Page 540 Cases

Farmers Ins. V. Henderson Facts:

Henderson had purchased insurance resulting from the operation of his car with certain limits: Bodily injury of $5,000 for one person, $10,000 per accident and $5,000 for property. One of Henderson’s employees, Whitehead, got into an accident with Breesman. Breesman sued Henderson and there was an opportunity to settle within the limits of the insurance coverage but the insurance did not wish to settle at that point. Henderson ended up having to sell the company to pay for liability in excess of the limit. He sued the Ins company and was awarded a verdict of $45,000. Farmers is not appealing.

Issue:

Is the insurance company obliged to settle within the policy limits and if so what is the correct measure of the insured’s damages?

Rule:

If it is to be considered a breach of contract, to recover for these items (humiliation, mental pain and suffering) the contract must be of such a nature that its breach would cause mental suffering for reasons other than the pecuniary loss.

Holding:

No emotional distress damages awarded.

Fogleman v. Peruvian Associates Ariz 1980 Facts:

Fogleman was hired by mining company on a 2 year contract to pay $1,700 a month plus housing. The company terminated his contract after 6 months. Fogleman sued for wrongful termination of employment contract and was awarded $14,989.33. He is appealing for general damages.

Issue:

Are consequential damages allowed in a breach of contract action?

Rule:

Consequential damages are not allowed in a breach of contract action, and so stated in conclusion of law number 15.

Browning v. Fies Ala 1912 Facts:

P tendered $5 for the use of a carriage to transport himself and friends from his house to a wedding, about 3 miles. The carriage was to arrive at 7:30pm. The carriage never arrived and provided no explanation why.

The wedding party had to ride public cars to the wedding and walk some distance, the wedding was delayed 45 min. Issue:

Is mental suffering and physical pain a recoverable damage for breach of contract?

Rule:

Damages recoverable for the breach of a contract are measured, not only by the actual loss sustained that naturally results as the ordinary consequence of the breach, but extend to consequences which may, under the circumstances of entering into the contract, be presumed to have been in the contemplation of both parties as the probable result of a breach. And, if the special circumstances are communicated, they become an element of the contract.