Frances Jean Lazenby, a Minor by next friend, Mary Frances Lazenby, v. Universal Underwriters Insurance Company, a Corporation, and Norman Frank Crutchfield, 214 Tenn. 639

Mr. Justice Dyer delivered the opinion of the Court. Frances Jean Lazenby, a minor, by next friend, Mary Frances Lazenby, were the complainants below and Universal Underwriters Insurance Company was the defendant below and will be referred to herein as complainant and defendant, respectively. Complainant, in the Circuit Court of Shelby County, secured a judgment against Norman Frank Crutchfield in the total amount of $4,000.79, of which $1,087.00 represented punitive damages, as a result of personal injuries sustained by complainant in an automobile accident due to the negligence of said Norman Frank Crutchfield.

Crutchfield was driving his vehicle in an intoxicated condition. Defendant is the insurance carrier on the Crutch-field car and has paid the amount of the compensatory damages but has failed and refused, under their insurance contract, to pay the amount awarded as punitive damages. The suit in the case at bar was filed to secure judgment against defendant for the punitive damages. The Chancellor found for complainant and defendant has appealed to this Court since .the cause was heard on agreed stipulation of facts.

The provision of the policy under which defendant would be liable, if liable, is as follows: “ Coverage A — Bodily Injury Liability.

To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including* death at anytime resulting therefrom sustained by any person caused by accident and arising out of ownership, maintenance or use of the automobile. ’ ’ In argument before the bar of this Court and in the excellent briefs filed there is raised one question simple to state, but difficult to answer, to wit: In Tennessee, as a matter of public policy, is an automobile liability insurance carrier required to pay punitive damages assessed against their assured, as the result of an automobile accident.

It should be kept in mind the issue here is not the liability of the assured defendant to pay punitive damages, only the liability of his insurance carrier to pay them. In support of his position Counsel for defendant cites and principally relies upon the case of Northwestern National Casualty Company v. McNulty, 307 F.2d 432 (5 C.C.A. 1962). This case arose in the State of Florida on an insurance policy made and issued in the State of Virginia.

Counsel for defendant states, in his brief, that his position in this cause is well set forth by Judge Wisdom in the McNulty case as follows: ‘‘The argument that insurance against punitive damages would contravene public policy is sometimes said to rest on the doctrine that ‘no one shall be permitted to take advantage of his own wrong.’ Mr. Justice Cardozo in Messersmith v. American Fidelity Co., 232 N.Y. 161, 133 N.E. 432, 19 A.L.R. 876 (1912). That doctrine is not necessarily applicable to cases of automobile liability insurance covering punitive damages.

In such cases the public policy against coverage is not so much to prevent encouragement of wrongdoing by obstructing the hopes of profit; it is rather to make effective the discouragement of wrong-doing by the imposition of punishment. When a person is able to insure himself against punishment he gains a freedom of misconduct inconsistent with the establishment of sanctions against such misconduct. It is not disputed that insurance against criminal fines or penalties would be void as violative of public policy.

The same public policy should invalidate any contract of insurance against the civil punishment that punitive damages represent.” Northwestern National Casualty Co. v. McNulty, supra. In the McNulty case Judge Wisdom wrote the opinion for the majority. Judge G-ewin wrote a separate specially concurring opinion.

Judge Wisdom further states in his opinion as follows: “Considering the theory of punitive damages as puni-tory and as a deterrent and accepting as common knowledge the'fact that death and injury by automobile is a problem far from solved by traffic regulations and criminal prosecutions, it appears to us that there are especially strong public policy reasons for not allowing socially irresponsible automobile drivers to escape the element of personal punishment in punitive damages when they are guilty of reckless slaughter or maiming on the highway.

It is no answer to say, society imposes criminal sanctions to deter wrongdoers ; that it is enough when a civil offender, through insurance, pays what he is adjudged to owe. A criminal conviction and payment of a fine to the state may be atonement to society for the offender. But it may not. have a sufficient effect on the conduct of others to make the public policy in favor of punitive damages useful and effective. So, at least, seems to be the policy of Florida and Virginia.

To make that policy useful and effective the delinquent driver must not be allowed to receive a windfall at the expense of the purchasers of insurance, transferring his responsibility for punitive damages to the very people — the driving public — to whom he is a member. We are sympathetic with the innocent victim here; perhaps there is no such thing as money damages making him whole.

But his interest in receiving non-compensatory damag'es is small compared with the public interest in lessening the toll of injury and death on the highways; and there is such a thing as a state policy to punish and deter by malting the wrongdoer pay.” Northwestern National Casualty Company v. McNulty, supra. Judge Gewin in his separate specially concurring opinion states as follows: ‘‘ The more appropriate basis upon which to hold that public policy prohibits insurance against liability is the nature of the conduct of the wrongdoer — not the nature of the damages awarded.

If the defendant acted willfully, intentionally, maliciously or fraudulently, coverage should be denied; because, in such circumstances, he should not be able to avoid punishment by shifting the penalty to an insurance carrier.

I doubt that such protection is ever afforded by insurance, because the companies who are experienced in such matters and who write the contracts, expressly exclude such conduct from the protection afforded by the policy. * * * “All of ns are concerned with the high death toll and personal injuries occurring on the highways, but I am somewhat skeptical that the prohibition of insurance against liability for punitive damages will accomplish the results expected by the majority.

There is no certain measuring stick to determine the effectiveness with which the law operates in a given field, but all the states have rather strict criminal laws relating to the operation of motor vehicles. If the criminal penalties provided by such statutes fail to deter the wrongdoers, I seriously doubt that closing the market to insurance coverage will do so.

As a matter of fact, it is my judgment that the opposite result will follow. * * * “It is also quite apparent that my brothers of the majority are looking at this question from one direction only — from the point of view of the nature of the wrong which caused the injury. "What about the injured party? Implicit in the entire field of tort liability and insurance law is the concept of furnishing some protection to those who are injured. Public policy is involved here to- a greater extent.

"What will society do with the thousands who are injured daily and to some of whom punitive damages are awarded.” Northwestern National Casualty Co. v. McNulty, supra. The holding of the court in the McNulty case is based first on the finding’, in Florida and Virginia, that the dominant purpose of punitive damages is not as compensation for a plaintiff, but rather as punishment for a defendant, and as a deterranee to him and others from repetition of the wrongful conduct.

Then the Court accepts, as common knowledge, that death and injuries are 'wrought daily on our roads and streets and it is and should be the public policy of the State to establish sanctions against socially irresponsible drivers causing or contributing to such conditions. That the allowance of punitive damages against these drivers is one of the sanctions against such conduct. Then to allow one to insure himself against this punishment, which in effect transfers the penalty to the premium paying public, is inconsistent with the establishment of the sanctions and violative of the public policy of the State.

The doctrine of punitive damages is well established in Tennessee although there have been several judicial statements challenging the efficacy and soundness of the doctrine. Such damages are allowed, after an award for compensatory damages, in negligence cases when there has been some willful misconduct, or entire want of care which would raise the presumption of a conscious indifference to consequences.

In such cases the interest of society and of the agreed individual are blended and such damages are allowed as punishment for such conduct and as an example or warning to the one so guilty, and others, in order to deter them from committing like offenses in the future. Such damages are not based so much upon the nature and extent of the injury as they are upon the oppression of the party who does the injury. Louisville & N. Railroad Co. v. Ray, 101 Tenn. 1, 46 S.W. 554 (1898), Cumberland Telephone & Telegraph Co. v. Shaw, 102 Tenn. 313, 52 S.W. 163 (1899), Knoxville Traction Co. v.

Lane, 103 Tenn. 376, 53 S.W. 557, 46 L.R.A. 549 (1899), Union Railway Company v. Carter, 129 Tenn. 459, 166 S.W. 592 (1914), Stepp v. Black, 14 Tenn.App. 153 (1913), Walgreen Co. v. Wal ton, 16 Tenn.App. 213, 64 S.W.2d 44 (1932), Herstein v. Kemker, 19 Tenn.App. 681, 94 S.W.2d 76 (1936), Allen v. Melton, 20 Tenn.App, 387, 99 S.W.2d 219 (1936), Nashville, C. & St. L. Ry. v. Harrell, 21 Tenn.App. 353, 110 S.W.2d 1032 (1937), Pratt et al. v. Duck, 28 Tenn.App. 502, 191 S.W.2d 562 (1945), Southwestern Aviation v. Hurd, 209 Tenn. 639, 355 S.W.2d 436 (1961), Liberty Mutual Insurance Company v.

Stevenson, 212 Tenn. 178, 368 S.W.2d 760 (1963). Although, the dominant purpose for the allowance of punitive damages in Tennessee is similar to Florida and Virginia, as found by the Fifth Circuit Court in the McNulty case, we do not reach the same conclusion as the Fifth Circuit on the public policy issue for the following reasons. FIRST. We accept, as common knowledge, the fact death and injuries on our highways and streets is a very serious problem and such is a matter of great public concern.

We further accept, as common knowledge, socially irresponsible drivers, who by their actions in operation of motor vehicles, could he liable for punitive damages are a great part of this problem. We, however, are not able to agree the closing of the insurance market, on the payment of punitive damages, to such drivers would necessarily accomplish the result of deterring them in their wrongful conduct. This State, in regard to the proper operation of motor vehicles, has a great many detailed criminal sanctions, which apparently have not deterred this slaughter on our highways and streets.

Then to say the closing of the insurance market, in the payment of punitive damages, would act to deter guilty drivers would in our opinion contain some element of speculation. SECOND. The language in the insurance policy in the case at bar, which is similar to many types of liability policies, has been construed by most courts, as a matter of

interpretation of the language of a policy, to cover both compensatory and punitive damages. Since most courts have so construed this language in the policy, we think the average policy holder reading this language would expect to he protected against all claims, not intentionally inflicted. THIRD. There is often a fine line between simple negligence and negligence upon which an award for punitive damages can be made. Public policy is the present concept of public welfare or general good. State ex rel. Loser v. National Optical Stores, 189 Tenn. 443, 225 S.W.2d 263 (1949), Ford Motor Company v.

Pace, 206 Tenn. 559, 335 S.W.2d 360 (1960). Public policy is practically synonymous with public good and unless the private contract is in terms of such a character as to tend to harm or injure the public good, public interest on public welfare or to violate the Constitution, laws, common or statutory, or judicial decisions of the State, it is not violative of public policy nor void on that account. Home Beneficial Association v. White, 180 Tenn. 585, 177 S.W.2d 545 (1944).

The insurance contract in the case at bar is a private contract between defendant and their assured, Norman Prank Crutchfield, which when construed as written would he held to protect him against claims for both compensatory and punitive damages. Then to hold assured, as a matter of'public policy, is not protected by the policy on a claim for punitive damages would have the effect to partially void the contract. We do not think such should be done except in a clear case, and the reasons advanced do not make such a clear case.

We recognize there are many factors, pro and con, involved in this matter that have not been discussed in this opinion; such as the possible affect on insurance rates paid by the public and the possible conflict of interest between the insurance company and their assured at the trial. We have weighed a great many such factors and suffice to say we do not think they are determinative of the matter. Judgment affirmed. Burnett, Chiee Justice, Clement, Special Justice. and Holmes, Justice, concur. Mr. Justice White concurs in an especially concurring opinion.