Court Opinion

ID: 9457370
Source: CourtListenerOpinion
Date Created: 2023-08-04 20:20:10.846085+00
Date Added: 2024-06-11T17:35:19.658109
License: Public Domain

MOORE, Circuit Judge
(dissenting):
Because in my opinion the result reached by the majority is quite contrary to our previous statement on the first appeal of the principles applicable to this case, Brockstein v. Nationwide Mutual Insurance Company, 417 F.2d 703 (1969) and the facts hitherto found which I believe to be determinative, I must dissent.
There is little need to search beyond our earlier opinion and Judge Dooling’s findings on remand. The background of fact has been adequately stated. Suffice it to say that the Brochsteins held a $50,000 accident insurance policy issued by Nationwide. An accident occurred and they were sued in an action referred to as the Kiely case. At this point we must consider the only operative facts as found by this court.
“That the Kiely action could have been — and almost was — settled for less than $50,000 is clear.”
Judge Dooling (on the’ first trial) found that the early demand of Lipsig (Kiely’s lawyer) was for $100,000 “but that well before trial, Lipsig told O’Neill (Nationwide’s lawyer) * * * that if the policy was for $50,000 [which it was], Lipsig would recommend settlement for $45,000, that this offer was repeated by Lipsig at a later pre-trial conference and at trial, and finally,- that during the trial the presiding judge told O’Neill that the case could be settled for $40,000.” 417 F.2d at 706. Thus the proof is incontestable that the case could have been settled within the policy lim*991its and the Brochsteins completely relieved of the liability from which they were protected under the policy which they had purchased for this purpose. Nationwide failed to make the available settlement. Instead it proceeded to trial and a $95,000 verdict was returned. As a result the Brochsteins instead of being fully protected found themselves subjected to a $45,000 excess policy judgment which they ultimately settled for $25,-000. Upon these facts and the law, Nationwide’s liability would appear to have been clear. How then does a contrary result occur? This court’s previous opinion points to the answer. It spoke in terms of “bad faith”, failure of Nationwide to advise the Brochsteins of their opportunity to make a contribution to a settlement (a factor wholly irrelevant to the issue) and whether the Brochsteins would have made a contribution to a settlement even if so advised by Nationwide of any such possibility (equally irrelevant). However, this court remanded the case to Judge Dool-ing to make findings (and on further testimony if necessary) as to what was told to the Brochsteins by Nationwide relating to the amount needed to settle the Kiely action, the amount Nationwide would contribute and the Brochsteins’ potential liability — all to determine whether Nationwide acted “in bad faith.”
In my opinion Judge Dooling’s further findings made at our behest do not meet the controlling legal issues. Thus he finds (# 86, p. 306a) that “There is no evidence that there was actual bad faith on Nationwide’s part (acting through O’Neill or other representative than O’Neill) * * Again in Finding # 87 he stresses contribution and failure by Nationwide to mention this possibility to the Brochsteins as leading to an “inference of constructive bad faith.” Herein lies the error in the approach of Judge Dooling and the majority opinion. It is unnecessary under the law to find “bad faith” as evidenced by facts showing evil motive or purpose.
In Young v. American Casualty Company of Reading, Pa., 416 F.2d 906, at page 910 (2 Cir., 1969), Judge Lumbard (then Chief Judge) said that “a finding of bad faith on the part of the insurer may be based on such factors as these: * * * (2) The refusal of the insurer to accept a settlement within the limits of the policy * *
Lack of any necessity to couch “bad faith” in terms of evil purpose appears from Judge Lumbard’s further comments that “in- the usual case, to establish bad faith by the insurer an insured should demonstrate that the claim could have been settled within the policy limits, * * Here the majority says that in this case this fact (settlement within the limits of the policy) is “clear.” Judge Lumbard continued: “Where an insurer receives an offer of settlement in excess of the coverage of its policy it acts in bad faith if it fails to make an attempt * * * (to secure a reduction) and * * * (fails to advise the insured of settlement opportunities) * * An a fortiori case is presented where, as here, the basic fact is conceded that a settlement could have been effected within the limits of the policy.
Even in Judge Wyatt’s dissenting opinion in Young, it was stated that “the core of the actionable wrong is the failure or refusal of the insurance carrier to settle when settlement within the policy limit could have been, and should have been, effected.” Young, p. 912. The “essential element of the case for the insured [was] that the claim could have been settled within the policy limit.” Again here that fact is not disputed.
A somewhat similar situation arose in Brown v. United States Fidelity and Casualty Company, 314 F.2d 675 (2d Cir. 1963) in which this court reversed the dismissal of a complaint in an action by an insured against an insurance company for failure to settle. In that opinion Judge Kaufman writing for the court said that “we are convinced that the good-faith settlement standard controls *992in New York in cases of an assured’s personal liability resulting from the insurer’s failure to settle within policy limits.” Brown at 678.
If “bad faith may be evidenced by the failure of the insurer even to mention to the insured his opportunity to make a relatively small contribution to avoid a large exposure,” as held in Brockstein, supra, 417 F.2d at 709, how much the more is it evidenced by the established fact that a settlement could have been effected within the policy limits — not requiring even a small contribution.
Since the opinion of the majority to me seems quite contrary to our previous decisions and to the views of five judges of this court, I would reverse the judgment dismissing the action on the merits.