State Farm Mutual Automobile Insurance Co. v. Jackson, No. 17779.

• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)
• Writing for the Court: RIDGE, Circuit
• Citation: 346 F.2d 484
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellant, v. Albert JACKSON and Howard Davis, Appellees.
• Decision Date: 10 June 1965
• Docket Number: No. 17779.

346 F.2d 484 (1965)

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellant,
v.
Albert JACKSON and Howard Davis, Appellees.

No. 17779.

United States Court of Appeals Eighth Circuit.

June 10, 1965.

346 F.2d 485

COPYRIGHT MATERIAL OMITTED

346 F.2d 486

John Thomason of Nelson, Norvell, Wilson & Thomason, Memphis, Tenn., made argument for appellant and filed brief with Max Shelton, Nelson, Norvell, Wilson and Thomason, Memphis, Tenn

G. D. Walker of Frierson, Walker & Snellgrove, Jonesboro, Ark., made argument for appellees and filed brief with Kaneaster Hodges, Newport, Ark., Robert Branch, Paragould, Ark. and Marcus Fietz, Jonesboro, Ark.

346 F.2d 487

Before VOGEL, MATTHES and RIDGE, Circuit Judges.

RIDGE, Circuit Judge.

After jury verdict, judgment was entered in favor of appellees and against appellant for Fifteen Thousand Dollars ($15,000.00), with interest from March 12, 1963, which represents the amounts necessary to discharge in full the balance due on a judgment for Twenty-Five Thousand Dollars ($25,000.00), entered against appellees in the Greene County, Arkansas, Circuit Court, in favor of Clarence and Barbara Price (Prices) in an action for personal injuries arising out of an automobile collision.¹

Under the form of judgment as entered, appellant (State Farm) is required to "exonerate" appellees from the judgment entered in favor of the Prices and "is obligated to discharge the said judgment in full." Ergo, the judgment here appealed from is one for excess coverage allowable under the law of the State of Arkansas for "negligence or bad faith" refusal of a liability insurance carrier to effect settlement of a personal injury claim which it could have compromised and settled, within the limits of coverage afforded by the policy of insurance here considered.

Prior to trial in the District Court, it was stipulated, among other things, that both appellees were insureds under the policy of insurance in suit; that by "the terms (thereof) State Farm obtained from the insured a power, irrevocable during the continuance of its liability under the policy, to determine whether an offer of compromise of a claim should be accepted or rejected"; * * * that "State Farm, in compliance with its liability insurance policy, assumed the defense of the litigation instituted by The Prices"; and, before trial thereof, "the Prices offered to compromise and settle all of their personal injuries and property damages (made against appellees) for $9,500, which offer was refused by State Farm" notwithstanding its "representatives viewed the (Price) case as one of liability on the part of Davis and Jackson. It (being) understood, however, that in evaluating the claims of the Prices, the claimed injuries were sharply disputed." (Pars. added.)

Appellant's assignments of error, though multifariously stated, relate to sufficiency of the evidence to sustain the jury's verdict; necessity of a demand to settle from appellees; rejection of advice of company counsel as to authority to compromise; affirmative duty of an insurer to exhaust all reasonable possibilities of compromise; and exclusion of a graphic chart as evidence.

Since appellant attacks the sufficiency of the evidence to support the verdict below, and asserts that its motion for a directed verdict should have been granted, it is necessary for us to consider the facts in some detail. As the judgment here reviewed was rendered upon a jury verdict, we, of course, accept as true all facts which the evidence reasonably tended to prove, as well as all inferences which may reasonably be drawn therefrom in favor of appellees. Lumbra v. United States, 290 U.S. 551, 54 S.Ct. 272, 78 L.Ed. 492 (1934); Railway Express Agency v. Mackay, 181 F.2d 257 (8 Cir. 1950); Carter Carburetor Corp. v. Riley, 186 F.2d 148 (8 Cir. 1951); Southern Farm Bureau Casualty Insurance Co. v. Mitchell, 312 F.2d 485 (8 Cir., 1953); Baker v. Chicago, Burlington and Quincy Railroad Co., 220 F. 2d 721 (8 Cir., 1955). To hold that appellant's motion for a directed verdict should have been granted in the case at bar, we would be required to rule that no reasonable conclusion favorable to appellee could have been reached under the evidence adduced; and, that all reasonable men would agree with the position

346 F.2d 488

appellant here takes. Brady v. Southern Ry. Co., 320 U.S. 476, 64 S.Ct. 232, 88 L.Ed. 239 (1943); Clay County Cotton Co. v. Home Life Ins. Co., 113 F.2d 856 (8 Cir., 1940); Mattson v. Central Electric & Gas Co., 174 F.2d 215 (8 Cir., 1949)

As above noted, during the pendency of the Price suit in the state court, their counsel offered to settle all liability and damages claimed by the Prices for $9,500.00, and later for $9,000.00, both sums being within the policy limits of insurance here considered. State Farm refused to offer more than $6,000.00. As no settlement was effected, the case proceeded to trial, resulting in a verdict of $25,000.00 against Jackson and Davis. State Farm paid its policy limits into the registry of the state court, and the instant suit is for the resulting excess amount of the above verdict. Further facts will be elucidated in the course of this opinion.

There is no longer any doubt in most jurisdictions, including Arkansas (see cases collected in Anno., 40 A.L.R.2d 168) that a liability insurer can render itself liable for the amount of a judgment against its insured in excess of policy limits because of its bad faith or negligent failure to compromise within policy limits. This does not, of course, mean that the insurer is required to settle rather than litigate if it, in good faith, believes a litigable issue is present. cf. Farm Bureau Mut. Automobile Ins. Co. v. Violano, 123 F.2d 692 (2 Cir., 1941). As both parties here correctly note, by virtue of Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.2d 1188 (1938), the law to be applied in this diversity of citizenship case is that of the State of Arkansas, and the law concerning excess judgment suits in Arkansas has been clearly defined in recent cases.²

Therefore, the first matter here to be noted in the light of Arkansas law is: * * * recovery from an insurer is allowed both for "negligence" and "bad faith," contrary to the law of some other jurisdictions which require one such premise to the exclusion of the other. The instructions as given by the Court below submitted the case at bar on both grounds, which was clearly correct. Southern Farm Bureau Casualty Insurance Co. v. Parker, 232 Ark. 841, 341 S.W.2d 36 (Ark., 1961). The Arkansas cases and the Mitchell case in this Court, ante, considering Arkansas law, give general guidance as to the elements which may be considered by a jury in arriving at a finding of bad faith or negligence under facts as here appearing. See also, Anno., 40 A.L.R.2d 168. Hence the instructions as given to the jury below were correct.³ As a consequence, the only substantial question here presented is whether or not under all of the evidence and the inferences reasonably deducible therefrom the same were sufficient to sustain the issues submitted to the jury, and not whether the absence of some specific element in the instructions is fatal to the judgment as a whole. Carter Carburetor Corp. v. Riley, supra.

Turning to the facts adduced we find, first, there was little or...