Hartford Cas. Ins. Co. v. Dodd, Civ. No. T-76-141.

• Decision Date: 04 August 1976
• Docket Number: Civ. No. T-76-141.
• Citation: 416 F. Supp. 1216
• Parties: The HARTFORD CASUALTY INSURANCE COMPANY, a body corporate v. Algie DODD et al.
• Court: U.S. District Court — District of Maryland

416 F. Supp. 1216

The HARTFORD CASUALTY INSURANCE COMPANY, a body corporate v. Algie DODD et al.

Civ. No. T-76-141.

United States District Court, D. Maryland.

August 4, 1976.

COPYRIGHT MATERIAL OMITTED

Samuel S. Smalkin, Baltimore, Md., for plaintiff.

Bernard Brager, Baltimore, Md., for defendants.

THOMSEN, Senior District Judge.

This interpleader action and the counterclaim filed therein arise out of a Maryland automobile accident in May 1973 wherein an automobile owned by Betty Jean Davis and driven by her husband, Willie Davis, in which Betty Jean Davis, Algie Dodd, Cora Lockwood, Hilda Matthews, Leonard Deedon and Theodore Kennedy were riding, collided with an automobile owned and operated by Ronald Meekins, in which Tyrone A. Chester and E. Tilghman were riding. Willie Davis and Kennedy died as a result of the accident. Betty Davis, Dodd, Lockwood, Matthews and Deedon (in the Davis car) were injured, as were Meekins and Chester (in the Meekins car). It is agreed that the accident was caused by negligence on the part of Willie Davis. No claim of negligence on the part of Meekins has been made.

The Hartford Casualty Insurance Company had issued to Betty Jean Davis, in Delaware, a policy of automobile liability insurance, with limits for bodily injury liability of $10,000 each person, $20,000 each accident, and for property damage liability of $5,000 each accident. In compliance with a requirement of Delaware law, 21 Del. § 2118(a)(2), effective January 1, 1972, the policy included a provision for Personal Injury Protection (PIP) benefits (also with 10/20 limits), which were available to the passengers in the Davis car, but not to the driver or passengers in the Meekins car. The Hartford soon learned that Willie Davis and Kennedy had died of their injuries, that Betty Jean Davis, Dodd and Matthews (passengers in the Davis car) and Meekins (the driver of the other car) were seriously injured, with large medical bills and income loss, incurred and in prospect, and that Deedon and Lockwood (passengers in the Davis car) and Chester (a passenger in the Meekins car) were also injured, although with less medical expenses and income loss. Dodd, Matthews, Deedon and Lockwood engaged an attorney, who notified Betty Jean Davis of his representation in June 1973, talked to a claims representative of the Hartford, sent the Hartford photocopies of some medical reports and bills in July 1973, and said he would furnish further reports and bills as received, but filed no application for PIP benefits. Thereafter, with knowledge of the foregoing facts and despite the relatively low policy limits, the Hartford paid to its policyholder (Betty Jean Davis) under the PIP provisions (1) the funeral bill of Willie Davis ($1,133.50), without waiting for an administrator of his estate to be appointed, and (2) over a period of six months beginning in September 1973 paid her $1,473.60 for medical expenses, $162 for household expenses and $6,143.57 for "lost wages".¹ Betty Jean Davis paid the funeral director $250 and kept the balance of the $1133.50 herself. The Hartford made no payments to anyone else under the PIP provisions except the administrator of Kennedy (a passenger in the Davis car), to whom in 1975 the Hartford paid $1,903.60 (about half of Kennedy's medical and funeral expenses) under the PIP provisions and $467.95 under the liability provisions of the Davis policy, in full settlement of all of his claims.

In August 1974 the Hartford settled with Meekins (who was very seriously injured and had medical expenses of more than $6,600), paying him $10,000, the applicable limit for one person under the ordinary liability provisions of the policy, and in October 1974 settled with Chester for $327.50, in each instance taking appropriate releases protecting its insured from larger claims. The Hartford made no settlement with and made no payments to Matthews, Dodd, Deedon or Lockwood, who were represented by counsel, although offers of settlement were made to them on August 27, 1974. Thereafter, Dodd, Deedon and Lockwood sued the administrator of the Estate of Willie Davis in this court; Matthews sued the administrator in the Circuit Court for Talbot County, Maryland, and all four of them sued the Hartford in the Superior Court for Newcastle County, Delaware, claiming that the payments made by the Hartford had been improper.

In January 1976 the Hartford filed the instant action under the Federal Interpleader Act, 28 U.S.C. 1335(a), and paid into the registry of this court the sum of $18,715.78. It alleges that $9,532.05 of that amount represents the remaining coverage for payment of claims under the ordinary liability provisions of its policy, and that $9,183.73 represents the remaining coverage for the payment of PIP benefits. It seeks a judgment releasing it from all further liability under its policy.

Dodd, Lockwood, Matthews and Deedon have answered the complaint and filed a counterclaim, contending that the conduct of the Hartford in making the payments set out above constituted a violation of the policy and of the Delaware Code, entitling them to recover from the Hartford a larger amount than was paid into court.

I. Liability Provisions

A liability insurer may settle claims in good faith with some claimants, even if such settlements reduce the amount available to others. There is ordinarily no requirement that the insurer wait until all claims have been presented before it deals with any claimant. State Farm Mutual Auto. Ins. Co. v. Hamilton, 326 F.Supp. 931, 934 (D.S.C.1971, Simons, J.); Castoreno v. Western Indemnity Co., 213 Kan. 103, 515 P.2d 789 (1973); Richard v. Southern Farm Bureau Cas. Ins. Co., 212 So.2d 471 (La.App. 1968), aff'd 254 La. 429, 223 So.2d 858 (1969); 8 Appleman, Insurance Law and Practice, § 4892 (1962); 8 Blashfield, Automobile Law and Practice, § 3438 (3d ed. 1966); 2 Long, Law of Liability Insurance, ¶ 21.01 et seq. (1975).

In this case the evidence clearly shows that the Hartford acted in complete good faith in paying Meekins $10,000 in settlement of his claim. His injuries were extensive, and if his claim had not been settled Meekins might well have obtained a large judgment against Betty Jean Davis, the named insured, the owner of the car, who was in the car at the time of the accident, as well as against the estate of Willie Davis, the driver of the car. The settlement of Chester's claim for $327.50 was also made in good faith. Settlement of the claim of Kennedy's estate by the payment of $467.95 under the liability provisions and $1,903.60 under the PIP provisions of the policy was not improper. This is not a case where the failure to settle with one or more claimants has substantially increased the danger to the insured of a judgment or judgments over policy limits. Gaskill v. Preferred Risk Mutual Ins. Co., 251 F.Supp. 66 (D.Md.1966), aff'd 371 F.2d 792 (4 Cir. 1966); State Farm Mutual Auto. Ins. Co. v. White, 248 Md. 324, 236 A.2d 269 (1966). Cf. State Farm Liberty Mutual Ins. Co. v. Davis, 412 F.2d 475 (5 Cir. 1969); Brown v. United States Fidelity & Guaranty Co., 314 F.2d 675 (2 Cir. 1963).

These settlements reduced to $9,204.55 the liability of the Hartford under the ordinary liability provisions of its policy. Having paid $9,532.05 into court under the provisions of 28 U.S.C. 1335(a)(2) the Hartford is entitled to a decision releasing it from further liability with respect to the ordinary liability provisions of its policy.² The remaining claimants (Dodd, Deedon, Matthews and Lockwood) must divide the $9,204.55 among themselves on the basis of their respective damages, to be determined later in this opinion.

II. Personal Injury Protection (PIP).

No payments were made to Dodd, Deedon, Matthews or Lockwood under either the PIP or the liability provisions, although offers to settle both the ordinary liability and PIP claims in the total amounts which it has paid into court in this case, less the $327.50 payment to Chester, were made by the Hartford in 1974. No PIP benefits were paid to Dodd, Deedon, Matthews and Lockwood even though the Hartford knew by July 1973 that all four of them had substantial claims for medical expenses or loss of earnings or both. Nevertheless, beginning in September 1973, the Hartford paid Betty Jean Davis, the named insured, medical expenses of $1,473.60 (all that she had claimed), lost earnings of $6,143.57 (nearly twice the amount claimed on her application for PIP benefits (see note 1 above), and extra household expenses of $162.00. In addition, the Hartford paid directly to Betty Jean Davis $1,133.50 for Willie Davis' funeral bill, although she had not paid the bill and thereafter paid only $250 on account thereof.

No case has been cited or found dealing with the duty of an insurer in handling claims for PIP benefits. This court concludes that the duty of the insurer is to act in good faith toward all persons having PIP claims; but the determination of what is good faith with respect to the PIP provisions of the policy involves different considerations from those involved with respect to the liability provisions. The duty of the insurer to protect its insured from a possible large judgment over the limits of the policy (see cases cited above) does not apply to PIP provisions. Under PIP all occupants of the car, including the named insured, are beneficiaries of the policy with respect to the PIP coverage.³ See 21 Del.C. § 2118(a)(2)c (1975 Supp.). The insurer may not discriminate in favor of the named insured against other beneficiaries who are also entitled to PIP benefits.

The record in this case shows that the Hartford discriminated in favor of its named...