Lee v. Nationwide Mutual Insurance Company

• Decision Date: 25 January 1961
• Docket Number: No. 8155.,8155.
• Citation: 286 F.2d 295
• Parties: Anna M. LEE, Administratrix of the Estate of Ernest Walter Lee, Late of Harford County, deceased, Appellant, v. NATIONWIDE MUTUAL INSURANCE COMPANY, a Body Corporate, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

286 F.2d 295 (1961)

Anna M. LEE, Administratrix of the Estate of Ernest Walter Lee, Late of Harford County, deceased, Appellant, v. NATIONWIDE MUTUAL INSURANCE COMPANY, a Body Corporate, Appellee.

No. 8155.

United States Court of Appeals Fourth Circuit.

Argued November 11, 1960.

Decided January 25, 1961.

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

Norman P. Ramsey and M. King Hill, Jr., Baltimore, Md. (Paul E. Burke, Jr., and Smith, Somerville & Case, Baltimore, Md., on brief), for appellee.

Before SOBELOFF, Chief Judge, BOREMAN, Circuit Judge, and BRYAN, District Judge.

ALBERT V. BRYAN, District Judge.

The decision in review is this: that in Maryland the administratrix of an insured, who died in an accident within the coverage of his automobile liability policy, cannot recover for the insurer's negligent or bad faith refusal to settle, at a figure below the insurance limits, the claims of other persons in the accident based upon the insured's carelessness, if the assets of his estate are not sufficient to satisfy the amount by which the subsequent judgments on the claims exceeds the insurance.

Until the estate is out-of-pocket as a result of the insurer's refusal, reasoned the District Judge, the estate has suffered no pecuniary damage and, hence, has no cause of action. Both principle and precedent, his searching discussion reveals, can be advanced for this view. We disagree only because, in the absence of a ruling by the Maryland Court of Appeals, we believe the opposing position offers a sounder resolution of the issue in law and is demanded under the Maryland statutes on the administration of decedent estates. Indeed, the candid appraisal of the trial judge is that the current of today's authorities generally is to give a cause of action in the circumstances.

Had the insured survived, even insolvent, the outstanding judgments, as constant and life-long threats to his financial security and rating, would have caused him almost immeasurable damage. Certainly it would have rounded out his cause of action against the insurer for tort. Logically, his death ought not to relieve the insurer's situation — it ought not to be a boon to the insurer — just as it should not aggravate it. This is emphasized by the utter irrelevance of the death to the insurer's tort, which was committed by the insurer long after the insured's death, with absolutely no connection between the two. Likewise, full recompense of the judgment creditors for their personal injuries and loss is in no wise referable to the death of the culpable insured. The moneys they look to for satisfaction need not have devolved from the deceased; the funds may originate in the estate. In brief, the insurer's wrong was a wrong to the insured's estate, not to him. It is still a wrong despite his death, and it should be remediable at the suit of the estate.

The damage done to the estate is the creation of its liability for the judgments. Their holders are creditors equally with other persons with whom debts may have been incurred though not paid, such as medical and hospital expenses. The tort origin of the judgments does not change their character as estate debts. They are nonetheless damages though they represent no contribution to the insured or his estate. The rule of damages, nearly universal, that incurrence is equivalent to outlay, is not restricted to any particular category of obligation. Plank v. Summers, 1954, 203 Md. 552, 102 A.2d 262. It serves to perfect the cause of action here. Wessing v. American Indemnity Co., D.C.W.D.Mo. 1955, 127 F.Supp. 775, post; Alabama Farm Bureau Mut. Cas. Ins. Co. v. Dalrymple, 1959, 270 Ala. 119, 116 So.2d 924; Henke v. Iowa Home Mut. Cas. Co., 1959, 250 Iowa 1123, 97 N.W.2d 168; Southern Fire & Cas. Co. v. Norris, 35 Tenn.App. 657, 250 S.W.2d 785, certiorari denied Tenn. Supreme Court (1952); Schwartz v. Norwich Union Indemnity Co., 1933, 212 Wis. 593, 250 N.W. 446.

Again, the plaintiff-administratrix has been peculiarly damaged in Maryland by the insurer's tort. Her fiduciary duty, in which she is beholden as much to the creditors as to the next of kin, is to collect all that is owing the estate. 1 Sykes, Maryland Probate Law and Practice, sec. 591. For omission to prosecute the collection of any sum due the estate, in tort as well as contract, the administratrix would be personally liable. This is a personal liability and, against her alone, obviously it is not limited to the penalty of her official bond. Failure to sue on the insurer's tort could thus make her personally answerable in damages — the element found wanting in the present case. Her responsibility in this respect would seem to dispel any concern lest under the view now advocated by the Court she, as judgment debtor, should become the arbiter of whether or not suit should be brought at all for the insurer's tort.

As the judgment now on appeal was rendered on motion to dismiss, the underlying events of the claim are admitted. Nationwide Mutual Insurance Company, the appellee, issued to Ernest Walter Lee, the plaintiff's husband, and to Gilbert C. Mabe motor vehicle liability policies upon their respective automobiles. The insurer obligated itself to defend the insured or his estate against all claims within the risk of the insurance, and to pay any judgment up to the face of the policy. But the insurer reserved the exclusive right and option to negotiate a settlement of any such claim.

While these policies were in effect, on January 5, 1956, the automobiles of the two insured were in collision on a Maryland highway. Lee and Mabe were killed, the latter's wife seriously injured. An action was begun against the Mabe estate by the appellant, administratrix of the Lee estate, for the death of her husband. Similarly, actions were instituted against the appellant, on behalf of the widow and surviving children of Gilbert Mabe, for her injuries and for his suffering and death.

Before as well as during the consolidated trial of these cases in the Maryland State court, the insurer repeatedly declined opportunities to settle the Mabe claims against the appellant-administratrix for $16,000, her husband's policy being for $20,000. Final judgments went against her for a total of $135,125. Towards the satisfaction of the Mabe judgments Nationwide paid the amount due under the Lee policy.

Meanwhile, the appellant had filed her final accounting as administratrix. It showed total assets of $4,117.11 and, after expenses and other priority disbursements, a net estate of $1,441.48. This sum she distributed among herself and her three infant children, as the sole beneficiaries of the estate. The Mabe judgments were not entered until after this division. Formal demand was made by the judgment holders upon the appellant, both as administratrix and in her own right, for the unpaid balance of...