Ganaway v. Shelter Mut. Ins. Co., 16198

Citation795 S.W.2d 554
Decision Date30 July 1990
Docket NumberNo. 16198,16198
PartiesSteven Anthony GANAWAY, assignee of Kenneth L. McDonald, trustee in bankruptcy for Craig Alan Scott, Plaintiff-Appellant, v. SHELTER MUTUAL INSURANCE COMPANY, a Missouri corporation, Defendant-Respondent.
CourtCourt of Appeal of Missouri (US)

Thomas Strong, Jeffrey W. Bates, Strong & Associates, P.C., Springfield, for plaintiff-appellant.

Rodney E. Loomer, Michael J. Patton, M. Sean McGinnis, Turner, Reid, Duncan, Loomer & Patton, P.C., Springfield, for defendant-respondent.

HOGAN, Judge.

Steven A. Ganaway (plaintiff) brought this action against Shelter Mutual Insurance Company (Shelter), a liability insurance carrier, seeking to recover damages on the ground that Shelter refused, in bad faith, to settle a claim against its insured and thereby became liable to its insured for a judgment recovered against him in excess of the policy limits. The suit was commenced on August 27, 1987. After the parties had completed their discovery and had indulged in a good deal of legal maneuvering, both moved the court for summary judgment pursuant to Rule 74.04. The court denied the plaintiff's motion for summary judgment and entered a summary judgment for Shelter. The plaintiff has appealed from both orders.

By way of very general background, it may be said that the appeal involves an automobile accident which occurred in Boone County, Missouri, on November 15, 1981. The plaintiff, who was a passenger in the insured's automobile, was pitifully injured. He has been diagnosed as being permanently quadriplegic. At the time the accident occurred, the plaintiff was 20 years of age. There is no doubt that the driver of the automobile in which plaintiff was riding was at fault; the focus of the controversy before us is the amount for which Shelter is liable as insurer of the driver of that vehicle. Various aspects of the dispute which arose out of the accident have been litigated on three occasions. The parties have accumulated a voluminous record, a great deal of which has been presented on this appeal. As in other cases where much testimony and innumerable exhibits have been introduced, we will confine ourselves to a recitation of those facts and consideration of those issues essential to a proper disposition of the appeal. See State ex rel. Ellsworth Freight Lines, Inc. v. State Tax Commission of Missouri, 651 S.W.2d 130, 133 (Mo. banc 1983), cert. denied, 465 U.S. 1001, 104 S.Ct. 1019, 79 L.Ed.2d 223 (1984); Bloomfield Reorganized School Dist. No. R-14 v. Stites, 336 S.W.2d 95, 97 (Mo.1960); Logsdon v. Duncan, 293 S.W.2d 944, 946 (Mo.1956). And while we bear in mind, as Shelter reminds us, that an order granting summary judgment will not be set aside on review if it is supportable on any theory, we also bear in mind that summary judgment is appropriate in the first instance only when no theory within the scope of the pleadings, depositions and affidavits filed would permit recovery and the moving party is entitled to judgment as a matter of law. Rule 74.04(c); Zafft v. Eli Lilly & Co., 676 S.W.2d 241, 244 (Mo. banc 1984).


Preliminarily, it is appropriate to discuss briefly the "bad faith" doctrine upon which the plaintiff predicates his right to recover. A great deal has been written about the duty of a liability insurer to exercise good faith in considering an offer to compromise a claim against its insured, but it is a fair general statement of the rule that a liability insurer, having assumed control of the right to settle claims against the insured, may become liable in excess of its undertaking under the policy provisions if it fails to exercise good faith in considering offers to compromise the claim for an amount within the policy limits. Annot., 40 A.L.R.2d 168, 178-81 § 4 (1955). 1 The "bad faith" doctrine has been recognized and applied by our courts. Zumwalt v. Utilities Ins. Co., 360 Mo. 362, 228 S.W.2d 750 (1950); Dyer v. General American Life Ins. Co., 541 S.W.2d 702 (Mo.App.1976); Landie v. Century Indemnity Company, 390 S.W.2d 558 (Mo.App.1965); McCombs v. The Fidelity and Casualty Co. of New York, 231 Mo.App. 1206, 89 S.W.2d 114 (1935). As carefully pointed out in Landie, an insurer's duty to defend is distinct and different from its duty to settle a claim against its insured within its policy limits when it has a chance to do so. It is also clear that a "bad faith" action for refusal to settle sounds in tort, not in contract, Zumwalt, 360 Mo. at 373, 228 S.W.2d at 756, and requires a showing that the insurer acted in bad faith, rather than negligently. Zumwalt, 360 Mo. at 370, 228 S.W.2d at 753.


As a further preliminary, the material terms of Shelter's policy should be noted. Part II of the policy provides automobile liability insurance. Paragraph 1 of Part II reads as follows:

"1. COVERAGE A--Bodily Injury Liability; COVERAGE B--Property Damage Liability--The Company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of:

A. Bodily injury sustained by any person;

B. Property damage sustained by any person;

caused by accident and arising out of the ownership, maintenance, or use of the described automobile or a non-owned automobile, and the Company shall defend any suit alleging such bodily injury or property damage and seeking damages which are payable under the terms of this policy, even if any of the allegations of the suit are groundless, false, or fraudulent; but the Company may make such investigation or settlement of any claim or suit that it deems expedient."

The final sentence of paragraph B is supplemented by language found in Paragraph 8 of the Conditions of the policy, which in material part provides:

"... 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 or surgical relief to others as shall be imperative at the time of the accident."

It will be seen that although the policy language is not quite as restrictive as the language considered in Zumwalt, 360 Mo. at 368, 228 S.W.2d at 752, it obviously reserves the right to settle claims against the insured to the insurer itself. Such policy provisions are generally construed to reserve to the insurer the decision whether an offer to compromise a claim against the insured should be accepted. See Annot., supra, 40 A.L.R.2d at 170 § 1 and n. 1; 7 Am.Jur.2d Automobile Insurance § 383, p. 1118 (1980).

The policy also contains the following language under Section III, which provides automobile medical payments insurance:

"1. COVERAGE C--Medical Payments--The Company will pay all reasonable expenses which are incurred within one year from the date of accident for necessary medical, surgical, x-ray, and dental services, including prosthetic devices, and necessary ambulance, hospital, professional nursing and funeral services, for bodily injury caused by accident and sustained by:

* * * * * *

(b) Any other person while occupying (1) the described automobile while being used by the named insured or spouse or by any other person with the permission of the named insured or spouse, provided his actual operation or (if he is not operating) his actual use thereof is within the scope of such permission,

* * * * * *

The amount of any payment under this Coverage C to or on behalf of any person shall be applied toward the settlement of any claim or the satisfaction of any judgment for damages entered against any insured because of bodily injury to such person arising out of any accident to which bodily injury liability (Coverage A) applies."


Some further statement of the facts is necessary to an understanding of the case. Certain documents included in the legal file indicate that the accident out of which this case arose occurred on Sunday, November 15, 1981, about 5:30 A.M. in Boone County, Missouri. The site of the accident was along and either side of the eastbound lane of Interstate 70 about .6 miles east of its intersection with Interstate 40. The plaintiff and three other persons were riding in the insured vehicle, a 1980 Honda Accord. The driver of the automobile was Craig Alan Scott. Scott, Ganaway and the other two occupants of the Honda were acquainted; Scott and Ganaway were students at Central Missouri State University at the time. The four men had attended a basketball game at Warrensburg, and very early in the morning they had decided to return to Columbia, Missouri, where all four men lived. Scott was following a tractor-trailer unit being driven by one Walter Leroy Wigfield, and had made several attempts to pass the truck. Wigfield indicated that the Honda would pass him, then would slow down and the truck would pass the Honda. After this exchange had occurred several times, Scott attempted to pass the truck once more but went over onto the shoulder. Scott tried to recover control of his vehicle but it went into a spin and struck the tractor. The trailer was overturned; it slid down both eastbound lanes of Interstate 70. The Honda went off the road on the right side. Two of the occupants were thrown from the car.

It is fair to say, as the plaintiff contends, that Shelter investigated the accident promptly and became aware of exposure to substantial risk almost at once. It is also apparent from the record that plaintiff's neck was broken in the accident and that Shelter was aware almost immediately that he had sustained that injury and had been diagnosed as quadriplegic. 2

In his brief, the plaintiff clearly states that he bases his bad faith action on Shelter's refusal to settle his claim prior to February 15, 1984. Some discussion of the settlement negotiations between the plaintiff's attorney and Shelter's representatives is necessary. As noted, the accident occurred on ...

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