Commercial Casualty Ins. Co. v. Fruin-Colnon Cont. Co.

Citation32 F.2d 425
Decision Date03 June 1929
Docket NumberNo. 8207,8208.,8207
CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)

Fred L. Williams, of St. Louis, Mo. (X. P. Wilfley, Earl F. Nelson, and Wayne Ely, all of St. Louis, Mo., on the brief), for plaintiff.

Fred L. English, of St. Louis, Mo. (Morton Jourdan and John T. Sluggett, Jr., both of St. Louis, Mo., on the brief), for defendant.

Before VAN VALKENBURGH and BOOTH, Circuit Judges, and MUNGER, District Judge.


These two appeals arose from judgments rendered upon two counts of a petition filed by the Fruin-Colnon Contracting Company against the Commercial Casualty Insurance Company. December 31, 1924, the insurance company issued to the contracting company a policy of insurance whereby, for the period of one year from date, it agreed to indemnify the insured against loss by reason of the liability imposed by law upon the contracting company for damages on account of bodily injuries or death accidentally suffered by any employee or employees of the insured by reason of the business of the contracting company therein described. By the terms of said policy the insurer's liability for loss was limited to the sum of $5,000 on account of an accident to one person. The policy contained, among others, the following clauses and provisions:

"E. Report and Defense of Suits — Co-operation of Assured.

"If suit is brought against the Assured to enforce a claim for damages covered by this Policy, the Assured shall immediately forward to the Company every summons or other process as soon as the same shall have been served on the Assured, and the Company will, at its own cost, defend such suit in the name and on behalf of the Assured. The Assured whenever requested by the Company, shall aid in effecting settlements, securing information and evidence, the attendance of witnesses and in prosecuting appeals, but the Assured shall not voluntarily assume any liability or interfere in any negotiation for settlement, or in any legal proceeding, or incur any expense, or settle any claim, except at the Assured's own cost, without the written consent of the Company previously given, except that, as respects liability for personal injuries covered hereunder, the Assured may provide at the Company's expense such immediate surgical relief as is imperative at the time of the accident.

"G. Assured's Right of Recovery.

"No action shall lie against the Company to recover for any loss and/or expense covered by this Policy, arising or resulting from claims upon the Assured for damages, unless it shall be brought by the Assured for loss and/or expense actually sustained and paid in money by him after actual trial of the issue, nor unless such action is brought within two years after payment of such loss and/or expense; nor for any other loss or damage covered by this Policy unless action is brought within two years after the occurrence causing the loss or damage."

The first count of the petition involved an alleged loss because of injury to one Ernest Scheibe. The second count concerns an injury to one E. D. McGuire. Scheibe and McGuire were employees of the contracting company, and both accidents were covered by the same policy, and recovery for both was sought in one suit. The plaintiff contracting company recovered on the first count; and the appeal of the insurance company appears under No. 8207. The judgment on the second count was in favor of the insurance company, and the contracting company has appealed under the number in this court of 8208. Both cases will be treated in one opinion. We deal first with cause No. 8207.

January 20, 1926, Ernest Scheibe, employee, instituted suit in the circuit court of St. Louis, Mo., against the Fruin-Colnon Contracting Company to recover the sum of $25,000 on account of injuries received by him while in the employ of the contracting company. The trial, on the 9th day of November, 1926, resulted in a judgment in favor of the plaintiff in the sum of $12,500 and costs taxed in the sum of $231.75. The insurance company, pursuant to the terms of the policy, conducted the defense of said suit, and on November 12, 1926, caused a motion for new trial to be filed, which motion was overruled on the 13th day of December, 1926; thereafter, to wit, on December 24th, the insurance company wrote the contracting company as follows:

"St. Louis Claim Division.

"John T. Sluggett, Jr., Counsel,

"Pierce Bldg.

"St. Louis, Mo. December 24th, 1926.

"Fruin-Colnon Contracting Co., Merchants Laclede Building, St. Louis, Missouri. Gentlemen: It is our desire to take an appeal to the Supreme Court in the case of Scheibe versus Fruin-Colnon Contracting Company, and in order to stay execution while the case is on appeal, it will be necessary to furnish an appeal bond.

"The judgment in this case, as you know, was $12,500.00 and an appeal bond in the sum of $25,000.00 will be required. It will be necessary for you to furnish the appeal bond or deposit collateral with us to protect us against loss in cases of our liability to you under the policy of insurance issued to you by this company, and we suggest that you give this matter immediate attention and let us know, without delay, whether you will furnish the appeal bond, or if you will deposit the necessary collateral. If the latter, kindly arrange to do so without delay."

December 25th, Christmas Day, fell on Saturday; the following day was Sunday, and, consequently, said letter did not reach the contracting company until Monday, December 27th. The contracting company, appellee in this case, through its president, did not understand the letter, and sought to communicate with counsel for the insurance company, by telephone, for the purpose of ascertaining how it was expected to proceed in the matter. Meantime, on December 23d, a writ of execution issued out of the office of the clerk of the circuit court of St. Louis, and was delivered to the sheriff of that city. On December 27th the sheriff proceeded to execute this writ, appeared at the place of business of appellee, and threatened forthwith to levy upon and seize the property and effects of appellee to satisfy said judgment and costs of suit unless the judgment was paid at once. Appellee attempted again to get into communication with counsel for appellant, but again without success; thereupon, to save its property and business from levy and consequent great injury, it paid the judgment and accrued costs in the sum of $12,731.75. Demand was made of appellant for payment in the sum of $5,092.70, the same being the proportion of the judgment and costs due from the insurer under the terms of the policy. Upon payment being refused, suit was brought.

At the trial a jury was waived in writing. By stipulation certain facts were admitted to be true; as to others testimony was introduced. The court made no special findings of fact, and none were asked by either party; both parties asked declarations of law. The court refused those tendered by appellant, gave those requested by appellee, and found the issues in favor of appellee. Judgment was rendered on this first count in the sum of $6,660.02, which included damages for vexatious refusal of appellant to pay in the sum of $509.27 and $750 allowed as attorneys' fee.

The points raised by appellant may all be summed up under a single head, to wit, that the demurrer to the evidence under this count should have been sustained. The following grounds in support of this demurrer are urged: (a) That no action under the policy would lie until the loss had been actually sustained and paid in money after trial of the issue, including final judgment on appeal. It is pointed out that the Supreme Court might reverse the judgment below or hold the question moot because of payment and discharge of the judgment by appellee; that in either case appellant would suffer serious prejudice. (b) The judgment was for $12,500, and the policy limit was $5,000. If appellant appealed without bond, execution could be levied; if it gave bond, it assumed a liability in excess of that required by the policy. It contends that it notified appellee that it would be necessary for appellee to furnish the appeal bond, or to deposit with appellant collateral to protect it against loss for the amount of the judgment in excess of $5,000 in case the judgment should be affirmed. (c) That appellee violated the conditions of the policy (1) by failure to co-operate in the appeal by giving bond or indemnity for the excess, and (2) in making payment without the company's written consent; therefore appellant contends that it did all that was required of it by taking the appeal within time on the 24th of January, 1927. (d) It is further contended that the allowance of damages for vexatious refusal to pay was without warrant, for the reason that there existed reasonable ground for an honest difference of opinion on the part of counsel as to the liability of appellant under its policy upon the undisputed facts.

The duty of an insurer under a policy such as that before us is thus stated in 36 C. J. §§ 102, 103, pp. 1111, 1112, and is supported by the great weight of authority:

"Manner of Conducting Defense(1) In General. In conducting the defense, it is the duty of insurer to act in good faith, and in a careful and prudent manner; otherwise, it is liable for damages caused by its negligence, even though such damages exceed the amount limited in the policy; unless insured was guilty of contributory negligence. It is insurer's duty to conduct the whole defense, regardless of the amount involved, whether it exceeds or does not exceed insurer's liability; and to protect insured as well as itself against liability at all stages of the litigation.

"(2) Appeal. Insurer in conducting the defense not only has the...

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