 58 (W. D.Penn., 1958), the Court held that, notwithstanding the third-party defendant's immunity from judgment, but recognizing that an injured party can make but one recovery and invoking principles of equity, the amount paid to secure a release should enure to the benefit of the defendant tort-feasor with or without a finding that the other alleged wrongdoer was also a joint tort-feasor. Gelsmine v. Vignale, 11 N.J.Super. 481, 78 A.2d 602 (1951). Again, we emphasize that this result is consistent with the theory of adequate compensation and indemnity.

Stating that double recovery is not permitted in California or elsewhere, the Court in Reinach v. City & County of San Francisco, 164 Cal.App.2d 763, 331 P.2d 1006 (1958), applied this principle in the absence of a controlling statute. See, also, to the same effect, Section 885, Restatement of the Law of Torts; Reeder v. Hoag, 158 Cal.App.2d 41, 321 P.2d 793 (1958); Skyline Cab Co. v. Bradley, 325 S.W.2d 176 (Tex.Civ.App., 1959); Daniels v. Celeste, 303 Mass. 148, 21 N.E.2d 1, 128 A.L.R. 682 (1939); Karcher v. Burbank, 303 Mass. 303, 21 N.E.2d 542, 124 A.L.R. 1292 (1939); Beck v. Bel Air Properties, 134 Cal.App.2d 834, 286 P.2d 503 (1955); Pacific States Lumber Co. v. Bargar, 10 F.2d 335 (9th Cir., 1926); Aldridge v. Morris, 337 Ill.App. 369, 86 N.E.2d 143 (1949), (where credit was allowed for the amount received from persons whose tort liability arose out of the same circumstances, irrespective of whether the covenantee was made a party to the suit, thereby assuring single recovery for damages sustained); New York, C. & St. L. R. R. Co., v. American Transit Lines, Inc., 408 Ill. 336, 97 N.E. 2d 264 (1951); Insuranshares Corporation of Delaware v. Northern Fiscal Corp., 42 F.Supp. 126 (E.D.Penn., 1941); Young v. Anderson, 33 Idaho 522, 196 P. 193, 50 A.L.R. 1056 (1921), (where credit was allowed notwithstanding the fact that the covenantee was not found to be a joint tort-feasor).

Mitigation of damages has been held allowable where the relationship of joint tort-feasors has not been judicially established. For the identical rule in jurisdictions not referred to above, see the annotation and comprehensive review setting forth the theory of indemnity and single recovery in 104 A.L.R. at page 931, and A.L.R. Blue Book, Supplemental Decisions, First...