Woodstock v. Evanoff

Decision Date15 June 1976
Docket NumberNo. 4564,4564
Citation550 P.2d 1132
PartiesLeonard WOODSTOCK, Appellant (Plaintiff below), v. George EVANOFF, Jr. and Greg Evanoff, Appellees (Defendants below).
CourtWyoming Supreme Court

James W. Owens, of Murane, Bostwick, McDaniel, Scott, Greenlee & Owens, Casper, and Robert Patrick Dixon, senior law student, for appellant.

William S. Bon and Robert H. McCrary, Casper, for appellees.

Before GUTHRIE, C. J., and McCLINTOCK, RAPER, THOMAS and ROSE, JJ.

ROSE, Justice.

FACTS

Plaintiff-appellant, Leonard Woodstock, asked damages in a suit against defendant-appellee, George Evanoff, Jr., for injuries allegedly received when their vehicles collided.

The plaintiff was hauling produce under a lease with a freight carrier, Pirkle Refrigerator Freight Lines, who had liability coverage with Allstate, and which policy furnished liability protection for the plaintiff.

After the accident, Allstate, acting through its agent, entered into negotiations with defendant, Evanoff, to settle the claim of Evanoff against Woodstock. These negotiations were consummated with Allstate's payment to Evanoff of $5,100.00, who signed an instrument releasing Pirkle and Woodstock from any and all claims for liability that he might have against them.

The agent for Allstate sent Woodstock a release which would have released Evanoff from any claim for injuries which Woodstock might have against him. Woodstock refused to sign the release and he did not, at any time, enter into or consciously consent to Allstate's settlement with Evanoff. Woodstock contended that he was not at fault and that Evanoff's negligence caused the accident.

After the suit was filed against Evanoff, he moved to counterclaim and add his son, Greg Evanoff, as an additional party. This motion was granted-the son was added as a party and the counterclaim was filed. When the plaintiff received the counterclaim, he forwarded it to Allstate for defense purposes. In response to its obligation to defend all claims covered by Pirkle's policy, Allstate pled the release running from Evanoff to Woodstock and the court dismissed the counterclaim in summary judgment proceedings.

The defendant Evanoff filed a motion for summary judgment on the ground that the plaintiff Woodstock, by allowing the insurance company to plead the release as a defense to the counterclaim, had ratified the release in a manner which would bar Woodstock from asserting his claim against Evanoff. In response to this motion, the court granted the summary judgment and the plaintiff's complaint was dismissed.

It is from the order granting defendant's motion for summary judgment that appeal to this court is taken.

CONTENTION OF THE PARTIES

It is contended by the plaintiff-appellant:

(1) There was no ratification of the release by the plaintiff when he tendered the counterclaim to his insurance carrier for defense and when the carrier moved for and was granted summary judgment on the counterclaim on the strength of the release signed by the defendant.

(2) The plaintiff further contends that even if there was ratification of the release-it only does what it purports to do, namely, settle all claims the defendant had against the plaintiff and Pirkle while in no way affecting or jeopardizing the right of action which the plaintiff may have had against the defendant.

It is contended by the defendant-appellee:

(1) There was a ratification of the release when it was set up as a bar to the counterclaim-and the release-being ratified was in settlement-not only of defendant's right of action against the plaintiff-but was also in full settlement of the plaintiff's right of action against the defendant.

HOLDING

This case presents a question of first impression in Wyoming and our rather searching inquiry leads us to agree with the position of the plaintiff-appellant and reverse the trial court for the reason that the great majority and, we think, better reasoned rule is diametrically opposed to the trial court's holding. The cases cited by appellee represent a minority point of view.

It is said in 7 Am.Jur.2d, Automobile Insurance § 153, pp. 480-481:

§ 153. Conclusiveness and effect of settlement by insurer.

'An automobile liability insurer's settlement of a claim against the insured, made without the insured's consent or against his protests of nonliability, and not thereafter ratified by him, will not ordinarily bar an action by the insured against the person receiving the settlement, on a claim arising out of the same state of facts. Even where the settlement was made after the claim against the insured had been formulated in an action, and resulted in a dismissal of such action, it has generally, although not universally, been held that the insured's claim is not barred, and this is so regardless of the principles of res judicata or estoppel, and regardless of whether the insured who wishes to recover from the person receiving the settlement is the named insured or an additional insured.' (Footnote numbers omitted-citing cases)

The rule is again stated in 32 A.L.R.2d 937, at page 938, in an article entitled 'Liability insurer's settlement of claim against insured as bar to insured's tort action against person receiving settlement,' where it is said:

'The courts which have considered the question are agreed that a liability insurer's settlement of a claim against the insured, made without the insured's consent or against his protests of nonliability, and not thereafter ratified by him, will not ordinarily bar an action by the insured against the person receiving the settlement, on a claim arising out of the same state of facts.' (Citing cases 1)

Speaking of the above rule, Keeton, in his Basic Text on Insurance Law, 'Reciprocal Claims,' § 7.10(a), page 529, says:

'. . . It would seem both fairer and more efficient to treat the settlement between one person's insurance company and a second person as having no effect on the first person's interests. The preferable rule, then, is that one's reciprocal claim is not barred by a settlement between his liability insurance company and the other party to an accident. This rule is supported by the great weight of authority.' (Citing cases-footnote numbers omitted)

In his article on 'Liability Insurance and Reciprocal Claims From a Single Accident,' Keeton, writing in Southwestern Law Journal, Vol. 10 (1956), speaks to the equities involving-not only the insured plaintiff but also the third-party defendant.

Of the plaintiff's interest, the author says, at page 6 of his article:

'The better view is that the insurance policy does not grant to the company the privilege of barring the insured's reciprocal claim by an agreement which the insured has not otherwise joined in, ratified, or authorized. The purpose of the policy clause granting to the company the privilege of making such settlement as it deems expedient is to give the company control over the handling of the claim against the insured. Nowhere in the policy is the reciprocal claim referred to expressly. The error of inferring that the policy grants to the company the privilege of barring the insured's reciprocal claim is apparent when the consequences of such construction are envisioned. Suppose that C asserts a claim for $250 damages against D, the insured, and D makes a reciprocal claim for $100,000 damages which he has suffered. May the company release D's $100,000 claim in consideration of C's release of his $250 claim, with the result that the cost of settlement to the company is nothing and the cost to the insured is the value of his $100,000 claim? If so, the insured in these circumstances would be in much worse position with liability insurance than without it. Furthermore, if C also had liability insurance, recognition that a liability insurance company has a privilege to release its insured's claim would enable the two insurance companies (or the one company, if both motorists were insured in the same company) to cancel out the reciprocal claims of C and D, leaving each of them with no recovery though at least one may have had an otherwise valuable claim. Whether the matter be argued as one of 'plain meaning of the language of the contract,' as one of 'giving effect to the intention of the parties,' or as one of judicial interpolation to fill a gap in the policy terms, the answer should be the stame: As between the company and the insured, the company is not granted the privilege of releasing the insured's reciprocal claim when making such settlement 'as it deems expedient' of the claim against the insured.'

In consideration of the interests of the thrid-party defendant, Keeton observes, at page 7 of his article:

'A negative answer should be given also to the question whether, as between the insured and the third party who settled with the company, the settlement bars the insured's reciprocal claim. This question differs from the preceding one is that here the interests of the third party must be considered. If, however, he is not misled as to whether or not the company has the privilege of barring the insured's reciprocal claim, due protection of the interests of such third party does not require recognition of power in the company any broader than its privilege . . .'

The court said in Fikes v. Johnson, 220 Ark. 448, 248 S.W.2d 362, 364, 32 %. l.r./2d 934:

'After investigating the accident Johnson's insurer paid Fikes for his property damage and took a release discharging Johnson from further liability. It is insisted that this settlement is a bar to Johnson's suit. The parties stipulated, however, that the settlement was made by the insurer without Johnson's knowledge or consent. Although the insurance policy requires the company to defend suits against Johnson and empowers it to settle such cases, the policy does not authorize the insurer to...

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2 cases
  • Suchta v. Robinett
    • United States
    • Wyoming Supreme Court
    • June 19, 1979
    ...respect to his reciprocal claim for damages, and to protect his interests in that regard. The opinion of this court in Woodstock v. Evanoff, Wyo., 550 P.2d 1132 (1976), leads to the ineluctable conclusion that our law recognizes no such duty. We then must affirm the rulings of the trial cou......
  • Brown v. Manchester
    • United States
    • Maine Supreme Court
    • April 13, 1978
    ...(1952); Perry v. Faulkner, 98 N.H. 474, 102 A.2d 908 (1954); Berlant v. McAllister, 25 Utah 2d 237, 480 P.2d 126 (1971); Woodstock v. Evanoff, 550 P.2d 1132 (Wyo.1976). The defendant-appellee acknowledges that he can find no clear authority for applying the Butters rule against anyone who i......

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