Wis. Zinc Co. v. Fid. & Deposit Co. of Md.

Citation155 N.W. 1081,162 Wis. 39
CourtUnited States State Supreme Court of Wisconsin
Decision Date11 January 1916
PartiesWISCONSIN ZINC CO. v. FIDELITY & DEPOSIT CO. OF MARYLAND.

OPINION TEXT STARTS HERE

Appeal from Circuit Court, Grant County; George Clementson, Judge.

Action by the Wisconsin Zinc Company against the Fidelity & Deposit Company of Maryland. From an order overruling a demurrer to each of three alleged causes of action, defendant appeals. Order overruling the separate demurrers to the first and second causes of action reversed, and remainder of order affirmed, and cause remanded, with directions to sustain the demurrer to the first and second causes of action.

The complaint in this case sets out three causes of action, arising out of the same transaction: One on contract, one in tort, and one based on fraud. The defendant demurred to each of said causes of action, on the ground that the complaint did not state facts sufficient to constitute a cause of action. A demurrer was also interposed on the ground that several causes of action were improperly united. The court, in deciding the demurrer, stated:

“I have specially considered the cause of action set forth in the third count of the complaint,and as to that I am satisfied that the demurrer is not well taken.”

An order was accordingly entered overruling the demurrer, from which order the defendant appeals.

The first cause of action alleges the corporate capacity of plaintiff and defendant, and that plaintiff is in the mining business, and that defendant is engaged in the business of writing casualty and indemnity insurance, and duly licensed to transact business in the state of Wisconsin. The complaint then sets forth that in March, 1912, the plaintiff and defendant entered into a contract of indemnity insurance, whereby for value received the defendant agreed to indemnify the plaintiff against loss for one year from liability imposed by law upon the plaintiff for damages on account of bodily injuries or death suffered by its employés, subject to the limitation of $5,000 for loss from an accident resulting in bodily injuries to or in the death of one person; that defendant undertook to settle or defend in the name and on behalf of plaintiff any suit brought against it to enforce a claim, whether groundless or not, for damages on account of bodily injuries or death suffered by any of its employés within the period covered by the policy; that in October, 1912, one Clyde Mayhew, an employé of the plaintiff, suffered a severe bodily injury, which resulted in the loss of his right arm; that such injury was caused by said Mayhew coming in contact with an insufficiently guarded belt, and was one for which liability was imposed by law upon the plaintiff and was covered by the policy of insurance; that under the terms of said policy settlement of all claims and the defense of all suits brought thereon was left exclusively in charge or under the control of the defendant; that said Mayhew made claim against the said plaintiff for the sum of $5,000, and offered to settle with the plaintiff and release all his claim for damages upon payment of said sum, which sum was a fair and reasonable amount for said injury; that the defendant was so informed, and plaintiff performed all the conditions of the contract on its part to be performed; that notwithstanding the fact that it was an injury for which liability was imposed by law, and the defendant had undertaken on plaintiff's behalf the exclusive control and management of said claim and negotiations for settlement thereof, the defendant refused and failed to settle with said Mayhew; that thereafter suit was brought by said Mayhew against the plaintiff, to recover damages in the sum of $25,000; that before trial said Mayhew offered to settle his claim and dismiss the suit and release all claim for damages against the plaintiff herein upon payment of the sum of $4,000, and that such offer was made to a duly authorized representative of the defendant; that said defendant failed and refused to carry out its contract, and permitted the said suit to go to judgment, and that judgment was rendered therein against the plaintiff for the sum of $12,500 and taxable costs; that thereafter said suit was appealed to the Supreme Court of the state of Wisconsin, and the judgment rendered therein was affirmed; that thereafter plaintiff was compelled to pay said Mayhew in satisfaction of said judgment the sum of $7,500 in addition to the $5,000 and interest contributed by the defendant, and that defendant has refused to reimburse the plaintiff to the extent of $7,500; that notwithstanding the defendant by its contract had agreed to indemnify the plaintiff to the amount of $5,000 in addition to all interest on the verdict and all costs, against all damage from liability imposed by law as alleged herein, and to defend or settle all suits brought on said claims, the said defendant, although it had an opportunity to do so, wholly failed and refused to make settlement, and thus indemnify said plaintiff, and thereby occasioned said plaintiff damage to the amount of $7,500, and that payment of said sum has been demanded and refused.

The second cause of action reiterates substantially all of the allegations found in the first cause of action, and in addition thereto alleges that the defendant negligently and carelessly failed and refused to settle with Mayhew, although it knew, or could have known by the exercise of reasonable care, that any suit brought upon said claim was attended with great danger, as the accident was one for which liability was imposed by law; that before trial said Mayhew offered to settle for $4,000, but that the defendant negligently and carelessly failed and refused to carry out the contract in reference to making a settlement, and negligently permitted said suit to go to judgment, and that it was defendant's duty, having undertaken in the plaintiff's behalf the exclusive control and management of the claim and negotiations for settlement and the defense of the suit, to conduct itself in respect to said negotiations for compromise and management of the defense of said suit with a reasonable degree of care, skill, and diligence for the protection of plaintiff's interest; that the defendant was negligent in the performance of the duties which it assumed, and wholly failed in the diligent performance thereof, in that it entirely failed to conduct said negotiations for settlement by way of compromse with reasonable skill and diligence, and negligently failed and refused to make a reasonable offer of compromise or settlement with said Mayhew, and negligently failed and refused to settle the claim before suit was brought, knowing, in the exercise of due care, that said injury was one for which liability was imposed by law, and failed and refused to cause said suit to be settled and adjusted for the sum of $4,000, which could have been done with the exercise of reasonable skill and diligence on the part of the said defendant;that notwithstanding the defendant had agreed to indemnify plaintiff from all damage from liability imposed by law, and had undertaken for a valuable consideration to settle or defend said suit, said defendant failed to use due and proper care and skill in adjusting said claim and in performing the terms and conditions of said contract of insurance so as to save the plaintiff harmless, as the defendant had contracted to do, and that by its unskillful and negligent conduct in the premises the plaintiff suffered damages in the sum of $7,500.

The third cause of action sets forth substantially all of the facts contained in the first cause of action, and contains the following additional averments: That at the time of entering into the said contract and thereafter the defendant well knew the hazards attending litigation of the character in which it became involved with Mayhew, and knew, or in the exercise of reasonable care should have known, the hazards attending the Mayhew claim and the danger of a large judgment being obtained by said Mayhew against the plaintiff; that under the circumstances and under its obligation to act in the settlement and defense of such claims in the name and on behalf of the plaintiff, it was the duty of the defendant to have settled said claim for $5,000, but that defendant, instead of acting on behalf of plaintiff in the matter, assumed a position hostile to plaintiff and plaintiff's interest, and, acting, not in behalf of plaintiff, but in its own interest and behalf, and in bad faith and fraudulently towards plaintiff, failed and refused to take advantage of the offer of settlement, and refused to make said settlement despite the fact that plaintiff, realizing the seriousness of the case and believing it was one in which it was liable, offered to pay one-third of any amount necessary to be paid in order to effect a settlement; that said defendant in bad faith refused to act in behalf of the plaintiff in the matter of the settlement of the Mayhew suit, and refused to make any offer of settlement or compromise with Mayhew, although frequently requested so to do; that after suit was commenced said Mayhew offered to settle for $4,000, but that said defendant in bad faith toward plaintiff, acting not on behalf of plaintiff, but in its own behalf and interest, and wholly disregarding and in hostility to the interest of the plaintiff, refused to accept the offer of compromise last aforesaid, despite the fact that it was a reasonable amount for the compromise of said suit, considering the nature and circumstances of the injury and the law of the state of Wisconsin relating thereto and the danger of a much larger judgment being obtained by Mayhew, and despite the fact that the plaintiff herein informed the defendant of the dangers attending the suit of said Mayhew, and requested that said settlement be made and offered to contribute one-third of the amount demanded; that defendant, acting wrongfully toward plaintiff, permitted said...

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