Brookville Electric Co. v. Utilities Ins. Co.

• Decision Date: 02 July 1940
• Docket Number: No. 25137.,25137.
• Parties: BROOKVILLE ELECTRIC CO. v. UTILITIES INS. CO.
• Court: Missouri Court of Appeals

142 S.W.2d 803

BROOKVILLE ELECTRIC CO. v. UTILITIES INS. CO.

No. 25137.

No. 25137.

St. Louis Court of Appeals. Missouri.

July 2, 1940.

Rehearing Denied September 13, 1940.

Appeal from St. Louis Circuit Court; Frank B. Coleman, Judge.

"Not to be reported in State Reports."

Action by the Brookville Electric Company against Utilities Insurance Company on an insurance contract to recover the amount which plaintiff had been compelled to pay out in defense of and in satisfaction of a judgment. From an adverse judgment, defendant appeals.

Affirmed.

Taylor, Chasnoff & Willson, J. H. Cunningham, Jr., and James V. Frank, all of St. Louis, for appellant.

John M. Goodwin, Wilbur C. Schwartz, and Orville W. Richardson, all of St. Louis, for respondent.

BENNICK, Commissioner.

Plaintiff, Brookville Electric Company, an Indiana corporation, the insured under a reciprocal policy of public liability insurance issued by the Subscribers at Utilities Indemnity Exchange in St. Louis, Missouri, has instituted this action against defendant, Utilities Insurance Company, the reinsurer of the contract, to recover the amounts which plaintiff was compelled to pay out in the defense of, and in satisfaction of a judgment rendered in, an action brought against plaintiff in the State of Indiana in 1931 by one Urban J. Schuck to recover damages for personal injuries sustained by the said Schuck in 1919 in a manner falling within the coverage of the policy, by which the original insurer had agreed to indemnify plaintiff against loss from the liability imposed upon it by law for damages on account of bodily injuries sustained by any person or persons not employed by plaintiff, which were the result of accidents occurring by reason of plaintiff's business operations.

Among the general agreements contained in the policy was the provision that upon the occurrence of an accident, the insured should give immediate written notice thereof, with the fullest information obtainable at the time, to the head office of the Exchange; that the insured should give like notice of claims for damages on account thereof, with full particulars; and that if any suit, even if groundless, should be brought against the insured to recover damages on account of such injuries as were covered by the policy, the insured should immediately forward to the Exchange every summons or other process served upon it.

For its part the Exchange agreed that it would thereafter, in the name and on behalf of the insured, but at its own cost and expense, either settle such claim or suit, or else defend the same, according to its own exclusive right which was specifically reserved to it in the policy.

In its petition plaintiff alleged that it had duly performed all the terms, conditions, and requirements of the policy on its own part, but that the Exchange, and the defendant herein, in total disregard and violation of their obligations and duties under the policy, had failed and refused to defend the action brought by Schuck against plaintiff, by reason of which plaintiff had been compelled to undertake the defense of the same at its own cost and expense, and to pay out the sums for which, in the aggregate, it sought recovery from defendant.

Admitting the issuance of the policy and that the same was in force on April 18, 1919, when Schuck's injuries were sustained, defendant denied liability to plaintiff upon the ground that plaintiff, in violation of the provisions of the policy, had failed to give it immediate written notice of the institution of Schuck's action, and had failed to forward to it the summons served upon plaintiff, thereby materially prejudicing the rights, both of the original insurer and of the defendant herein, in that both the original insurer and the defendant herein were prevented from making an immediate investigation of the matters involved in said action, and were caused to lose the benefit of necessary records, reports, and data contained in files available to defendant at and after the time of the service of summons upon plaintiff, but not available at the time defendant was first notified of the pendency of the action.

There was a further allegation that the policy in question had been an Indiana contract; and certain decisions and rules of law of that state, allegedly serving to bar plaintiff's right of recovery in this action, were pleaded and referred to in the answer.

Tried to a jury in the Circuit Court of the City of St. Louis, a verdict was returned in favor of plaintiff, and against defendant, for the aggregate amount of $4,625.34. From the judgment which was entered in conformity with the verdict, defendant's appeal to this court has been taken and perfected in the usual course.

Schuck was only ten years of age at the time he was injured in 1919 by coming in contact with a live wire maintained by plaintiff in connection with the operation of its electric power plant in Brookville, Indiana.

On April 19, 1919, the very next day after the accident, plaintiff's then attorney, one Milford P. Hubbard of Brookville, gave written notice of the accident to the St. Louis office of the Exchange, which thereupon proceeded to have an investigation made by Messrs. Joseph & Abrams, a firm of lawyers in Indianapolis, Indiana, who at that time were representing the Exchange in that state. The fact of the making of such investigation was subsequently ascertained in 1934 by the discovery in defendant's files of a canceled check for $61.50, bearing date of March 17, 1920, and made payable to Messrs. Joseph & Abrams for legal services in connection with the Schuck accident. It was shown, however, from the form of notations appearing on the face of the check, that the payment evidenced thereby had been purely for the attorneys' services, expenses, and the like in making the investigation, and that no portion of the money had gone to Schuck's father as any part of the settlement which plaintiff, through Hubbard, its local attorney, had made with the father at that time.

It would appear that following the accident, no claim was made that Schuck, who was then a minor child, had been seriously injured, so that although plaintiff, through the efforts of its attorney, Hubbard, paid the doctor's bill and took a release of some sort from the father, there was no legal settlement made of the minor's own cause of action. Why the Exchange, notwithstanding its liability under the policy and the investigation it had made of the accident, saw fit to permit the matter to be handled in such an unsatisfactory and incomplete fashion, is not disclosed by the record; and the failure to have effectively settled the minor's own cause of action at that time is the basis of the present controversy between the parties, since on May 29, 1931, after Schuck had meanwhile attained his majority, he instituted an action in the Circuit Court of Franklin County, Indiana, against plaintiff and one Brockman, the former president and chief owner of plaintiff company, praying damages against said defendants in the sum of $25,000.

On the same day a summons was issued by the clerk of the court and delivered to the sheriff, commanding him to summon Brockman and one Charles Deutsch, the then local manager and "highest ranking agent" of Brookville Electric Company, to appear in court on July 20, 1931, to answer to Schuck's petition or complaint, as it seems the same is known in Indiana. As for Deutsch, the agent of the company through whom the latter was brought into court, service was had by merely reading the summons to him—a practice said to be permissible in the State of Indiana—and this fact is of importance as showing the inability of Brookville Electric Company to have forwarded the summons to the office of the Exchange in St. Louis, even if the former's then officers had known of the existence of the policy, which they did not.

Incidentally, the record shows that Brookville Electric Company had originally been operated as a small family corporation owned entirely by Brockman and his three sons, but that in 1926 the interest of the Brockmans was sold to certain parties in Cleveland, who in turn transferred that interest to the Cleveland Southwestern Railway Company, a member of a chain of utility companies with holdings throughout that territory. A year or so later some one of the new owners came to Brookville, and after removing all the company's papers and records, including the policy in question, from the safe in which they had formerly been kept in the local office, transferred them to Cleveland, from whence they were subsequently removed to Marion, Ohio, and finally to Bowling Green, Ohio, where such of them as still remained eventually came into the possession of the Northeastern Water & Electric Service Corporation, which had meanwhile acquired the controlling interest in the company by virtue of the foreclosure of certain of its mortgaged property. There was testimony to show that by reason of the adverse interest of the mortgagor, it had been difficult for the mortgagee to acquire all the records of the company; and at any rate, in the course of all the successive transactions noted, the insurance policy was either lost or misplaced, and was never found. So it was that when Schuck's action was instituted in 1931, the persons then in control of the affairs of plaintiff company knew nothing of the existence of an insurance policy in 1919 when Schuck was injured, and for that reason failed to give immediate notice to defendant of the claim for damages that had been made.

At the return term for Schuck's action, the defendants, Brockman and Brookville Electric Company, filed answers, which were subsequently withdrawn so that a demurrer might be filed on behalf of Brockman, and a motion to strike out on behalf of the corporate defendant. The demurrer as to Brockman was sustained by the court; two amended complaints were subsequently filed on behalf of plaintiff; a change of...