Isaacson Iron Works v. Ocean Accident & Guarantee Corp.

I cannot agree with the majority opinion "that respondent's cause of action in the case at bar is not covered by the policy."

The policy provides that appellant will insure the assured against loss by reason of the liability imposed by law upon the assured for damages on account of damage to or destruction of property as the result of an accident caused solely and directly by assured's business or work covered by the policy. Under that policy, the assured was obligated to use due diligence and to exercise reasonable care to avoid doing damage to the property of others. The policy provided that it was the purpose of the property damage endorsement "to apply solely to accidental property damage."

The judgment in the former damage action is not resadjudicata. Northern Pac. R. Co. v. Snohomish County, 101 Wash. 686,182 P. 878. See, also, Baxter v. Central West CasualtyCo., 186 Wash. 459, 58 P.2d 835, in which we held that while a judgment is generally res adjudicata as to every point properly belonging to the subject of litigation, there is no resadjudicata where the second action involves a different question, although the actions were similar.

It is quite true that, in the former action, the negligence of the servants of the Isaacson Iron Works was the negligence of the employer; but in the present action, whether the respondent used due diligence and exercised reasonable care, constituted an affirmative defense which the appellant was required to interpose if it would defeat the action. The statement of the appellant that the acts of the employees of a corporation are acts of a corporation is only partially true. It was the duty of the respondent to employ men who were capable of performing the work. The negligence of those employees is not the negligence of the respondent, if the respondent used due diligence and exercised reasonable care in the selection of those employees. The testimony on behalf of the respondent as to the skill and competency of the men employed is not disputed.

The rule to the effect that the negligence of employees is not attributable to the employer in cases like the case at bar is stated as follows in §§ 1476 and 1478, Couch, Cyclopedia of Insurance Law, Vol. 6:

"In view of the fact that the object of insurance is to grant indemnity against certain perils the risk of which the insurer assumes, and, as shown in the preceding chapter, that the proximate cause of loss, rather than the remote cause, is to be considered, it is quite generally agreed that, unless the policy provides to the contrary, the negligent or other wrongful, but nonprohibited, act of the insured does not preclude recovery, especially where the loss is only remotely ascribable to such negligence. And, as a matter of fact, many forms of insurance obviously contemplate indemnity, or purport to protect the insured against losses resulting from negligent or wrongful acts, unless fraudulent or amounting to reckless and wilful misconduct, habitual carelessness, or criminal conduct, so that it would seem that it would not be fatal, unless expressly so declared, or within one of the classes just mentioned, that the loss was directly and proximately caused by the mere negligence, carelessness, or want of due care on the part of the insured, or his authorized representatives or agents or others, as in the case of accident, fire, automobile, etc., insurances. So, for instance, although a common carrier cannot avoid liability for negligence by direct contract, there is no reason of public policy which prohibits him from contracting with a third person for insurance against losses sustained or injuries caused by reason of his own or his servant's negligence. And in this connection it may be generally stated that people insure against their own negligence as well as that of their neighbors, and against those untoward events which human foresight is unable to prevent; against accidental causes which cannot be avoided, and against acts of omission or commission on their part which might have been guarded against, and the dangers arising in the carrying on of business operations in the ordinary way; and such must, in general, be considered a necessary part or incident of the risk which the insurer has undertaken to bear. As has been well stated by Mr. Justice Story: "There is nothing unreasonable, unjust, or inconsistent with public policy in allowing the insured to insure himself against all losses from any peril not occasioned by his personal fraud.'. . .

"If the servants of insured are so habitually and frequently careless in performing their duties, it may be a question whether the failure of the insured to exercise reasonable diligence, or to employ faithful servants, does not make their acts of negligence those of the master; at least, it has been held that it does; but it may be suggested that even in such a case there must be such gross negligence as to evidence fraud, within the meaning of the above rule, and under the authorities."

The appellant failed to prove the affirmative defense that the respondent did not use due diligence and exercise reasonable care to avoid doing damage to the property; hence, the judgment should be affirmed.