Finley v. Casualty Co.

notice: London Guarantee Co. v. Siwy (Ind. App.), 66 N. E., 481; Travelers' Ins. Co. v. Myers (Ohio), 57 N. E., 458, 49 L. R. A., 760; Smith & Dove Co. v. Travelers' Ins. Co. (Mass.), 50 N. E., 516.

Under neither class of these policies is the employee treated as in privity with the parties to the contract. Under each the contract is held to be one between the company and the master, and for the benefit of the latter.

In Anoka Lumber Co. v. Fidelity & Casualty Co. it is said: "The defendant claims that it is not liable because the Nelson judgment (the judgment obtained by the employee against the assured) has not been paid by the plaintiff. If it be simply a contract of indemnity, then, under the decision of this court in Weller v. Eames, 15 Minn., 461 (Gil., 376), 2 Am. Rep., 150, the payment of the judgment is a condition precedent to the right of the plaintiff's recovery."

In Fenton v. Fidelity & Casualty Co., it is said: "There is a distinction made by the authorities between a contract of indemnity against liability for damages and a simple contract of indemnity against damages. In the former case it has very generally been held that an action may be brought, and a recovery had, as soon as the liability is legally imposed, while in the latter there is no cause of action until there is actual damage. Jones v. Childs, 8 Nev., 121; 10 Am. & Eng. Enc. Law, 413; Smith v. Chicago & N. W.R. Co., 18 Wis., 21; Thompson v. Taylor, 30 Wis., 73; Locke v. Homer, 131 Mass., 93, 41

Finley v. Casualty Co.

Am. Rep., 199; Trinity Church v. Higgins, 48 N. Y., 532. If, therefore, the policy upon which this action is based is a mere contract of indemnity, the payment by the mill company of the liability incurred by it for the injuries of the plaintiff is a condition precedent to the right of recovery. If, on the other hand, the contract is one of indemnity against liability, a cause of action accrued thereunder as soon as the liability of the mill company to the plaintiff attached."

In Frye v. Bath Gas & Elec. Co., wherein it appeared that the policy under examination was in practically the same language as the one before the court, it was said: "We are unable to perceive any ground upon which the bill can be sustained, and the relief prayed for granted. The contract of insurance was with the gas company to indemnify that company against loss from liability for damages on account of bodily injuries accidentally suffered by the employees, and caused by the negligence of the assured. The use of the word 'indemnify' shows the object and nature of the contract. It was to reimburse or make whole the assured against loss on account of such liability. There can be no reimbursement when there has been no loss. The contract of insurance contains nothing to show that it was the object or intention of the contracting parties that the insurer should guarantee the gas company's liability for negligence to its employees. It was not a contract of insurance against liability, but of indemnity against loss by reason of liability. The difference between a contract of

Finley v. Casualty Co.

indemnity and one to pay legal liabilities is that upon the former an action cannot be brought and recovery had until the liability is discharged, whereas upon the latter the cause of action is complete when the liability attaches. The contract was one of indemnity

only. It was not obtained by the gas company for the benefit of its employees, but for its own benefit exclusively—to reimburse it for any sum that the company might be obliged to pay and had paid on account of injuries sustained by employees through its negligence."

In Bain v. Atkins it appeared that the policy was one insuring against legal liability, and that before an effort was made by the employee to get the benefit thereof by legal proceedings a compromise had been effected between the employer and the insurance company without any fraud. "Therefore," continues the court, "the plaintiff is compelled to contend that the obligation of the company upon the happening of the accident constituted a fund for the benefit of the plaintiff, impressed with a trust for him that such a trust fund could be paid to Atkins, if at all, only to reimburse him after he had satisfied his own liability to the plaintiff and that the company's settlement with Atkins without the consent of the plaintiff was in the company's own wrong, and void as to the plaintiff. The essence of this contention, without which no part of it can stand, is that the insurance constituted a trust fund for the benefit of the plaintiff, and for this there is no ground. The only parties to to the contract of insurance

were

Finley v. Casualty Co.

Atkins and the company. The consideration for the company's promise came from Atkins alone, and the promise was only to him and his legal representatives. The policy only purports to insure Atkins and his legal representatives against legal liability for damages respecting injuries from accidents to any person or persons at certain places, and within the time and under the circumstances defined. It contains no agreement that the insurance shall inure to the benefit of the person accidentally injured, and no language from which such an understanding or intention can be implied. Atkins had as full a right to settle with the company, and to use in his business the proceeds of the settlement, as to deal at his will with any other part of his property, and the company had a right to settle with him as it did."

There are some parts of the policy copied in this opinion that are apparently, on first consideration, out of harmony with the view that the contract was intended as one of indemnity merely against loss from liability for damages, rather than against liability simply. We refer to the second and third paragraphs, under the caption "General Agreements." Similar terms were referred to in Fenton v. Fidelity & Casualty Co., supra, as indicating that the contract was one simply against liability. This construction is very suggestive, and, if the clauses referred to stood alone, it would be difficult to assign any other meaning to them. However, they are qualified and controlled by the seventh special agree

Finley v. Casualty Co.

ment. When construed along with the latter provision, the following is observed to be the meaning: While the company is bound to reimburse the assured for loss actually sustained and paid by him in satisfaction of a judgment recovered against him by an employee, yet, in order to make sure, as far as possible, that there shall be no recovery as a basis on which to subsequently estab lish a claim, the company reserves the right to defend the litigation; also to supervise any settlement that may be made, and to have a free hand in negotiating settlements of a claim made against the assured. As stated, if these provisions that is, the second and third general agreements-stood alone, they would furnish strong reasons for construing the contract as one against liability; but, from what has just been stated, it is perceived that they have a proper place in a contract against loss from liability for damages, in the way of enabling the company to minimize the loss.

When we consider that the provisions in the outset of the policy is "to indemnify against loss from liability for damages, and that in the seventh general agreement it is provided "that 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,” etc., we think there can be no doubt that this policy must be construed as one belonging to the class of policies furnishing indemnity against loss from liability for damages,