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Bowers v. Camden Fire Insurance Association

Decided: January 22, 1968.


For reversal -- Chief Justice Weintraub and Justices Jacobs, Francis, Proctor, Goldmann, Schettino and Haneman. For affirmance -- None. The opinion of the court was delivered by Francis, J.


Plaintiff Leslie Bowers obtained a judgment against defendant Camden Fire Insurance Association for $9,000, plus interest, representing the excess over the limit of coverage of his liability policy of a judgment against him in an automobile accident suit. The Appellate Division reversed, 93 N.J. Super. 302 (App. Div. 1967), and this Court granted certification, 49 N.J. 20 (1967).

Prior to May 21, 1961, the Association had issued an automobile liability insurance policy to Bowers. By its terms, the Association agreed to pay on his behalf all sums which he became "legally liable to pay as damages" because of bodily injuries suffered by any person in an accident arising out of the operation of the insured vehicle, up to a limit of $20,000. The policy reserved to the insurer the right to "make such investigation, negotiation and settlement of any [covered] claim or suit as it * * * [deemed] expedient."

On May 21, 1961, in the daylight hours, plaintiff Bowers was involved in an accident while driving his automobile on Clinton Street in Clayton, New Jersey. The car came into

contact with Albert Seagrave, a 21-months old infant who was in the street at the time. There were no eye witnesses and no one said Bowers was driving at an unreasonable speed. He did not see the little child before the impact. There were no cars parked along the curb at or near the scene to obstruct his vision. He first became conscious that something had happened when he felt and heard a thump on the right side of his car. He stopped and found the child lying behind his right rear wheel. At this time the right side of the car was at least eight feet away from the curb. The child was taken to the hospital immediately.

Clinton Street is a residential area. Bowers was familiar with it and knew that children played along and in the street. The accident happened in front of the Seagrave boy's home located on the right side of the street in the direction in which Bowers' car was proceeding. As he approached the Seagrave home, he had a clear view of the lawn in front of it, the sidewalk and the grass plot between the sidewalk and the curb and the street.

After the accident, Bowers immediately notified his insurer, and it undertook the investigation of the circumstances and the Seagrave child's injuries. At this time it was Bowers' view that he had not been guilty of negligent driving which caused the mishap. Thereafter, a suit was brought against him in the Superior Court, Law Division, to recover damages for the child's injuries and for the consequential losses sustained by his father. In accordance with its policy obligation, the Association undertook the defense thereof.

The investigation had revealed that the child's injuries were serious. After examining the various medical and hospital reports, the attorney who was engaged by the insurer to defend the suit concluded that if the trial resulted in a verdict for the plaintiff, it would probably exceed the policy limit of $20,000. As he put it in the present case, "to me, it was a very serious case on the injury end." Therefore, in accordance with the Association's practice in such cases, he wrote Bowers calling attention to the serious nature of the

injuries. He advised that if a verdict exceeded the policy limit, Bowers would be personally responsible for the excess. The letter also informed him that he could, if he wished, engage a personal attorney to cooperate in defense of the law suit. Bowers decided against retaining independent counsel.

The record is unclear on the matter of settlement prior to trial. Plaintiff's attorney had no clear recollection of submitting any settlement demand. The insurer's attorney testified that he offered $12,000 or $14,000, probably $14,000, but the offer was neither accepted nor was any counter-proposal made. The complaint in the present action, however, alleges that prior to trial of the damage suit, the Seagraves' attorney offered to settle their claims for the policy limit, $20,000. The answer of the insurer admits that fact. In any event, the case proceeded to trial.

At the trial, the evidence of Bowers' negligence was purely circumstantial. The jury found it sufficient, however, and returned a verdict of $20,000 for the infant and $9,000 for his father's consequential losses. After the verdicts were returned, defense counsel discussed the matter with Bowers, who indicated he still felt he was not responsible for the accident. During this conversation, when advised of his right of appeal, Bowers indicated that he favored such an appeal.

Thereafter, defense counsel first sought a new trial. The grounds urged were that as a matter of law the facts proved were insufficient to justify verdicts for the plaintiffs, and that the verdicts were contrary to the weight of the evidence. After hearing argument, the trial court denied the motion. At the time the motion was argued, and before a decision was rendered, the Seagraves' attorney told the court and defense counsel that if the insurance carrier would pay its limit of $20,000, he would recommend that his clients accept it in settlement of the $29,000 judgments. Later that day, this $20,000 offer of settlement was repeated by letter to Bowers' insurer-provided attorney. The offer was conditioned upon termination of the litigation. This letter, which was admitted in evidence in the suit on the policy over defendant's

objection, expressed the opinion that a successful appeal was unlikely. Defendant was warned also that if it was unwilling to settle on the basis suggested, "and unreasonably gambles on the result of an appeal," it "could be held liable" for the excess of the judgments because of a failure to act in good faith on behalf of its insured. Four days later, Bowers was notified by the carrier's attorney that the motion for new trial had been denied. The letter advised him of Seagraves' offer to settle for $20,000, and told him also that the Association had refused because "it feels as I do, and also as you have indicated to me you felt, that there was no evidence from which the jury could have found negligence on your part, and the reasonable course is to appeal on that ground." Consequently, an appeal had been authorized. Bowers' consent to the appeal was not requested, nor was his viewpoint sought on the matter. It was suggested, however, that if he had any questions he should consult his personal counsel.

Bowers testified in the present action that this letter was the first notice he had that the Seagraves would take $20,000 in payment of the $29,000 judgments. He said also that if he had known that fact after the verdict against him he would not have indicated to trial counsel that he favored an appeal. In any event, he engaged a personal attorney, as the Association had suggested, and after consultation they decided the appeal should not be prosecuted. A letter was then written to the insurer's attorney informing him that in light of the offer of settlement, Bowers no longer favored an appeal. The view was expressed also that there was no reasonable probability of success on appeal. Therefore, the Association was requested to make the settlement and advised that good faith ...

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