Summary
In Rutledge, supra, the insured sued his insurance company to recover damages he allegedly sustained as a result of the insurance company's failure to fulfill its obligations under the insurance contract.
Summary of this case from Allianz Insurance Co. v. State Farm Fire Cas. Co.Opinion
39641.
DECIDED SEPTEMBER 21, 1962.
Damages, etc. Cherokee Superior Court. Before Judge Davis from Cherokee Circuit.
Greer, Morris, Bartholomew Finley, Richard G. Greer, for plaintiff in error.
Henderson Pope, Marion T. Pope, Jr., contra.
The trial court erred in sustaining the general demurrer of the defendant insurance company to the petition of the plaintiff insured seeking to recover damages allegedly sustained by the plaintiff as a result of the defendant's failure to perform its obligations under a contract of automobile liability insurance executed by the parties.
DECIDED SEPTEMBER 21, 1962.
This was a suit by the plaintiff insured against the defendant insurance company to recover damages allegedly sustained by the plaintiff as a result of the defendant's failure to perform its obligations under a contract of automobile liability insurance executed by the parties. The insured's petition alleges that on May 14, 1957, the defendant, through its authorized agent, issued to the plaintiff in the form of a "binder" contract, a contract of automobile liability insurance in a stated amount on a described vehicle owned by the insured, for a period of six months beginning May 14, 1957, said contract being attached to the petition as an exhibit; that on May 20, 1957, and during the policy period the insured's son while operating the insured vehicle in a negligent manner was involved in a collision causing personal injuries to two persons and property damage to another; that the insured was liable for said acts of his son under the family purpose car doctrine; that notice of the collision was given to the defendant insurance company, and the defendant through its adjuster made an investigation of the same; that subsequently to said investigation the defendant insurance company notified the plaintiff that it was not extending any coverage whatsoever to the plaintiff under the contract of automobile liability insurance executed by the parties and that said insurance agreement was void; and that as a result of the collision two suits were filed against the plaintiff by the parties injured in said collision in each of which suits damages in the amount of $25,000 were sought to be recovered against the plaintiff by the injured parties.
The petition further disclosed the existence of an automobile liability insurance policy executed by the plaintiff and State Farm Mutual Automobile Insurance Company which was identical in nature with the insuring agreement entered into with the defendant and was in effect on the date of said collision; and it was alleged that by said agreement and policy the two companies were to participate on a prorata basis on any losses incurred by the insured which were covered thereunder, the proportionate liability of each company amounting to 50% of said losses. It was further alleged that the plaintiff acting upon expert legal advice determined that there was legal liability on his part as a result of said collision and that his most reasonable and economical course of action would be to settle all claims against him arising from said collision provided that the same could be done on a reasonable basis; that after learning that the defendant had failed and refused to recognize and perform its obligations under its insuring agreement with the plaintiff, the plaintiff entered into an agreement with the co-insurer, State Farm Mutual Automobile Insurance Company, under the terms of which State Farm would attempt to settle all claims against the plaintiff arising out of said collision and would bear 50% of the costs incurred in the settlement of said claims including the attorneys' fees incurred in connection therewith; that State Farm would advance as a loan to plaintiff the remaining 50% of said costs with the same to be paid out on behalf of the plaintiff in settlement of said claims and attorneys' fees; and that in furtherance of said agreement State Farm paid to the injured parties the sum of $9,864 in full settlement of their claims against the insured and expended as attorneys' fees the sum of $902 in connection therewith, for a total of $10,766, 50% of said amount being paid out on behalf of the plaintiff under said loan agreement. Petitioner further alleged that demand was made upon the defendant for payment of one-half of the sum set forth and a refusal by the defendant to pay same. The plaintiff's petition sought to recover from the defendant this amount plus an additional sum for attorneys' fees and bad faith.
The trial court sustained the defendant's general demurrer to the petition, and the exception is to that judgment, there being no ruling on numerous special demurrers filed by the defendant.
The allegations of the plaintiff's petition disclosed the existence of a valid contract of automobile liability insurance between the defendant insurance company and the insured; a legitimate claim of liability against the insured arising out of an automobile collision involving the insured vehicle under said contract; notice to the defendant insurance company by the insured of said collision; investigation of said collision and claim by the defendant insurance company and the subsequent denial of liability by said insurance company on the ground that the contract of insurance was void; and the settlement in good faith of the insured's liability arising out of the collision by a co-insurer in cooperation with the insured, the settlement and expenses thereof being shared equally by said parties.
Since it is settled in this State that when an insurer wrongfully denies coverage to its insured, the latter may settle his liability without litigation and without the insurer's consent, the insurance company being bound to reimburse the insured in the amount of any settlement made in good faith plus expenses and attorneys' fees ( Ga. S. F. R. Co. v. U.S. Cas. Co., 97 Ga. App. 242, 244, 102 S.E.2d 500), the above alleged facts are sufficient to disclose the existence of a cause of action for the damages allegedly sustained by the plaintiff because of the failure of the defendant insurance company to perform its obligations under the contract of liability insurance. See Maryland Cas. Co. v. Sammons, 63 Ga. App. 323 ( 11 S.E.2d 89); Liberty Mut. Ins. Co. v. A.C.L. R. Co., 66 Ga. App. 826 ( 19 S.E.2d 377).
It is contended by the defendant insurance company, however, that even though a valid contract of insurance is alleged to have been in existence at the time of the collision, the trial court properly sustained the general demurrer to the petition for the reason that the petition affirmatively disclosed that the alleged co-insurer, State Farm Mutual Automobile Insurance Company, had voluntarily settled the alleged claims against the insured without any agreement with or authority from the defendant to do so, and that for such payments voluntarily made, the alleged co-insurer could not recover contribution from the defendant under the guise of the present action. In support of this contention the defendant primarily relies upon the case of Farm Bureau Mutual Automobile Ins. Co. v. Buckeye Union Cas. Co., 147 Ohio St. 79 ( 67 N.E.2d 906), in which the Supreme Court of Ohio held that where an automobile liability policy issued by each of two insurers on the same automobile contained a pro rata clause and one of the insurers, in spite of notice from the other insurer that the latter would not pay its proportion of a loss, paid the entire amount of the loss, the other insurer who had paid the entire loss had no right to a contribution from the other.
The defendant's argument in this regard is without merit under the alleged facts and circumstances of the plaintiff's petition. This was not a suit by the co-insurer to recover contribution from the defendant but was a suit by the insured to recover damages sustained by him by reason of the defendant's refusal to fulfill its obligations under the contract. The existence of the second policy of insurance could serve only to reduce the amount of coverage afforded to the insured by the defendant insurance company under the prorata clause of its contract of insurance with the insured, and could not affect the question of the liability of the defendant to the insured under the insurance contract. Hartford Steam Boiler c. Co. v. Cochran Oil Mill c. Co., 26 Ga. App. 288 ( 105 S.E. 856). While it is contended by the defendant that the alleged loan by State Farm to the insured was without consideration and that therefore State Farm is the real party at interest in this suit, the facts alleged disclose that this is not the case; for under the prorata clause in the policy issued by State Farm that company was only liable for its proportionate share of the amount of the settlement and attorneys' fees; and this being true, it cannot be said that the loan from State Farm to the insured for the purpose of paying the amount of the settlements and fees in excess of State Farm's coverage was without consideration.
Nor can the defendant under these circumstances contend that the settlement voluntarily made by the co-insurer and the plaintiff without its consent or authority vitiated its contractual obligations to the insured; for the defendant's alleged wrongful abdication of its status and responsibilities as an insurer by its denial of liability and contention that the policy of insurance with the insured was void, put the plaintiff and the co-insurer in the place of both co-insurers with the rights of both, including the right to settle claims against the insured without litigation. The defendant, therefore, having thrust sole responsibility upon the plaintiff insured and the co-insurer, cannot escape its obligations to reimburse the plaintiff on the ground that it was not a party to the settlement. To hold otherwise would permit a co-insurer which disavowed its liability and refused to perform its obligations to the insured to escape its duties without injury because of the performance of those duties by the insured in cooperation with the co-insurer.
Accordingly, under the allegations of the instant petition the plaintiff insured was entitled to bring this action to seek reimbursement from the defendant insurance company for the amount of the settlement and attorneys' fees borne by the plaintiff under the loan agreement with State Farm, and the trial court erred in sustaining the defendant's general demurrer to the petition.
Judgment reversed. Nichols, P. J., and Frankum, J., concur.