Title: Phillips v. Liberty Mutual Insurance Company

State: delaware

Issuer: Delaware Supreme Court

Document:

253 A.2d 502 (1969)
Beatrice D. PHILLIPS and John H. Phillips, Jr., Defendants Below, Appellants,
v.
LIBERTY MUTUAL INSURANCE COMPANY and Liberty Mutual Fire Insurance Company, corporations of the State of Massachusetts, Plaintiffs Below, Appellees.

Supreme Court of Delaware.
April 28, 1969.
Clement C. Wood, of Allmond & Wood, Wilmington, for defendants below, appellants.
William Prickett, of Prickett, Ward, Burt & Sanders, Wilmington, for Liberty Mutual Fire Ins. Co., plaintiff below, appellee.
CAREY and HERRMANN, JJ., and MESSICK, Judge, sitting.
*503 HERRMANN, Justice:
This is an appeal by Beatrice D. Phillips and John H. Phillips, Jr. (hereinafter "the Phillips"), defendants below, from the decision of the Chancery Court declaring that the plaintiff, Liberty Mutual Fire Insurance Company (hereinafter "Fire") is entitled to be reimbursed, out of a judgment recovered by the Phillips from Delaware Power & Light Company (now known as Delmarva Power and Light Company, hereinafter "Delmarva"), for insurance monies Fire paid to the Phillips, as their fire insurance carrier, for the loss of the Phillips' house and its contents. The appeal is also from the denial of the Phillips' counterclaim for a portion of the legal fees and costs expended by them in obtaining the judgment against Delmarva; and from the ruling that Fire may have reimbursement as to the portion of the insurance monies paid over to the holder of the mortgage on the house.
The Phillips' home and contents were destroyed by a gas explosion. The Phillips sued Delmarva for which Liberty Mutual Insurance Company (hereinafter "Liberty") was the liability carrier. Fire and Liberty were affiliated companies and Robert Ralston was the local claims manager for both. Fire promptly paid the Phillips $18,000., the total limits of coverage on the property; $10,000. on the house and $8,000. on the contents. Ralston made several efforts to settle the liability claim with the Phillips' attorney, but the settlement talks failed. As the result of a jury trial in the Superior Court, the Phillips recovered judgment against Delmarva in the amount of $68,611.92 covering certain personal injuries and property damage. Liberty sought to pay the judgment less Fire's subrogation claim for $18,000.; but the Phillips insisted on being paid the full amount of the judgment. The instant action was then brought in Chancery Court to restrain the Phillips from executing on the Superior Court judgment and for a declaration that Fire was entitled to be reimbursed out of the judgment proceeds. A preliminary restraining order was entered by agreement, under which $22,600. ($18,000. plus accrued interest) is being held on deposit, pendente lite; the balance of the proceeds of the Superior Court judgment was disbursed to other lien holders and to the Phillips. Following trial, the Chancery Court ruled in favor of Fire on all issues. The Phillips appeal.
The Phillips contend that the Superior Court judgment did not include the amount which Fire now seeks by way of subrogation; that the Chancery Court erred in finding otherwise. In this connection, the Chancery Court made the following factual findings:
We hold that the record contains sufficient evidence to support the findings of fact made by the Trial Court in this respect; and we agree with the inferences and deductions the Trial Court drew therefrom.
The Phillips contend that Fire was not led to believe that its subrogation claim would be honored in the event of a recovery in the Superior Court action; that the Chancery Court erred in finding otherwise. In this connection, the Chancery Court made the following factual findings:
We hold that the record contains sufficient evidence to support the findings of fact made by the Trial Court in this respect; and we agree with the inferences and deductions the Trial Court drew therefrom.
The Phillips contend that their defenses of estoppel and waiver were substantiated by a preponderance of the evidence; and that the Chancery Court erred in holding otherwise. In this connection, the Chancery Court held:
Here again, we deal with factual findings made by the Trial Judge. We hold that the record contains sufficient evidence to support those findings; and we agree with the inferences and deductions the Trial Court drew therefrom. Compare Wilson v. American Insurance Company, Del., 209 A.2d 902 (1965).
The Phillips contend that the Chancery Court erred in holding that Fire was entitled to reimbursement for the $3,570. portion of the fire loss paid to the holder of the mortgage on the house. In this connection, the Chancery Court stated:
We agree with the conclusions of the Trial Court in this respect. Fire does not seek to be subrogated to the rights of the mortgage holder against the Phillips; rather, having paid the mortgage debt, it looks to Delmarva for reimbursement. The Phillips seek a double benefit; first, by payment of the mortgage debt they owed; second by recovery from Delmarva for the same amount. Neither the insurance policy, nor the cases cited by the Phillips, nor considerations of fairness and equity, permit such result. There was no error in the Vice Chancellor's ruling upon this phase of the case.
The Phillips contend that they should have prevailed on their counterclaim for a sharing by Fire of legal fees and expenses incurred in obtaining the Superior Court judgment. We agree in principle. In this connection, the Chancery Court stated:
The Trial Court erred in this facet of the case, we think, because the Superior Court litigation included trial of the issue of liability on the part of Delmarva. The verdict and judgment, by which Fire now will benefit, were based upon the success of the Phillips' attorney as to that issue. Since Fire will share in the benefits of the successful litigation of the issue of liability, fairness requires that Fire should share in some proper proportion in reasonable legal fees and expenses necessarily incurred in obtaining that result.
Fire argues that the Phillips' attorney was not employed by Fire; that no "fund" was created; and that this is not a derivative suit. We have considered these contentions and the numerous cases cited on both sides relative thereto. While there can be no dispute as to the basic principles for which Fire contends, we think they are not apposite here; and because of the extraordinary factual situation in the instant case, we find unpersuasive the authorities upon which Fire relies.
Basing our decision on considerations of fairness and equity, we hold that Fire should make an appropriate contribution toward reasonable legal fees and expenses in the Superior Court action. The cause will be remanded to the Chancery Court for determination of the portion of such reasonable fees and expenses to be contributed by Fire pursuant to this ruling.
With the exception of the last-mentioned question, for the quantitative determination of which the cause is remanded, the judgment below is affirmed.