Olympia Fields Country Club v. Bankers Indem. Ins. Co.

Decision Date01 May 1945
Docket NumberGen. No. 43020.
PartiesOLYMPIA FIELDS COUNTRY CLUB v. BANKERS INDEMNITY INS. CO.
CourtUnited States Appellate Court of Illinois

OPINION TEXT STARTS HERE

Appeal from Superior Court, Cook County; William J. Lindsay, Judge.

Action by Olympia Fields Country Club against Bankers Indemnity Insurance Company to recover amount paid one who had recovered a personal injury judgment against the plaintiff. From a judgment for plaintiff for $10,853.11, the defendant appeals.

Judgment reversed, and cause remanded for a new trial.Rawlins & Wright and Poppenhusen, Johnston, Thompson & Raymond, all of Chicago (Chester D. Kern, Floyd E. Thompson, Henry J. Brandt, and A. L. Rittenberg, all of Chicago, of counsel), for appellant.

Gotthard A. Dahlberg, of Chicago (Sarsfield Collins, of Chicago, of counsel), for appellee.

SCANLAN, Justice.

Bankers Indemnity Insurance Company, defendant, issued to Olympia Fields Country Club, plaintiff, a public liability policy. Thereafter Alice Jean Halladay brought a suit against the plaintiff to recover for personal injuries sustained by her while an invitee on its premises and she recovered a judgment against it in the sum of $20,000. The First Division of this court affirmed the judgment (Alice Jean Halladay v. Olympia Fields Country Club, 295 Ill.App. 622, 15 N.E.2d 345), and the Supreme Court denied an appeal. Defendant then paid to Mrs. Halladay $10,815.80. Plaintiff paid Mrs. Halladay the amount of the balance due on the judgment and sued to recover from defendant the said amount. A jury returned a verdict finding defendant guilty and assessing plaintiff's damages at $10,853.11. A motion for judgment notwithstanding the verdict and an alternative motion for a new trial were overruled. Defendant appeals from the judgment entered upon the verdict.

Defendant's policy insured plaintiff against loss by reason of liability imposed by law for damages arising out of bodily injuries, etc., accidentally suffered by any person or persons not employed by the assured while within or upon the premises of the insured. The limit of liability under the policy was $10,000 for bodily injuries to any one person. The policy provided, inter alia:

‘In Addition to the Above the Company Agrees: (2) To Make Such Investigation at its own cost of all accidents reported to the Company to which this Policy applies, and to undertake such negotiations for settlement, or to make such settlements of any claims for damages made against the Assured, as the Company may deem expedient; and in the event of suit being brought against the Assured on account of such an accident, to defend such suit, even if groundless, in the name and on behalf of the Assured, unless or until the Company shall elect to effect settlement thereof.’

Plaintiff's amended complaint consisted of six counts. At the close of plaintiff's case motions to direct a verdict as to counts three and four were sustained, and motions to direct as to counts one, two, five and six were overruled. Court one charged that defendant failed to exercise good faith toward plaintiff in that prior to the trial it was fully apprised of the seriousness of the injuries received by Mrs. Halladay and fully aware of the danger to the rights of plaintiff should a judgment in excess of the policy limit be rendered in said suit, yet it arbitrarily and unreasonably refused to accept an offer of Mrs. Halladay to settle her suit for the sum of $3,500. Count two charges that defendant failed to exercise good faith toward plaintiff when it arbitrarily and unreasonably refused to compromise for $8,000 the judgment in favor of Mrs. Halladay before it was affirmed by the Appellate Court, although defendant was fully aware of the imminent danger to the rights of plaintiff by reason of the entry of said judgment. Counts five and six make the same charges as are contained in counts one and two and in addition charge that the refusal to accept the said offers was contrary to the advice of its attorney, who was in charge of the defense of the Halladay suit.

Defendant states: ‘That it fully performed, and in good faith, each and every of its obligations under the terms and provisions of the said policy of insurance; that it was within its contractual rights to refuse each of the two offers to compromise and that its refusal in each case was neither arbitrary nor unreasonable; that it defended the plaintiff on the trial, prosecuted the appeal to the Appellate Court, and petitioned for leave to appeal to the Supreme Court in an honest belief that the claim of Mrs. Halladay was without merit; that although it may now be said as a matter of hindsight that the defendant would have exercised better judgment had it accepted either of the offers of compromise, a mere error of honest judgment is not bad faith and is insufficient to sustain a recovery by the plaintiff; that it is not guilty of bad faith as charged in the plaintiff's complaint.’ Plaintiff contends that defendant had full control of the investigation, trial and settlement of the Halladay case and that it was guilty of bad faith toward the insured when it refused to accept the two offers of settlement made by counsel for Mrs. Halladay; that the jury were warranted in finding that defendant refused to accept the offers after its counsel had recommended to it that it accept the offers; that the said refusal was an arbitrary and unwarranted act under all the facts and circumstances, and that the verdict and judgment in the instant case were fully justified under the evidence and the law.

Defendant assumed charge of the defense of the Halladay case and employed Joseph H. Hinshaw, an able and experienced lawyer, to try the case; he was in charge of the defense and also prosecuted the appeal. Defendant notified plaintiff that the suit was brought to recover damages in a sum in excess of the policy limit of liability and invited plaintiff to have its personal counsel participate in the defense. Thereafter John H. Bishop, the regular attorney for plaintiff, ‘rendered assistance to Mr. Hinshaw in the trial * * * helped him get witnesses, and some of the records of the club,’ and discussed the case with Hinshaw at different times. Hinshaw, a witness for defendant, testified that Bishop chose to ‘sit on the back bench and watch.’ Bishop also reviewed the briefs that were written by Hinshaw and filed in this court upon the appeal from the judgment. At the opening of the trial Erwin W. Roemer, Mrs. Halladay's attorney, made an offer to Hinshaw to compromise her case for $3,500, and Hinshaw submitted the offer to Mr. Elliott, the claim agent of defendant, who declined to accept it. During the trial, the trial judge called the attorneys into his chambers, where Roemer told the judge that they were willing to take $3,500 in settlement of the case, and Roemer testified that ‘Hinshaw then said that he had discussed the settlement repeatedly with his client and had not been able to do anything with them.’ Sometime after the judgment for $20,000 had been entered, Roemer offered to settle the judgment for $8,000. Bishop testified that he communicated the offer to Hinshaw and that the latter stated that he thought that $8,000 would be a good settlement and he would recommend it to defendant; that about a week or two thereafter Hinshaw telephoned him that defendant declined to make the settlement. Hinshaw testified that he never told Bishop or Roemer that he would recommend to defendant that it should accept the offer of $8,000 and that the only recommendation he made to defendant was contained in a letter he wrote to it the day after the trial judge in the Halladay case decided the motion for a new trial. The material parts of the latter, introduced in evidence by defendant, are:

‘October Two 1937

‘Bankers Indemnity Insurance Company

‘Insurance Exchange, South

‘Chicago, Illinois

‘Halladay vs Olympia Fields; 3 GL 26708

‘Gentlemen:

We regret to report that Judge Frank-hauser, on October 1, 1937, came to a decision on our motion for new trial.

* * *

‘I notified Mr. Bishop by telephone and he states that the Board of Directors of Olympia Fields Country Club will meet on October 9, 1937, at which time the circumstances will be brought to their attention.

‘I cannot think of anything which we might have done and failed to do and am of the opinion that there are at least four reversible errors in the record.

* * *

‘My recommendation is that no offer of settlement be made and that the case be carried to the Supreme Court if necessary. I cannot believe that the Appellate Court or the Supreme Court will allow this judgment to stand.

‘When I discussed the matter with Mr. Bishop, attorney for Olympia Fields Country Club, he stated that he realized we had done everything possible. He and our Mr. Treadway were with me all through the trial of eight days and Mr. Bishop understands the situation first hand.

‘I told Mr. Bishop that I would recommend no payment be made and he stated he feels the same way about it, but as soon as the Board of Directors of Olympia Fields Country Club meet he will communicate their wishes in the matter to the company, and at that time be prepared to discuss whether or not any offer of settlement will be made.

‘In the meantime we will proceed on the theory that the case will be appealed, will prepare our form of bond and prepare the record, a great deal of which has already been written up, as you know.

* * *

‘My definite opinion is that this judgment will not stand.

‘Very truly yours,

J. H. Hinshaw.’

Hinshaw testified that he told Bishop that he was strongly of the opinion that the Appellate Court would reverse the judgment, and that Bishop entertained the same opinion. On November 23, 1937, plaintiff wrote a letter, dictated by Bishop, to defendant, which stated that Mrs. Halladay had agreed to accept the sum of $8,000 in full satisfaction of the judgment and that

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