Lee v. Nationwide Mutual Insurance Company

• Decision Date: 02 June 1960
• Docket Number: Civ. A. No. 11530.
• Citation: 184 F. Supp. 634
• Parties: Anna M. LEE, Administratrix of the Estate of Ernest Walter Lee, Late of Harford County, deceased v. NATIONWIDE MUTUAL INSURANCE COMPANY, a body corporate.
• Court: U.S. District Court — District of Maryland

184 F. Supp. 634

Anna M. LEE, Administratrix of the Estate of Ernest Walter Lee, Late of Harford County, deceased v. NATIONWIDE MUTUAL INSURANCE COMPANY, a body corporate.

Civ. A. No. 11530.

United States District Court D. Maryland.

June 2, 1960.

Melvin J. Sykes and Francis D. Murnaghan, Jr., Baltimore, Md., for plaintiff.

M. King Hill, Jr., Clater W. Smith and Norman P. Ramsey, Baltimore, Md., for defendant.

R. DORSEY WATKINS, District Judge.

Questions Presented.

The amended complaint of Anna M. Lee, administratrix of the estate of Ernest Walter Lee, (plaintiff) seeks (1) a judgment against Nationwide Mutual Insurance Company (Nationwide) in the amount of $115,675, alleged to be the damages sustained by plaintiff through the alleged negligent or bad faith failure of Nationwide to settle, within the limits of an automobile liability policy issued to Ernest Walter Lee (Lee), claims arising out of the alleged negligence of Lee; and (2) a declaratory judgment that Nationwide is liable to "reimburse" plaintiff for the amount of unsatisfied judgments against plaintiff, in excess of the policy limits, arising out of the alleged negligence of Lee whether or not plaintiff has or has not in fact discharged all or any part of said excess.

Nationwide has moved to dismiss both counts of the amended complaint on the grounds that neither states facts sufficient to constitute a cause of action.

Facts.

The facts stated, on motion to dismiss, most favorably to plaintiff, may be summarized¹ as follows:

On January 5, 1956, Nationwide had an outstanding automobile liability policy of $10/20,000 covering personal injuries from the operation of motor vehicles by Lee, and a policy of $20/40,000 covering personal injuries from the operation of motor vehicles by Gilbert C. Mabe (Mabe). On that day, an automobile driven by Mabe was in a rear-end collision with a truck driven by Lee. Both drivers were killed. Mrs. Mabe, a passenger in the Mabe car, was badly injured.

The following suits were brought in the Circuit Court for Harford County:

(1) Against the plaintiff as Lee's administratrix:

(a) A death suit on behalf of Mrs. Mabe and her two minor children, for $150,000; (b) by Mrs. Mabe, as executrix of Mabe, for his conscious pain and suffering, property damage and for funeral expenses, in the amount of $5,000; and (c) by Mrs. Mabe, individually, for personal injuries, for $50,000; and

(2) against the administratrix of Mabe: (a) a death suit on behalf of the widow (plaintiff) and three minor children of Lee; and (b) by plaintiff as administratrix of Lee to recover for funeral expenses, and for personal injuries and property damage suffered by Lee before his death. All of the suits were consolidated, and tried together.

The plaintiffs (Mabes and Lees) were respectively represented by competent counsel of their own selection, who in turn associated with them leading trial counsel specializing in tort suits.

Nationwide was obligated to defend each of the defendants (Mabes and Lees) and their estates in the Harford County suits; and was vested with the absolute and ultimate control of such defenses, and with the exclusive right and option to negotiate with respect to possible settlement of all or any of the cases. Nationwide thereupon retained separate defense counsel for the two administratrices, which counsel cooperated with personal counsel for the respective administratrices solely for protecting such administratrices in their statuses as defendants.

Nationwide was directly represented by counsel of its own choosing who did not enter his appearance in any of the suits, but who received reports from the defense counsel furnished by Nationwide; was present throughout the trial; consulted with, counselled and guided the respective defense counsel provided by Nationwide; participated in all conferences and discussions with the trial judge held out of the presence of the jury; and who exclusively conducted such discussions and negotiations as there were respecting settlement.

The amended complaint alleges that "The evidence at the trial pointed overwhelmingly to the conclusion that the accident was the legal responsibility of" Lee "and that a verdict would almost inevitably be rendered holding the" plaintiff herein liable as administratrix. The facts thereafter alleged in the amended complaint would, if proved, amply support this conclusion.² The evidence also established that the injuries received by the Mabes were substantial, and if verdicts were received by the Mabes, the damages would be far in excess of the $10/20,000 limits of the Lee policy.³

Before the trial, possible settlement was discussed informally, but Nationwide's own counsel took the position that the Mabes' cases had no more than a nuisance value, and he was never willing to make an offer to settle in any specific amount. During the trial, personal counsel for the Mabes approached Nationwide's counsel for settlement on the basis that the Mabes would win, but that in view of the policy limits, they would give some discount, and would "settle the case (sic) for a total of $18,000.00, out of which the Mabes would take $16,000.00 and $2,000.00 would be paid the Lees." Personal counsel for the Lees "strongly urged that the offer be accepted." Nationwide's counsel "rejected the offer stating that in his opinion both sets of cases would result in defendant's verdicts since he felt that both Lee and Mabe were guilty of negligence."⁴ The offer was repeated on the third day of the trial, after the cases had been submitted to the jury, but was rejected by Nationwide's counsel, and no counter-offer was made.

The jury, after deliberating approximately two and one-half hours, returned verdicts for the Mabes totalling $135,125, apportioned, in the death suit, $51,000 for Mrs. Mabe and $33,000 for the two infants; $1,125 for conscious pain and suffering and funeral expenses; and $50,000 to Mrs. Mabe for her personal injuries.

Nationwide filed no motions for new trial or for judgment n. o. v., and took no appeal, but paid and credited on the judgments $19,450, being the policy limits less $550 paid in the settlement to an injured passenger in the Lee truck. Thereafter, the personal attorney for the Mabes "formally demanded that plaintiff pay in full the entire sum of $115,675.00, representing the difference between the full amount of the judgment and the amount paid by the defendant insurance company, with interest as provided by law." Plaintiff notified Nationwide of the demand. Nationwide has denied liability.

The amended complaint also alleges that "the instant suit is brought pursuant to express authorization therefor by the" Orphans' Court of Harford County.

The first cause of action of the amended complaint concludes as follows:

"25. The plaintiff desires to wipe out the cloud on the good name of her deceased husband, Ernest Walter Lee, and her family by paying the judgments rendered against her, and respectfully represents that she will apply the proceeds of her recovery herein to the payment of the said judgments. Plaintiff further alleges that she has suffered loss and damage as a direct result of the said judgments. As indicated by the inventory dated January 13, 1956, filed by her in the estate of Ernest Walter Lee, deceased, in the Orphans' Court of Harford County, there were total assets in the said estate of $3,117.11, of which $2,217.11 consisted of moneys in bank or building and loan associations, and $900.00 constituted the net value of a 1954 four-door sedan automobile. The estate, except for the judgments herein complained of, was fully solvent, and all expenses and disbursements, including funeral expenses, court costs, administratrix's commissions, tax on commissions, and debts due by the decedent, amounted to $1,675.63, leaving a net total of $1,441.48, which would have been available for distribution over and above all liabilities and obligations of the estate in the absence of the entry of the judgments herein complained of. On February 28, 1957, while the Mabe suits were pending against the plaintiff herein as administratrix of the estate of Ernest Walter Lee, the said proceedings being fully known to the instant plaintiff, who had been duly summoned therein, the plaintiff filed her first and final account as administratrix of the estate of her decedent, which distributed the said sum of $1,441.48, less only inheritance taxes of 1%, to the beneficiaries of the estate, including three infant children of the decedent and the instant plaintiff. As the direct result of the entry of the judgments herein complained of, the plaintiff is and will be liable to the Mabes for the amount distributed through the estate of Ernest Walter Lee; and neither the plaintiff, who has personal assets out of which such amount may be made nor the estate will be in a position, so long as the said judgments are outstanding, to escape liability or to distribute free of encumbrances the net sum of $1,441.48, less inheritance taxes as aforesaid, which the estate and plaintiff as administratrix would have been able to distribute over and above all debts, obligations and expenses of the said estate had not the said judgments been entered against the plaintiff as administratrix. Plaintiff alleges that said judgments against her in excess of the insurance policy limits are a result of the defendant's tortious conduct as aforesaid, and that the defendant is responsible to her to the extent of the difference between the amount of the said judgments and the moneys heretofore paid on account thereof by the defendant, together with necessary related expenses, interest and costs."

Contentions of the Parties.

Plaintiff contends that the facts alleged show that Nationwide failed to exercise reasonable prudence, and was guilty of bad faith, in failing to settle within the policy limits; and that mere entry of judgment against plaintiff, regardless of whether plaintiff has...