Appeal from order of Superior Court, Oct. T., 1965, No. 557, affirming order of Court of Common Pleas No. 5 of Philadelphia County, Sept. T., 1964, No. 209, in case of Robert A. Gray v. Nationwide Mutual Insurance Company.
Milford J. Meyer, with him Charles H. Weidner, and Meyer, Lasch, Hankin & Poul, and Stevens & Lee, for appellant.
Michael Shekmar, for appellee.
Bell, C. J., Musmanno, Jones, Cohen, Eagen, O'Brien and Roberts, JJ. Opinion by Mr. Justice Jones. Mr. Chief Justice Bell dissents.
Robert A. Gray (Gray) instituted a trespass action against Robert B. MacLatchie (MacLatchie), for personal injuries and property loss suffered as the result of a collision which occurred at a street intersection on April 5, 1957, between Gray's automobile and an automobile owned and driven by MacLatchie. At the time of the accident, MacLatchie was insured by Nationwide Mutual Insurance Company (Nationwide), under an automobile liability policy, the coverage of which was limited to $5,000 for personal injuries plus interest, costs and property damage. Nationwide undertook to defend MacLatchie pursuant to the provisions of its insurance policy. Gray obtained a $15,000 jury verdict against MacLatchie. Post-trial motions for judgment n.o.v. and for a new trial were denied and the judgment entered on the verdict was affirmed per curiam, on May 22, 1961, by this Court: Gray v. MacLatchie, 403 Pa. 595, 170 A.2d 590 (1961).
Nationwide paid its entire policy coverage with interest and costs on account of the judgment to Gray in the sum of $5,236.67. Gray demanded the balance of the judgment, $9,763.33, from MacLatchie who, then, assigned to Gray all of his rights against Nationwide. This assignment provided that, regardless of the outcome of Gray's suit against Nationwide, any obligation of MacLatchie owed to Gray would be satisfied at the conclusion of the suit of Gray against Nationwide.
Gray, on the basis of the assignment of MacLatchie, then instituted an assumpsit action against Nationwide in the Court of Common Pleas No. 5 of Philadelphia
County to recover the balance of the judgment. Nationwide filed preliminary objections in the nature of a demurrer which the court below sustained and Gray's complaint was dismissed. Gray then appealed to the Superior Court which affirmed the trial court's order by an equally divided court:*fn1 Gray v. Nationwide Mutual Insurance Company, 207 Pa. Superior Ct. 1, 214 A.2d 634 (1965). On December 3, 1965, the Superior Court certified this appeal to our Court at Gray's costs.
Gray asserted in his complaint that, prior to the Gray-MacLatchie suit, he had made an offer to settle with Nationwide within the liability limits of MacLatchie's policy but that Nationwide had refused this offer, allegedly in bad faith, forcing Gray to bring suit;*fn2 that judgment on the verdict in that suit having been rendered at $15,000 or, in other words, $10,000 over the liability limits of MacLatchie's policy, MacLatchie had the right to be reimbursed by his insurer, Nationwide for the entire amount of the judgment; therefore, Gray concluded that, since MacLatchie had assigned all his rights against Nationwide to Gray, he, Gray, standing in MacLatchie's shoes, could sue Nationwide directly for the unpaid balance of the judgment.
We believe Gray's contentions are meritorious. Because Nationwide's preliminary objections in the nature of a demurrer were sustained by the trial court, we must assume, for purposes of this appeal, that, as alleged, Nationwide did act in bad faith by refusing to settle with Gray for an amount within the limits of MacLatchie's policy.*fn3 Nationwide's breach of its obligation gave MacLatchie a right of action against it for the amount of judgment against him in excess of the limits of the policy coverage: Cowden v. Aetna Casualty and Surety Company, 389 Pa. 459, 134 A.2d 223 (1957). ". . . [B]y asserting in the policy the right to handle all claims against the insured, including the right to make a binding settlement, the insurer assumes a fiduciary position towards the insured and becomes obligated to act in good faith and with due care in representing the interests of the insured. If the insurer is derelict in this duty, as where it negligently investigates the claim or unreasonably ...