Holland America Ins. Co. v. National Indem. Co.
| Decision Date | 08 May 1969 |
| Docket Number | No. 39438,39438 |
| Citation | 75 Wn.2d 909,454 P.2d 383 |
| Court | Washington Supreme Court |
| Parties | HOLLAND AMERICA INSURANCE COMPANY, a Missouri corporation; Allen L. Bradshaw, Appellants, v. NATIONAL INDEMNITY COMPANY, a Nebraska corporation, Respondent. |
Reed, McClure & Moceri, Hugh A. McClure, Seattle, for appellants.
Rutherford, Kargianis & Austin, Samuel C. Rutherford, Seattle, for respondent.
This case presents for decision a single question of law--whether an insurer which has issued a policy of automobile liability insurance is obliged to defend a person who is not the named insured but is allegedly an insured under the omnibus clause. The omnibus clause in the policy with which we are concerned, which was a standard policy of its type, provided that the word 'insured' included any person using the automobile with the permission of the named insured.
The automobile described in the policy was involved in an accident, and an action was brought against the named insured and the man who was allegedly driving the automobile with his permission. That man, Allen L. Bradshaw, owned a policy more or less identical to the policy of the owner, who was insured by the National Indemnity Company. Bradshaw was insured by Holland America Insurance Company, which tendered the defense of its policyholder to National Indemnity Company. That company, while it accepted defense of the action on behalf of its own policyholder, refused to defend the driver, saying he was not in fact driving with the permission of the owner.
Holland America hired attorneys who rendered legal services in behalf of Bradshaw. The case was settled by National Indemnity Company attorneys for an amount less than the limits of its policy. After the case was thus disposed of, Holland America brought this action to recover the attorneys' fees which it had been obliged to pay in preparing a defense for Bradshaw.
The case was submitted to the trial court on these agreed facts. It was also stipulated that the attorneys' fees claimed by the Holland America Insurance Company were reasonable. Neither company presented any evidence on the question whether Bradshaw was in fact driving with the permission of the owner of the automobile, the position of Holland America being that the duty to defend the action was to be determined from the allegations of the complaint, and the position of National Indemnity being that it had no duty to defend a driver who did not have permission to drive the automobile and that the burden was upon Holland America to prove that Bradshaw was an insured under National Indemnity's policy. The trial court sustained the latter contention and dismissed the action.
To sustain the judgment, National Indemnity cites the following statement from 12 Couch on Insurance 2d § 45:363:
The person seeking to hold the insurer liable on the basis of the omnibus clause has the burden of proving the existence of the permission necessary under that clause. * * *
While this is undoubtedly a correct statement of the law, it does not pertain to the question presented here. As its context makes abundantly clear, the 'person' referred to in the statement is an injured party seeking to recover on the insured's liability policy. We are here concerned with the rights of the defendant driver in a damage action brought by such a person, and are not concerned with an alleged right to hold the insurer liable for damages caused by the negligent operation of an automobile but rather with a right to be defended by that insurer.
We should state at the outset that it is conceded here that the insurer of the automobile is the primary insurer and is obliged to pay all of the costs of the defense if the driver had permission to use the car, inasmuch as the action was settled for an amount less than the limits of the primary policy. We so held in the recent case of Western Pac. Ins. Co. v. Farmers Ins. Exch., 69 Wash.2d 11, 416 P.2d 468 (1966).
The primary insurer in that case had refused to defend an action, contending that the driver had deviated beyond the scope of the permission given him by the named insured and was not driving with the latter's consent. After judgment had been rendered against the driver, the secondary or 'excess' insurer, which had defended the action, sued the primary insurer. We said that, since the allegations of the complaint in the action against the driver, if proven true, would render the primary insurer liable, it was obliged to defend the action; that it could not stand aloof from the action on the basis of its unilateral determination that the driver was not insured, and, after liability had been established in the damage action, escape responsibility for the expenses of defending him.
The trial court, and the respondent here, have read into that opinion an implied dictum that the primary insurer could escape liability for the driver's expenses of defense if liability was Not established in the damage action. We intended no such implication.
It is well established in this and other jurisdictions that the insurer's duty to defend, unlike its duty to pay, arises when the complaint is filed and is to be determined from the allegations of the complaint. Lawrence v. Northwest Cas. Co., 50 Wash.2d 282, 311 P.2d 670 (1957); Hering v. St. Paul-Mercury Indem. Co., 50 Wash.2d 321, 311 P.2d 673 (1957); Town of Tieton v. General Ins. Co., 61 Wash.2d 716, 380 P.2d 127 (1963); 7 Am.Jur.2d Automobile Insurance § 162 (1963); 14 Couch on Insurance 2d § 51:40 (1965); 7A J. Appleman, Insurance Law & Practice § 4683 (1962); See Annot.,50 A.L.R.2d 469 (1956).
The reason for the rule is well stated in Bloom-Rosenblum-Kline Co. v. Union Indem. Co., 121 Ohio St. 220, 226, 167 N.E. 884 (1929), where the court said:
The contract of the company does not contemplate that its duty arises subsequent to the trial of such case and a final determination of the question of the liability of the assured. This agreement to make the defense on behalf of the assured whenever a suit is brought...
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