Associates Discount Corp. of Idaho v. Yosemite Ins. Co. , 96 Idaho 249 ( 1974 )

ON PETITION FOR REHEARING

BAKER, Justice.

The Court granted respondent’s petition for rehearing on the sole issue of attorney fees. Respondent, relying upon Carter v. Cascade Insurance Co., 92 Idaho 136, 438 P.2d 566 (1968), argues that since there was a question concerning whether coverage was actually afforded in this case, that attorney fees should not have been allowed.

I.C. § 41-1839 provides in pertinent part:

“41-1839. Allowance of attorney fees in suits against insurers. — (1) Any insurer issuing any policy, certificate or contract of insurance, surety, guaranty or indemnity of any kind or nature whatsoever, which shall fail for a period of thirty (30) days after proof of loss has been furnished as provided in such policy, certificate or contract, to pay to the person entitled thereto the amount justly due under such policy, certificate or .contract, shall in any action thereafter brought against the insurer in any court in this state for recovery under the terms of the policy, certificate or contract, pay such further amount as the court shall adjudge reasonable as attorney’s fees in such action.

“(2) In any such action, if it is alleged that before the commencement thereof, a tender of the full amount justly due was made to the person entitled thereto, and such amount is thereupon deposited in the court, and if the allegation is found to be true, or if it is determined in such action that no amount is justly due, then no such attorney’s fees may be recovered.”

In Halliday v. Farmers Insurance Exchange, 89 Idaho 293, 404 P.2d 634 (1965), in considering the coverage of I.C. § 41-1839 in the context of an insurance company’s refusal to pay a specified claim under an uninsured motorist statute, this Court stated at page 301, 404 P.2d at page 639:

“An attorney fee is authorized by the statute for refusal or failure to comply with terms of a policy of insurance. Not being a penalty, such attorney fee is an additional sum rendered as compensation subsequent to a determination that the respondent is entitled to recover pursuant to the provisions of his policy.”

The Court also stated :

“The material issue is ‘Who prevails?’ If the insured prevails, then that party is entitled to reasonable attorney fees.” 89 Idaho at 301, 404 P.2d at 638.

The Carter case relied upon by respondent involved an insured motorist whose automobile was struck by an automobile driven by an uninsured motorist. The insured sent a proof of claim to the insurer but did not mention a specific sum as acceptable in satisfaction or settlement of the claim. Thus, the insurer had no way of ascertaining the amount to pay. The uninsured motorist independently denied liability and the insurer refused to pay under the insured’s uninsured motorist coverage pending a determination of the uninsured driver’s fault. The insured then successfully sued the uninsured driver and the insurer immediately tendered the amount of the judgment. This Court reversed the trial court’s allowance of attorney fees for the attorney’s work on the suit against the uninsured motorist. The essence of the Court’s reasoning was that no amount was “justly due” from the insurer until facts substantially indicative of the uninsured motorist’s liability are shown the insurer or, in the absence of such facts, until the uninsured motorist’s liability is admitted or judicially declared. In effect, the Court held that a prerequisite to coverage under the policy was proof of the amount of the uninsured motorist’s liability, if any. In so holding, the Court carefully distinguished the facts in Halliday, supra, and restricted the Halliday holding to the facts found therein. The Court stated at page 140 of 92 Idaho, at page 570 of 438 P.2d:

“In Halliday, an insured brought a direct action against his insurer on a policy provision almost identical to that of present concern. In the name of and on behalf of the insurer, an answer was filed denying that the other driver had been uninsured, had been negligent or that, if any, his negligence proximately had caused damages to the insured. The insurer also pleaded contributory negligence by the insured and unavoidable accident. The case went to trial, the only parties still being the insured, as plaintiff, and the insurer, as defendant. After the insured rested his case, the insurer abandoned all the stated defenses; left for the jury’s determination was only the amount of damages. The district court awarded attorney’s fees to the insured under I.C. § 41-1839, and this Court affirmed.

“Halliday must be limited to its facts. On close reading, those facts are quite different from the facts of the present action. For the insured’s action in Halliday was directly against the insurer, a sole defendant, and the company in effect chose to defend the uninsured motorist." (Emphasis supplied).

Further, the Court said with regard to claims against insurance companies in general under I.C. § 41-1839:

“In absence of statute expressly and precisely compelling an opposite result, the general rule is that an insurer’s refusal to pay a claim under its policy must be unreasonable before a court may award attorney’s fees as part of the recovery in a subsequent action by the claimant.” 92 Idaho at 139, 438 P.2d at 569.

Since Carter three other cases have dealt with this problem. In Stephens v. New Hampshire Insurance Co., 92 Idaho 537, 447 P.2d 14 (1968), decided subsequent to Carter, the issue involved was wind damage to a potato cellar where the insurer denied that the insured’s loss was due to “wind” but was caused by a structural deficiency. This Court allowed attorney fees for the lower court action and also awarded attorney fees on appeal without discussing the language set forth in Carter. Following Stephens the Court decided the case of United States Fidelity and Guaranty Co. v. Clover Creek Cattle Co., 92 Idaho 889, 452 P.2d 993 (1969), wherein, at least inferentially, Carter was recognized and a “preponderately reasonable” test was used to determine if an insurer’s rejection of a claim was just or unjust. In Dawson v. Olson, 94 Idaho 636, 496 P.2d 97 (1972), this Court set forth the holding of Carter as applying to uninsured motorist insurance cases as follows:

“In Carter this Court established two rules: (1) In general, no amount is ‘justly due’ from the insurer until facts substantially indicative of the uninsured motorist’s liability are shown the insurer, or, in the absence of such facts, until the uninsured motorist’s liability is admitted or judicially declared. (2) Where the insurer is sued for attorney fees incurred in a separate successful action against the uninsured motorist, the insurer is obligated to pay the attorney fees only if its initial refusal to pay the claim were unreasonable.” 94 Idaho at 641, 496 P.2d at 102.

In view of the varied decisions in the foregoing cases construing § 41-1839, and the conflicting language used therein, we have carefully reconsidered the statute in question and the authorities and reasoning in both Halliday and Carter. While the result reached in the Carter decision was correct in view of the fact that the proof of claim filed with the insurer did not mention a specific sum and therefore no tender could be made, the language employed and the rule announced in Carter engrafts upon the statute a requirement which we now feel is unwarranted. Therefore, to that extent, Carter v. Cascade Insurance Co., 92 Idaho 136, 438 P.2d 566 (1968), is overruled.

We therefore hold that under I.C. § 41-1839, any person who has a claim under a policy of insurance and who furnishes proof of loss as provided in the statute may recover attorney fees against the insurer if the amount ultimately recovered in the action exceeds the amount tendered by the insurer before the commencement of the action.

The allowance of attorney fees in this case is affirmed. Costs, if any on rehearing, to appellant.

SHEPARD, C. J., and DONALDSON and McQUADE, JJ., concur. McFADDEN, J., dissents.