Wessing v. American Indemnity Co. of Galveston, Tex.

• Decision Date: 13 January 1955
• Docket Number: No. 526,527.,526
• Citation: 127 F. Supp. 775
• Parties: B. J. WESSING and Leonard Twenter, Plaintiffs, v. AMERICAN INDEMNITY COMPANY OF GALVESTON, TEXAS, Defendant. Gertrude DOUGLAS, Plaintiff, v. AMERICAN INDEMNITY COMPANY OF GALVESTON, TEXAS, Defendant.
• Court: U.S. District Court — Western District of Missouri

127 F. Supp. 775

B. J. WESSING and Leonard Twenter, Plaintiffs, v. AMERICAN INDEMNITY COMPANY OF GALVESTON, TEXAS, Defendant.

Gertrude DOUGLAS, Plaintiff, v. AMERICAN INDEMNITY COMPANY OF GALVESTON, TEXAS, Defendant.

Nos. 526, 527.

United States District Court, W. D. Missouri, Central Division.

January 13, 1955.

COPYRIGHT MATERIAL OMITTED

Walter A. Raymond, Kansas City, Mo., for plaintiffs.

Henry W. Buck, William H. Curtis and William A. Rundle, Jr. (of Morrison, Hecker, Buck, Cozad & Rogers), Kansas City, Mo., for defendant.

WHITTAKER, District Judge.

Though these are separate cases, they are related, and they are prosecuted, and defended, by the same counsel, and, for economy of time, are hereby consolidated, for the limited purpose of ruling defendant's motion, filed, in each case, under Rule 12(b) (6), 28 U.S.C.A., to dismiss for failure of the complaints to state a claim upon which relief can be granted. The separate cases will be hereinafter referred to as the Wessing case and the Douglas case.

The questions presented, and to be determined, in the Wessing case, are:

(1) Whether the complaint alleges "facts" sufficient to show "bad faith" of defendant, an automobile liability insurer, in refusing an opportunity to settle, within the policy limits and before trial, an action pending against plaintiffs (the insureds, and the defendants in that action) for damages for a serious bodily injury, covered by the policy, and in permitting the action to go to trial, which resulted in a final judgment against plaintiffs greatly in excess of the insurance, and

(2) Whether the plaintiffs (the insureds, and the defendants in the bodily injury action) must first pay that part of the final judgment not discharged by application of the insurance proceeds before they may maintain an action against the defendant, the insurer, for a tortious failure to settle within the policy limits.

The determinative question presented, and to be determined, in the Douglas case, is: Whether the defendant, the insurer, by refusing, "in bad faith", to settle, with the plaintiff in the bodily injury action (Mrs. Douglas), within the policy limits and before trial, breached any duty which it owed to the injured person (Mrs. Douglas), and whether she has any cause of action against the insurer for such failure to settle.

The facts alleged in both complaints, stated briefly but sufficiently to develop the legal questions involved, are: Defendant issued to the plaintiff, Wessing, an automobile liability policy, covering a particularly described motor truck, by which policy it obligated itself, among other things, "to pay on behalf of the insured (and persons driving the truck with his permission) all sums which the insured shall become obligated to pay by reason of the liability imposed upon him by law for damages * * * because of bodily injury * * * sustained by any person or persons, caused by accident and arising out of the ownership, maintenance or use of the automobile * * * to the extent of $15,000 for each person, and $30,000 for each accident".

While the policy was in full effect and when the plaintiff, Twenter, was driving the insured truck, with the permission, and in the service, of plaintiff, Wessing, a collision occurred with an automobile in which Gertrude Douglas was riding, inflicting serious, painful and permanent injuries upon her.

That defendant was immediately notified of the casualty and accepted the duty to, and did, investigate the facts concerning it; that thereafter Mrs. Douglas sued plaintiffs, Wessing and Twenter, in the Circuit Court of Boone County, Missouri, praying damages in the amount of $100,000; that defendant took charge of, and conducted and controlled, the investigation, preparation and defense of that action; that depositions were taken in that case, of the plaintiff and of other witnesses, both on the part of the plaintiff and of the defendants, on the questions of liability, and on the question of the nature and extent of plaintiff's injuries, which "made it apparent that a submissible case of negligence would be made for the jury on undisputed evidence and that plaintiff had sustained horrible, incapacitating and permanent injuries which would sustain a verdict greatly in excess of the limits of defendant's policy."

Afterwards, and when the suit was nearing trial, Mrs. Douglas offered, "orally and in writing", to accept the policy limit, of $15,000, in full settlement of all claims, and "these plaintiffs", Wessing and Twenter, "repeatedly urged defendant, both orally and in writing, to accept said offer of plaintiff", or to "negotiate a compromise and settlement of said claim within the policy limits" and they advised defendant that, if it failed to do so, they "would hold defendant responsible for the entire amount of any judgment rendered against them in the case, however much it might exceed the policy limits"; nevertheless "defendant refused to discuss settlement or negotiate and never made an offer of settlement to Mrs. Douglas at any time."

The case went to trial before a jury which returned a verdict for the plaintiff in the amount of $60,000, against both defendants (the plaintiffs here); that an appeal, without supersedeas, was taken to the Supreme Court of Missouri, Douglas v. Twenter, 259 S.W. 2d 353, which ordered a remittitur of $12,500, which was filed, and then the Court affirmed the judgment for $47,500; that, thereafter, the defendant paid to the Clerk of the trial court the $15,000 of insurance, plus interest on the judgment to the date of that payment, and the court costs, amounting in all to $20,342.74, and defendant then took, and has ever since maintained, the position that it has discharged its full obligation, and has denied, and continues to deny, any further obligation to the plaintiffs, though plaintiffs are left with an unsatisfied judgment against them in the principal sum of $32,500.

Plaintiffs further allege that the defendant "was negligent and guilty of fraud and bad faith", in considering its own interest exclusively and disregarding its duty to, and the interest of, the plaintiffs, in failing to accept the offer to settle said claim and suit for $15,000, which sum was within the policy limits, and, thereby, damaged the plaintiffs to the extent the judgment exceeded the insurance proceeds, or by $32,500, and "that defendant has become, and now is, liable for the remaining unpaid part of said judgment, interest and costs, (although the amounts are above the limits of its policy) in the sum of $32,500 principal, together with interest thereon from July 25, 1953, at the rate of 6% per annum", for which they pray judgment.

The plaintiff in the Douglas case alleges, substantially, the same facts, and asserts that, because of the "bad faith" refusal of defendant to accept her offer to settle, in advance of trial, within the policy limits, defendant breached a duty which it owed to her, which breach has resulted in damages to her, and she asks a declaratory judgment "construing and interpreting the provisions of the policy of insurance in the light of the facts", and that the Court "enter a declaratory judgment that defendant acted in bad faith in refusing to negotiate and settle said claim and is now under the duty to pay the remaining and unpaid balance of said judgment and accrued interest to plaintiff", and that the Court "enter a declaratory judgment directing defendant to pay to this plaintiff the balance of the principal of said judgment in the sum of $32,500 with interest thereon from July 25, 1953, to date, at the rate of 6% per annum, plus the costs of this proceeding."

These are the facts upon which the legal questions, raised by defendant's motions to dismiss, depend.

As to defendant's first claim, in the Wessing case—that the complaint does not allege "facts" sufficient to show "bad faith" of defendant in refusing the opportunity to settle within the policy limits—, defendant concedes that the Supreme Court of Missouri has held, in the case of Zumwalt v. Utilities Insurance Co., 360 Mo. 362, 228 S.W.2d 750 (as has the St. Louis Court of Appeals in the case of McCombs v. Fidelity & Casualty Co., 231 Mo.App. 1206, 89 S.W.2d 114), that an automobile liability insurer is liable, in tort, for damages suffered by the insured through the failure of the insurer to accept an opportunity to settle within the policy limits, if, and provided, the failure to settle "is predicated upon the lack of good faith". But defendant says, in its brief, "plaintiffs cannot plead a cause of action by alleging, as a conclusion, that defendant was guilty of bad faith. Plaintiffs must allege facts showing bad faith on the part of defendant, and they have not done this."

It is true that the complaint alleges, on this score, only that from the investigation made, and depositions taken, it was "apparent that a submissible case of negligence would be made for the jury on undisputed evidence and that plaintiff had sustained horrible, incapacitating and permanent injuries which would sustain a verdict greatly in excess of the limits of defendant's policy * * *", and does not say that the insurer could not, reasonably, and in "good faith", have expected either a verdict for defendant or a verdict for plaintiff, but within the policy limits, or use words of similar import. While the failure to settle, within the policy limits of $15,000, "a submissible case", established by "undisputed evidence"—even where the injuries were "horrible"—, would not, necessarily, show "bad faith", yet, if, in the particular circumstances, reasonable minds might differ upon the point, the issue would be one for the jury. But here the complaint alleges more. It alleges that the defendant, insurer, in "bad faith" and "considering its own interests exclusively and disregarding its duty to these plaintiffs" refused to consider the offer to settle, or to negotiate for a settlement, within the policy...