Court Opinion

ID: 9746885
Source: CourtListenerOpinion
Date Created: 2023-08-27 14:42:39.108955+00
Date Added: 2024-06-11T07:25:00.813055
License: Public Domain

BROSKY, Judge,
concurring:
I concur in the decision of the majority. However, I would require that the insurer adhere to the “utmost good faith” in defending their insured.
It has consistently been held that an insurer owes to his insured a defense which must be conducted in accordance with the ordinary care required in such a defense. The insurer is liable for any harm suffered by the insured “in the form of a judgment in excess of policy limits because of negligence of a company in defense of a suit against insured.” Robert E. Keeton, Liability Insurance and Responsibility For Settlement, 67 Harv.L.R. 1136 (1954). This responsibility owed the insured includes the duty to settle a case when to do so is in the insured’s best interest. American Mutual Liability Insurance Company v. Cooper, 61 F.2d 446 (5th Cir. 1932), cert. denied 289 U.S. 736, 53 S.Ct. 595, 77 L.Ed. 1483 (1933).
The insured’s duty is held to a standard of ordinary care. The Pennsylvania Courts have interpreted this standard of care to require that the insurer act in “good faith.” In Gedeon v. State Farm, 410 Pa. 55, 188 A.2d 320 (1963) at 322, the Pennsylvania Supreme Court held:
.. . [B]y asserting in the policy the right to handle all claims against the insured, including the right to make a binding settlement, the insurer assumes a fiduciary posi*198tion towards the insured and becomes obligated to act in good faith and with due care in representing the interests of the insured. If the insurer is derelict in this duty, as when it negligently investigates a claim or unreasonably refuses an offer of settlement, it may be liable regardless of the limits of the policy for the entire amount of the judgment secured against the insured. See Cowden v. Aetna Casualty and Surety Company, 389 Pa. 459, 134 A.2d 223 (1957).
Former Chief Justice Eagen stated in a concurring opinion to Gedeon, supra, the rules which apply to the duty to settle as required by Cowden, supra. They are:
(1) The insurer is required to treat the claim against the insured as if it were only against itself;
(2) The insurer must not expose the insured to the risk of pecuniary loss of a settlement or verdict beyond the limits of the policy unless the insurer has a bona fide belief, based on all the relevant circumstances, that it can win the suit;
(3) The insurer cannot hazard the well being of the insured;
(4) Good faith requires that the chance of a finding of nonliability be real and substantial and that the decision to litigate be made honestly.
Id., 389 Pa. 459,134 A.2d at 223.
The “good faith” standard required by Cowden, supra, appears to require a higher level of “good faith” than ordinary. This is evidenced by the court’s holding that the finding of non-liability must be “real and substantial.” The Cowden, supra, court based its decision upon several earlier opinions which give a clear indication of the rigor of scrutiny to be applied by this court in determining whether an insurer has defended in “good faith.”
In Weiner v. Targon, 100 Pa.Super. 278 (1930), this court held:
The relationship of the insurer to the insured required a high degree of good faith in the conduct of the indemnity *199company’s counsel generally, and especially when the case was called for a trial in which he had undertaken to present the defense to the claim. . .
(Emphasis added.) Cowden, supra, 389 Pa. 462, 134 A.2d at 225; see also Iron Mountain Security Storage v. American Specialty Foods, 457 F.Supp. 1158 (E.D.Pa.1978). In Perkoski v. Wilson, 371 Pa. 553, 92 A.2d 189 (1952), the court stated:
When the company voluntarily undertook the defense of (the insured) in pursuance of its privilege under the policy, it assumed a position of trust and confidence which called for the exercise of the utmost good faith, particularly in view of the possible confíict of interest between the insurer and the insured as later developed.
(Emphasis added.) Cowden, supra, 389 Pa. 464, 134 A.2d 225; see also Iron Mountain, supra, and Malley v. American Indemnity Co., 297 Pa. 216, 146 A. 571, 81 A.L.R. 1322 (1929) (which also required a showing of “utmost good faith.”)
In light of the weight of precedent, I would hold that State Farm owed to its insured, Gerald Reed, the “utmost good faith” in handling his defense. This is particularly true when, as in the instant case, the plaintiff was an innocent victim of an automobile accident. To hold otherwise would be “unduly severe and inequitable.” See Brakeman v. Potomac Insurance Company, 472 Pa. 66, 76, 371 A.2d 193, 198 (1977).
The claim adjusters and attorney for the defendant, State Farm, were each confronted with evidence that Reed had driven his car in what several disinterested witnesses described as dense fog at 45 to 50 miles per hour without his headlights turned on to signal oncoming traffic that he was approaching. The insurance company also neglected to join Owens as an additional defendant to the proceeding. These actions prejudiced the position of their client, Reed, by exposing him to greater risk of liability. In so doing, State Farm did not treat the claim against the insured as if it were only against itself. See Cowden, supra.
Furthermore, and most significantly, State Farm took no steps toward arranging a settlement with Shearer. State *200Farm’s attorney, Silverblatt, told them that their case depended on a sympathetic finding by the jury that the fog was not dense. While Silverblatt informed State Farm that he thought they would win, he never assured the company they would succeed in the suit. It was not reasonable for State Farm to believe they would come out of this action “scott free” as Shearer’s expert witness explained to the court.
It appears to me that State Farm negligently provided their insured, Reed, a defense. In so doing, State Farm exposed Reed to liability to which, were a proper defense given, he would never have experienced. Therefore, I would hold that State Farm did not act in “good faith.”