Landie v. Century Indem. Co.
| Citation | 390 S.W.2d 558 |
| Decision Date | 05 April 1965 |
| Docket Number | No. 24149,24149 |
| Parties | Martin LANDIE and Sol Landie, Respondents, v. CENTURY INDEMNITY COMPANY, a corporation, Appellant. |
| Court | Missouri Court of Appeals |
Roy A. Larson, Jr., Kansas City, Sprinkle, Carter, Sprinkle & Larson, Kansas City, of counsel, for appellant.
Jack N. Bohm, Kansas City, for respondents.
In this case respondents, plaintiffs below, seek to recover from appellant, defendant below, that part of a judgment which is in excess of the limits of an automobile liability insurance policy issued by appellant. We shall refer to the parties as they appeared below. Since the procedures had in previous litigation vitally affect the issue in the present case, we will list such previous proceedings in chronological order.
One C. F. Dawkins was engaged in the business of selling used buses, trucks and parts in Wolcott, Kansas, and was the insured under an automobile liability policy issued by the defendant in the present case, Century Indemnity Company.
About the middle of November, 1954, Dawkins loaned an old truck-tractor to Martin Landie, who with his brother, Sol Landie, was engaged in the junk business and in the business of buying and moving old houses. The two Landies are the plaintiffs in the present case. The Landies put a fifth wheel on the borrowed truck-tractor and attached a trailer thereto, and proceeded to move a house with such rig.
While so moving the house on a public highway in Jackson County, Missouri, on November 27, 1954, one Chester Redman collided therewith and received serious personal injuries.
On November 29, 1954, Redman filed suit against both Landies. The Landies were insured under a liability insurance policy issued by the Central Standard Insurance Company of Sioux Falls, South Dakota, and such company assumed the defense of this damage suit on behalf of the Landies.
In April, 1955, C. F. Dawkins (who owned the truck-tractor involved in the accident and who was insured by the Century Indemnity Company) was made a party defendant in the Redman suit. Century Indemnity Company defendant Dawkins in the Redman suit.
About October of 1955, the Central Standard Insurance Company went bankrupt and ceased to represent the Landies, who then, through their private attorney, made an oral demand upon the Century Indemnity Company to assume their defense. This oral demand was refused. Thereafter, on March 10, 1956, written demand was, for the first time, made upon Century Indemnity Company to defend the Redman case on behalf of the Landies, which demand was refused. This demand was made on the theory that they were operating the truck-tractor owned by Dawkins with his permission, and were therefore covered by the policy issued to Dawkins by Century Indemnity Company as an additional insured.
On May 9, 1956, Redman dismissed his lawsuit against Dawkins.
On November 6, 1956, the Landies through their private attorney, wrote another letter to Century Indemnity Company again demanding that the company defend the Redman case on their behalf, and also advising that such case could be settled for $15,000.00 (this was the limit of the policy issued by Century Indemnity Company to Dawkins), and demanding that the company settle this lawsuit for this amount.
By letter of November 15, 1965, Century Indemnity advised the Landies that there was no coverage for them under the policy and that they would not defend the Redman suit, on behalf of the Landies, except under a full reservation of rights.
The Landies refused to enter into an agreement for the reservation of rights and Century Indemnity did not defend the Redman suit in their behalf.
On November 21, 1956, an agreement was reached by Redman and the Landies whereby it was agreed that, regardless of any judgment recovered by Redman against the Landies, the Landies would be required to pay only $7,500.00, and that Redman would not attempt to collect more from them but would be limited to attempting to collect from any insurance which might be available in the case.
Thereafter, and on the same day, November 21, 1956, judgment was entered in the Circuit Court of Jackson County, Missouri, for the plaintiff Redman and against the defendant Landies in the amount of $22,500.00. This represented the $15,000.00 limit of the insurance policy issued by Century Indemnity plus the $7,500.00 that the Landies had agreed to pay.
The Landies then paid the sum of $7,500.00 to Redman as per their agreement.
Century Indemnity did not make any payment and thereafter Redman instituted garnishment proceedings against the company to collect his judgment against the Landies. After trial to the court judgment was rendered for the plaintiff Redman April 28, 1960, in the amount of $15,000.00. In this proceeding the court found that the insurance policy issued by the Century Indemnity Company to Dawkins did, in fact, cover the operation of the vehicle by the Landies. This judgment has now become final and Century Indemnity has paid the $15,000.00 and costs, plus interest.
On May 15, 1961, the Landies filed the present suit against the Century Indemnity Company seeking to recover from the insurance company the $7,500.00 which they had paid to Redman under the agreement referred to above. This $7,500.00 payment was over and above the limits of the policy issued by the company. Plaintiffs in this suit also seek to recover their attorney fees and expenses incurred in defending the original Redman suit.
After trial to a jury in the Circuit Court of Jackson County, Missouri, a verdict was returned on April 21, 1964, awarding judgment to the plaintiffs Landies in the amount of $8,365.00, being the $7,500.00 excess of the Redman judgment, plus $865.00 attorney fees and expenses.
It appears that at the trial the company conceded and the parties agreed that because the company had failed to defendant the Landies when the policy did in fact cover them, the company was liable to the Landies for attorney fees and expenses in defending the Redman suit. This amount was agreed to be $865.00.
We thus have a factual situation wherein the insurance company has failed and refused to defend an insured and while persisting in such refusal to defend, has refused to settle the suit against its insureds within the limits of the policy, although such settlement was demanded by the insured.
It appears to be the position of the defendant insurance company that it had reasonable grounds to believe, and in good faith did believe, that the Landies did not have permission from Dawkins to operate the borrowed truck-tractor on the public highways in moving a house and consequently there was no coverage under the policy, and that, because they acted in good faith in contending that there was no coverage they are not liable for any judgment against their insured in excess of the policy limits.
It appears to be the contention of the plaintiffs Landies that they were covered by the policy (and this fact has been finally and conclusively settled by the final judgment in the garnishment proceedings) and that the company was thereby obligated to defend them, and in such defense was obligated to use good faith in considering offers of settlement. Since the company failed to defend it is liable for the judgment against plaintiffs to the limits of their policy (which has now been paid) plus their attorney fees and expenses in defending the Redman suit (which the company now admits). Plaintiffs further contend that the company was not in good faith, but in fact acted in bad faith, when they refused to settle the Redman suit within the limits of the policy pursuant to the notification and demand contained in their letter of November 6, 1956, and that, because the company acted in bad faith in refusing to settle within the policy limits it is liable to them for the amount of the Redman judgment in excess of the policy limits.
In the argument counsel advised that they were unable to find any Missouri case involving the double-barrelled proposition of refusal to defend and refusal to settle. Considerable research by the writer has likewise failed to reveal any such Missouri case. In fact, only a small handful of cases in any way involving this factual situation have been found in the United States.
The policy in question obligated the company to defend any suit against the insured claiming damages because of injury arising out of the ownership, maintenance or use of any automobile, even if such suit is groundless, false or fraudulent and the company reserved to itself the exclusive right to make such investigation, negotiation and settlement of any claim or suit as it deems expedient.
This is a standard policy provision and under this or essentially similar provisions it has been universally held that the company is contractually obligated to defend anyone who in fact comes within the policy definition of 'insured'; that failure to so defend is a breach of contract and that reasonable or good faith belief that there is no coverage under the policy is no defense. The company fails to defend at its peril.
For such breach of contract the company is liable to its insured to pay any judgment recovered against him up to the limits of the policy plus attorney fees, costs, interest and any other expenses incurred by the insured in conducting the defense of the suit which it was the obligation of the company to perform under its contract. Also, the insured is released from the policy prohibition against incurring expenses and negotiating and settling claims. The company is thus obligated to reimburse the insured for such settlement, absent collusion, etc. See Freese v. St. Paul Mercury Indemnity Co., Mo.App., 252 S.W.2d 653, Bituminous Casualty Corp. v. Walsh & Wells, Inc., Mo.App., 170 S.W.2d 117.
This general rule is concisely...
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