Dumas v. Hartford Accident & Indem. Co.

• Decision Date: 06 January 1948
• Citation: Dumas v. Hartford Accident & Indem. Co., 94 N.H. 484, 56 A.2d 57 (N.H. 1948)
• Parties: DUMAS v. HARTFORD ACCIDENT & INDEMNITY CO.
• Court: New Hampshire Supreme Court

56 A.2d 57

DUMAS

v.HARTFORD ACCIDENT & INDEMNITY CO.

Supreme Court of New Hampshire.

Dec. 2, 1947.

Rehearing Denied Jan. 6, 1948.

COPYRIGHT MATERIAL OMITTED.

Exceptions from Superior Court, Hillsborough County; Duncan, Judge.

Case by Maurice H. Dumas against Hartford Accident & Indemnity Company, for negligence in failing to settle a claim within the limits of policy insuring against personal injury caused by accident arising out of use of automobile. Questions of law raised by defendant's exceptions were reserved and transferred by Duncan, J.

Judgment for plaintiff on the verdict.

Case, for negligence in failing to settle a claim within the limits of an insurance policy. This proceeding arises from the same accident that was the basis of the tort action for personal injuries because of the negligence of an automobile driver reported in Moran v. Dumas, 91 N.H. 336, 18 A.2d 763. An action similar in some respects to the present one was brought by this plaintiff, transferred in advance of trial and dismissed without prejudice. Dumas v. Hartford Acc. & Indem. Company, 92 N.H. 140, 141, 26 A.2d 361.

On July 22, 1937 about noontime Miss Ann Moran while walking on a cross-walk from the east to the west side of Main Street in Nashua was struck by the car of Dr. Dumas, which he was driving northerly on the easterly side of the street. An officer stationed at the center of the roadway was directing traffic. There was evidence from which it could be found that Miss Moran saw the officer give a signal which she reasonably and properly understood to be for her as notice that she might proceed to cross the street. There was evidence that she looked to the south and observed one or two cars stopped on the southerly side of the cross-walk between her and the officer. She was struck while she was 8 to 10 feet from the sidewalk by the doctor's car and while it was passing the stationary car or cars on their right. The evidence was conflicting as to whether the officer gave the doctor a signal to pass over the cross-walk. Even if it were found that a signal was given which he reasonably thought was intended for him to proceed, it could also be found that in the exercise of due care he should have seen Miss Moran in season to stop or swing to his left. The action for personal injuries was tried in February of 1940 and the jury returned a verdict of $12,000 for Miss Moran.

Dr. Dumas was insured against liability for personal injury caused by accident arising out of the ownership, maintenance or use of his automobile in the defendant company. The limit of the policy was the sum of $5,000 for each injured person. No claim is made that the attorney employed was not fully competent or that the tort case was not tried in an entirely correct manner. Dr. Dumas does insist that the defendant company was negligent in failing to settle the claim of Miss Moran for a sum within the policy limit.

The policy provided as follows:

‘III. Defense, Settlement, Supplementary Payments

‘It is further agreed that as respects insurance afforded by this policy under Coverages A and B the company shall:

‘(a) defend in his name and behalf any suit against the insured alleging such injury or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent; but the company shall have the right to make such investigation, negotiation and settlement of any claim or suit as may be deemed expedient by the company; * * *

‘Exclusions

‘This policy does not apply: * * *

‘(d) under Coverages A, B, C-1, C-2 and D, to any liability assumed by the insured under any contract or agreement;

‘Conditions

‘Assistance and Cooperation of the Insured.

‘The insured shall cooperate with the company and, upon the company's request, shall attend hearings and trials and shall assist in effecting settlements, securing and giving evidence, obtaining the attendance of witnesses and in the conduct of suits and the company shall reimburse the insured for any expense, other than loss of earnings, incurred at the company's request. The insured shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expense other than for such immediate medical and surgical relief to others as shall be imperative at the time of the accident.’

After the opinion was handed down in Moran v. Dumas, supra, the defendant company paid to the plaintiff Moran $5,942 in accordance with its contractual obligation under the policy. After Miss Moran brought suit against him for $7,060.70 plus interest, the balance of her judgment, Dr. Dumas settled with her by a check for $7,000.

Other facts appear in the opinion.

Trial by jury with a view. A verdict was returned for the plaintiff Dumas. During the trial, the defendant took exceptions to the admission and the exclusion of evidence, to the denial of certain requests for instructions and to portions of the charge. It also excepted to the denial of its motion to set aside the verdict and for judgment notwithstanding the verdict. The questions of law raised by these exceptions were reserved and transferred by Duncan, J. McLane, Davis & Carleton and Stanley M. Brown, all of Manchester, for plaintiff.

Wyman, Starr, Booth, Wadleigh & Langdell, of Manchester, for defendant.

JOHNSTON, Justice.

The authorities are divided concerning the liability of an indemnity company that has final control over settlement for negligence in failing to settle a claim when possible to do so within the policy limits. ‘According to the old majority rule, the insured could recover the excess of a judgment above the policy limits from the insurer, because of its failure to effect a settlement for a smaller sum, only if the Company was guilty of actual fraud or bad faith. It should be noted, however, that this bad faith rule is tending to become the minority rule, being displaced by the rule of negligence, which is discussed hereafter.’ 8 Appleman, Insurance Law and Practice, § 4712.

The leading case in this state to the effect that an insurer may be liable for negligence in the failure to make a compromise settlement irrespective of good faith is Douglas v. United States Fidelity & Guaranty Company, 81 N.H. 371, 127 A. 708, 710, 37 A.L.R. 1477. ‘The defendant concedes that Cavanaugh [Bros.] v. [General Accident Fire & Life Assur.] 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. * * * 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.’ Pages 374, 375 of 81 N.H., page 710 of 127 A., 37 A.L.R. 1477. In this case the policy limit was $5,000. The company refused an offer to settle for $1,500 and a verdict was given the plaintiff in the accident case for $13,500. The principle of the Cavanaugh and the Douglas cases has been recognized by dicta in Lumbermen's Mut. Casualty Company v. Yeroyan, 90 N.H. 145, 147, 5 A.2d 726, Duncan v. Lumbermen's Mut. Casualty Company, 91 N.H. 349, 23 A.2d 325 and Dumas v. Hartford Acc. & Indem. Company, 92 N.H. 140, 26 A.2d 361.

Cases from other jurisdictions that adopt this rule of liability for negligence are collected in 8 Appleman, Insurance Law and Practice, § 4713, Note 30.

The obligation of the defendant to use due care arose out of its policy, under the terms of which it had control over the settlement of claims. ‘That obligation (to use care) is ordinarily imposed by law upon all who undertake a service. Burnham v. Stillings, 76 N.H. 122, 79 A. 987, and cases cited.’ Douglas v. United States Fidelity & Guaranty Company, supra, 81 N.H. page 375, 127 A. page 711, 37 A.L.R. 1477. See also, Mehigan v. Sheehan, 94 N.H. 274, 56 A.2d 632.

[2] [3] The duty of the insurer was not only to pay on behalf of the insured all sums the latter should become obligated to pay because of bodily injury within the policy limit of $5,000, but also to save the insured harmless from any and all liability caused by accident and arising out of the ownership, maintenance or use of his automobile in so far as it could do so by a reasonable performance of its service to settle claims. It is a well-recognized rule in the law of negligence that, when one knows or has reason to anticipate that the person, property, or rights of another are so situated as to him that they may be injured through his conduct, it becomes his duty so to govern his action as not negligently to injure the person, property, or rights of that other. Attleboro Mfg. Company v. Frankfort Marine, Accident & Plate Glass Ins. Company, 1 Cir., 240 F. 573, 579. ‘The whole question of insurance against loss may be laid out of the case, and still the defendant would be accountable for negligence. It had contracted to take charge of the defense of this claim. That contract created a relation out of which grew the duty to use care when action was taken. The insurer entered upon the conduct of the affair in question. It had and exercised authority over the matter in every respect, even to negotiating for a settlement. It is difficult to see upon what ground it could escape responsibility when its negligence resulted in damage to the party it...