Southern Fire & Cas. Co. v. Norris

• Citation: 250 S.W.2d 785,35 Tenn.App. 657
• Parties: SOUTHERN FIRE & CASUALTY CO. v. NORRIS.
• Decision Date: 14 January 1952
• Court: Tennessee Court of Appeals

Page 785

250 S.W.2d 785

35 Tenn.App. 657

SOUTHERN FIRE & CASUALTY CO. v. NORRIS.

Court of Appeals of Tennessee, Eastern Section.

Jan. 14, 1952.

Certiorari Denied by Supreme Court June 7, 1952.

Donaldson, Montgomery & Kennerly, Knoxville, and Goodpasture, Carpenter & Dale, of Nashville, for plaintiff in error.

Poore, Cox, Baker & McAuley, Knoxville, for defendant in error.

McAMIS, Judge.

This is an action by an insured under a garage liability policy to recover an amount in excess of the policy limit, claimed to be due by reason of the negligence and bad faith of the insurer in failing to compromise and settle the claim of James L. Davis. It is conceded that the insurer engaged competent attorneys to defend the suit and after the Davis judgment for $25,000 became final on appeal that it paid all costs and counsel fees and $10,000, the limit of its liability under the policy, with interest to date of payment. Plaintiff's insistence is that the Company had an opportunity to settle the claim within the policy limit before the trial and negligently and in bad faith declined to do so.

The trial court instructed the jury that no verdict could be rendered solely on a showing of negligence in the investigation of the claim and in negotiating. attempting to negotiate or failure to negotiate a compromise of the Davis claim though such negligence, if shown, could be considered in determining the existence of bad faith. That term the Court defined as conveying the 'idea of willingness to gamble with the insured's money in an attempt to save its own money' or 'as an intentional disregard of the financial interests of the plaintiff in the hope of escaping full liability imposed upon it by its policy'.

This definition was followed in the charge by instructions: (1) That good faith required the Company to investigate the claim to such an extent that it would be in position to exercise an honest judgment as to whether the claim should be settled; (2) That the material question was not what the actual facts were but what facts relative to the accident and injuries to Davis were known to the insurer and its agents 'which they should have considered in deciding whether it should or should not settle an action brought against the insurer as the reasonable thing to be done'; (3) That a mere mistake of judgment would not constitute bad faith; (4) That while the right of the insurer to control negotiations for settlement must be subordinated to the purpose of the contract to indemnify the insured to the limit of the policy, there must be bad faith with resulting injury to the policy holder before a cause of action accrues; (5) That if the insurer dealt fairly with the insured and acted honestly and according to its best judgment it would not be liable; (6) That it owed its insured no duty to settle merely because a settlement could be made within the limits of the policy.

It will be noted that the charge placed the burden on the insured of establishing bad faith and a dishonest motive before recovery could be allowed. On this charge the jury returned a verdict for $17,500. The trial judge suggested a remittitur of $2,500 and approved a judgment for $15,000. The defendant insurer has appealed insisting as its primary contention that there was no material evidence of bad faith on its part and that the court should have directed a verdict in its behalf at the close of all the evidence. We hold that under a proper analysis of the evidence the questions of bad faith and proximate cause were for the jury.

On March 26, 1947, while the policy was in force and effect, the plaintiff was a used car dealer in Knoxville, Tennessee. He had in his employ as a driver Daniel Briscoe Cox. On that date Cox and two other drivers were directed to take three of plaintiff's cars through Chattanooga to a sale in Georgia. They left Knoxville early in the morning and were proceeding along Brainerd Road, a four lane thoroughfare, entering Chattanooga, at about 7 A. M., when they overtook from the rear a small truck owned and operated by F. D. Howard. Davis and one Bishop, passengers of Howard, were riding in the cab of the truck. There was no evidence of a joint enterprise between the occupants of the truck, though that theory was advanced on the trial of the Davis suit.

Cox, driving the front car, struck the truck from the rear knocking it off the pavement and causing it to overturn and severely injure Davis. The other two drivers of plaintiff's cars did not see the collision though they arrived at the scene almost immediately after it occurred. Cox was arrested and charged with reckless driving, a charge of which he was later found not guilty in the Criminal Court of Hamilton County. While defending this charge he was served with process in three damage suits instituted in the Circuit Court of Hamilton County by the three occupants of the truck and counterpart summons issued to Knox County for the insured, hereinafter referred to as plaintiff.

Plaintiff had spent the preceding night in Chattanooga. Upon learning of the accident he contacted defendant's Knoxville office and was directed to contact Mr. Cantrell, defendant's Chattanooga adjuster. Cantrell went to the scene of the accident, arriving there about 11 A.M. of the day of the accident. He took a statement from Cox and the two drivers of plaintiff's cars who were following Cox. He took no other statements. Although a newspaper account of the accident appearing in a Chattanooga paper the next day indicated that a taxi driver named McMurray had radioed information that the accident had occurred, defendant knew nothing of this witness until two or three days before the trial when a subpoena carrying his name was examined by defendant's attorney. There is evidence that it is a common practice among adjusters and attorneys to watch the newspapers following a serious accident for names of witnesses and other information of value in adjusting or defending claims.

A transcript of the evidence and various proceedings in the Davis suit was filed in this case. Honorable Joe V. Williams. Jr., of the Chattanooga Bar was engaged by defendant to defend the Circuit Court actions against plaintiff. The record shows that he conducted a vigorous defense of the Davis suit. A plea in abatement was filed charging a fraudulent conspiracy to bring plaintiff within the jurisdiction of the Circuit Court of Hamilton County through the medium of the prosecution of Cox for reckless driving. A motion was also made to disqualify Davis' counsel in the damage suit because of their connection with that prosecution. When both of these maneuvers proved unsuccessful a wayside bill of exceptions was preserved as a basis for review on appeal. A vigorous defense was made on the merits but the case went to trial without any eyewitness testimony for defendant except that of Cox himself. Davis, by contrast, in addition to his own testimony had the testimony of Howard, the driver of the truck, and McMurray. (He also offered Bishop as a witness to show that he had been rendered infamous.) These witnesses all testified that the truck was in the outside (north) lane traveling west at about 25 miles per hour when it was struck without warning from the rear by the car driven by Cox. The testimony of Cox carried an inherent weakness, if not positive incredibility. According to his testimony the Howard truck suddenly cut to its left and came to a sudden stop in front of him as he was in the act of overtaking and passing it. It was shown without dispute that there was no reason for Howard to cut to his left or, having done so, to come to a sudden stop. In addition Cox admitted that he was still 50 feet away when this occurred and that he made no effort to cut back to the north lane to avoid striking the truck, insisting that he did not have time to do so. Any negligence of Howard would not be imputable to Davis and, as might well have been anticipated, the result on the issue of liability was adverse to plaintiff herein, defendant in that case.

On the question of the extent of Davis' injuries the medical testimony for Davis showed that he had suffered a fracture of the femur which had failed to knit and that he was permanently and totally disabled. No medical testimony was offered to refute Davis' proof as to the extent of his disability. He was shown to have had an earning capacity of $7 per day prior to the injury with no physical disability except possibly an inactive tuberculosis of the lungs. It is important to note here that defendant had previously been furnished a report of Davis' medical witnesses and knew what their testimony on the trial would likely be.

With this case background in mind we consider defendant's efforts to investigate and settle the claim. It appears that the defense was turned over to Mr. Williams in May 1947 at about the same time he was employed by Cox in the reckless driving prosecution. Up to that time the claim had been handled by Mr. Cantrell, the adjuster already mentioned. Aside from what counsel learned about the claim through representing Cox in the criminal case nothing transpired to further the defense of the Davis suit until early in March preceding the trial which began on the 30th day of March, 1948. No effort was made to have Davis examined or to learn the extent and exact nature of his injuries which defendant all along seems to have regarded only as the ordinary case of a broken leg or injured hip and a claim of anything more serious as merely an exaggeration for the benefit of the trial.

Finally, on March 18, 1948, by agreement with Davis' counsel he was examined by Dr. Killifer and, on March 20th, his report, showing total disability, was mailed by Mr. Williams to defendant's Knoxville office. About the same date another report, based on X-ray, and indicating an active tubercular condition was mailed to defendant. Apparently, though recognizing that this might 'cut both ways'...