RAYMOND N. DILLINGHAM, Aрpellant, v. TRI-STATE INSURANCE CO., INC., and MIDWESTERN INSURANCE CO., INC., Appellees.
Supreme Court of Tennessee
May 8, 1964
July 15, 1964
381 S.W.2d 914
MR. JUSTICE HOLMES
Jackson, April Term, 1964.
EDWARD W. KUHN, HENRY T. V. MILLER, Memphis, MCDONALD, KUHN, MCDONALD, CRENSHAW & SMITH, Memphis, of counsel, for appellees.
MR. JUSTICE HOLMES delivered the opinion of the Court.
The parties will be referred to according to their status in the Trial Court. The complainant, Raymond N. Dillingham, filed his original bill in this cause on May 15, 1963, naming as defendant Tri-State Insurance Group. This bill alleges that complainant had recovered a judgment in the Circuit Court of Shelby County against one Cyrus Huffman, Jr., in the amount of $7,500.00 for personal injuries and $250.00 for property damages, thаt
On May 29, 1963 the complainant filed an amended bill in this cause, naming as defendants Tri-State Insurance Co., and Midwestern Insurance Co., Inc. These defendants first filed their answer to the original and amended bill, which they were later allowed to withdraw, and then filed a demurrer to these bills upon the ground, among others, that the bill showed on its face that the defendants did not owe any duty of care to complainant and did not breach any duty owed to him. The Chancellor sustained this demurrer and then, upon application of complainant, granted complainant leave to amend the original and amended bills so as to set up an assignment to the complainant from the named insured Cyrus Huffman, Jr., of his cause of action against the defendant insurance companies. The Chancellor granted complainant leave to file this amendment. Thе amend-
By Assignment of Error Number One, the complainant insists that a judgment creditor alleging bad faith and negligence on the part of the insurer in refusing to settle within the policy limits may maintain an action against the insurer for the excess judgment over and above the policy limit. In support of this contention, complainant in the brief and oral argument in this Court relies upon Auto Mutual Indemnity Co. v. Shaw, 134 Fla. 815, 184 So. 852. In the Shaw case the Supreme Court of Florida did hold that, under terms of the policy issued by the insurer in that case, the judgment creditor, after the return of an execution against the insured unsatisfied, could maintain an action against the insurer for the excess. The policy in that case provided:
“the judgment creditor shall have a right of action against the Company to recover the amount of said judgment to the same extent that Assured would have had if he had paid the judgment.” (Emphasis supplied.)
“No action shall lie against the company unless, as a condition precedent thereto, the insured shall have fully complied with all the terms of this policy, nor until the amount of the insured‘s obligation to pay shall have beеn finally determined either by judgment against the insured after actual trial or by written agreement of the insured, the claimant and the company:
“Any person or organization or the legal representative thereof who has secured such judgment or written agreement shall thereafter be entitled to recover under this policy to the extent of the insurance afforded by this policy.” (Emphasis suppliеd.)
The Florida Courts have held that a policy containing the same provision contained in the policy issued by the defendants in the case now before the Court gives no right of action to the judgment creditor against the insurance company for any excess of the judgment over and above the policy limit.
In Canal Ins. Co. etc. v. Sturgis (Fla. App.), 114 So.2d 469, the District Court of Appeal of Florida, at page 471 of 114 So.2d stated:
“In our opinion, the ‘insurance afforded by this policy’ should be construed to mean thе insurance provided
by the policy up to the policy limits. As we view it, the amount in excess of the policy limits which an insured might in a proper case be able to recover against the insurer because of its negligence or bad faith in failing to compromise or settle a claim, is not truly of the character of ‘insurance‘, but rather constitutes damages resulting from the insurer‘s tort or breach оf contract.”
This opinion of the Florida District Court of Appeal was in all things affirmed by the Supreme Court of Florida in Sturgis v. Canal Insurance Co. etc. (Fla.), 122 So.2d 313. The Supreme Court of Florida stated:
“we have reached the conclusion that the District Court was correct in its decision that a judgment creditor may not maintain a suit directly against the insurer for recovery of the judgment in excess of the insurance policy limits under the circumstances of this case and the language оf the insurance policy issued by the respondent.”
In an article by Professor Robert E. Keeton appearing in 67 Harvard Law Review, 1136 et seq., (May 1954) in discussing the liability of insurance companies for judgments in excess of policy limits, at page 1175, it is stated:
“Has claimant a cause of action in his own right? Some policies have contained a provision that claimant, after writ of execution agаinst 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 (citing the Shaw
case and a federal case). Typical policies now in use do not contain this provision; in the absencе of such a policy provision, the courts have declined, as to the cause of action in excess of policy limits, to permit direct recovery by claimant against company. The excess liability of company arises out of the relationship between insured and company. Claimant is a stranger to that relationship. Not only is company without any duty to claimant to acсept claimant‘s reasonable settlement offer, but also, if there is a sizeable disparity between the settlement offer and the amount of the judgment obtained in the trial which follows refusal of the offer, claimant is benefited rather than harmed by company‘s refusal to settle. It would therefore be anomalous to permit claimant to recover directly against company in his own right (in the absence of policy provision, such as the italicised phrase above, clearly having that meaning.)”
In Tennessee, actions to recover the excess over the policy limits have been expressly held to be actions ex delicto. In the recent case of Carne v. Maryland Casualty Co., 208 Tenn. 403, 346 S.W.2d 259, this Court, speaking through Mr. Justice Burnett, now Mr. Chief Justice Burnett, stated:
“* * * Of course, such a suit, and the basis for liability thereon, arises оut of a contract but they are ex delicto nevertheless. This being true, we are confronted with the proposition that this is the kind of lawsuit which is based upon bad faith. That is the gist of the present controversy where ‘the issue is one sounding in tort.’ ” 208 Tenn. 406, 346 S.W.2d 261.
Among the cases holding that a suit for the excess may not be maintained by the judgment creditor are Murray v. Mossman, 56 Wash.2d 909, 355 P.2d 985 (holding the action sounds in tort); Francis v. Newton et al., 75 Ga.App. 341, 43 S.E.2d 282; Paul v. Kirkendall, 6 Utah 2d 256, 311 P.2d 376; Duncan v. Lumberman‘s Mutual Casualty Co., 91 N.H. 349, 23 A.2d 325, in which the Court, at 326 of 23 A.2d stated:
“In short, conduct to be legally wrongful must contravene some duty which the law attaches to the relation between the parties (citing cases) and it is clear that nо relationship here exists between Mary K. Yeroyan (the judgment creditor) and the defendant company which would permit the maintenance of the present action.”
See also Wessing v. American Indemnity Co. (D.C.Mo.), 127 F. Supp. 775, and Chittick v. State Farm Mutual Automobile Ins. Co. (D.C.Del.), 170 F.Supp. 276.
The first assignment of error is overruled.
This precise contention was raised аnd found to be without merit in Carne v. Maryland Casualty Co., supra. In the Carne case, Dr. Carne, who was the insured under a policy of liability insurance issued by the Maryland Casualty Co., had a judgment rendered against him in excess of the limits of his policy. He died before instituting any suit to collect from his insurance company the excess of the judgment over the policy limits. His administratrix brought an action against the insurer for this excess, alleging negligence and bad faith upon thе part of the insurer. This Court held that the insured‘s cause of action against his insurer in such case “is really based on fraud or bad faith.” It was held that this cause of action died with the person of the insured and did not survive for the benefit of his estate. In so holding, the Court, at 408 of 208 Tenn. at 262 of 346 S.W.2d stated:
“It is very forcibly and ably argued in behalf of the plaintiff in error that the cause of action herein was assignable, and thus if it was assignable it survived and suit can nоw be maintained on it by the representative of the deceased. The test of assignability of a right of action ex delicto as we have heretofore determined this is, is made to depend upon whether or not it is survivable. Haymes v. Halliday, 151 Tenn. 115, 268 S.W. 130. Under the statutes heretofore referred to we cannot conclude this type of action is survivable. We have been cited no other statute
wherein such an aсtion is made survivable. The action here brought is really based on fraud or bad faith. * * * “We have been very much interested in our study of the able briefs herein as well as our independent investigation of the matter, and we are satisfied that the action upon which this suit is based cannot be assigned, and for the reasons herein stated the judgment of the lower court must be affirmed.”
Haymes v. Halliday, 151 Tenn. 115, 268 S.W. 130, makes it abundantly clear that “The test of the assignability of a right of action ex delicto is made to depend by the overwhelming weight of authority on its survivability.” 118 of 151 Tenn., 130 of 268 S.W. The cause of action sued on in Haymes v. Halliday, supra, was held to be one for injuries to real property which survives pursuant to the provision of Chapter 111 of the Acts of 1877 (now
The opinion in the Carne case shows that the Court fully considered the rules stated in Haymes v. Halliday, supra, and Adcock v. New Crystal Ice Co., 144 Tenn. 511, 234 S.W. 336, in arriving at the conclusion reached by the Court. In 67 Harvard Law Review, from which we have heretofore quoted, the author, with reference to the assignment of such causes of action, states at pages 1176 and 1177:
“* * * Should he be allowed to accomplish the same result indirеctly by taking an assignment from insured?
“A doctrine or statute permitting claimant to recover the excess from company, either in his own right or as assignee of insured, is only slightly beneficial to insured—the one who is the victim of company‘s wrong. Insured is protected by the cause of action for reimbursement. This additional remedy would benefit insured only by making possible at claimant‘s option a transfer from insured to claimant of the cost of enforcing the claim of excess liability such expenses and attorney‘s fees as are not included in the measure of recovery. The person greatly benefited by such doctrine is claimant—a person not harmed by company‘s refusal to settle. A judicial extension (either by tort or by implied contract theory) of the liability of company beyond that undertakеn by the agreement cannot be justified by a purpose of benefiting a third party who is not harmed by anything company has done or failed to do.”
In complainant‘s brief, several California cases are cited as authority for the assignability of the cause of action here sued upon. In Comunale v. Traders & General Ins. Co., 50 Cal.2d 654, 328 P.2d 198, 68 A.L.R.2d 883, the Court held that such a cause of action was assignable under
As stated, the rule in Tennessee as to the assignability of the cause of action here sued on is controlled by the
The second assignment of error is overruled.
Complainant‘s third assignment of error is as follows:
“The Court erred in denying complainant‘s application to amend his Original Bill, as amended, so as to make the named insured, Huffman, a party complainаnt (R. 33).
“This was error because the Court had previously held that Dillingham had no cause of action against the defendants-insurers; it had ruled, further, that Dillingham could not even maintain an action against said defendants under an assignment from the insured, Huffman, and that the bill should be dismissed.”
This assignment recognizes, as is reflected by the record, that the application to amend and bring the action in the name of the insured was made after the Chancellor had sustained the demurrer to the amended bill as amended and had ruled that the bill should be dismissed.
In Crowder v. Turney, 43 Tenn. 551, the Chancellor sustained a demurrer to a bill. Thereafter, on the same day, the complainant moved the Court for leave to amend his bill and presented his amended bill. The Chancellor denied the application to amend. In affirming the action of the Chancellor, this Court stated, at 552 of 43 Tenn.:
“The record shows leave was not asked to amend the original bill until after the decree of the Court had been pronounced sustaining the defendant‘s demurrer thereto; and, therefore, the application was
too late. The demurrer was to the whole bill; it had been allowed, and the bill dismissed.”
That case was decided in 1866.
In the very recent case of Daniels v. Talent, 212 Tenn. 447, 370 S.W.2d 515, this Court cited that case with approval and held that Trial Judges have a broad discretion in allowing or denying applications to amend. The action of the Trial Judge in such case will not be reversed unless that discretion is abused.
In the case before the Court, there was no abuse of discretion on the part of the Chancellor. When the last application to amend was made, the Chancellor had ruled upon the demurrer and ordered the amended bill as amended dismissed.
The third assignment of error is overruled.
By the fourth assignment of error, complainant urges that the action of the Chancellor in not permitting complainant to prosecute the action as assignee of the insured was in violation of the
It results that all of the assignments of error are overruled and the decree of the Chancery Court is affirmed at complainant‘s cost.
On Petition to Rehear
Counsel for the appellant have filed a vigorous petition to rehear, in which it is sought to distinguish the present case from Carne v. Maryland Casualty Co., 208 Tenn. 403, 346 S.W.2d 259, insofar as the assignability of the cause of action is concerned. In the petition to rehear, it is stated:
“The facts in the case of Dr. Carne, Admx., are completely distinguishable from those in the case at bar. There, the right of action did not survive because suit on it was not commenced before Dr. Carne‘s death.”
This petition further states:
“However, the question of what happens after death of a party is of no concern in the case at bar, because the parties are still living. Therefore, since the suit at bar was commenced (before death) while the parties are still alive (thаt is, before death) it is a survivable
cause of action under T.C.A. 20-602 and the ‘interest’ in the cause may be transferred (or assigned) underT.C.A. 20-601 .”
As pointed out in our original opinion, the assignability of a chose in action depends on whether or not it would survive and pass to the personal representative of a decedent. If it would so survive, it may be assigned. If it would not survive, it is not assignable. This is the rule stated in Haymes v. Halliday, 151 Tenn. 115, 268 S.W. 130. The fact that complainant attempted to take an assignment from the named insured and to bring an action as assignee while all of the parties are living does not make the cause of action assignable. The assignability of a chose in action depends not upon whether or not an action brought thereon may be revived, but upon whether or not the cause of action would survive death.
In the Carne case, this Court unequivocally held that a cause of action of the same character as that sued on in the present case is not assignable under the law of Tennessee.
It is next contended in the petition to rehear that, in deciding this case, we overlooked the case of Horton v. Employers’ Liability Assurance Corp., 25 Tenn. App. 593, 164 S.W.2d 1011, in which certiorari was denied by this Court by opinion reported in 179 Tenn. 220, 164 S.W.2d 1016.
We did not overlook this case. It is simply not applicable. The Horton case was an action brought by a judgment creditor of the insured against the insurance company to collect a $5,000.00 judgment which had been
“The complainant here sues upon the policy and may not be heard to repudiate any of the provisions thereof.”
Other contentions made in the petition to rehear were fully considered by us in the preparation of our original opinion and were found to be without merit. The petition to rehear is denied.