Indemnity Insurance Co. v. Hawkeye-Security Ins. Co., Civ. No. 5307.

• Decision Date: 27 January 1958
• Docket Number: Civ. No. 5307.
• Citation: 158 F. Supp. 817
• Parties: INDEMNITY INSURANCE COMPANY OF NORTH AMERICA, Plaintiff, v. HAWKEYE-SECURITY INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — District of Colorado

158 F. Supp. 817

INDEMNITY INSURANCE COMPANY OF NORTH AMERICA, Plaintiff, v. HAWKEYE-SECURITY INSURANCE COMPANY, Defendant.

Civ. No. 5307.

United States District Court D. Colorado.

January 27, 1958.

Yegge, Bates, Hall & Shulenburg, and James L. Treece, Denver, Colo., for plaintiff.

Wormwood, O'Dell & Wolvington, and Forrest C. O'Dell, Denver, Colo., for defendant.

ARRAJ, District Judge.

The above action was instituted by plaintiff to recover from the defendant the amount paid by plaintiff on a judgment rendered against the Northern Utilities Company, together with interest thereon from the date of payment. Northern Utilities Company carried liability insurance with the defendant in the amount of $10,000 and it carried indemnity insurance with the plaintiff for the excess over that amount for which the insured might become liable. A judgment was obtained in a Wyoming State Court against the insured in excess of defendant's liability and plaintiff was obligated to pay the excess; plaintiff now seeks to recover from defendant claiming a breach of contract on the part of defendant with the insured and bad faith in failing to settle the original claim against the insured. At the Pre-Trial Conference the Court had found that inasmuch as plaintiff had fully indemnified the insured for all claims now asserted plaintiff was the real party in interest and was subrogated to the claims of the insured against the defendant. Jurisdiction is founded on diversity of citizenship.

The case was tried before the Court without a jury, and in compliance with Rule 52(a) of the Federal Rules of Civil Procedure, 28 U.S.C.A., I find the facts specifically and state my conclusions of law thereon, in the above case as follows:

Findings of Fact.

1. That the defendant entered into a contract of liability insurance with Northern Utilities Company on November 15, 1949, which contract was in full force and effect on November 7, 1950, when Northern Utilities Company was guilty of negligence which caused a fire on that date at the Rafferty Mill & Fixture Company in Casper, Wyoming.

2. That the limitation of coverage under Insuring Agreement I of said contract for damage done to property was $10,000.

3. That the defendant immediately undertook, pursuant to Insuring Agreement II of said contract, to investigate on behalf of its insured, Northern Utilities Company, the fire and resulting damage to Harry C. Rafferty, and hired for that purpose the law firm of Murane & Bostwick, of Casper, Wyoming.

4. That on November 28, 1952, a suit was commenced by Harry C. Rafferty against Northern Utilities Company in the District Court for Natrona County, State of Wyoming, in which Rafferty claimed damages to property in excess of $23,000, resulting from the negligence of Northern Utilities Company, and that said case proceeded to trial on about May 27, 1953.

5. That before suit was filed and continuing until the trial of the said case, the defendant had opportunities to enter into a compromise settlement of the claims of Rafferty for a sum of less than $9,000.

6. That the defendant after suit was instituted against its assured, Northern Utilities Company, hired the firm of Murane & Bostwick to defend the suit of Rafferty against its assured, Northern Utilities Company, and pursuant to the said contract of insurance the defendant thereafter controlled that litigation.

7. That the defendant offered Rafferty $750 prior to the trial of the case in compromise settlement, which offer was refused by Rafferty.

8. That the defendant failed to follow the advice of its counsel, Mr. Murane, that the settlement offer of Rafferty in the approximate amount of $9,000 be accepted by the defendant, which advice if followed would have saved the defendant's insured, Northern Utilities Company, harmless from loss.

9. That the defendant proceeded to trial in reliance upon the opinion of Mr. Murane that no specific acts of negligence on the part of Northern Utilities Company could be proved by Rafferty, and his opinion that the doctrine of res ipsa loquitur was not applicable to the case.

10. That at the trial of the case of Rafferty v. Northern Utilities Company no evidence was offered by Rafferty of specific acts of negligence on the part of Northern Utilities Company, but the trial judge applied the doctrine of res ipsa loquitur to the case and overruled on this basis the motions made by Mr. Murane for dismissal and for a directed verdict in favor of Northern Utilities Company, and submitted the case to a jury on the doctrine of res ipsa loquitur.

11. That the defendant knew prior to the trial that if the case of Rafferty v. Northern Utilities Company were submitted to a jury that an adverse verdict would very likely result.

12. That the jury in the case of Rafferty v. Northern Utilities Company returned a verdict in favor of Rafferty and against Northern Utilities Company in the amount of $22,636.86, on which verdict judgment entered on June 6, 1953, together with $54.40 court costs.

13. That if the doctrine of res ipsa loquitur was not properly applied in the case of Rafferty v. Northern Utilities Company by the trial judge, a successful appeal by Northern Utilities Company would have resulted in a reversal and dismissal of the Rafferty case.

14. That the defendant's trial counsel, Mr. Murane, was an experienced and competent attorney in both trial and appellate practice and had peculiar qualifications for taking an appeal of the case of Rafferty v. Northern Utilities Company, since he had had on appeal to the Wyoming Supreme Court other cases involving the doctrine of res ipsa loquitur.

15. That Mr. Murane recommended to the defendant that an appeal be taken. In so doing, he did not rely on decisions regarding the doctrine of res ipsa loquitur in other jurisdictions, but relied on the holdings of the Supreme Court of Wyoming in other cases involving the doctrine of res ipsa loquitur.

16. That nothing occurred at the trial of the case of Rafferty v. Northern Utilities Company to change the opinion of Mr. Murane that the doctrine of res ipsa loquitur was not applicable to the case, but his opinion remained that the factual situation that existed in the Rafferty case prevented the application of the doctrine of res ipsa loquitur.

17. That the defendant did not make a settlement with Rafferty when...