Riggs v. New Jersey Fidelity & Plate Glass Co. ( 1928 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] This is an action against the defendant to obtain reimbursement covering the payment of a judgment, which was obtained against plaintiff and which he was compelled to pay. The judgment was obtained in a damage action instituted against the plaintiff based upon negligence wherein Jeanette Waller was plaintiff.

On March 11, 1924, plaintiff, while driving his car from Salem to Portland, suffered an accident by colliding with an automobile belonging to Andrew B. Junor, who was injured, and Jeanette Waller, an occupant of plaintiff's automobile and a member of his family and household, was also injured.

An action for damages was instituted by Andrew B. Junor against plaintiff Riggs in the Circuit Court of Marion County and was vigorously contested by Riggs and by the defendant, which we will hereafter term the company, as plaintiff held an insurance policy issued by the company protecting him against loss, by virtue of accidents with his automobile. The amount of damages demanded by Junor was more than the limit of the liability as set forth in plaintiff's policy. Jeanette Waller, in said action, was a witness for the appellant in resisting the claim of Andrew B. Junor. The trial resulted in a verdict against Riggs and judgment thereupon entered which the company paid.

Thereafter Jeanette Waller commenced an action against plaintiff Riggs and likewise obtained judgment. The company was notified of the action of Mrs. Waller and gave plaintiff notice that it would defend the action but that it would not pay any collusive judgment that might be rendered.

The complaint in the present action sets forth some of the provisions of the policy issued by defendant to plaintiff, by the terms of which defendant agreed with plaintiff, among other things, as follows:

"Article A. To indemnify the herein named Assured against loss from liability imposed by the law upon the Assured for damages on account of bodily injuries, including death resulting therefrom, accidentally suffered within the policy period by any person or persons not hereinafter excepted by reason of the ownership, maintenance or use of any of the automobiles enumerated and described in the schedule.

"Article B. To make a thorough investigation of all accidents reported to the company to which this policy applies.

"Article D. To pay, irrespective of the limits of liability hereinafter mentioned, all costs taxed against the assured in any legal proceedings defended by the company pursuant to the foregoing agreement, and all interest accruing after entry of judgment in such proceedings.

"Article E. To pay, irrespective of the limits of liability hereinafter mentioned, the expense necessarily incurred and paid in money by the Assured for such immediate surgical aid as may be imperative at the time of the accident."

The policy is introduced in evidence and contains the two following clauses:

"The insurance provided by the policy is so extended as to be available, in the same manner and under the same conditions as it is available to the named Assured, to any person or persons, while riding in or legally operating any of the automobiles described in the Schedule, and to any person, firm or corporation legally responsible for the operation thereof, provided such use or operation is with the permission of the named Assured, or, if the named Assured is an individual, with the permission of an adult member of the named Assured's household other than a chauffeur or a domestic servant; provided further, insurance payable hereunder shall be applied first to the protection of the named Assured, and the remainder, if any, to the protection of other persons entitled to insurance under the provisions and conditions of this Clause, as the named Assured shall in writing direct.

"The Company shall have the exclusive right to contest or settle any of said claims or suits, and the Assured shall not incur any expense (except for such immediate surgical aid as may be imperative at the time of the accident) or settle any claim or suit without the written authority of the Company. Except as requested by the Company the Assured shall not interfere in any way respecting any negotiations for the settlement of any claim or suit or in the conduct of any legal proceedings. The Assured shall at all times render to the company all possible cooperation and assistance. The Assured shall not voluntarily assume or admit any liability for an accident, and no loss arising from a liability which has been voluntarily assumed or admitted by the Assured shall be covered hereunder."

The complaint further described the accident mentioned and alleged that thereafter on the twelfth day of December, 1924, Jeanette Waller commenced an action against plaintiff for damages for bodily injuries received in said accident, and for a detailed statement a copy of Mrs. Waller's complaint is attached to and made a part of the complaint. That the plaintiff forwarded to the company's attorney the summons and complaint served in the Waller action. Thereafter the defendant assumed full control of the defense of said action and filed an answer on behalf of plaintiff and said case was put at issue and duly tried. That the result of the trial was a verdict and judgment in favor of Jeanette Waller and against plaintiff in the sum of $954.83 and $34.40 costs. That no appeal was taken from said judgment. That the defendant company refused to satisfy the judgment.

"XIII. That on the 20th day of March, 1926 plaintiff therein duly paid said judgment in money.

"XIV. That plaintiff herein has duly and fully performed all the terms and obligations of said policy upon his part to be kept and performed."

That defendant has failed to indemnify plaintiff in compliance with terms of its policy.

The defendant company, in its answer, admits all of the allegations of plaintiff's complaint, except paragraphs 13 and 14 which are quoted above, and as a further and separate defense, alleges in substance as follows:

First, the corporate character of the defendant company; second, the issuance of the policy; third, that plaintiff permitted Jeanette Waller to institute an action against him; that the said Jeanette Waller believed the plaintiff to be free from negligence, entered into the agreement above set forth and presented a claim and threatened to sue this defendant, and this defendant thereupon notified the plaintiff that it would defend said action, but that it would refuse to pay any judgment if one was rendered because of the collusive contract on the part of the plaintiff and the said Jeanette Waller, and that upon an action being instituted by the said Jeanette Waller in accordance with said contract with the plaintiff herein; that plaintiff failed to aid and co-operate in the trial of said action in accordance with the terms of the policy and breached the policy contract.

The cause was tried by the court and a jury resulting in a judgment in favor of defendant, from which plaintiff appealed.

REVERSED. A third amended answer was filed by defendant. Motions to strike a portion of the former answers were interposed by plaintiff and the ruling thereon assigned as error. As the pleadings to which the motions were directed have been superseded by an amended answer and are no longer a part of the record, we cannot consider this assignment. Plaintiff interposed a demurrer to defendant's third amended answer, which the trial court overruled and which ruling is assigned as error.

Before noticing the allegations of the answer, it may be stated that the rule appears to be in such cases, of the alleged failure to co-operate by an insured in the defense of an action against him, controlled and conducted by a company who has issued a policy agreeing to protect the insured against loss by virtue of accidents with his automobile, it should be shown that the failure to co-operate affected the verdict or judgment in the original damage action: Taxicab MotorCo. v. Pacific Coast Cas. Co., 73 Wash. 631 (132 P. 393,396).

In Rohlf v. Great American Mut. Indemnity Co., 27 Ohio App. 208,215 (161 N.E. 232, at page 234), in discussing a case similar to the one in hand, we find the language: "If the accident happened under the circumstances stated by Chapman when interviewed in Toledo, there was a perfect defense to the claim made by Rohlf." Under the policy involved in that case, the company assumed liability directly to the party injured where a judgment was rendered against the insured and the execution was returned unsatisfied. This case is cited by defendant and plainly indicates that, to commence with, the defendant in the original action for damages should have a defense, at least in part, and that any failure to co-operate on the part of the insured in defending the action must tend to affect the result thereof.

There is no averment in the answer that Jeanette Waller did not have a valid claim and cause of action against Riggs, the insured, in her case against him. If she did, then it was immaterial whether Riggs permitted her to institute an action against him or not. There is no averment that he could prevent her from so doing. The allegation that Riggs "believed himself to be free from any negligence because of the accident" is no part of a defense. Irrespective of his belief, it was for the court and jury to determine that matter and not for Riggs. It is averred that Riggs "agreed," but the answer does not show that he "agreed" to anything material. Standing by itself, this does not amount to an allegation of a fact. It is alleged in the answer "that the plaintiff failed to persuade and prevail upon said Jeanette Waller not to institute action." It is not shown that there was any reason for her not bringing such action, or that Riggs could prevail upon her not to do so.

It is alleged in the answer that plaintiff "failed to render co-operation and assistance to the defendant, but on the contrary took no step to obtain the presence at the trial of one of the important witnesses, Williams." It is not indicated in the answer that in the trial of the damage action of Waller v. Riggs plaintiff did not furnish the defendant company with all of the information that he possessed in regard to the facts of the case, or that the defendant's attorney did not know about the witness, Williams, and could have subpoenaed him in the customary manner. There is no averment of fact that he failed in any other manner. It is noticed, in this connection, that no mention is made in regard to the witness Williams in the testimony in the trial of the case.

It is averred in the answer that plaintiff, during the progress of the trial further gave out the information to the press, so that it was published in the papers of Salem, Oregon, during the progress of the trial, that the said Jeanette Waller's action was being defended by the insurance company representing the plaintiff herein, and this plaintiff further stated that but for the fact that he was insured, the action of Jeanette Waller would not have been instituted against him. There is nothing to indicate that this matter alleged was anything more than an excuse on the part of Riggs for having litigation with his mother-in-law. It is not averred that the jury ever knew about the same or that it affected the trial or result of the case: United States Fidelity Guaranty Co. v.Williams, 148 Md. 289 (129 A. 660, 667).

It is also averred that plaintiff "evinced the hope to defendant's attorney herein during the progress of the trial that said Jeanette Waller would recover from the defendant."

This allegation is sufficient to raise a suspicion on the part of the company, as against Riggs, and the other allegations referred to may amount to innuendos which, taken with the averment of substantive facts, might serve as coloring matter in the case. In order for the answer to constitute a defense it would show that the assured failed, in some substantial or material particular or particulars, to co-operate with and assist the company in the defense of an action for damages covered by the policy, so that apparently the trial resulted in a judgment which was in whole or in part wrong, or, in other words, that the interests of the defendant company were prejudiced in the defense of the personal injury action.

Defendant does not allege that plaintiff admitted liability to Jeanette Waller, or that he failed to "render to the company all possible co-operation and assistance" in the defense of the damage action. The defendant's proof in the case is no stronger than the answer. The defendant's attorney testified as a witness for the company, but he failed to mention any instance where plaintiff was requested to do anything in connection with the defense of the Waller action, which he failed to do.

The main question in the damage action was whether there was a "liability imposed by law" upon the assured (Riggs) for damages "accidentally suffered" by Mrs. Waller in the automobile accident mentioned. It appears that the Junor action was tried first, and the answer of defendant suggested that Riggs changed his belief as to his liability after the trial of the Junor case. It is not sufficient for the defendant to allege that plaintiff failed to co-operate without setting out wherein he failed. It is not a complete defense for defendant to allege that plaintiff "breached the condition of the policy contract" without an averment of the facts showing such breach: Pearson v.Richards, 106 Or. 78 (211 P. 167; Almada v. Vandecar,94 Or. 515 (185 P. 907). The fact that Riggs considered he was liable for damages caused in the automobile accident and requested the company to settle with Mrs. Waller without litigation would not militate against him in this case.

See, also, United States Cas. Co. v. Drew (C.C.A.),5 Fed. 2d 498, a case where the insured's son's wife, while riding with him in the automobile, was killed in a collision with a railroad train. The son brought action against the father for damages for negligence. The insurance company was notified of the action and defended. The trial resulted in a judgment against the defendant for $13,099.50. The company gave notice that it denied liability. The insured executed a note to his son in payment of the judgment. Thereafter the insured obtained a judgment against the insurance company in the amount of the policy. Error was assigned on appeal on account of the giving of the note, and for refusal to instruct for the company. Judge GILBERT said:

"Reference is made to testimony of one of the attorneys who were conducting the defense in that court, who said that the defendant in error never spoke to him about the case during the entire trial, and never assisted him. But he did not testify that he ever called upon the defendant in error for assistance, nor did he testify to anything that the latter could have done to assist him. Nor do we think that evidence of bad faith or lack of cooperation is to be found in the fact that in the action in the state court the attorney for the plaintiff was the plaintiff's brother, or in the fact that the railroad company was not made a party defendant in that action; the insurance company's attorneys having, as they did, sole charge of the defense."

See, also, Francis v. London etc. Co., 100 Vt. 425 (138 A. 780, 781); Berry on Automobiles (4 ed.), p. 1607, § 1886; 14 R.C.L. 63, § 21.

The demurrer to the answer should have been sustained.

It appears from the record that the trial court treated the allegations of the answer, as those of facts showing a breach of the condition of the policy and instructed the jury, that if they should find from the testimony in the case that the plaintiff failed to render all possible co-operation to the defendant in the case which Mrs. Waller brought against the plaintiff in this case, then their verdict should be for the defendant. The instruction was proper if there had been allegations of fact supported by proof upon which to base the same.

It is the law that in order for an indemnitee to be entitled to recover upon the idemnity contract he must fully perform all conditions which by the terms of the contract are conditions precedent to any liability on the part of the indemnitor: 31 C.J., p. 442, § 40.

The rule is stated generally that, in order that any matter may be set up as a defense to an action on a contract of indemnity, it must be germane to the cause of action pleaded and present a legal reason why the indemnitee should not recover. It is a good defense that the indemnitee has not complied with the essential conditions of the contract. It has been held to be no defense to an action by an indemnitee against an indemnitor that he failed to appear and defend a suit unless such failure was the result of negligence or an appearance would have availed the indemnitor: 31 C.J. 459, § 59; Doran v. Davis, 43 Iowa, 86;Fidelity Dep. Co. of Maryland v. Hibbler, 177 Mich. 490 (143 N.W. 604).

Where the indemnitor is notified of the pendency of an action against the indemnitee in reference to the subject matter of the indemnity and is given an opportunity to, and does defend such action, the judgment in such action, if obtained without fraud and collusion, is conclusive upon the indemnitor as to all questions determined therein which are material to a recovery against him in an action for indemnity brought by the indemnitee: 31 C.J. 460, § 60. See Fenton v. Fidelity Cas. Co., 36 Or. 283 (56 P. 1096, 48 L.R.A. 770); Astoria v. Astoria Col.Riv. R.R. Co., 67 Or. 538 (136 P. 645, 49 L.R.A. (N.S.) 404).

The judgment of the lower court is reversed and the cause will be remanded, with directions to sustain the demurrer and to take such further proceedings as may be deemed proper not inconsistent herewith.

REVERSED AND REMANDED.

RAND, C.J., and BROWN and BELT, JJ., concur.