Appeal from the United States District Court for the Western District of Pennsylvania.
Kalodner, Hunter and Garth, Circuit Judge.
We are called upon to determine whether the district court properly granted summary judgment to the garnishee insurance company in this proceeding by the death action verdict winner to recover so much of the judgment as exceeded the insurance coverage. We hold that the record presented disputed issues of material fact and that summary judgment was therefore improperly granted.
On February 28, 1963 Leo C. McGrath was killed as a result of a vehicle collision with an automobile owned by Miracle Mile Rambler, Inc. (Miracle Mile) and driven by Benjamin H. Kirkland, a Miracle Mile employee. Thereafter, Howard Jamison, Administrator of the Estate of McGrath, commenced a wrongful death and survival action against Miracle Mile and Kirkland in the U.S. District Court for the Western District of Pennsylvania at Civil Action No. 63-1028.
At the time of the accident Miracle Mile had in effect an insurance policy issued by Peerless Insurance Company (Peerless) which indemnified Miracle Mile for automobile liability up to $100,000.00. In accordance with the policy Peerless undertook the defense of both Miracle Mile and Kirkland. Before as well as during trial, Peerless, on behalf of the defendants, engaged in settlement negotiations with counsel for Jamison. No settlement agreement was reached. Consequently, the case was submitted to a jury which returned a verdict in favor of Jamison and against Miracle Mile and Kirkland in the amount of $155,000.00. This judgment was duly entered on July 2, 1965.
After filing a motion for a new trial and paying the $100,000.00 policy limit plus interest into the court, Peerless terminated its representation of Miracle Mile and Kirkland. The district court denied the motion for a new trial and an appeal to this Court was filed by Miracle Mile but not pursued.
Thereafter, in June, 1967, Miracle Mile commenced suit against Peerless in the district court for the Western District of Pennsylvania (Civil Action No. 67-813) to recover the amount of its liability to Jamison in excess of the insurance coverage. This complaint, seeking $55,000.00 plus interest, alleged that Peerless, as insurer, "negligently and in bad faith refused to settle" the wrongful death action "within the policy limits of $100,000.00." Although Jamison had notice of Miracle Mile's excess judgment action against Peerless, he did not intervene nor was he joined as a party. On April 10, 1969, Miracle Mile settled its $55,000.00 action against Peerless for $7,500.00. This settlement, less counsel fees, has been retained in trust for Jamison. That same date the district court entered an order dismissing the excess judgment action (Civil Action No. 67-813) with prejudice pursuant to the stipulation and release entered into by Miracle Mile and Peerless.
Thereafter, on April 21, 1969, Jamison filed a praecipe for a writ of execution at Civil Action No. 63-1028 (Execution No. 4637) naming Peerless as garnishee. This praecipe alleged that the garnishee, Peerless, had failed "to act in good faith and without negligence" in its handling of Jamison's wrongful death action against Miracle Mile, which thereby resulted in a judgment in excess of the insurance coverage. Finally, the praecipe stated that this execution attachment constituted an assignment to Jamison of the excess judgment claim allegedly owing from Peerless to Miracle Mile. The writ of execution was issued by the district court pursuant to the praecipe on April 21, 1969.
Peerless answered this praecipe by alleging, among other affirmative defenses, the settlement and dismissal with prejudice of Miracle Mile's excess judgment action (Civil Action No. 67-813).
To establish the garnishment claim, Jamison sought discovery of the negotiations which resulted in the settlement of the $55,000.00 excess judgment suit for $7,500.00 as well as discovery of the unsuccessful settlement discussions in the underlying wrongful death action. Jamison attempted to depose George Buckler, Esq., who had been Peerless' counsel and had represented Miracle Mile and Kirkland in the wrongful death action and Peerless in the excess judgment action.
Peerless moved for a protective order to preclude the taking of an oral deposition of its counsel on the ground that discovery would cause "unreasonable annoyance and undue burden." On June 4, 1971 the district court granted the protective order on the basis that Jamison was seeking to discover work products and "failed to show ...