General Cas. Co. of Wisconsin v. Larson

• Decision Date: 02 May 1952
• Docket Number: No. 14489.,14489.
• Citation: General Cas. Co. of Wisconsin v. Larson, 196 F.2d 170 (8th Cir. 1952)
• Parties: GENERAL CAS. CO. OF WISCONSIN v. LARSON.
• Court: U.S. Court of Appeals — Eighth Circuit

196 F.2d 170 (1952)

GENERAL CAS. CO. OF WISCONSIN v. LARSON.

No. 14489.

United States Court of Appeals Eighth Circuit.

May 2, 1952.

Maugridge S. Robb, Minneapolis, Minn. (Robb, Robb & Van Eps, Minneapolis, Minn., were with him on the brief), for appellant.

Harding A. Orren, Minneapolis, Minn. (Freeman, King, Larson & Peterson, Minneapolis, Minn., were with him on the brief), for appellee.

Before GARDNER, Chief Judge, and WOODROUGH and THOMAS, Circuit Judges.

THOMAS, Circuit Judge.

On December 23, 1947, the appellant, General Casualty Company of Wisconsin, issued its Manufacturers' and Contractors' Public Liability Policy for a term of one year to the appellee, Alfred Larson, doing business as Camel Oil Burner Company, of Minneapolis, Minnesota. Larson's business included cleaning, servicing and repairing oil burners.

In August, 1948, Frank Clinite employed Larson to clean and service the furnace and oil burner at his residence in Minneapolis. On August 3, 1948, Larson sent his employee Strand to clean the furnace preparatory to his inspection and servicing of the oil burner. Strand finished the cleaning that same day, but in doing so he accidentally cross-threaded the connection between the furnace door and the oil burner. As a consequence, when Clinite turned on the oil on August 7, 1948, before Larson had inspected and serviced the burner, the oil leaked out of the cross-threaded union, and a fire resulted which damaged the house.

Clinite had a policy of fire insurance covering his property with the Home Insurance Company of New York. The company paid the damages caused by the fire, and, as subrogee, commenced an action against Larson and his employee Strand to recover the amount which it had so paid, alleging that such damage had been caused by the negligence of Larson and Strand, his employee. The defense of this action was tendered by Larson to the appellant herein, but the defense was refused. The Home Insurance Company obtained a judgment in that case against Larson on December 12, 1949, for $4,683.81. Thereafter Larson brought this action against the appellant upon his Public Liability Policy to recover the amount of the judgment in the Home Insurance Company case with interest and attorney's fees. The appellant denied liability. The case was tried to the court without a jury. The court found for the plaintiff and entered judgment against the defendant for the amount claimed, for a $500 attorney fee, together with interest and costs, and the defendant appeals.

The appellant seeks reversal of the judgment on the grounds:

A. 1. That the appellee "is concluded in this action for indemnity by the pleadings, findings and judgment" in the Home Insurance Company case.

2. That the "No Action" clause in the policy precludes recovery upon any other basis than the pleadings, findings and judgment in the former action.

3. That the court erred, therefore, in admitting the transcript of the evidence taken in the Home Insurance Company case.

B. That the Tender of Defense was properly refused upon the ground that the pleading tendered did not state a cause of action against the insured for which the appellant had contracted indemnity.

C. That the adjudicated facts in the former action lie within the specific exceptions of the policy issued by the appellant; and

D. That the policy issued by appellant upon which this action is brought does not afford indemnity against the liability of the appellee pleaded and adjudicated in the former action.

The policy on which this action is based was in the first instance one for bodily injury only. For an additional premium it was endorsed to extend the coverage to include damage to property also.

As amended the policy provides that the appellant agrees

"To pay on behalf of the Insured all sums which the Insured shall become obligated to pay by reason of the liability imposed upon the Insured by law for damages because of injury to or destruction of property * * * as the result of an accident * * * caused solely and directly by reason of the business operations of the Insured * * * except as to any operations or exposure * * * which are shown to be excluded in said policy or, which are expressly shown to be excluded elsewhere in this endorsement, and subject further to all exclusions, conditions and limitations hereinafter contained.

"It is further agreed that respecting insurance provided by this policy the Company shall:

"(a) Investigate and have the right to negotiate or settle any claim or suit, whether groundless, false or fraudulent, as may be deemed expedient by the Company;

"(b) Defend in his name and behalf suits against the Insured alleging such injury and loss, as hereinbefore defined and insurance provided for, even if such suit is groundless, false or fraudulent; * * *."

The appellant's contentions A and B are predicated upon the assumption that this is an action for indemnity and that the appellee is "concluded * * * by the pleadings, findings and judgment in the Home Insurance case." It is argued that the "No Action" clause in the policy precludes recovery in this action.

These contentions are clearly erroneous. This is not an action for "indemnity", and the "No Action" clause in the policy does not make it so. This is an action upon the liability contract of the policy whereby the appellant became "obligated to pay by reason of the liability imposed upon the Insured by law." The so-called "No Action" clause provides only that "No action shall lie against the Company unless as a condition precedent thereto * * * the amount of Insured's obligation to pay shall have been finally determined either by judgment against the Insured * * * or by written agreement." It is conceded by the appellant that payment of the judgment is not a condition precedent to an action on the policy. The judgment in the Home Insurance Company case determined only the amount of Larson's liability for the injury to Clinite's property caused by the negligent and accidental act of Strand, Larson's employee. This situation does not warrant the assumption that this is an action for indemnity nor that the "No Action" clause of the policy is a contract for indemnity.

In the case of Central States Grain Cooperative, Inc., v. Nashville Warehouse & Elevator Corporation, 7 Cir., 48 F.2d 138, 140, the court say: "One of the characteristic differences between a contract of indemnity and one to pay legal liabilities is that upon the former an action cannot be brought and recovery had until the liability...