Haas v. Mid America Fire & Marine Ins. Co., Illinois Division

• Court: Appellate Court of Illinois
• Writing for the Court: ALLOY
• Citation: Haas v. Mid America Fire & Marine Ins. Co., Illinois Division, 343 N.E.2d 36, 35 Ill.App.3d 993 (Ill. App. 1976)
• Decision Date: 20 February 1976
• Docket Number: No. 75--180,75--180
• Parties: Harvey E. HAAS, Administrator of the Estate of Paul J. Haas, Deceased, Plaintiff-Appellant, v. MID AMERICA FIRE & MARINE INSURANCE COMPANY, ILLINOIS DIVISION, a corporation, and Country Mutual Insurance Company, a corporation, Defendants-Appellees.

Page 36

343 N.E.2d 36

35 Ill.App.3d 993

Harvey E. HAAS, Administrator of the Estate of Paul J. Haas Deceased, Plaintiff-Appellant, v. MID AMERICA FIRE & MARINE INSURANCE COMPANY, ILLINOIS DIVISION, a corporation, and Country Mutual Insurance Company, a corporation Defendants-Appellees.

No. 75--180.

Appellate Court of Illinois, Third District.

Feb. 20, 1976.

William Phillips, Geneva, counsel; Gates W. Clancy, Geneva, for plaintiff-appellant.

Daniel K. Russell, Princeton, counsel, Johnson, Martin & Russell, Princeton, Peter K. Wilson, Jr., Aurora, counsel; Puckett, Barnett, Larson, Mickey, Wilson & Ochseschlager, Aurora, for defendants-appellees.

ALLOY, Presiding Justice:

Harvey E. Haas, as Administrator of the Estate of Paul J. Haas, deceased (hereinafter referred to as Haas), appeals from a judgment of the Circuit Court of LaSalle County dismissing with prejudice the amended complaint filed by plaintiff, for failure to state a cause of action.

The action with which we are concerned results from an automobile accident on January 1, 1970, between automobiles driven by Rodney Parks and Paul Haas. The collision proved fatal to both drivers and to one of three passengers in the Haas vehicle. The other two passengers suffered injuries.

Plaintiff Haas, as representative of the Estate of Paul Haas, filed a damage action against the Parks Estate, and the Parks Estate counterclaimed as against the Haas Estate in the same action. Defendants in the cause before us, Mid America Fire & Marine Insurance Company, a corporation, and Country Mutual Insurance Company, a corporation, are the respective insurers of the deceased drivers. Country Mutual insured the liability of plaintiff's decedent Haas and Mid America was the insurer for the decedent Parks.

It appears from the amended complaint that an adjustor representing both insurers negotiated a settlement for the claims of the three passengers who were riding in the Haas car. Payments made by Mid America in settlement of claims totaled $17,500, out of the $20,000 available for each occurrence, as provided in Parks' liability policy in the Mid America Company.

Plaintiff alleges that he was unaware of the negotiations involved, until the settlement was actually consummated, when he was advised that Mid America offered him the remaining $2,500 of its policy limits in settlement of his claims against the Parks Estate. The offer was refused and the case proceeded to trial. In that action, plaintiff recovered a judgment, resulting from a jury verdict, of $26,000. Mid America tendered the $2,500 to the court as full payment of its obligations to Parks under the liability policy. Since plaintiff was unable to further satisfy the judgment which he had obtained, in view of the fact that the Parks Estate had no assets other than the liability insurance proceeds, plaintiff then instituted the action now before us against both insurance companies to recover the balance of the judgment obtained against the Parks Estate. Defendants both filed motions to dismiss in the trial court and such motions were allowed both as to the original complaint and as to the amended complaint for failure to state a cause of action. The dismissal of the amended complaint was made with prejudice. No proposed second amended complaint was presented to the court, nor, so far as the record shows, was an effort made at such time to amend in the trial court.

In determining the sufficiency of the complaint, when a motion to dismiss for failure to state a cause of action is filed, we must accept as true all well-pleaded allegations and reasonable inferences therefrom. (Burke v. Sky Climber, Inc. (1974), 57 Ill.2d 542, 547, 316 N.E.2d 516; Cunningham v. MacNeal Memorial Hospital (1970), 47 Ill.2d 443, 448, 286 N.E.2d 897; Arlington Heights National Bank v. Village of Arlington Heights (1965), 33 Ill.2d 557, 561, 213 N.E.2d 264). The amended complaint alleged that both Country Mutual and Mid America are effectively one and the same entity, since they are owned and operated by the same people and employ the same personnel. For the purposes of this appeal, we are considering the issues as if there was a single insurer for both parties to the accident. Plaintiff alleges in the complaint, and contends on appeal, that defendants owed him a duty to deal fairly and in good faith with him, and that defendants breached such duty in a tortious manner by conducting negotiations and reaching a settlement with the other claimants without any notice to him, particularly since the settlement virtually exhausted the assets of the Parks Estate, and thus deprived plaintiff of most of the benefit of his eventual judgment against the Parks Estate.

While our attention has been directed to no Illinois cases in point, and we have found none, it is generally held in other jurisdictions that an insurer may settle with some claimants even if the settlement virtually or completely exhausts the available proceeds and even though another claimant, who subsequently obtains a judgment, is unable to collect in full. 44 Am.Jur.2d Insurance, § 1735; 70 A.L.R.2d 416, § 5; 8 Appleman Insurance Law and Practice, § 4892; Alford v. Textile Ins. Co. (1958), 248 N.C. 224, 103 S.E.2d 8; Castoreno v. Western Indemnity Co., 213 Kan. 103, 515 P.2d 789; See also: Richard v. Southern Farm Burea Cas. Ins. Co., 254 La. 429, 223 So.2d 858 (1969), aff'g, 212 So.2d 471 (La.App.1968).

The cases indicate a settlement of that type by the insurer with some of the claimants must be made in good faith and be reasonable. (See: Richard v. Southern Farm Bureau Cas. Ins. Co., supra). At least in some specific instances, where the facts would justify such conclusion, a liability insurer may owe a duty of good faith to the various claimants, to the extent of notifying them, at a minimum, of the proposed settlement negotiations. On the basis of the amended complaint in this cause and the precedents on the issue, however, no such facts are alleged in the amended complaint before us. We cannot find that there is a breach of duty shown in the complaint and must conclude that the trial court properly granted the motions to dismiss.

An insurance policy or contract, in common with other agreements, imposes duties and obligations, while it also confers rights and benefits on the contracting parties, the insurer and the insured. The primary duty of the insurer in a situation where claims are made against its insured, is to protect the interests of the insured and of the insurance company. The duty to the insured is demonstrated by numerous cases which find that a liability insurer may become liable to its insured for the excess amount of a judgment recovered over the policy...