Smith v. Audubon Ins. Co.
| Decision Date | 05 September 1996 |
| Citation | 679 So.2d 372 |
| Parties | 95-2057 La |
| Court | Louisiana Supreme Court |
Kraig T. Strenge, Lafayette, for Applicant.
John H. Weinstein, Opelousas, Hamilton J. Chauvin, Jr., Metairie, and Aaron F. McGee, for Respondent.
[95-2057 La. 1] LEMMON, Justice. *
This is an action by an insured against his homeowner's insurer for damages sustained when a judgment in excess of the policy limits was rendered against the insured in an earlier tort action. 1 In this action, the insured claims that the insurer is liable for the excess judgment, as well as for penalties and attorney's fees, because of its bad faith failure to settle the claim within the policy limits. The principal issue in this court is whether the trial court committed manifest error in rejecting the insured's claim.
[95-2057 La. 2] Facts
The insured owned a mobile home covered by a homeowner's policy issued by defendant insurer with liability limits of $25,000. On May 12, 1987, the insured's twenty-nine-year-old grandson, Kenneth Smith, was attempting to install a rebuilt gasoline motor onto his grandfather's riding lawn mower at his grandfather's home. Kenneth had rebuilt the motor from two old motors given to him by his employer, but had not yet tested the rebuilt motor.
Kenneth Smith removed the old motor from the mower and connected the rebuilt motor to the gas tank with a short hose, but did not bolt down the motor. Kenneth pulled the cord for the manual starter, whereupon the motor caught fire at the carburetor. Kenneth attempted to put out the fire with his shirt, but then grabbed a burlap sack in the workshop and "hit" the fire with the sack. At that point, the fire flamed up, badly burning Kenneth and slightly burning his grandfather.
The grandfather immediately notified his insurer of the accident. An independent claims adjuster took statements from the insured and his grandson shortly after the injury. In his recorded statement given three days after the accident, Kenneth Smith stated "[w]hen I pulled it again, the carburetor caught on fire and it wasn't bolted down or nothing and I went and got the sack to put the fire out, I guess I knocked the tank and everything off and that is when the gas flew up on me." 2 Since the statement indicated that the insured did not rebuild the engine or put the rebuilt engine on the mower and did not direct his grandson's activities, and since neither statement suggested any negligence on the part of the insured, the adjuster filed the following report:
[95-2057 La. 3] It appears claimant caused his injury. He put an untested old motor (age unknown) onto an old mower. The motor was not bolted down. Claimant owned the motor he was putting on. The insured in no way assisted in repair of mower.
Kenneth Smith requested his grandfather's insurer to pay all of his medical bills and his lost wages. 3 The insurer paid $2,000 under the medical payment feature of the policy, but declined to pay anything further. The underlying tort action ensued.
Underlying Tort Action
In his petition filed in January 1988 in the underlying case, Kenneth Smith alleged that he "was assisting [his grandfather] in the repair of a rider lawn mower" when the carburetor caught on fire. This allegation contrasted with the grandfather's statement that, referring to his grandson, "he had to tune it [the rebuilt motor] up" and "he was putting a new motor in at the time of the accident," and with Kenneth's own statement that "I put the motor together and ... I had the motor on the lawn mower but I didn't have it bolted down and I went to start it and it popped like it was going to start and then when I went to start it again, it caught on fire...." Moreover, in answer to the question whether his grandfather was directing his "putting this motor on the lawn mower" or "telling you how to do it," Kenneth had stated "[n]o I knew how to do it."
The petition further alleged that while Kenneth Smith "was attempting to put the small fire out with a burlap sack, [his grandfather] negligently and carelessly dropped the lawn mower gas tank" and "[t]he gasoline in the tank splashed out and on to" Kenneth. However, neither Kenneth nor his grandfather in their recorded statements had ever mentioned the grandfather's holding the gas tank or dropping [95-2057 La. 4] it onto the fire. Indeed, as noted above, Kenneth had volunteered that probably he had "knocked the tank and everything off and that is when the gas flew up on me."
Pretrial depositions by Kenneth Smith and his grandfather, the only two witnesses to the accident, presented versions much more favorable to Kenneth's recovery against his grandfather's insurer than their original statements. Kenneth testified that "I got a feed sack, when I hit--when I hit the carburetor to put the fire out, either he [the grandfather] dropped the tank or I knocked it out of his hand, I don't know which ..." (emphasis added). In his deposition, 4 the grandfather testified that while Kenneth was attempting to douse the carburetor fire with a burlap sack, the grandfather's hands and shirt caught on fire, and he either dropped the tank or threw it away from him, splashing gasoline onto Kenneth.
Prior to trial, Kenneth Smith's attorney offered several times to settle the case for the policy limits of $25,000, but the insurer declined the offer. Throughout the pretrial preparation, the insurer's attorney continued to advise that the claim was defensible, even though Kenneth and his grandfather had flavored their earlier statements with more favorable subsequent versions.
At trial, the grandfather was unable to testify because of a terminal illness.
Kenneth Smith testified at trial that after he placed the unbolted motor on the mower chassis with the motor connected to the gas tank, he looked for a place to bolt the tank to the chassis, but his grandfather instructed him to proceed with his attempt to start the motor while the grandfather held the tank in his hands. He (Kenneth) filled the tank with gasoline and attempted unsuccessfully to start the motor, removed the top and adjusted the points, and then pulled the cord again. On the second pull, the motor backfired, and the carburetor caught on fire. He and his grandfather remained calm, according to Kenneth's testimony (although the [95-2057 La. 5] grandfather was holding the fuel tank connected by hose to the burning engine), because the fire was small. He then "placed" the burlap sack over the fire which suddenly grew larger. Kenneth asserted, in contrast to earlier deposition testimony, that he "now knew" he did not knock the fuel tank out of his grandfather's hands.
On cross-examination, Kenneth Smith admitted his previous statements were not that he had "placed" the burlap sack over the fire but rather that he had "hit" the carburetor with the sack. He also admitted previous testimony that he did not know how the fuel tank left his grandfather's hands and that he had stated either he knocked the tank from his grandfather's hands or his grandfather dropped the tank onto the burning carburetor.
The jury allocated forty percent of the fault in the case to Kenneth Smith and sixty percent to his grandfather. The judgment, in accordance with the fault allocation and the amount of damages found by the jury, awarded Kenneth a judgment of $25,000 in principal against his grandfather and the insurer, and an excess judgment of $30,363.62 in principal against his grandfather.
The insurer's attorney notified the insured of his right to appeal through the insurer's attorneys, but stated that the insurer would not appeal its portion of the judgment. The insurer's attorney also discussed with Kenneth Smith's attorney the possibility of post-judgment settlement for the policy limits, but Kenneth's attorney made no such offer. 5
Present Action Against Insurer for Excess Judgment
After the insured died, his widow, as executrix of his estate, filed the instant action. Asserting that it was apparent in the underlying tort action "that a [95-2057 La. 6] submissible case of negligence would be made for the jury on non-disputed evidence," the executrix alleged that her husband's insurer "was negligent and guilty of bad faith in refusing to accept the compromise offer" to settle within the policy limits (emphasis added). The petition sought damages in the amount of the excess judgment, along with penalties and attorney's fees.
After trial on the merits, the trial court rejected all claims and dismissed the action. 6 The judge concluded that "from the information available, especially but not exclusively, the deposition of plaintiff in the prior case, the insurer was justified in defending the matter and was not arbitrary, capricious or otherwise guilty of conduct making it liable for the excess judgment." Upon request for more specific findings, the trial judge observed that neither of the two witnesses to the accident, Kenneth Smith nor his grandfather, made any mention of any negligence on the grandfather's part in recorded interviews taken within six days of the accident. The judge further noted that neither witness had mentioned in the initial statement that the grandfather held the gas tank or that the tank was disengaged from the motor for any reason. Referring to Kenneth's recorded interview, the judge emphasized that the claimant at one point stated "gasoline flew all over him when he struck the carburetor with the burlap sack and the motor toppled over" and at another point "guessed he knocked the tank and everything off." Finally, the judge noted Kenneth's admission in his deposition that he really didn't know what had happened, but "attempted to favor a version that the grandfather had dropped the tank." Based on this evidence, the judge concluded that the insurer was justified in defending the case.
On appeal of the executrix, the...
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