Fulton v. Woodford

• Decision Date: 29 June 1972
• Docket Number: CA-CIV,Nos. 1,s. 1
• Parties: R. S. FULTON, aka Bob Fulton dba Bob Fulton Trucking Company, Appellant, v. Reid WOODFORD and Harleysville Mutual Insurance Company, a Pennsylvania corporation, Appellee. HARLEYSVILLE MUTUAL INSURANCE COMPANY, a Pennsylvania corporation, Cross- Appellant, v. R. S. FULTON, aka Bob Fulton dba Bob Fulton Trucking Company, Cross-Appellee. GLENS FALLS INSURANCE COMPANY, a New York corporation, Appellant, v. William Earl PATTERSON et al., Appellees. 1684, 1 1805.
• Court: Arizona Court of Appeals

Page 564

498 P.2d 564

17 Ariz.App. 490

R. S. FULTON, aka Bob Fulton dba Bob Fulton Trucking Company, Appellant, v. Reid WOODFORD and Harleysville Mutual Insurance Company, a Pennsylvania corporation, Appellee.

HARLEYSVILLE MUTUAL INSURANCE COMPANY, a Pennsylvania corporation, Cross- Appellant, v. R. S. FULTON, aka Bob Fulton dba Bob Fulton Trucking Company, Cross-Appellee.

GLENS FALLS INSURANCE COMPANY, a New York corporation, Appellant, v. William Earl PATTERSON et al., Appellees.

Nos. 1 CA-CIV 1684, 1 CA-CIV 1805.

Court of Appeals of Arizona, Division 1.

June 29, 1972.

Rehearing Denied July 31, 1972.

Lewis & Roca by John P. Frank, Joseph E. McGarry and Paul G. Ulrich, Phoenix, for Fulton

Gust, Rosenfeld & Divelbess by Richard A. Segal, Phoenix, for woodford

Renaud, Cook, Miller & Cordova, P.A. by J. Gordon Cook, Phoenix, for Harleysville.

O'Connor, Cavanagh, Anderson, Westover, Killingsworth & Beshears by John H. Lyons, Phoenix, for Glens Falls.

Hughes, Hughes & Conlan by Coit I. Hughes and John C. Hughes, Phoenix, for Patterson.

HOWARD, Judge.

This opinion resolves appeals taken from two separate lawsuits which are a segment of the litigation following in the wake of a wrongful death action.

BACKGROUND SUMMARY

The facts which gave rise to the wrongful death action are as follows. Sheriff, general contractor of a Circle K Market construction project, entered into a subcontract with Sanner Contracting Company for paving and supplying the necessary dirt fill. Sanner contacted Conway, a licensed Arizona Corporation Commission carrier, to supply trucks for the job. Conway had a $100,000 comprehensive general automobile liability insurance policy issued by Glens Falls Insurance Company containing an 'automatic coverage' rider required by the Corporation Commission. This rider extended coverage to all losses, damages, injuries or deaths occurring while the vehicles insured were operated as motor carriers under Conway's certificate of convenience and necessity.

Conway did not have enough trucks for the job and therefore contacted Fulton, also a Corporation Commission licensed carrier, and asked him to supply additional trucks. Fulton had a Harleysville $100,000 general automobile liability insurance policy which also contained the automatic certificate of insurance required by the Corporation Commission. Additionally, Fulton had a $50,000 comprehensive general liability policy issued by Employers Casualty Company. Fulton did not have enough trucks in proper running condition to meet Conway's needs so his son, acting for Fulton, asked Patterson to supply his truck for the hauling undertaking. Patterson had a $10,000 U.S.F. & G. Company automobile liability insurance policy.

On his first run, Patterson collided with a motorcycle operated by Johannsen and the accident resulted in Johannsen's death. His widow, on behalf of herself and four surviving children, brought a wrongful death action against Sheriff, Sanner, Conway, Fulton and Patterson.

On January 31, 1964, Harleysville accepted the tender of Fulton's defense and advised him in a letter of that date that the Johannsen claim was in excess of the Harleysville coverage and that attorney Woodford would represent him. (Woodford also represented Patterson.) About two weeks later, the law firm which regularly represented Fulton, advised Woodford and Harleysville that it represented Fulton and wished to be informed of all proceedings and receive copies of all pleadings. Fulton was subsequently deposed by Johannsen's attorney without his law firm being advised of same and Woodford wrote to Fulton on behalf of Harleysville advising him that the insurer was continuing his defense under a reservation of rights. ¹

Employers Casualty Company was notified by Fulton's law firm as to the pendency of Johannsen's suit but Employers refused to defend on the ground of non-coverage. Neither Harleysville nor Woodford made any attempt, prior to trial of the Johannsen suit, to establish that Employers or Glens Falls, Conway's insurance carrier, owed coverage to Fulton. Harleysville's policy imposed upon it the responsibility for investigation, negotiation and settlement of such claims or suits as it deemed expedient and required its insured to cooperate and assist in effecting settlement. It further prohibited the insured from voluntarily making any payment, assuming any obligation or incurring any expense except at his own cost.

Subsequently Conway, Sanner and Sheriff moved for summary judgment against Johannsen. No opposition thereto was filed by Woodford nor did he appear at the oral argument on said motions. Furthermore, neither Fulton nor his personal counsel were advised of the motion or of the granting thereof until the date set for trial. The trial date was accelerated, pursuant to plaintiff's motion, and Fulton was not apprised thereof until several days before trial. Woodford did not inform Fulton's counsel of the acceleration and they only learned of the new trial setting from Fulton.

At the pretrial conference, there was some discussion about a range of settlement but neither Fulton nor his personal attorneys were aware of such discussion.

The Johannsen lawsuit was tried to a jury which returned a verdict of $200,000 in favor of the plaintiff. U.S.F. & G., prior to trial, had paid $9,000 and obtained a covenant not to execute against Patterson, and on December 18, 1964, a judgment for $191,000 was entered against Fulton and Patterson, jointly and severally. Fulton appealed therefrom and since Harleysville was willing to supersede only $100,000 of the judgment, Fulton himself had to obtain a $91,000 supersedeas bond which he accomplished by mortgaging his business property and depositing $10,000 in cash as collateral.

On July 20, 1965, Fulton filed a declaratory judgment action in federal court against Employers and Glens Falls. ² Glens Falls moved for summary judgment which was denied on the ground that Conway had a nondelegable duty of care as a licensed carrier to furnish insurance affording coverage for any breach of his duty to operate trucks without an unreasonable risk of harm to the traveling public. Fulton immediately filed a motion for summary judgment against Glens Falls but before the motion was ruled upon, the Johannsen judgment was affirmed on appeal. See Fulton v. Johannsen, 3 Ariz.App. 562, 416 P.2d 983 (1966). As a consequence thereof, Fulton was faced with the prospect of execution against his business property to satisfy the $91,000 excess judgment or foreclosure of the mortgage and forfeiture of the $10,000 collateral.

Glens Falls and Employers agreed to lend him $30,000 and $15,000 respectively if Fulton would dismiss the pending federal court declaratory judgment action and pursue an action against Harleysville for its bad faith and negligence in handling the Johannsen claim. Fulton was obligated to repay these sums only in the event of recovery against Harleysville. Fulton decided to accept this offer as he was able to raise an additional $46,000, thus satisfying the $91,000 excess judgment. In December, 1966, a stipulation of dismissal was filed in federal court ³ and simultaneously therewith Fulton filed suit in superior court against Harleysville and Woodford.

In June, 1967, Harleysville filed suit against Employers and Glens Falls in federal court which resulted in summary judgment in favor of Harleysville and against Glens Falls. The district court found that Patterson's U.S.F. & G. insurance policy provided primary coverage for the Johannsen accident and that Harleysville and Glens Falls afforded equal, secondary and proportionate coverage to Patterson and Fulton. Glens Falls was directed to pay Harleysville the sum of $22,461.41 ⁴ and Glens Falls appealed to the Ninth Circuit Court of Appeals. (Case No. 25548, submitted for decision November 29, 1970.)

APPEAL FROM FULTON VS. HARLEYSVILLE & WOODFORD LITIGATION

In his complaint, Fulton alleged that Harleysville had wrongfully refused to settle or compromise the Johannsen claim prior to trial; that, acting through its counsel Woodford, the insurer had negligently conducted the preparation of Fulton's defense; that Harleysville was negligent in its selection of an attorney; and that Woodford was guilty of malpractice in his conduct of Fulton's defense. Harleysville counterclaimed for reimbursement of the amount it had paid to satisfy the judgment against Fulton. Harleysville and Woodford filed motions for summary judgment and Solely for purposes of these motions, they conceded the malpractice and/or negligence and/or bad faith.

The lower court in granting both motions, concluded that Fulton, when faced with a $91,000 excess judgment, had a duty to mitigate his damages and that he had voluntarily compromised his claims against Glens Falls at a time when it seemed certain that he would prevail as to coverage of the loss by Glens Falls, and therefore there would be no excess judgment over and above the insurance coverage. The court further ruled that the Glens Falls policy was 'deemed' to have covered the loss, that Fulton was judicially estopped to deny same, and that a claim for bad faith would not lie since the judgment was less than the total insurance coverage, namely $210,000. ⁵

Fulton moved for summary judgment on Harleysville's counterclaim for reimbursement and the lower court, in granting the motion, ruled that the Harleysville policy afforded coverage since the Patterson truck qualified as a temporary substitute vehicle. Reversal of the trial court's rulings on the respective motions for summary judgment is sought on appeal.

As we indicated above, Harleysville and Woodford, Solely for purposes of their motions for summary judgment, conceded the truth of Fulton's allegations of bad faith, negligence and malpractice. Our only consideration therefore, in reviewing the propriety of summary judgment against Fulton, is whether there are any issues of fact to be...