Nationwide Mutual Insurance v. Aetna Casualty & Surety Co.

Parker, J. Ordinarily, the Court of Appeals will' not entertain an appeal from an order striking or denying a motion to strike allegations contained in pleadings.. Rule 4 (b); Rules of Practice in the Court of Appeals. In this case, however, the plaintiff’s motions to *12 strike are addressed to each further answer and defense in its entirety on the grounds that the facts alleged therein do not constitute a legal defense. The plaintiff’s motions are, therefore, in substance demurrers to the further answers in their entirety and will be so considered. Jewell v. Price, 259 N.C. 345, 130 S.E. 2d 668 (1963); Mercer v. Hilliard, 249 N.C. 725, 107 S.E. 2d 554 (1959). The trial court’s order was thus in effect an order sustaining a demurrer and defendants may immediately appeal therefrom. Rule 4(a) of the Rules of Practice in the Court of Appeals, when otherwise applicable, limits the right of immediate appeal only in instances where the demurrer is overruled and not where, as here, the demurrer is sustained. Questions involving the liability of an insurance company under its policy, in cases where a genuine controversy exists, are a proper subject for a declaratory judgment. Nationwide Mutual Insurance Company v. Roberts, 261 N.C. 285, 134 S.E. 2d 654 (1964). The case before us does present such a controversy and determination of the controversy by a declaratory judgment is, therefore, proper. Plaintiff alleged in its complaint that Chambers, the driver of the Corvair automobile as to which plaintiff had issued its liability insurance policy, was operating such car at the time of the accident without the knowledge or permission of the insured owner. See, Torres v. Smith, 269 N.C. 546, 153 S.E. 2d 129 (1967); Bailey v. General Insurance Company of America, 265 N.C. 675, 144 S.E. 2d 898 (1965). The defendants in their answers have denied plaintiff’s allegations as to the nonpermissive use by Chambers and that issue is not presently before us. The defendants appellants alleged in their further answers and defenses facts relating to the conduct of the plaintiff in settling certain claims arising from the accident, and contend that the plaintiff, by such conduct, waived any rights which it may have had to deny coverage under its policy and thereby became estopped from doing so. The trial court allowed plaintiff’s motions to strike these allegations. Taking the facts alleged in the further answers to be true, as we must for purposes of testing the correctness of the trial court’s action, the only matter now before us for decision is whether or not such facts establish any affirmative defense to the judgment being sought by the plaintiff in this action. If they do, the motions should have been disallowed. If they do not, the further answers were properly stricken. At the outset it should be observed that the present appeal does not present any controversy between an insurance company and its named insured. Plaintiff simply seeks to obtain a judicial determination on the question of the nature of the use, whether permissive *13 or nonpermissive, which was being made by the driver of its named insured’s automobile at the time it became involved in the accident. The defendants appellants, who were occupants of the other automobile and an insurance carrier for one of them, contend that plaintiff became estopped as to them to raise the question of nonpermis-sive use of its insured’s automobile because plaintiff had effected settlement of the two claims with Porter and Smith. Nothing prevents a liability insurer from waiving a defense that a particular liability is not within the coverage of its policy. Indeed, the insurer waives this defense as -to a particular claim under its policy, just as it waives all other defenses, when it makes settlement of that claim. But such a waiver does not in all circumstances and by itself automatically and necessarily preclude the insurer from thereafter asserting the objection of noncoverage. Estoppel to assert noncoverage occurs when the insurer’s action results in some detriment to the insured or to someone else having rights under the policy. Such a detriment and the resulting estoppel are found in cases in which the insurer, having knowledge of facts which would result in noncoverage, nevertheless assumes and conducts the defense of an action brought against its insured, such cases finding the elements of an estoppel in the fact that the insurer’s action in actively conducting the defense has deprived its insured of his right to control his own lawsuit. Such a case was presented in Early v. Farm Bureau Mutual Automobile Insurance Company, 224 N.C. 172, 29 S.E. 2d 558 (1944), in which the court said (page 174): “The apposite rule as we gather it from the decisions of various jurisdictions is that an objection that the liability is not one within the terms of the policy may be waived, and where the insurer undertakes the defense of the action by the injured person against the insured, with full information as to the character of the injury, it will be deemed to have waived such objection. Royle Mining Company v. Fidelity & Casualty Company of New York, 103 S.W. 1098 (Mo.). The effect of this rule would seem to be that by having elected to defend the action of the plaintiff against its insured the insurer deprived its insured of his right to control his own lawsuit, and thereby assured the insured that the insurer would recognize the liability as falling within the terms of the policy.” Other cases illustrative of the principle involved may be found in Annotations in 81 A.L.R. 1326 and in 38 A.L.R. 2d 1148. Even in such cases, however, the insurer will not be held estopped if it defends under a full reservation of its right to deny coverage, Shearin *14 v. Globe Indemnity Company, 267 N.C. 505, 148 S.E. 2d 560 (1966); or if it gives timely notice to its insured of reservation of its right to assert the defense of noncoverage, Jamestown Mutual Insurance Company v. Nationwide Mutual Insurance Company, 266 N.C. 430, 146 S.E. 2d 410 (1965). In the case before us plaintiff insurer has denied coverage under its policy to the driver of its named insured’s automobile and is defending the pending actions brought in the Superior Court of Guil-ford County under a full reservation of rights and denial of coverage. The defendants by their further answers seek to assert, however, that plaintiff became estopped from denying coverage under its policy by its prior actions in making out-of-court settlements of two claims. But plaintiff’s actions in making these settlements worked no detriment to its insured or to anyone else who might acquire rights under its policy. No suit to recover damages has been brought against plaintiff’s named insured, and should any such suit be brought nothing which plaintiff has done in making the settlements with Porter and with Smith would in any way prejudice its insured in conducting a defense. On the contrary, to the extent such settlements may have absolved the plaintiff’s insured from any liability to Porter and to Smith, the insured would have reason to be well pleased. Therefore such settlements could not work an estoppel to prevent plaintiff from later asserting the defense of noncoverage even as against its named insured. Still less is plaintiff estopped as against the defendants presently seeking to assert the estoppel. One of these, Bonnell S. Smith, even benefited directly when plaintiff settled Smith’s claim for damages to his automobile. Another, the defendant insurance company, may have benefited indirectly in having its potential liability reduced. "The law favors the settlement of controversies out of court.” Penn Dixie Lines, Inc. v. Grannick, 238 N.C. 552, 78 S.E. 2d 410 (1953). A liability insurance carrier which acts in conformity with this sound policy of the law by settling certain claims does not thereby in all circumstances automatically and irrevocably waive its defenses as to other claims. The settlements made by plaintiff in this case caused no detriment to anyone except possibly to plaintiff itself. No one else having present or potential future rights under plaintiff’s policy was thereby induced to change any position or to surrender any rights to his detriment. An essential element of an estoppel is here lacking. The cases cited and relied on by defendants in support of their contention that plaintiff, by making the settlements with Porter and Smith, became estopped as to the defendants to raise the question *15 of the nonpermissive use of plaintiff’s insured’s automobile are not apposite. Since the facts alleged in the further answers do not establish any defense, there was no error in the trial court’s order that they be stricken, and the trial court’s order is Affirmed. Campbell and Morris, JJ., concur.