Mowrer v. Poirier & McLane Corp. , 382 Pa. 2 ( 1955 )

Opinion by

Mr. Chief Justice Horace Stern,

The controlling question is whether plaintiff is a third-party beneficiary of a contract between defendant and the Commonwealth of Pennsylvania.

The contract with the Commonwealth called for the construction by defendant, Poirier & McLane Corporation, of an impounding dam on the Schuykill River. Paragraph 21a provided that “The Contractor shall take out and maintain during the life of this contract, such Public Liability and Property Damage insurance as shall protect him, and any subcontractor performing work covered by this contract, from claims for damages for personal injury, including wrongful death, as well as from claims for property damages, which may arise from operations under this contract, whether such operations be by himself or by any subcontractor or anyone directly or indirectly employed by either of them. . . ”

Defendant engaged the Hamilton Construction Company as one of the subcontractors on the job. Plaintiff was the owner of a tractor which, according to the case stated agreed upon by the parties, “was the subject matter of a bailment existing between the plaintiff, Clifford Mowrer, and the Hamilton Construction Company.” While the tractor was being used by the latter in the course of its work under the subcontract with defendant it was damaged in some manner Avhich does not appear in the record, causing plaintiff a loss of $4,250.00. Plaintiff brought suit against Hamilton Construction Company and obtained a verdict and judgment in that amount, but, as the case stated further sets forth, he “has made no recovery from said Hamilton Construction Company and no recovery on said judgment can be obtained.” Plaintiff seeks in the present action to recover the amount of his loss from defendant, the general contractor, basing his alleged right on the provision of the contract above quoted Avhich required defendant to take out property damage insurance. In pursuance of that obligation defendant had taken out a policy of insurance but there was an exclusion clause therein which provided that the policy should not apply “to injury to or destruction of property owned, rented, occupied, or used by the insured and ... of property in the care, custody, or control of the insured.” The parties agree that by reason of this exclusion the policy did not cover the damage to plaintiff’s tractor. The court entered judgment for the plaintiff. Defendant appeals.

The question in the case resolves itself to this:— For ivhat purpose — for whose benefit — -was the requirement of insurance inserted in the contract between defendant and the Commonwealth? Plaintiff points to the familiar cases which hold that where, for example, as in Commonwealth v. Great American Indemnity Company, 312 Pa. 183, 167 A. 793, the contractor in the agreement is obligated to pay all claims of subcontractors, materialmen and laborers, such claimants, as donee beneficiaries, can maintain actions against the contractor to recover the amounts due them, or where, as in Keefer v. Lombardi, 376 Pa. 367, 102 A. 2d 695, the contractor is obligated to pay the damages sustained by any persons during the performance of the work, a person whose property is thus injured can, as a third-party beneficiary, recover his damages from the contractor. But the insurance provision in the contract here involved is quite different from the obligations of the contractors in those cases to make the payments which were there specified.

In all cases of this sort the inquiry must be directed to the intention of the parties. It was said in Spires v. Hanover Fire Insurance Company, 364 Pa. 52, 56, 57, 70 A. 2d 828, 830, 831: “To be a third party beneficiary entitled to recover on a contract . . . both parties to the contract must so intend and must indicate that intention in the contract; in other words, a promisor cannot be held liable to an alleged beneficiary of a contract unless the latter was within his contemplation at the time the contract was entered into and such liability was intentionally assumed by him in his undertaking; the obligation to the third party must be created, and must affirmatively appear, in the contract itself: . . . .” In 12 Am. Jur. 832, §280, it is stated that “The question whether a contract was intended for the benefit of a third person is always one of construction. The intention of the parties in this respect is determined by the terms of the contract as a whole, construed in the light of the circumstances under which it was made.”

The language of the contract in the present case leads irresistably to the conclusion that the insurance provision was intended, not for the benefit of those who might be injured in their persons or their property, but for a wholly different purpose. The wording is that the contractor shall take out and maintain such public liability and property damage insurance as shall protect him and any subcontractor from claims for damages for personal injury and from claims for property damages. The object as thus stated was not, as in the case of the contracts in the cases referred to by plaintiff, that the contractor should pay certain claims, but, on the contrary, that he and the subcontractors should be protected from certain claims. The reason for such a provision is that if claims for personal injuries or property damage should be made against the contractor or a subcontractor it might result in their own property being attached or levied upon in execution and their being rendered thereby unable to continue the performance of the work under their respective contracts. What the Commonwealth therefore sought to establish, through the medium of adequate insurance coverage, was the immunity of the contractor and subcontractors from such liability so as to make certain that the work would be completed in accordance with the contract. To repeat, therefore, the object of the insurance provision and the intention of the parties was to protect the contractor and subcontractors from claims for personal injuries and property damages, — not to compel them to pay such claims for the benefit of the claimants. It is, of course, true that the insurance provision in the agreement accrued to the benefit of the plaintiff, not, however, as a donee beneficiary and as such entitled to a right of action against the defendant for failure to procure a proper policy, but merely as an incidental beneficiary, and such a beneficiary acquires no right of action against either party to the agreement: Restatement Contracts, §133 (c), §147.

The provision in paragraph 37 of the agreement between the defendant and the Commonwealth that the contractor should indemnify and save the Commonwealth and its officers and agents harmless from all suits in connection with the work, and should, if required, show evidence of settlement of any such action before final payment is made by the Commonwealth, is further evidence of the fact that the sole purpose underlying the agreement was to protect the Commonwealth against any stoppage or nonperformance of the work.

It may also be added that paragraph 14 of the agreement, which provided that materialmen and laborers might have a right of action against the contractor and the surety on his bond as though they had been named as obligees therein, shows that when the parties intended to create third party beneficiaries they manifested such intention in express and unambiguous terms.

The judgment is reversed and here entered for defendant.