Weber v. Biddle
| Decision Date | 22 March 1971 |
| Docket Number | No. 296--I,296--I |
| Citation | 483 P.2d 155,4 Wn.App. 519 |
| Court | Washington Court of Appeals |
| Parties | Laura WEBER, a widow, Respondent and Cross-Appellant, v. Carole BIDDLE, whose former name was Carole Day, and Marie E. Day, a single person, Defendants, Rocky Mountain Fire & Casualty Company, Appellant. Laura WEBER, a widow, Respondent, v. ROCKY MOUNTAIN FIRE & CASUALTY COMPANY, a corporation, Appellant. |
Murray, Dunham & Waitt, Wayne Murray, Seattle, for appellant.
Clinton, Moats, Andersen & Fleck, James A. Andersen, Seattle, for respondent.
At a jury trial in January of 1966 Mrs. Laura Weber was awarded $57,500 for injuries which she received in an automobile accident on April 19, 1962, at the intersection of Bothell Way and 73rd N.E. in Seattle. That judgment was appealed and affirmed by the Supreme Court. See Weber v. Biddle, 72 Wash.2d 22, 431 P.2d 705 (1967). Thereafter, Mrs. Weber initiated actions against Rocky Mountain Fire and Casualty Company, the appellant herein, as the insurer of the defendants on a policy of automobile liability insurance. The actions were brought (1) on a writ of garnishment for the $10,000 insurance limits and (2) as assignee of Carole Day Biddle and Marie Day, her mother (the insureds), for the $47,500 sum in excess of the policy limits, claiming that Rocky Mountain was guilty of 'bad faith' in not settling the primary action for the $10,000 policy limits. The two actions were consolidated for trial. Rocky Mountain appeals from a verdict in favor of Mrs. Weber on both causes of action. Mrs. Weber appeals from that portion of the judgment limiting recovery of interest to the $10,000 policy.
Rocky Mountain argues that it was not guilty of bad faith as a matter of law and further that Carole Biddle and Marie E. Day cannot recover because of the breach of the cooperation clause of the insurance policy.
Carole gave two versions of the accident to Rocky Mountain. In the first, she stated that she was driving the car and ran a red light. In the second, she stated that a 17-year-old boy was driving without her consent and against her wishes. The second version, if true, precludes coverage and exempts her and the insurance company from any liability whatsoever. Rocky Mountain alleges that it relied and had a right to rely on the second version. Rocky Mountain also argues that there can be no recovery against it on behalf of the insureds because of a breach of the cooperation clause of the insurance policy.
In order for the insurer to make a good-faith decision not to settle within policy limits, it must have made a diligent effort to thoroughly investigate the facts upon which an intelligent and good-faith judgment may be predicated. 1 See Tyler v. Grange Ins. Ass'n, 3 Wash.App. 167, 473 P.2d 193 (1970); Baker v. Northwestern Nat'l Cas. Co., 22 Wis.2d 77, 125 N.W.2d 370 (1963).
The jury was instructed:
The term 'bad faith' as used in these instructions may be defined as involving insincerity, dishonesty, disloyalty, duplicity or deceitful conduct; it implies dishonesty, fraud or concealment. An honest mistake of judgment is not in and of itself bad faith and no single fact is necessarily decisive of this issue.
Instruction 10. There was no exception to this instruction. It therefore becomes the law of the case. O'Brien v. Artz, 74 Wash.2d 558, 445 P.2d 632 (1968); Sebers v. Curry, 73 Wash.2d 358, 438 P.2d 616 (1968).
Whether the conduct of the appellant met these criteria is a question of fact for the jury. Upon conflicting evidence the jury concluded that the conduct of the appellant amounted to bad faith. There is substantial evidence to support this finding. It will not be disturbed on appeal. Thorndike v. Hesperian Orchards, Inc., 54 Wash.2d 570, 343 P.2d 183 (1959); O'Byrne v. Spokane, 67 Wash.2d 132, 406 P.2d 595 (1965).
Whether the Days breached the cooperation clause of the insurance policy was also a question of fact for the jury. In a comprehensive instruction, 2 the court summarized the claims of the parties. The jury was instructed that Mrs. Weber could not recover if (1) the Days had violated the cooperation clause or the notice of suit clause of the policy and (2) such violations were not waived by the defendant company. The jury resolved the issue against the appellant.
Rocky Mountain argues that it was error to give an instruction on waiver since there was a nonwaiver agreement signed by the Days and it defended under this reservation of rights.
A reservation of rights agreement is not a license for an insurer to conduct the defense of an action in a manner other than it would normally be required to defend. The basic obligations of the insurer to the insured remain in effect.
It is clear, * * * that a nonwaiver agreement can be waived either expressly or impliedly by the insurer or its authorized representatives. Such agreements are construed strictly against the insurer and liberally in favor of the insured, and will not be extended beyond the exact terms of the agreements. In addition, such an agreement will not operate to prevent a waiver if it is vaguely or ambiguously drafted. Likewise, a general notice of reservation of rights failing to refer specifically to the policy provision upon which the insurer wished to rely may be insufficient to prevent a waiver or estoppel from arising from the insurer's control of the defense of the suit brought against the insured. * * *
The mere obtaining of a nonwaiver agreement does not give the insurer a right to do anything it may wish to prejudice the rights of the insured and thereafter continue to rely upon the non-waiver agreement, since such agreement may be waived by the insurer's subsequent conduct.
(Footnotes omitted.) 16A J. Appleman, Insurance Law & Practice § 9377 (Rev. ed. 1968). See also Sheeren v. Gulf Ins. Co. of Dallas, Tex., 174 So. 380 (La.App.1937).
Non-waiver agreements are not so sacrosanct that they immunize an insurer from responsibility for any and all actions taken in adjusting a loss. The agreement being solely for the benefit of the insurer must be strictly construed against it under sound contract principles.
Connecticut Fire Ins. Co. v. Fox, 361 F.2d 1, 7 (10th Cir.1966).
The reservation of rights in the present case is general in nature. It does not state the specific policy defenses upon which the insurer intends to rely. Rocky Mountain's counsel maintained complete control over the defense of this action and as such, a high fiduciary duty was owed by the insurer to the insured. 3 The insurer is not free to proceed through negotiation and defense stages of litigation safeguarding only its own interests and neglecting those of its insureds.
In Meirthew v. Last, 376 Mich. 33, 38, 135 N.W.2d 353, 355 (1965) the insurer defended the original action under a general notice of reservation of rights. In the subsequent garnishment proceedings, a policy defense was asserted by the insurer. In holding the insurer liable for the amount of the judgment in the original action, the court noted:
We hold the notice (of reservation of rights) legally insufficient; also, that it came too late to avoid presumptive prejudice of Last's rights and plaintiff's consequential rights. The notice was vague and uncertain. It smacks of bad faith for want of specific reference to that clause of the policy the garnishee has pleaded. In no field of law is legal duty more rigidly enforced than in instances as at bar. The insurer must fulfill its policy-contracted obligation with utmost loyalty to its insured; not for the purpose of developing, secretly or otherwise, a policy defense. When a conflict of interest--even a mere possibility thereof--arises, the law suggests (if it does not require) that the insurer act promptly and openly, on peril of estoppel, preferably upon a record made in the pending case (if pending as here) with the court fully apprised of all necessary details; also that the insurer act thus on time for arms' length actions which may protect the respective rights of both parties to the contract of insurance.
It was proper for the trial court to instruct the jury on the issue of waiver. The acts of the Days regarding the breach of the cooperation clause and those of Rocky Mountain regarding its conflict of interest were before the jury. Whether or not the acts of the insurer so prejudiced the rights of the insureds as to amount to a waiver was a question of fact for the jury to determine.
Appellant argues that instruction 5 was erroneous in a second respect in that it instructed the jury that Laura Weber brought the garnishment action 'directly and in her own right.' Appellant contends that a garnishing creditor has no greater rights than those of the debtor. We agree, but the instruction merely indicated that Mrs. Weber had the right to bring the garnishment action directly and the bad-faith action as an assignee of the Days. The jury was instructed that there could be no recovery on either cause of action if it found a breach of the cooperation or notice of suit clauses by the Days and such violations were not waived by the insurer. Instructions must be read as a whole. Samuelson v. Freeman, 75 Wash.2d 894, 454 P.2d 406 (1969); Roberts v. Goerig, 68 Wash.2d 442, 413 P.2d 626 (1966).
Respondent called Mr. Arthur Piehler, an attorney, as an expert witness to testify on the issue of conflict of interest. Appellant, in turn, called experts to testify on the same question. Error is assigned to the court's admission of this testimony.
The purpose of opinion evidence is to assist the trier of the fact in correctly understanding matters not within common experience, but, in passing upon the admissibility of such testimony, the court has a duty to see that the jury is not likely to be misled. Such are relevant considerations in weighing admissibility of proffered opinion testimony.
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