*1 COM- MUTUAL INSURANCE LIBERTY PANY, Appellant, Davis, DAVIS and Lillie Mae
Oliver Appellees.
No. 25515. Appeals States
United Fifth Circuit.
April 7, 1969. Rehearing
Rehearing Denied En May Banc Denied
cupied by plaintiffs, Mr. and Mrs. Oliver Davis their three children. The double collision in serious resulted injury to the and the two five Davises Rawlses. There has never been responsibility as to Bess’ *3 accident.
Liberty auto- Mutual had issued an liability policy mobile to Bess limits with injury $10,000 personal to one for injuries person, $20,000 personal for accident, property $5,000 one for damage.1 to all con- It was soon evident injury that to two cerned $20,000, alone exceed and that the would $20,000.2 Rawls claim also exceed expect The insurer could no contribution Bess; penniless. he was attorney, Thomp- The Davises’ Robert son, 27, 1963, by telephone on March Luckie, Pittman, Valeri, Tampa Man- Charlie Richard Charles W. A. Claims MacFarlane, Fergu Jr., Bush, ager Mutual, by Liberty for letter R. John Fla., 29, son, Kelly, Tampa, 1963, for com- dated March offered to Allison & promise $20,000. appellant. responsibility questioned never its Icard, Scarritt, Cullis, Daniel James W. expend its limits on of Bess behalf Holroyd, Merrill, Cullis, Timm & Sara- recognized that six of seven sota, Fla., appellees. injuries. claimants had substantial WISDOM, GODBOLD Before compromise refused the offer SIMPSON, Judges. Circuit for fear that liable to the would be Rawls, depleted if it the entire amount Judge: WISDOM, Circuit by settling proceeds the insurance with Thompson diversity the Davises. recalled his con- on action is based This 27, 1963, alleged versation Valeri of March company’s faith in bad injury failing personal follows: certain to settle of an insured’s within the limits claims they He then said were [Valeri] policy. automobile —they meaning company —were case is The distinctive feature having pay- worried about to make a in- multiple claims there were 20; they ment over and above the exceeding the limits insured solvent paid they my were afraid that if clients policy. affirm the policy limits, his We available, all that was assignees claimants, of certain favor that because being Rawlses of the insured. volved in the accident also that pay insured, have to Bess, an itinerant Rawlses some- Clinton thing over and above the 20. In Sarasota, fruit-picker, driving in words, they other pay wanted to Florida, 25, 1962, November the 20. automobile struck the rear end of a car occupied by Rawls. An Lewis and Mrs. inter-office Mr. memorandum written oc- car Valeri into a head-on explanation Bess’ car careened corroborates this pending 2. determine wheth Mr. is now Mrs. Suit Rawls instituted suit single ac collisions constituted Bess er the on November express policy. no We obtained $24,840 cident May verdict opinion matter. on the Miller of Professor Kee- was aware reluctance to settle Mutual’s involving suggestion ton’s that in cases the Davises: ought recog- multiple claims the courts can make how we I can’t see proceeding nize some form of allocation commitments view definite percentages of available determine say, we will claims. Needless Rawls coverage applicable to the limits of sev- up expend promptly to line our efforts however, observed, eral claims. Miller special. cases, confirm obtain and both yet [Pro- “no followed court has very likelihood seem a It would suggestion” and the fessor Keeton’s] willing put our that we will company be under “would 20,000 on the line for all limits of memo- proceedings”. The initiate such of both vehicles as we soon randum concludes: up. get them lined suggestion practical I do offer *4 22, 1963, response April in to a On potential involved that all claimants Valeri, Miller, request by house I.G. episode, in the neys, or their attor- 10 P.M. Liberty Mutual, reviewed counsel for that the value be notified regard to the state the law with limits, claims will exceed doubtless multiple noted He settlement claims. partici- people to that these be invited duty primary “the to our insured” that agree- pate jointly reach in efforts “is not diminished that this disposition of available ment as to * * * our reason of the fact agreement cannot be funds. If any re- named lacks insured financial expenditure of reason- reached after sponsibility”. The con- memorandum present effort, able I can see then tinued : why claims could reason individual liberty compromise disposed of individu- not we are at thereafter be ally value, first on of fair one more asserted the basis prior come, judgment, reduction to first served. though our limits are exhausted even ignored Liberty this advice Mutual process, incurring lia- without Instead, from its office home counsel. bility claimants, to other and even delay payment to it instructed Valeri though may such other claimants later filing company’s pending Davises judgment become creditors. New proceedings the Federal Inter- time, York the rule “first follows bring pleader Rawlses Act to both right”, applies as which rule first suit into court. This Davises judg- to amicable settlements well was indeed filed. ments. Bauman Misc.2d [24 David v. May 8, 1963, the Davises sued Bess 67], (1960). 196 746 As a N.Y.S.2d County. for corrolary, may Circuit Court Sarasota claim- we refuse a day Thompson that same Valeri wrote ant’s reasonable offer of settlement stating filed this date”. theory that “suit will be pay that to a rea- such plead- copy of the did not He enclose our sonable settlement exhaust ings, Bess, prison, failed then coverage limits, for to do so would papers any of the charge forward open to the leave us familiar The Florida he with which was served. failed in bad faith to settle we limits, having granted preliminary had de- within Circuit Court opportunity judgment to effect such a settle- the issue fault on hearing I on ment on a reasonable basis. believe for final the case set Liberty 21, 1963, should same results would obtain June June Thompson applied. Auto Mutual Florida Mutual notice law received 815], hearing. 25,1963, Indemnity Bess Fla. of the final June Co. v. Shaw [134 (Fla.1938). requested Liberty Mutual to defend the 184 852 Keeton, Liability-Insurance Claims, (1956). Settlement Harv.L.Rev. 27 Preferential attorney $27,593 26, 1963, for favor whom suit. June Bess, per employed interest at the rate cent from to defend the insurer had May 5, $10,000 and a 1965. The added for a court filed a motion continuance attorneys’ for the default. When fees. motion to set aside damages for the case called trial was I. summarily the defend- the court denied ceremony, the scant ant’s motions. With is wheth- The central issue case leaving out, attorney walked guilty of bad faith er the insurer was representation on the issue Bess without refusing Davises. to settle with the sitting damages. without there be some insurer concedes that jury, judgment awarded a favor being its concern about $48,500. The Mr. and Mrs. Davis legally justifiable, a volunteer was Appeals Florida Court of affirmed good faith concern. insists was and, February January 8,1965, court the trial The insurer contends 17, 1965, petition rehear- denied the directing a in its erred in not verdict ing. charge favor; erred in its allowing faith; erred in on bad oppor- Again, had an filed; negotiations suit before By tunity to settle the Davises. refusing permit and erred Thompson letter dated March testify experts surer’s compromise offered *5 good Mutual’s faith. policy the should the demand limits by 19, The insurer be met 1965. March decision involv- A. The first Florida took no action. insurer for the of an failure policy Auto- limits is petitioned to within The next for a writ Davises Indemnity Shaw, Co. v. garnishment. mobile Mutual opposition, of the Without 815, 852. The against 134 Fla. judgment Florida court entered degree of held the insurer to “that Court Liberty $27,526.85. Mutual for This diligence man ordi- care and which a of policy proceeds, amount included the full nary prudence should exercise care and interest, expenses. Mutual management garnishment May 5, in the own business”. paid judgment the approved the same Court Yet at the time * * * “prevailing the the rule following October, plaintiffs’ The the good the in faith toward insurer must act attorney approached Bess, still who was negotiate a in its effort assured prison, in for the Davises obtained langauge This ambivalent settlement”-. assignment an Bess Fidelity in American & construed against Liberty for Corporation, Greyhound Casualty Co. v. resulting damage from to Bess Court, 89. This 232 F.2d 5 Cir. company’s refusal to settle the Davises’ reversing remanding, stated: assign- In of this consideration claim. quite appears clear It thus ment, their claim released Supreme the Shaw Florida unpaid portion of Bess’ majority case, aligned itself with debt. adhering good jurisdictions to the assignees upon re- then sued The duty placed faith test of the Libery Mutual re- claim. fusal-to-settle insurer, negligence than the rather for Court to the District moved case (Citation omitted) test. Florida, under the Middle District ** * though] [Even At the close Title 28 U.S.C. § negligence on the is admissible evidence, denied the court district * * * good faith, the test directed verdict motion good refusal effect converted [still not] faith issue bad jury faith to care. returned due The vedict settle. appeal remand, subsequent judgment after the 258 F.2d
On
709, 716,
cred-
explained
the “due
the Court
itor is
to collect his
unable
remaining
language
proceeds.
care”
Shaw:
in full from the
by
But,
argues,
the recitation
court
[F]rom
Florida
insurer
clearly
may
Florida
we reach the conclu-
Court
ex-
has
held that an insurer
adopted
policy
preferential
sion that it has
the rule that
haust
its
limits
good
application
payments
test
faith
not
claimants but
some
given
neg-
question,
consideration
to the
The
the insurer
others.
real
determining
ligence
insists,
insurer in
it had
ex-
whether
pend
it has conducted settlement
whether
its
limits
exclusion
negotiations
good
litigated
faith.
usu-
some claimants.
cases
ally
opportunity
involved some
of this
Later decisions
hold the insured harmless.
that,
make
courts
it clear
Florida
In the case
Mutual never
at bar
for the
“In
the Insurer is liable
Florida
opportunity
harm-
to hold Bess
had
less;
for failure
excess over
limits
exposed
he
have been
would still
defense,
faith in the
han
exercise
dling
claims.
Rawlses’
of a claim
and settlement
”
Undoubtedly these
considera
Burton
Farm
v. State
Assured.4
Liberty Mutual’s de
determined
tions
Co., 5 Cir.
Mutual Automobile Insurance
they
Undoubtedly
cision
to settle.
1964, 335 F.2d
324 n. 14.
jury ques
the ultimate
are relevant to
complicating factor
is the
here
not,
But
do
tion of bad faith.
multiple claims.
existence of
law, justify the
court’s
matter of
trial
general
concedes that the
The insurer
directing
It
for the insurer.
a verdict
as stated
minimizing ? In his total supports case— the non-mover’s which cases, agree achieve an overall efforts to light and all reasonable with ment, though entailing a refusal to even party most to the inferences favorable immediately more settle with one opposed If the facts and to the motion. strongly point and over- so the insurer’s inferences parties, accord with will Litiga- policy proceeds. re- other than the of bad faith which of the sort money might premised. covery in excess of the 314 F.2d at tion over be plaintiffs be a waste of the then wonld eager money, all the more to and he is particular compromise. principle operates with 6. This has no assets where the defendant force whelmingly party claimants; in that favor one failed settle the with men Davises, that the reasonable Court believes the insurer conceded when had verdict, contrary not at a could granting arrive and that his the insured’s exposure knew proper. damages of motions On the exceedthe would far hand, if there substantial limits; other the failed act accord motions, opposed to the that prevailing evidence to heed the law even weight quality given and is, legal by of such evidence the insurer’s the advice company men reasonable and fairminded that that counsel home-office impartial danger exercise in no settled would be conclusions, the reach different these failures and denied, the case negligence motions should be tantamount amounted to jury. mere scin- short, submitted A the district court did In bad faith. denying tilla present evidence insufficient motion the insurer’s not err in jury. The' for a directed verdict. judg- motions directed verdict contends that The insurer B. n. o. not ment should decided be defining erred in not district court case, side has the better of the which requested defined faith” as “bad granted only should nor be however, into charge.8 went complete proba- there is a absence of good explaining detail considerable jury support a tive facts to verdict. accord so in faith and did and bad faith There must a conflict in substantial prevailing law. ance with jury question. evidence to create However, part, charged, as follows: jury it is the function of facts, traditional finder of the long charged that so You are further Court, weigh not conflict- honestly company acts an insurance inferences, and de- faith, required to it is not credibility termine of witnesses. settlement, even accept any offers though The insurance reasonable. There was substantial evidence ob- no contractual company jury could which infer that ligation the claim guilty giving insurer was of bad faith Davises, mere fact weight more its own than to interests make not does settled claim was the interests of the In addi insured. company in this liable the insurance tion, reasonably could company had case. The right found the insurer failed to exercise judgment in own its to exercise diligence proper the facts determine claim, settling Davis the matter damages 7; toas failed to on the defend good faith it acted provided that damages; explore issue of failed to insured, Bess. possibility settling toward with all of the doing wrong; Thompson plies conscious testified one from through known company a breach means had in to come will, and ill interest or reports motive obtain the some file and the medical mislead intent actual he had made available Mu- connotes *8 another. tual. deceive or Fidelity & American in This Corp., Greyhound 5 Cir. Casualty requested following v. Co. Defendants the defi- disapproved fol- the F.2d : nition “ de- is faith’ lowing ‘Bad faith, instruction: Bad will which in- render or mislead intent company policy actual surance fined as liable a and another, a real refers as deceive such the one involved in this case capable either of mind Judgment policy state for a in actual excess of the proof. faith Bad company’s or circumstantial limits because of the direct failure some- was imputed there unless policy to settle cannot be a claim within lim- equiv- particular thing transaction its, simply judgment neg- not in is bad or fraud, or constructive.” alent, ligence, imports actual pur- a dishonest pose obliquity or some moral im- thereto, gotiations m reference or with is not in bad mistake A failing to a settlement company effect is The insurance faith. However, such Davises. faith it failed if in bad liable may negligence, any, considered opportunities of settlement itself avail by you question on limits, faith. whether policy in bad within company in acted bad charge faith, you that I As to bad faith. relationship the insuror between charge to the insurer’s The as insuror is such that the the insured multiple there are claimants in- give consideration to must a legal Miller to the advice Mr. I. equal similar G. con- insured terest gave Liberty in his inter-office given its own interest sideration good faith memorandum: matter, it must act with involving in- all transactions in Now, is an accident which where there interest. sured’s multiple injuries in claim- results any ants, you instructed are duty upon a There is may company settle acting surance claim- company, when injured on less than all of those policy settlement offer within ant’s basis, come, first served even first limits, con- decision to make whatever though exhausts the such settlement cerning acceptance rejection long limits, as the settlement as dic- and discretion honest fair and reasonable one. is a light facts of all available tate giving equal consideration Now, good this not does mean that own. interest as well as its insured’s company part of the re- faith on the procedure, quires such nor is failure good Furthermore, on the so, proof itself, do bad faith. rejecting in offer of settle- faith limits, only regard charge ment within the clear and We by exer- an insuror who decision made of the law fair statement which diligence apprising himself cises understand. to con- facts is entitled material judge acted C. The district good having been made in sideration as limiting judicial discretion within faith. testimony experts. of the insurer’s Therefore, you consider on this testify on did not them He allow question of bad faith whether Mutual acted bad investigation insur- made testify them to But he did allow faith. enough thorough company ance was opinion their “it was not unrea fair, permit to come to some insurer to refuse sonable” honest, intelligent regard- decision was as far the Davises. This opportunities in the the settlement go. competent were existing light probabilities. then judge prop district D. The charge negligence as an ele negotiations erly be allowed evidence ment of bad faith based on this Court’s An filed. fore suit was interpretation American Fi Shaw Indeed, required settlement. to rush to delity Greyhound: Casualty & v. Fidelity & States in Brown United supra, Guaranty Co., held fn. the court You are instructed that the insurance eager” settlement company insurer’s “over this case that an is not liable case merely any negligence But each faith. evidence of bad because of upon its own facts. handling determined or must be of the Davis claim investigation the facts lawsuit, handling or in the *9 damages, relating the negotiations settlement with reference negotia thereto, negligence of the failing any or extent and seriousness — rejection tions, of set handling claim, and the insurer’s Davis to the issue of handling relevant are all ne- tlement settlement 484 1932, 446, Cooper, is 448. suit 5 61 F.2d good well as after v. Cir. faith before Casualty & In Davis, Fire Co. v. American
filed. 615, D.C.A.Fla.1962, 1st 146 So.2d 620, the : court said II. theory the con- of this action is Mutual attacks arising company duct of assignment the Davises claim to Bess’ duty out contract —a breach ground a refusal-to-settle on the by the that would not have been owed tort, it is based suit sounds in since the con- insured had faith, follows that Florida bad tract of not been exist- injury personal a rule that common law added) (Emphasis ence. non-assignable. Dade v. is Clar claim say These seem observations 34; D.C.A.Fla.1959, County, 116 So.2d 3d duty good Florida the faith to settle 1941, Bender, Department v. Road State relationship arises out the contractual However, 15, 298.9 Fla. 147 2 So.2d of the of insured and insurer as a result rule, assignability generally is since ques- control of all exclusive exception, non-assignability is liability, settlement, tions of of defense to confine reasonable it would seem exception wrongs management before and after person, due to trial. feelings in reputation, of the or the approved in other states Courts jured person. failure An insurer's assignment of a cause of an action wrong closely settle resembles more insured’s refusal to settle.10 In Com pocket (the property insured’s Insurance unale v. Traders and General book) purely personal tort of than a 654, 1958, Company, Cal.2d 328 P.2d 50 Insur nature. See Brown v. Guarantee 198, case, 883, leading 68 A.L.R.2d 679, Co., 1957, Cal.App.2d 319 ance 155 Supreme California held 69, Choses P.2d 1202. 66 A.L.R.2d assignable the action arising are, of action out contract sounding in tort or in considered as Spears course, assignable. Coast West v. In contract. Critz v. Farmers See also 980, Co., 1931, Fla. Supply 101 Builders 1964, Group, Cal.App.2d surance 230 133 97. So. 1142; 788, 401, Cal.Rptr. 41 12 A.L.R.3d refusal A claim insurer for Gray Insurance v. Mutual Nationwide neatly into fitted cannot 8; Co., 1966, 500, A.2d 422 Pa. 223 categories. either tort contract Farm Auto In v. Mutual Gedeon State W.D.Pa.1966, F. Company, surance 261 Supreme Florida City Supp. 122; American Atlantic v. that, Shaw, pointed relation out “This Casualty Company, Insurance D.C.N.J. ship in insurer and the [between 1966, F.Supp. 254 396. see Carne v. But imposes the insurer sured] Co., Maryland Casualty 1961, Tenn. 208 the terms settle] not [to 259; Dillingham Tri- S.W.2d speaking, strictly but because contract Co., Insurance 214 Tenn. State honestly it, flowing from to act 914.11 S.W.2d insured”. and in faith toward action, If of an survival Cf. American at assignability, is ac- Boston, traditional test Liability Mass. Co. Insurance injury growing arising out of points cause action 9. Ciar that cases out property. Wrongful Statute, out of Death Florida’s 768.01-768.03, F.S.A., are not F.S. §§ annota- 10. The cases are collected assignable. statute is because the That appearing in 12 tion A.L.R.3d per- provides specifically which classes cited, 11. The two cases Carne Tennessee wrongful sons are to sue for entitled Dillingham held that cause of ac- death. assignable be- tion for bad faith “pure” In Bonier tort. referred survive the cause does not death expressly excepted plaintiff. that case the court
485 champerty.13 maintenance12 An as that Florida and cepted noted it should be signment of a chose in action a distant permit of claims the survival statutes reputable 45.11 cousin maintenance against of decedent. F.S. § or a Liability champerty: In- (1959). Does the Note, See Duty Compromise, 14 a surer have champerty The doctrines of (1961). There are Fla.L.Rev. as maintenance known to common strong policy in favor considerations law, England early arise at an date in assignment of failure-to-settle approving peculiar from causes to the state injured A hold- claimant. claims society existing. then con- Out many contrary leave ing would existing ditions then arose the com- recourse. creditors without assign- prohibited rule mon law which damages be The awarded claimant ments of choses action and the sale judgment-proof debtor whose left awith adversely. and transfer of land held cause action is his asset valuable progress enlightenment, law, The unlikely against It his insurer. during past and civilization few com- a undertake insured would such an years large has, however, hundred to a plex expensive suit necessity extent obviated the of the offering no direct benefits. him surer stringent In none rules. of the states injured party with- This leave the would champerty are the doctrines of damages and would for his out recourse preserved origi- maintenance in their * * * play companies fast allow vigor Considering nal less their with and loose society status of and conditions now Here, assigna- policyholders. affluent prevailing country in this to transfer a assignor bility as well benefit would right of action or to maintain suit assignee it to the extent having any of another without direct wage garnishment diminished contingent or interest in it will subjected. which he be necessarily produce means mischief assignment against permitting an reason oppression. Indeed, may or be that encourage might the claim is that assistance or will such maintenance the insured collusion between fraud and tendency rights secure injured This reason- claimant. and the justice. promote ends of 14 Am. case, if, inapplicable in this Maintenance, Jur.2d, Champerty and rejected already the settle- has 1. See. this ease circumstances In the ment. Thompson certainly the trans- initiated agree the district presents, with we gratuitously, how- action. He did so not assignment. approval court’s ever, purpose applying un- Bess’ sole asset toward Davises’ outstanding judgment. satisfied III. owing distinguishes clients his Thompson next maintains voluntary Thompson intermed- from the assignment by accomplished resort (most of them dlers involved cases Champerty: “Champerty com- Maintenance: “At Definition Definition signified law, species an un- is de- maintenance of maintenance. It mon is a upholding champetor taking bargain by in hand or fined as a lawful portion plaintiff quarrels or to the disturbance or defendant or sides * * * right in case involved a suit of common of the matter hindrance action, person as- where a existed of a successful termination Maintenance carry money champetor main- undertakes which the another sisted expense.” expense carry party cause, on at his own tain or saved put, Champerty Am.Jur.2d, and Mainte- otherwise he which 3, pages nance, in the whole 843-844. him out Sec. bore otherwise expense part suit.” Maintenance, Am.Jur.2d, Champerty and 2, page 843. Sec. *11 mellow) by Liberty cited Mu- ON somewhat PETITION FOR REHEARING tual. AND PETITION FOR REHEAR- EN
ING BANC IY. PER CURIAM: excepts Mutual further Rehearing The Petition for is denied to the District Court’s award attor Judge panel and no member of this nor ney plaintiffs. It that fees to notes regular active service on the Court point the Florida statute in awards such having requested polled Court be only fees to “an insured or the named rehearing banc, (Rule on en Federal beneficiary,” in suits Procedure; Appellate Rules of Local surer. The Davises here stood 12) Fifth Circuit Petition for Rule they bought insured; shoes of the his Rehearing En Banc is denied. purpose The is to claim. statute intransigence penalize an insurer’s SIMPSON, Judge (dissent- Circuit litigated. ing). Bad it forces be found, faith, equivalent is the of such respectfully I dissent. intransigence, penalty should assignees enforceable, less than the insured. The entire cause of action including right assigned, Bess’ attorneys’ fees. V. consider final we TURNER, John Appellant, Alford appeal interest should run garnishment payment from the date of STATE CAROLINA, OF NORTH judgment. Appellee. authority cites effect Florida No. 12026. only from interest in tort actions accrues which, judgment, the time of in this United Appeals States Court of case, Again, would be later date. Fourth Circuit. however, dichotomy can tort-contract Argued March easily rationally be extended 16, 1969. Decided June actions for refusal to settle. note We case, supra, Shaw the court awarded interest from the date of the original judgment the insured. rehearing, Supreme On the Florida upheld that element of award. 832, 184 Fla. is affirmed. SIMPSON, Judge (dissent- Circuit ing) : respectfully I dissent. I as un- view warranted and unsound conclusion majority this cause of action assignable Ac- Florida law. cordingly, I with direc- would reverse insurer, tions enter Liberty Mutual.