Tri-State Ins. Co. v. Busby

• Decision Date: 06 December 1971
• Docket Number: No. 5--5686,TRI-STATE,5--5686
• Citation: 473 S.W.2d 893,251 Ark. 568
• Parties: INSURANCE CO., Appellant, v. Mary BUSBY et al., Appellees.
• Court: Arkansas Supreme Court

Page 893

473 S.W.2d 893

251 Ark. 568

TRI-STATE INSURANCE CO., Appellant, v. Mary BUSBY et al., Appellees.

No. 5--5686.

Supreme Court of Arkansas.

Dec. 6, 1971.

Rehearing Denied Jan. 10, 1972.

Wright, Lindsey & Jennings, Little Rock, for appellant.

Spears & Sloan, West Memphis, for appellees.

HOLT, Justice.

This is an action to recover damages in excess of the insured's policy limits. The appellant issued to appellee Ethel Louise Nelson (Mrs. W. F.) an automobile liability insurance policy with coverage limited to $10,000 as to any one claim. On July 10, 1964, as appellee Nelson drove her car away from a curb she struck and injured appellee Mary Busby as she stepped into the street. A jury awarded Mrs. Busby $20,000 damages and her husband, appellee Bruce Busby, $5,000. The jury also found Mrs. Nelson 65% negligent and Mrs. Busby 35%. After appropriate deductions for Mrs. Busby's contributory negligence, the court reduced the awards to $13,000 for Mrs. Busby and $3,250 for her husband, making a total of $16,250. We affirmed this judgment. Nelson et al. v. Busby et al., 246 Ark. 247, 437 S.W.2d 799 (1969). Thereupon the appellant paid only the $10,000 policy limit with interest. The present action was brought by the Busbys against the appellant to recover the excess judgment. Appellee Nelson and her guardian, Mrs. Littlefield, joined in the complaint for the use and benefit of the Busbys.

Appellees alleged that the appellant was negligent and acted in bad faith in failing to settle, within the policy limits, the Busbys' personal injury suit. Appellees asked that they be awarded $6,250, together with interest thereon from May 28, 1968, the date of the original judgment; that a 12% penalty be assessed; and a reasonable attorney's fee be awarded. The trial court, sitting as a jury, awarded the Busbys $6,250, together with interest only from the date of this judgment. Appellant appeals from this judgment. Appellees cross-appeal from the court's refusal to award the 12% penalty, reasonable attorney's fee, and interest on the excess judgment from the date of the original judgment in May 1968.

For reversal appellant contends that the trial court erred in holding that the legal test for determining whether appellant would be liable to appellees for the excess judgment was whether or not appellant exercised 'bad judgment.' We think the appellant is correct. It is well established in our State that an insurer is liable to its insured for any judgment in excess of the insured's policy limits if the insurer's failure to settle the claim was due to fraud, bad faith, or negligence. Southern Farm Bureau Cas. Ins. Co. v. Parker, 232 Ark. 841, 341 S.W.2d 36 (1960); Home Indemnity Co. v. Snowden, 223 Ark. 64, 264 S.W.2d 642 (1954); McChristian v. State Farm Mutual Auto. Ins. Co., 304 F.Supp. 748 (W.D.Ark.1969); State Farm Mutual Auto. Ins. Co. v. Jackson, 346 F.2d 484 (8th Cir. 1965); Great American Ins. Co. v. Ratliff & Holland, 242 F.Supp. 983 (E.D.Ark.1965).

In the case at bar the court, in its findings, noted that it had heard the original case tried and after listening to the trial of this case, it was the court's opinion that: 'Counsel for defendant (appellant) and the other agents, servants and employees of the insurance company which had to do with this claim and this case, exercised bad judgment and not bad faith; I'm not willing to call it that at all; I don't think anybody exercised bad faith in this case at all, some have called it bad faith and I think it is a mistake.' As to negligence, the court stated: 'I don't know whether you would call it negligent conduct or not.' Later the court said: 'You can say it amounts to negligence if you want to, but to me it is purely the proposition of being mistaken in your judgment of the evaluation of the case and I think the insurance company and all of them were mistaken in the evaluation of this case.'

It appears that the issue before this court is to decide whether 'bad judgment' is equivalent to 'negligence.' Appellees present the argument that the finding of the trial court that appellant exercised 'bad judgment' is actually more serious than finding negligent conduct. Appellees cite to us dictionary definitions of the words 'bad' and 'judgment' in support of their argument that this amounts to negligence or more than negligence. No case authority is cited that 'bad judgment' is equated with 'negligence.' Nor do we so construe the finding of the court. It appears to us that the finding of the court on the issue of negligence was not clear and conclusive. This being true, we are of the view that the judgment should be reversed and the cause remanded for a retrial upon all of appellees' allegations and a more definitive ruling with respect to the issues in accordance with our established decisions.

Appellant next contends that as a matter of law there was no substantial evidence to support a finding that appellant was guilty of negligence or acted in bad faith in failing to settle the Busbys' personal injury claim within the Nelson policy limits. We cannot agree. The insured, Mrs. Nelson, al elderly woman, had stopped her car at a street curb at the local post office and as she moved forward she struck Mrs. Busby, a pedestrian. Mrs. Nelson's car skidded 21 feet, allegedly dragging Mrs. Busby this distance, and stopped with Mrs. Busby...