Jaloff v. United Auto Indemnity Exchange , 120 Or. 381 ( 1926 )

Defendants first raise this question: Was plaintiff required to make an election of remedies? That question must be answered in the negative. The doctrine of election of remedies may be invoked where there are two or more coexisting remedies which are inconsistent with each other, so that the pursuit of one necessarily implies the negation of the other: 9 R.C.L., p. 958; 20 C.J., p. 2. Causes of action, like defenses thereto, "are inconsistent when one of them admits a fact, and the other denies the same fact." Peters v. Queen City Ins. Co., 63 Or. 382 (126 P. 1005).

The defendants contend that plaintiff's complaint attempts to state an action at law for the breach of a contract and a suit in equity for the reformation thereof. In this the defendants are in error. The complaint in no wise attempts to reform the contract.

Defendants next claim that the court erred in permitting the introduction of parol evidence to vary the terms of the contract of insurance. The testimony was admitted, not to vary the contract, but to establish the common intent of the parties thereto. When an insurance contract is clear and explicit and contains no latent ambiguity, parol evidence is not admissible to vary its terms: Or. L., § 713; Edgar v. Golden, 36 Or. 448 (48 P. 1118); Hilgar v. Miller, 42 Or. 552 (72 P. 319);Sutherlin v. Bloomer, 50 Or. 398 (93 P. 135). However, where the language of a written instrument is ambiguous, equivocal or susceptible of conflicting interpretations, parol evidence may be admissible for the purpose of aiding the court in giving the instrument a proper construction: Or. L., § 717.

The following question is submitted by defendants: Was the policy a specific or a blanket policy, and if a specific policy, was car number 48 covered thereby? This is the pivotal point in the case. The trial court found that the policy was a blanket policy. The parties to the contract treated it as a blanket policy. Car number 48 is not specifically mentioned in that policy. However, the policy purports to insure "all cars owned and/or operated by assured." That car was owned and operated by assured, and defendants, knowing this to be true, accepted and retained premiums for insurance in accord with the terms expressed in the policy. As showing the circumstances under which the policy was written and delivered, the following communication from a representative of the insurer, and written at its direction, is illuminating:

"As you know, we have made arrangements through Mr. Friedman of the United Underwriters of this city to cover your entire operations at the expiration date of the above mentioned, so that you will be fully protected to the extent of $5,000 to injury to one person in any one accident, and up to $15,000 to injury to more than one person in any one accident.

"This will be applicable to all cars that you now own or operate, as well as any car or cars which you may hereafter add to your equipment from time to time.

"This letter will serve as a binder pending the issuance and delivery to the Public Service Commission of Oregon the policy and a copy thereof to yourself."

Contemporaneous with the issuance and delivery of the policy, one of the representatives of the insurer transmitted to plaintiff, on behalf of the insurance company, a copy of policy number 428, the policy sued upon, and wrote plaintiff that the original policy had been mailed to the Public Service Commission. From this communication we carve the following language:

"Under the terms of this policy your entire operations are covered against liability and property damage for all cars you now own or may hereafter own, as well as any additional cars while not owned but which you may use in connection with your stage business."

Attached to the policy was a "schedule of cars now owned." Car number 48 was not included in that list. Respondent carried two policies of insurance with the defendants, i.e., policy number 302 and policy number 428. Policy number 302 is a fire and collision policy, issued for the protection of plaintiff's property. Policy number 428 is what is generally known as a liability insurance policy, as distinguished from the fire and collision policy number 302. Policy number 302 was issued in response to a written application made therefor on March 15, 1924. Policy number 428 was not issued as result of a written application.

Prior to the issuance of policy number 428, the plaintiff had carried public liability insurance under a blanket policy with the Auto Inter-Insurance Association of Seattle, which covered, on a mileage basis, all the cars owned or operated by this plaintiff. That policy expired May 12, 1924, and on its expiration, United Auto Indemnity Exchange issued to plaintiff policy number 428, the foundation of this action, which undertakes to indemnify the plaintiff against liability arising from certain accidental injuries as set forth therein, for the consideration of $220 for each 73,000 miles traveled, or about 60 cents for each 200 miles traveled by any car. The value of the cars did not affect this policy. No risk attached when the cars were idle. The policy insured plaintiff against the infliction of certain accidental injuries resulting from his manipulation and use of motor cars in the business described in the policy. Each month while the policy was in force, the plaintiff reported to the company issuing that insurance contract the number of miles traveled by his cars. In June, 1924, plaintiff furnished the insurer with a list of cars operated in his business during the month of May, together with the mileage made by each car. In this report, the mileage made by car number 48 was set out, and plaintiff transmitted to the insurer the premium covering this car under policy number 428, which premium the insurer accepted and retained. A like report of the mileage covered by car number 48 was made to the insurer in July and the premium paid, accepted and retained. The same thing happened in August. An additional circumstance pointing to the true situation is found in the fact that the insurer would, from time to time, go to the office of the plaintiff for the purpose of checking up the record, and that these records, as checked by the insurer, disclosed the operation of car number 48 by plaintiff and the payment of premiums to the insurer for insurance on that car. So it will be seen that the insurer and the insured treated the policy as covering car number 48. It was their contract, and they had a lawful right to put their own construction thereon.

An insurance policy must be so interpreted as to give effect to the mutual intention of the parties at the time of contracting, so far as such intention can be deduced from the language of the policy. In other words, it should be construed with regard to the intent of the insured and of the insurer as expressed in the words of the contract. The policy in the case at bar by pertinent language expressly protects the plaintiff as a public carrier, while engaged in the manipulation of "all cars owned or operated by assured" in his business as such carrier. Car number 48 was used upon the highway by plaintiff as a public carrier of passengers, which fact, as shown by the evidence, the defendants well knew. However, the attached schedule or list of cars that plaintiff "now owns" ("now" referring to the date of the contract), in the mind of the writer creates some ambiguity in the expressed intention of the parties, making doubly clear the requirement for an application of the wholesome provisions of Section 717, Or. L., which says:

"For the proper construction of an instrument, the circumstances under which it was made, including the situation of the subject of the instrument, and of the parties to it, may also be shown, so that the judge be placed in the position of those whose language he is to interpret."

The undisputed evidence relating to the circumstances surrounding the making of the insurance contract shows that it was written as a substitute for a former blanket policy, and that the list of cars attached to policy number 428 was made only for the purpose of disclosing to the Public Service Commission the extent of plaintiff's business as a public carrier at the time the policy was written.

Again, as to the interpretation to be placed upon this contract, the case of St. Louis Gas Light Co. v. St. Louis,46 Mo. 121, is precisely in point. In that case the court discussed the question fully, and in a clearly reasoned opinion said:

"In a case of that kind, whose interpretation should prevail? If the court gives one differing from that understood by the parties, it * * makes a new agreement — the very thing most to be avoided. If it leaves the parties to be governed by their understanding of their own language, it, in effect, enforces the contract as actually made. That they should be so permitted to construe their own agreement accords with every principle of reason and justice."

To the same effect are Fuller Bros. Toll Lbr. Box Co. v.Fidelity Cas. Co., 94 Mo. App. 490 (68 S.W. 222); Fullerton v. United States Casualty Co., 184 Iowa, 219 (167 N.W. 700, 6 A.L.R. 367). See, also, Or. L., § 721; Loomis v. McFarlane,50 Or. 129 (91 P. 466); Harlow v. Oregonian Pub. Co.,53 Or. 272 (100 P. 7).

A fair and just statement of the law governing defense of a suit against the insured under a policy which precludes insured from interfering with any negotiations for settlement, or from participating in the defense of actions arising out of claims covered thereby, is laid down in Berry, Automobiles (5 ed.), § 1898, in language following:

"Under a policy of insurance which excludes the assured from participation in the defense or settlement of any claim against him, the insurer cannot, after * * undertaking the defense of a suit on other claims, withdraw from the defense and cast the burden thereof on the assured on the theory that it had mistaken the nature of its obligation under the policy."

Cases cited in support of the text are: Fullerton v. UnitedStates Cas. Co., 184 Iowa, 219 (167 N.W. 700, 6 A.L.R. 367);Fuller Bros. T.L. B. Co. v. Fidelity Cas. Co.,94 Mo. App. 490 (68 S.W. 222); Sanders v. Frankfort M.A. P.G. Ins.Co., 72 N.H. 485 (57 A. 655, 101 Am. St. Rep. 688); Lombard v.Maguire-Penniman Co., 78 N.H. 110 (97 A. 892).

In Lombard v. Maguire-Penniman Co., supra, it was held that an insurer against liability for negligence who undertakes the defense of an action against his insured cannot thereafter be discharged except by payment of the indemnity to the assured or by securing his discharge from the claim. See, also, Sanders v.Frankfort M.A. P.G. Ins. Co., supra.

It is a rule of general application in the construction of contracts that, where the meaning of an insurance policy is doubtful and its language is fairly susceptible of two constructions, one in favor of the insurance company and the other in favor of the assured, the contract should be construed most strongly in favor of the policy-holder: Fenton v.Fidelity Casualty Co., 36 Or. 283 (56 P. 1096, 48 L.R.A. 770); Stringham v. Mutual Ins. Co., 44 Or. 447 (75 P. 822);Stinchcombe v. New York Life Ins. Co., 46 Or. 316 (80 P. 213); Moore v. Aetna Life Ins. Co., 75 Or. 47 (146 P. 151, Ann. Cas. 1917B, 1005, L.R.A. 1915D, 264).

We have alluded to the fact that, at the conclusion of the reception of plaintiff's evidence, both the defendants and the plaintiff moved for a directed verdict, and that the court denied the defendants' motion and directed a verdict in favor of the plaintiff. The defendants now challenge the authority of the court to direct a verdict in favor of the plaintiff on the ground that questions of fact were involved which should have been passed upon by the jury. That point has been before this court a number of times, and its ruling is reviewed in the recent case of Hudelson v.Sanders-Swafford Co., 111 Or. 600 (227 P. 310), where Mr. Justice RAND, in speaking for the court, wrote:

"It is settled by the decisions of this court that, where the plaintiff and the defendant in an action at law each move for a directed verdict, it amounts to a waiver by the parties to the action of their right to have the questions of fact determined by the jury and a consent upon their part to have all issues of law and fact determined by the court, and imposes upon the court the duty to determine all such issues."

Then follows a collection of Oregon authorities.

We have before us a record showing that, on August 17, 1924, car number 48, while being operated by the plaintiff as a public carrier of passengers for hire, collided with an automobile driven by C.A. Wells, and that, as a result of such collision, a number of passengers in the Wells automobile sustained personal injuries; that the plaintiff immediately gave the defendants notice as required by the policy and forwarded to the defendants all information, process, pleadings and papers relating to the accident and the actions arising therefrom; that the defendants took immediate charge of the investigation of the facts relating to the collision and remained in charge and control thereof; that, during the investigation, they examined car number 48 and well knew that it was such car, and well knew from the former reports made by plaintiff, and by the numbers on the car, that they were examining car number 48, and with this knowledge entered upon the defense of the cases referred to above. We have already, in our statement, alluded to the fact that two actions at law were instituted against the plaintiff on account of the collision; that the insurer, as a result of its investigations, filed an answer and entered upon the defense of each case, but, upon the return by the jury of a verdict of $4,000 in the case first tried, immediately deserted and abandoned the defense of the second case, i.e., the very day on which it was to be tried, and long after its searching investigation of the facts involved in the collision and the liabilities of the parties hereto. In fact, this abandonment of plaintiff's defense came seven months after the happening of the accident. During these seven months, the defendants assumed full control and direction of the investigation of the facts and negotiations for settlement, and the defense of the actions at law; but, when the $4,000 verdict was returned into court, they suddenly discovered that car number 48 was not specifically mentioned in the policy of insurance and therefore not covered thereby. This, too, despite the fact that, during each month the plaintiff had operated car number 48 in his business, the company had knowingly accepted and retained insurance premiums covering its operation.

Each material allegation of the complaint in this case is supported by some competent evidence. A consideration of the entire record unquestionably shows that it was the mutual intention of the parties to cover car number 48 by insurance policy number 428. It follows that the case should be affirmed. It is so ordered. AFFIRMED.

McBRIDE, C.J., and BEAN and BELT, JJ., concur.