Elliott v. Ætna Life Ins. Co. of Hartford, Conn.

• Decision Date: 21 February 1917
• Docket Number: No. 18822.,18822.
• Citation: Elliott v. Ætna Life Ins. Co. of Hartford, Conn., 100 Neb. 833, 161 N.W. 579 (Neb. 1917)
• Parties: ELLIOTT v. ÆTNA LIFE INS. CO. OF HARTFORD, CONN.
• Court: Nebraska Supreme Court

100 Neb. 833

161 N.W. 579

ELLIOTT

v.ÆTNA LIFE INS. CO. OF HARTFORD, CONN.

No. 18822.

Supreme Court of Nebraska.

Feb. 21, 1917.

Syllabus by the Court.

Where according to the terms of an indemnity policy an insurance company has taken sole and exclusive charge of the defense of an action against the insured for damages for the death of the latter's employé, and a judgment has been rendered against the insured, the liability of the insurance company is subject to garnishment where the insured is insolvent, notwithstanding a provision that “no action shall lie against the company to recover for any loss or expense under this policy unless it shall be brought by the assured for loss or expense actually sustained and paid in money by him after actual trial of the issue.”

Appeal from District Court, Douglas County; Leslie, Judge.

Action by Mattie A. Elliott, administratrix of the estate of Howard Elliott, deceased, against the Ætna Life Insurance Company of Hartford, Conn. Judgment for defendant sustaining its demurrer and dismissing the action, and plaintiff appeals. Reversed and remanded.

Cornish, J., dissenting.S. L. Winters, of South Omaha, and W. C. Lambert, of Omaha, for appellant.

Gurley & Fitch, of Omaha, for appellee.

MORRISSEY, C. J.

Plaintiff recovered a judgment against the General Construction Company for the death of her son while in its employ and in garnishment proceedings summoned the Ætna Life Insurance Company which had insured the General Construction Company against loss resulting from claims for damages on account of injuries or death suffered by any employé. The garnishee denied liability to the judgment debtor on the ground that the latter was insolvent and had not paid the judgment, the policy providing:

“No action shall lie against the company to recover for any loss or expense under this policy unless it shall be brought by the assured for loss or expense actually sustained and paid in money by him after actual trial of the issue.”

The garnishee was discharged. This action was brought to recover from the Ætna Life Insurance Company for an unsatisfactory answer in the garnishment proceedings. From an order sustaining defendant's demurrer and dismissing the action, plaintiff has appealed.

In addition to the provision quoted the policy also provided:

“Upon the occurrence of an accident the assured shall give immediate written notice thereof with the fullest information obtainable to the home office of the company at Hartford, Connecticut, or its duly authorized agent. If a claim is made on account of such accident the assured shall give like notice thereof with full particulars. The assured shall at all times render to the company all co-operation and assistance in his power.

If thereafter any suit is brought against the assured to enforce a claim for damages on account of an accident covered by this policy, the assured shall immediately forward to the company's home office every summons or other process as soon as the same shall have been served on him, and the company will, at its own cost, defend such suit in the name and on behalf of the assured, unless the company shall elect to settle the same or to pay the assured the indemnity as provided for in condition A hereof.

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 his own cost, without the written consent of the company previously given, except that the assured may provide at the company's expense such immediate surgical relief as is imperative at the time of the accident.”

The petition alleges that the insured complied with the provisions of the contract and surrendered control of the action, that defendant herein conducted all negotiations for settlement, took sole charge of the action against the General Construction Company, and from a judgment in plaintiff's favor took an appeal to the Supreme Court, where the judgment was affirmed. Elliott v. General Construction Co., 93 Neb. 453, 140 N. W. 1024. It may also be inferred from the petition that the insured was insolvent when the action against it was commenced.

The question presented seems to be: Where, according to the terms of an indemnity policy, an insurance company has taken sole charge of the defense of an action against the insured for damages for the death of the latter's employé, and a judgment has been rendered against the insured, is the liability of the insurance company subject to garnishment where the insured is insolvent, where the policy provides that “no action shall lie against the company to recover for any loss or expense under this policy unless it shall be brought by the assured for loss or expense actually sustained and paid in money by him after actual trial of the issue?”

Defendant contends that the policy is an indemnity contract, and that under the terms of the provision just quoted it is in no case liable to the insured until the latter has actually paid the judgment. In the interpretation of a contract an admissible and a reasonable construction which will not render it invalid should be adopted. The general purpose of the contract should also be considered. The general object of the indemnity was that losses arising from injuries to employés should not fall upon the employer, but upon the insurer, who by the collection of premiums creates a fund with which to pay such losses. To cheapen the cost of insurance the insurer agreed to defend at its own cost all actions which it should be unable to compromise. The employer surrendered control of the litigation, and the insurer through its attorneys resisted the claim of plaintiff, were unsuccessful, and appealed to the Supreme Court, where the judgment was affirmed. Elliott v. General Construction Co., 93 Neb. 453, 140 N. W. 1024. For every purpose except that of paying the judgment the insurer has been the real litigant. After it has exhausted all legal measures in attempting to defeat plaintiff's claim it attempts to deprive her of the fruits of the litigation by relying upon the failure of the insolvent employer, the judgment debtor, to pay the judgment as required by the following provision of the contract:

“No action shall lie against the company to recover for any loss or expense under this policy unless it shall be brought by the assured for loss or expense actually sustained and paid in money by him after actual trial of the issue.”

This is a proper provision to protect the insurer from claims of the employer before the latter has paid the judgment, since the purpose of the contract was to reimburse him, and not to provide him with funds which he might or might not use to pay a judgment recovered by an employé. This protection is not denied the insurer when through garnishment proceedings after judgment it is compelled to pay a judgment rendered against an insolvent employer. Its obligation under the contract is discharged as fully as if it had paid the employer after he had paid the judgment. Any other construction can serve no purpose except to defeat the collection of plaintiff's judgment. Where the insurer has been the actual litigant it will not be permitted to defeat the collection of the judgment by insisting upon such a construction. The conclusion here reached has been justified by the Supreme Court of Minnesota in the following language:

“Upon the record did it appear that the company, the garnishee, was indebted to the defendant when the disclosure was had? It may be conceded that the company intended so to frame the policy that not every avenue of escape from payment in case of a loss should be closed. The main purpose of its business is to obtain and retain the premiums. The object of the assured is to get protection. The object and purpose of the contracting parties is not to be lost sight of in construing a contract, nor is the rule that in case of ambiguity it must be resolved against the one who prepared the instrument.”

“If suit is brought on a claim intended to be covered by this policy, the company, after notice, agreed to defend; but, not only that, it reserved to itself the exclusive right to settle or carry on the litigation, excluding the assured from any interference therewith. On these provisions the company acted, assumed the defense, and has carried on the litigation to the bitter end, even after defendant left this jurisdiction. The assured retained no voice...