*2 LIPEZ, JOHNSON, JJ. Bеfore WATKINS WATKINS, Judge: Company Casualty
The Mutual appellant, [Secur- of Durant judgment from the entered favor ity] appeals interest, $96,687.75 recov- plus in the amount of Reid [Reid] action. pursuant garnishment ered to Reid’s accident occurred The facts indicate that an automobile Carrington Reid and July involving appellee vehicle, causing hit Reid’s Reid Ruffin. Ruffin’s vehicle injuries. Reid was unable permanent physical severe and of five months. At the time period for a work accident, Mutual Insurance Ruffin was insured $10,000 per person in the amount of Company [Granite] into a contract $20,000 accident. Grаnite had entered per last of Gran- reinsurance for the for $10,000 coverage, prior ite’s to the accident. *3 to the accident immediately reported
Ruffin claims assigned independent the case to an which then 1972, on a doctor examined Reid In October of adjuster. to his injuries determined that the of Granite and behalf serious, loss of involving partial permanent right arm were to arm, inability and the use of the hand and numbness adjuster The claims extend the wrist or abduct thumb. Ruffin, Ruffin of the existence and was told interviewed testimony might to the accident whose eyewitnesses two was forwarded to Ruffin. This information be unfavorable 8, on December 1982. by lеtter to Granite 1, 1972, complaint Reid had filed his On November 20, 1972, Gran- December against Ruffin. On arbitration (1) that it Security stating a letter ite’s house counsel sent cover- portion of the insurance possible Security’s that was involved, (2) eyewit- that there existed two would be age Ruffin, (3) to be unfavorable testimony whose would nesses on the injuries of Granite’s doctor report summary following statement: Reid and liability defense on the view have some “While we I sustained the driver permanent injury the serious felt your company although should be advised do not suggest you carry any reserve at this time.” Security acknowledged receipt by reply this letter on requested 1973 and January keep Granite to advised of developments. request did not letter, specific further information in its reply despite the reply fact that the information pre-printed contained form provisions that could marked to request specif- additional ic from information Granite. months,
During following few Reid’s counsel sent wage information, loss signed statements of the witnesses and, 19, 1973, adverse to Ruffin on April a settlement offer $10,000 Granite, open for 30 On days. May again house counsel for Granite stating wrote to Security eyewitnesses names of thе had provided been but $10,000. failed to mention the offer of petitioned Reid transfer the suit from arbitration to major listing case 21, 1973, May and informed Granite of this fact. On May 30, 1973, $9,000 a counter offer of made by was Granite’s representative, claims which counter offer rejected by Reid.
On June Granite’s claim representative sent a copy Reid’s transfer petition Security and stated in an accompanying letter:
Please note that the attorney has withdrawn the Certifi- cate of Readiness and has filed a petition to make this a Major $10,000 case. The attorney has made a demand оf $9,000, and we made him an offer of but he is willing not to budge $10,000. from his demand of Suggest you carry a reserve of keep and will you *4 any advised of further developments. date, $9,500
On the same the claims representative offered to Reid and sent Ruffin a letter indicating his liability for any judgment $10,000. in Ruffin, excess The letter insured, their failed to disclose the settlement offers. Se- 16, curity responded August inquiring whether an excess letter had been sent to Ruffin and what the ad plaintiff’s damnum clause of complaint specified. taking
After the of depositions, finally made an $10,000 offer of to Reid on September which was A rejected. jury found in favor of Reid after trial in ¿mount $80,000 in against Octobеr 1973 Ruffin. Reid then proceeded garnishment proceed- to commence a ing against and Security, charging both Granite both with trial, Following bad faith refusal to settle. a jury verdict against was rendered for Reid both insurers on November in plus the amount of interest. Post-trial motions filed Granite were denied. subse- Granite was determined to quently be insolvent. Post-trial motions filed heard by Security Security grant- were and a new trial for ed, resulted in a in Reid again which verdict favor of $80,000. against Security the amount of The trial court $96,687.75. then molded the verdict to Post-trial motions or judgment for n.o.v. a new trial were denied and this tаken. appeal
Appellant Security appeal, namely: raises four issues on (1) compa- whether the reinsurer of an insurance automobile actively to the insured to ny any participate owes insured, (2) the defense the insurer of claims the reinsurance makes the insurer its whether liable, agent, despite so as to render the reinsurer a lack of knowledge conducting insurer’s bad faith defense, (3) the issue of bad faith of the reinsurer whether jury, should to the absence of evidence be submitted any duty of acts or omissions which violated owed insured, trial erred in its eviden- and whether the court reinsur- rulings jury charge respect tiary the reinsurer’s duties and related matters. agreement, ance “undertaking whereby refers to an Reinsurance insurer, as the agrees protect insurer another known one reinsured, it has partially either or from a risk which wholly undertaken, time, being effect at the same policies both having insured no interest in the reinsur original and the Practice Appleman, 13A Insurance Law & ance.” has the of insur subject When an insurer 484-85 another, privity him is “no reinsured to there ance
51 the original reinsurer; between insured and the the latter is in no respect otherwise; liablе to the former as a surety or contract insurance and of being reinsurance totally distinct and Goodrich, disconnected.” Appeal 109 Pa. 2 A. The insolvency original insurer change does not the nature of the reinsur- er’s so obligation permit as to the insurer pursue it Insurance, directly.” (R.A. Couch on 80:66 at 959 Ander- ed., (1959)). son 2d ed. however, The insured may, bring a direct action against the reinsurer where a proper third-par- ty beneficiary contract to that effect may be found or where the reinsurer is a successor which has assumed the original insurer’s Insurance, liabilities.” 19 Couch on su- pra, 80:67 at 959.
Security did not have the to control the settle negotiations ment nor did it participate fact, In same. did nothing exercise of its rights contract, under the as was its option. There was no third party con beneficiary tract between the companies, and reinsuring contract did not create a principal-agent relationship with Granite as spells the contract rights out the obligations of each of parties. An agency relationship was neither contem plated nor intended by parties.
Ruffin was not privy to the reinsurance contract nor was he owed duty by Security as a result of it.
Judgment reversed judgment non-obstante verdicts is entered appellant, for the Mutual Casualty Compa- ny.
LIPEZ, J., concurred the result.
JOHNSON, J., files a dissenting opinion.
JOHNSON, Judge, dissenting:
I respectfully dissent. I view central issue as wheth- er an automobile accident victim may damages recover from the “reinsurer” of a for party liable a victim’s injuries when said “reinsurer” and/or the liable party’s original insurer engage a bad faith refusal to settle a claim. The trial question court answered this the affirmative. would affirm. *6 appeal, raises four issues on
Appellant Security specific (1) insur- namely: whether the reinsurer of an automobile company participate ance to the insured to any duty owеs against in the defense the insurer of claims the actively insured, (2) the makes the agreement whether reinsurance liable, render the reinsurer agent, insurer its so as to of the faith in despite knowledge a lack of insurer’s bad defense, (3) faith of conducting the whether the issue of bad in the reinsurer should to the absence of jury, be submitted it any duty or omissions any evidence of acts which violated insured, in its the and whether the trial court erred owed evidentiary rulings jury charge respect with and related agreement, reinsurance the reinsurer’s duties matters.
Article 8 of the reinsurance between Granite statеs: ARTICLE 8—LOSS REPORTS shall advise the Reinsurer Company The [Granite] [Secur- of the opinion of all claims which in the promptly ity] being charged in excess loss result an Company, may reinsurance, develop- subsequent this and all which, may opinion Company, thereto the of the ments Reinsurer. position affect the materially the loss settlements agrees Reinsurer to abide The understood, however, that when so being Company, afford the Reinsurer Company will requested at the the Company, associated with opportunity Reinsurer, in claim or any the defense expense of reinsurance, that the involving this proceeding suit or in the defense or every respect Company cooperate will claim, or The Reinsurer proceeding. suit control of such and claims underwriting to examine right have the shall shall all times and Company reasonable files of retained to confer with trial counsel have claim. reference to Company The shall Company immediately give notice to the Rein- surer on all claims reserved excess of the Company’s retention, and also give shall prompt notice to the Rein- which, surer on claims judgment of the Company could develop into losses involving reinsurance hereunder. Further, as respects bodily injuries, the Company shall report to the Reinsurer all claims involving fatalities, spinal cord damage, damage, blindness, brain extensive burns, multiple fractures amputations, or regardless of liability, (or where the limits policy Compen- Workmen’s benefits) sation applicable to such losses exceed the reten- tion of the Company. Inadvertent omission dispatch- ing such notices shall in way no effect the liability Reinsurer Agreement, under this provided the Company informs the Reinsurer of such omission or oversight *7 promptly upon its discovery. Settlement of claims involv- ing this reinsurance shall not be made without the con- sent of Reinsurer, the except in those instances where an immediate decision is necessary and it is impracticable to obtain the consent of the Reinsurer. In such instances, the shall Company exercise the necessary powers in the common interest of itself and Reinsurer, the and the Reinsurer agrees rely upon the judgment of the Com- pany, it being understood that the Company will forth- with advise the Reinsurer of the action taken.
I. The first by Appellant issue raised is whether a reinsurer of an automobile insurance company owes the insured to participate in the actively defense the insurer of claims against the insured. Reinsurance has been de- fined as: ceding one insurance to another of company all
[T]he portion or a of its risks for a stipulated portion of the premium, which the liability the reinsurer is solely reinsured, which is the ceding and in company, which ceding contract retains all company contact with the 54 insured, to and prior handles all matters
original loss____ arises The reinsurance situation subsequent it has more ceding company finds that ... [when] The keep portfoliо____ it cares to in its own risks than reinsurance, has no insured is not notified of the original generally not reinsuring company, contact with no interest therein. legal to the contract and has party Practice Appleman, 13A & Insurance Law & Appleman § (1976) (footnote omitted); 480-81 see also Couch 7681 at § (1968); 44 Insurance on Insurance 2d 80:66 Am.Jur.2d § (1969). 1867 in the has no interest original generally
The
insured
reinsurance;
of contract exists. See
privity
contract for
no
Goodrich,
523,
The original insurer of a typical automobile
insur
liability
ance policy undertakes three types
obligations: (1)
indemnify
against
insured
for
liability
personal and
(2)
property damage,
to defend the insured against any
suits arising
under the policy and
assume
fiduciary
position towards the insured concerning the
rights
insurer’s
to make a binding settlement. Gedeon v. State Farm
Mutual Automobile
55,
Insurance
410 Pa.
Company,
(1963).
A.2d 320
third obligation
This
requires
original
insurer to act in good faith and with due
in represent
care
ing
insured,
interests
if
breached,
and this
original
insurer may be
for the
liable
entire amount of
any judgment
against
insured,
secured
regardless of the
Gedeon,
limits.2
policy
supra; see also Cowden v. Aetna
Casualty
Surety
Company, 389 Pa.
Good faith
an insurer to consider the interests of
the insured as
as
well
the insurer’s own interests in decid-
ing
or
whether
not to settle a case within policy limits. The
weigh
insurer must
this conflicting
making
interest
go
decision to settle or
to trial as if
coverage
it had full
for
might
whatever verdict
recovered,
regardless of the
policy limits.
Resort,
Rova Farms
Inc. v. Investors Insur-
2.
It has been held that an insured has a cause of action in either
assumpsit
wrongful
or tort
the insurer
for
refusal
to settle
obligation
based on a breach of
represent
good
the insurer’s
faith
rights
Gray
of its insured.
v. Nationwide Mutual Insurance Com-
pany, 422 Pa.
56
America,
Company
ance
474,
Concerning Reed, id., 194, 428 Shearer stated, Pa.Superior in 286 A.2d at 638: honest, thoroughly to settle must a decision not be
“[A] one one. It must be a realistic intelligent objective and expertise assumed necessarily when tested Assoc., Ins. v. Camden Fire 51 N.J. сompany.” [Bowers 857, expertise This must be 237 A.2d 861 ]. consideration of all case, given in a to a applied, the advis original] bearing upon in the [emphasis factors for the of the insured. ability protection of a settlement as to attorney view the carrier or its While evalua good important factor, is one liability faith more, requires tion It includes con [emphasis added] verdict, of a should it anticipated range of the sideration all of the adverse; strengths weaknesses known; on either side so far as presented to be evidence area cases particular geographic of the history nature; persuasive appearance, and the relative similar insured, claimant, ness, of the likely appeal Ins. v. Am. Mut. Liab. the witnesses at trial. Gardner Co., (1973). 604, 607-697 Cal.Rptr. 107 Cal.App.3d Resort, Compa Insurance Inc. v. Investors Rova Farms America, 489-90, ny of A.2d 503-04 65 N.J. original) (emphasis to its obligated, pursuant view, clearly was my In faith towards Ruffin, good to act contract with If, the victim. negotiations with in its settlement insured good to act in faith hand, had no the other coverage reinsured of the insured’s portion regarding then the insured of its could lose the benefit Security, case, insurer. original In this where has no reinsured, if the reinsurer $2,500 coverage agree- faith reinsurance good to act where obligation to settle claims original of the insurer ability limits the ment has but insured, in effect the insured then coverage is subject good which requirement. faith *10 The insured receives less bargained than what he has for. do interpret not parties duties of the to permit such a result.
Therefore, although Security was not required to enter into direct victim, or active negotiations settlement I would hold obligated it was in good to act faith concerning that portion negotiations of the involving the $2,500 of covеrage reinsured.
II. The second issue is phrased as whether or not the rein- agreement surance created an agency relationship between Granite and Security.
This to issue amounts whether the between Granite and Security was fact a contract of reinsurance. As distinguished stated trial judge WILLIAM M. in his opinion: MARUTANI well-reasoned Agreement The between and Granite a was not strict contract reinsurance. The definition suggests that the reinsurer remains in background agrees to indemnify the against reinsured its loss. As the previ- provisions ous discussion of the Agreement makes clear, Security did not to cоntract take a back seat. It right had the to associate itself with Granite claim, defense any or proceeding. Moreover, suit right retained the to control settlement negotiations through power its veto any over settlement offer of more $7,500. than “Liability under any written contract must upon be determined consideration of the words employed, light attending read circumstances.” Fidelity & Pink, Deposit Company v. U.S. S.Ct. [58 82 L.Ed. 213] Therefore, Security escape cannot im- fiduciary duty posed on it by hiding behind the label “reinsurer.” If Security has good faith, no act the insured Ruffin will be to protect unable himself. In thе original Ruffin, Granite and Granite
insurance contract between settle, defend, given right the exclusive investi- Ruffin. Un- or claim or suit gate, negotiate a insurance, assumed fiduci- this contract of Granite der good to act in faith. ary duty imposed law Ruffin, transferred, portion a then unbeknownst also pro received a Security. exclusive Thus, paid Ruffin. unless premiums rata share these receives bene- fiduciary duty imposed, Security risks, leaving less than protection fits with no Ruffin with thought he he had. 1972, slip op. No. 4988 Term
Reid v. October Ruffin, 1981) (footnotes omitted). (C.P. Philadelphia County, 23-4 *11 in agreement the court that the agree learned trial other than a something to “strict the instant case amounted of contract reinsurance.” law,3that determined, as a of there
The trial court
matter
and
relationship
an
between Granite
Securi
agency
existed
agreement.
the
ty,
upon
based
(1) the
from
manifes-
Agency
relationship resulting
is the
(2)
the other
person
of
of one
to another
tation
consent
control,
(3)
his
subject
act
his
shall
on
behalf
v.
440
Westfall,
the other so
act. Smalich
by
consent
476,
(1970);
409, 413-14,
A.2d
480
Restatement
269
Pa.
§ 1(1)
(Second)
(1958).
Agency
of
may
principal
“The
the
be exercised
right of control
do
agent shall or shall not
before
the
prescribing what
acts,
he
or
acts,
the
when
at
agent
or at
time
both
* *
Further,
power to
has
revoke
principal
times
*.
constitute a
agent's authority, although this would
* *
him
*. The control of the
his contract with
breach of
however,
control at
not,
every
include
does
principal
and,
attenuated
as
moment;
very
may
its exercise
interpretation of a written instru-
agency,
on an
An issue of
based
3.
ment,
by the
v.
question
determined
court. Gillian
is
of law be
(1967).
Corp., 424
A
agent
servant
an
whose
in
physical conduct
perform-
ance of service is controlled or is subject
master;
therefore,
control by the
in such a relationship, the
master
not only
work,
controls
results
but
in
manner
performed.
which the work is
Juarbe
City
Philadelphia,
Pa.Super.
Article 8 here requires under review to, alia, (1) Granite inter afford Security opportunity to be associated with in claim, Granite the defense of any suit or proceeding, cooperate every respect the defense or claim, control of suсh proceeding, (3) suit or allow Securi- ty confer with trial counsel retained Granite with claim, (4) reference to any notice to give all claims in excess of which, and all claims in Granite’s judgment, could develop $7,500, into losses excess of (5) obtain the consent of for any settlement $7,500, excess of except those instances where an imme- diate decision is necessary impracticable and it is to obtain Security’s consent, in which case shall exercise necessary power in the common interest of parties. both
The entire panoply rights maintained by Security and *12 the concomitant obligations imposed upon by this agreement are such that would hold that the trial court that, did not err in determining despite the of use the term reinsurer in agreement, and Granite Security had creat- ed an agency agreement concerning portion that insurance coverage whereby reinsured Security functioned principal/master as the agent/servant. Granite the The of by Security control over the actions of Granite extended to only involving claims the reinsured portion of coverage. case, In the instant by claim Reid clearly that coverage. involved The injuries to Reid to a certain extent. undisputed being permanent as
were $7,500. of All offers of settlement sums excess involved Therefore, any scope faith Granite within the of bad attributed to because should be authority Granite’s relationship. Westfall, this Smalich su- agency See pra. the determination that Granite disputed has not court, regard In the trial in its faith. this
acted bad opinion, stated: sufficient, if not against
The evidence Granite was verdict that Granite overwhelming, jury’s to sustain the its handling faith in the claim had acted bad plaintiff, The insured, injured Ruffin. examination of working that this its revealed physician, made own regain the use of the arm.” fully would “never plaintiff informed of the kept currently plain- Grаnite was also $5,500. expenses, totalling tiff’s loss and medical wage Further, copies of statements two Granite received the inter- witnesses, insured had entered stating a light. section on red to liability, this evidence as
Notwithstanding compelling that “the chance of fell far of the standard —which short Cowden, substantial,” real and nonliability finding from its own doctor notwithstanding notice supra,—and serious, injuries nature of the permanent had notwithstanding plaintiff notice that the plaintiff, $5,500,—not men- losses of incurred definable already losses, failed suffering, etc.—Granite pain and future tion to settle 30-day counsel’s offеr plaintiff’s respond $10,000. two Approximately modest amount of for the of- offer, Granite 30-day expiration weeks after being subsequently $9,000, rejected, such upon fered $9,500—still itself seeking to “save” offer to increased its period of During this entire (in fact, Security) $500. Ruffin, its inform time did Granite at no negotiating, offers, or demand, give Granite’s insured, plaintiff’s *13 the insured an opportunity to participate contribution. Granite, It not time was until the of trial that for the first time, $10,000. offered of policy limit Such reject- was ed, the jury returned a verdict insured Ruffin $80,000. in the amount of
It is conjure difficult to a more compelling set of facts will leаd of finding which “bad part faith” an insurance carrier. (footnotes Ruffin, Slip op.,
Reid v. supra 18-20. omit- ted).
III. The third issue concerns whether there was sufficient evidence bad Security’s faith have submitted this issue jury. Security argues (1) that the evidence indicates that Gran- ite misled Security Granite’s failure promptly notify Security the victim’s initial offer to settle for that Security had no force or initiate settlements directly the victim.
I agree that Security was original not informed Reid’s offer to settle within the limits policy until the offer to after expired. settle had negligent Granite was in not informing Security However, offer promptly. there is no indication that Security making discussed the by Granite of time, offer at nor any is there evidence that requested any pertinent additional concerning information claim, Reid’s other than whether insured had been sent an excess letter and what the ad damnum clause of Reid’s complaint set forth. determination,
Despite Granite’s as communicated to Se- no curity initially, that reserve need be Security, held information that supplied by to Security con- sufficient, Reid’s cerning my view, claim was to have alerted in- value the claim and the *14 62 call of to the liability, would for an offer settlement
sured’s Thereforе, Security limit. I was policy of the believe victim to, minimum, of feasibility at a discuss duty under such an offer to Reid with Granite. right no to force or initiate
Security alleges that had determina directly. the victim With this settlements with However, duty had the and agree. Security right tion I $2,500 coverage that the reinsured was to inform Granite duty arise right for an offer. This and Granite available discussed provisions of Article 8 from underscored Furthermore, this and are supra. $9,000 made of subsequently fact offers by the that Granite of willing then to offer all $9,500. Clearly, Granite was of $7,500, hesitant to offer all its but coverage, retained $2,500. the first From the time of coverage of Security’s acting May Granite was offer settlement a settlement Security’s agent negotiating as when solely of insurance than the dollar amount involving more failure to Security’s alone. by retained Granite coverage full to offer the permission of inform Granite Granite’s to ratification of Granite’s coverage amounted (Second) Agency of Restatement silence.4 See by acts § (1958). agent as the its of settlement made offers agent’s offers but informed its
Security. Therefore, nature and amount. their object failed to. determined any bad faith imputed with Security should by made Granite. to have been
IV. trial erred is court final issue whether Appellant’s charge rulings and evidentiary making certain routinely little, any, significance the fact that Granite 4. if I find coverage by with- involving reinsured settlement offers made required 8 of the Security’s permission, as Article securing out agreement. jury respect with to the agreement, Security’s duties and to related matters. initially note concerning issues rulings (1) on: amendment certain Answers to Requests for Admis
sions, (2) reading allegedly objectionable Requests for Admissions to the jury, the admission aof report medical testimony respect it have bеen waived for Appellant failure to preserve them means post-trial motions.5 Gates, Commonwealth v. 295 Pa.Su per. 441 A.2d
The first
properly
issue
preserved by
Appellant wheth-
er the
trial court erred
a witness
permitting
as
testify,
reinsurer,
as to his opinion
an
concerning what
*15
claimsperson’s
insurer’s
reaction should have been to cer-
alleged
tain
facts. As Appellant has
specifically
failed to
argue this
point
brief,
its
other than to
an
state
as
issue, I would not consider the merits thereof. See Pa.R.
2119(a),(e);
A.P.
Shaw,
364,
Commonwealth v.
494 Pa.
370
3,
n.
(1981);
431 A.2d
900 n. 3
v.
Commonwealth
299
Sanford,
Pa.Super.
It is well established that the trial court has wide discre-
tion
the
concerning
scope and limits of cross-examination
and will not be reversed absent an abuse of discretion.
Rothman,
Gatling
Pa.Super.
Granite because the Therefore, concerning rein- agreement. cross-examination was irrelevant because of this determination surance limiting cross- the trial court did not abuse its discretion expert examination of this witness. concern- errors the trial court
Concerning alleged I find ing jury, Appellant’s arguments сharge be meritless.
CONCLUSION here agreement of the reinsurance involved My review court, trial distinguished agree leads me MARUTANI, M. that Honorable WILLIAM good concerning portion faith that obligated indeed act coverage rein negotiations involving that, facts difficulty finding no on the sured. have court did presented, here trial wording of had been determining agency relationship err in that an not concerning created and between agency Since an coverage portion reinsured. law, exist in it is my opinion, a matter did relationship, as faith, since alleged unnecessary Security’s bad anаlyze indisputab Granite, is clear and agent, faith of the bad or in of the trial court rulings no error Finding le.6 *16 19,1981 in May judgment entered charge jury, its Se against garnishee-appellant Reid and plaintiff favor of affirmed. curity should be court, following opinion an filed March in its
6. The trial had, itself, facts, concluded that review exhaustive faith, good noting confronted that “[w]hen violated its opposing party who has verdict for potential substantial party permanent injuries, unreasonable that suffered serious liability action to limit facing would not take affirmative such Ruffin, Slip op., supra, possible." at 26. liability Reid as much as