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

• Decision Date: 30 September 1976
• Docket Number: No. 75-1241,75-1241
• Citation: 539 F.2d 1044
• Parties: Edna M. WARD, Wife of and Robert L. Ward, Plaintiffs-Appellees, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1044

539 F.2d 1044

Edna M. WARD, Wife of and Robert L. Ward, Plaintiffs-Appellees, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellant.

No. 75-1241.

United States Court of Appeals Fifth Circuit.

Sept. 30, 1976.

Horace C. Lane, Baton Rouge, La., C. Gordon Johnson, Jr., New Orleans, La., for defendant-appellant.

John J. Cummings, III, Robert K. Tracy, New Orleans, La., for plaintiffs-appellees.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before TUTTLE, AINSWORTH and CLARK, Circuit Judges.

AINSWORTH, Circuit Judge:

Plaintiffs, Mr. and Mrs. Robert L. Ward, brought this Louisiana diversity action against their insurer, State Farm Mutual Automobile Insurance Company, alleging that they were wrongfully damaged by the failure of defendant to settle within the policy limits ($10,000) certain claims against them growing out of an automobile accident.

On March 15, 1969 a car driven by plaintiff, Mrs. Ward, collided with the rear end of a vehicle which Mrs. Thelma Becnel was driving causing physical injuries which eventually were found to be extremely severe. A Louisiana State Court held that Mr. and Mrs. Ward were solidarily liable for Mrs. Becnel's injuries under applicable provisions of Louisiana law, and awarded Mrs. Becnel and her husband, Judge Morris Becnel, damages in the total amount of $521,375. (See Becnel v. Ward, 286 So.2d 731 (La.App.1973).)

The present case was tried before a jury which awarded the Wards a verdict of $521,375 for the excess liability judgment previously rendered against them in Louisiana State Court; and also awarded additional damages for "any breach of duty on the part of the defendant State Farm Mutual Insurance Company" (i. e., for mental anguish, humiliation and embarrassment) of $450,000 to Mrs. Ward and $200,000 to Mr. Ward. ¹

We affirm the excess liability award of $521,375 with interest and costs, subject to a credit of $10,000 (all as provided in the judgment). However, we have concluded to certify to the Supreme Court of Louisiana the question of Louisiana law whether nonpecuniary damages may properly be awarded in addition to the amount of the excess state judgment. (See La.R.S. 13:72.1; La.Sup.Court Rule XII.)

Thus we do not at this time decide appellant's third contention, that the damages assessed by the jury were punitive, and are not recoverable under the Louisiana rule forbidding an award of punitive damages.

The record discloses the following. The March 15, 1969 accident occurred in clear weather with good visibility. A car driven by Mrs. Ward, State Farm's insured, struck the rear of a car driven by Mrs. Becnel. The first State Farm representative to deal with the claim testified below that he considered the case one of absolute liability on the part of his company. The personal injury claim of a guest passenger in the Becnel car was settled by State Farm, as was the property damage subrogation claim of the Becnels' insurer. On March 18 Judge Becnel was visited by a State Farm representative; Judge Becnel testified that he offered to release State Farm and the Wards for $600 for Mrs. Becnel's apparent slight injury, plus $500 for depreciation to his car due to the accident, plus the unknown amount for rental of a replacement vehicle, plus the then unknown amount of Mrs. Becnel's medical expenses. The agent telephoned "some days later," Judge Becnel testified, rejecting the depreciation demand. A State Farm superintendent testified that because the car had not yet been repaired the amount of depreciation if any could not be determined. By mid-May Mrs. Becnel's medical expenses were $71, and the cost of rental of a replacement vehicle was $245. Judge Becnel telephoned a State Farm representative to renew his offer, now known to total $1,416. In mid-June the State Farm representative telephoned Judge Becnel concerning possible settlement, and the Judge repeated the $1,416 offer. The State Farm representative noted in a later memorandum that on a date "near . . . June 13" he was unable to meet Judge Becnel's offer by only $200 to $300; he had authority to pay $900 for Mrs. Becnel's personal injury and $71.10 for medical expenses. State Farm's attorney testified that Judge Becnel never substantiated his depreciation claim in the usual manner, and for this reason State Farm did not authorize payment. State Farm representatives also testified that the Wards were not informed of Judge Becnel's early offers because company policy at that time was to notify the insured of offers only in cases which appeared to involve liability in excess of the policy limit; the Becnel claim did not appear to do so in June 1969. On July 3 Mrs. Becnel's condition began to deteriorate, and she entered the hospital.

In mid-July Judge Becnel retained an attorney, and on July 16 the attorney wrote to State Farm withdrawing all previous offers. On July 23 the Becnels' attorney met with a State Farm representative and advised him of Mrs. Becnel's poor condition. The Becnels' attorney testified that at the time of this meeting he did not know "how the doctors were relating the accident" to the present condition of Mrs. Becnel. On July 24 the State Farm representative advised his company that it was "inconceivable" that Mrs. Becnel's present condition could be related to the March 15 accident. On August 25 the Becnels' attorney wrote to State Farm again reporting on Mrs. Becnel's worsening condition. On October 1 the Becnels' attorney mailed to State Farm the first medical reports connecting Mrs. Becnel's condition with the March 15 accident. The Becnels' attorney testified that on October 2 he telephoned State Farm's attorney to make a "demand for payment and settlement" for $10,100. On October 14 he telephoned again to inquire concerning the October 2 demand and was told no action had been taken because State Farm was seeking authority to have a doctor of their own examine Mrs. Becnel. On October 20 the Becnels' attorney mailed a certified letter to State Farm's adjuster offering to settle for the maximum amount of the policy plus "the cost . . . incurred to date"; the Becnels' attorney viewed these amounts to be $10,000 for the personal injury, $995 property damage, and $100 "costs." This offer stated a deadline of ten days from the date of the letter.

On October 22 Judge Becnel filed suit against the Wards and State Farm in Louisiana State Court. On October 27 the Wards were served with process in connection with the lawsuit. They testified that this was their first notice that Mrs. Becnel's personal injury claim had not been settled. The State Farm claim superintendent was also notified of the lawsuit by receipt of suit documents from the Louisiana Secretary of State. In accordance with standard procedure when a petition was received he forwarded the claim file to State Farm's attorney for evaluation. Upon receiving the file State Farm's attorney wrote the Wards a letter, which they received October 31, advising them that in view of the lawsuit there was a possibility of liability beyond policy limits, and suggesting that they retain private counsel. On October 29 Judge Becnel's offer of October 20, with its ten-day deadline, reached the claim superintendent's office; he testified that it may not have come to his attention that day. The record does not explain the delay in forwarding the offer from the adjuster who originally received it. The superintendent testified that in any case by October 29 the claim was out of his hands and in those of the attorney; he forwarded the offer to the attorney. The State Farm attorney received it October 31, the day after the deadline. He testified that although the deadline had passed he felt that settlement was still available because in his experience such deadlines were flexible among attorneys. Also on October 31, the day after the deadline, the Becnels' attorney mailed to the State Farm claim superintendent authority to have Mrs. Becnel's medical records examined. The superintendent testified that he had requested permission to have Mrs. Becnel herself examined as well, but that this permission was never granted. The superintendent forwarded the October 31 authorization to State Farm's attorney, who had the rest of the file. The claim superintendent testified that the attorney eventually advised that additional medical information be waived in connection with efforts to settle the claim, and this was done. On November 12 the Wards visited State Farm's attorney, who again suggested that they retain counsel. He testified that he could not remember whether he mentioned to them the October 20 offer and deadline; the Wards, however, testified that he did not mention it.

On November 13 the Wards retained an attorney who thereupon asked them for authority to contribute to settlements in excess of the policy limit, and they authorized him to contribute up to $2,000. On November 14 State Farm's attorney responded to the October 20 offer. He telephoned the Becnels' attorney to say that he would be willing to recommend to State Farm acceptance of an offer of $10,000 for Mrs. Becnel's personal injury, plus $245 for loss of use of the Becnels' car, plus $100 in reimbursement of Judge Becnel's collision insurance deductible amount, plus "court costs" up to the date of the letter, plus such amounts for loss of clothing as could be "reasonably established." Specifically excluded were any interest on the $10,000 and Judge Becnel's demand for depreciation; State Farm still had no documentation of the latter on file. By letter of November 19 the Becnels' attorney replied to this proposal, withdrawing "all previous offers" and expressing "serious doubt" that his clients would now accept an offer of the nature of the October 20 offer that is, one based on policy limits. The Becnels' attorney testified that as of October 31, the day after the expiration of the deadline, there was no chance...