Thompson v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 31 January 1973
• Docket Number: No. 12041,12041
• Parties: Bruce THOMPSON, Plaintiff and Respondent, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant and Appellant.
• Court: Montana Supreme Court

Page 423

505 P.2d 423

161 Mont. 207

Bruce THOMPSON, Plaintiff and Respondent, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant and Appellant.

No. 12041.

Supreme Court of Montana.

Submitted Dec. 5, 1972.

Decided Jan. 17, 1973.

Rehearing Denied Jan. 31, 1973.

McKeon, McKeon & Skakles, John L. McKeon, Gregory J. Skakles, argued, Anaconda, for defendant and appellant.

Morrow, Nash & Sedivy, Edmund P. Sedivy, argued, James H. Morrow, Jr., Bozeman, for plaintiff and respondent.

CASTLES, Justice.

This cause was heard on oral argument on April 24, 1972. An opinion was rendered on August 23, 1972 and appears in 29 St.Rep. 713. Subsequently a petition for rehearing was granted, and the matter was again argued on December 5, 1972. After rehearing the following opinion is substituted for the opinion rendered on August 23, 1972.

This is an appeal from a judgment for plaintiff in the amount of $76,830.03 entered on a jury verdict in Gallatin County, the Honorable Jack D. Shanstrom, presiding. Defendant moved for judgment notwithstanding the verdict and for a new trial. Both motions were denied.

This case, in other facets, has been before this Court previously. Welch v. Thompson, 145 Mont. 69, 399 P.2d 748; St. Paul Fire & Marine Ins. Co. v. Thompson, 150 Mont. 182, 433 P.2d 795; St. Paul Fire & Marine Ins. Co. v. Thompson, 152 Mont. 396, 451 P.2d 98.

Plaintiff brought the instant suit against defendant alleging bad faith in defendant's handling of a tort action.

On September 27, 1961, plaintiff Bruce Thompson was the driver of an automobile owned by his father and insured by defendant State Farm Mutual Automobile Insurance Company. Plaintiff was then 20 years of age, single, and working as a laborer for Haggerty-Messmer Co. in Bozeman. While in the course of his employment (an issue in previous cases decided by this Court), plaintiff traveling between jobs attempted to pass a jeep pulling a loaded horse trailer, driven by one Welch. Welch was making a left turn off a highway in a construction zone when plaintiff Thompson collided with him while attempting to pass.

Welch employed attorneys Landoe and Gary of Bozeman, and filed suit for damages in the amount of $134,000 on August 2, 1962, alleging negligence on the part of Thompson. Thompson appeared by motion to dismiss which motion was heard and denied on October 22, 1962. Subsequently after certain discovery proceedings, Thompson's employer, Haggerty-Messmer, was joined as a defendant and the addendum in the amended complaint was increased to $160,000. Thompson answered separately and filed a counterclaim against Welch for $25,000 damages. At that time, Thompson was represented by two law firms, Morrow, Nash & Sedivy, and Lyman Bennett, Jr. Mr. Nash acted as attorney for Thompson on his counterclaim.

Haggerty-Messer was represented by still another law firm, Berg, O'Connell & Angel. Haggerty-Messmer appeared separately by a motion to dismiss which was denied and then by a separate answer.

Meantime, Thompson's attorney, Donald A. Nash, withdrew as attorney for Thompson on his counterclaim and a praecipe for dismissal of the counterclaim resulted in dismissal of the counterclaim.

Pretrial was had on April 6, 1963. Trial was had and a jury verdict was returned in favor of plaintiff with judgment in the amount of.$61,500. This judgment was appealed to this Court and affirmed on March 3, 1965.

State Farm paid $11,204.64 and St. Paul Fire & Marine, carrier for Haggerty-Messmer, paid the balance.

In our opinion affirming that judgment, Welch v Thompson, 145 Mont. 69, 72, 399 P.2d 748, 750, one significant statement was made there that is pertinent here. After setting forth the details of the accident, this Court observed:

'It is true that some of the foregoing evidentiary matters are disputed, but as we will discuss later our review is to determine whether the evidence, if believed, was substantial.'

On March 2, 1966, St. Paul, as subrogee of Haggerty-Messmer, sued Thompson for $57,240.61 for indemnity. Thompson notified State Farm and requested State Farm to defend him. State Farm did commence to defend Thompson by a motion to dismiss, which motion was subsequently overruled. Shortly thereafter, State Farm advised Thompson that it would not further defend him. Thompson then, through his own attorney, filed a third party complaint against State Farm seeking damages for the insurer's breach of contract to defend the suit and for $2,500 attorney fees. A summary judgment for $2,500 was entered against State Farm. State Farm appealed and numerous issues were stated but finally resolved to one issue: Whether State Farm had a duty to defend the action for indemnity between joint tortfeasors (the employer being liable under the doctrine of respondeat superior)? We held that State Farm had the duty to defend and affirmed the judgment. St. Paul Fire & Marine Ins. Co. v. Thompson, 150 Mont. 182, 188, 433 P.2d 795, 799. There we said:

'We find then that the obligation to defend does exist. But, State Farm argues that it should be allowed to defend rather than paying counsel to defend the action. There can be no question of the good faith and sincere defense by counsel for State Farm in the Welch suit nor here. However, the inconsistent and yes, antagonistic positions that have developed make it clear that Thompson was required to hire his own counsel. No issue as to the amount of damages is involved.

'But one more matter needs discussion. Subsequent to the oral argument and predicated upon the fact that State Farm, as appellant, abandoned several of the issues on appeal, leaving in effect Thompson as the sole respondent, St. Paul has filed a motion for damages for appeal without merit. We believe our discussion previously indicates that St. Paul might have litigated the issue of indemnity in the previous action, but chose not to because of an inconsistent position. Even though St. Paul now has the favorable position of being 'let-out' on issues on appeal, nonetheless it is very much a part of the issue. We have no doubt, for that matter, that it likely would have appeared as amicus curiae. Additionally, we have observed previously that the parties were and are in good faith, we hold that assessment of damages for appeal without merit are not proper. It is so ordered.'

We note, too, that in Justice Haswell's concurring opinion he observes 'tactical' reasons why State Farm did not litigate the rights and liabilities between the two defendants, Thompson (its insured) and Haggerty-Messmer (insured by St. Paul).

In the meantime and before our opinion cited above was filed on October 27, 1967, Thompson on April 18, 1967, filed the instant suit against State Farm alleging bad faith in handling the original tort suit. Trial was had by jury. Verdict was returned for plaintiff in the amount of $76,830.03 and judgment was entered.

One other factor giving rise to a curious and complicated state of facts is that State Farm carried collision insurance on Welch's vehicle. So, State Farm insured Thompson through his father and also Welch, thus covering to some extent both vehicles involved. St. Paul, another insurance company, with the judgment against Thompson came into the act because of its insurance coverage of Haggerty-Messmer, Thompson's employer. In the first action, Haggerty-Messmer strenuously insisted that Thompson was not acting in the scope of his employment when the accident occurred. Yet, during the time of the lawsuit, Thompson received industrial accident benefit payments as a covered employee. While some of these background facts appear entraneous and irrelevant, they all are a part of a complicated picture where bad faith in a tort action was alleged. The various activities of the litigants, claims adjusters, investigators, examining amining doctors and lawyers involved are gone into in the evidence.

The pretrial order upon which the matter was finally submitted to the jury came with the following contentions of plaintiff:

'1. That State Farm Insurance Company did not exercise good faith, and was negligent and was guilty of bad faith toward Bruce Thompson, their insured, infailing to settle the law suit by Mr. Welch against Bruce Thompson within the $10,000.00 limits of the insurance policy because:

'a) It failed to accept a reasonable offer to settle the suit against Bruce Thompson which offer or offers were within the $10,000.00 limits of the policy.

'b) It knew, or should have known, that there was a likelihood that any verdict rendered for Welch would greatly exceed $2,000.00 or even $10,000.00 because of the severity of the injuries sustained by Mr. Welch.

'c) It knew, or should have known, that the evidence to be presented in the case would indicate that a defendant's verdict on the issue of liability was doubtful, and their claim of contributory negligence was a question of fact to be decided by the jury.

'd) It did not give proper regard or consideration to the recommendations of its trial counsel, Mr. Bennett, who recommended that no offer be made in excess of $2,000.00 for the reason that Mr. Bennett had failed to provide Hohn T. Anderson of State Farm as requested, with the requisite medical information on Welch and on his current activities. And, that Mr. Bennett failed to inform Mr. Anderson as requested, of the position of co-defendant, Haggerty-Messmer Co. as to their willingness to contribute to any joint offer of settlement and as to their demand that State Farm accept tender of the defense of Haggerty-Messmer Co. And, failed to provide Mr. Anderson with comprehensive evaluation and written reports concerning all phases of this matter, though often requested.

'e) Bruce Thompson demanded that State Farm, as insurer, settle within the policy limits of $10,000.00.

'f) It failed to inform Bruce Thompson of any of the offers of settlement tendered by Mr. Welch and failed to inform Bruce Thompson of any offers of settlement made by...