Highway Ins. Underwr. v. Lufkin-Beaumont M. Coaches

• Court: Texas Court of Appeals
• Writing for the Court: Walker
• Citation: Highway Ins. Underwr. v. Lufkin-Beaumont M. Coaches, 215 S.W.2d 904 (Tex. App. 1948)
• Decision Date: 22 September 1948
• Docket Number: No. 4482.,4482.
• Parties: HIGHWAY INS. UNDERWRITERS v. LUFKIN-BEAUMONT MOTOR COACHES, Inc.

Page 904

215 S.W.2d 904

HIGHWAY INS. UNDERWRITERS v. LUFKIN-BEAUMONT MOTOR COACHES, Inc.

No. 4482.

Court of Civil Appeals of Texas. Beaumont.

September 22, 1948.

Rehearing Denied November 12, 1948.

Second Petition for Rehearing Denied December 30, 1948.

Appeal from District Court, Tyler County; Clyde E. Smith, Judge.

Action by the Lufkin-Beaumont Motor Coaches, Inc., against Highway Insurance Underwriters to recover on a public liability policy the amount of a judgment which had been rendered against the plaintiff in an action for damages for injuries by a third person. From a judgment in favor of the plaintiff, the defendant appeals.

Judgment affirmed.

Dave Marcus, of Beaumont, for appellant.

Collins, Dies, Williams & Garrison, of Lufkin, for appellee.

WALKER, Justice.

This action was brought by appellee, the named Insured in a public liability policy issued by appellant, against the appellant to recover the amount of a judgment which had been rendered against appellee in an action for damages for personal injuries by one Riley Alexander. We refer to appellee hereafter as Insured and to appellant, as Insurer. The present action was occasioned by Insurer's refusal to accept Alexander's offers to compromise and settle his action against Insured for a sum within the limits of the policy held by Insured, as will hereinafter more fully appear. After Alexander's offers were rejected, judgment was rendered against Insured for $6,000 more than the sums contracted to be paid in said policy, and Insured, having paid the full amount of the judgment, brought this action to recover the sum paid out, with interest thereon from the date the payment was made. The petition asserts, in effect, two causes of action, one for the sums contracted to be paid and one (in tort) for the excess of the judgment above those sums; but Insurer has not denied the contractual liability and the issues made in the present action are limited to the cause of action in tort, for the excess. The duty and standard of care invoked by Insured are those declared in G. A. Stowers Furniture Company v. American Indemnity Company, Tex.Com.App., 15 S.W.2d 544. We have limited our discussion to the cause of action in tort.

Insured is, and was at all times referred to herein, a common carrier for hire, operating motor busses for the carriage of passengers over a route extending from Lufkin to Beaumont.

On the night of April 13, 1943, between 11:00 and 12:00 o'clock, Insured's bus, bound for Beaumont, collided with the aforesaid Riley Alexander upon the public highway while he was attempting to repair his automobile and injured him severely. The collision occurred at a place between Woodville and Kountze, way stations on Insured's route. About the first of the year 1944, Riley Alexander brought suit against Insured in the District Court of Hardin County to recover damages for the injuries he had sustained. He alleged that Insured had been negligent in the operation of the bus at the time and place of the collision, and prayed recovery of $65,000 in damages.

Insured's policy insured it against loss from Alexander's injuries — to the extent of $5,000 only. This policy also bound Insurer to defend Alexander's suit against Insured, at its own expense, and to pay other items of expense which were incidental to a judgment against Insured and to an appeal from that judgment. Insured could not compromise and settle Alexander's action, without Insurer's consent, except at its own expense. The relevant provisions of the policy need not be quoted; they made applicable to Insurer, in considering Alexander's offers of settlement, the duty and standard of care declared in the Stowers Furniture Company case.

Insured notified Insurer of the collision between its bus and Alexander, and later notified Insurer of the action for damages brought by Alexander. Insurer, acting under the aforesaid policy, assumed control of the defense of Alexander's action, selected counsel to defend the action in behalf of Insured and paid these counsel for their services, and the counsel selected filed answer in behalf of Insured and defended Insured upon the trial of Alexander's action in the District Court of Hardin County and in the appellate courts. No other counsel represented Insured in Alexander's action, and there is no evidence that Insurer ever suggested that Insured procure other counsel.

Alexander's action for damages came on for trial in the District Court of Hardin County on May 31, 1944, before the court sitting with a jury. Special Issues were submitted to the jury and a verdict was returned on June 6, 1944, assessing Alexander's damages at $11,000, over twice the amount of Insured's policy. On June 7, 1944, the trial court rendered judgment in behalf of Alexander against Insured for $11,000. Insurer then took an appeal to this Court of Civil Appeals in Insured's name, but this Court affirmed the trial court's judgment on June 7, 1944,¹ and later, in due time, the Supreme Court refused an application for a writ of error to this Court's judgment.

Several offers of settlement were made by Alexander's counsel to both Insured and Insurer during the course of the trial of Alexander's case. The first of these offers was made to Morris McMullen, who attended the trial as a representative of Insured and who testified that he was Insured's traffic manager. What authority he had from Insured was never fully proven; there is no evidence that he had authority from Insured to compromise and settle the Alexander suit (he denied that he had the authority) or to approve in Insured's behalf of Insurer's conduct of the defense of that suit. There is some dispute regarding the exact sum required in this offer, but it was at least within the limits of Insured's policy. Insured was represented by two lawyers at the trial of Alexander's case and Mr. McMullen referred this offer of settlement to the leading counsel of the two, for Insurer's consideration. This was in strict accord with the policy, under which a settlement by Insured, without Insurer's consent, was at Insured's expense. Later, Alexander's counsel made offers to the same lawyer to whom we have referred as Insured's leading counsel, to compromise and settle the case for $4,500, which was $500 less than the amount of the policy, and the lawyer to whom this offer was made referred it to Insured's claims manager, the authorized and responsible officer of Insurer, for acceptance or rejection. The claims manager rejected it. There is evidence (and none to contradict it) that this officer acted upon the opinion of the two lawyers defending Insured, who thought that they would either win the trial or would bring recovery below the policy limits. There is also evidence that the claims manager, before he acted, was informed that Mr. McMullen approved of this course, but McMullen denied that he approved, or that he expressed an approval, of this course of action, and the conflict was not put to the jury. Nor, indeed, was the ground upon which the claims manager acted. We have referred to the absence of evidence that McMullen had authority from Insured to give Insured's consent to the refusal of offers of settlement. There is no evidence tending to show that Insured ever approved Insurer's rejection of Alexander's offers.

This offer of settlement for $4,500 was repeated during the trial. Alexander's counsel communicated it to one of Insured's present counsel, who, in Insured's behalf, then communicated it to the lawyer to whom we have referred as Insured's chief counsel, and brought to the attention of this lawyer Insured's limited protection under the $5,000 policy. The offer was made again after all of the evidence had been introduced, and before the charge was submitted to the jury; it was rejected, apparently by the lawyer of Insured to whom it was made.

It is not in evidence that Insured ever demanded or requested Insurer to accept the offer of settlement.

After the trial court's judgment became final, Insured demanded that Insurer pay it in full; it then amounted to $11,679.79. Insurer, however, refused to pay more than the amount of the policy, to-wit, $5,000, and costs and interest on the judgment, leaving Insured to pay the balance, amounting to $6,000. Insured then paid the entire judgment, in the sum stated. Insurer afterwards offered to pay to Insured the sum previously offered, namely, policy limit, costs and interest on the entire judgment; but Insured refused to accept this offer and brought suit for the entire amount paid out in satisfaction of the judgment, claiming that Insurer was obligated to pay it all.

The trial pleadings of Insurer and Insured need not be described in detail. Insured alleged that Insurer was negligent in refusing to accept Alexander's offers of settlement. These allegations Insurer denied, pleading that Insurer rejected the offers in good faith, with due care.

The cause was tried to the court sitting with a jury, and the evidence adduced on the trial of Alexander's case was read to the jury on the trial of this cause.

Only one Special Issue was submitted to the jury, which with the jury's answer thereto, reads: "Do you find — that a person of ordinary prudence in the exercise of such degree of care as such a person would use in the management of his own business, would, under the facts and circumstances known to the — Highway Insurance Underwriters, or to its attorney who represented the defendant, Lufkin-Beaumont Motor Coaches, Inc., in said suit so brought by Riley Alexander against it, prior to the rendition of the jury's verdict in said case, have settled said case by paying said Riley Alexander the sum of $4,500.00? Answer: Yes."

Pursuant to the jury's verdict, the trial court rendered judgment in behalf of Insured against Insurer for $11,679.79, together with interest thereon from the date that sum was paid out by Insured, namely, May 29, 1945; and from this judgment Insurer...