Johnson v. American Family Mut. Ins. Co., 77-433

Citation93 Wis.2d 633,287 N.W.2d 729
Decision Date07 February 1980
Docket NumberNo. 77-433,77-433
PartiesEmaline JOHNSON and Donald Johnson, Plaintiffs-Appellants, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Defendant-Respondent.
CourtUnited States State Supreme Court of Wisconsin

Emaline Johnson and Donald Johnson, her husband, plaintiffs-appellants, commenced an action against American Family Mutual Insurance Company, defendant-respondent, to recover damages alleging that American Family exercised bad faith in failing to settle a claim for damages for personal injuries within the policy limits. The case was tried to a jury, and the jury returned a verdict finding that American Family had not exercised bad faith. Judgment was entered dismissing the complaint upon its merits and the plaintiffs now appeal.

Richard E. Rosenberg (argued), Janesville, for plaintiffs-appellants; Nowlan, Mouat, Lovejoy, Wood & Cripe, Janesville, on the brief.

Steven J. Caulum (argued), Madison, for defendant-respondent; Bell, Metzner & Seibold, S. C., Madison, on the brief.

HANSEN, Justice.

The facts out of which this case arises are set forth in Johnson v. Heintz, 61 Wis.2d 585, 213 N.W.2d 85 (1973), and Johnson v. Heintz, 73 Wis.2d 286, 243 N.W.2d 815 (1976). The action arises out of successive auto accidents which occurred on November 20, 1964. The accidents occurred in a blizzard when the vehicle driven by Gladys Heintz, in which Emaline Johnson was a passenger, ran into the rear end of the Myrtle Bruhn car, which had stalled on the highway. While Emaline Johnson was still in the Heintz car, another collision occurred about twenty minutes later when an automobile driven by Elizabeth Thomas, coming from the opposite direction, collided with the side of the Bruhn car, forcing it to collide with the Heintz vehicle.

Following these collisions, a hospital examination of Emaline Johnson revealed that she had suffered a contusion of the right shoulder, a contusion of the right knee and other injuries. In November, 1968, she underwent surgery for the removal of cartilage from the right knee. By August of 1969 she had returned to work.

On August 12, 1969, after her return from work, she fell while hanging out clothes and sustained additional injury to her knee. It was her contention that the August, 1969, fall was the result of permanent injuries that she had sustained in the 1964 collisions.

In 1967, Emaline Johnson and her husband Donald commenced an action for damages against Gladys Heintz and Heintz's insurer, American Family Mutual Insurance Company. These defendants answered and served a third-party summons and complaint on Myrtle Bruhn and her insurer, Allstate Insurance Company, and a third-party summons and complaint on State Farm Mutual Automobile Insurance Company, the insurer of the vehicle driven by Elizabeth Thomas.

Prior to trial, a $500 settlement was reached by American Family Mutual Insurance Company with Myrtle Bruhn and her insurer, Allstate Insurance Company. In the first trial the jury found Gladys Heintz 85 percent causally negligent and Elizabeth Thomas 15 percent causally negligent. Damages in the amount of $30,000 were awarded to Emaline Johnson and $5,000 was awarded to Donald Johnson.

An appeal was brought by Gladys Heintz, American Family Mutual Insurance Company and State Farm Mutual Automobile Insurance Company. This court reversed the judgment. There was no evidence to a reasonable degree of medical probability that the fall on August 12, 1969, was the result of a disability caused by the prior automobile accident. This court held that, in the absence of such evidence, it was error to submit to the jury a question which permitted it to include in its assessment of damages a sum for the injuries which the plaintiff received in August, 1969. The court also held that the jury should have determined the extent of the injuries sustained in the first impact and the extent of the injuries sustained in the second collision. Elizabeth Thomas was answerable in damages only for the injuries sustained in the second impact and the jury should have been so instructed; thus, it was error to permit the jury to conclude that each tort-feasor (Heintz, insured by American Family, and Thomas, insured by State Farm) was responsible for the total injuries which Emaline Johnson sustained in the successive impacts.

On re-trial, the jury returned a verdict in excess of $78,000, and this was affirmed on appeal. American Family immediately paid their policy limits of $25,000 plus interest and costs.

Gladys Heintz thereafter assigned to Emaline and Donald Johnson any cause of action Heintz had against American Family arising from the company's conduct in handling the Johnsons' claims.

Emaline and Donald Johnson then commenced the instant action against American Family Mutual Insurance Company alleging that American Family was negligent and acted in bad faith in several respects concerning the investigation, evaluation, conduct and trial of the action brought by the Johnsons against American Family and its insured, Gladys Heintz.

Before considering the issues presented on appeal, we summarize the facts as testified to at the instant trial.

On November 23, 1971, three days before the pretrial conference in the original action brought by the Johnsons against both American Family and Gladys Heintz, one of the lawyers for the Johnsons, Robert Elliott, offered to settle the case for $20,000.

A few days before the first trial, in two letters to American Family, John Wickhem, one of its trial lawyers, extensively analyzed and discussed the case. It was his opinion that a settlement of the case within the range of $13,000 and $15,000 would be proper. He emphasized that Dr. Odland, Mrs. Johnson's treating physician, stated in his deposition that Mrs. Johnson's symptoms after she fell in August, 1969, were not associated with the 1964 automobile accident; and that her two other physicians could not testify that the injury to the knee in August, 1969, was caused by the 1964 accident. He also stated he had reviewed the case with counsel for both Allstate and State Farm. They all agreed Mrs. Johnson presented a negative impression as a witness at the adverse examination and had reservations as to her credibility. Wickhem expressed the opinion that he and counsel for the other insurance companies did not believe it was probable that a verdict would exceed $25,000. Wickhem stated that if satisfactory arrangements could be made with the other defendants, a settlement of $15,000 would be reasonable. However, at that time, State Farm, insurer of Thomas, was unwilling to contribute to any settlement, so Wickhem recommended that they proceed to trial. He advised against American Family making a unilateral settlement.

By letter dated January 7, 1972, Elliott, counsel for the Johnsons, again offered to settle for $20,000. He also offered to settle for $17,500 or, in the alternative, to settle for $15,000 plus 50 percent of the contributions up to a total of $2,500. One of American Family's trial lawyers acknowledged the settlement demands and said that the evaluation of $17,500 was not too far away from their evaluation of the damages. However, he found the offers unacceptable because State Farm continually refused to offer anything toward settlement, and because he felt Heintz was no more negligent than Thomas, State Farm's insured. He said that American Family could not settle unless State Farm made a satisfactory contribution.

Gladys Heintz, American Family's insured, was fully advised of the preceding and all subsequent settlement negotiations.

On the first day of trial, the Johnsons offered to accept a $15,000 "pot" from American Family. American Family rejected this settlement demand because State Farm refused to contribute toward the settlement.

The jury (in the first trial) found Heintz 85 percent causally negligent and Thomas 15 percent causally negligent, and awarded $35,000 in damages. After trial, Elliott, on behalf of his client, Mrs. Johnson, offered to settle the case for $32,500.

Wickhem, American Family's trial counsel, recommended that an appeal be taken from the judgment. This recommendation was based upon the fact that at trial, Dr. Odland testified that Mrs. Johnson's re-injury of her knee in August, 1969, was not related to the 1964 accident. Wickhem reasoned that since there was a lack of evidence from which the jury could have concluded that Mrs. Johnson's condition resulting from the 1964 accident caused her to re-injure herself in August, 1969, the jury should not have been allowed to speculate that there was a connection between the two incidents. He believed the jury could not have arrived at the amount of damages it did without taking the re-injury into consideration.

The Johnsons then offered to settle for $30,000. Wickhem informed American Family of this offer, but advised that they should proceed with the appeal.

On May 3, 1972, William Donovan, State Farm's lawyer, wrote to counsel for American Family and stated that offers of settlement seemed to be predicated upon the theory that State Farm would contribute 15 percent of the total judgment as part of a settlement. He stated that State Farm had always maintained the position that it owed nothing and had no exposure to the plaintiffs, but only to the third-party plaintiff, American Family. His position was that if State Farm should offer any contribution, it would have to be based on some percentage of the amount actually paid to the plaintiffs by American Family. Counsel for the Johnsons reiterated his settlement offer to American Family and stated that Donovan's letter was of no consequence. He stated that his settlement offer amounted to an offer to settle the case for the entire amount of the judgment and then a reimbursement by the plaintiffs so that Heintz would not have to pay any part of the judgment in excess of the amount of insurance involved.

At this...

To continue reading

Request your trial
26 cases
  • Kranzush v. Badger State Mut. Cas. Co., 80-504
    • United States
    • United States State Supreme Court of Wisconsin
    • June 30, 1981
    ...opportunity to settle an excess liability case within policy limits and it fails to do so." See also: Johnson v. American Family Mutual Ins. Co., 93 Wis.2d 633, 287 N.W.2d 729 (1980); Howard v. State Farm Mutual Auto. L. Ins. Co., 70 Wis.2d 985, 236 N.W.2d 643 (1975); Howard v. State Farm M......
  • Mowry v. Badger State Mut. Cas. Co.
    • United States
    • United States State Supreme Court of Wisconsin
    • May 30, 1986
    ...the duty to settle, which arises out of fiduciary principles. Alt, 71 Wis.2d at 348, 237 N.W.2d 706. Johnson v. American Family Mut. Ins. Co., 93 Wis.2d 633, 646, 287 N.W.2d 729 (1980). Second, the insurer in Luke refused the plaintiff's offer to hold the suits in abeyance in order to give ......
  • Sumnicht v. Toyota Motor Sales, U.S.A., Inc.
    • United States
    • United States State Supreme Court of Wisconsin
    • February 5, 1985
    ......Co., 54 Wis.2d 345, 195 N.W.2d 602, 198 N.W.2d 161 ... Morgan v. Pennsylvania General Ins. Co., 87 Wis.2d 723, 735, 275 N.W.2d 660 (1979); ... Johnson v. Heintz, 73 Wis.2d 286, 302, 243 N.W.2d 815 ...American Family Mut. Ins. Co., 93 Wis.2d 633, 644, 287 ......
  • Roehl Transp. Inc v. Liberty Mut. Ins. Co.
    • United States
    • United States State Supreme Court of Wisconsin
    • June 22, 2010
    ...what it had contracted for.”). See also Epstein, supra note 41, § 8[b] (collecting cases). 43. Johnson v. Am. Family Mut. Ins. Co., 93 Wis.2d 633, 644, 287 N.W.2d 729 (1980). See also Helmbrecht v. St. Paul Ins. Co., 122 Wis.2d 94, 109, 362 N.W.2d 118 (1985). Wisconsin Stat. § 805.14(1) pro......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT