Ott v. American Fidelity & Casualty Co. , 161 S.C. 314 ( 1931 )

July 29, 1931. The opinion of the Court was delivered by This is an action on a liability insurance policy, issued by the American Fidelity Casualty Company, and filed with the State Highway Commission by the Carolina Transit Company in accordance with Section 5 of Act No. 170 of the 1925 statutes (page 255), which provides that the State Highway Commission (now the State Railroad Commission, Acts 1928, page 1238), shall require every applicant for a certificate for passenger carrying vehicles on improved public highways of the State "to procure and file with said commission liability and property damage insurance * * * on such motor vehicle or vehicles to be used in the service aforesaid * * * insuring or indemnifying passengers and the public receiving personal injury by reason of any act of negligence * * * ; such policy * * * to contain such conditions, provisions, and limitations as the commission may prescribe. * * *"

On February 13, 1928, plaintiff served on the transit company and the casualty company a summons and complaint in a suit for damages for personal injuries alleged to have been caused, on September 28, 1927, by the transit company's negligent operation of a bus covered by the policy. The Circuit Judge ordered a nonsuit as to the casualty company in consequence of the following provision in the policy: "The company shall not be liable to pay any loss or shall any action be brought against the company, to recover under this policy until a final judgment shall have been recovered against the assured in the Court of last resort after trial of the issue." Plaintiff obtained judgment against the transit company for $1,950.00, and from this judgment there was no appeal.

Execution was issued, but, the transit company being insolvent, was returned unsatisfied, whereupon plaintiff brought this action against the casualty company to recover the amount of his judgment. The defense was failure of the assured to comply with the following provisions of the policy: "Upon the occurrence of an accident, the assured shall give immediate written notice thereof, to the company at its home office in Richmond, Virginia, or to its duly authorized agent, with the fullest information obtainable at the time. If a claim is made on account of such, the assured shall give like notice thereof immediately after such claim is made, with full particulars. If thereafter any suit is brought against the assured to enforce such claim, the assured shall immediately forward to the company at its home office every summons or other process as soon as the same shall have been served on him. Whenever requested by the company the assured shall aid in securing information, evidence, and the attendance of witnesses; in effecting settlements; and in prosecuting appeals; and the assured shall at all times render to the company all possible cooperation and assistance."

Plaintiff and defendant each made a motion for a directed verdict. Both motions were refused, the jury found for the defendant, and the plaintiff appeals.

Respondent's contention was, throughout the trial of the case, and is, that it had no notice whatever of the occurrence of the accident until the date it was served with the summons and complaint in the suit brought by the plaintiff against it and the transit company, or about four and one-half months after the accident; that under the terms of the contract immediate notice of the accident was imperative and an essential element of the effective validity of the policy; and that, no such notice having been given, there can be no recovery against the insurer.

This position would undoubtedly be correct in a suit brought against the insurer by the insured, but the same rule would not necessarily apply in a suit by an injured member of the public. We must assume that the policy was intended, not to evade, but to effectuate the purposes of the statute in compliance with which it was filed, and it must be construed in the light of such statute. Curtisv. Michaelson, 206 Iowa, 111, 219 N.W., 49; Edwards v.Fidelity Casualty Company, 11 La. App. 176,123 So., 162. The manifest purpose of the statute is the protection of passengers and members of the public who may be injured by negligence of bus operators, and a policy issued for such purpose must be construed most strongly against the insurer.Curtis v. Michaelson, supra. In the light of these principles, the matter would appear to be set at rest by the following provision of the policy: "The insolvency or bankruptcy of the assured shall not release the company from any payment for which it would otherwise be liable under this policy, and if such insolvency or bankruptcy shall occur and an execution on a judgment recovered in a suit against the assured covered by this policy is returned unsatisfied, the judgment creditor shall have a right of action to recover the amount of such judgment against the company to the same extent that the assured would have had to recover against the company had the assured paid the said judgment; but in no event shall the liability of the company exceed the limits expressed in the policy."

This language can have no other meaning than that, under the specified conditions, a judgment creditor has the right to recover the amount of his judgment from the insurer up to the amount specified in the policy, this amount being limited, under another provision to $5,000.00 in the case of injury or death of one person, the effect of the language "to the same extent," etc., being to limit the amount of recovery on a judgment to $5,000.00, even though the injured person has recovered a judgment against the bus operator in excess of that amount. By the provision in question the insurer contracted to pay to the injured person, under the conditions named therein, the amount of his judgment (not the damages he may have sustained), not exceeding $5,000.00. It must be borne in mind that the suit here is brought to recover on the judgment and not for the negligence of the insured, such negligence having been established in the former suit.

In Edwards v. Insurance Company, supra, the policy contained the following provision: "If an execution on a judgment recovered in a suit against the assured covered by this policy is returned unsatisfied, the judgment creditor shall have a right of action to recover the amount of such judgment against the company to the same extent that the assured would have had to recover against the company had the assured paid the said judgment; but in no event shall the company's liability exceed the limits expressed in this policy. The insolvency or bankruptcy of the assured shall not release the company from any payment for which it would otherwise be liable under this policy."

This language is almost identical with the language of the policy in the case at bar, and the Court, after remarking that the law of the case is not found solely within the provisions of the policy, but is contained primarily in the statute, said: "We think that it was the purpose of the statute to create, immediately upon the happening of the accident, a cause of action in the injured party against the insurer, if any, of the party at fault. Of course, the right to present and enforce this cause of action is conditioned upon the obtaining of a judgment against the party at fault and upon unsuccessful efforts to collect that judgment, but these are conditions with which it is within the power of the injured party to comply If he cannot comply with them he has only himself to blame." See, also, Gillard v. Insurance Company, 93 N.J. Law, 215;107 A., 446, and Kruger v. Indemnity Exchange,201 Cal., 672; 258 P., 602, in which somewhat similar provisions of liability policies were construed.

It is urged that it would work great hardship on the insurer to require him to defend a case involving an accident as to the occurrence of which he has had no prior notice, as he would be thus deprived of an opportunity to adequately prepare his defense. The same point is raised and well answered in the Edwards case, in which the Court said: "As to the hardship and disadvantage under which the insurer labors, and the difficulty under which the injured party finds himself, we think that the ends of justice require that the benefit of the doubt should be given to the injured party, who is in no way at fault, and whose loss was caused entirely by some one else, as against the insurer who has entered into the contract with full knowledge of the statute and for a monetary consideration."

Furthermore, it appears to us that to allow the insured's failure to give notice of the accident to prevent the injured person's recovery would be to practically nullify the statute by making the enforcement of the rights of the person intended to be protected dependent upon the acts of the very person who caused the injury.

Nor do we think the fact that the statute provides that the policy shall contain "such conditions, provisions, and limitations as the commission may prescribe," changes the rules of construction or the reasons therefor in any way. The commission, in prescribing the provisions of the policy, had a right to assume that they would be construed in accordance with established principles of law and in view of the purpose of the statute, namely, the protection of the public. It will be observed further that, while the policy provides that "the assured, by acceptance of the policy, agrees" to the conditions specified therein, including the giving of immediate notice of the accident, there is no stipulation that innocent persons for whose benefit the policy was given should be bound by such conditions; and it may well be that such stipulation was omitted in view of the purpose of the policy under the statute and the quoted provision as to a judgment creditor's right of recovery.

It follows, from what we have said, that plaintiff's motion for a directed verdict should have been granted. The judgment of the trial Court is reversed, and the case remanded with instructions that judgment be entered up for the plaintiff under Rule 27 of this Court.

MR. CHIEF JUSTICE BLEASE and MR. JUSTICE CARTER concur.