Schneider v. Allstate Ins. Co.

• Decision Date: 03 January 1980
• Docket Number: Civ. A. No. 78-0941.
• Parties: Louis SCHNEIDER, Plaintiff, v. ALLSTATE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — District of South Carolina

487 F. Supp. 239

Louis SCHNEIDER, Plaintiff, v. ALLSTATE INSURANCE COMPANY, Defendant.

Civ. A. No. 78-0941.

United States District Court, D. South Carolina, Charleston Division.

January 3, 1980.

Solomon, Kahn, Roberts & Smith, Charleston, S. C., for plaintiff.

Sinkler, Gibbs & Simons, Charleston, S. C., for defendant.

ORDER

BLATT, District Judge.

Prior to the institution of this action, the plaintiff herein and his wife had brought suit against one Lourdine J. Davis for personal injuries arising out of an automobile accident. The defendant herein, Allstate Insurance Company, had in effect at the time of the accident an automobile liability insurance policy for Ten Thousand Dollars ($10,000.00) covering the Davis automobile. Pursuant to that policy, Allstate undertook to defend Davis in the suit brought by the Schneiders. Plaintiff alleges that during the course of pretrial negotiations he offered to settle all claims for Nine Thousand Dollars ($9,000.00), but the defendant, representing Davis, would offer no more than Five Thousand Dollars ($5,000.00) in settlement. The case proceeded to trial, and plaintiff was awarded judgment in the sum of Sixty-Two Thousand Dollars ($62,000.00); his wife was awarded an additional Six Thousand Dollars ($6,000.00). Defendant Allstate has paid plaintiff Ten Thousand Dollars ($10,000.00), which amount plaintiff admits satisfies his wife's verdict in full, but plaintiff contends he is owed Fifty-Eight Thousand Dollars ($58,000.00) on the verdict which he recovered. After the judgment had been rendered against her, Davis, the defendant in the original action, assigned to plaintiff "all of her rights and claims against Allstate Insurance Company, existing by reason of the negligence, bad faith, or other improper conduct of said insurer in failing and refusing to settle plaintiff's claim against Davis within the policy limits, by reason of which tortious conduct an excess judgment was rendered in favor of plaintiff and against Davis." Plaintiff brings this action against Allstate pursuant to the aforementioned assignment. The matter is now before this court on motion of the defendant to dismiss the suit on the grounds that the complaint fails to state a claim upon which relief can be granted, that Lourdine Davis is an indispensable party under F.R.Civ.P. 19, without whose presence the action cannot proceed, and that the plaintiff is not the real party in interest as required by F.R.Civ.P. 17(a). Underlying each of these grounds is Allstate's position that, under the law of South Carolina, Lourdine Davis' right of action against Allstate is not assignable and must, therefore, be brought by her and not by plaintiff Schneider.

To determine the assignability of the claim that Schneider now asserts against Allstate, this court must first establish from the pleadings whether Schneider has brought this action in tort or in contract. This court held in Jolly v. General Accident Group, 382 F.Supp. 265 (D.S.C.1974), that an action against an insurer for negligent failure to settle within policy limits may be brought either in tort for negligence or in contract for breach of the insurer's implied contract to exercise reasonable care in conducting the suit. That conclusion is supported by the Tyger River cases, which gave birth to this type of action in South Carolina. The following language is taken from the second Tyger River case, Tyger River Pine Co. v. Maryland Casualty Co., 170 S.C. 286, 170 S.E. 346 (1933):

"The following was quoted from the case of Attleboro Mfg. Co. v. Frankfort, etc., Co., (C.C.Mass.) 171 F. 495: `Where an insurer under an employer's liability policy on being notified of an action for injuries to insured's servant assumed the defense thereof, and was negligent in conducting the suit, to the loss of the employer, the latter was entitled to sue the insurance company for breach of its implied contract to exercise reasonable care in conducting the suit or in tort for negligence.'" 170 S.C. at 291, 170 S.E. at 348 (emphasis added).

This court further held in Jolly that an action based on "negligence, bad faith, willfulness, and maliciousness" alleged an action in tort. 382 F.Supp. at 267. Schneider, in his complaint here, alleges entitlement to recovery "by reason of Defendant's negligence in failing to conduct the negotiations for settlement with reasonable skill and diligence and its failure to exercise good faith to settle the action within the limits of the policy, and other tortious conduct. . . ." (emphasis added). This language, coupled with the fact that plaintiff Schneider asks for both actual and punitive damages, clearly indicates that plaintiff has elected to bring this action in tort; thus, the issue presented, for the purpose of defendant's motion to dismiss, is whether an action in tort against an insurance company for negligent, willful, or bad faith failure to settle within policy limits is assignable under the law of South Carolina.

This court held in Jolly that such an action is assignable. It is the established law in South Carolina, and elsewhere as well, that a right of action is assignable if, and only if, the same action would survive to the assignor's personal representative in the event of the assignor's death. Doremus v. Atlantic Coast Railroad Company, 242 S.C. 123, 130 S.E.2d 370 (1963). The South Carolina Survival Statute, S.C.Code Ann. § 15-5-90 (1976), provides:

"Causes of action for and in respect to any and all trespasses to and upon real estate and any and all injuries to the person or to personal property shall survive both to and against the personal or real representative, as the case may be, of a deceased person and the legal representative of an insolvent person or a defunct or insolvent corporation any law or rule to the contrary notwithstanding." (emphasis added).

The decision in Jolly turned on the interpretation of the words "any and all trespasses to and upon real estate and any and all injuries to the person or to personal property." After a review of the relevant case law,¹ this court concluded:

"In its effort to provide a liberal construction to the provisions of the Survival Statute without placing thereon a judicial construction to effectuate this court's conception of those causes of action which survive, Claussen v. Brothers, 148 S.C. 1, 145 S.E. 539 (1928)², this court is of the opinion, since the alleged negligent and willful acts of the defendants caused the assignor of the claim herein assigned to be subjected to a judgment of approximately $47,000.00 in excess of his insurance coverage, that the language of the Survival Statute warrants a holding that such judgment resulted in `injury' to any property, real or personal, or any property interest, owned by said assignor. Because this excess judgment constitutes a lien against the assignor's real estate and makes any other property interest owned by him subject to attachment and sale to satisfy this judgment, it is this court's conclusion that the alleged acts of the defendants did result in the type of `injury' to the property interests or rights of the assignor that a claim based thereon would survive to the assignor's personal representative upon his death. Simply stated, this court cannot overlook the plain fact that the excess judgment rendered against the assignor has resulted in the value of any real or personal property, or interest of the assignor, being diminished to the extent of said judgment." 382 F.Supp. at 269. (original footnotes omitted).

Defendant Allstate now asks this court to abandon the position it adopted in Jolly and hold the assignment to plaintiff Schneider invalid.

Allstate asserts that this court, in Jolly, ignored the precedent of Bemis v. Waters, 170 S.C. 432, 170 S.E. 475 (1933). Bemis arose from the execution of a will, in which the residuary beneficiaries, five of the testatrix's children, sought to recover damages against their sister, a co-beneficiary under the will. The complaint alleged that the defendant had exercised undue influence to persuade the testatrix, during her lifetime, to convey certain real estate to the defendant, with the intention "to deprive the plaintiffs of their right to inherit the said real estate." 170 S.E. at 476. The complaint further alleged "that by her conduct as aforesaid, the defendant has deprived the plaintiffs of their right to inherit five-sevenths of said real estate, so obtained by the defendant, to their actual damage Six Thousand Four Hundred and Thirty ($6,430.00) Dollars, and that the defendant by reason of her aforesaid conduct, is liable to the plaintiffs in the sum of Five Thousand ($5,000.00) Dollars punitive damages also." Id. The South Carolina Supreme Court sustained the defendant's demurrer to the complaint, holding that the complaint had not stated a cause of action that would have survived the death of the testator. The Court's holding was not, however, based upon a narrow reading of the Survival Statute, as Allstate asserts; rather, the Court's holding was based on a determination that the testatrix had never possessed the cause of action stated in the complaint during her lifetime. Thus, in Bemis, the Court held that the cause of action never existed,³ not that it failed to survive. The Court said:

"If Mrs. Austin—the testatrix—had a cause of action against Mrs. Waters—the defendant—as, under the allegations of the complaint, she undoubtedly had, it was either in equity to have the deed to Mrs. Waters set aside, or it was for damages for the alleged fraud perpetrated upon her. But the complaint is not based upon either of these causes of action, although the theory of the complaint is that the plaintiffs derived their right to maintain the present action from the residuary clause of the will or by survival. In neither event can the position of the plaintiffs, respondents herein, be sustained, for the very simple reason that the cause of action set forth in the

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