Rogers v. UNITED SERVICE AUTOMOBILE ASSOCIATION, 18508.

• Citation: 410 F.2d 598
• Decision Date: 13 May 1969
• Docket Number: No. 18508.,18508.
• Parties: Thomas O. ROGERS, Plaintiff-Appellee, v. UNITED SERVICE AUTOMOBILE ASSOCIATION, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

410 F.2d 598 (1969)

Thomas O. ROGERS, Plaintiff-Appellee, v. UNITED SERVICE AUTOMOBILE ASSOCIATION, Defendant-Appellant.

No. 18508.

United States Court of Appeals Sixth Circuit.

May 13, 1969.

Fred H. Cagle, Jr., Knoxville, Tenn., for appellant; Frantz, McConnell & Seymour, Knoxville, Tenn., of counsel.

Calvin N. Taylor, Knoxville, Tenn., for appellee; Cheek, Taylor & Groover, Knoxville, Tenn., of counsel.

Before O'SULLIVAN and COMBS, Circuit Judges, and KENT, District Judge.

O'SULLIVAN, Circuit Judge.

We consider the appeal of the United Services Automobile Association from a $10,000 judgment against it in favor of appellee Thomas O. Rogers. This, a diversity action, was tried to a jury in the United States District Court for the Eastern District of Tennessee. It was brought upon an automobile liability policy issued to appellee Rogers by United Services, in which policy the insurance company agreed to pay to Rogers the amount, not to exceed $10,000, which Rogers would be legally entitled to recover from an uninsured motorist should he suffer injuries in an automobile accident. Plaintiff sued an uninsured motorist, who in turn sued Rogers, both claiming damages from the other arising from an automobile collision. These suits were brought in a Tennessee state court. Without waiting for adjudication of either of these state court actions, Rogers sued the insurance company directly in the United States District Court, charging that "the matter in controversy" exceeded $10,000 because of Rogers' entitlement to a penalty of 25% for the insurance company's alleged delay in settling his claim. Under proper circumstances, such penalty is recoverable against an insurance company, which, in bad faith, fails to pay a claim. Tenn.Code Anno. § 56-1105. The jury awarded plaintiff $12,500 which was reduced to $10,000 upon the District Judge's exoneration of the insurance company of any bad faith.

We reverse.

After setting out the right of an insured to be paid for a tort committed against him by an uninsured motorist, the involved policy contained the following:

"provided, for the purpose of this coverage, determination as to whether the insured or such representative is legally entitled to recover such damages, and if so the amount thereof, shall be made by agreement between the insured or such representative and the company, or if they fail to agree, by arbitration.

"No judgment against any person or organization alleged to be legally responsible for the bodily injury shall be conclusive, as between the insured and the company, of the issues of liability of such person or organization or of the amount of damages to which the insured is legally entitled unless such judgment is entered pursuant to an action prosecuted by the insured with the written consent of the company.

* * * * * *

"Arbitration. If any person making claim hereunder and the company do not agree that such person is legally entitled to recover damages from the owner or operator of an uninsured automobile because of bodily injury to the insured, or do not agree as to the amount of payment which may be owing under this Part, then, upon written demand of either, the matter or matters upon which such person and the company do not agree shall be settled by arbitration in accordance with the rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof."

On June 4, 1966, plaintiff was injured when his automobile came into collision with one driven by the uninsured, Ogle. Rogers made a report of the injury to Crawford & Company of Knoxville, adjusters and representatives of the insurance company, who then carried on investigation procedures. Investigation disclosed that the respective motorists, Rogers and Ogle, each claimed the other was at fault. Ogle's version was supported by a disinterested young man who claimed to be an eye witness, and by Ogle's wife who was a passenger in the front seat of Ogle's car. Another disinterested witness substantially supported Rogers' claim. Continued efforts failed to locate another person rumored to have been an eye witness. Neither driver claimed that his view of the approach of the other was in any way impaired.

The adjusters checked Ogle's claims and obtained reports from Rogers as to the progress of his recovery and reports from the several doctors attending him. He had returned to work, but asserted that his injuries required some interruptions of his working. The adjusters also investigated the claims of injuries by the Ogles. On October 18, 1966, a Knoxville attorney, retained by the Ogles, wrote a letter to the adjusters asserting Rogers' liability and describing injures allegedly suffered by Ogle, his wife and infant child. The letter proposed the sum of $10,000 would be accepted from United Services in discharge of Rogers' liability to the Ogles. United Services' policy insured Rogers up to $100,000 against any liability that might accrue to him for the involved accident. Rogers at no time prior to February 16, 1967, evidenced any dissatisfaction with the way the matter was being handled by the insurance company and at trial conceded that the adjusters had handled the entire matter with diligence.

On February 16, 1967, Rogers wrote a letter to the insurance company at its home office at San Antonio, Texas, with copy to Crawford & Company, presenting his claim for $10,000 under the uninsured motorist's provision of his policy. The letter contained the following.

"Under coverage J of my policy, I herewith submit claim for $10,000.00. Attached is detailed documentation of expenses and related basis for the claim.

"It is my understanding that you only have one year under Tennessee law to bring an action in a matter of this kind. And from reading my policy I have learned that I have to have your written consent to bring any action. It is also my impression that this matter could be arbitrated and I would very much appreciate it if you would advise me whether this should be arbitrated, or in the alternative, give me your written consent to hire a lawyer and bring suit.

"Of course, I feel confident you will want to settle this with me and I only mention this because of the requirements set out in the policy and also because of the time element involved. I would appreciate hearing from you at your convenience regarding this matter."

Having received no response to his letter,¹ on March 16, 1967, Rogers went to the office of Crawford & Company for an explanation. Crawford & Company called John W. Carl, senior claims examiner of United Services, who explained to Rogers why the insurance company could not then pay his claim. Rogers made no demand, written or oral, for arbitration and was told on several occasions that he had the insurance company's consent to sue the Ogles to determine Ogle's liability and the extent of Rogers' recoverable damages.²

On April 10, 1967, Rogers brought suit against Ogle in the Circuit Court for Knox County, Tennessee, for recovery of $50,000 damages allegedly suffered in the June accident. Thereafter, three suits were brought against Rogers, one by Ogle for $10,000 one by Ogle's wife for $10,000 and one by Ogle as next friend of his infant son for $25,000. These charged Rogers with responsibility for the accident and for the damages suffered by the Ogles. These also were brought in the Circuit Court for Knox County, Tennessee. We have not been advised as to the status of these state court lawsuits.

On May 9, 1967, complaint in this lawsuit was filed in the United States District Court. Rogers sought to recover $10,000, the limit of permissible recovery against an uninsured motorist, and $2,500 penalty under T.C.A. § 56-1105 because of the insurance company's alleged bad faith. After charging Ogle with negligence and asserting his own freedom from negligence and the damages suffered, he averred:

"that on February 16, 1967, by letter to the defendant, complete details setting out his injuries and damages were forwarded to the defendant at its offices in San Antonio, Texas, and that at said time the complainant, in accordance with the terms of the policy asked that he be given permission to sue the third party and also asked if his claim could not be arbitrated within the terms of the policy.

"Complainant avers that to the date of the filing of this complaint the defendant, without just cause, has failed, refused and neglected to answer his correspondence, and has failed, refused and neglected to advise him as to whether or not he could bring suit against the third party or whether or not his claim could be arbitrated as set out in Coverage "J", Part IV, of the policy of insurance. Complainant avers that due to the defendant\'s disregarding his correspondence that he had to retain legal counsel at his personal expense, and consequently, sues for the 25% statutory penalty as set out in Tennessee Code Annotated Section 56-1105. Complainant avers that he waited the 60-day period before bringing this

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