W. O. Johnson v. Hardware Mutual Casualty Co

• Decision Date: 04 October 1938
• Citation: 1 A.2d 817,109 Vt. 481
• Parties: W. O. JOHNSON v. HARDWARE MUTUAL CASUALTY CO
• Court: Vermont Supreme Court

1 A.2d 817

109 Vt. 481

W. O. JOHNSON v. HARDWARE MUTUAL CASUALTY CO

Supreme Court of Vermont

October 4, 1938

February Term, 1938.

Action by Insured against Liability Insurer Failing to Settle Suit Within Policy Limits---Status of Case on Remand with Leave to Apply for Amendment---Allowance of Amendment without Error Though Leave Not Obtained---Duplicity, etc., in Pleadings Faults of Form and Not Reviewable---Amendment Stating New Cause of Action Not Allowed---Testing Whether Amendment States New Cause of Action---Cause of Action Defined---Alleging Bad Faith Instead of Negligence Not Introduction of New Cause of Action---Duty of Liability Insurer as to Management of Suits---Relationship of Parties to Liability Insurance Contract---Right of Insurer to Look after Its Own Interests---Insured's Right of Recovery against Insurer Failing to Settle Suit When Verdict over Policy Limits Returned---Bad Faith on Part of Insurer Explained [109 Vt. 482] ---Issue Raised by Motion for Directed Verdict---Scope of Review Where Motion Denied---Immaterial That Plaintiff's Evidence Is Contradicted or Inconsistent---Proof of Bad Faith---Bad Faith Determined by Facts of Particular Case---Failure of Insurance Adjuster to Report Probability of Large Verdict as Evidence of Bad Faith---Knowledge and Conduct of Adjuster Chargeable to Company---Requisites of Good Faith in Determining Question of Settlement of Suit against Insured---Statement of Adjuster Held Evidence of Bad Faith---Denial of Motion for Directed Verdict Held Proper in Circumstances---Exclusion of Parts of Depositions without Error---Opinion Evidence as to Attitude of Insurer toward Insured Inadmissible---Exception to Failure to Charge as Requested Inadequately Briefed---Charge Held to Cover Requested Charge That No Breach of Contract Was Claimed---That Bad Faith Is Never Presumed---Refusal of Requested Charge as to Duty of Insurer to Consult Interest of Insured Held Without Error---Status of Exceptions to Denial of Requests Where Grounds Not Stated and Inadequacy of Charge Given Not Pointed out---Necessity of Making Plain Fault Found with Charge and Giving Trial Court Opportunity to Pass on Any Question Raised---Ground of Objection to Charge on Insurer's Control of Litigation Not Sufficiently Explicit---Review of Motion to Set Aside Verdict as Contrary to Evidence---As without Supporting Evidence---Arrest of Judgment---Presumption in Favor of Sufficiency of Pleadings---Motion in Arrest of Judgment for Defects of Form---Scope of Motion for Judgment Notwithstanding the Verdict---Motion Held Properly Overruled.

1. Where action at law was remanded to county court with leave to apply for amendment of complaint if plaintiff were so advised, case was not for trial until plaintiff applied for and obtained leave to amend the complaint.

2. Defendant's exceptions to allowance of amendments to complaint were overruled, since his rights were sufficiently protected where he appeared and participated in hearings on amendment, though plaintiff did not obtain leave to amend as provided in rescript on remand of case, but proceeded as though case were covered by county court rule 14, par. 3 permitting amendment on continuance.

3. Alleged faults that amended complaint was duplicitous, repetitious, prolix, obscure and uncertain were faults of form only and were not for consideration of Supreme Court under provisions of Practice Act (P. L. 1578) that pleading shall not fail for want of form and that sufficiency of pleadings in this respect shall be for discretionary determination of trial court.

4. Amendments to complaint which introduce new cause of action are not permissible under Practice Act.

5. Test to determine whether proposed amendment introduces new cause of action, is whether it is a different matter, another subject of controversy, or the same matter more fully or differently laid to meet possible scope and varying phases of testimony, for as long as plaintiff adheres to contract or injury originally declared upon, alteration of modes in which defendant has broken the contract or caused the injury is not introduction of new cause of action.

6. Cause of action, for purpose of determining whether proposed amendment introduces new cause of action, is facts which give rise to right of action.

7. In action against insurance company to recover damages suffered by insured through failure of defendant to settle automobile accident claim within limits of its liability policy proposed amendment on remand of cause alleging bad faith in failure to make settlement was not introduction of new cause of action where original declaration relied upon negligence in such failure as ground for recovery, since fundamental facts, with respect to failure of defendant to make settlement, were same in both original and amended complaints.

8. When insurance company accepted premium charged for automobile liability policy, it impliedly undertook to use control and management of actions against insured given it under policy for mutual benefit of parties to the contract.

9. Relations between parties to automobile liability insurance contract became mutually fiduciary, and each owed the other duty of utmost good faith in their dealings together, and in exercising privileges and discharging duties specified in and incident to the policy contract.

10. Insurer under automobile liability insurance contract had right to look after its own interests, but it was bound to protect insured's interests as well.

11. If insurer under automobile liability insurance contract acted honestly and according to its best judgment in failing to settle suit against insured, latter would not be entitled to recover in action against insurer for damages sustained when verdict in accident suit exceeded policy limits, but if insurer used its authority over suit to save itself from as much of the loss as possible, in disregard of insured's rights, consciously risking loss to insured to save loss to itself, insured's action should succeed.

12. Bad faith which would make insurer under automobile liability insurance contract liable to insured for amount paid by him when suit which insurer failed to settle within policy limits resulted in verdict in excess of such limits, would be intentional disregard of financial interest of insured in hope of escaping full responsibility imposed upon insurer by its policy.

13. In action by insured against insurer under automobile liability insurance contract to recover for damages suffered through alleged bad faith of insurer in failing to settle suit against insured which resulted in verdict above policy limits, defendant's exception to denial of its motion for directed verdict raised issue whether there was substantial evidence from which, if believed, and excluding effect of modifying evidence, jury could reasonably infer that defendant acted in bad faith in manner alleged.

14. In passing upon exception to denial of defendant's motion for directed verdict, Supreme Court views evidence in light most favorable to plaintiff and does not pass upon credibility of witnesses, since tendency of evidence and not its weight is to be considered.

15. If there is evidence fairly and reasonably tending to support plaintiff's claim, it is immaterial to defendant's motion for directed verdict that such evidence is contradicted, or that it is unreasonable or inconsistent, so long as it is not impossible, since contradictions and opposing inferences are for jury.

16. Bad faith of liability insurer in handling claim against insured is a state of mind, indicated by acts and circumstances, and is provable by circumstantial as well as direct evidence.

17. In determining existence of bad faith on part of such insurer each case must stand and be determined upon its particular state of facts.

18. Where evidence tended to show that it was policy of defendant insurance company to settle claim against insured rather than meet possibility of verdict beyond limits of insurance contract, failure of adjuster to inform home office that such verdict was expected was evidence from which jury could infer that requisite good faith on part of company was not exercised in failing to settle suit against its insured, since probability of verdict in excess of policy limits, if reported by adjuster, who was agent of company might well have caused acceptance of offer of settlement.

19. Adjuster for insurance company was its agent, and his knowledge and conduct were chargeable to his principal.

20. Good faith on part of insurer in determining whether it should settle action against its insured under automobile liability insurance contract required full report from its adjuster of all facts bearing upon matter of settlement and decision based upon all such facts.

21. Statement of insurance adjuster, made on refusal of insured under liability policy to contribute to settlement within policy limits, that he would let settlement go if he could not make more out of it and that case would go for sum far in excess of limits with jury was evidence tending to show bad faith on part of insurer, though adjuster denied making the statement, since it was open to jury to find he had done so on the conflicting evidence.

22. In action by insured against insurer under automobile liability insurance policy to recover damages sustained through failure of insurer to settle within policy limits suit against insured resulting in verdict in excess of limits, where evidence tended to show that insurer's counsel and adjuster anticipated adverse verdict and so informed both insurer and insured, that adjuster attempted to have insured contribute to settlement within policy limits and stated when insurer refused that he would "let it go" and verdict would...