Summary
In Wasserman, this court, relying on Slater v. Motorists Mutual Ins. Co. (1962), 174 Ohio St. 148, paragraphs one and two of the syllabus, sustained a jury instruction defining bad faith as "embrac[ing] more than bad judgment or negligence," and as equivalent to fraud, deceit, or dishonest purpose, etc.
Summary of this case from Spitler v. State Auto MutOpinion
No. 72-197
Decided December 6, 1972.
Insurance — Liability — Action by insured against insurer — Refusal of insurer to settle claim — Lack of good faith alleged — Judgment in excess of liability sought — Charge to jury — "Bad faith" construed — Evidence — Conduct of counsel.
A charge to a jury on the issue of "bad faith" in an action by an insured against his insurer to recover the amount, in excess of the policy limit, of a judgment rendered against him in a tort action, which quotes verbatim paragraph two of the syllabus in Slater v. Motorists Mutual Ins. Co., 174 Ohio St. 148, is a complete and correct statement of the law of Ohio and a proper charge to the jury.
APPEAL from the Court of Appeals for Cuyahoga County.
Myron E. Wasserman, plaintiff-appellee, is the duly qualified and appointed Trustee in Bankruptcy for Steve Koren, Inc.
The Buckeye Union Casualty Company, defendant-appellant, issued a liability insurance policy to Steve Koren, Inc., covering the operation of its tavern and restaurant business at 1620 East 66th Street, Cleveland, Ohio. The policy had a $10,000 liability limit for damage to one person, and also included the standard provision that the insurer would defend any lawsuit against the insured.
One Betty Coventry allegedly sustained injuries on the insured's premises and sued Steve Koren, Inc., in the Common Pleas Court of Cuyahoga County for $200,000 in damages. Koren turned the suit papers over to Buckeye for defense, and Buckeye engaged the services of an attorney to defend the action. At pre-trial, Betty Coventry offered to settle for $8,500. Buckeye refused to divulge the policy limits and refused to settle. Steve Koren, the president of Steve Koren, Inc., was not present or represented by independent counsel at the pre-trial, nor was he advised of Betty Coventry's offer to settle.
The case was tried to a jury, which returned a $60,000 verdict for Betty Coventry against Steve Koren, Inc. Then Betty Coventry offered to settle her $60,000 judgment for $10,000 while that cause was on appeal. This information was not communicated to Koren, and the offer was rejected by Buckeye. A notice of appeal was timely filed in the Court of Appeals, but due to Buckeye's failure to file a bill of exceptions, the appeal was dismissed.
The record here indicates that Steve Koren did not take part in the decisions rejecting settlement offers, but he agreed that the case should be appealed after judgment was rendered. He was neither advised of his right to independent counsel for the amount of the complaint in excess of his liability coverage nor informed when the appeal was dismissed. Steve Koren did testify, however, that he was satisfied with the manner in which the attorney for Buckeye handled the litigation.
Betty Coventry instituted proceedings to collect on her judgment of $60,000, and to levy upon the assets of Steve Koren, Inc. Steve Koren, Inc., filed a voluntary petition in bankruptcy, and Myron E. Wasserman, plaintiff-appellee in the instant case, was appointed the Trustee in Bankruptcy.
The trustee then filed the present action, alleging that Buckeye conducted an inadequate investigation and failed to notify Steve Koren of the settlement offer, thus making it impossible to settle the case; and that $50,000 damages were incurred because of the manner in which Buckeye handled the defense in Betty Coventry's personal injury action.
The case was tried to a jury, which rendered a verdict for Buckeye. The major item of evidence consisted of two volumes of the bill of exceptions which the appellant had failed to timely file in the original appeal to the Court of Appeals in the Coventry suit.
That record included the depositions of the bartender and the porter employed by the tavern. They testified that the floor was in good condition at the time of Betty Coventry's alleged injury and also as to Betty Coventry's alleged intoxicated condition at the time the accident occurred.
Wasserman, the trustee, appealed on the grounds that the trial court's charge on the issue of the good faith of the appellant was incorrect in that it should have contained an instruction on the issue of negligence.
The Court of Appeals reversed the judgment of the Court of Common Pleas, and Buckeye, in its appeal to this court, claims that the trial court's decision on the issue of good faith was an accurate statement of the law, and that the comments of the prevailing party during final argument as to the possible interest of the opposing counsel were not prejudicial when such opposing counsel was a principal witness in the case.
Pursuant to the allowance of a motion to certify the record, this case is before us.
Mr. Frank Leonetti, for appellee.
Messrs. Kitchen, Messner Leyshon and Mr. Charles W. Kitchen, for appellant.
The Court of Appeals based its reversal in the present case upon the alleged error that the trial court's charge to the jury as to what constitutes a lack of good faith was not a complete or correct statement of the law applicable to the facts in the case. In its opinion, the court ( 29 Ohio App.2d 7), at page 19, concluded:
"The court's charge to the jury, set out above, failed to afford the jury the aid it ought to have received from the court. It had no special reference to the facts, circumstances and law in this case, and was merely a short statement on the general subject of fraud and bad faith. The charge ought not only to be correct but to be so adapted to the case and so explicit as not to be misconstrued or misunderstood by the jury in the application of the law to the facts as they find them from the evidence. Little Miami Rd. Co. v. Wetmore (1869), 19 Ohio St. 110. "
The court concluded further that the charge was inadequate, specifically in that it was "limited to bad faith in terms of fraud and deceit. It did not include the broader definition of lack of good faith of the majority view, and thus was not a complete statement of the law of good faith applicable to the facts in the present case."
The Ohio law of the liability of an insurer to an insured, involving the recovery of a judgment in excess of its liability, was stated specifically by this court in Hart v. Republic Mutual Ins. Co. (1949), 152 Ohio St. 185, and Slater v. Motorists Mutual Ins. Co. (1962), 174 Ohio St. 148.
The syllabus in Hart reads:
"1. A liability insurance company which reserves the right to settle, as it deems expedient, any claim against its insured is not liable to the insured for negligence in settling or refusing to settle such a claim.
"2. Such company is liable to respond in damages to its insured if it fails to act in good faith with respect to the settlement of such a claim."
That case involved refusal by the defendant insurance company to settle a claim within the limits of its liability to the insured under a policy of insurance, leading to a judgment for the plaintiff against the insured in excess of the insurer's coverage. The insurer's defense in justification of its conduct was that it believed there was no liability for the injuries sustained by the insured. Such a belief, the court said, "may not be an arbitrary or capricious one. The conduct of the insurer must be based on circumstances that furnish reasonable justification therefor."
This court has elaborated further on the concept of bad faith or lack of good faith in the Slater case, supra. Paragraphs one and two of the syllabus state:
"1. In an action by an insured against his insurer to recover the amount of a judgment rendered against him in a tort action in excess of the policy limit, such insured must allege and prove a lack of good faith on the part of the insurer either in negotiations respecting a settlement of the claim against the insured or in the conduct of the trial of the tort action on behalf of the insured.
"2. A lack of good faith is the equivalent of bad faith, and bad faith, although not susceptible of concrete definition, embraces more than bad judgment or negligence. It imports a dishonest purpose, moral obliquity, conscious wrongdoing, breach of a known duty through some ulterior motive or ill will partaking of the nature of fraud. It also embraces actual intent to mislead or deceive another."
The issue in Slater was whether the insurer's failure to make official disclosure of its maximum liability under the policy held by the insured, thus preventing settlement, amounted to bad faith. In holding that it did not, this court reaffirmed the view that "bad faith" was not merely negligence or bad judgment but the active and intentional purpose to mislead or breach a known duty.
In the instant case, the trial judge gave as his charge on "bad faith" paragraph two of the syllabus in Slater, supra. Insofar as the Slater case sets out the essential elements of "bad faith" as something more than mere negligence or bad judgment and implying a dishonest purpose, the charge was a correct and complete statement of the law.
Since there was sufficient evidence from the bartender and the porter to raise a question as to the cause of Betty Coventry's injuries, appellant's decision to appeal cannot be classified as capricious or arbitrary. The failure to file a bill of exceptions is no more than negligent conduct which does not constitute "bad faith" under the standards set by this court.
Although not included or mentioned in the syllabus or opinion of the Court of Appeals, the journal entry in that court also finds Assignment of Error (4), "Misconduct of counsel for the prevailing party," to be well taken and disposes of it in these words:
"The remarks of counsel for defendant-appellee in closing argument insinuating that counsel for plaintiff-appellant was the sole person who was interested in the plaintiff's action or who would benefit from a verdict for plaintiff were irrelevant and prejudicial. The trial court committed prejudicial error in not sustaining objection to them."
After a careful reading and consideration of the record before us, we disagree. Counsel for appellee was a witness for plaintiff at the trial, and, as such, he was subject to cross-examination and to the same tests for credibility as any other witness. Under the circumstances, we do not find the remarks of counsel for appellant in closing argument to constitute misconduct, or to be prejudicial.
The judgment of the Court of Appeals is reversed and the judgment of the Court of Common Pleas is affirmed.
Judgment reversed.
O'NEILL, C.J., SCHNEIDER, HERBERT, STERN and LEACH, JJ., concur.
BROWN, J., dissents.