Gay & Taylor, Inc. v. American Cas. Co. of Reading, Pa.

• Decision Date: 12 December 1963
• Citation: 381 S.W.2d 304,53 Tenn.App. 120
• Parties: GAY & TAYLOR, INC. v. AMERICAN CASUALTY COMPANY OF READING, PENNSYLVANIA. 53 Tenn.App. 120, 381 S.W.2d 304
• Court: Tennessee Court of Appeals

Page 304

381 S.W.2d 304

GAY & TAYLOR, INC. v. AMERICAN CASUALTY COMPANY OF READING, PENNSYLVANIA.

53 Tenn.App. 120, 381 S.W.2d 304

Court of Appeals of Tennessee, Eastern Section.

Dec. 12, 1963.

Certiorari Denied June 4, 1964.

[53 TENNAPP 121] M. Lacy West, Kingsport, for plaintiff in error Gay & Taylor, inc.

Walter & Claiborne, Knoxville, for defendant in error American Casualty Company of Reading, Pennsylvania.

COOPER, Judge.

This appeal is from the action of the trial judge, sitting without the intervention of a jury, awarding plaintiff American Casualty Company of Reading, Pennsylvania a judgment for $10,500.00 against the defendant Gay & Taylor, Inc., lay insurance adjusters as [53 TENNAPP 122] damages for negligence and breach of contract in failing to forward a claim file to plaintiff's attorney, thus permitting default judgments to be entered against plaintiff's assured. The defendant insists, primarily, that there is no evidence in the record to show that the plaintiff suffered any damages as the result of the defendant's admitted negligence and breach of contract.

The facts giving rise to this suit are undisputed.

The plaintiff is an insurance company engaged, among other things, in the writing of automobile liability insurance. The defendant is an independent adjusting firm engaged in the business of investigating and adjusting claims arising out of automobile accidents.

Plaintiff, in the course of its business, issued an automobile liability policy insuring Sterchi Bros., Inc. against loss resulting from the negligent operation of a motor vehicle by the insured or its agents. While the policy was in effect, a truck owned by Sterchi Bros., and driven by its employee James Stanton in the course and scope of his employment, was in collision with an automobile driven by Linda Wayne Hurd. The collision occurred on March 31, 1961 at the intersection of Bloomingdale Pike and Thomas Street in Kingsport, Tennessee.

In accordance with instructions from the plaintiff, the insured reported the accident to the defendant, who made an initial investigation and forwarded the notice of loss and the statement of the insured's driver to the plaintiff. The notice of loss and the driver's statement, which were received by the plaintiff on April 13, 1961, contained a notation that Eula Massengill, a passenger in the Hurd automobile, had received 'possible neck and back injuries'[53 TENNAPP 123] and was in the Holston Valley Community Hospital.

On April 18, 1961, the defendant notified the plaintiff that Eula Massengill and her husband had filed suit against Sterchi Bros. seeking to recover damages arising out of the accident of March 31, 1961, and requested instructions concerning the forwarding of the file to an attorney.

Plaintiff wrote defendant on April 24, 1961 instructing it to 'furnish a copy of the file to Mr. Mentor (plaintiff's attorney in Kingsport),' and to continue the investigation, with special emphasis on the need for medical information.

The defendant misplaced the claim file and failed to deliver it to plaintiff's attorney. As a consequence, default judgments were entered against plaintiff's assured and, on writ of inquiry on May 18, 1961, the jury awarded Eula Massengill a judgment of $7500.00 for personal injuries, and awarded her husband, Raymond Massengill, a judgment of $3,000 for loss of consortium and as reimbursement of expenses he incurred in the treatment of his wife's injuries.

The judgments were subsequently paid by the plaintiff, and the present suit was brought with the result above stated.

It is universally recognized that an agent stands in a fiduciary relationship to his principal and is under a duty to be careful, skillful, diligent and loyal in the performance of his principal's business and that for a failure so to act he subjects himself to liability to his principal for any damages naturally and proximately [53 TENNAPP 124] flowing from the breach of duty. See 3 Am.Jur.2d, Agency, Sections, 198, 199, 202; 3 C.J.S. Agency Secs. 138, 155, 162, 172, 286; 2 Restatement Agency, Sections 379, 387, 399.

In Walker v. Walker, 52 Tenn. 425, 427, the Court, considering the responsibility of an agent for not following instructions, said:

'The rules are thus laid down for responsibility of agents by Mr. Story: 'Whenever an agent violates his duties or obligations to his principal, whether it be by exceeding his authority or by positive misconduct, or by negligence or omission in the proper function of his agency, or in any other manner, and any loss or damage thereby falls on his principal, he is responsible therefor, and bound to make full indemnity. The loss or damage need not be directly or immediately caused by the act which is done, or omitted to be done. It will be sufficient if it be fairly attributable to it, as the natural result or just consequence.' Sec. 217 e, p. 259.' See also Kirkeys & Son v. Crandall, 90 Tenn. 532, 538, 18 S.W. 246; 56 A.L.R. 962.

Without question, the default judgments entered against plaintiff's assured in the Massengill cases resulted from the negligence of the defendant and, without question, the defendant is liable for any damages that naturally and proximately resulted therefrom.

Counsel has not cited us to any case, nor have we been able to find one, where a default judgment has resulted from the failure of a lay insurance adjuster to forward 'suit papers' to an attorney. However, there are numerous reported cases where default judgments have been entered due to the negligence of an attorney or to [53 TENNAPP 125] his failure to follow instructions (see 45 A.L.R.2d 9, 56 A.L.R. 962), and we think the rules of law voiced in those cases are applicable to the present case.

As pointed out in the annotation 'Attorneys--Negligence--Liability,' 45 A.L.R.2d 9, at page 19: 'The ordinary rule that negligence is actionable only where it is the proximate cause of the damages complained of has frequently been applied in actions against attorneys for alleged negligence in connection with litigation. In such cases the damages claimed are usually the value of the claim lost or judgment suffered as an alleged result of the attorney's negligence, and it has...