Miles v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 31 May 1961
• Docket Number: No. 17790,17790
• Citation: 238 S.C. 374,120 S.E.2d 217
• Parties: Beatrice B. MILES, Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Respondent.
• Court: South Carolina Supreme Court

Page 217

120 S.E.2d 217

238 S.C. 374

Beatrice B. MILES, Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Respondent.

No. 17790.

Supreme Court of South Carolina.

May 31, 1961.

John A. Martin, George F. Coleman, Winnsboro, for appellant.

Nelson, Mullins & Grier, Columbia, T. K. McDonald, Winnsboro, for respondent.

LEGGE, Justice.

Plaintiff, insured under defendant's policy against liability for bodily injury caused by the operation of her automobile, brought this action in tort alleging negligence and bad faith on defendant's part in failing to defend, settle, or save her harmless from the claim of her daughter-in-law, a passenger in said automobile, who had been injured while plaintiff was operating it. She appeals, charging that the trial Judge erred: (1) in directing a verdict in favor of the defendant; and (2) in excluding certain proffered testimony.

The policy, limiting the amount of coverage to $5,000 for injury to or death of one person and to $10,000 for injury to or death of more than one person, excluded from coverage 'bodily injury to the insured or any member of the family of the insured residing in the same household as the insured.'

The accident occurred on December 3, 1958. Two days later the insured signed and delivered to the insurer's agent, Mr. Arnette, a report of it on the company's 'Automobile Claim Report' form. That report listed as the occupants of the car, other than the insured, Laverne Miles (the insured's daughter-in-law), Ricky and Kenneth Miles (Laverne's children), and Brenda, Cathy and Sandra Miles (children of the insured). It described the accident as having happened about 9:40 p. m. on Pine Needle Road in Columbia, S. C., when the insured drove into a sharp curve unexpectedly at a speed of about forty miles per hour and lost control of the car, which struck tree and a utility pole on the right side of the road. In the 'Personal Injury Report Space' it stated the name and address of the policyholder as 'Mrs. Beatrice B. Miles, Old Camden Road, Ridgeway, S. C.', and it listed the names and addresses of the persons injured, other than the insured as follows: Sandra Miles, age 15, Old Camden Road, Ridgeway, S. C.; Cathy Miles, age 10, Old Camden Road, Ridgeway, S. C.; Laverne Miles, age 23, Old Camden Road, Ridgeway, S. C. It gave the relation of the injured to the insured as 'daughters'; and it answered 'Yes' the question 'Does injured reside in same household as insured?'

Laverne Miles employed an attorney of the bar of Winnsboro in Fairfield County, and on April 17 he wrote to Mr. Arnette, the insurer's agent at Winnsboro, advising of his representation of her. On April 20, the insurer's claims representative called at the home of Mrs. Beatrice B. Miles and obtained from her the following written statement, which she signed:

'I am Mrs. Beatrice B. Miles, white female, age 46, residing on Rt. 2 Old Camden Highway, Ridgeway, S. C. My post office box is No. 24. Y phone No. is 2651. I work at Boney's Grocery in Ridgeway, S. C., phone No. 3161. I am a widow and I have three children at home with me now. I have seven children in all.

'On Dec. 3, 1958, about 9:40 p. m., I had an accident while driving my 1953 Ford on Pinestraw Rd., Columbia, S. C. I was going into Columbia from my home. It was not raining. It was dark. The weather was good. I had never traveled that road before. I came upon a sharp curve to my right all of a sudden. I lost control of the steering wheel and ran off the road on the right side. I hit a tree. I was driving. Laverne Miles and Sandra Miles were riding in the front seat with me. There were four children in the back seat. Brenda, Cathy, Ricky and Kenneth Miles were in the back seat. Sandra, age 15, and Brenda, age 12, and Cathy, age 10, all daughters. They all live with me.

'Laverne, age 23, is my daughter-in-law. Ricky, age 5, and Kenneth, age 4, are Laverne's children. Laverne and the children stay in Winnsboro now with her people. They live at Rt. 4, the Great Falls highway. At the time of the wreck, she lived with me. Ricky and Kenneth did also. Laverne married my son, Austin Miles, about 6 or 7 years ago. They stayed with each other off and on. She has lived in California, Illinois, and Alabama. They are not living together now. She has filed for divorce. Austin came from California about two weeks ago. He is leaving again Friday. He is 24 years old. He and Laverne have two children. In April of 1958 Laverne and the children came to my house to live with me. She came from California and never did go back. She lived with me in my house until January of 1959. She was living with me when this accident happened. She was working in Columbia at the time. She was a waitress. She worked at Doug Broome's too. I went down there every night and brought her home. Sometimes it would be 3:00 a. m. before I would get back home. I spent a lot of money on her and the two children. I did it for the children. While she was with me she would visit her parents in Winnsobor. She stayed about three weeks one time which was about the longest she ever stayed. She never took all her clothes with her. She would change about and swap about. I told her she could stay with me as long as she respected me. It was my son's fault they were not living together. Laverne was raised by a stepmother. They couldn't get along. She slept with me while she was at my house. When she worked she would help buy the groceries. If I had bills come due and I couldn't make it, she would help me. She was real good to me. She never gave me a certain amount. We always cooked and ate goether. She got along wonderful with my children.

'She went back to her father's house in January. I carried her to the doctor a few times since then. She would stay with me a few days. I haven't seen her in three weeks. She is supposed to go back to the doctor the 2ord. She was hurt bad in the wreck. She had a stell thing in her leg. She has 19 pins in it. As far as I know we still get along all right. I don't know why she left. She left one day while I was gone to work. She took all her things with her. We didn't have any argument or anything. Her children were not hurt in the wreck. They didn't get a scratch, not even a bump.

'The above statement is true according to my knowledge.'

By letter dated April 2,, the insurer's claims representative acknowledged receipt of notice of Laverne's representation by counsel and advised that on his next trip to Winnsboro he would drop by her attorney's office and discuss the claim with him; but in fact he did not call upon Laverne's attorney until some time after August 15, when he called for the purpose of denying coverage.

In September, 1959, Laverne brought suit against Beatrice, asking damages in the amount of $60,000. On October 5, copies of the summons and complaint having been received by the company, its claim superintendent wrote to Beatrice adivising that the company had placed the matter in the hands of its attorneys in Columbia, S. C., with instructions to look after the defense, not waiving, but specifically reserving the right to deny coverage, and suggesting that because of that fact and the further fact that the amount demanded was in excess of the protection afforded by the policy, she might procure counsel to represent her personally, at her own expense, in addition to counsel employed by the insurance company. On October 14, 1959, the company's claim superintendent wrote to Beatrice stating the the company had completed its investigation, which had established, among other things, that Laverne, the insured's daughter-in-law, was at the time of the accident a member of the family of the insured residing in the same household, and that her injury was therefore not covered by the policy and that therefore the company would not defend the action brought by Laverne and would not pay any judgment obtained against Beatrice therein; and that she (Beatrice) should take whatever steps she might deem appropriate to defend herself in said action. Copy of this letter was sent to Laverne's attorney, Honorable John A. Martin. On October 20, 1959, he wrote to Beatrice, advising of his receipt of said copy; offering, on behalf of Laverne, to settle her claim for $5,000, subject to acceptance of the offer on or before October 28; and advising that a copy of his letter was being sent to the company's claim superintendent and to the company's attorneys, Messrs. Nelson, Mullins & Grier, who had previously contacted Mr. Martin with regard to extension of time. On October 27, Massers. Nelson, Mullins & Grier wrote to Beatrice, returning to her the copy of summons and complaint, and suggesting that she employ her own counsel for defense of the action and arrange at once with Mr. Martin for a reasonable time in which to make her appearance in the case. By letter of the same date to Mr. Martin, Messrs. Nelson, Mullins & Grier advised that they had returned the suit papers to Beatrice and requested that he give her a reasonable time in which to procure representation and file an answer.

Beatrice was given additional time to procure counsel and defend, but she did not do so; and judgment was entered against her, by default, on April 4, 1960, in the amount of $12,500.

Laverne then sued State Farm Mutual for $5,000 on the policy, as a third party beneficiary thereunder. State Farm, defending, contended that she was within the exclusion clause before mentioned; but the jury resolved that issue against it and rendered a verdict for the plaintiff in the amount of $5,000, which State Farm paid.

Beatrice then brought the present action in tort against State Farm, alleging negligence and bad faith on its part in not properly investigating the matter of Laverne's residence and in failing to settle her claim. Damages were sought in the amount of $7,500, being the excess of Laverne's judgment over the amount of the coverage, $5,000, which State Farm had paid as...