Court Opinion

ID: 9457885
Source: CourtListenerOpinion
Date Created: 2023-08-04 20:36:31.565911+00
Date Added: 2024-06-11T17:35:33.165749
License: Public Domain

OAKES, Circuit Judge
(dissenting):
I dissent. The majority opinion here expands upon and applies to Connecticut a decision that involved only the law of New York,1 that has been sharply limited by this and other courts2 and criticized to some extent by the commentators,3 and that was in my view based *288on unsound and insufficient premises. Reversing the decision of a trial judge well-versed in Connecticut law, the majority opinion runs counter to Connecticut legislative policy 4 aimed at promoting good faith in the conduct of settlement negotiations by a liability insurer, a policy aimed not only at protecting assureds but also at fostering the prompt and fair disposition of liability claims. Cf. Bartlett v. Travelers’ Insurance Co., 117 Conn. 147, 157, 167 A. 180, 184 (1933).
I say that in my view Harris was based on unsound premises, as Judge Smith’s dissent pointed out, 297 F.2d at 638, not only because the pendency of the action might have affected the assured’s credit, since the refusal to settle in Harris occurred four months before insolvency, but also because Harris opens the door to using the shaky financial condition of an insured as a device for driving down settlements. I add that Harris’s premises were insufficient because there is a strong public interest in spreading the burden of caring for the injured, Note, Direct Action Statutes : Their Operational and Conflict-of-Law Problems, 74 Harv.L.Rev. 357 (1960), and a real social and judicial interest in promoting good faith settlement negotiations,5 interests which the majority in Harris and here, it seems to me, overlook.
But we are not here concerned simply with the underlying rationale of Harris, since it involved New York law — decided, incidentally, when a negligent failure to settle was not actionable and when no New York court had found evidence of bad faith sufficient to impose liability upon an insurer. 30 Fordham L.Rev. 188, 192 (1961). The majority extends Harris to Connecticut, where the statute reads, "... such judgment creditor . . . shall have a right of action against the insurer to the same extent that the defendant in such action could have enforced his claim against such insurer had such defendant paid such judgment.” [Emphasis supplied.]
The majority relies upon a quoted excerpt from an article by Professor Robert Keeton, stating that the claimant is “a stranger” to the relationship between an insured and his company. R. Keeton, Liability Insurance and Responsibility for Settlement, 67 Harv.L.Rev. 1136, 1176 (1954). The inapplicability of the quoted excerpt to this case can be seen, however, only by evaluating the statement in its full context. The second sentence preceding the excerpt reads: “Some policies have contained a provision that claimant, after writ of execution against insured is returned unsatisfied, may recover against company to the same extent as could insured if he had paid the judgment; such provision has been construed as applying to the recovery to which insured would have been entitled under the doctrine of excess liability.” 67 Harv.L.Rev. at 1175.6 The sec*289ond sentence following the majority’s Keeton excerpt reads: “It would therefore be anomalous to permit claimant to recover directly against company in his own right (in the absence of a policy provision, such as the italicized phrase above, clearly having that meaning)67 Harv.L.Rev. at 1176.
I fail to see any difference between Professor Keeton’s policy provision that is his own exception to the rule on which the majority opinion here is based, on the one hand, and the Connecticut statute just above quoted, on the other. Further, I find nothing in the Connecticut cases cited in the majority opinion which calls for any reading of the statute other than that given it by the court below, or that given to it by then District Judge Smith in Turgeon v. Shelby Mutual Plate Glass & Cas. Co., 112 F.Supp. 355 (D.Conn.1953). Indeed, the cases cited by Professor Keeton, note 6 supra,, construing the same provision appearing in insurance policies, are further support for this reading of the statute.
The fortuitous and to my mind irrelevant death of the assured is held by the majority to permit an insurer to conduct settlement negotiations in bad faith, on the basis that the assured’s estate was so small that his widow’s allowance and funeral expense could have consumed it.
The majority has forged a rule of law that makes the insurer’s duty turn on the wealth or poverty and the survival of the assured. This rule is further refined — by the decision in Young v. American Casualty Co., note 2 supra — so that if the deceased assured had had one dollar over priority items available for his heirs the plaintiff would have been entitled to recover the excess of his judgment over the policy limits, some $75,000. Such a rule might give incentive to insurers to write limited policies for the financially irresponsible, but it appears to me to be an anomaly.
I would affirm the judgment.

. Harris v. Standard Acc. & Ins. Co., 297 F.2d 627, 630 (2d Cir. 1961) (2-1 decision), cert. denied, 369 U.S. 843, 82 S.Ct. 875, 7 L.Ed.2d 847 (1962) (where assured insolvent before and bankrupt after entry of judgment, suit for recovery of excess over policy limits will not lie).

. Young v. American Cas. Co., 416 F.2d 906 (2d Cir. 1969), petition for cert. dismissed, 396 U.S. 997, 90 S.Ct. 580, 24 L. Ed.2d 499 (1970) (Harris inapplicable if insured not insolvent at time of settlement negotiations); Anderson v. St. Paul Mercury Indem. Co., 340 F.2d 406, 409 (7th Cir. 1965); lessen v. O’Daniel, 210 F.Supp. 317, 329-330 (D.Mont.1962), aff’d sub nom. National Farmers Union Prop. & Cas. Co. v. O’Daniel, 9 Cir., 329 F.2d 60 (1964); Nichols v. United States Fid. & Guar. Co., 37 Wis.2d 238, 155 N.AV.2d 104 (1967). See also Brockstein v. Nationwide Mut. Ins. Co., 417 F.2d 703 (2d Cir. 1969).

. 7A J. Appleman, Insurance Law and Practice § 4711, at 207 (Supp.1970), says as to the majority opinion in Harris v. Standard Acc. & Ins. Co., 297 F.2d 627 (2d Cir. 1961) (2-1 decision), cert. denied, 369 U.S. 843, 82 S.Ct. 875, 7 L.Ed. 2d 847 (1962):
This decision is subject to criticism for the following reasons: The assumption that the insured suffered no loss is contrary to fact. Although the New York statute [prohibiting use of assured’s insolvency as defense] is keyed to policy limits, the court disregards the fact that the insurer’s conduct in refusing in bad faith to settle within policy limits is a breach of contract, and the promise to settle constitutes part of the coverage protected by the statute. Finally it opens a new avenue for driving down the amount of a proposed settlement without additional risk to the insurer.
See also 60 Mich.L.Rev. 517 (1962); 41 Texas L.Rev. 595 (1963). Essentially neutral on this point were 62 Colum.L. *288Rev. 896 (1962) and 30 Fordham L.Rev. 188 (1961).

. Conn.Gen.Stat. § 38-175 is quoted in full in the majority opinion (note 1 of that opinion). I would emphasize the last clause, however: “. . . and shall have a right of action against the insurer to the same extent that the defendant in such action could have enforced his claim against such insurer had, such defendant paid such judgment." [Emphasis supplied.] The statute reads “paid such judgment.” It does not read “been able to pay such judgment (or a portion thereof) at the time such judgment is entered,” as the majority construes it.

. See Traders & Gen. Ins. Co. v. Rudeo Oil & Gas Co., 129 F.2d 621 (10th Cir. 1942); Employers Mut. Cas. Co. v. Chicago, St. P., M. & O. Ry., 235 Minn. 304, 50 N.W. 2d 689 (1952).

. The emphasis is Professor Keeton’s; the eases he cites are Kleinschmit v. Farmers Mut. Hail Ins. Ass’n, 101 F.2d 987 (8th Cir. 1939), and Auto Mut. Indem. Co. v. Shaw, 134 Fla. 815, 184 So. 852 (1938). Keeton goes on to add that the typical policy “now in use” does not contain such a provision, but he does not mention statutes to the same effect, as here.