holding no claim of bad faith could lie where insurer settled claim within policy limits as provided by terms of insurance contract, and noting that cases recognizing bad faith claim were distinguishable in part because "the instant insured has not been exposed to further liability, over and above the limits of his policy"Summary of this case from Romstadt v. Allstate Ins. Co.
Nos. 84-686 and 84-687
Decided July 31, 1985.
Insurance — Policy provides that insurer may settle claims as it deems appropriate — No breach of good faith where claim settled within policy limits.
O.Jur 3d Insurance §§ 1029, 1031, 1032.
Where a contract of insurance provides that the insurer may, as it deems appropriate, settle any claim or action brought against its insured, a cause of action alleging a breach of the insurer's duty of good faith will not lie where the insurer has settled such claim within the monetary limits of the insured's policy.
APPEALS from the Court of Appeals for Cuyahoga County.
The causes herein have been consolidated since the parties and issues are identical, although the facts involved in each cause arise out of separate claims and accidents based on the use of appellee Victor Marginian's 1977 Buick which was insured by a policy issued by appellant, Allstate Insurance Company.
In case No. 84-686, on March 31, 1982, appellee's wife, Ethel, parked the Buick in question in the driveway of a friend. Sue L. Hahn claimed that Mrs. Marginian backed the automobile into her car causing damages.
In case No. 84-687, on April 7, 1981, Victor Marginian was driving his automobile in a private driveway and was involved in a collision with a car driven by Pamela Lee. In January 1982, Lee filed an action against appellee for personal injuries and property damages in the amount of $29,000.
In both cases, appellee notified his insurer, appellant, of the accident, and instructed appellant not to pay anything on either claim for the reason that both collisions occurred as a result of the negligence of the other party, and that such claims would be fictitious and fraudulent.
Notwithstanding appellee's instructions, the appellant entered into full settlement negotiations with the two claimants, and settled both claims. The claim made by Hahn was settled for a sum believed by appellee to be in the amount of $300. The other claim was settled for an amount which is not in the record, but was within the monetary limits of appellee's policy.
Appellee then commenced the instant actions in the court of common pleas against appellant, alleging that appellant acted in bad faith in ignoring his instructions to not settle the claims made against him. Appellee alleged in both complaints that he had been damaged as a result of appellant's bad faith to the extent that the premiums on the subject insurance policy, or any other similar policy he may procure, have been or will be greatly enhanced. In both actions, appellee prayed for compensatory, as well as punitive damages, and reasonable attorney fees.
Appellant filed a motion to dismiss the complaint in each case pursuant to Civ. R. 12(B)(6), on the ground that the complaint failed to state a claim upon which relief could be granted. On December 27, 1982 in case No. 84-686, and on March 21, 1983 in case No. 84-687, the trial courts dismissed the respective complaints pursuant to appellant's motions.
Upon appeal, the court of appeals reversed and remanded the consolidated causes. The appellate court found that it did not appear beyond doubt that appellee could not prove a set of facts entitling him to relief, and that under O'Brien v. University Community Tenants Union (1975), 42 Ohio St.2d 242 [71 O.O.2d 223], the trial court erred in dismissing the complaints. In so holding, the court of appeals cited this court's decisions in Hart v. Republic Mut. Ins. Co. (1949), 152 Ohio St. 185 [39 O.O. 465], and Hoskins v. Aetna Life Ins. Co. (1983), 6 Ohio St.3d 272, for the proposition that an insurance 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.
The causes are now before this court pursuant to the allowance of motions to certify the record.
John R. Vintilla, for appellee.
McNeal, Schick, Archibald Biro, Fredric E. Kramer, Sonnenschein, Carlin, Nath Rosenthal and Duane C. Quani, for appellant.
Squire, Sanders Dempsey, Richard W. McLaren, Jr., and Frank A DiPiero, urging reversal for amicus curiae National Assn. of Independent Insurers.
The novel issue presented in the causes before us is whether an insured has a cause of action against its insurer when, contrary to the wishes of the insured, the insurer settles claims lodged against the insured within the monetary limits of the insured's policy, and where the policy empowers the insurer to settle claims as it feels appropriate.
The insurance policy issued by appellant to appellee provides in relevant part:
"Allstate will pay for all damages a person insured is legally obligated to pay — because of bodily injury or property damage * * *:
"* * *
"We will defend a person insured if sued as the result of a covered auto accident. This defense will be supplied even if the suit is groundless, false or fraudulent. We will defend that person at our own expense, with counsel of our choice and, may settle any claim or suit if we feel this is appropriate." (Emphasis added.)
Appellant contends that the judicial policy of this state is to encourage early disposition of litigation and reduction of court dockets. Appellant argues that the above-emphasized language contained in appellee's insurance policy gives it the right to settle claims made against the insured, if it feels that settlement would be appropriate, given the circumstances of the particular claim.
Appellee asserts that appellant has the duty to act in good faith in the handling and payment of claims made against him, and that a breach of this duty will give rise to an action in tort against the insurer.
In Gomolka v. State Auto. Mut. Ins. Co. (1982), 70 Ohio St.2d 166, 168 [24 O.O.3d 274], we noted that:
"* * * [W]here the provisions of an insurance policy are clear and unambiguous Courts may not indulge themselves in enlarging the contract by implication in order to embrace an object distinct from that contemplated by the parties, Stickel v. Excess Ins. Co. (1939), 136 Ohio St. 49 [15 O.O. 570], paragraph one of the syllabus, nor read into the contract a meaning not placed there by an act of the parties, Motorists Ins. Co. v. Tomanski (1970), 27 Ohio St.2d 222, 226 [56 O.O.2d 133]; Olmstead v. Lumbermens Mut. Ins. Co. (1970), 22 Ohio St.2d 212, 216 [51 O.O.2d 285], nor make a new contract for the parties where their unequivocal acts demonstrate an intention to the contrary, Jackson v. Metropolitan Life Ins. Co. (1973), 34 Ohio St.2d 138, 140 [63 O.O.2d 232]; Fidelity Cas. Co. v. Hartzell Bros. Co. (1924), 109 Ohio St. 566."
Our review of the language contained in the instant policy leads us to conclude that the parties herein, expressly and unambiguously contracted to allow appellant-insurance company the option of settling any claims made against the appellee-insured, regardless of whether such claims are groundless, frivolous or fraudulent if it determined that settlement were appropriate. Given this precise language, we find that there can be no set of circumstances under which appellee's causes for relief could be granted. Therefore, we must reverse the court of appeals' decision to the contrary.
The appellate court below determined that our prior decisions in Hart, supra; Slater v. Motorists Ins. Co. (1962), 174 Ohio St. 148 [21 O.O.2d 420]; Centennial Ins. Co. v. Liberty Mut. Ins. Co. (1980), 62 Ohio St.2d 221 [16 O.O.3d 251]; and Hoskins, supra, provide appellee with a cause of action for his "bad-faith" claims against appellant. We disagree, and find these decisions to be readily distinguishable from the causes sub judice.
In Hart, we recognized a cause of action where the insurer failed to act in good faith in settling a claim brought against its insured. The facts of Hart disclose that the insurer had several opportunities to settle the claim within the insured's policy limits, but refused to do so, thus causing out-of-pocket losses for the insured.
The Slater case set forth another situation where the insurer had ample opportunity to settle a claim brought against its insured within the policy limits, but did not do so. A judgment was rendered against the insured in excess of the limits of his policy; and we held that the insured could maintain an action against his insurer for a breach of the insurer's duty to act in good faith in settling the claim lodged against the insured.
The Centennial decision involved an excess insurer subrogating to the insured's rights against the primary insurer on a bad-faith claim. Once again, the primary insurer refused to settle within the policy limits of the insured's coverage prior to trial. We held, there, that the excess insurer could subrogate and maintain the bad-faith action against the primary insurer.
Finally, in Hoskins, supra, we found a cause of action for a breach of the duty of good faith where the insurer wrongfully failed to pay the valid claim of its own insured.
The common thread running through most of these cases is that an insured has a cause of action against its insurer on a claim of bad faith, where the insurer had abundant opportunity to settle a claim made against the insured within the policy limits of the insured's coverage, but failed to do so. In most of these cases, the insured was forced to pay out-of-pocket amounts when judgment was rendered against said insured over and above the limits of his coverage.
The instant causes can be easily distinguished from the foregoing decisions because, here, we have a contract of insurance which expressly gives the insurer the option to settle claims as it deems appropriate, even if the claims brought against the insured are fraudulent or groundless. Moreover, the appellant-insurer herein, unlike the insurers in the other cases, settled the two claims made against the appellee-insured within the limits of his policy coverage. As a result, the instant insured has not been exposed to further liability, over and above the limits of his policy.
Accordingly, we hold that where a contract of insurance provides that the insurer may, as it deems appropriate, settle any claim or action brought against its insured, a cause of action alleging a breach of the insurer's duty of good faith will not lie where the insurer has settled such claim within the monetary limits of the insured's policy.
Therefore, we reverse the judgment of the court of appeals, and reinstate the judgments of the trial courts dismissing the causes herein.
CELEBREZZE, C.J., LOCHER, HOLMES, C. BROWN, DOUGLAS and WRIGHT, JJ., concur.