Opinion ID: 1641741
Heading Depth: 1
Heading Rank: 3

Heading: Present Action Against Insurer for Excess Judgment

Text: After the insured died, his widow, as executrix of his estate, filed the instant action. Asserting that it was apparent in the underlying tort action that a submissible case of negligence would be made for the jury on non-disputed evidence,  the executrix alleged that her husband's insurer was negligent and guilty of bad faith in refusing to accept the compromise offer to settle within the policy limits (emphasis added). The petition sought damages in the amount of the excess judgment, along with penalties and attorney's fees. After trial on the merits, the trial court rejected all claims and dismissed the action. [6] The judge concluded that from the information available, especially but not exclusively, the deposition of plaintiff in the prior case, the insurer was justified in defending the matter and was not arbitrary, capricious or otherwise guilty of conduct making it liable for the excess judgment. Upon request for more specific findings, the trial judge observed that neither of the two witnesses to the accident, Kenneth Smith nor his grandfather, made any mention of any negligence on the grandfather's part in recorded interviews taken within six days of the accident. The judge further noted that neither witness had mentioned in the initial statement that the grandfather held the gas tank or that the tank was disengaged from the motor for any reason. Referring to Kenneth's recorded interview, the judge emphasized that the claimant at one point stated gasoline flew all over him when he struck the carburetor with the burlap sack and the motor toppled over and at another point guessed he knocked the tank and everything off. Finally, the judge noted Kenneth's admission in his deposition that he really didn't know what had happened, but attempted to favor a version that the grandfather had dropped the tank. Based on this evidence, the judge concluded that the insurer was justified in defending the case. On appeal of the executrix, the intermediate court reversed. 94-1571 (La.App. 3 Cir. 5/3/95); 656 So.2d 11. In reciting the facts, the court stated that the grandfather either dropped the tank or threw it on Kenneth. [7] Id. at 13. The court noted offers to settle, first for the medical expenses and later for the policy limits, and the fact that the insurer knew its insured would not be able to attend trial. In discussing manifest error, the court stated: [W]e find that it was not reasonable for the trial court to rely on the defendant's representations that there was no liability on the part of its insured. Audubon clearly was aware of the fact that both Cleven Smith and Kenneth Smith had some part in causing the accident. They did not have a reasonable belief that Kenneth Smith was 100% at fault. Thus, Audubon's actions in failing to make settlement offers when its insured was potentially exposed to a large excess judgment were also unreasonable.... We find the trial court committed manifest error in failing to find that the insurer acted in bad faith. Id. at 17 (emphasis added). The court accordingly awarded the executrix the amount of the excess judgment, in addition to penalties and attorney's fees. On the insurer's application, we granted certiorari because the record evidence appeared to furnish adequate support for the factual findings of the trial court and because there appeared to be no basis in the statutes or in the decisions of this court for the award of either penalties or attorney's fees. 95-2057 (La.11/17/95); 663 So.2d 724.