Court Opinion

ID: 5145804
Source: CourtListenerOpinion
Date Created: 2022-01-02 01:26:28.037936+00
Date Added: 2024-06-11T08:24:45.256208
License: Public Domain

ARNOLD, V.C.J.
(dissenting). This case arose out of the facts and circumstances considered and passed upon by this court in the case of Britt et al. v. Doty, Administratrix, 195 Okla. 620, 161 P. 2d 521. That was an appeal from wrongful death verdict and judgment. At all times material to this action the plaintiffs, Carl M. Britt and Glenn D. Britt, were a partnership doing business as Britt Milling Company and carried an insurance policy with the defendant, the National Mutual Casualty Company, a corporation. The defendant as insurer agreed to indemnify plaintiffs against all liability imposed by law for damages on account of injury to or death of plaintiffs’ employees, *182but not in excess of $5,000 as to any one employee. Its contract further bound the company to investigate .all claims arising under its contract and to defend all actions resulting therefrom.
On October 9, 1941, James Doty, an employee of plaintiffs, was accidentally killed by a slide in a chat pile caused by the explosion of dynamite shots placed in the chat pile by another employee of plaintiffs. The company, pursuant to its obligation under its contract, conducted an investigation of the facts and circumstances attending the accident and conducted the defense of the action brought by Mayme Doty as administratrix of the deceased against the Britts and the company.
In the instant action, plaintiffs sought judgment against the insurance company in the sum of $5,000, the amount in excess of the policy limit which plaintiffs paid on the judgment in the Doty case. The claim on which plaintiffs’ action is based is that the company acted in bad faith in the investigation and defense of the prior action and in refusing to make a settlement of that action within the limits of its policy when the opportunity to do so was offered it.
Admitting the partnership of plaintiffs and its own corporate existence, defendant denied generally and specifically each and all of the material allegations of plaintiffs’ petition.
In presenting the case to this court for review the principal contention of defendant and the burden of its argument is that the evidence is insufficient to establish and show bad faith on its part in the discharge of its obligations to plaintiffs under its indemnity contract.
Both parties in their briefs cite and quote excerpts from the case of Boling v. New Amsterdam Casualty Co., 173 Okla. 160, 46 P. 2d 916. In the Boling case the lower court sustained a demurrer to plaintiff’s amended petition, dismissed her action, and this court in reviewing that judgment held that the allegations were sufficient to state a cause of action in tort. Those allegations showed that after a judgment was obtained against Boling and her insurance company for $20,000, the plaintiff in that action offered to settle her claim and enter full satisfaction of the judgment for the sum of $6,000 if paid within a specified time; that Boling communicated this offer to the company which refused to make the settlement on that basis unless Boling would pay $4,500 of the $6,000 settlement which in effect would release the company of its liability under its contract to the extent of $3,500. When plaintiff in that action refused to accede to this demand by the company, it failed and refused to appeal that case to this court for review. Plaintiff in that case alleged that under these demands the refusal to appeal by the company was arbitrary, oppressive, and in violation of its obligations under its contract and constituted bad faith. These allegations of fact being admitted by the demurrer the action of the trial court in dismissing the action was held by this court to be erroneous and its judgment was reversed.
In the instant case the record discloses that immediately upon learning of the accident, defendant notified Carl M. Britt to have all witnesses to the accident at the office of its attorney that evening. Pursuant to that notice Mr. Britt and all of the employees engaged in work at the scene of the accident were present at the attorney’s office and were carefully interrogated by the attorney as to all of the facts and circumstances showing how the accident occurred and their several statements were reduced to writing by the attorney and each of said witnesses signed the same. There is practical unanimity in these statements which omit only one important detail, which is a direct statement of the presence of Doty, the deceased, at the time the shots in the chat pile were discharged. On the basis of these statements signed by the witnesses within a few hours after the accident happened, the attorney ad*183vised the company that no negligence was shown on the part of the Britts and that no liability against them resulted from Doty’s accidental death. The attorney so acting for and advising the company was one of long experience in the practice of law in Oklahoma.
Subsequent to this preliminary investigation by the attorney for defendant and after suit was filed on August 13, 1942, the depositions of these same witnesses were taken by the attorney for the administratrix, and while their testimony by deposition was in greater detail as to facts and circumstances than shown in their signed statements, the substance of their testimony was the same as their statements except that it was shown that when the shots were fired in the chat pile Doty, the deceased, .was on his way to the mill with a truckload of chat and was not present when the shots were fired and when the first slide following the shots occurred, and that when he did return after an absence of some ten or fifteen minutes, he was not advised by any of his fellow employees that the shots in the chat pile had been fired.
Evidently Doty knew the shots had been fired because Fred Holt in his deposition testified that upon his return from the mill Doty left his truck and came directly to the witness and, as they walked to the west side of the shovel, Doty said: “Let’s try to break this off here so we can back in on this side.” LeRoy Wade, the foreman, testified that Doty helped him place the shot around the casing before leaving for the mill. Joe Nolan, the powder man, testified that upon Doty’s return from the mill some 100 to 150 tons of chat had come down following the shots and that the face of the pile had changed considerably; that he did not tell Doty nor hear anyone else tell him that the shots had been fired, but “I surmised he knew it. He could tell some had been shot down.” All of the witnesses agree that the three truck drivers, Doty, Fred Holt, and Henry Wade, were experienced men in the work they were doing and knew the danger of getting too near the chat pile after shots had been fired therein. Fred Holt testified that Carl Britt had personally warned him and Doty to stay away from the pile as he did not want a man to get hurt. LeRoy Wade, the foreman, testified that he had personally warned all of the trucks drivers of the danger of getting too near the pile after shots were fired.
In viewing and evaluating the. decision of the company to resist the claim of the administratrix this may not be done from the vantage point established by the subsequent verdict and judgment in the Doty case. Like the case of a man charged with manslaughter, who pleads self-defense, the facts and circumstances must be viewed from the standpoint of the defendant at the time it made its decision to resist the claim. When the record in the Doty case was reviewed by this court, the facts and circumstances shown therein preceding and attending the accident caused this court, in its opinion, to make two significant observations. It said:
“The testimony is in irreconcilable conflict as to when Doty left. Fred Holt testified for the plaintiff stating that Doty left before the shots were fired. The testimony of witnesses for defendant is to the contrary.”
Again:
“The evidence is in serious conflict as to whether Doty was there at the time the shots were fired.”
If this court in reviewing that record found reason to hesitate in determining the weight and value of the evidence upon a vital issue in the case, certainly the defendant, viewing the same facts and circumstances prior to the verdict of the jury, could not be guilty of bad faith in making the decision which it did make. Not only so, but on August 31, 1942, the company wrote a letter to Britt Milling Company advising it that the suit had been filed for damages in the sum of $46,600 and that the company had employed *184Mr. McNaughton to defend the suit. It further advised the Britt Milling Company that if it desired to have an attorney participate in the trial in its behalf it would find Mr. McNaughton very co-operative. Bad faith is the antithesis of good faith and our Legislature has told us in statutory language what constitutes good faith. In 25 O. S. 1941 §9, we are told:
“Good faith consists in an honest intention to abstain from taking any unconscientious advantage of another, even through the forms or technicalities of law, together with an absence of all information or belief of facts which would render the transactions unconscientious.”
In the case of Sapulpa Petroleum Co. v. McCray, 136 Okla. 269, 277 P. 589, this court said in speaking of good faith:
“It is the opposite of fraud and its nonexistence must be established by proof.”
On this appeal we are not concerned with the merit or lack of merit in the damage action of Doty’s administratrix, but the sole question for determination here is the good or bad faith of the present defendant in what it did or omitted to do in the discharge of its contractual obligation to the present plaintiff in the Doty case. Its decision at that time, whether wise or unwise, cost it eventually $2,270 in excess of its contractual obligation, so that considerations of self-interest may not be inferred as having influenced its decision.
Since both the parties to this appeal quote and rely on the rule of law announced in the Boling case, supra, it is apparent that the primary issue here involved is the existence or absence of bad faith on the part of defendant in its conduct of the defense in the Doty case, and that authorities based on negligence are inapplicable because the basis for the rule announced in the Boilng case is thus stated in that opinion:
“The action at bar is predicated on bad faith, which is a thing apart from self-interest and renders unnecessary consideration of the cases based on negligence. Insurer’s rejection of the offer to settle because insured would not assume a part of its contractual liability would support a conclusion of bad faith. American Mut. Liability Ins. Co. of Boston, Mass., v. Cooper (C.C.A.) 61 Fed. (2d) 446. Especially when coupled with failure of insurer to either defend the original suit on appeal or settle to the extent of its then liability.”
Based upon this statement the rule announced in that case reads:
“It may be stated as a rule of law that where an insurance company agrees to indemnify against loss from personal injury claims, conditioned upon insured’s surrendering to the insurance company control of investigations, adjustments of claims, and defenses of lawsuits, and where the insurance company does, pursuant to such contract, take control of such matters, a relationship arises between insured and insurer which imposes on the insurer the duty owing to the insured to exercise skill, care, and good faith to the end of saving the insured harmless as contemplated by the contract to indemnify. The insurer must act honestly to effectually indemnify and save the insured harmless as it has contracted to do — to the extent, if necessary, that it must make whatever payment and settlement an honest judgment and discretion dictate, within the limits of the policy, and an abandonment of this duty to act subsequent to its assumption in part constituted bad faith.”
Plaintiff’s action in the Doty case sought recovery of damages in the sum of $46,000 and the only definite offer of settlement was made on the day that case was set for trial and was for the sum of $4,900. It is small wonder that defendant’s attorney felt that his view of the adducible evidence in that case was shared by the attorney for the administratrix and that his belief in the nonliablity of the Britts was substantially confirmed by this offer. The subsequent trial and determination in that case showed his judgment in this respect to have been erroneous, but an error of judgment as to the *185effect on a jury of conflicting evidence is not an indication of bad faith in entertaining such opinion. As was said in Georgia Casualty Co. v. Mann, 242 Ky. 447, 46 S. W. 2d 777:
“The facts were investigated, the evidence on the question of liability was conflicting, and the most that can be said is that in refusing to settle the insurance company committed a mere error of judgment for which it cannot be held liable.”
In Mendota Elec. Co. v. New York Ind. Co., 175 Minn. 181, 221 N. W. 61, the court used this language:
“It takes something more than mere mistake to constitute bad faith, particularly with respect to the action of an insurer under a policy of public liability who is not absolutely bound to make a settlement. The right to control negotiations for a settlement must, of course, be subordinated to the purpose of the contract, which is to indemnify the insured within the contract limit. But it takes something more than error of judgment to create liability. There must be bad faith with resulting injury to the insured before there can be a cause of action.”
A case very similar to the one at bar is that of Lawson & Nelson Sash & Door Co. v. Associated Ind. Corp., 204 Minn. 50, 282 N. W. 481. Quoting from that opinion and substituting the names of the attorneys in the Doty ease for the names of the attorneys mentioned in that case:
“The most that can be said about the whole situation retrospectively is that Mr. Commons’ judgment was better than that of Mr. McNaughton’s, i. e., it would have been better for all concerned if the proposed settlement had been made effective. But, after all, no mortal has the gift of prophecy. In so far as any standard of due care could be applied to the exercise of honest judgment, we think the result justified no other conclusion than that reached by the trial court.”