Insurance Research Serv. v. Associates Finance Corp.

• Decision Date: 13 July 1955
• Docket Number: No. 1921.,1921.
• Citation: 134 F. Supp. 54
• Parties: INSURANCE RESEARCH SERVICE, Inc., Plaintiff, v. ASSOCIATES FINANCE CORPORATION, Protective Insurance Agency, Inc., and Charles Burkhalter, Defendants.
• Court: U.S. District Court — Middle District of Tennessee

134 F. Supp. 54

INSURANCE RESEARCH SERVICE, Inc., Plaintiff, v. ASSOCIATES FINANCE CORPORATION, Protective Insurance Agency, Inc., and Charles Burkhalter, Defendants.

No. 1921.

United States District Court M. D. Tennessee, Nashville Division.

July 13, 1955.

COPYRIGHT MATERIAL OMITTED

James L. Roberts and C. Allen High, Nashville, Tenn., for plaintiff.

James M. Swiggart, James Clarence Evans, Thomas M. Evans, and Lewis S. Pope, Nashville, Tenn., for defendants.

WILLIAM E. MILLER, District Judge.

This is an action of libel predicated upon two letters written by defendant Burkhalter while in the employment of defendants, Associates Finance Corporation and Protective Insurance Agency, Inc.

The plaintiff contends that the two letters, one dated November 10, 1953, and the other November 13, 1953, were libelous per se, that they were duly published, that they were written by Burkhalter in the course of his employment by Associates and Protective, and that it is entitled to a recovery against all defendants for both actual and punitive damages, without proof of special damages.

The defendants interpose a number of defenses to the plaintiff's claim:

That the letters were written by Burkhalter outside the scope of his employment by Associates or Protective and that they are not, in any event, accountable therefor; second, that the letters, particularly the letter of November 13, 1953, were qualifiedly privileged, and the plaintiff's action must therefore fail in the absence of proof of actual malice; third, that the allegedly libelous statements were true in fact; fourth, that the letter of November 10, 1953, having been written to the plaintiff, was not published within the meaning of the law of libel; sixth, that the letter of November 13, 1953, was not published because there is no proof that the letter was understood by any third person as identifying or referring to the plaintiff; seventh, that the letters in fact were not written of and concerning the plaintiff; and, eighth, in any event, that there is no warrant under the proof for recovery of more than nominal damages.

Defendant, Associates, is an Indiana corporation domesticated and doing business in Tennessee. Its principal business is financing the purchase of automobiles. Defendant, Protective, is a Tennessee corporation, and the defendant, Burkhalter, is a citizen and resident of that state. Plaintiff, Insurance Research Service, Inc., is a Missouri corporation.

The president of both Associates and Protective is Dan Maddox who individually owns all of the stock of Protective and 50 per cent of the stock of Associates. The other 50 per cent of Associates' stock is owned by another corporation, Associates Investment Company, which in turn owns all of the stock of EMMCO Insurance Company, of South Bend, Indiana.

Protective was organized for the purpose of managing and directing Associates' insurance program which appears to be a definite part of its business in financing the purchase of automobiles. As a part of this program, Protective supervises the obtaining of insurance upon the automobiles financed by Associates, primarily to protect Associates' security interest therein. It also performs insurance adjusting services.

The close relationship between Associates and Protective is shown by the fact that Burkhalter, the director of Protective's insurance program, was employed by Associates and that Associates pays his salary. There is evidence that in certain instances Protective paid expenses in connection with its business by using the funds of Associates, and upon the whole record there can be no doubt that the activities of the two corporations are so closely interwoven that they must be regarded, at least for the purposes of the present action, as part and parcel of the same organization.

EMMCO is engaged in a general automobile insurance business and maintains a working arrangement with Protective. It refers its adjustment work in the Nashville area to Protective and Protective reciprocates when it has claims arising in the territory of EMMCO. Employees of the two corporations meet together for study of their joint problems.

Plaintiff, a Missouri corporation, with principal place of business at Kansas City, Missouri, conducts a general adjustment business for various insurance companies, and in addition it acts as the representative in this country of a number of foreign underwriters, including underwriters at Lloyd's and other companies in England, both in writing insurance and in adjusting claims.

In April or May of 1953, Associates, apparently for the first time, began taking insurance on automobiles which it financed, upon certificates of insurance executed by plaintiff as the representative of "Underwriters at Lloyd's and/or companies in England".

Thereafter, until August 1953, when losses occurred under the certificates so issued by plaintiff, the adjusting services were performed by Protective which reported directly to the plaintiff in Kansas City, Missouri, which in turn reported to the underwriters in England.

The letter of November 10, 1953, was written by Burkhalter on behalf of Protective to R. E. Lawrie as Claims Manager of plaintiff (he was also its President and a substantial stockholder), in regard to an item of adjustment expense which had been incurred by Protective in connection with a loss occurring July 4, 1953, under certificate issued by plaintiff to Associates and James H. Strength. Protective, in adjusting the claim, had incurred an item of expense of $11.46, for which it had billed plaintiff. On November 6, 1953, plaintiff wrote Protective that "underwriters have denied this billing as they do not consider that your long distance calls in clearing a claim are their obligation and certainly not your office time in processing the claim especially since it is your business". In its reply of November 10, written by Burkhalter on its behalf, Protective acknowledged receipt of the November 6 letter as follows:

"I have your letter of November 6, 1953 and am not too surprised at your organization's refusing to pay this just and exact charge for handling loss in the above caption. We have decided that your organization is not to willing to pay anything, including claims.

"If you will disregard any future charges that we have made for handling your claims, it will be perfectly agreeable with me. I have only one request of your organization, and that is that your give your just claims attention and make payment on same. We are not accustomed to doing business in the matter (manner) in which you and your organization insist."

The November 10 letter was dictated by Burkhalter to his stenographer in his office in Nashville, but other than the fact that the letter was received by Lawrie and read by him in his office at Kansas City, Missouri, there is no evidence that it was seen or read by any other person after it was mailed.

The letter of November 13 was written by Burkhalter for Protective to E. P. Aldrich, Assistant Secretary of EMMCO at South Bend, Indiana, concerning an item of adjustment expense which had been incurred by EMMCO under certificate issued by plaintiff to Associates and Carl T. Larson. The adjustment of the loss had been referred by Protective to EMMCO since it occurred in its territory, and in adjusting the loss EMMCO incurred an item of expense of $13.02, for which it billed Associates on October 19, 1953.

On November 7, 1953, plaintiff wrote EMMCO directly, refusing payment of the charge "on behalf of Underwriters" on the ground that EMMCO had not been authorized to represent the plaintiff in the adjustment of the loss. It was pointed out that all authorizations for loss handling emanate from plaintiff's office and that plaintiff had its own regularly appointed adjusters with whom it dealt. Plaintiff's letter of November 7, having been received by EMMCO, was forwarded to Protective by letter of November 11, 1953, in which EMMCO stated: "We are attaching a copy of the letter just received from the Insurance Research Service, Inc., for we thought you would be interested in knowing the attitude taken by that company on the adjustment of claims under Lloyd's insurance certificates". In this letter the subject matter is described as "Carl T. Larson, Policy No. 9605, Lloyds of London, Collision 7-6-53". Indeed, the plaintiff in its letter of November 7 also described the subject matter as "Lloyds certificate AU 9605, Insured Sgt. Carl T. Larson".

After receiving EMMCO's letter of November 11, enclosing plaintiff's letter of November 7, Burkhalter on behalf of Protective, wrote the letter of November 13, 1953, addressed to Mr. E. P. Aldrich, Assistant Secretary, EMMCO Insurance Company, South Bend, Indiana, with a copy to plaintiff at Kansas City, Missouri. This letter reads as follows:

"We have for acknowledgment your letter of November 11, 1953 to which was attached copy of letter from Mr. R. E. Lawrie dated November 7, 1953, regarding payment of your service bill on the above loss.

"This company is building a terrific reputation for paying none of their bills, and it looks as though we will have to sue them to get anything out of them, either for claims or adjustments.

"In order to prevent any ill feeling between your good company and ours, we are enclosing Associates Finance Corporation's Check No. 42486 in the amount of $13.02, representing your service bill. After all, this assignment was given you in good faith and at the time of assignment, we had no instructions to the contrary from Lloyds of London.

"We are indeed sorry for any inconvenience caused, and are

"Very truly yours,"

The November 13 letter was also dictated by Burkhalter to his stenographer in his office at Nashville and it was received and read by Aldrich in South Bend, Indiana. Whether it was read by any other person is not shown, although it appears that the letter, after being read by Aldrich, was in due course filed with...