Georgia Casualty Co. v. Cotton Mills Products Co.

• Decision Date: 19 January 1931
• Docket Number: 29000
• Citation: 132 So. 73,159 Miss. 396
• Court: Mississippi Supreme Court
• Parties: GEORGIA CASUALTY CO. v. COTTON MILLS PRODUCTS CO

132 So. 73

159 Miss. 396

GEORGIA CASUALTY CO. v. COTTON MILLS PRODUCTS CO

No. 29000

Supreme Court of Mississippi

January 19, 1931

Division A

1 INSURANCE.

Insurance contract, if terms are ambiguous, must be construed most favorably to insured, and against insurer.

2. INSURANCE.

Insurance contract, if terms are plain and unambiguous, must be construed like any contract between parties.

3 NEGLIGENCE.

Negligence consists of failure to perform duty owing to injured person.

4 NEGLIGENCE.

Negligence can only arise from failure to perform duty imposed by contract, by statutes, or by well-defined public policy.

5 INSURANCE. Insurer, under terms of employer's liability policy, held under no obligation to compromise and settle suit against employer on claim within policy provisions.

Policy issued to employer covering liability to employees for in juries received in course of employment, among other provisions, required insurer to defend suit against employer in name and on behalf of assured; required insurer to pay all expenses incurred and court costs assessed against assured regardless of policy limits; required assured to give to insurer all co-operation and assistance possible; gave insurer right to settle any claim or suit at its own cost at any time; and prohibited assured from voluntarily assuming any liability or incurring any expense or settling any claim except at its own cost without written consent of insurer, nor interfere in any negotiations for settlement or in any legal proceedings conducted by insurer on account of any claim.

6. INSURANCE. Insurer, under terms of employer's liability policy, held not liable for negligence, if any, in failing to settle claim, resulting in recovery on claim beyond limits of policy.

After injured employee had recovered judgment on claim for amount in excess of policy limits, insurer deeming amount recovered excessive, appealed, and judgment was sustained. Before appeal, it had opportunity to settle judgment for an amount less than policy limits, but it refused to do so because it deemed offered settlement unreasonable.

7. INSURANCE.

Negligence cannot be predicated upon failure to exercise option or reservation made for benefit of optioner, such as insurer's right to settle.

HON. W. H. POTTER, Judge.

APPEAL from circuit court of Yazoo county, HON. W. H. POTTER, Judge.

Suit by the Cotton Mills Products Company against the Georgia Casualty Company. Judgment for plaintiff, and defendant appeals. Reversed, and judgment rendered for defendant.

Reversed, and judgment here for appellant.

Bratton & Bratton, of Jackson, and J. G. Holmes, of Yazoo City, for appellant.

No principle of law is more firmly founded that there can be no foundation for an action in tort except for the negligent breach of a positive duty which the one person may owe to the other. The loss must be the result of a negligent breach of a duty owing by the negligent party to the injured party. If no duty is owing to the injured party, then there is no right of action arising.

45 C. J., p. 639; Mullican et al. v. Meridian Light & Railway Company, 121 Miss. 806, 83 So. 816.

If insurer acts in good faith in rejecting an offer of settlement and electing to litigate the matter, and a judgment is recovered for a greater amount, it is not liable for the excess over the amount limited in the policy, even though it did not notify the insured of the offered settlement.

36 C. J., pages 1114 and 1115.

Where suit has been brought for an accident, the insurer is not bound to accept an offer of settlement by the insured person for less than the face of the policy, but only to elect between settlement, defense of the action, or payment of the face of the policy.

Kingham & Co., Ltd. v. Maryland Casualty Co., 115 N.E. 348.

An insurance company is not liable for having declined in good faith to accept the terms of a compromise, which was less than the amount of the judgment subsequently rendered.

New Orleans & C. R. Company v. Maryland Casualty Company, 38 So. 89.

An insurer in appealing from an adverse judgment against the assured, is not bound to consult the interests of the assured to the prejudice of its own but may appeal over the opposition of the assured.

Davison v. Maryland Casualty Company, 197 Mass. 167, 83 N.E. 407.

An automobile indemnity insurer does not, by refusing the assured's request to settle for an amount slightly in excess of the amount of the policy, the assured offering to pay all in excess of the amount of the policy, render itself liable for an amount recovered in excess of its liability.

Schmidt & Sons Brewing Co. v. Traveller's Insurance Co., 52 L. R. A. (N. S.) 126.

One insuring against liability for injury by automobile under a contract entitling it to settle claims if it saw fit, and prohibiting the assured from doing so without its consent, is not liable for the difference between the amount of the proffered settlement and the amount of the judgment recovered in excess of the face of the policy simply because it refused to settle a large claim for a reasonable amount as urged to do by the assured.

Big Vein Pocahontas Company v. Maryland Casualty Company, 266 F. 365; Auerbach v. Maryland Casualty Co., 236 N.Y. 247, 28 A. L. R. 1294.

The insurer need not accept an offer of compromise for an amount less than the maximum liability under the policy, even though urged to do so by the assured, and that having elected to defend, the insurer is not liable to the assured for an amount in excess of the amount of indemnity under the policy what was recovered by an employee, but only to its stipulated liability.

Rumford Falls Paper Company v. Fidelity & Casualty Company, 92 Maine, 574, 43 A. 503; Best Building Co., Inc. v. Employer's Liability Assurance Corp., Ltd., 247 N.Y. 451, 160 N.E. 911; Wisconsin Zinc Company v. Fidelity, etc. Company, 162 Wis. 39, 1918C. Ann. Cas. 399; Newberger v. Preferred A. Insurance Company, 89 So. 90; F. & C. Company v. Stewart Dry Goods Company, 271 S.W. 444; Wakefield v. Globe Indemnity Company, 225 N.W. 643; Wynnewood Lumber Company v. Traveller's Insurance Company, 91 S.E. 347; Puckett v. F. & C. Company, 38 S.E. 160.

The case of Douglas v. U. S. Fidelity & Guaranty Co., 37 A. L. R. 1477 is reasoned from the premises that there was a positive duty upon the assured to settle, and that in the exercise of such duty the insurance company was required to act as a reasonable man would have acted under the same circumstances and for failure so to act, should be held liable as for negligence. In the case at bar the insurer did not engage to serve the assured by settlement, but engaged to indemnify and to defend, and it fulfilled both of these engagements.

In the case of Georgia Insurance Company v. Mississippi Central Railroad Company, 116 Miss. 114, the policy contained the following provision: "that when the company has the opportunity to settle the claim of any insured employee within the limit designated in this policy, and fails to take advantage of such opportunity for settlement within the time provided the company shall thereafter protect the assured from any judgment not in excess of ten thousand dollars." Since no such duty existed under the policy contract at bar, no action for an alleged negligent breach thereof will lie.

Wells, Jones, Wells & Lipscomb, of Jackson, Amicus Curiae.

Where in such a contract the insurer reserves the exclusive right to settle any claim or suit against the assured but does not expressly assume any duty to make settlement or to exercise ordinary care in negotiating them, the right so reserved is a mere option which may be exercised to its full extent by the insurer for its own benefit and advantage, provided it acts in good faith.

Wisconsin Zinc Co. v. Fidelity, etc. Co. of Maryland, 162 Wis. 39, 155 N.W. 1081; Best Building Company v. Employer's Liability Insurance Corporation, 247 N.Y. 451; Rumford Falls Paper Company v. Casualty Company, 92 Me. 574, 43 A. 503.

The rights of the parties are to be determined by the agreement into which they entered. By the provisions of the policy, the insurance company was obliged to defend at its own cost any action against the insured and the entire management of the defense was expressly entrusted to it and the insured was forbidden to settle any claim or to interfere in any negotiations for settlement or in any legal proceeding against it. The insurer was under no obligation to pay in advance of trial and the decision whether to settle or try was committed to it. The plain words of the policy have no other meaning.

Schmit v. Travelers Ins. Co., 244 Pa. 286, 90 A. 673; New Orleans, etc. Co. v. Maryland Casualty Co., 114 La. 153, 38 So. 89; McAleeman v. Massachusetts Bonding Co., 219 N.Y. 653, 34 A. L. R. 752; Levin v. New England Casualty Co., 233 N.Y. 631, 34 A. L. R. 751; Auerbach v. Maryland Casualty Co., 236 N.Y. 247.

It was appellant's duty to elect to defend or to settle or to pay. It was not its duty to settle to the exclusion of the other alternatives.

The institution of the suit created no other duty than to elect. By electing to defend, and by defending, appellant discharged its full duty toward appellee arising at that stage of the proceedings. As there was no duty to settle the argument must fail. Liability against appellant cannot, in the absence of fraud, be predicated on the fact that it elected to defend, rather than to settle.

Davison v. Maryland Casualty Company, 197 Mass. 167; Kingan v Maryland Casualty Co., 65 Ins. App. 301, 115 N.E. 348; Best Building Co. v. Employer's Liability Ins. Corp., 247 N.Y. 662; Schenecke Piano Co. v. Philadelphia Casualty Co., 216 N.Y. 662; Streat Coal Co. v. Frankfort Ins. Co., ...