Farmers Elevator Mut. Ins. Co. v. American Mut. Liability Ins. Co.

• Decision Date: 19 December 1969
• Docket Number: No. 37254,37254
• Citation: 185 Neb. 4,173 N.W.2d 378
• Parties: FARMERS ELEVATOR MUTUAL INSURANCE COMPANY, a Corporation; and Farmers Cooperative Association, nonstock of Big Springs, Nebraska, Appellants, v. AMERICAN MUTUAL LIABILITY INSURANCE CO., a Corporation; and Empire Fire& Marine Ins. Co., a Corporation; and Wilmac Construction Company, Appellees.
• Court: Nebraska Supreme Court

Page 378

173 N.W.2d 378

185 Neb. 4

FARMERS ELEVATOR MUTUAL INSURANCE COMPANY, a Corporation; and Farmers Cooperative Association, nonstock of Big Springs, Nebraska, Appellants, v. AMERICAN MUTUAL LIABILITY INSURANCE CO., a Corporation; and Empire Fire& Marine Ins. Co., a Corporation; and Wilmac Construction Company, Appellees.

No. 37254.

Supreme Court of Nebraska.

Dec. 19, 1969.

Syllabus by the Court

1. Where an insurance company issues a comprehensive liability policy to a contractor insuring against injury by accident, a contract for construction work is incidental to the business and within the insuring clause although not specifically mentioned in the policy.

2. The insuring clause in an insurance policy issued to a building contractor covers a nondescribed contract incidental to the business entered into subsequent to the issuance of the policy without the payment of a premium where classifications of work and premium rates are fixed by the policy and payment of premiums are determined at the close of the policy year by audit of the insured's records.

3. An exclusionary provision in a general liability policy which provides for no coverage for bodily injury to any employee of the insured arising out of and in the course of his employment by the insured, provides no coverage to an employee of the insured injured by a fall from a defective ladder furnished by the employer.

4. Where a party obtains judgment against another for damages for tort on specified grounds of negligence and such judgment debtor then seeks indemnity against another on specified and different grounds of negligence, which are sustained, such parties are joint tort-feasors and each is liable as such.

5. Generally joint tort-feasors have no right of contribution or indemnity, one against the other.

6. The rule that one of two negligent persons in causing jury to a third where the negligence of one is active and primary and the other passive and secondary, and permitting contribution or indemnity against the one guilty of active negligence, has no application where the negligence of each is founded on separate and distinct acts of negligence and no way exists to determine the relative degrees of negligence of each. Such joint tort-feasors have no right to contribution or indemnity, the one against the other.

7. Joint tort-feasors have no right of contribution or indemnity among themselves except by contract or some other legal relation giving rise to it.

8. Where two insurance companies have issued general liability insurance policies to the same insured, each obligated to defend the insured for the same injury, if one affords a defense, no damage ordinarily results to the insured from the failure of the other to defend.

9. The duty to defend an insured is for the purpose of protecting the insured's interests and from the costs and expenses of litigation. Its purpose operates as a shield for the protection of the insured and not as a sword to impose liability where none otherwise exists.

Craig, Woodruff & Hanley, Omaha, Crosby & Nielsen, North Platte, Craig & Craig, Jack E. Horsley, Mattoon, Ill., for appellants.

Knapp, Tarrell & State, Kearney, Walsh, Walentine, Miles & Katskee, Omaha, for appellees.

Heard before WHITE, C.J., and CARTER, SPENCER, BOSLAUGH, SMITH, McCOWN and NEWTON, JJ.

CARTER, Justice.

This is a declaratory judgment action brought by the Farmers Elevator Mutual Insurance Company and the Farmers Cooperative Association of Big Springs, Nebraska, against the American Mutual Liability Insurance Company, the Empire Fire and Marine Insurance Company, and the Wilmac Construction Company to determine the insurance coverage of Empire Fire and Marine Insurance Company and to recover from the latter the full amount of a judgment in the federal district court of Nebraska against Wilmac Construction Company, including the amount of the judgment in excess of policy limits. The trial court found that there was a contract of insurance between the Wilmac Construction Company and the Empire Fire and Marine Insurance Company, that adequate notice of the accident and injury giving rise to the litigation was given to the Empire Fire and Marine Insurance Company, and that, under the exclusionary provisions of the policy, there was no coverage. Judgment was entered for the defendants and the plaintiffs have appealed.

For convenience we shall hereafter refer to the Farmers Elevator Mutual Insurance Company as Farmers Elevator Mutual; to Farmers Cooperative Association as Farmers Co-op; to American Mutual Liability Insurance Company as American Mutual; to Empire Fire and Marine Insurance Company as Empire; and to the Wilmac Construction Company as Wilmac.

Farmers Co-op was the owner of a grain elevator facility at Big Springs, Nebraska. In the fore part of 1960, it entered into a written contract with Wilmac for the remodeling of the existing elevator and for the renovation of other portions of the facility. After the contract was entered into and on October 19, 1960, one Arthur C. Strand, an employee of Wilmac, was seriously injured by a fall from a defective ladder. American Mutual had in force a workmen's compensation and liability policy of insurance with Wilmac. Workmen's compensation was adjusted and paid by a lump sum settlement. Wilmac contended that it had a comprehensive general liability policy with Empire which the latter denied. However, in the course of the trial, Empire admitted in open court and later by an amended pleading, that it had a policy of insurance in force, but denied there was any coverage under the terms of the policy.

The litigation in this case originated as the result of a fall from a defective rung in a ladder furnished by Farmers Co-op to Wilmac. Wilmac contributed to the accident by removing the defective rung and permitting its use by Strand with the missing rung. American Mutual paid its liability as the compensation carrier. On January 14, 1964, Strand filed an action in the federal district court against Farmers Co-op and American Mutual in which action a third party complaint was filed against Wilmac by Farmers Co-op. The original action and the third party complaint were separately tried. On October 28, 1965, Wilmac filed an answers to the Strand complaint setting up the right of subrogation to the amounts paid under the workmen's compensation law. In the original action, the jury returned a verdict for $200,000 and a judgment was entered thereon on May 16, 1966, which was affirmed on appeal. In the suit of Strand v. Farmers Co-op in the federal district court, neither Wilmac nor Empire was a party. In the third party complaint, Wilmac, but not Empire, was a party.

The third party complaint was filed by Farmers Co-op, the third party plaintiff, against Wilmac, the third party defendant. An answer to the third party complaint was filed on behalf of Wilmac on August 21, 1964. On May 8, 1968, a settlement was made between Farmers Co-op and American Mutual in which American Mutual paid Farmers Co-op $5,000 for an agreement that Farmers Co-op would not prosecute any claims against it on any judgment rendered on the third party claim, American Mutual having included a general liability provision in the workmen's compensation policy. On May 27, 1968, Wilmac, by its president, consented to the entry of a judgment against it in the amount of $272,955.74. On May 28, 1968, Empire upon discovery of the entry of the consent judgment moved to intervene asserting an understanding with counsel that the case would not be called up prior to the trial of the instant case in the district court for Douglas County without notice. On June 5, 1968, the consent judgment was vacated. On June 14, 1968, the consent judgment was again entered in the federal district court which was after the trial of the present case in the state district court.

On October 15, 1965, this action for a declaratory judgment was filed in the district court for Douglas County which, after hearing, found that Empire's policy of general liability insurance contained no coverage for the accident to Strand.

No policy of insurance issued by Empire to Wilmac was in existence at the time of the trial of this case. The evidence shows that Empire suffered a fire which destroyed its old storage file area, including any insurance policies or records pertaining to Wilmac. The soliciting agent for Empire testified that he destroyed his files after 4 years in accordance with his custom. Wilmac filed a petition in bankruptcy in 1962 and appears to have been unable to produce an insurance policy. It was established, however, that a policy issued in 1961 contained the same coverage, conditions, and exclusions as the 1960 policy.

The insuring clause of the policy applicable here provided: 'To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person and caused by accident.' The exclusionary provisions relied upon state: 'This policy does not apply: (a) to liability assumed by the insured under any contract or agreement except under coverages B and D, (1) a contract as defined herein or (2) as respects the insurance which is afforded for the Products Hazard as defined, a warranty of goods or products; * * * (h) under coverage B, except with respect to liability assumed by the insured under a contract as defined herein, to bodily injury to or sickness, disease or death of any employee of the insured arising out of and in the course of his employment by the insured; * * *.' It is the contention of Empire that the foregoing provisions exclude liability in the instant case. It is the contention of Farmers Co-op and Wilmac that the provisions provide coverage but, in any event, liability attaches as a matter of law and that the exclusions are wholly immaterial to the resolution of ...