F. & C. Co. v. Stewart Dry Goods Company

• Decision Date: 03 March 1925
• Citation: 208 Ky. 429
• Parties: Fidelity and Casualty Company of New York v. Stewart Dry Goods Company.
• Court: United States State Supreme Court — District of Kentucky

Page 429

208 Ky. 429

Fidelity and Casualty Company of New York v. Stewart Dry Goods Company.

Court of Appeals of Kentucky. Common Pleas Branch, Second Division.

Decided March 3, 1925.

1. Insurance — Where Liability of Insurer and Insured Under Accident Policy Incompatible Each May Protect its Own Interest. — Where policy indemnified employer against liability for accident to employe except minor hired contrary to law, and an injured minor employe sought recovery on two grounds, one covered by policy and other not, insurer and insured could each protect its own interest, and neither had right to demand that other surrender defense of case.

2. Insurance — Insurer Held Not to have Waived Right to Claim Exemption from Liability by Defending Suit where Insured Given Full Notice. — Where insurer was not liable if injured employe was a minor hired contrary to statute, and injured minor employe sought to recover on two grounds, one covered by policy and other not, action of insurer in defending case, after full notice to insured and opportunity to it to protect its rights was not a waiver of right to claim exemption from liability on ground that minor was employed contrary to statute.

3. Insurance — Series — Where Insurer Liable on One Ground of Recovery and Insured Liable on Other Neither can Exclude Other from Participating in Defense. — Where there are two grounds of liability asserted by injured employe, for one of which insurer is liable and for other insured is liable, neither party has right, without fault of other, to exclude other from participating in defense.

4. Insurance — Insured could Not Fail to Make Settlement with Injured Employe and then Hold Insurer Liable for Additional Amount Recovered by Employe — Where employer's liability policy exempted insurer, where employe was hired contrary to statute, insured could not fail to make proposed settlement with an injured employe which insurer rejected and which called for payment of full amount of policy by insurer, and then hold insurer liable for additional amount recovered by employe since if employe was hired contrary to statute insurer would not be liable.

5. Insurance — Where Ground on which Verdict Based Not Shown, no Inquiry can be Made in Subsequent Action. — Where record does not show on what ground verdict of jury was based in action against employer there can be no inquiry into such question in employer's action against liability insurer.

6. Insurance — Burden on Insurer to Show Injured Minor Employe Hired Contrary to Statute Within Exemption from Liability. — Where employer's liability policy excepted injury to minor hired contrary to statute, and a minor employe recovered damages which insured paid, but judgment did not determine whether minor was employed contrary to statute, in action by insured against insurer, burden is on insurer to prove that minor was employed contrary to statute.

Appeal from Jefferson Circuit Court

FRED FORCHT and MERIT O'NEAL for appellant.

R.C. KINKAID, H.H. NETTELROTH and HOWARD B. LEE for appellee.

OPINION OF THE COURT BY COMMISSIONER HOBSON.

Reversing.

The Stewart Dry Goods Company is a corporation engaged in the general merchandise business in Louisville, Kentucky. The Fidelity and Casualty Company of New York is an insurance company which, among other things, issued elevator liability policies, insuring persons against loss as a result of accidents to their employes. In 1912 it issued, in consideration of the sum of $18.00, an elevator liability policy to the dry goods company by which it agreed to indemnify it against loss or damages, not exceeding $5,000.00, on account of bodily injury or death occurring while the policy was in force to any person or persons while in the car of its elevator, and further agreed "to defend in the name and on behalf of the assured any suit brought against the assured to enforce a claim, whether groundless or not." The policy contained this provision:

"This policy does not cover loss from liability for or any suit based on injuries or death suffered or caused by any child employed by the assured contrary to law or any minor while performing any work contrary to law."

In November, 1912, John K. Miller, while employed by the dry good company as a messenger boy, sustained serious injuries on the elevator and brought this suit against the dry goods company to recover therefor. In his petition he charged that he was employed in a place that was dangerous and unsafe and was compelled in his occupation to use an elevator which was in a dangerous and defective condition and also that the elevator was negligently operated. The insurance company was notified of the suit and by its attorneys answered in the name of the dry goods company. About a year after the issues were made up and before the trial of the case the plaintiff filed an amended petition in which he alleged that at the time he was injured he was under sixteen years of age and was employed by the Stewart Dry Goods Company in an occupation dangerous to life or limb, contrary to the child labor statute of Kentucky, in force at the time of his injury. When this amendment was filed the attorneys for the insurance company promptly notified the attorney for the dry goods company, by letter of January 8, 1914, of the allegations of the amendment, stating that the insurance policy did not cover accident where the injured person was employed contrary to law and that if it developed upon the trial of the case that Miller was employed contrary to law, the insurance company would not pay any judgment that might be rendered. In answer to this letter, on February 26, 1914, the counsel for the dry goods company said that in view of the fact that the insurance company would not be liable under its policy if the plaintiff was employed contrary to law, it was apparent that the Stewart Dry Goods Company was entitled to have the question as to the legality of the employment presented to the court, and therefore the dry goods company called upon the insurance company to state whether or not it would assume charge of the defense of the suit and indemnify the defendant against any recovery which might be had therein up to the amount fixed in the policy, and if the company would not do this the dry goods company would be prepared to defend the action and then seek to hold the insurance company liable under the policy to the full extent. The letter concludes with these words:

"Inasmuch as the plaintiff was employed as a messenger boy in defendant's dry goods store, we contend that such employment was not one which could be regarded as dangerous or injurious to health or morals, or to life or limb, and we are confident that we can so establish upon the trial of this case. Under your construction of the policy in question, it may not be to your interest to make an effort to show that such employment was legal, but the defendant would be vitally affected by failure to maintain this position.

"Our client, therefore, calls upon your company to say whether or not it will defend this suit and indemnify the defendant in the amount fixed in its policy, and we notify you that our client is not willing to give over the defense of this case to your company with any agreement that the verdict shall determine the question as to your company's liability."

The provisions of the policy referred to in this letter are these:

"The company reserves the right to settle any claim or suit. Whenever requested by the company, the assured shall aid in securing information, evidence, and the attendance of witnesses, in effecting settlements, and in prosecuting appeals. The assured shall at all times tender to the company all cooperation and assistance within its power. . . .

"E: The assured shall not voluntarily assume any liability; nor interfere in any negotiations or legal proceedings conducted by the company on account of any claim; nor, except at his own cost, settle any claim, nor incur any other expense without the written consent of the company previously given; except that he may provide at the time of the accident, and at the cost of the company, such immediate surgical relief as is imperative."

In answer to this letter the attorney for the insurance company, on March 2nd, wrote this:

"In response to this statement, I wish to say, first, that the Fidelity & Casualty Company has a right under the terms of the policy to manage the defense of this case, and if you mean to notify the Fidelity & Casualty Company that the Stewart Dry Goods Company withdraws such right, then, in no event, would the Fidelity & Casualty Company be liable or responsible to the Stewart Dry Goods Company for any verdict in the case. Second, the Fidelity & Casualty Company will in no event assume any liability whatever other than is stated in the policy, and in order that you may have no misunderstanding or misconception of its position, I will now state that the Fidelity & Casualty Company will not assume any responsibility for any judgment obtained by reason of any illegal employment of the plaintiff. These positions the Fidelity & Casualty Company is clearly entitled to under the policy contract, and it does not intend in any way whatever to vary or enlarge the terms of the policy contract; and I do now hereby notify the Stewart Dry Goods Company in behalf of the Fidelity & Casualty Company, that if the Stewart Dry Goods Company takes the defense of this action out of the hands of the Fidelity & Casualty Company's attorney, the latter company will decline all responsibility of any kind in the case."

On March 3rd the attorneys for the dry goods company wrote this in reply, after quoting its letter of February 26th:

"The Stewart Dry Goods Company does not mean to withdraw from the Fidelity & Casualty Company any right which it may have under its policy to defend the above action but neither will the Stewart Dry Goods Company accord to your company any right which is not...