Springer v. Citizens Casualty Company of New York

• Decision Date: 16 August 1957
• Docket Number: No. 16456.,16456.
• Citation: 246 F.2d 123
• Parties: Florence A. SPRINGER, as Administratrix of the Estate of Ralph B. Springer, also known as R. B. Springer, Deceased, Appellant, v. CITIZENS CASUALTY COMPANY OF NEW YORK, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

246 F.2d 123 (1957)

Florence A. SPRINGER, as Administratrix of the Estate of Ralph B. Springer, also known as R. B. Springer, Deceased, Appellant, v. CITIZENS CASUALTY COMPANY OF NEW YORK, Appellee.

No. 16456.

United States Court of Appeals Fifth Circuit.

July 19, 1957.

Rehearing Denied August 16, 1957.

T. D. Ellis, Jr., Sherwood Spencer and Ellis, Spencer & Butler, Hollywood, Fla., for appellant.

Herschel E. Smith, Miami, Fla., Knight, Smith, Underwood & Peters, Miami, Fla., of counsel, for appellee.

Before HUTCHESON, Chief Judge, and TUTTLE and CAMERON, Circuit Judges.

CAMERON, Circuit Judge.

This appeal presents the question whether plaintiff's evidence raised issues for jury decision¹ in an action by the insured to recover from the insurer an amount the insured was compelled to pay as the result of a personal injury suit, the insured's action being predicated on the alleged bad faith of the insurer in failing to settle with the injured person within policy limits. The insured² (plaintiff-appellant) was compelled to pay the sum of $75,074.80 as excess over and above the $5,000 limit contained in an Automobile Liability Insurance Policy issued by insurer, Citizens Casualty Company (defendant-appellee), in liquidation of a judgment rendered against her and others in a Florida State Court based upon personal injuries inflicted by one Knowles while he was driving an automobile rented from the insured and covered by the policy.

Said Knowles drove said automobile against Pearl Morrell Morris, inflicting serious and permanent injuries; the insurer was promptly notified and assumed control of the claim she made against the insured pursuant to the provisions of the policy; and it refused to settle her claim on at least three occasions when it had opportunity to do so within the policy limits. Insurer defended this action brought against it by insured³, answering in general terms that it was not guilty of any bad faith in the handling of settlement negotiations with Mrs. Morris and her attorney. It developed, from a colloquy between court and counsel near the beginning of the trial in the court below, that the insurer's main defense was that Mrs. Morris was guilty of contributory negligence barring her from recovery in her suit against the insured and others.⁴

After the insured had put on her evidence, consisting chiefly of proof of repeated efforts on her part to induce insurer to settle within the policy limits of $5,000⁵, and of the details of settlement negotiations between the several parties, and proof of the rendition by the jury in Mrs. Morris' suit against the insured and others of a verdict for $75,000 whose judgment had been affirmed by the Florida Supreme Court, the court below granted insurer's motion for a directed verdict chiefly on the ground that all of the attorneys in the case felt that the case was one of doubtful liability.⁶

The two witnesses upon whose testimony the court's ruling was based were the attorney for Mrs. Morris in her suit against insured and one of the attorneys who acted for insured along with the other defendants in that suit.⁷ Assuming that such "expert" testimony was admissible, we are unable to agree with the court's conclusion that absence of bad faith on the part of the insurer was by it established as a matter of law.

Our disagreement is based upon several grounds: (1) one of insured's attorneys in the Morris suit who testified stated positively that he was of the opinion that insurer's liability was quite clear in the light of admissions found in the insurer's file; (2) the record before the court below contained no proof from which contributory negligence could be attributed to Mrs. Morris; and (3) the evidence introduced by the insured in the court below was ample to contradict the opinion evidence of the two attorneys, or at least to establish facts from which reasonable men could find that the insurer was guilty of bad faith. This opinion will relate chiefly to ground three.

While the court below was not bound by what transpired in Mrs. Morris' suit, it could not ignore the facts, in evidence before it without objection, that a dispassionate Florida trial court and jury had decided that Knowles had negligently injured Mrs. Morris, that she was not contributorily negligent (or was protected under the doctrine of last clear chance) and had placed a valuation of $75,000 on her injuries; and that the Supreme Court of Florida had⁸ affirmed the decision, holding that the evidence of negligence and contributory negligence was "in direct and hopeless conflict" and that the verdict and judgment would also be approved under the last clear chance rule.⁹

It being insurer's duty to make a reasonably prompt and thorough investigation of the facts and there being no proof that any facts upon which the courts of Florida acted were not known by insurer,¹⁰ a question is raised at the outset whether the insurer did not have knowledge of facts which its expert claim handlers ought reasonably to appraise as sufficient to require the conclusion that Mrs. Morris' case against insured would be submitted to a jury. The record showing abundantly and all parties before us conceding that the injuries were sufficient to support a very large verdict, that question encompasses also the good faith of the company in its stubborn refusal to offer even one-twentieth of the jury award and to settle so dangerous a case by the payment of the entire obligation contained in its insurance contract.¹¹

A brief examination of the opportunities insurer had of settling insured's liability within the policy limits will demonstrate that the jury was warranted in finding bad faith on its part, keeping in mind that the insurance contract between them laid upon insurer the duty of being at least as zealous in protecting insured's interests as it was in looking after its own. For two months following Mrs. Morris' injury she had no lawyer and, through her sister, made contact with insurer's representatives. Being without funds to meet the enormous expenses which were rapidly accumulating, Mrs. Morris was interested chiefly in obtaining money sufficient to cover hospital and doctors' bills, which at that time aggregated about $4,300, and she was willing to give a full release for that amount. The best commitment she was then able to get from the insurer's representative was that maybe the company would pay $3,000 which he would try to get the Springers to supplement to the extent of $500. The trial court doubted the admissibility of such evidence without definite proof that it was communicated to the company. The evidence was clearly admissible in view of the testimony of Mrs. Morris and her sister and of the duty of the insurer to keep in continuing contact with the injured lady in an effort to bring about a settlement.

About two months after Mrs. Morris' injury insurer's local representative established contact with an attorney who was then acting for her without pay, and the attorney was offered $3,500 which was the limit which had been placed on the claim. In a letter to insurer's home office the local representative expressed the opinion that this limit would eventually settle the case and stated further: "During the course of one of our conferences * * *, this attorney was trying his best to get us to boost our figure another $500.00 * * * We have exhausted any possibility of securing any contribution from the insured (Springer) until our limits have been exhausted. The claimant's attorney has also made overtures to Springer for a contribution." Emphasis supplied. From that it is clear that insurer could then have settled the claim for $4,000. It is further manifest — a fact which subsequent dealings served to emphasize — that the insurer was immovably bent upon requiring the insured to make a contribution towards settlement before offering the full amount of its liability under the policy. The above letter was written May 15th, and it appears that the insurer dropped its efforts to settle until the latter part of September after suit had been filed by Mrs. Morris — a circumstance the jury was entitled to consider in determining whether the insurer had fulfilled its good-faith obligation in the handling of the claim.

During the weeks after the filing of suit and before it came to trial in April, 1951, insured, through her attorney, kept pressing, orally and in writing, the insurer to settle the suit against her within the limit of $5,000, which the attorney assured the company could be done. Something like a week before the date set for trial Mrs. Morris' attorney wrote insured's attorney that $5,000 would be accepted in settlement of the claim as against her.¹² Insured's attorney, receiving a copy of that letter, wrote insurer's attorney demanding that the offer be accepted.¹³ The attorney for the insurer replied that under established legal principles, he did not feel that the company was bound to pay the $5,000, especially in view of the fact that the company had a responsibility to protect Knowles also.¹⁴

The words emphasized in this letter are important because the record contains no hint that Knowles had ever called upon the insurer to defend him in the Morris suit or had expected any such assistance from it. The evidence, on the other hand, makes it clear that Knowles had protection with another insurance company and that he was represented in the Morris suit by an attorney employed by the other company.

Moreover, any liability the insurer might have had with respect to Knowles grew solely out of the omnibus clause of its policy with insured, while its obligation to defend insured was imposed by explicit language in the insurance contract itself. The insurer could in no event be called upon to pay more than $5,000 in discharge of its entire liability under the policy.¹⁵ The jury would have been justified in doubting the good faith of insurer's solicitude for Knowles under the terms...