Sobus v. Lumbermens Mutual Casualty Company

• Decision Date: 26 March 1975
• Docket Number: Civ. No. 72-195-K.
• Parties: John Michael SOBUS v. LUMBERMENS MUTUAL CASUALTY COMPANY, an Illinois Corporation.
• Court: U.S. District Court — District of Maryland

393 F. Supp. 661

John Michael SOBUS v. LUMBERMENS MUTUAL CASUALTY COMPANY, an Illinois Corporation.

Civ. No. 72-195-K.

United States District Court, D. Maryland.

March 26, 1975.

COPYRIGHT MATERIAL OMITTED

M. Stanley Radcliffe, Towson, Md., for plaintiff.

Emanuel H. Horn, Baltimore, Md., for defendant.

FRANK A. KAUFMAN, District Judge.

On October 28, 1965, Charles Loren Knisley brought suit in the Circuit Court for Howard County against the plaintiff herein, John Michael Sobus, seeking damages for injuries allegedly incurred in an automobile collision on May 22, 1965. On that date Sobus, 19 years of age at the time of the accident (Defendant's Exhibit C, after lunch proceeding, at p. 4), was insured in the amount of $25,000 by the defendant, Lumbermens Mutual Casualty Company (hereinafter Lumbermens) under a family automobile liability policy taken out by Sobus' father. The terms of the policy called upon Lumbermens, inter alia, to defend Sobus against Knisley's suit. Lumbermens employed the firm of Due, Whiteford, Taylor and Preston, Baltimore, Maryland, to represent Sobus. After investigating the claim, Lumbermens did not agree to any settlement demands by Knisley's attorneys, nor did Lumbermens make any offer to settle the case, until February 24, 1969, the day the trial began, when in response to Knisley's demand for "all available insurance", Lumbermens offered the full policy limit of $25,000. Knisley's attorneys, apparently in hope that Sobus was insured under one or more other policies, sought additional information with regard thereto and were given the opportunity to question Sobus in the chambers of Judge James A. Macgill on the record. By that time the jury had already been selected and thus the trial had begun. In Judge Macgill's chambers, Sobus revealed that there were more automobiles in the household than originally indicated by Sobus prior to trial, including during conversations with his own attorneys. Specifically, in Judge Macgill's chambers, Sobus referred to an automobile owned by Sobus' brother which was insured by the Penn National Insurance Company. That night — the night of February 24, 1969 — and the next morning both Sobus' attorneys and Knisley's attorneys made efforts to ascertain whether there was any other insurance available to Sobus. On February 25, 1969, Knisley's attorneys, apparently unsatisfied with the completeness of the records shown to them, refused to accept the $25,000 unless allowed to reserve certain rights, the exact nature of which are in dispute as is discussed in detail infra. Sobus' attorneys, after stating that they knew of no insurance coverage other than Lumbermens' $25,000 and after representing that $25,000 was all of the insurance that the Kemper Group, of which Lumbermens was a member, had available to Sobus, refused to allow Knisley to reserve the rights which Knisley's counsel desired to reserve. The case proceeded to trial, and on March 6, 1969, the jury rendered a verdict for $175,000 in Knisley's favor. After judgment for that amount was affirmed on appeal, Sobus, faced with the judgment entered against him in excess of his $25,000 Lumbermens coverage and apparently having no other insurance coverage, instituted the within suit against Lumbermens, alleging that the company acted negligently and in bad faith while representing him.

Sobus' charges against Lumbermens seemingly fall into four broad categories of complaint:

1. Counsel selected for Sobus by Lumbermens committed trial errors, including the failure to object to an increase in the ad damnum clause of Knisley's complaint.

2. Lumbermens, before trial, made an inadequate investigation and appraisal of the case against Sobus.

3. Lumbermens acted in bad faith in refusing to settle the case.

4. Lumbermens failed to evaluate properly the case after the verdict had been rendered against Sobus, and negligently thereafter failed to negotiate settlement.

Lumbermens has moved for summary judgment. "Whether summary judgment is appropriate in any case is * * * to be decided upon the particular facts of * * * a case * * *." First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 259, 88 S.Ct. 1575, 1577, 20 L.Ed.2d 569 (1968). Summary judgment may be granted only if, as provided by Federal Civil Rule 56(c), "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." In this case, although there exist certain factual disputes, the uncontroverted facts entitle the defendant to summary judgment.

FACTS

1. The collision between Knisley and Sobus occurred at approximately 8 P.M. on Saturday, May 22, 1965, at the intersection of State Route 32, a favored highway, and Marriottsville Road, an unfavored highway. Neither driver was able to recall the occurrence of the accident. The issue of liability depended on establishing which vehicle was proceeding on the favored highway (Complaint ¶ 9; answer ¶ 10).

2. Sobus informed Lumbermens at all times that he had been proceeding on Route 32, the favored highway (Defendant's Exhibits 1 at p. 2; 1A at p. 2; 2 at p. 8; 3 at pp. 232-33; 4 at pp. 10-11; 6 at p. 12).

3. On May 22, 1965, Sobus was insured under a Lumbermens policy against automobile negligence liability in the amount of $25,000 (Complaint ¶ 2). The policy under which Sobus was insured was a family policy taken out by Sobus' father. (Defendant's Exhibits 4 at p. 39; 5 at p. 3).

4. The insurance policy provided, among other things, that Lumbermens would investigate any claim against Sobus and that Lumbermens would defend Sobus against any such claim. (Complaint ¶¶ 5, 7; Answer ¶¶ 5, 7).

5. Approximately ten minutes after the accident, Trooper Barnes of the Maryland State Police arrived on the scene of the accident and made an investigation. Barnes also obtained a signed statement from an eyewitness, Lawrence B. Duncan, who stated that Knisley's vehicle was traveling along Route 32 when Sobus' vehicle pulled out of Marriottsville Road. Trooper Barnes filed a report concluding that Knisley had been on the through highway. Barnes charged Sobus with failure to yield the right of way. (Complaint ¶ 10; Answer ¶ 10).

6. Shortly before the accident, two police officers, W. R. McElroy and Millard F. Cooper, observed Knisley proceeding along Route 32 at a time which would have placed Knisley on Route 32 around the time of the accident. (Complaint ¶¶ 11, 15; Answer ¶¶ 11, 15).

7. Lumbermens deposed Trooper Barnes on May 24, 1966 (Complaint ¶ 12). Lumbermens deposed Lawrence B. Duncan on February 19, 1969 (Complaint ¶ 13). Lumbermens obtained the transcript of certain testimony which Officer McElroy gave at a traffic court hearing in the Westminster Magistrate Court on August 28, 1965, which contained a recitation of what he had seen before the accident (Complaint ¶ 11). Agents for Lumbermens contacted and interviewed Trooper Barnes, Lawrence B. Duncan, and Officer Cooper before filing a report with their company on June 16, 1965. That report contained photographs of the accident site as well as an analysis of the accident itself. The analysis supported Sobus' position that he was on Route 32. (Plaintiff's Exhibit 3).

8. On May 28, 1965, Sobus stated to a Lumbermens claims representative, apparently either C. E. Hollie or L. J. Wolf (see Plaintiff's Exhibit 3; Deposition of John Michael Sobus, September 16, 1972, at p. 10), that his father owned two vehicles, both automobiles (Defendant's Exhibit 1), one of which Sobus normally operated.

9. On August 12, 1965, L. M. Davis, a Lumbermens' claims agent, reported that Knisley appeared to have suffered substantial injury and that a "king size claim" was possible (Plaintiff's Exhibit 4).

10. On October 4, 1965, Patrick A. O'Doherty, Esq., one of Knisley's attorneys, wrote to Lumbermens informing the company that he would shortly bring suit on Knisley's behalf and stating: "we understand, from our own investigation, that your insured carries no more than $20,000 or $25,000 insurance for the injury to any one person"; and "if he Sobus denies he was on Marriottsville Road the company Lumbermens may have a bona fide reason for defending the action without risking the payment of an excess verdict." (Defendant's Exhibit R-2).

11. On October 26, 1965, L. J. Wolf, one of Lumbermens' agents, wrote to another Lumbermens' agent, M. L. East (Plaintiff's Exhibit 6), concerning an expert report of Professor Francis J. Smith of the Drexel Institute of Technology in Philadelphia which placed Sobus on Route 32 at the time of the accident (Plaintiff's Exhibits 4, 6). That letter also reveals that Wolf told O'Doherty, who had called Wolf concerning settlement, that Lumbermens' investigation "revealed no liability" on Sobus' part.

12. On October 28, 1965, Knisley instituted suit against Sobus in the Circuit Court for Howard County, claiming damages in the amount of $150,000.

13. On November 30, 1965, Lumbermens wrote to Sobus informing Sobus that Lumbermens had employed the Baltimore firm of Due, Whiteford, Taylor and Preston to defend Sobus. The letter also stated that the amount demanded by Knisley, $150,000, exceeded Sobus' policy limits and that Sobus, for that reason, might deem it advisable to hire his own attorney. (Defendant's Exhibit A). Sobus understood the content of that letter. (Defendant's Exhibit 4 at p. 8).

14. On February 21, 1966, Knisley's attorney deposed Sobus. (Defendant's Exhibit 2). On that same date, "a couple hours" before the taking of that deposition, Sobus met with Paul F. Due, Esq., the senior partner in the law firm selected by Lumbermens to act as his counsel. (Post-trial Deposition of John Michael Sobus, September 16, 1972, at pp. 11-13). In his post-trial deposition of September 16, 1972, Sobus at first stated (at 13) that on February...