Jolly v. General Accident Group, Civ. A. No. 73-1419.

• Court: United States District Courts. 4th Circuit. United States District Court of South Carolina
• Writing for the Court: C. D. Hopkins, Jr., North Charleston, S. C., Robert A. Elsner, Atlanta, Ga., for plaintiff
• Citation: 382 F. Supp. 265
• Parties: Rosanell JOLLY, Plaintiff, v. GENERAL ACCIDENT GROUP et al., Defendants.
• Docket Number: Civ. A. No. 73-1419.
• Decision Date: 05 August 1974

382 F. Supp. 265

Rosanell JOLLY, Plaintiff,
v.
GENERAL ACCIDENT GROUP et al., Defendants.

Civ. A. No. 73-1419.

United States District Court, D. South Carolina, Charleston Division.

August 5, 1974.

C. D. Hopkins, Jr., North Charleston, S. C., Robert A. Elsner, Atlanta, Ga., for plaintiff.

Morris D. Rosen, Samuel J. Corbin, Charleston, S. C., for defendants.

ORDER

BLATT, District Judge.

Prior to the institution of the above entitled action, the plaintiff herein, Rosanell Jolly, brought suit against one Richard B. Gilbert for personal injuries resulting from a collision between the Jolly and Gilbert automobiles. The defendants constitute a group of automobile liability insurance companies doing business under the trade name of General Accident Group, and these defendants had in effect at the time of the aforesaid collision a policy of automobile liability

382 F. Supp. 266

insurance in the amount of $10,000.00 covering the Gilbert automobile. The plaintiff recovered a judgment against Gilbert for approximately $47,000.00 in excess of the coverage provided by the defendants. After the aforesaid judgment had been rendered against him, Gilbert assigned to the plaintiff any claim that he had against the defendants based on alleged negligent and bad faith conduct by the defendants in refusing to settle the claim against Gilbert within the policy coverage. The matter is now before this court on motion of the defendants to dismiss this suit on the ground that the plaintiff has no interest in the cause of action set forth in the complaint because such an alleged cause of action could not be assigned by Gilbert to the plaintiff. Based on the pleadings herein, the questions confronting this court are whether the complaint sets forth an action in contract or an action in tort, and, if in tort, can a cause of action sounding in tort and arising from negligence and bad faith in failing to settle within policy limits a claim against an insured be assigned by the insured after a judgment in excess of the policy limits has been rendered against him

The plaintiff in this action charges that the defendants were guilty of negligence, willfulness, and bad faith in refusing to settle the claim against their insured within policy limits when they had a reasonable opportunity to do so. It appears clear to this court that such allegations rest in tort. In the case of State Farm Mutual Automobile Insurance Company v. Arnold et al., 276 F.Supp. 765 (D.S.C.1967), a case involving a failure to defend rather than a failure to settle, the Honorable Donald Russell, then a District Judge, held that a counterclaim containing a cause of action with allegations similar to those here involved set forth a cause of action resting in tort. Judge Russell based his conclusion on the opinion of the Supreme Court of South Carolina in Miles v. State Farm Mutual Automobile Insurance Company, 238 S.C. 374, 120 S.E.2d 217 (1961). Like Judge Russell's Arnold case, the Miles case, too, was based on a failure to defend, not a failure to settle, and in the Miles case, at page 220 of 120 S.E.2d, is found the following language:

". . . In the defense of an action against its insured, an insurer is bound not only to act in good faith but also to exercise reasonable care. Appelman, Insurance Law and Practice, Vol. 8, Section 4687; Tiger River Pine Co. v. Maryland Casualty Co., 163 S.C. 229, 161 S.E. 491. In such a case unreasonable refusal on its part to accept an offer of compromise settlement has been held to render it liable in tort to the insured for the amount of the judgment against him in excess of the policy limit. Tyger River Pine Co. v. Maryland Casualty Co., 170 S.C. 286, 170 S.E. 346."

A close reading of the Tyger River cases, which the court cites as authority in Miles for the above quoted statement, persuades this court to conclude that an insurance carrier that negligently fails to settle a claim against its insured within policy limits is subject to suit by such insured either in contract for breach of its implied contract to exercise reasonable care in conducting the suit, or in tort for negligence. Such conclusion is bottomed on the following language found in the second Tyger River case:

". . . The following was quoted from the case of Attleboro Mfg. Co. v. Frankfort, etc., Co. (C.C.Mass.) 171 F. 495: `Where an insurer under an employers' liability policy on being notified of an action for injuries to insured's servant assumed the defense thereof, and was negligent in conducting the suit, to the loss of the employer, the latter was entitled to sue the insurance company for breach of its implied contract to exercise reasonable care in conducting the suit or in tort for negligence.'

We said in our opinion in connection with this question: `The same

382 F. Supp. 267

principle is announced in the rehearing of the same case reported in (Attleboro Mfg. Co. v. Frankfort, etc. Co.) (C.C.A.) 240 F. 573. And such we find to be the prevailing opinion.'

We adhere to that conclusion." Tyger River Pine Co. v. Maryland Casualty Co., 170 S.C. 286, 291, 170 S.E. 346, 348 (1933) (emphasis ours)

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