Hartford Accident & Indemnity Co. v. Hewes

CourtUnited States State Supreme Court of Mississippi
Citation199 So. 93,190 Miss. 225
Docket Number34313
PartiesHARTFORD ACCIDENT & INDEMNITY CO. v. HEWES et al
Decision Date20 January 1941

December 9, 1940

Suggestion Of Error Sustained January 20, 1941.

APPEAL from the circuit court of Hinds county, HON. JULIAN P ALEXANDER, Judge.

Action by G. P. Hewes, Jr., and others, against the Hartford Accident & Indemnity Company and another to recover premiums on policies wherein defendant filed demurrers. From an adverse judgment, named defendant appeals. Reversed and judgment entered for named defendant.

On suggestion of error and motion to correct and modify the judgment. Suggestion of error and motion to correct the judgment sustained, and the former judgment reversing the case and rendering judgment modified by reversing and remanding the case.

Reversed, and judgment here for appellant. Cause reversed and remanded, and judgment corrected and modified.

Butler & Snow, of Jackson, for appellant.

A performance bond conditioned merely that the principal shall well and truly perform all the conditions of his contract is not intended for the benefit of insurance agents of companies furnishing insurance to the contractors.

Lee v Newman, 55 Miss. 365; Canada v. Y. & M. V. R. R., 101 Miss. 274, 57 So. 913; Moore v. Kirkland, 112 Miss. 55, 72 So. 855; Y. & M. V. R. R. v. Sideboard, 161. Miss. 4, 133 So. 669.

A mere incidental beneficiary of a contract acquires no rights thereunder.

Y. &amp M. V. R. R. v. Sideboard, 161 Miss. 4, 133 So. 669; Montgomery v. Rief, 15 Utah, 495, 50 P. 623; Durnherr v. Rau, 135 N.Y. 219, 32 N.E. 49; Am. Surety Co. v. Smith, 100 Fla. 1012, 130 So. 440; Woodhead Lbr. Co. v. Niemann Inv. Co., 99 Cal.App. 456, 278 P. 913; Restatement of Contracts, sec. 147; 6 R. C. L. 886; Note, 81 A. L. R. 1286.

The contract and bond were not intended for the benefit of appellees, and appellees are at most merely incidental beneficiaries.

Restatement of Contracts, sec. 147; Fellows v. Kreutz (Mo.), 176 S.W. 1080.

A performance bond is to be distinguished from bonds given for the benefit of third persons.

Notes, 77 A. L. R. 21 at pp. 65 and 105; 118 A. L. R. 57 at pp. 68 and 75; Fleming v. Greener, 173 Ind. 260, 90 N.E. 73; Cobb v. Allen, 231 S.W. 829.

Third parties have no rights on a performance bond where a separate payment bond is given.

Md. Cas. Co. v. Shafer, 57 Cal.App. 580, 208 P. 192.

A bond conditioned that the principal shall perform a contract, which contract requires the principal to provide insurance, creates no right of action in persons selling insurance to the contractor.

Third parties cannot maintain an action on a contractor's bond for the performance of the contract where the contract merely requires the contractor to furnish or provide insurance.

Notes, 77 A. L. R. 21 at pp. 64 and 101; 118 A. L. R. 57 at pp. 68 and 75; Jones Lbr. Co. v. Villegas, 8 Tex.Civ.App. 669; Babcock v. Am. Surety Co., 149 C. C. A. 472, 236 F. 340; U.S. use of Stallings, v. Starr, 20 F.2d 803; Greenfield Lbr. & Ice Co. v. Parker, 159 Ind. 571, 65 N.E. 747; Staples-Hildebrand Co. v. Metal Concrete Chimney Co., 62 Ind.App. 592, 112 N.E. 832; Standard Oil Co. v. Nat. Surety Co., 234 Ky. 764, 29 S.W.2d 29; Fellows v. Kreutz, 189 Mo.App. 547, 176 S.W. 1080; Puget Sound Brick, Tile & Terra Cotta Co. v. School Dist., 12 Wash. 118, 40 P. 608.

In the first place, it is inexact to say that the bond shall be given a "liberal" construction. The true meaning of the statement is that the rule of strictissimi juris, which operated in favor of gratuitous sureties, is inapplicable in a suit against a compensated surety. Accordingly, the surety is not entitled to a strict or technical construction of the contract; on the contrary, the obligation is to be considered in the same light as any other contract. The obligation of the surety should not be extended beyond the scope of his undertaking as deduced from the terms, conditions, and circumstances of the instrument.

12 A. L. R. 387, Annotation; Pacific County v. Ill. Surety Co., 234 F. 97; Evans v. U.S. F. & G. Co., 195 Mo.App. 438, 192 S.W. 112; State, use of Southern Md. Nat. Bank v. Nat. Surety Co., 126 Md. 290, 94 A. 916; Green v. U.S. F. & G. Co., 135 Tenn. 117, 185 S.W. 726; Guarantee Co. of N. A. v. Mechanics' Sav. Bank & Trust Co., 183 U.S. 402, 46 L.Ed. 253, 22 S.Ct. 124; State v. Blanchard Const. Co., 91 Kan. 74, 136 P. 905, Ann. Cas., 1915C, 192; U.S. F. & G. Co. v. Citizens Bldg. & Imp. Co., 62 Colo. 440, 163 P. 281; New Amsterdam Cas. Co. v. Cent. Nat. F. Ins. Co. (8 C. C. A.), 4 F.2d 203; Puget Sound Bridge & Dredging Co. v. Jahn, 148 Wash. 37, 268 P. 169.

In general ordinary usage, the word "carry" used in reference to insurance, has no particular or specific signification as regards payment for insurance premiums. The accepted usage of the word in this connection is that insurance be maintained and continued in effect. The word "carry" when used in reference to insurance means "to hold" or to "possess."

San Francisco Realty Co. v. Linnard, 276 P. 368, 370, 98 Calif. App. 33; First Nat. Bank of Chicago v. U.S. 38. F. (2d) 925; New Standard Dictionary; Anderson v. U.S. F. & G. Co. (N. Mex.), 104 P.2d 906.

Irrespective of any technical definition of the word "carry, " the adoption of which is urged by appellees, the sole question in the present case is whether the provisions of the sub-contract which related to insurance were carried out. Certainly within the accepted and usual meaning of the term "carry" as used in connection with insurance, the contract was performed. Coverage was provided throughout construction; the insurance coverage was maintained at all times during the work.

The facts which appellees propose to allege by amendment do not state a cause against the Hartford Accident & Indemnity Company; and in no event do they afford a basis for any relief in the present suit. Consequently, we submit that the suggestion of error should be overruled and that the motion to correct and modify the judgment should be denied.

Lotterhos & Travis and Vardaman S. Dunn, all of Jackson, for appellee.

The contract and bond must be construed together. If from the terminology of the instruments, using as a guide fundamental principles of construction and bearing in view the ultimate purpose to be accomplished, it may fairly be said that the contractor obligated himself to pay the items in question, the surety on a performance bond is directly responsible; otherwise, not.

The subcontract and bond must be construed together, and the undertakings viewed as a whole as constituting an indivisible contract. When so construed, appellant, as surety, obligated itself to carry insurance. Moreover, the undertakings as a whole must be liberally construed against appellant and in favor of appellees.

Ryan v. Shannahan (Cal.), 285 P. 1045; U.S. F. & G. Co. v. Parsons, 154 Miss. 587, 122 So. 544; 77 A. L. R. 46, note.

The bond and subcontract must be liberally construed in appellees' favor.

Blyth-Farco Co. v. Free, 46 Utah 233, 148 P. 427; 77 A. L. R. 42.

The bond and subcontract must be liberally construed to effectuate the primary purpose of these undertakings, which is that the work will be completed and on time. When so construed, it follows, we submit, that appellees were intended to be benefited within the recognized rule.

Mass. Bonding & Ins. Co. v. U.S. for use of Clarksdale Machinery Co. (C. C. A. 5), 88 F.2d 388; Fla. East Coast R. R. Co. v. Am. Surety Co. (5 C. C. A.), 38 F.2d 193; Standard Accident Ins. Co. v. U.S. for the use of Powell, 302 U.S. 442, 82 L.Ed. 350; Ga. Ry. Co. v. U.S. F. & G. Co., 223 Ala. 458, 137 So. 36; Topeka. Steam Boiler Works v. U.S. F. & G. Co. (Kan.), 15 P.2d 416.

The undertakings in the case at bar necessarily required that a benefit be conferred upon third parties, who in this case are appellees. Therefore, the parties "intended" the benefit regardless of what their motives or desires may have been.

If the terms of the subcontract in the case at bar require the subcontractor to confer a benefit on a third person with regard to insurance premiums, the subcontract, and hence the parties thereto contemplated or intended a benefit to that third person, and therefore to appellees, who furnished the insurance.

81 A. L. R. 1286, note; 6 R. C. L. 886; 77 A. L. R. 21, Annotation.

The requirement of the subcontract that the subcontractor carry insurance imposed upon him, and therefore appellant as surety, the obligation to pay the premiums therefor.

Pacific States Electric Co. v. U.S. F. & G. Co. (Calif.), 293 P. 812; Ryan v. Shannahan (Calif.), 285 P. 1045; Mack Mfg. Co. v. Bonding Co., 103 S.C. 67, 87 S.E. 439; Wheeler, Osgood & Co. v. Everett Land Co. (Wash.), 45 P. 316; Bristol Steel & Iron Works, Inc., v. Plank (Va.), 163 Va. 819, 178 S.E. 58, 118 A. L. R. 50; Standard Oil of N. J. v. Powell Paving & Cont. Co., 138 S.E. 184.

Many of the cases relied upon by appellant involve merely a performance bond, which simply undertakes that the contractor shall "faithfully perform the work, " and the entire argument of appellant seems to be based upon the assumption that the performance bond in the case at bar is merely in the nature of an indemnity agreement. On the other hand, the case at bar goes infinitely further in that the bond undertakes not only that the subcontractor will faithfully perform the work, but in addition that he "shall well and truly perform and fulfill all the undertakings, covenants, terms, conditions and agreements" of the subcontract.

Crane Co. v. Barwick Trenching Corp., 138 Calif. App. 319, 32 P.2d 387.

To carry insurance means to pay therefor.

77 A L. R. 62, 96; 118 A. L. R. 66; Webster's New International unabridged Dictionary; The Century...

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