REL: 01/08/1999 EVANS v MUTUAL ASSURANCE
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SUPREME COURT OF ALABAMA
OCTOBER TERM, 1998-99
1970786
Owen B. Evans
v.
Mutual Assurance, Inc.
Appeal from Jefferson Circuit Court
(CV-92-05822)
PER CURIAM.
Dr. Owen B. Evans filed an action in the Circuit Court of
Jefferson County against Mutual Assurance, Inc., his medical-
malpractice insurer, alleging that Mutual Assurance had, in bad
faith or negligently, failed to settle a medical-malpractice
wrongful-death action that had been filed against him in the
Circuit Court of Mobile County. Dr. Evans also alleged that Mutual
Assurance had committed the tort of outrage. After the conclusion
of the underlying malpractice action, the Jefferson Circuit Court
entered a judgment on the pleadings on Evans's failure-to-settle
claim, holding that because in the malpractice action Evans was
never held liable for any damages that he would have to pay out of
his own pocket -- i.e., that exceeded what his insurer would pay --
he could not, as a matter of law, proceed with that claim. The
circuit court also entered a summary judgment in favor of Mutual
Assurance on the outrage claim. Dr. Evans appealed. We affirm.
On November 18, 1986, Dr. Evans, an obstetrician/gynecologist,
performed an elective abortion on an 18-year-old girl. The girl
died six days after the procedure, from a hemorrhage. Dr. Evans
was sued in a wrongful-death action in the Mobile Circuit Court.
Dr. Evans's malpractice insurer, Mutual Assurance, undertook the
defense of the malpractice wrongful-death action. The jury in the
Mobile County action returned a verdict finding Dr. Evans liable
for the death and assessing $10 million in damages. Dr. Evans's
insurance policy provided only $1 million in coverage. While the
malpractice judgment was on appeal to this Court, the parties
agreed to settle the case for $5 million. Mutual Assurance agreed
to pay the entire $5 million, even though that amount exceeded the
policy limits by $4 million.
Mutual Assurance's claim file regarding the malpractice action
against Dr. Evans showed that Mutual Assurance was aware (1) that
in the malpractice action there was strong evidence favorable to
the plaintiff on the merits of the plaintiff's case, although there
was also evidence favorable to Dr. Evans; (2) that it had been
advised by counsel that there was a 50-50 chance the jury would
find for Dr. Evans; (3) that the plaintiff' s counsel had several
times offered to settle the case for the $1 million policy limit;
(4) that a Mobile jury might return a large verdict; (5) that the
stress and publicity resulting from the malpractice claim were
having severe detrimental effects on Dr. Evans's health and his
business; and (6) that Dr. Evans maintained that he did not commit
malpractice and had agreed to let the case go to trial so long as
Mutual Assurance agreed to be responsible for the amount of any
judgment that exceeded his policy limits.
Dr. Evans claims that, given Mutual Assurance's knowledge of
the risk of a large judgment, and its knowledge of the deleterious
effect the malpractice action was having on him, Mutual Assurance
should have settled the case before trial for the $1 million policy
limits. Dr. Evans contends that even though Mutual Assurance fully
paid the claim against him, he is still entitled to damages from
Mutual Assurance for emotional distress, humiliation, damage to his
reputation, and loss of business, all of which he says resulted
from Mutual Assurance's insistence that the malpractice claim be
tried before the Mobile jury.
In Waters v. American Cas. Co. of Reading, Pa., 261 Ala. 252,
73 So.2d 524 (1954), this Court recognized that if an insurer
negligently failed to settle a case, the insurer should be liable
for the full amount of any judgment, including any excess over the
policy limits. This Court has on several occasions addressed the
tort of negligent or bad-faith failure to settle. Each time, the
Court has held that a cause of action arising out of a failure to
settle a third-party claim made against the insured does not accrue
unless and until the claimant obtains a final judgment in excess of
the policy limits. See State Farm Mut. Auto. Ins. Co. v. Hollis,
554 So.2d 387 (Ala. 1989); Turner Ins. Agency v. Continental Cas.
Ins. Co., 541 So.2d 471 (Ala. 1989); Hartford Accident & Indem. Co.
v. Cosby, 277 Ala. 596, 173 So.2d 585 (1965). See also Boyd Bros.
Transp. Co. v. Fireman's Fund Ins., 540 F.Supp. 579, 582 (M.D. Ala.
1982) (there is no injury from a failure to settle until there is
a final judgment against the insured), aff'd, 729 F.2d 1407 (11th
Cir. 1984).
Relying on a number of cases, Dr. Evans argues that a cause of
action based on an insurer's bad-faith failure to settle a claim
should be held to accrue at the time the insurer first exhibits a
bad-faith failure to settle. See Safeco Ins. Co. of America v.
Sims, 435 So.2d 1219, 1222 (Ala. 1983); Chavers v. National Sec.
Fire & Cas. Co., 456 So.2d 293, 294 (Ala. 1984); McLeod v. Life of
the South Ins. Co., 703 So.2d 362, 364-65 (Ala.Civ.App. 1996).
Each of those cases, however, involved a first-party claim wherein
the insured alleged that the insurer had, in bad faith, refused to
pay a legitimate claim made by the insured on his own policy.
Those cases hold that the cause of action accrues the moment the
insurer refuses, in bad faith, to honor the claim, and that the
insurer cannot absolve itself of liability by subsequently
tendering payment.
We find no basis for substituting the accrual rule applicable
in first-party cases for the established accrual rule applicable in
causes of action based on an insurer's failure to settle third-
party claims against its insured. It is clear from Dr. Evans's
complaint that he was never subject to a final judgment ordering
the payment of money that Dr. Evans personally -- and not his
insurer -- would have to pay, and that Mutual Assurance's paying
the settlement absolved Dr. Evans of any personal liability. The
circuit court properly entered the judgment on the pleadings.
With respect to Dr. Evans's claim alleging the tort of
outrage, we agree with the circuit court that Dr. Evans failed to
present substantial evidence indicating that Mutual Assurance
"intentionally or recklessly" engaged in "conduct so outrageous ...
and so extreme ... as to go beyond all possible bounds of decency"
and that caused "emotional distress ... so severe that no
reasonable person could be expected to endure it." American Road
Service Co. v. Inmon, 394 So. 2d 361, 365 (Ala. 1980). See Ex
parte Crawford & Co., 693 So.2d 458, 459 (Ala. 1997).
We affirm the judgment on the pleadings as to Dr. Evans's bad-
faith claim and the summary judgment on the tort-of-outrage claim.
AFFIRMED.
Hooper, C. J., and Maddox, Almon, Shores, Houston, Kennedy,
Cook, and See, JJ., concur.
Lyons, J., recuses himself.