HURD, Circuit Judge.
An accident occurred while workers were dismantling the stage following Wayne Newton's performance at the 1983 South Dakota State Fair. A boom truck collapsed and injured two workers, Chris Wolff (Wolff) and Kenneth Kempf (Kempf). Kempf suffered a broken arm and Wolff was seriously injured and is now permanently disabled. Don Romeo (Romeo) and his son Bob Romeo own Don Romeo Agency, Inc. (Romeo Agency) which books entertainment for special events and was entertainment director for the 1983 South Dakota State Fair. Romeo attended the Wayne Newton concert and thus became aware of the accident. He did not immediately report the accident to his insurance agent Kenneth Schenck (Schenck) or his insurance carrier Royal Insurance (Royal) because he did not believe his agency had any liability for the accident.
Wolff and Kempf each filed a lawsuit in United States District Court in July, 1984 against Romeo Agency; Flying Eagle, Inc., Wayne Newton's production company (Flying Eagle); Pittman Manufacturing Company, the boom truck manufacturer (Pittman); and Four Star Productions, responsible for additional spotlights used at the concert (Four Star). Don and Bob Romeo also own Four Star. The district court consolidated the actions and also allowed other defendants to be joined, including a local and international union of stage hands.
Flying Eagle was granted summary judgment in federal district court and several other defendants settled with Wolff and Kempf. As a result, a few weeks before the scheduled July 30, 1987 trial date, only Pittman, Four Star, and Romeo Agency remained as defendants. In June 1987, Pittman and Four Star agreed to each pay $175,000 to settle the lawsuit. As the only remaining defendant, Romeo Agency offered to settle for $10,000. Wolff and Kempf demanded $200,000. After further negotiations, Wolff and Kempf offered full settlement in exchange for payment of $25,000 on condition that Romeo Agency provide proof that it was uninsured and unable to satisfy a larger judgment. Counsel for Romeo Agency telephoned Schenck and was informed that Romeo Agency was named as a co-insured on a policy of insurance issued by Royal to a company known as Mid-America. On June 24, Romeo Agency requested that Royal acknowledge coverage and undertake the defense of the district court lawsuit. Royal was given eight hours to decide and was provided a copy of the Kempf complaint but was not given a copy of the Wolff complaint. Royal denied coverage asserting that Romeo Agency failed to give timely notice of the claim as required by the terms of the insurance policy. The next day, Romeo Agency settled with Wolff and Kempf by agreeing to pay $25,000 and stipulating to a judgment in the amount of $275,000 in the District Court of South Dakota, Southern Division. Romeo Agency also assigned to Wolff and Kempf any and all rights it may have under the insurance policy issued by Royal. In exchange, Wolff and Kempf covenanted not to execute on the $275,000 judgment.
Wolff, Kempf and Romeo Agency filed suit in circuit court against Royal and Schenck. Wolff and Kempf sought to recover from Royal on the $275,000 district court judgment. Romeo Agency sought reimbursement for litigation costs it expended in defending the district court action. The trial court held that Wolff and
WHETHER THE TRIAL COURT WAS CLEARLY ERRONEOUS IN FINDING THAT THE SETTLEMENT BETWEEN WOLFF AND KEMPF AND ROMEO AGENCY WAS UNREASONABLE, COLLUSIVE AND REACHED IN BAD FAITH.
In the circuit court action underlying this appeal, Royal and Schenck attacked the federal district court judgment alleging that the settlement between Romeo Agency and Wolff and Kempf was a result of bad faith and collusion.
As a general rule, when an insurer declines coverage, an insured may settle rather than proceed to trial to determine its legal liability. Luria Bros. & Co. v. Alliance Assur. Co., Ltd., 780 F.2d 1082, 1091 (2nd Cir.1986). However, the amount must be reasonable in view of the size of possible recovery and degree of probability of claimant's success against the insured. Id. The insurer's denial of coverage must be unjustified before policy provisions, such as a cooperative clause, are considered waived. 44 Am.Jur.2d Insurance § 1421. The Nebraska courts have held:
Otteman v. Interstate Fire & Casualty Co., 172 Neb. 574, 111 N.W.2d 97, 102-3 (1961).
The trial court concluded that Romeo Agency's acceptance of Wolff's and Kempf's covenant not to execute was a sham and breached the cooperation clause in the policy. This conclusion is supported by the following evidence:
The evidence before the trial court supports its conclusion that Royal's denial of coverage in June 1987 was justified and the ultimate settlement was not one of reasonable prudence. Accordingly, the trial court's determination was not clearly erroneous
WHETHER THE TRIAL COURT WAS CLEARLY ERRONEOUS IN FINDING THAT ORAL NOTICE WAS PROVIDED TO ROYAL IN JULY 1984.
Royal contends on notice of appeal that the trial court was clearly erroneous in determining that it received oral notice of the claim against the insurance policy in July 1984. For the following reasons we conclude that the trial court's finding on this issue was not clearly erroneous.
Romeo testified that he contacted Schenck by telephone in July 1984 and briefly discussed the accident and Schenck advised him that there was no insurance coverage. The trial court heard the evidence, judged the credibility of the witnesses, and determined that Romeo Agency had provided oral notice to Schenck in July 1984. On appeal, Schenck and Royal argue strenuously that Romeo's testimony was not believable. The trier of fact is the exclusive judge of the credibility of the witnesses and the weight to be given to their testimony. In Interest of A.D., 416 N.W.2d 264 (S.D.1987). Neither Royal nor Schenck has demonstrated that the trial court's factual findings on this issue were clearly erroneous. Bachand v. Walker, 455 N.W.2d 851 (S.D.1990); In re Estate of Hobelsberger, 85 S.D. 282, 181 N.W.2d 455 (1970); SDCL 15-6-52(a). Accordingly, we affirm the lower court's finding that oral notice was provided to Royal in July 1984.
WHETHER THE TRIAL COURT ERRED IN HOLDING THAT THE ORAL NOTICE PROVIDED IN JULY 1984 WAS SUFFICIENT UNDER THE TERMS OF THE INSURANCE POLICY.
The trial court also found that when Schenck was contacted in June 1987, shortly before the trial was to begin, he readily acknowledged that a policy of insurance existed. Romeo Agency demanded that Royal decide within eight hours whether the policy provided coverage for the accident. Operating within Romeo Agency's time frame, Royal denied coverage claiming that Romeo Agency failed to provide timely and sufficient notification to Royal of the insurance claim.
This Court will overturn the trial court's findings only when, after a review of all the evidence, the Court is left with a definite and firm conviction that a mistake has been made. Proceedings for Dep. in Court of Monies, 417 N.W.2d 187 (S.D.1987). Based on the evidence and the record viewed in its entirety, a definite and firm conviction exists that even though Romeo Agency contacted Schenck in July 1984, the information he provided was insufficient to satisfy the notice provisions of the Royal policy requiring;
Romeo failed in July 1984 to tell Schenck the amount of the lawsuit or the names of the parties. Romeo also testified he knew that he was also co-insured on the policy issued to Mid-America. Yet, he did not make reference to this policy following Schenck's statement that there was no insurance.
In interpreting the contract, as a matter of Nebraska law, "a forfeiture will not be declared unless the contract specifically provides for such forfeiture". George v. Aetna Casualty & Surety Co., 121 Neb. 647, 655, 238 N.W. 36, 39 (1931) (emphasis added); Ach v. Farmers Mutual Insurance Co. of Nebraska, 191 Neb. 407, 215 N.W.2d 518 (1974) (holding that "as soon as practicable" language in policy meant with reasonable celerity and with reasonable and proper diligence and depended on facts and circumstances of the case).
As in other cases that have been brought to this Court, we have considered the other issues raised and find them to be without merit or moot. Fort Pierre v. United Fire and Cas. Co., 463 N.W.2d 845 (S.D.1990).
The trial court's finding that the settlement between Wolff and Kempf and Romeo was unreasonable, collusive, and conducted in bad faith is affirmed. Upon review of the clear language of the policy and the above authority we hold that the trial court erred in concluding that the oral notice Romeo Agency provided to Schenck in July 1984 was sufficient. As a result, the trial court's judgment in favor of Romeo Agency ordering reimbursement for litigation costs in the district court action is reversed.
MILLER, C.J., HENDERSON, J., and MORGAN, Retired Justice, concur.
SABERS, J., concurs in part and dissents in part.
AMUNDSON, J., not having been a member of the Court at the time this action was submitted did not participate.
HURD, Circuit Judge, for WUEST, J., disqualified.
SABERS, Justice (concurring in part and dissenting in part).
The majority opinion reverses the trial court on Issue 3 based on insufficiency of notice to Royal without addressing or even mentioning the basis on which the trial court decided Issue 3, waiver. This is poor appellate practice which is, to my knowledge, unprecedented.
During the July 1984 telephone conversation, Don Romeo provided Schenck, and thereby Royal, with all the information Schenck needed concerning the accident and the claims of Wolff and Kempf in the underlying lawsuit to enable Schenck, for Royal, to deny the claim. The trial court's findings of fact are as follows:
The trial court's conclusions of law are:
In other words, Royal, through Schenck, had "ample notice to permit it to take any and all necessary steps to protect its interest." Iowa Mut. Ins. Co. v. Meckna, 180 Neb. 516, 144 N.W.2d 73, 80 (1966). Royal was not prejudiced by the lack of written notice caused by its own incorrect advice to Romeo.
Surprisingly, under Issue 2 on whether Royal got notice, the majority opinion states:
By reversing Issue 3 on the sufficiency of the notice to Royal, the majority opinion is doing indirectly what it hesitates to do directly. The fact is that Schenck's wrongful denial of coverage prevented Romeo's disclosure of further information and his forwarding of the summons and complaint. This excuses Romeo's failure to provide additional information and constitutes a waiver of "the right to raise the provisions of its policy regarding the obligation to give written notice of an accident and other information as soon as practicable and the obligation of the insured to immediately forward suit papers," as the trial court correctly concluded. See Conclusion of Law No. 16.
Keene Coop. Grain & Supply Co. v. Farmers Union Ind. Mut. Ins. Co., 177 Neb. 287, 128 N.W.2d 773, 777 (1964) (citations omitted).
Therefore, the majority opinion wrongfully reverses the trial court on Issue 3, and I respectfully dissent therefrom. The trial court should be affirmed on all issues.
First Sea Bank, 441 N.W.2d at 196.