Title: Lohman v. Woodruff

State: kansas

Issuer: Kansas Supreme Court

Document:

224 Kan. 51 (1978)
578 P.2d 251
GARY LOHMAN, Appellant,
v.
BILLY G. WOODRUFF, Appellee.
No. 48,608

Supreme Court of Kansas.
Opinion filed May 6, 1978.
Robert J. Bednar, of Duncan, Senecal, Bednar and Mears, Chartered, of Atchison, argued the cause, and Robert F. Duncan, of the same firm, was with him on the brief for the appellant.
J.H. Eschmann, of Ascough, Bausch, Eschmann, of Topeka, argued the cause and was on the brief for the appellee.
The opinion of the court was delivered by
OWSLEY, J.:
This is an appeal from an order granting summary judgment in favor of defendant Billy G. Woodruff.
The action arose from a traffic accident occurring on August 26, 1974. It is alleged that defendant parked his tractor-trailer rig on the shoulder of U.S. Highway 73, approximately six miles south of Atchison, Kansas, and plaintiff Gary Lohman ran his truck into the back of the vehicle. Subsequently, plaintiff's insurance company, State Farm Mutual Automobile Insurance Company, investigated the accident and obtained a release from defendant for $1,800. The release, executed on November 13, 1974, stated:
"RELEASE
s/ "Billy G. Woodruff"
The release was obtained by State Farm without the consent or knowledge of plaintiff. Plaintiff filed a lawsuit for his personal injuries on October 29, 1974. Defendant answered, denying his own negligence, alleging negligence on the part of plaintiff, and counterclaiming for damages in the amount of $1,769.17. When State Farm learned of the counterclaim it hired plaintiff's attorney to defend on the counterclaim, instructing him to plead the release as a defense. Plaintiff's reply filed on behalf of State Farm alleged the counterclaim was barred by the release.
At pretrial defendant's counterclaim was dismissed because of the release. Thereafter, plaintiff's petition was also dismissed, the trial court ruling the release was a compromise on all matters set forth in plaintiff's petition.
The only issue on appeal is whether the trial court was correct in ruling that the release of November 13, 1974, was a compromise of all claims arising out of the August 26, 1974, accident, thus barring plaintiff's cause of action after it was pled as a defense to defendant's counterclaim. For the reasons set forth herein we hold the trial court erred in dismissing plaintiff's petition.
Plaintiff claims the release should not bar his cause of action because the release was not an admission of liability on his part and, even if that were the case, it would not be barred because of the comparative negligence statute (K.S.A. 60-258a). He further argues that an insurer has an obligation to pay up to the policy limits on a claim or judgment. The insurer cannot escape this *53 liability by entering into a release agreement with a claimant without knowledge of the insured and by that act deny plaintiff the right to sue or leave him potentially liable on a counterclaim. Plaintiff's primary argument focuses on the fact the release was unilateral and contained no promise on his part to forego a possible lawsuit against defendant, and that the later interjection of the release into the lawsuit was done by his attorney at the direction of the insurer after the insurer hired the same attorney to defend the counterclaim. This, he argues, cannot amount to an act of ratification on his part.
Defendant agrees that ordinarily a settlement by the insurer will not bar an action by the insured against the payment recipient, but argues this case is an exception to the general rule. He argues that by pleading the release plaintiff specifically ratified the settlement and must now be bound by the results. Defendant argues the release was a full compromise and settlement of all claims by both parties to the lawsuit and it bars any subsequent court action. If this is not the case, he argues, the release should be set aside, each party should be allowed to fully litigate its claim against the other, and the $1,800 already paid to defendant should be used as a setoff against any judgment defendant may take against plaintiff.
In Graves Truck Line, Inc., v. Home Oil Co., Inc., 181 Kan. 507, 312 P.2d 1079 (1957), we held that in an action to recover property damage to a truck owned by Graves, a settlement made by its insurer with the deceased driver of defendant's truck did not bar the lawsuit. The court stated:
In Faught v. Washam, 329 S.W.2d 588, 594-95 (Mo. 1959), the Missouri Supreme Court recognized that a standard automobile liability policy gives the insurer the right to investigate, negotiate and settle any and all claims or suits against the insured; however, such a policy does not give the insurer the right to negotiate or settle any claims or suits an insured may have against a third party absent the insured's knowledge or consent. The court also *54 noted that an insured is not barred by the settlement of a claim against him, but in some cases he may be estopped from subsequent action where he ratifies or adopts a settlement by his insurer. As to the question of whether the pleading of a release in reply to a defendant's counterclaim constituted a ratification of the release and a complete bar to plaintiff's action, the Faught court stated:
See also, Berlant v. McAllister, 25 Utah 2d 237, 480 P.2d 126 (1971).
The facts of the instant case are strikingly similar to those in Faught. Here the plaintiff's insurer had a duty to defend plaintiff against the counterclaim and in fact did so by pleading the release. The record indicates plaintiff had no knowledge the release existed. Plaintiff's attorney pled the release after he was hired by State Farm to defend the counterclaim and it was pled for the benefit of State Farm, not plaintiff personally. A purchaser of liability insurance is entitled to receive the fruits of the contract; i.e., defense from lawsuits and coverage up to the policy *55 limits. These fruits should not be jeopardized when his insurance carrier obtains a release from the claimant without his knowledge or consent.
We follow the rule stated in Graves Truck Line, Inc., v. Home Oil Co., Inc., supra, and further hold that a plaintiff-insured does not ratify a unilateral release executed by a defendant when the release is asserted as a defense to the defendant's counterclaim at the direction of plaintiff's liability insurance carrier for the benefit of the insurer.
The decision of the trial court is reversed.