Berg v. Associated Employers' Reciprocal

• Citation: 47 Idaho 386,279 P. 627
• Decision Date: 22 March 1929
• Docket Number: 5060
• Parties: E. H. BERG, Receiver for MODERN BOX MANUFACTURING COMPANY, a Corporation, Respondent, v. ASSOCIATED EMPLOYERS RECIPROCAL AND ILLINOIS INDEMNITY EXCHANGE, Appellants
• Court: United States State Supreme Court of Idaho

279 P. 627

47 Idaho 386

E. H. BERG, Receiver for MODERN BOX MANUFACTURING COMPANY, a Corporation, Respondent, v. ASSOCIATED EMPLOYERS RECIPROCAL AND ILLINOIS INDEMNITY EXCHANGE, Appellants

No. 5060

Supreme Court of Idaho

March 22, 1929

INSURANCE-CONDITION OF INSURER'S LIABILITY-COMPLIANCE-CORPORATIONS-OFFICERS OUT OF STATE-SERVICE ON COUNTY AUDITOR.

1. Failure of corporation to comply with terms of indemnity contract requiring it to forward all process, pleadings and papers of any kind relating to all claims and proceedings, to attorney for indemnitor, cannot be excused because of fact that service was made on county auditor of county in which corporation had its principal place of business, in accordance with C. S., sec. 6676, for reason that all the officers of corporation had left the state.

2. Insured has duty of exercising ordinary care in acquiring knowledge in order that insurer may be promptly notified in accordance with requirement of policy for presentation of information relating to claim or proceeding against insured.

3. Reasonable or substantial compliance with provisions of contract of indemnity relating to the furnishing of information to insurer of all claims or proceedings against insured is a condition precedent to the maintenance of any action under such contract.

ON REHEARING.

4. Service on county auditor of county in which corporation has its principal place of business, in accordance with C. S sec. 6676, subd. 1, because all the officers of the corporation had left the state, has the same effect as personal service, and gives the court jurisdiction the same as personal service.

APPEAL from the District Court of the Eighth Judicial District, for Kootenai County. Hon. Chas. L. Heitman, Judge.

Action on contract of indemnity. Judgment for plaintiff. Reversed.

Judgment reversed, with directions. Costs awarded to appellants.

Robert H. Elder and Ralph S. Nelson, for Appellants.

A condition in an employer's liability policy requiring that notice of the action shall be given to the insurance company is valid and failure to observe this condition precedent is a breach of the contract and the contract cannot be enforced by the insured. (Imperial Fire Ins. Co. v County of Coos, 151 U.S. 452, 14 S.Ct. 379, 38 L.Ed 321; Oakland Motor Car Co. v. American Fidelity Co., 190 Mich. 74, 155 N.W. 729; Traveler's Ins. Co. v. Scott (Tex. Civ. App.), 218 S.W. 53; Traveler's Ins. Co. v. Myers, 62 Ohio St. 529, 57 N.E. 458, 49 L. R. A. 760; National Paper Box Co. v. Aetna Life Ins. Co., 170 Mo.App. 361, 156 S.W. 740; Northwestern Tel. Exch. Co. v. Maryland Casualty Co., 86 Minn. 467, 90 N.W. 1110; Lee v. Casualty Co. of America, 90 Conn. 202, 96 A. 952.)

The judgment and proceedings in the lower court impair the obligation of the contract between the Modern Box Manufacturing Company and the subscribers at the Illinois Indemnity Exchange in violation of art. 10, sec. 1, of the constitution of the United States. (Allgeyer v. Louisiana, 165 U.S. 578, 17 S.Ct. 427, 41 L.Ed. 832; New York Life Ins. Co. v. Dodge, 246 U.S. 357, Ann. Cas. 1918E, 593, 38 S.Ct. 337, 62 L.Ed. 772.)

Ezra R. Whitla, for Respondent.

No question of the sufficiency of the evidence is raised on this appeal. This eliminates from consideration any question of notice of the accident. Nowhere does the policy make it a condition precedent and nowhere does the policy provide that it shall be forfeited if it is not complied with. It is always held that unless the policy provides for forfeiture or makes the giving of notice a condition precedent to recovery, the court will not so construe it but will always construe the policy against forfeiture. Shafer v. United States Casualty Co., 90 Wash. 687, 156 P. 861, where the court said: "In our present case the terms of the policy do not make the giving of the notice either a condition precedent to recovery or of the essence of the contract." Hope Spoke Co. v. Maryland Casualty Co., 102 Ark. 1, Ann. Cas. 1914A, 268, 143 S.W. 85, 38 L. R. A., N. S., 62, where the court said: "The language of the policy is that of the insurer, and, when it is doubtful or ambiguous, must be given the strongest interpretation against the insurer which it will reasonably bear. . . ."

The duty to give notice only arises when the insured himself receives it. (Stevens & Company v. Frankfort Marine etc. Ins. Co., 207 F. 757, 125 C. C. A. 295, 47 L. R. A., N. S., 1214.) There the court said: "It will be seen, therefore, that the controlling point in the case is whether by the terms of the policy in question the assured was required to give notice of the injury sustained by its employee before it had any notice of such injury. The court below held that it was, both by its rulings in respect to the plaintiff's offer of proof and in its instructions to the jury, and thereby, in our opinion, committed clear error. As said by this court in Empire State Surety Co. v. Northwest Lumber Co., 203 F. 417, 121 C. C. A. 527:

"'It is self-evident that a party cannot give notice of an accident in respect of which a claim can be made until he himself informed of it, or has knowledge concerning it, and he could not be expected so to do.'"

The court then reversed the lower court squarely upon this question. This decision is sustained by all of the authorities upon that question. (Empire State Surety Co. v. Northwest Lumber Co., 203 F. 417, 121 C. C. A. 527; Mandell v. Fidelity & Casualty Co., 170 Mass. 173, 64 Am. St. 291, 49 N.E. 110; Shafer v. United States Casualty Co., 90 Wash. 687, 156 P. 860.)

The difference between the cases cited by appellants and the one at bar is that all of appellants' cases expressly make the giving of notice a condition precedent, while here the contract does not do so.

BUDGE, C. J. Givens, J., Hartson, D. J., T. Bailey Lee and Varian, JJ., concurring. Wm. E. Lee, J., dissents.

OPINION

BUDGE, C. J.

Louis E. Blandy was injured, on January 22, 1918, while in the employ of the Modern Box Manufacturing Company. The Box Company previously had entered into a contract with the Illinois Indemnity Exchange under the terms of which the exchange agreed to indemnify the Box Company "against legal liability up to the amounts set forth in the attached schedule for damages by reason of bodily injuries accidentally sustained, . . . . which may be suffered or alleged to have been suffered by any employee or employees of the assured. . . ." The following clause was also contained in the contract:

"Provided, always, that the indemnity herein provided for is and shall be subject to the following conditions:

"2. Upon the occurrence of any contingency covered by this contract, the assured shall give immediate written notice thereof to the attorney, and shall forward to the attorney forthwith after receipt thereof, every written communication, or information as to any verbal communication, and every process, pleading and paper of any kind relating to any and all claims and proceedings."

Blandy instituted an action against the Box Company, in the district court of the eighth judicial district, claiming damages on account of his injuries. At this time all the officers of the Box Company had left the state of Idaho, and summons was served upon the auditor of the county in which the Box Company had its principal place of business, as authorized by C. S., sec. 6676. After default of the Box Company, judgment was entered in favor of Blandy, which was paid with money borrowed by the receiver for the Box Company, as authorized by the court. Some time thereafter, motions were made to set aside the judgment obtained by Blandy and to vacate an order appointing a receiver for the Box Company. These motions were granted, but upon appeal to this court were reversed. ( Blandy v. Modern Box Mfg. Co., 40 Idaho 356, 232 P. 1095.) The present action was commenced by the receiver for the Box Company to recover over from appellants under the indemnity contract on account of the judgment recovered by Blandy. After trial of the cause to court and jury, verdict was returned in favor of the receiver, and the insurers have prosecuted this appeal from the judgment entered on the verdict.

As we view the case, the court erred in the denial of appellants' motion for nonsuit, made at the conclusion of respondent's introduction of evidence and renewed after all the evidence had been presented. As bearing on a compliance by the insured with the provisions of the indemnity contract set out above it is sufficiently established by the record that the Illinois Indemnity Exchange had notice of the injuries sustained by Blandy, but not of the pendency of his action against the Box Company. There was no compliance by the Box Company with the provision regarding the forwarding to the attorney of "every process, pleading and paper of any kind relating to any and all claims and proceedings." That is to say, the summons and complaint in the action of Blandy against the Modern Box Manufacturing Company were not forwarded to the attorney for the insurer as required under the terms of the indemnity contract, and it had no notice whatever of the pendency of that action. And while it appears that the process served upon the county auditor was not forwarded by the latter to any of the officers of the Box Company, the service as made upon the auditor was valid and effectual as to the Box Company, and failure by it to comply with the terms of the indemnity contract in regard to forwarding all process, pleadings, etc., to the attorney for the indemnitor cannot be excused by reason of none of its officers receiving personal service. C. S., sec. 6676, provides that when the president, secretary, cashier or managing agent of a domestic corporation are absent from the...