Tyler v. Grange Ins. Ass'n

• Decision Date: 03 August 1970
• Docket Number: No. 267--40420--I,267--40420--I
• Citation: 3 Wn.App. 167,473 P.2d 193
• Parties: Norman E. TYLER, Respondent, v. GRANGE INSURANCE ASSOCIATION, Appellant.
• Court: Washington Court of Appeals

Page 167

3 Wn.App. 167

473 P.2d 193

Norman E. TYLER, Respondent, v. GRANGE INSURANCE ASSOCIATION, Appellant.

No. 267--40420--I.

Court of Appeals of Washington, Division 1, Panel Two.

Aug. 3, 1970.

Murray, Dunham & Waitt, Wayne Murray, Seattle, for appellant.

Ross & Schweinler, Lawrence M. Ross, and Burkey, Marsico, Rovai & McGoffin, Robert L. Rovai, Tacoma, for respondent.

UTTER, Judge.

The Grange Insurance Association appeals from a judgment against them for $29,087.40 entered in favor of Norman E. Tyler, their insured, by the court sitting without a jury. That sum represents the difference between the policy limits of Norman Tyler and the amount of a verdict rendered against him, plus interest. The issues on appeal are whether the court's findings of fact and conclusions of law are supported by the record and the nature of the duty owed by Grange to Tyler.

In 1962, Gordon L. Tyler and Norman E. Tyler, who are brothers, went out for an evening of bowling. They later stopped at a tavern and on the way home the car, driven by Norman Tyler, left the road and collided with a tree. Gordon Tyler was seriously injured as a result of the accident. ¹

An investigation of the accident was made shortly thereafter by Grange. Grange took a sworn statement from Norman Tyler regarding the circumstances of the accident and from others who had knowledge of the conduct of the parties prior to the accident.

The following facts were all embodied in findings of fact entered by the trial court, after hearing the testimony, and are the findings to which error is assigned by Grange: Subsequent to taking Norman E. Tyler's statement on March 24, 1962, no significant activity occurred in the handling of the claim of Gordon Tyler until September, 1962, 23 days prior to trial when Norman Tyler's deposition and his brother's were taken. At that time, some reference was made between counsel for Gordon Tyler and the insured's attorney, relative to settlement of the claim, but the reference did not amount to or constitute negotiations for the purpose of, or in an effort to compromise the claim of Gordon L. Tyler.

On October 4, 1962, the claim of Gordon Tyler was tried, resulting in a verdict and judgment in favor of Gordon Tyler and against Norman Tyler for $50,000. At no time in the proceedings or prior to the conclusion of the case on appeal, did Grange Insurance offer to negotiate or compromise the claim of Gordon L. Tyler.

At all times during the pendency of Gordon Tyler's claim, Grange, through its claims manager, demonstrated the handling of the claim was singularly lacking in written verification of the opinions and conclusions of the defendant or its chosen attorney. A decision was made by Grange during the pendency of the claim of Gordon Tyler, not to attempt to negotiate a settlement or to obtain other or additional medical information relative to the injuries sustained by Gordon Tyler, other than that provided by his deposition. Their decisions were the sole responsibility of Grange.

In its oral opinion, the court amplified its findings regarding Grange's handling of the investigation of the claim. The court there stated,

(I)t's little hard for me to believe, * * * that a bona fide determination as to the possible damages which might be recoverable if the case was allowed to go to the jury could be properly assessed relying solely upon the statement of Norman E. Tyler, * * * and Gordon Tyler, * * * even though Gordon Tyler was an experienced adjuster, particularly in view of the type of injuries which were involved. The file * * * does not contain, * * * nor was there submitted any evidence indicating that even the hospital records at the Burien Hospital were examined or copies obtained for * * * study by * * * (their attorney) or * * * (claims manager) or a doctor of their choice and at no time during the case, including the trial, was any such preparation indulged in. * * * (I) am going to have to assume that * * * (their attorney) felt * * * bound by the injuries of the plaintiff * * * and * * * there was no way * * * (to) refute them. * * * Knowing that it seems * * * even a greater obligation arose to determine just what these injuries and the resultant disability, be they permanent or otherwise, would create by way of damage liability. * * * I think that there was a duty on the part of the company, and its agent, * * * to be certain * * * they were in a position to apprise themselves as to the extent not only of the immediate injuries, but of the permanency of them, before adamantly making no effort to settle.

In determining what the findings of fact are in the case, the oral opinion of the trial court may be used to supplement the written findings of fact where they are not inconsistent. Vacca v. Steer, Inc., 73 Wash.2d 892, 441 P.2d 523 (1968); El Cerrito, Inc. v. Ryndak, 60 Wash.2d 847, 376 P.2d 528 (1962).

The court found the damages previously set forth and, based on its findings of fact, entered conclusions of law. These held regardless of the opinion arrived at by Grange Insurance that no liability existed in the action by Gordon Tyler against Norman Tyler or that, in any event, an adverse verdict would be within the insurance coverage, Grange had a duty in view of their acceptance of the nature and extent of the injuries sustained by Gordon Tyler, as claimed by him, to explore settlement and make a meaningful offer of settlement sometime prior to, after its motion for nonsuit was denied, or other time during, or subsequent to the trial and prior to the conclusion of the appeal. The court further concluded the failure of Grange Insurance to make a meaningful offer of settlement was the failure to exercise good faith and was negligence on the part of the insurance company and that Grange did not, in good faith, give equal consideration to the interests of Norman Tyler in arriving at a decision not to attempt to settle or compromise the claim of Gordon Tyler.

The trial record indicates that shortly before the trial, Grange was advised Gordon Tyler was prepared to settle the claim for the policy limits of $25,000. This information was conveyed to Norman Tyler the night before the trial when he was advised of his right to have personal counsel. He indicated he wished to have Grange defend, but also requested the case be settled. Grange did not respond to the communication of Gordon Tyler or make any attempt to negotiate a settlement.

The case was tried on October 4, 1962, at which time Grange learned of the full extent of Gordon Tyler's medical injuries, including the brain damage. The existence of the brain damage was unknown to Gordon Tyler prior to the trial and was a fact he could not have been aware of at the time of his deposition.

The findings of fact were made after listening to disputed testimony on all issues in trial. We have examined the record and believe the findings are supported by substantial evidence. We cannot disturb them on appeal.

The typical liability insurance policy contains no express provision requiring the insurer to settle and gives the company control over the defense of the claim and control over the decision concerning opportunities of settlement within policy coverage. The existence of this control of defense and settlement is a necessity of insurance practice, but, with this power given the insurer, the courts have stated there is a duty sounding in tort (Murray v. Mossman, 56 Wash.2d 909, 355 P.2d 985 (1960)) requiring the insurer to give consideration to the interests of the insured, when negotiating a settlement.

Washington had held the insurer is liable if he is guilty of either bad faith or negligence in failing to settle a claim against the insured within its policy limits. Murray v. Mossman, Supra; Evans v. Continental Cas. Co., 40 Wash.2d 614, 245 P.2d 470 (1952); and Burnham v. Commercial Cas. Ins. Co. of Newark, N.J., 10 Wash.2d 624, 117 P.2d 644 (1941).

When courts speak of liability for bad faith or the duty to use good faith, they are usually referring to the same obligation. Generally speaking in the context of these cases, good faith means being faithful to one's duty or obligation; bad faith means being recreant thereto. Cernocky v. Indemnity Ins. Co. of North America, 69 Ill.App.2d 196, 216 N.E.2d 198 (1966). The court, in Murray, uses the terms interchangeably and so do we.

The duty to refrain from bad faith or, alternately, to use good faith is said in our state to be founded on what has been termed a fiduciary relationship existing between the insurer and the insured. Murray v. Mossman, Supra. ²

Some jurisdictions have attempted to define the liability of the insurer for bad faith to require an actual intent to mislead or deceive another and stated there would be no liability in a particular transaction unless there was conduct equivalent to fraud or actual bad faith. Johnson v. Hardware Mut. Cas. Co., 108 Vt. 269, 187 A. 788 (1936). The basis of liability of the insurer is not this narrowly founded in Washington. The recognition in Murray that the duty of the insurance company springs from a fiduciary relationship implies a broad obligation of fair dealing.

The court in State Farm Mut. Auto. Ins. Co. v. White, 248 Md. 324, 236 A.2d 269 (1967), recognized that for liability to exist on the part of the insurer, the term 'good faith' did not tend to connote or imply by use of that term that dishonesty, misrepresentation, deceit, or a species of fraud must be present and stated that in applying the good faith theory, the courts found the presence of a number of acts affected the 'good faith' posture of the insurer: The severity of plaintiff's injury giving rise to the likelihood of a verdict greatly in excess of policy limits; lack of proper and adequate investigation of the circumstances surrounding the accident; lack of skillful evaluation of plaintiff's disability; failure of the insurer to inform the insured of a compromise offer...