No. 12041
I N THE SUPREME COURT O THE STATE O M N A A
F F OTN
BRUCE THOMPSON,
P l a i n t i f f and Respondent,
STATE FARM M T A AUTOMOBILE INSURANCE
UU L
COMPANY,
Defendant and A p p e l l a n t .
Appeal from: D i s t r i c t Court of t h e E i g h t e e n t h J u d i c i a l D i s t r i c t ,
Honorable J a c k D , Shanstrom, Judge p r e s i d i n g .
Counsel of Record:
For A p p e l l a n t :
McKeon, McKeon and Skakles, Anaconda, Montana.
John L. McKeon and Gregory J. Skakles a r g u e d ,
Anaconda, Montana.
For Respondent :
Morrow, Nash and Sedivy, Bozeman, Montana.
Edmund P. Sedivy argued and James H. Morrow a p p e a r e d ,
Bozeman, Montana.
Submitted: December 5, 1972
F i l e d : JfiPj 17' 1973
M r . J u s t i c e Wesley C a s t l e s d e l i v e r e d t h e Opinion of t h e Court.
This cause was heard on o r a l argument on A p r i l 24, 1972.
An opinion was rendered on August 23, 1972 and appears i n 29 S t .
Rep. 713. Subsequently a p e t i t i o n f o r rehearing was granted,
and t h e matter was again argued on December 5 , 1972. After
r e h e a r i n g t h e following opinion i s s u b s t i t u t e d f o r t h e opinion
rendered on Agust 23, 1972.
This i s an appeal from a judgment f o r p l a i n t i f f i n t h e
amount of $76,830,03 entered on a j u r y v e r d i c t i n G a l l a t i n
County, t h e Honorable Jack D, Shanstrom, presiding. Defendant
moved f o r judgment notwithstanding t h e v e r d i c t and f o r a new
trial. Both motions were denied,
This c a s e , i n o t h e r f a c e t s , has been before t h i s Court
previously. Welch v. Thompson, 145 Mont. 69, 399 P.2d 748;
S t , Paul F i r e & Marine I n s . Co, v. Thompson, 150 Mont. 182, 433
P.2d 795; S t , Paul F i r e & Marine Ins. Co, v. Thompson, 152 Mont.
396, 451 P.2d 98,
P l a i n t i f f brought t h e i n s t a n t s u i t a g a i n s t defendant a l l e g i n g
bad f a i t h i n defendant's handling of a t o r t a c t i o n ,
O September 27, 1961, p l a i n t i f f Bruce Thompson was t h e
n
d r i v e r of an automobile owned by h i s f a t h e r and i n s u r e d by
defendant S t a t e Farm Mutual Automobile Insurance Company. Plain-
t i f f was then 20 years of age, s i n g l e , and working a s a l a b o r e r
f o r Haggerty-Messmer Co. i n Bozeman. While i n t h e course of h i s
employment (an i s s u e i n previous c a s e s decided by t h i s Court),
p l a i n t i f f t r a v e l i n g between jobs attempted t o pass a jeep p u l l i n g
a loaded h o r s e t r a i l e r , driven by one Welch. Welch was making a
l e f t t u r n o f f a highway i n a c o n s t r u c t i o n zone when p l a i n t i f f
Thompson c o l l i d e d with him while attempting t o pass.
Welch employed a t t o r n e y s Landoe and Gary of Bozeman, and
f i l e d s u i t f o r damages i n t h e amount of $134,000 on August 2, 1962,
a l l e g i n g negligence on t h e p a r t of Thompson. Thompson appeared by
motion t o dismiss which motion was heard and denied on October 22,
1962. Subsequently'aftercertain discovery proceedings,
Thompson's employer, Haggerty-Messmer, was joined as a de-
fendant and the addendum in the amended complaint was increased
to $160,000. Thompson answered separately and filed a counter-
claim against Welch for $25,000 damages, At that time, Thompson
was represented by two law firms, Morrow, Nash & Sedivy, and Lyman
Bennett, Jr. Mr.. Nash acted as attorney for Thompson on his
counterclaim.
Haggerty-Messmer was represented by still another law firm,
Berg, OfConnell& Angel. Haggerty-Messmer appeared separately
by a motion to dismiss which was denied and then by a separate
answer,
Meantime, Thompson's attorney, Donald A, Nash, withdrew as
attorney for Thompson on his counterclaim and a praecipe for
dismissal of the counterclaim resulted in dismissal of the
counterclaim.
Pretrial was had on April 6, 1963. Trial was had and a
jury verdict was returned in favor of plaintiff with judgment
in the amount of $61,500. This judgment was appealed to this
Court and affirmed on March 3, 1965,
State Farm paid $11,204.64 and St, Paul Fire & Marine,
carrier for Haggerty-Messmer, paid the balance.
In our opinion affirming that judgment, Welch v. Thompson,
145 Mont. 69, 72, 399 P,2d 748, one significant statement was
made there that is pertinent here. After setting forth the
details of the accident, this Court observed:
1I
It is true that some of the foregoing evidentiary
matters are disputed, but as we will discuss later our
review is to determine whether the evidence, if believed,
was substantial."
( 1 March
3 2, 1966, St. Paul, as subrogee of Haggerty-Messmer,
sued Thompson for $57,240.61 far indemnity. Thompson notified
State Farm and requested State Farm to defend him, State Farm
did commence to defend Thompson by a motion to dismiss, which
motion was subsequently overruled, Shortly thereafter, State
Farm advised Thompson t h a t i t would n o t f u r t h e r defend him.
Thompson then, through h i s own a t t o r n e y , f i l e d a t h i r d p a r t y
complaint a g a i n s t S t a t e Farm seeking damages f o r t h e i n s u r e r ' s
breach of c o n t r a c t t o defend t h e s u i t and f o r $2,500 a t t o r n e y
fees. A summary judgment f o r $2,500 was entered a g a i n s t S t a t e
Farm. S t a t e Farm appealed and numerous i s s u e s were s t a t e d b u t
f i n a l l y resolved t o one i s s u e : Whether S t a t e Farm had a duty
t o defend t h e a c t i o n f o r indemnity between j o i n t t o r t f e a s o r s
( t h e employer being l i a b l e under t h e d o c t r i n e of respondeat supe-
r i o r ) ? W h e l d t h a t S t a t e Farm had t h e duty t o defend and
e
affirmed t h e judgment. S t . Paul F i r e & Marine I n s . Co. v. Thomp-
son, 150 Mont. 182, 188, 433 P.2d 795. There we s a i d :
"We f i n d then t h a t t h e o b l i g a t i o n t o defend does
e x i s t . But, S t a t e Farm argues t h a t i t should be
allowed t o defend r a t h e r than paying counsel t o
defend t h e a c t i o n . There can be no question of t h e
good f a i t h and s i n c e r e defense by counsel f o r S t a t e
Farm i n t h e Welch s u i t nor here. However, t h e incon-
s i s t e n t and yes, a n t a g o n i s t i c p o s i t i o n s t h a t have de-
veloped make i t c l e a r t h a t Thompson was r e q u i r e d t o
h i r e h i s own counsel. N i s s u e a s t o t h e amount of
o
damages i s involved.
"~ut one more matter needs discussion. Subsequent t o
t h e o r a l argument and predicated upon t h e f a c t t h a t
S t a t e Farm, a s a p p e l l a n t , abandoned s e v e r a l of t h e
i s s u e s on appeal, leaving i n e f f e c t Thompson a s t h e
s o l e respondent, S t . Paul has f i l e d a motion f o r
damages f o r appeal without m e r i t . W e b e l i e v e our
d i s c u s s i o n previously i n d i c a t e s t h a t S t , Paul might
have l i t i g a t e d t h e i s s u e of indemnity i n t h e previous
a c t i o n , but chose n o t t o because of an i n c o n s i s t e n t
p o s i t i o n . Even though S t . Paul now has t h e favorable
p o s i t i o n of being ' l e t - o u t ' on i s s u e s on appeal, nonethe-
less i t i s very much a p a r t of t h e i s s u e . W e have no
doubt, f o r t h a t m a t t e r , t h a t i t l i k e l y would have ap-
peared a s amicus c u r i a e . A d d i t i o n a l l y , we have obsenred
previously t h a t t h e p a r t i e s were and a r e i n good f a i t h ,
w e hold t h a t assessment of damages f o r a e a l without
merit a r e n o t proper. It i s s o ordered. RP
W n o t e , t o o , t h a t i n J u s t i c e asw well's concurring opinion
e
he observes " t a c t i c a l " reasons why S t a t e Farm d i d n o t l i t i g a t e
t h e r i g h t s and l i a b i l i t i e s between t h e two defendants, Thompson
( i t s insured) and Haggerty-Messmer (insured by St. Paul).
I n t h e meantime and before our opinion c i t e d above was
f i l e d on October 27, 1967, Thompson on A p r i l 18, 1967, f i l e d
t h e i n s t a n t s u i t a g a i n s t S t a t e Farm a l l e g i n g bad f a i t h i n handling
the original t o r t s u i t . T r i a l was had by jury. Verdict was
r e t u r n e d f o r p l a i n t i f f i n t h e amount of $76,830.03 and
judgment was entered.
O e o t h e r f a c t o r giving rise t o a curious and complicated
n
s t a t e of f a c t s i s t h a t S t a t e Farm c a r r i e d c o l l i s i o n insurance
on Welch's v e h i c l e , So, S t a t e Farm insured Thompson through h i s
f a t h e r and a l s o Welch, t h u s covering t o some e x t e n t both v e h i c l e s
involved. S t . Paul, another insurance company, with t h e judgment
a g a i n s t Thompson came i n t o t h e a c t because of i t s insurance
coverage of Haggerty-Messmer, Thompson's employer. In the f i r s t
a c t i o n , Haggerty-Messmer strenuously i n s i s t e d t h a t Thompson was
n o t a c t i n g i n t h e scope of h i s employment when t h e a c c i d e n t
occurred, Yet, during t h e time of t h e lawsuit, Thompson received
i n d u s t r i a l a c c i d e n t b e n e f i t payments a s a covered employee. While
some of t h e s e background f a c t s appear extraneous and i r r e l e v a n t ,
they a l l a r e a p a r t of a complicated p i c t u r e where bad f a i t h i n
a t o r t a c t i o n was a l l e g e d . The v a r i o u s a c t i v i t i e s of t h e l i t i g a n t s ,
claims a d j u s t e r s , i n v e s t i g a t o r s , examining doctors and lawyers
involved a r e gone i n t o i n t h e evidence.
The p r e t r i a l o r d e r upon which t h e m a t t e r was f i n a l l y sub-
mitted t o t h e j u r y came with the following contentions of p l a i n -
tiff:
"1. That S t a t e Farm Insurance Company d i d n o t e x e r c i s e
good f a i t h , and was n e g l i g e n t and was- g u i l t y of bad
f a i t h toward Bruce Thompson, t h e i r insured, i n f a i l i n g
t o s e t t l e t h e law s u i t by M r . Welch a g a i n s t Bruce Thompson
w i t h i n t h e $10,000.00 l i m i t s of t h e insurance p o l i c y
because :
"a) It f a i l e d t o accept a reasonable o f f e r t o
s e t t l e t h e s u i t a g a i n s t Bruce Thompson which o f f e r o r
o f f e r s were w i t h i n t h e $10,000.00 l i m i t s of t h e p o l i c y ,
"b) It knew, o r should have known, t h a t t h e r e was
a l i k e l i h o o d t h a t any v e r d i c t rendered f o r Welch would'
g r e a t l y exceed $2,000,00 o r even $10,000.00 because of
t h e s e v e r i t y of t h e i n j u r i e s s u s t a i n e d by M r . Welch.
"c) It knew, o r should have known, t h a t t h e e v i -
dence t o be presented i n t h e c a s e would i n d i c a t e t h a t
a defendant's v e r d i c t on t h e i s s u e of l i a b i l i t y was
d o u b t f u l , and t h e i r claim of c o n t r i b u t o r y negligence
was a question of f a c t t o be decided by t h e jury.
"d) It did n o give proper regard or considera-
lt
tion to the recommendations of its trial counsel, Mr.
Bennett, who recommended that no offer be made in excess
of $2,000.00 for the reason that Mr. Bennett had failed
to provide John T. Anderson of State Farm as requested,
with the requisite medical information on Welch and on
his current activities, And, that Mr, Bennett failed to in-
form Mr, Anderson as requested, of the position of co-
defendant, Haggerty-Messmer Co. as to their willingness
to contribute to any joint offer of settlement and as to
their demand that State Farm accept tender of the defense
of Haggerty-Messmer Co. And, failed to provide Mr. Ander-
son with comprehensive evaluation and written reports
concerning all phases of this matter, though often requested.
"e) Bruce Thompson demanded that State Farm, as
insurer, settle within the policy limits of $10,000.00,
"f) It failed to inform Bruce Thompson of any of
the offers of settlement tendered by Mr. Welch and failed
to inform Bruce Thompson of any offers of settlement made
by it to Mr. Welch.
"It is further guilty bad faith that:
"a) That it failed to properly investigate the
accident and failed to adequately prepare for trial,
"b) It failed to make any reasonable offer or
counter offer of settlement of the suit against Bruce
Thompson, and failed to carry on negotiations for the
settlement of the claim of Mr, Welch.
"c) It failed to give equal consideration to the
interests of Bruce Thompson, as compared to its own
and their respective hazards, and it failed to consider
fairly Bruce Thompson's liability for any excess judg-
ment in evaluating the offers of settlement within the
policy limits, or in negotiating for a settlement.
"d) That it failed to give due consideration to
the applicable law.
"e) That it failed to reasonably appraise and
evaluate the case from a settlement standpoint. I I
To these allegations basically, defendant entered a denial
and a defense that it had not received an offer to settle within
policy limits, nor an unequivocal demand to settle within policy
limits.
It is to be generally noted that under the policy of in-
surance issued by State Farm to Art Thompson, father of plaintiff,
State Farm obligated itself to pay on behalf of the insured all
sums which the insured shall become legally obligated to pay as
damages because of:
"A
() bodily injury sustained by other persons ***
"a
() to defend any suit against the insured al-
leging such bodily injury * * but the company may
make such i n v e s t i g a t i o n , n e g o t i a t i o n and s e t t l e -
ment of any claim o r s u i t a s i t deems expedient. 11
I n a d d i t i o n t o t h e foregoing, an amended complaint was f i l e d
wherein p l a i n t i f f sought damages f o r mental pain and s u f f e r i n g
caused by t h e imposition of t h e excess judgment a g a i n s t him.
This matter was allowed t o go t o t h e j u r y and t h e j u r y r e t u r n e d
a v e r d i c t awarding him $750 f o r mental pain and s u f f e r i n g .
Appeal i s a l s o taken t o t h i s p o r t i o n of t h e judgment. But, i n
view of our d i s p o s i t i o n h e r e i n a f t e r , we need n o t d i s c u s s t h i s .
Appellant S t a t e Farm p r e s e n t s t e n i s s u e s f o r review, How-
ever, t h e determinative i s s u e s a r e b u t two, and they a r e i n t e r -
woven. These i s s u e s a r e :
Were t h e f i n d i n g s of bad f a i t h and negligence supported
by t h e evidence?
2. Was t h e r e a settlement o f f e r w i t h i n t h e l i m i t s of
S t a t e Farm's policy, which S t a t e Farm f a i l e d and r e f u s e d t o
accept ?
F i r s t , t h e b a s i c c r i t e r i a f o r recovery i n Montana i n t h i s
type of a c t i o n was discussed by t h i s Court i n Fowler v. S t a t e
Farm Mutual Automobile I n s . Co., 153 Mont. 74, 78, 454 P.2d 76.
There we s a i d :
" e t h i n k t h a t e x c e l l e n t d i s c u s s i o n s of t h e a p p l i c a b l e
W
law appear i n t h r e e reported c a s e s a r i s i n g i n Montana:
F e t t e r Livestock Co. v. National Farmers U.P.& C.Co.,
257 F,Supp. 4; Jessen v. ~ ' ~ a n i e 210 F.Supp. 317; and l,
National Farmers Union Property & Casualty Co. v, 0'
Daniel, 329 F.2d 60.
"In F e t t e r Livestock Co. v. National Farmers U.P.& C.Co.,
supra, 257 F.Supp. a t p, 10, Judge Jameson discussed t h e
a p p l i c a b l e r u l e s a s follows: ***
"'It i s w e l l s e t t l e d t h a t "Error i n judgment i n n o t
s e t t l i n g a case within the policy l i m i t s i s not i n
i t s e l f s u f f i c i e n t t o impose l i a b i l i t y upon t h e i n s u r e r
f o r any recovery i n excess of t h e E m i t s ; nor i s the
mere f a c t t h a t t h e i n s u r e r was unsuccessful i n t h e t r i a l
of t h e c a s e s u f f i c i e n t t o show t h a t t h e defense was n o t
made i n good f a i t h . " Jessen v. OIDaniel, supra (210 F.
Supp. a t 325). On t h e o t h e r hand, "It has been h e l d t h a t
a policy of t h i s type places a f i d u c i a r y duty on t h e
insurance company t o look a f t e r t h e i n t e r e s t s of t h e
insured a s w e l l a s i t s own, thus r e q u i r i n g i t t o consider
f a i r l y t h e i n s u r e d ' s l i a b i l i t y f o r t h e excess when evalu-
a t i n g an o f f e r of s e t t l e m e n t w i t h i n t h e p o l i c y l i m i t s .
Failure to do so is bad faith and renders the company
liable for its breach of fiduciary duty in the amount
of any judgment over the policy limits." National
Farmers Union Property & Casualty Co. v. O'Daniel,
supra. (329 F.2d at 64-65.)
"'1n Jessen v O'Daniel this Court set forth relevant
factors for determining whether an insurer acts in
"bad faith" as follows:
"'Factors to be considered include (1) whether, by
reason of the severity of the plaintiff's injuries any
verdict is likely to be greatly in excess of the policy
limits; (2) Whether the facts in the case indicate that
a defendant's verdict on the issue of liability is
doubtful; ( ) Whether the company has given due regard
3
to the recommendations of its trial counsel; ( ) Whether
4
the insured has been informed of all settlement demands and
offers; (5) Whether the insured has demanded that the
insurer settle within the policy limits; (6) Whether the
company has given due consideration to any offer of
contribution made by the insured, As a rule no one factor
is decisive. All must be considered in determining whether
the insurer acted in goad faith.' (210 F,Supp. at 326-
327,)"
The briefs of each party exhaustively analyze the evidence
within the six criteria set forth above, Respondent Thompson
reminds us of the rules on sufficiency of the evidence on review
by quoting from Campeau v, Lewis, 144 Mont. 543, 398 P.2d 960,
and Bernhard v. Lincoln County, 150 Mont. 557, 437 P,2d 377,
We shall likewise analyze the evidence to determine whether or
not there was substantial credible evidence, sufficient to be
submitted to the jury on the issue,
Thompson at all times insisted on his own lack of negligence
in the original accident. Thompson through his own lawyer, Mr.
Nash, filed a counterclaim alleging negligence on the part of
Welch. This counterclaim was dismissed before trial. The in-
vestigating highway patrol officer issued traffic citations to
both drivers, Thompson for reckless driving and Welch for making
an improper turn. Mr. Nash testified that he felt his client
Thompson had a poor defense. After Mr. Nash's withdrawal as
attorney for Bruce Thompson and after dismissal of the counter-
claim, Thompson continued to assert in sworn testimony his lack
of negligence and negligence on the part of Welch.
Counsel representing Thompson's employer Haggerty-Messmer
also felt, as indicated by testimony and letters as exhibits,
t h a t Thompson had a v a l i d defense; and t h a t Welch d i d not
have a "cinch" c a s e a g a i n s t Thompson on e i t h e r t h e l i a b i l i t y
i s s u e o r t h e damage i s s u e , Heretofore we c a l l e d a t t e n t i o n t o
t h e observation of t h i s Court i n Welch v. Thompson, supra, t o
t h e e f f e c t t h a t t h e evidence was disputed. There we recognized
t h a t t h e v e r d i c t might have gone e i t h e r way depending upon which
evidence was believed. The jury v e r d i c t was 9 t o 3 .
Opposed t o t h i s i s Thompson's e f f o r t s t o h i g h l i g h t t h e
apprehension, doubts, questions, and concern of v a r i o u s i n v e s t i -
g a t o r s and agents of S t a t e Farm i n i n v e s t i g a t i o n s and t r i a l
preparation on behalf of S t a t e Farm.
Referring back t o t h e c r i t e r i a set f o r t h by t h i s Court i n
Fowler and cases c i t e d t h e r e i n , i t i s c l e a r t h a t a p o l i c y of
insurance of t h e type i n question p l a c e s a " f i d u c i a r y dutyf1 on
t h e insurance company " t a look a f t e r t h e i n t e r e s t s of t h e insured
a s w e l l a s i t s own." Thus when i t came t o evaluating s e t t l e m e n t ,
t h e i n s u r e r was r e q u i r e d t o consider f a i r l y t h e i n s u r e d ' s
l i a b i l i t y f o r p o s s i b l e o r probable excess judgment, W emphasize
e
h e r e t h e word " f a i r l y " , because, a s pointed out i n Fowler,
a mere e r r o r i n judgment o r poor r e s u l t a t t r i a l i s n o t s u f f i -
c i e n t t o e s t a b l i s h a claim f o r damages because of bad f a i t h .
W s h a l l f i r s t assume t h a t t h e r e was a v a l i d o f f e r of
e
s e t t l e m e n t within p o l i c y l i m i t s , The p o l i c y l i m i t s were $10,000
and t h e r e was a demand and an o f f e r t o s e t t l e f o r $9,500 on a
covenant n o t t o sue. I t was obvious t h a t Welch intended t o keep
t h e employer i n t h e c a s e and t h a t S t a t e p arm's p o s s i b l e obliga-
t i o n i n indemnity would remain. But assuming an o f f e r , was t h e r e
bad f a i t h i n r e f u s i n g i t under t h e s i x c r i t e r i a of Fowler?
No. I. Was a v e r d i c t l i k e l y t o be g r e a t l y i n excess of
policy l i m i t s ? I n view of Welch's admitted previous d i s a b i l i t y ,
none of t h e a t t o r n e y s before t r i a l , with one n o t a b l e exception,
evaluated t h e c a s e very highly. Except f o r testimony of M r .
Gary, one of Welch's counsel, no one seemed t o a n t i c i p a t e a
l a r g e v e r d i c t on damages, i f l i a b i l i t y was proven. Mr. ~ a r y ' s
testimony i s a s u b j e c t of another i s s u e on t h i s appeal and w i l l
n o t be discussed, However, i n our a n a l y s i s c r i t e r i o n No, 1 i s
not satisfied.
No. 2, Under t h e f a c t s , defendant Thompson i n s i s t e d t h a t
p l a i n t i f f Welch was n e g l i g e n t . There was evidence of f a i l u r e
t o s i g n a l properly, changing t r a f f i c l a n e s and r e c e i v i n g a
t r a f f i c c i t a t i o n from t h e highway p a t r o l . Under t h e i n s t r u c t i o n s
given i n t h e Welch v. Thompson, supra, t r i a l , t h e r e might w e l l
have been a defense v e r d i c t , The f a c t s t h e r e were disputed.
Thompson's counsel now argues t h a t f a c t o r s , such a s Thompson's
r e c e i v i n g a t r a f f i c summons, h i s speed, t h e c a n c e l l a t i o n of h i s
insurance coverage, h i s f a i l u r e t o observe o t h e r c a r s following
Welch, and o t h e r f a c t o r s s o c l e a r l y i n d i c a t e l i a b i l i t y t h a t h i s
l i a b i l i t y was c l e a r . To make such an a s s e r t i o n now i s an example
of 20-20 h i n d s i g h t v i s i o n . During t h e highly contested t r i a l ,
a motion f o r d i r e c t e d v e r d i c t on l i a b i l i t y was made, b u t denied
by t h e t r i a l judge. The i n s t r u c t i o n s , a s commented b e f o r e , would
have allowed a v e r d i c t f o r defendant. W find that c r i t e r i o n
e
No. 2 was n o t s a t i s f i e d .
No, 3 . Did t h e insurance company give due regard t o t h e
recommendations of i t s counsel? It i s c l e a r t h a t a t t o r n e y Bennett
never evaluated t h e c a s e i n excess of $2,000, never asked f o r
more a u t h o r i t y , and never suggested more. The company a t a l l
times followed h i s recommendations.
Thompson's b r i e f on t h i s p o i n t suggests a "historyf' on
t h e p a r t of a t t o r n e y Bennett of taking law s u i t s t o t r i a l r a t h e r
than seeking t o s e t t l e them, From t h i s , Thompson develops an
argument t o t h e e f f e c t t h a t t h e company should n o t have r e l i e d
on i t s c o u n s e l ' s advice. Perhaps insurance companies should
question t h e i r c o u n s e l ' s advice, b u t t o put a connotation of
bad f a i t h on following c o u n s e l ' s advice does n o t impress us.
W f i n d t h a t c r i t e r i o n No, 3 was n o t met.
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No. 4, Was the insured informed of all demands and offers?
Obviously he was informed of the $9,500 offer for a covenant
not to sue. As to another offer of a $15,000 settlement by both
defendants during trial, there is a dispute in the evidence and
thus an issue of fact. Viewing the facts favorably to the plain-
tiff, criterion No. 4 would be satisfied.
No. 5. Did the insured demand that the insurer settle within
policy limits? While there is some dispute in the testimony
concerning whether Thompson made any meaningful demand, we need
not go into details. It was disputed but there was evidence
sufficient, if other matters were proven, to raise a fact issue.
Thus, criterion No. 5 would be satisfied,
No. 6. Did the company give due consideration to offers
of contribution by Thompson? Thompson made no offer of contri-
bution. He would rely on his employer's offer of contribution
through its insurer St. Paul. Attorney ~ ' ~ o n n e l l
apparently
suggested a split on contribution to an offer of settlement
during trial of $15,000 made by Welch's attorney Landoe. The
split would have been $8,500 due from the employer Haggerty-
Messmer and $6,500 due from ~hompson'sinsurer State Farm. But,
even here, attorney O'Connell never agreed to release Thompson
under the theory of indemnity. Criterion No. 6 was not met.
In our foregoing discussion of the six criteria, we found
that only two, Nos. 4 and 5, raised fact questions. These two,
concerning whether Thompson was informed of all demands and offers
and whether Thompson, in fact, made any meaningful demand are
not enough, standing by themselves, to establish bad faith.
They are but two elements which standing by themselves are not
bad faith.
Thus, of the six criteria set out in Fowler, Nos. 1,2,3 and
5 were simply not met. There is no question really on the
adequacy of the investigation by State Farm. That mistakes,
omissions, or misjudgment may have been made is apparent; but
these do not make bad faith. Bad faith was instructed by the
trial judge as meaning "a willful failure to respond to plain
and well-understood obligation. I'
Just as in Fowler, after reviewing all of the evidence,
even that which is otherwise questioned as issues on this
appeal and to which we have not directed our attention, and
taking it as a whale, there was a lack of proof of bad faith
or negligence amounting to bad faith and the issue should
not have been submitted the jury.
Hereinbefore, we assumed that a valid offer of settlement
within policy limits was made. The offer of settlement was for
a covenant not to sue, It would not and was not intended to
exonerate Thompson because Thompson's employer, Haggerty-
Messmer was still a defendant. Haggerty-Messmer's right of
indemnity against Thompson remained so Thompson's possible
liability remained almost the same. Mad State Farm accepted
that offer, it would not have been protecting Thompson under the
circumstances.
Even during the trial, when contribution by St. Paul Fire
and Marine Ins, Co, was offered, there was never an agreement
to release Thompson fully; although it is true the counsel
testified that he assumed he might have. Counsel did not com-
municate this to State Farm.
Thus, no offer or demand for settlement within policy limits
was made,
Accordingly, the judgment is reversed and the case dis-
missed, each party to pay its own costs.
A Concur:
Assaciate Justices.