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Lawskills.com Georgia Caselaw
KLAG et al. v. HOME INSURANCE COMPANY.
42780.
Complaint. Fulton Civil Court. Before Judge Langford.
PANNELL, Judge.
1. The institution by appellant of a suit for damages against the driver of the insured automobile, one month prior to the running of the statute of limitation, does not as a matter of law represent an acceptance of the ruling of the trial judge enumerated as error on this appeal from the sustaining of demurrers to a suit brought by appellant on an alleged breach of contract settlement between appellant and the liability insurer of the owner of the insured automobile. The filing of this second action would not be such an admission in judicio or election of remedy (assuming the election of remedy rule could be applied in such instance) as would require a dismissal of the appeal. The election, if there was one, was first made by filing the first suit and the appeal to pursue the first suit. Barbee v. Barbee, 201 Ga. 763, 766 (2) (41 SE2d 126); Randolph v. Brunswick & Birmingham R. Co., 120 Ga. 969 (1) (48 SE 396). The motion to dismiss the appeal is overruled.
2. "An implied promise may be a sufficient consideration for an express promise." Loewenherz v. Weil, 33 Ga. App. 760 (1) (127 SE 883). "A promise of another is a good consideration for a promise." Code 20-304. The promises of the respective parties alleged in the present case are of such character as to be capable of enforcement against the parties making them, they being sufficiently definite both as to time and subject matter, and being so, the contract is neither without consideration nor unilateral. Pepsi-Cola Co. v. Wright, 187 Ga. 723, 727 (1) (2 SE2d 73).
3. Even though it is executory, a parol contract between an injured party, injured by the alleged negligent operation of an automobile, and the liability insurance carrier on the automobile, settling the alleged claim is not a contract by the insurer to answer for the debt, default, or miscarriage of another nor is it a contract not to be performed within one year of the making thereof, though no express time limits stated for its consumation. See Code 20-401, Paragraphs (2, 5).
Mr. and Mrs. Donald J. Klag brought an action against the Home Insurance Company as defendant alleging the following:
"2. Defendant has damaged plaintiffs in the amount of $1,750 by reason of its breach of its contract with plaintiffs for the settlement of certain liability claims plaintiffs asserted against one of defendant's insureds and in addition is liable to plaintiffs in the amount of $8,500 as expenses of litigation, as shown by the facts hereinafter set out.
"3. On April 14, 1965, plaintiff, Donald J. Klag, was driving his automobile, entering Highway 23 from Oakmont Road in Doraville, Georgia, when he was struck by a DeKalb County police car occupied by two DeKalb County police officers coming north on Highway 23. Donald J. Klag and the two DeKalb County police officers (hereinafter called, respectively, "driver" and "passenger") were injured in the collision.
"4. DeKalb County was, at the time of said collision, covered by a liability insurance policy issued by defendant, The Home Insurance Company, which said insurance contract provided coverage for claims arising from said collision.
"5. Subsequent to the collision and pursuant to its said public liability insurance contract with DeKalb County defendant, acting through its agent, Robert L. Shaughnessy, who is employed by defendant as a 'staff claims adjuster,' undertook to and did investigate the circumstances surrounding said collision.
"6. Subsequent to the collision and after being contacted by said Shaughnessy, plaintiffs employed Lloyd T. Whitaker, an attorney at law and a partner in the law firm of Alston, Miller & Gaines, to represent their interest in connection with said collision. Whitaker was at all times fully empowered to act for plaintiffs, in all respects, in the premises and they have and did fully approve and ratify all of his said acts.
"7. On July 19, 1965, and following earlier correspondence and discussions of the matter by telephone, said Shaughnessy and Whitaker met to discuss the claims of plaintiffs against DeKalb County. At this meeting Shaughnessy said he wished to undertake further investigation of the case and obtain additional documents before making any offer of settlement. Plaintiffs were to obtain and furnish to defendant copies of all documents substantiating expenses relating to the incident and information relative to the valuation of the Klag automobile.
"8. After obtaining from plaintiffs the information requested by Shaughnessy, Whitaker attempted on three occasions to contact Shaughnessy by phone without success and in each instance left his name and telephone number with defendant's switchboard operator with the request that Shaughnessy return the call. Finally, on August 24, 1965, Whitaker wrote Shaughnessy advising that he had the requested information and was prepared to discuss settlement and, by telephone, an appointment was set up for September 1, 1965, in Whitaker's office.
"9. On September 1, 1965, plaintiffs and the defendant, acting through their respective duly authorized agents as hereinbefore set out, entered into a contract for the settlement of the liability claims which plaintiffs had asserted against DeKalb County, Georgia, insurance with respect to which claims were provided by defendant as aforesaid.
"10. The basic terms of the original contract of settlement were set out in a confirming letter from plaintiffs' agent and attorney, Lloyd T. Whitaker, to the defendant's said agent and claims adjuster, Robert L. Shaughnessy, a copy of which letter is attached hereunto as Exhibit 'A' and made a part of this paragraph and petition.
"11. On December 1, 1965, plaintiffs and the defendant, acting as aforesaid through their said respective duly authorized agents, agreed to a modification of the aforesaid contract for the settlement of plaintiffs' alleged claims against DeKalb County.
"12. The basic terms of said modification and the contract as so modified were set out in a confirming letter from plaintiffs' said agent, Whitaker, to defendant's said agent, Shaughnessy, a copy of which letter is attached hereunto as Exhibit 'B' and made a part of this paragraph and petition.
"13. Defendant's agent, Shaughnessy, received both of said letters, plaintiffs' Exhibit 'A' and 'B' hereunto, and not with standing repeated efforts on behalf of plaintiffs to secure performance by defendant of its agreement, plaintiffs received no reply from defendant until on plaintiffs' initiative in contacting on separate occasions both said Shaughnessy and his superior, defendant's agent and 'Claims Superintendent' Mr. B. F. Pierce, on January 18, 1966, defendant denied having settled said claims and in any event repudiated the settlement and advised that said Home Insurance Company was 'denying any liability' of their insured for plaintiffs' claims.
"14. The terms of said denial and repudiation were confirmed in defendant's agent Shaughnessy's letter to plaintiffs' agent Whitaker on January 19, 1966, a copy of which is attached hereunto as Exhibit 'C' and made a part of this paragraph and petition.
"15. Although plaintiffs have at all times subsequent to said settlement stood ready to perform their obligations under said settlement agreement, as modified, and have made diligent effort to secure defendant's performance thereof, defendant has, in bad faith, fully repudiated said agreement and has conducted itself in bad faith in its dealings with plaintiffs leading up to, during and following, its repudiation of said settlement agreement.
"16. On January 21, 1966, said Pierce, Shaughnessy's immediate superior, advised Shaughnessy to 'close his file at this time and cease and desist from further discussion of the case with (Whitaker).'
"17. Thereafter, on February 7, 1966, plaintiffs' agent and attorney, Whitaker, wrote to defendant's president, Mr. Kenneth Black, in an effort to persuade defendant to honor its contractual obligation to plaintiffs, a copy of which letter is attached hereunto as Exhibit 'D' and made a part hereof. In response Whitaker received a letter from one of defendant's vice presidents, John H. Washburn, the final paragraph of which provides:
" 'In summary, Mr. Whitaker, we are at a loss to understand the progression of negotiations represented by the copies of the letters you sent us when not only does our staff indicate they did not take place, but sound logic leads us also to this conclusion.'
"18. Defendant's refusal to honor its contract with plaintiffs, as aforesaid, has caused plaintiffs unnecessary trouble and expense.
"19. Defendant's actions in the premises have been in bad faith for which plaintiffs are entitled to an additional recovery of $8,500 as reasonable expenses of litigation for the prosecution of this action in accordance with the provision of law relative thereto and as set out in Ga. Code Ann. 20-1404.
"Wherefore, plaintiffs pray: (1) That process issue in accordance with law requiring defendant to be and appear and answer this petition as by law provided: (2) That they have verdict and judgment against the defendant in the sum of one thousand seven hundred fifty and No/100 ($1,750) dollars together with reasonable expenses of litigation in the amount of $8,500 plus all costs of this action."
Exhibit "A" attached to the petition was a letter from plaintiffs' attorney addressed to Mr. R. L. Shaughnessy, claims Investigator of the Home Insurance Company as follows:
"September 1, 1965.
"Dear Mr. Shaughnessy:
"This will confirm our settlement of the Klags' claims arising out of the collision which occurred with a DeKalb County police car on April 14, 1965, on the Buford Highway.
"The terms of the settlement were that the Klags will release DeKalb County in such form as you request in return for $1,750 in cash together with separate notarized statements from each of the officers in the DeKalb County police car which was involved in the collision, which statements contain a statement absolving Mr. King [Klag?] of any responsibility for the accident as well as separate covenants not to sue from each of these officers.
"I will pass along to the Klags your suggestion that the bulk of the automobile can be disposed of by contacting Automobile Disposal Company in Forest Park. We recognize, of course, that if there is any monetary consideration paid for the bulk that it goes to your company.
"Lloyd T. Whitaker"
Exhibit "B" is a letter addressed to Mr. Shaughnessy as follows:
"December 2, 1965.
"Dear Mr. Shaughnessy: Re: Mr. and Mrs. Donald J. Klag.
"This will confirm our telephone conversation yesterday in which we agreed to proceed with the settlement of the subject claims notwithstanding your inability to obtain a covenant not to sue from the police officer-passenger in the DeKalb County vehicle.
"It is my understanding, therefore, that we will receive within a week copies of the form of release to be executed by Mr. and Mrs. Klag and the covenant not to sue from the police officer-driver of the DeKalb County vehicle. We will attend to the proper execution of the releases and exchange them for your company's check in the amount of $1,750, the agreed upon dollar figure of settlement.
"We appreciate your efforts in connection with obtaining the other covenant and, notwithstanding, you[r] inability to do so, we are pleased to conclude the matter on this basis.
"Lloyd T. Whitaker"
Exhibit "C" is a letter from Mr. Shaughnessy in answer to plaintiffs' attorney as follows:
"January 19, 1966.
"Dear Mr. Whitaker:
"This will confirm our telephone conversation of the above date in which I informed you that we are denying liability for the accident captioned above.
"I further wish to inform you that I have not agreed verbally or in writing to any settlement figure in the above matter. I further wish to inform you that to the best of my knowledge, I have never mentioned any figure upon which we would agree to settlement.
"Robert C. Shaughnessy Exhibit "D" was a letter from attorney for plaintiffs to the president of the defendant company as follows:
"February 7, 1966.
"I am taking the liberty of writing directly to you with the hope of having my faith restored in the integrity of your company.
"To make a long story short, I settled a personal injury claim on behalf of my clients, Mr. and Mrs. Donald J. Klag, against DeKalb County, Georgia which is insured by your company, with Mr. Robert C. Shaughnessy, who is a staff claims adjuster with your Atlanta office. This settlement has not been honored and in fact it has now been not only repudiated but even the very fact of settlement has been denied. I enclose herewith correspondence which not only documents fully my position but which illustrates what I consider to be a complete exhaustion of remedies locally with representatives of your company. This correspondence, incidentally, is the complete file in that the first correspondence which I received from anyone with your company were the letters of January 19 and 21, 1966 respectively from Mr. Shaughnessy and Mr. Pierce.
"It is any intention, unless my settlement contract with Mr. Shaughnessy is honored, to file suit against your company on behalf of my clients. I say this not as a threat but merely as a statement of my intentions and to give you an opportunity to rectify what I consider to be an unconscionable breach of contract.
"I will be happy to discuss this matter with you or your representative in person or by telephone if you are interested.
Exhibit "E" was the reply received to Exhibit "D" as follows:
"Dear Mr. Whitaker:
"President Black has referred to me, as executive in charge of the Loss-Claim Department, your letter of February 7, 1966 with enclosures.
"My delay in answering has been to permit an opportunity to investigate this matter with our Atlanta office, and particularly with Messrs. Shaughnessy and Pierce of that office.
"Mr. Shaughnessy has advised us unequivocally that he at no time made an offer of settlement to you on behalf of DeKalb County, our insured, or the driver of the police car. The facts of the accident clearly indicate that your client, Mr. Klag, entered a principal highway from a side street which was controlled by a stop sign. The police vehicle was on an emergency call with their red light on and siren working.
"Further, you are undoubtedly aware that both police officers received injuries, and I understand that the passenger-officer received most substantial, and very probably disabling, injuries. You must realize that it is not within the province of an insurance adjuster to attempt to secure covenants from his own people in a situation of this kind. We could not do this even if the liability appeared to be in favor of your client. That is a legal matter for which our insured driver and passenger should have proper representation. We have determined from both officers that Mr. Shaughnessy in fact did not discuss with them the securing of covenants.
"We understand that your client is uninsured and can well realize both his and your concern over the present situation.
"In summary, Mr. Whitaker, we are at a loss to understand the progression of negotiations represented by the copies of letters you sent us when not only does out staff indicate they did not take place, but sound logic leads us also to this conclusion."
The following demurrers to the petition were sustained by the trial judge:
"(2) Defendant demurs generally to said petition on the ground that it fails to set forth any cause of action against this defendant in that the petition fails to allege or show that there was any consideration for the alleged agreement.
"(3) Defendant demurs generally to said petition on the ground that the same, along with the attached documents, shows on its face a total failure of consideration.
"(4) Defendant demurs generally to said petition on the ground that the same shows on its face that the alleged contract was not sufficiently definite to be enforced by the courts.
"(6) Defendant demurs generally to said petition on the ground that the same shows on its face that it has not satisfied the provisions of the Statute of Frauds, Title 20, Section 401, Ga. Code Anno.
"(7) Defendant demurs generally to said petition on the ground that the same shows on its face that it has not satisfied the provisions of the Statute of Frauds, Title 20, Section 401, Section 2, Ga. Code Anno.
"(9) Defendant demurs generally to said petition on the ground that the same does not satisfy the Statute of Frauds, Ga. Code Anno., Title 20, Section 401 (5)."
Upon appeal to this court a motion was made to dismiss the appeal on the ground that subsequent to the appeal Mr. Klag filed suit against the driver of the vehicle seeking damages in excess of $10,000 arising out of the same collision, and that by doing so he has acquiesced in the order sustaining the general demurrers to the petition in this case and that this renders moot the joint appeal of Mr. and Mrs. Klag.
Only Headnote 3 requires elaboration.
Pretermitting the question of whether grounds 6, 7, and 9 of the demurrers sustained were insufficient to present any question for decision (a) because the demurrers do not point out wherein the "petition" shows it "has not satisfied the provisions of the Statute of Frauds" or (b) because the Statute of Frauds referred to in the demurrers is described only as to title, section and paragraph of "Ga. Code Anno.," etc., and is therefore defective because no law of the State of Georgia or the statute of frauds of the State of Georgia is sufficiently set forth (see CTC Finance Corp. v. Holden, 221 Ga. 809, 811 (147 SE2d 427); Parrott v. Fletcher, 113 Ga. App. 45, 46 (3) (146 SE2d 923)), we are of the opinion that the contract alleged in the petition does not violate the Statute of Frauds of the State of Georgia in any of the particulars claimed.
The provisions of the Statute of Frauds of this state (Code 20-401 (2, 5)) insofar as applicable to the questions here involved are as follows: "To make the following obligations binding on the promisor, the promise must be in writing, signed by the party to be charged therewith, or some person by him law-fully authorized, viz.: . . .
"2. A promise to answer for the debt, default, or miscarriage of another. . .
"5. Any agreement . . . that is not to be performed within one year from the making thereof."
The appellee, in its brief, has practically conceded that demurrer number 9, involving Paragraph 5 of Code 20-401, was improperly sustained. With this we agree. See in this connection Henderson v. Touchstone, 22 Ga. 1; Burney v. Ball, 24 Ga. 505 (4); and Alderman v. Chester, 34 Ga. 152 (2), ruling that possibility of performance within one year dispenses with the necessity that the contract be in writing to be enforced under this particular paragraph of the Statute of Frauds.
We come next then to the question whether the alleged contract was a contract by the insurer to answer for the debt, default, or miscarriage of the insured.
It appears to us that the agreement here sued upon was not, on the part of the insurer, a promise to answer for the debt, default, or miscarriage by another required by the Statute of Frauds to be in writing. The insurer's contract is the promise to answer for the debt, default, or miscarriage of the insured as provided in the terms of the policy. That contract is in writing. See Brown v. Noland Co., (Ky. App. 1966) 403 SW2d 33; Ortis v. Travelers Ins. Co., 2 Mich. App. 548 (140 NW2d 791) (1966)); Regus v. Schartkoff, 156 Cal. App. 2d 382 (319 P2d 721) (1958). We quote from the case of Ortis v. Travelers Ins. Co., supra: "Travelers did agree in its written policy with [its insured] to pay certain of [its insured's] obligations which might arise in the future up to the policy limits. Travelers' oral agreement with the plaintiff was within the limits of its written agreement with [its insured]. Furthermore, Travelers' was settling not only [its insured's] potential liability but its own possible obligation to pay and its own duty to defend [its insured]." The insurer has a financial interest in the claim against the insured even though it only becomes liable to the third party when legal liability is established against the insured, and where the insurer agrees to settle its potential liability as well as the potential liability of the insured, the oral promise by the insurer to settle or pay the claim against the insured is an original undertaking and need not be in writing. See Ferst's Sons & Co. v. Bank of Waycross, 111 Ga. 229 (36 SE 773). As was said by the California court in Regus v. Schartkoff, supra: "The leading or main object of [the insurance adjuster] was not to become surety or guarantor for [their insured], but to subserve the purpose and interest of Allstate. Therefore, the promise was an original one and valid, though oral." See also Evans v. Griffin, 1 Ga. App. 327 (57 SE 921); Holt v. Empire Tire &c. Co., 33 Ga. App. 723 (127 SE 803); Palmetto Mfg. Co. v. Parker, 123 Ga. 798 (51 SE 714); Harris v. Jones, 140 Ga. 768 (79 SE 841); Fuller v. Holsomback, 42 Ga. App. 483 (156 SE 460). This is in accord with 3 Williston on Contracts (3rd Ed.), 477, p. 453 et seq., which reads in part as follows: "Where a third person promises a creditor to discharge a debt due from another to the latter, the arrangement may conceivably take one of three forms: . . .
"2. The new promisor may, with the concurrence of the original debtor and on his behalf, make his promise in substitution for the obligation of the original debtor. This arrangement when accepted by the creditor will effect a novation.
"3. The new promise may be made as in 2, except that the original debtor does not assent thereto. As a debtor's obligation can be discharged at law only by himself or by his authorized agent such an agreement does not create a legal novation; but since a creditor who had agreed to the substitution would not be allowed by equity to enforce his claim against the original debtor, the transaction may be called an equitable novation. If the agreement is of the second kind, and the debt of the party primarily liable is thereby discharged, the new promisor who thus assumes the obligation in consideration of the discharge of the original debtor, is bound, though his promise is oral. The discharge of the old debt at the request of the new promisor is as adequate a quid pro quo for the creation of a new original debt as the payment to the creditor of an amount of money equal to the old debt would be. . .
"The basis for the rule is that the very consideration of the second promise, the necessary operation of the new agreement, is to discharge the first liability at the moment of creating the new one, so that the creditor cannot be said to have two persons charged for the same debt; and if there is only one person liable, there can be nothing to which his promise can be said to be collateral. There is a new, original, and independent engagement, founded upon the merger and extinguishment of the preexisting debt or demand and operating by way of novation and substitution. To support the transaction, as an original undertaking, there is no necessity for an agreement, express or implied, that the debt is to be assigned to the promisor, or that he should have funds of the original debtor in his hands to reimburse himself; and the promise, to render it valid as an original undertaking, does not require a consideration, independent of the discharge of the original debtor, moving between the promisor and the promisee and beneficial to the promisor." (Emphasis supplied.)
This court in Langford v. Milwaukee Ins. Co., 101 Ga. App. 92, 94 (113 SE2d 165) said in reference to such an agreement, "While it remained executory such a parol agreement was unenforceable as within the Statute of Frauds, it being a promise in parol to answer for the debt, default, or miscarriage of another (Code 20-401 (2)), and also a promise to revive a debt barred by the statute of limitations (Code 20-401 (6))." It is our opinion that the view heretofore expressed above is the sounder view than that expressed in the Langford case, and is in accordance with prior decisions of this court; the ruling in the Langford case therefore should not be followed. Whether the result in the Langford case was otherwise correct because the promise was one to revive a debt barred by the statute of limitation, we do not decide.
Judgment reversed. Bell, P. J., and Whitman, J., concur.
Neely, Freeman & Hawkins, Edgar A. Neely, Jr., Joe C. Freeman, Jr., Thomas H. Harper, Jr., for appellee.
Nall, Miller, Cadenhead & Dennis, Theodore G. Frankel, Thomas S. Carlock, Alston, Miller & Gaines, Lloyd T. Whitaker, Kenneth W. Gilchrist, for appellants.
ARGUED MAY 1, 1967--DECIDED OCTOBER 19, 1967-- REHEARING DENIED NOVEMBER 17, 1967--CERT. APPLIED FOR.
Friday May 22 19:26 EDT


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