Pipoli v. U.S. Fidelity & Guaranty Co.

• Decision Date: 15 February 1972
• Citation: 328 N.Y.S.2d 688,38 A.D.2d 249
• Parties: Elaine PIPOLI, Plaintiff-Appellant, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, Defendant-Respondent.
• Court: New York Supreme Court — Appellate Division

Page 688

328 N.Y.S.2d 688

38 A.D.2d 249

Elaine PIPOLI, Plaintiff-Appellant, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, Defendant-Respondent.

Supreme Court, Appellate Division, First Department.

Feb. 15, 1972.

Marc Bazin, New York City, for plaintiff-appellant.

Robert G. Burkhart, New York City, of counsel (Edward L. Milde, New York City), for defendant-respondent.

Before STEVENS, P.J., and MARKEWICH, NUNEZ, KUPFERMAN and STEUER, JJ.

STEUER, Justice:

Suit is on an assigned claim, and the rights of the parties are to be determined as if the assignor were the plaintiff. The assignor, one Tedeschi, was the insured under a liability policy for $10,000 issued by defendant. The insured was involved in an accident in which a young woman was seriously injured. It appeared that the insured left his car on the highway and another car crashed into it. It was the insured's contention, maintained throughout, that he ran out of gas; that when his car stopped he took every possible precaution to make its presence known to other drivers; and that at least two such drivers passed him before the crash. And his version was to some extent corroborated by the other defendant, to the latter's disadvantage. The injured young lady sued both drivers, and in the course of trial the other driver settled for $32,000. Negotiations were had with defendant and the final result was that defendant, having made an offer of $5,000, refused to increase it, and the demand, which at that time was $6,500, would not be lowered. The case proceeded to verdict, which was in the sum of $31,000 in excess of the amount already received. The defendant having paid the policy limit, Tedeschi, the insured, owed the plaintiff $21,000.

He asserted a claim against defendant for this sum, which claim he assigned to the plaintiff in the underlying action. An insurer's duty to its insured is to defend the action against him in good faith. Without going into all of the factors which lead to a conclusion on whether good faith in fact characterized the company's actions (see Brown v. United States Fidelity and Guaranty Co., 2 Cir., 314 F.2d 675; Keeton, 'Liability Insurance and Responsibility for Settlement,' 67 Harv.L.Rev. 1136), there is in this case one overriding consideration. An insured who steadfastly proclaims his own freedom from fault cannot complain if his insurer believes him and acts accordingly (Colbert v. Home Ind. Co., 35 A.D.2d 326, 315 N.Y.S.2d 949).

It is argued that this principle has no application because the insurer did make an offer. This contention loses sight of the practicalities of negligence litigation. There are several factors which lead to an offer of settlement which in an ideal system of absolutes, depending strictly on the merits of the action, would lead to none. To mention just a few: the cost of defending, including time and energy; the possibility of a very large, even though unmerited, recovery; and the creation of an unfavorable image of adamant resistance, justified or unjustified, in the eyes of the litigating fraternity. The last frequently takes the form of making some contribution to a larger offer made by a co-defendant, in order to dispose of the entire litigation. In view of these, the fact of some offer being made is no sign that the company did not rely on the insured's insistence on his version of the occurrence. Surely it is under no duty to him to disbelieve him.

The judgment entered August 5, 1971 (Frank, J.) should be affirmed with costs.

Judgment, Supreme Court, New York County (Frank, J.), entered on August 5, 1971, affirmed. Respondent shall recover of appellant $50 costs and disbursements of this appeal.

All concur except NUNEZ and KUPFERMAN, JJ., who dissent in an opinion by KUPFERMAN, J.

KUPFERMAN, Justice (dissenting):

The plaintiff sues as the assignee of Philip Tedeschi, the insured under a policy of liability insurance issued by the defendant United States Fidelity and Guaranty Company (hereinafter USF & G) based on her recovery against Tedeschi in a negligence action.

The plaintiff, then an infant, was a passenger in a motor vehicle owned and operated by Frank Bonanno, which struck the rear of Tedeschi's stopped automobile standing in the extreme left or fast lane of the Gowanus Parkway in Brooklyn. Bonanno and Tedeschi were sued as joint tort feasors by the plaintiff and her mother. During the trial, the plaintiffs offered to accept $40,000 in settlement against both defendants. The Bonanno litigation was settled for $32,000, and a conditional release given which permitted the plaintiffs to continue against Tedeschi. USF & G on behalf of Tedeschi offered $5000, which was one-half of the coverage afforded by its assured's liability policy, as against the $8000 demanded. The plaintiffs reduced their figure to $6500 during the course of the trial, but USF & G refused to meet that split difference and adhered to its limited offer of $5000.

The jury verdict imposed liability upon Tedeschi in the sum of $31,000 above the amount paid in the Bonanno settlement. This was $21,000 in excess of the coverage afforded by the USF & G policy. This Court affirmed without opinion the determination in that negligence action, Pipoli v. Tedeschi, 31 A.D.2d 718, 295 N.Y.S.2d 1010, and leave to appeal was denied by the Court of Appeals. 23 N.Y.2d 645, 299 N.Y.S.2d 1025, 247 N.E.2d 498.

Thereafter, Tedeschi assigned to the plaintiff Elaine Pipoli his cause of action against USF & G for not acting in good faith with respect to the proposed settlement, which, if so demonstrated, would mean that the plaintiff is entitled to the excess judgment of $21,000.

The problem has heretofore been well posed in an article by Robert E. Keeton in 67 Harvard Law Review, 1136 (1954) entitled 'Liability Insurance and Responsibility for Settlement.' More recently, it has been analyzed by the Second Circuit Court of Appeals in Brown v. United States Fidelity...