Aetna Cas. & Sur. Co. v. Security Forces, Inc.

• Decision Date: 14 April 1986
• Docket Number: No. 0767,0767
• Court: South Carolina Court of Appeals
• Parties: AETNA CASUALTY & SURETY COMPANY, a corporation; and Doris Geneva Greer, as Administratrix D.B.N.C.T.A. of the Estate of Charles Furman Greer, Deceased, Respondents, v. SECURITY FORCES, INC., and Security Insurance Company of Hartford, Appellants. . Heard

Page 903

347 S.E.2d 903

290 S.C. 20

AETNA CASUALTY & SURETY COMPANY, a corporation; and Doris

Geneva Greer, as Administratrix D.B.N.C.T.A. of

the Estate of Charles Furman Greer, Deceased, Respondents, v. SECURITY FORCES, INC., and Security Insurance Company of

Hartford, Appellants.

No. 0767.

Court of Appeals of South Carolina.

Heard April 14, 1986.

Decided Aug. 4, 1986.

John E. Johnston, Bradford N. Martin and Gwendolyn G. Embler, of Leatherwood, Walker, Todd & Mann, Greenville, for appellants.

N. Heyward Clarkson, III, of Rainey, Britton, Gibbes & Clarkson, and C. Wade Cleveland, Greenville, for respondents.

SANDERS, Chief Judge:

Appellants Security Forces, Inc. and Security Insurance Company of Hartford appeal from an order of the Circuit Court ruling that respondents Aetna Casualty & Surety Company and Doris Geneva Greer, as administratrix D.B.N.C.T.A. of the estate of Charles Furman Greer, could not be liable in connection with an action previously filed by Security Forces against the estate. We reverse.

Our primary task in this appeal is to establish which of the following has precedence: (1) the duty of Aetna, as an automobile liability insurer, to one who holds the status of an insured by virtue of the policy's omnibus coverage or (2) the rights accruing to Aetna by virtue of its status as subrogee of the policy's named insured. Here, Aetna's duty as an insurer on the one hand and its subrogated rights on the other are at hopeless loggerheads. We hold that in this case Aetna's duty as an insurer is paramount.

The facts, though somewhat involved, can be fairly summarized as follows.

In July 1970, Security Forces and Hystron Corporation had in effect a contract under which Security Forces provided Hystron with guard services to protect Hystron's property in Spartanburg County. Security Forces agreed to defend and hold Hystron harmless in connection with any claims arising as a result of operations performed by Security Forces. Security Forces also agreed to obtain general liability and automobile liability insurance in specified amounts of coverage. In fulfillment of this agreement Security Forces acquired a combined general and automobile liability insurance policy from Security Insurance. Security Forces provided Hystron with Security Insurance's certificate of insurance, which repeated verbatim the hold harmless provision contained in the contract for guard services.

Among the guards Security Forces assigned to protect Hystron's property was Charles Furman Greer. On July 27, 1970, while Greer was on duty at the Hystron location, Hystron directed him to transport one Hans Biener, a Hystron employee, and his family to the airport, using an automobile owned by Hystron. While in route to the airport the automobile struck a bridge abutment. Biener's wife was killed and the other members of the Biener family were injured. Greer later died from the injuries he received in the accident.

At the time of the accident Hystron had in force an automobile liability insurance policy issued by Aetna. Under the policy Hystron was the named insured and the automobile Greer drove was an insured vehicle. Under the policy's omnibus coverage Greer had the status of an insured because he was a permissive user.

The Bieners brought suit in the State of New York against Hystron for injury and death. Hystron joined Security Forces as a third party defendant in that suit, seeking contractual indemnity from Security Forces based upon their agreement for guard services. Security Forces then attempted to join Greer's estate as a fourth party defendant seeking implied indemnity from the estate for its liability, if any, to Hystron. The estate, in turn, sought to join Aetna as a fifth party defendant seeking indemnity from Aetna for its liability, if any, to Security Forces. The trial court ruled it did not have personal jurisdiction over the estate. Nevertheless, the trial court's order set forth limits upon the right of Security Forces to seek indemnity from the estate, and the estate to seek indemnity from Aetna.

The parties to the action stipulated damages to be $450,000. The New York trial court ruled that Hystron was directly liable to the Bieners and that Security Forces was obligated to indemnify Hystron for Hystron's liability to the Bieners under the hold harmless provision of the contract for guard services. On appeal, the Appellate Division of the New York Supreme Court, in a 1980 decision, affirmed these aspects of the trial court's order. Without explanation, however, the Appellate Division modified the order to delete the limitations imposed on any future actions related to the fourth and fifth party actions against the estate and Aetna respectively.

Aetna, as insurer of Hystron, then paid the Bieners, and Security Insurance, as insurer of Security Forces, indemnified Aetna the amount it had paid the Bieners.

In October 1983, Security Forces filed an action in the Court of Common Pleas for Spartanburg County against the estate of its former employee, Greer, seeking implied indemnity based on the right of a master to maintain a suit against a servant where alleged misconduct of the servant has given rise to vicarious liability of the master. The proceeds of the Aetna policy are the only undistributed asset of Greer's estate.

Aetna and the administratrix of Greer's estate then brought this declaratory judgment action against Security Forces and Security Insurance seeking an order that neither Aetna nor the estate could be liable to Security Forces in connection with its pending suit against the estate.

In granting Aetna and the estate the relief they sought, the Circuit Court focused upon Aetna's right to be subrogated to the rights of Hystron, its insured. The Court noted that Aetna, in its status as Hystron's subrogee, is entitled to the benefit of both the hold harmless provision in the contract for guard services between Hystron and Security Forces and the insurance protection that Security Forces obtained from Security Insurance as part of Security Forces' performance of the contract. The Court reasoned that to require Aetna to defend Security Forces' suit against Greer's estate and pay any resulting money judgment would destroy Aetna's protection, as Hystron's subrogee, under the hold harmless provision. ¹

Although the Circuit Court correctly analyzed the effect of such a decision against Aetna, we conclude it erred in giving effect to Aetna's rights as Hystron's subrogee over Aetna's contractual duty as the insurer of Greer.

Aetna's right, as Hystron's subrogee, to the protection of the hold harmless provision arises from the policy it issued to Hystron. Aetna's contractual duties as Greer's insurer arise out of the same policy. Aetna's right and its duties are separate and distinct. In the absence of either one, the other would undoubtedly dictate the result in this case. Resolution of this dispute requires only a choice as between the two. On the facts of this case we are unwilling to subordinate Aetna's duty to its insured to its right of subrogation accruing from another insured. This choice is consistent with the long-standing line of precedent in this jurisdiction that intensifies the duty of an insurer to its insured based upon the special nature of a contract of insurance. See Tyger River Pine Co. v. Maryland Casualty Co., 170 S.C. 286, 170 S.E. 346 (1933); Miles v. State Farm Mutual Automobile Insurance Co., 238 S.C. 374, 120 S.E.2d 217 (1961); Nichols v. State Farm Mutual Automobile Insurance Co., 279 S.C. 336, 306 S.E.2d 616 (1983). See also Brown v. South Carolina Insurance Co., 284 S.C. 47, 324 S.E.2d 641 (Ct.App.1984).

Here, Aetna agreed with Hystron to insure permissive users, like Greer, of Hystron's vehicle. Then, as now, this coverage was required by statute. See Sections 46-750.31 to -750.32 of the Code of Laws of South Carolina, 1962, now codified in Sections 56-9-820 to -830 of the Code of Laws of South Carolina, 1976. Aetna may not now nullify this obligation by interposing a separate agreement (the hold harmless provision) through its rights as Hystron's subrogee. Cf. Pennsylvania National Mutual Casualty Insurance Co. v. Parker, 282 S.C. 546, 551, 320 S.E.2d 458, 461 (Ct.App.1984) ("Where a statute requires insurance for the benefit of the public ... the insurer is not permitted to nullify its purposes through engrafting exceptions from liability as to uses which it was the evident purpose of the statute to cover."). Under the circumstances of this...