Olive v. Great American Insurance Co.

333 S.E.2d 41 (1985)

Ross M. OLIVE and wife, Nancy M. Olive
v.
GREAT AMERICAN INSURANCE COMPANY.

No. 8410SC1343.

Court of Appeals of North Carolina.

August 6, 1985.

Holleman and Stam by Paul Stam, Jr., Apex, for plaintiffs-appellants.

Patterson, Dilthey, Clay, Cranfill, Sumner and Hartzog by Ronald C. Dilthey and Sanford W. Thompson, IV, Raleigh, for defendant-appellee.

EAGLES, Judge.

The first question that we consider is whether plaintiffs' appeal from the trial court's entry of partial summary judgment is premature. We hold that it is not. In Oestreicher v. American National Stores, 290 N.C. 118, 225 S.E.2d 797 (1976), the plaintiffs' complaint alleged three claims for relief. The first was for breach of contract; the second was for punitive damages based on the breach of contract; and the third was for anticipatory breach of the same contract. In reversing this court, our Supreme Court held that a plaintiff had a substantial right to have all of his factually related claims tried before the same judge and jury and that an immediate appeal lies from an order allowing summary judgment on fewer than all of the claims. We think that Oestreicher is controlling and that plaintiffs here are entitled to an immediate appeal.

In their second argument, plaintiffs contend that the trial court erred in granting summary judgment for defendant as to plaintiffs' second and third claims for relief. They argue that the material in the record before the trial court presents an issue of material fact and that defendant was not entitled to summary judgment as a matter of law. In support of this argument, plaintiffs rely heavily on this court's recent opinions in Dailey v. Integon Ins. Corp., 57 N.C.App. 346, 291 S.E.2d 331 (1982) (Dailey I) and Payne v. N.C. Farm Bureau Mutual Ins. Co., 67 N.C.App. 692, 313 S.E.2d 912 (1984). Both of those cases, like the present one, involved a failure by the defendant insurance companies to settle the loss claims of plaintiffs. In their complaints, those plaintiffs alleged that the failure of the defendant insurance companies to settle their claims was in bad faith, amounting to a tortious breach of contract and entitling plaintiffs to punitive damages. In each case, the claims of bad faith and punitive damages were dismissed by the trial court on defendant's motions to dismiss under G.S. 1A-1, Rule 12(b)(6). We reversed the trial court in each case, holding that plaintiffs had alleged facts which, if true, would establish a tortious breach of contract entitling plaintiffs to claim punitive damages.

Although plaintiffs here have pleaded the same claims pleaded in Dailey I and Payne, a different question is presented because plaintiffs' appeal is from an order allowing summary judgment for defendant. The issue here is not whether, as in Dailey I and Payne, plaintiffs have sufficiently alleged a claim for relief but whether, based on the pleadings, affidavits, depositions and other material submitted in support of and in opposition to the motion, there is an issue of material fact as to the claims that would require them to be submitted to a jury. Singleton v. Stewart, 280 N.C. 460, 186 S.E.2d 400 (1972); Loy v. Lorm Corp., 52 N.C.App. 428, 278 S.E.2d 897 (1981). We hold that no issue of material fact has been shown to exist here and that the trial court properly allowed defendant's motion for summary judgment.

Plaintiffs devote considerable energy and space in their brief to arguments that are more appropriate to their breach of contract claim: whether and to what extent the policy issued by defendant covers the losses claimed by them. That issue was not adjudicated below and is not before us now; it remains a question of fact for the jury. In our consideration here of whether plaintiffs' allegations as to the second and third claims are supported sufficiently to withstand defendant's summary judgment motion, however, we assume that plaintiffs have established their breach of contract claim. The question that we must answer then is whether on the basis of the materials before the court, a jury could find that the assumed breach of contract was under circumstances which amount to a tort and, if so, whether those circumstances could warrant an award of punitive damages.

Plaintiffs' forecast of the evidence tends to show that they dealt with two local agents of defendant Great American Insurance Company. One of the agents, Herndon, was on the scene the day after the fire, placed plaintiffs' claim by telephone and promptly communicated to plaintiffs that it would be denied. Plaintiffs nevertheless submitted a claim of loss to defendant that was promptly denied. With the help of agent Herndon, plaintiffs submitted yet another claim to defendant that was denied. After further investigation and negotiations with plaintiffs, agents Wright and Herndon proposed a settlement conditioned on approval from the home office. The home office rejected the proposed settlement.

Plaintiffs' argument that this is evidence of bad faith appears to be premised almost entirely on their contention that defendant has not interpreted the policy correctly. Plaintiffs in their brief concede (1) that the new house was the dwelling intended to be covered under the policy and (2) that the old house was an "other structure" as defined by the policy. Plaintiffs contend that the old house was nevertheless part of the "residence premises" and that its destruction by a "covered peril," i.e., fire, entitles them to the full coverage provided in the policy for personal property loss, loss of use, and additional coverages. Plaintiffs argue that defendant's continued denial of coverage, despite the clear language of the policy, and the conduct of agents Herndon and Wright amounts to a bad faith breach of contract under circumstances of such rudeness, oppression and disregard for their rights that plaintiffs are not only entitled to compensatory damages for the tortious breach but also to punitive or exemplary damages for defendant's "outrageous conduct."

Defendant contends that the issue of coverage is not involved in this appeal and does not argue it. In their response below, however, their denial of coverage was based on two theories: (1) that the claimed personal property losses did not occur in connection with the destruction of the "residence premises" and (2) that the personal property damaged in the fire was specifically covered by other insurance.

While the issue is not before us, it seems clear from the record that the trial court properly determined that the interpretation of the policy was a question of fact for the jury and properly denied plaintiffs' motion for summary judgment on that issue. Defendant argues that, because the trial court denied defendant's summary judgment motion and determined that the question of coverage was for the jury, the claim was clearly the basis of an honest disagreement between the parties and that plaintiffs' claim of tortious breach and punitive damages were required to be dismissed. Though we have rejected plaintiffs' argument and hold for defendant here, we do not agree with defendant's argument. Though we express no opinion as to the propriety of defendant's denial of plaintiffs' claim, we think that the policy is clearly open to more than one reasonable interpretation, especially in view of plaintiffs' particular living situation at the time of the fire. Further, we do not think that the actions of defendant or defendant's agents in dealing with plaintiff evidenced any bad faith on the part of defendant that would support a claim of tortious breach of contract should the jury in fact decide that the contract was breached. Necessarily, there can be no claim for punitive damages if there has been no tort committed. It appears that defendant here promptly and consistently denied plaintiffs' insurance claim based on an interpretation that is neither strained nor fanciful, regardless of whether it is correct. Further, while defendant's agents may have provided plaintiffs with inaccurate advice, they did so apparently in good faith, with the desire to be helpful and perform their duties, not with the intent to injure plaintiffs or with a disregard for plaintiffs' unfortunate predicament.

It is instructive to compare the facts of this case with the fact situation in the recent case of Dailey v. Integon Ins. Corp., 75 N.C.App. 387, 331 S.E.2d 148 (1985) (Dailey II) which involved the post-verdict appeal in the trial resulting from the Dailey I remand. In Dailey II plaintiff produced evidence that defendant and defendant's agent conducted an investigation into the origin of a fire that destroyed plaintiffs' house while plaintiff was out of town. Arson was the suspected cause of the fire but plaintiff had been cleared of suspicion by local law enforcement officials. Nevertheless, defendant's agent conducted his investigation as if plaintiff were a suspect, implicating plaintiff to his neighbors and in the community as the arsonist and otherwise creating ill-will toward plaintiff. There was evidence that the agent offered money to people to implicate plaintiff in the fire. The evidence in that case further shows that defendant delayed the investigation of the fire, even though its potential liability was immediately clear; that defendant caused plaintiff to incur substantial expense and inconvenience; that its investigation of the claim was not conducted in a reasonable manner; and that it proposed a settlement that was patently unreasonable and unfair. The jury in that case found that defendant had acted in bad faith and awarded punitive damages to plaintiff. The trial judge entered judgment n.o.v. for defendant on the tortious breach and punitive damages claims because, in his opinion, their claims were not recognized in North Carolina law. On appeal, this court reversed the trial court, holding that the claims were recognized in our law and that plaintiff was entitled to an award if the jury found that he had proved his allegations.

While it is not clear what minimum proof would be sufficient to require that the issues of tortious breach of contract and punitive damages be submitted to the jury, the distinction between Dailey II and the instant case is that here plaintiffs simply did not meet their burden. The record before us and before the trial court contains nothing that supports plaintiffs' allegations. While we are not reluctant to allow the pleading of such claims, see Dailey I and Payne v. N.C. Farm Bureau Mutual Ins. Co., both supra, or recovery on those claims when warranted, see Dailey II, supra, we approach these issues with caution. As our Supreme Court noted in Newton v. Standard Fire Ins. Co., 291 N.C. 105, 229 S.E.2d 297 (1976), exposing insurers to "liabilities beyond those called for in the insurance contract ... except for the most extreme circumstances, would ... be detrimental to the consuming public whose insurance premiums would surely be increased to cover them." Id. at 116, 229 S.E.2d at 303.

Lest we be misunderstood, we emphasize again that the trial court's determination of plaintiffs' summary judgment motion on the first claim did not influence our determination of the propriety of its rulings on the second and third claims.

For the reasons stated above, the judgment of the Superior Court is affirmed and the cause remanded for trial on the issue of liability.

Affirmed and remanded.

BECTON and PHILLIPS, JJ., concur.