Opinion · Supreme Court of the United States
St. Louis Dressed Beef & Provision Co. v. Maryland Casualty Co.
201 U.S. 173
- Type
- Opinion
- Court
- Supreme Court of the United States
- Jurisdiction
- Federal
- Date
- 1906-03-19
- Topic
- general
How later courts describe this case
- "Moreover, the [insurer], by its refusal [to defend], cut at the very root of the mutual obligation, and put an end to its right to demand further compliance with the supposed term of the contract on the other side."
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ST. LOUIS BEEF CO.v. CASUALTY CO.,201 U.S. 173(1906)
26 S.Ct. 400
ST. LOUIS DRESSED BEEF AND PROVISION COMPANYv. MARYLAND CASUALTY COMPANY.
CERTIFICATE FROM THE CIRCUIT COURT OF APPEALS FOR THE EIGHTH CIRCUIT.
No. 197.
Argued March 7, 1906.
Decided March 19, 1906.
THIS case was brought here on the following certificate:
"The judgment which the writ of error challenges sustained a
demurrer to the petition and dismissed the action. The plaintiff
in its petition alleged the existence of these facts: The
plaintiff is a corporation of the State of Missouri, and the
defendant is a corporation of the State of Maryland. On June 16,
1900, the defendant in consideration of the payment of $168
issued to the plaintiff a policy which contained these
provisions: `In consideration of the application for this policy,
a copy of which is hereto attached and which is made part
Page 174
of this contract, and of one hundred sixty-eight dollars ($168)
premium, Maryland Casualty Company, of Baltimore, Maryland
(hereinafter called "the company"), does hereby agree to
indemnify St. Louis Dressed Beef Provision Co. of St. Louis,
county of ____, State of Missouri, hereinafter called "the
assured" for the term of one year beginning on the fifth day of
July, 1900, at noon, and ending on the fifth day of July, 1901,
at noon, standard time, at the place where this policy has been
countersigned, against loss from common law or statutory
liability for damages on account of bodily injuries, fatal or
non-fatal, accidentally suffered by any person or persons, and
caused through the negligence of the assured, by means of the
horses or vehicles in his services, and the use thereof, as
described in the application and while in the charge of the
assured or his employes. Provided, however, that:
"`A. The company's liability for an accident resulting in
injuries to, or in the death of one person is limited to five
thousand dollars ($5,000) and subject to the same limit for each
person; the total liability for any one accident resulting in
injuries to, or in the death of any number of persons is limited
to ten thousand dollars ($10,000).
"`This insurance is subject to the following conditions, which
are to be construed as conditions precedent of this contract:
"`1. The assured, upon the occurrence of an accident, shall
give immediate notice thereof in writing, with full particulars
to the home office of any claim which may be made on account of
such accident.
"`2. If thereafter any suit is brought against the assured to
enforce a claim for damages on account of an accident covered by
this policy, immediate notice thereof shall be given to the
company, and the company will defend against such proceeding, in
the name and on behalf of the assured, or settle the same at its
own cost, unless it shall elect to pay the assured the indemnity
provided for in clause " A " of special agreements as limited
therein.
Page 175
"`3. The assured shall not settle any claim, except at his own
cost, nor incur any expense, nor interfere in any negotiation for
settlement or in any legal proceeding, without the consent of the
company previously given in writing, but he may provide at the
time of the accident such immediate surgical relief as is
imperative. The assured when requested by the company shall aid
in securing information and evidence and in effecting
settlements, and in case the company calls for the attendance of
any employe or employes as witnesses at inquests and in suits,
the assured will secure his or their attendance, making no charge
for his or their loss of time.
"`8. No action shall lie against the company as respects any
loss under this policy unless it shall be brought by the assured
himself to reimburse him for loss actually sustained and paid by
him in satisfaction of a judgment after trial of the issue. No
such action shall lie unless brought within the period within
which a claimant might sue the assured for damages unless at the
expiry of such period there is such an action pending against the
assured, in which case an action may be brought against the
company by the assured within thirty days after final judgment
has been rendered and satisfied as above. In no case except that
of minors shall any action lie against the company after the
expiration of six years from the date of the given injuries or
death. The company does not prejudice by this clause any defenses
to such action which it may be entitled to make under this
policy.
"`This policy shall only cover losses sustained by and
liability for any claims against the assured as a result of the
risk specified in the contract or contracts hereto attached, and
is issued and accepted upon the condition that all the provisions
printed on the slip or slips attached to this policy are accepted
and shall be fulfilled by the assured as part of this contract as
fully as if they were recited at length over the signatures
hereto affixed.'
"The portion of the policy hereinbefore quoted commencing with
the words `against loss from common law or statutory
Page 176
liability' and ending with the words `entitled to make under this
policy' at the close of paragraph numbered 8, were printed on the
slip attached to the policy.
"On May 25, 1901, the plaintiff became liable for damages on
account of bodily injuries accidentally suffered by Mrs. Nellie
Heideman and caused through the negligence of the plaintiff by
means of a horse and vehicle in its service and the use thereof
as described in the application for the policy and while in
charge of one John Berry, who was one of the plaintiff's
employes. The plaintiff immediately gave the defendant notice of
the accident and of the fact that Nellie Heideman made a claim
against the plaintiff for damages on account of the bodily
injuries she had suffered from the accident and that Henry
Heideman, her husband, also made a claim for damages against it
on account of the loss of the services of his wife and of the
expenses of physicians and nurses which resulted to him from her
bodily injuries. On August 16, 1901, the defendant notified the
plaintiff that it denied that it was liable to it on account of
the damages resulting from the accident under its policy because,
as it alleged, the driver of the plaintiff's wagon was not an
employe of the plaintiff, but the fact was that this driver was
an employe of the plaintiff and the accident and the damages were
covered by the policy. On November 23, 1901, Nellie Heideman sued
the plaintiff for $10,000 damages on account of the bodily
injuries to her caused by the negligence of the plaintiff's
driver and by the accident, and Henry Heideman brought an action
against it for $3,000 damages which he alleged he sustained from
the same cause. On November 29, 1901, the plaintiff in writing
notified the defendant of the commencement of these suits and
requested it to undertake the defense of said suits as its said
policy provides it would do. But the defendant declined to
undertake the defense upon the alleged ground that its policy did
not cover the accident or the claims, while the fact was that it
covered both. The injuries to Mrs. Heideman were, among others,
the breaking of her right hipjoint socket bone, were serious and
permanent and
Page 177
the plaintiff was liable for damages in each of the suits. It
feared heavy judgments if the actions were permitted to proceed
to trial. Thereupon, on April 15, 1902, it compromised the suits
and paid Mrs. Heideman $2,000 damages and her husband $500
damages on account of the injuries caused by the accident and the
negligence of its driver.
"The petition also contained the following averments: `The
plaintiff served on defendant a written notice notifying it of
the terms of settlement offered by said Nellie Heideman and Henry
Heideman for the injuries sustained and damages suffered by them
respectively, as aforesaid, and that plaintiff proposed to accept
said settlements and pay said amounts, and to hold defendant
responsible for such payment under its aforesaid policy; that
defendant interposed no objection to said proposed settlements,
relying upon its disclaimer of any liability under said policy by
reason of its alleged claim that the driver of said wagon was not
in the employ of the plaintiff herein; and that said defendant by
reason of the said denial and disclaimer of any liability waived
all the conditions of the said policy as herein set forth.
Plaintiff further states that by reason of defendant's failure
and refusal to defend said actions brought by Nellie Heideman and
Henry Heideman against plaintiff, and by reason of the waiver
aforesaid, it was obliged to and did defend said actions and
employed counsel for that purpose, at an expense of two hundred
and fifty dollars ($250.00), and that said employment of counsel
was reasonably necessary, and that said sum of $250.00 is the
reasonable value of said services so performed.'
"And the Circuit Court of Appeals for the Eighth Circuit
further certifies that the following questions of law are
presented by the assignment of errors in this case, that their
decision is indispensable to a decision of this case and that to
the end that this court may properly decide the issues of law
presented it desires the instruction of the Supreme Court of the
United States upon the following questions:
"1. Did the denial of all liability by the assurer and its
refusal
Page 178
to defend the suits in the name and on behalf of the assured as
provided by paragraph 2 of the policy constitute such a breach of
the contract on its part that it released the assured from its
agreement in paragraph 3 that it would not settle any claim
except at its own cost without the consent of the assurer
previously given in writing, and from the provision of paragraph
8 that no action should lie against the assurer as respects any
loss unless for loss actually sustained and paid by the assured
in satisfaction of a judgment after trial of the issue?
"2. Were the provisions of paragraphs 3 and 8 of the policy
that the assured should not settle any claim except at its own
cost, without the consent of the assurer, previously given in
writing, and that no action should lie against the assurer as
respects any loss under the policy unless brought by the assured
to reimburse it for loss actually sustained and paid by it in
satisfaction of a judgment after trial of the issue, waived by
the assurer's denial of liability under the policy and by its
failure and refusal to defend the suits against the assured
according to the provision in paragraph 2?
"3. Did the compromise by the assured of the suits against it
after the assurer denied liability and refused to defend them and
the payment by the assured of the damages claimed of it pursuant
to the compromise, without the consent of the assurer and without
the rendition of a judgment or a trial of the issues, prevent the
assured from securing any recovery of the assurer upon the policy
on account of the negligence, accident and injuries described?
"4. Considering the terms of the policy, is the right of the
assurer to insist upon the condition of paragraph 8 respecting
the rendition of judgment after trial and its satisfaction by the
assured dependent upon the assurer's defense of the action
against the assured according to the provision in paragraph 2?
"5. Considering the terms of the policy, is the assurer's
denial of liability under the policy a waiver of the condition in
paragraph 8 respecting the rendition of judgment after trial and
its satisfaction by the assured?
Page 179
"6. Under the terms of the policy may the liability of the
assured to the injured person and the extent of that liability be
litigated in the first instance in an action between the assured
and the assurer where the assurer has denied its liability under
the policy and has refused to defend an action brought against
the assured by the injured person ?"
This question of the difference between contracts of indemnity against loss and indemnity against liability for loss, has never been presented to this court for decision. It has, however, been presented to several of the Supreme Courts of the States. SeeFentonv.Fidelity Casualty Company,36 Or. 283;Hovenv.Lake Superior Iron Co.,93 Wis. 201.
The fact that $3,000 has been paid to compromise the loss does not fix the amount; it establishes the fact that all the loss which the complainant was liable for, or has sustained, has been paid. A judgment against an indemnitee, after notice to the insurer to defend suit, is conclusive of the amount and liability. 16 Am. Eng. Ency. of Law, 180, note 4, and cases cited;Showersv.Wadsworth,81 Cal. 270.
Such a judgment, without any notice to an indemnitor, is presumptive evidence of liability and its amount only. 16 Am. Eng. Ency. of Law, 180, note 5;Kansas City c. R. Co. v.Southern Ry. News,151 Mo. 373,391;Laingv.Hanson(Texas),36 S.W. 116,118.
The provision for the judgment and its payment is of the same nature and effect as the provision in fire insurance policies for a determination of amount and liability by arbitration, and that such arbitration "shall be a condition precedent to any right of action in law or in equity to recover for such loss." Such contracts are valid and binding as long as the indemnitor proceeds in accordance with them, and does not deny its liability.Hamiltonv.Ins. Co.,136 U.S. 242,252.
But they are ineffective and are waived when the insurerPage 180denies all liability.Weinerv.Fire Ins. Co.,153 Mass. 235,238;Savagev.Phoenix Ins. Co.,12 Mont. 458;Penselv.Home Ins. Co.,3 Wn. 485.
The provisions of this contract are nothing more than a method of proof which is waived when the company denies its liability and refuses to follow that method.Rossv.American c. Ins.Co.,56 N.J. Eq. 55;Southern Ry. News Co. v.FidelityCasualty Co., 83 S.W. Rep. (Ky.) 620. See alsoTaylorv.Insurance Co., 9 How. 390; 4 Joyce on Insurance, § 3211;Knickerbocker Ins. Co. v.Pendleton,112 U.S. 696;Baileyv.AEtna Ins. Co., 46 N.W. Rep. (Wis.) 440; Beach on Insurance, § 1244.Mr. Frank GosnellandMr. Geo. Weems Williamsfor the Casualty Co.:
The company agreed to indemnify the insured against loss from common law or statutory liability only. There is a clear distinction between a contract against "liability for damages" and a contract of indemnity against "loss from liability for damages." Under the latter clause no liability arises until payment by the assured of a judgment after a trial.Gilbertv.Wiman,1 N.Y. 550;Fryev.Bath Gas Co.,97 Me. 241;Mosesv.Travellers Ins. Co.,63 N.J. Eq. 260;Finbyv.United States Casualty Co., 83 S.W. 2;Cushmanv.FuelCo.,122 Iowa 656;Connollyv.Bolster, 72 N.E. Rep. (Mass.) 981;O'Connellv.N.Y., N.H. H.R.R.,187 Mass. 272.Sandersv.Frankfort Ins. Co.,72 N.H. 465, distinguished.
It is suggested, to be sure, that the plaintiff should have defended the suit against it. But not only was that not one of the plaintiff's undertakings, but it was expressly forbidden to the plaintiff by the contract, as no doubt the defendant would have pointed out had that course been taken. Moreover, the defendant, by its refusal, cut at the very root of the mutual obligation and put an end to its right to demand further compliance with the supposed term of the contract on the other side. The only concern of the plaintiff was to establish reasonable ground for believing that if the defendant had not broken its contract it would have been called on to make a payment to the plaintiff, and how much that payment would have been.
Looking at the substance of the matter, it makes no practical difference, no difference in the amount of the defendant's liability, whether we say that the defendant by its conduct made performance of the conditions by the plaintiff impossible, and therefore was chargeable for the sum which it would have had to pay if those conditions had been performed, or answer, in the language of the questions, that performance of the conditions was waived. The sole difference would be in the form of the declaration. In either case the plaintiff would declare upon the policy, only the breaches assigned would not be the same. In the former the breach would be the refusal to defend, in the latter the refusal to pay. If it is necessary to considerPage 182the question in a technical aspect, we think that the plaintiff was entitled to treat the contract as on foot, notwithstanding the defendant's act, and go on with itcypres. Under the circumstances it could not comply literally with the words, and was justified in doing the best thing that could be done for the interest of both. The defendant by its abdication put the plaintiff in its place with all its rights. To limit its liability as if its only promise was to pay a loss paid upon a judgment is to neglect the meaning and purpose of the reference to a judgment, and even the words of the promise. The promise in form is to indemnify against loss by certain kinds of liability. The judgment contemplated in the condition is a judgment in a suit defended by the defendant in case it elects not to settle. The substance of the promise is to pay a loss which the plaintiff shall have been compelled to pay, after such precautions and with such safeguards as the defendant may insist upon. It saw fit to insist upon none.
We assume that the settlement was reasonable, and that the plaintiff could not expect to escape at less cost by defending the suits. If this were otherwise no doubt the defendant would profit by the fact. The defendant did not agree to repay a gratuity, or more than fairly could be said to have been paid upon compulsion. But a sum paid in the prudent settlement of a suit is paid under the compulsion of the suit as truly as if it were paid upon execution.
But there is another aspect of the eighth condition of the slip which requires a few words more. It is said that this condition expressly contemplates a breach of contract by the company and defines the plaintiff's rights in that case. The words "no action shall lie against the company as respects any loss under this policy unless, " etc., certainly do contemplate a case in court in which the company may turn out to be in the wrong, and therefore technically guilty of a breach of contract. But notwithstanding the contrary suggestion inSandersv.Frankfort Marine, Accident Plate Glass Ins. Co.,72 N.H. 485,498,499, we think that the only breach which that condition hasPage 183in view is a refusal by the company to pay after the decision in a case of which it has taken charge, when, notwithstanding the judgment, it conceives itself to have a defense. The action referred to is an action for money alleged to be due under the policy. Contracts rarely provide in detail for their non-performance. It would be stretching the words quoted to a significance equally hurtful to both parties, and probably equally absent from the minds of both, to read them as having within their scope an initial repudiation of liability by the defendant and a requirement that in that event the plaintiff should be bound to try the case against itself, although it should be plain that by a compromise it could reduce its claim on the defendant as well as its own loss.
If there is anything in the doubt whether the defendant, by assuming the defense of the original suit, would not lose its right to deny that the policy applied, even if it purported to save that right, it does not change our opinion. The requirement of a trial and judgment would not accomplish the object suggested, to make collusion impossible. The objections to thus hampering thedominus litishave been touched upon, and there would be presented the anomaly, if not the monstrosity, of a party attempting to provide by contract that if he should do what by general principles of contract forfeited his right to make further requirements of the other side, his conduct, on the contrary; should impose new obligations on the other side. If the defendant kept its contract, it would defend the suit, and the plaintiff would have no duties. If it refused to do as it had promised, we cannot think that it was entitled to complain that the plaintiff did not do it when the interest of both was the other way. Before a policy should be construed to have such an extraordinary effect honesty requires that the assured should be notified of his duties in unmistakable words.
We answer the first, second, fourth and fifth questions in the affirmative, the third in the negative and the sixth in the affirmative, so far as the question is warranted by the facts set forth.It will be so certified.Page 184