Douglas v. United States Fid. & Guar. Co.

• Citation: 127 A. 708
• Parties: DOUGLAS v. UNITED STATES FIDELITY & GUARANTY CO.
• Decision Date: 05 November 1924
• Court: Supreme Court of New Hampshire

127 A. 708

DOUGLAS

v. UNITED STATES FIDELITY & GUARANTY CO.

Supreme Court of New Hampshire. Hillsborough.

Nov. 5, 1924.

Transferred from Superior Court, Hillsborough County; Marble, Judge.

Action by John L. Douglas against the United States Fidelity & Guaranty Company. A verdict was rendered for plaintiff, and case was transferred on defendant's exceptions to denial of its motion for nonsuit and to instructions given to jury. Exceptions overruled.

Case for negligently failing to settle a claim for damages against the plaintiff. Trial by jury and verdict for the plaintiff. The plaintiff died before the trial, and the cause was prosecuted by his administrator.

The defendant had insured the plaintiff against liability for personal injury to his employees not exceeding $5,000 for a single injury. The contract contained the following provisions, among others:

"Liability.

"II. To indemnify the employer against loss by reason of the liability imposed upon the employer by law for damages on account of such injuries or death, provided such loss is legally insurable under the laws of such states or commonwealths as are specified in item 3 of the declarations.

"Service.

"III. To serve the employer (1) by the inspection of work places set forth in said declarations whenever deemed necessary by the company, and thereupon to suggest to the employer such changes and improvements as may operate to reduce the number and severity of personal injuries during work; and (2) upon notice of such injuries so sustained by investigation thereof and by settlement of any resulting claims in accordance with the law.

"Defense.

"IV. To defend in the name and on behalf of the employer any suits or other proceedings which may at any time be instituted against him on account of such injuries, including suits or other proceedings alleging such injuries and demanding damages or compensation therefor; although such suits, proceedings, allegations and demands are wholly groundless, false or fraudulent.

"Costs and Expenses.

"V. To pay all costs taxed against the employer in any legal proceeding defended by the company, all interest accruing after entry of judgment, and all expenses incurred by the company for investigation, negotiation, and defense."

An accident occurred wherein one Elliott, the plaintiff's employee, was injured. The defendant was notified, and assumed charge of the defense. An offer of settlement for $1,500 was made by Elliott, and was not accepted. The case went to trial, and resulted in a verdict for $13,500. Other facts bearing upon the defendant's conduct are stated in the opinion. Transferred from the superior court, upon the defendant's exceptions to the denial of its motion for a nonsuit and to the instructions given to the jury.

Lucier & Lucier, of Nashua, and Robert W. Upton, of Concord, for plaintiff.

Henry V. Cunningham, of Boston, Mass., and Banigan & Banigan, of Manchester, for defendant.

PEASLEE, C. J. I. The motion for a nonsuit is put upon the ground, among others, that there was no evidence of the defendant's negligence. The testimony shows a serious injury to the servant, Elliott, one for which a common-law recovery would probably exceed the $5,000 insurance carried with the defendant. There was an offer by Elliott to settle for $1,500. The defendant failed to accept the offer, suit was brought, and a verdict for $13,500 was returned and sustained. Elliott v. Douglas, 80 N. H. 418, 117 A. 593.

At the trial of the present action the defendant's head representative in the transactions (Hartnett) sought to justify the failure to settle upon two grounds: That it had no reason to believe that Douglas was liable, and that Elliott's mental condition was such that a binding settlement with him could not have been made.

As to the first ground the evidence was conflicting. While Hartnett denied all knowledge of any inculpating facts, O'Callaghan, the adjuster who made the investigations was not called to testify. On the other hand, Douglas's son testified that he discovered the existence of the cause upon which the verdict was sustained shortly after the accident, and that he and his father told the adjuster all that the witness knew. It is not denied that knowledge of such facts would at once inform any one that Douglas was probably liable. This phase of the defense is put upon the ground of lack of such knowledge. It is manifest that this situation presented a clear and plain issue for the jury.

As to Elliott's mental condition, the evidence was also conflicting, and this issue was also for the jury.

It is further sought to excuse the defendant upon the ground that it followed the advice of counsel. According to the evidence, counsel were not informed of the facts known to the junior Douglas. It follows that the defense of reasonable reliance upon the advice of counsel (if open to this defendant) cannot avail upon this motion. If O'Callaghan failed to tell Hartnett, it is liable for O'Callaghan's fault, and, if Hartnett failed to tell the lawyer, it is responsible for Hartnett's fault.

Further light is thrown upon Hartnett's knowledge and motives by other portions of the evidence. But it is unnecessary to go further into details. Enough has been said to show that there was evidence to be considered upon the question of the defendant's negligence. The case is governed by Cavanaugh v. Corporation, 79 N. H. 186, 106 A. 604.

II. It is also urged that the issue of negligence in this case is one that could not be fairly and intelligently passed upon by a jury, that it involves intricate questions of law not within the understanding of jurors, and upon which they could not pass in any event without the aid of expert testimony. The extent of the right to trial by jury is settled by ascertaining how it was "used and practiced" before 1784. "With some exceptions which do not bear upon the present controversy, the right to trial by jury in suits at law was absolute. The books will be searched in vain for a precedent for taking a common-law action from the jury upon the ground that the particular case was beyond their comprehension." Daley v. Kennett, 75 N. H. 536, 537, 78 A. 123, 124, 39 L. R. A. (N. S.) 45.

Nor is the claim that further or expert evidence was needed well founded. The issue as presented to the jury did not involve intricate questions of law. The defendant's claim was that it did not consider Douglas liable because it had no information of facts showing liability. The plaintiff's claim and evidence tended to show that such facts existed and that the defendant was informed of them. The pros and cons of the defendant's conduct were very fully gone over in the introduction of the testimony. It might be said that the subject was exhaustively debated between counsel and the witnesses. The net result was that at the close of the evidence the issues between the parties were clearly defined and were merely questions of fact, save only those usual matters as to which the presiding justice gave instructions as to the law. If the defendant desired other or fuller instructions as to the bearing of certain facts upon the issue of negligence, it should have filed requests therefor. In the absence of such requests, it cannot complain of what the charge does not contain. Tuttle v. Dodge, 80 N. H. 304, 316, 116 A. 627, and cases cited.

III. The defendant concedes that Cavanaugh v. Corporation, 79 N. H. 186, 106 A. 604, permits a recovery for a negligent failure to settle, but it is urged that the decision is contrary to reason and to the authorities elsewhere. In support of this position the following cases are cited: Rumford Falls Paper Company v. Company, 92 Me. 574, 43 A. 503; Schmidt v. Company, 244 Pa. 286, 90 A. 653, 52 L. R. A. (N. S.) 126; New Orleans, etc., Company v. Company, 114 La. 153, 38 So. 89, 6 L. R. A. (N. S.) 562; McAleenan v. Company, 219 N. Y. 563,114 N. E. 114; Levin v. Company, 233 N. Y. 631, 135 N. E. 948; Auerbach v. Company, 236 N. Y. 247, 140 N. E. 577, 28 A. L. R. 1294.

The cases relied upon do not consider the question involved here. They were all actions upon the contract, and were brought upon the theory that the duty to settle was absolute. The question of care or negligence in exercising the right to elect is not considered in any of them. But they do state, in the course of the discussion, that the insurer has an option to settle or not as it chooses. The fact that the right of election is vested solely in the insurer does not dispose of the present case. Exclusive authority to act does not necessarily mean the right to act arbitrarily. Our law upon the subject is based upon the broad proposition that in all its dealings with the defense to Elliott's claim the defendant was bound to act as a reasonable man might act under the same circumstances.

While the questions of negligence and agency are not discussed in the cases cited by the defendant, they are considered in another case, wherein the issues here involved are decided in the defendant's favor. Wisconsin Zinc Company v. Company, 162 Wis. 39, 155 N. W. 1081, Ann. Cas. 1918 C, 399. The question of negligence is there disposed of upon the ground that the right to settle is a mere option. "We can find nothing in the contract by which defendant agreed to make any settlement, nor whereby it agreed to exercise ordinary care in the matter of negotiating settlements. It would be an arbitrary assumption to say that the parties intended that their contract should contain such important provisions and still omitted any express mention of them." 162 Wis. 50, 51, 155 N. W. 1086. So far as an obligation to use care is concerned, the above reasoning has no weight. That obligation is ordinarily imposed by law upon all who undertake a service. Burnham v. Stillings, 76 N. H. 122, 79 A. 987, and cases cited. It is not usual to express this duty in the contract.

Nor is the fact that there is no hard and fast agreement to make a...