Home Ins. Co. of New York v. Moore

• Decision Date: 11 June 1928
• Docket Number: 27193
• Parties: HOME INS. CO. OF NEW YORK v. MOORE & RAWLS. [*]
• Court: Mississippi Supreme Court

117 So. 524

151 Miss. 189

HOME INS. CO. OF NEW YORK v. MOORE & RAWLS. ^[*]

No. 27193

Supreme Court of Mississippi

June 11, 1928

Division A

1 INSURANCE. Insurance policy covering railroad cars for which insured parties were "legally liable" covered liability created by their contract to pay railroad company furnishing cars for car destroyed, under which railroad recovered judgment.

Insurance policy covering railroad cars delivered to lumber company for plaintiffs insured parties, by railroad, and covering all cars in plaintiffs' possession for which they were legally liable, held to cover liability created by contract to pay railroad company furnishing cars for all cars lost or destroyed, under which railroad recovered judgment, since words "legally liable" could only mean liability imposed by law or liability which law fixed by contract on insured.

2 INSURANCE. Insurance contract is construed most strongly in favor of insured.

A contract of insurance is construed most strongly in favor of the insured.

3. FRAUDS, STATUTE OF. Agreement to pay for cars furnished by railroad to third party for promisor, if destroyed by fire held not within statute as promise to answer for debt, default, or miscarriage of another, since it created direct obligation (Hemingway's Code 1927, section 3325(a).

Agreement by insured parties regarding liability, under oral contract, for destruction by fire of railroad cars placed on C.'s tracks for insured parties' use, was a direct proximate obligation, and statute of frauds, Hemingway's Code 1927, section 3225(a), Code 1906, section 4775, had no application, so that insurer insuring cars for which insured parties were legally liable could not defend on ground contract was void as being one to answer for the debt, default, or miscarriage of another.

4. INSURANCE. Generally, negligence on part of insured, his agents or servants, although causing loss, will not relieve insurer from liability.

General rule is that mere negligence or carelessness on part of insured, his agents or servants, although directly contributing to and causing loss, will not relieve insurer from liability.

5. INSURANCE. Insured parties alleged negligence in not guarding railroad cars to prevent fire could not relieve insurer from liability.

Alleged negligence on part of insured part of insured parties in not guarding railroad cars insured, if that could be done so as to prevent them from catching on fire, could not relieve insurer from liability.

HON. G. C. TANN, Chancellor.

APPEAL from chancery court of Jones county, Second district, HON. G. C. TANN, Chancellor.

Suit by Moore & Rawls against the Home Insurance Company of New York. From a judgment overruling its demurrer, defendant appeals. Affirmed and remanded.

Judgment affirmed and remanded.

C. S. Street and R. L. McLaurin, for appellant.

The parol agreement between the railroad company and Moore & Rawls is set out to carry to Moore & Rawls an insurable interest in the two cars in question. The question we desire to present here is whether or not the contract sued on, which provides a possible indemnity of five thousand dollars to Moore & Rawls for the loss of the cars in question by fire "for which they are legally liable," is enforceable when the right of action of appellee is based entirely on a contract as distinguished from a liability imposed by law. It is our contention that the liability of Moore & Rawls to the railroad company, if any, is a contractual liability as distinguished from a liability imposed by law, and that the insurance contract in question never undertook to indemnify or to provide for indemnity to Moore & Rawls for a contractual liability. There is a good reason for this, because there would be no way in the world for the insurance company to know in advance or to have any definite idea about the liability it was assuming. If it undertook in the dark to protect Moore & Rawls against any liability they might assume by contract with the railroad company, the hazard might be limitless, and the rate for the insurance would be prohibitive.

If it had been the intention of the policy to cover every kind of liability, the word "legally" would have been omitted and the sentence would have read "for which they are liable." The word "legally" qualifies and limits the liability. Williams v. Luckett, 26 So. 967; Wilczinsky v. R. R. Co., 66 Miss. 595; Harris v. Townsend, 101 Miss. 590, 58 So. 529; T. & P. Ry. Co. v. Cau, 120 F. 15. See Annotated Cases 1918E, 756 and 790.

Our second proposition is: The contract for reimbursement between Moore & Rawls and the Gulf, Mobile & Northern Railroad Company was within the statute of frauds, being an oral contract to answer for the debt, or default, or miscarriage of another person, that is, for the Canal Lumber Company, and cannot be a basis for the right of recovery. Marengo First National Bank v. Blair State Bank, 80 Neb. 400, 114 N.W. 409; Hunter v. Bales, 24 Ind. 299; Petty v. Petty, 4 Mon. (Ky.) 215, 39 Am. Dec. 501; Sweatman v. Parker, 40 Miss. 19; Bloom v. McGrath, 53 Miss. 250; Hendrix v. Robinson, 56 Miss. 694; Spengler v. Stiles, 94 Miss. 798; Newman v. Supreme Lodge K. of P., 110 Miss. 371.

We are not unmindful of the fact that in attempting to avail of the provisions of the statute of frauds, section 3325, Hemingway's Code of 1927, referred to above, that we will be met with the contention by the appellee that the statute of frauds is personal to the parties to the contract and is not available to a stranger in a collateral proceeding. Our courts have passed on this proposition a number of times, especially in the cases of Grisham v. Lutric, 76 Miss. 444, and Parish v. Railroad, 103 Miss. 288, and other cases. But in passing upon the merits of the proposition at bar, we believe the court will recognize certain distinctions and exceptions. In the first place, this suit is in a court of equity, and we submit that it would be inequitable, in the facts shown by the pleadings here, to permit appellee to recover under the contract sued on. Furthermore, section 3325, Hemingway's 1927 Code, specifically provides "an action shall not be brought whereby to charge a defendant or other party," etc. It is a very different proposition, we submit, to defend an action within the statute of frauds from the right of a party to a contract within the statute of frauds attempting to base a right of action thereon. Mahn v. United States, 16 Wallace 143, 27 C. J. 305; McIlvane v. Big Stony Lumber Co., 105 Va. 613, 54 S.E. 473.

Our third proposition is: The negligence of complainants below, appellees here, is shown by the bill of complaint and the record to have been so gross or wanton as to, in legal effect, constitute fraud against the rights of appellant, and hence appellees should not be permitted to recover on this contract. 26 C. J. 437, sec. 443; Lycoming Ins. Co. v. Barringer, 73 Ill. 230; Bindell v. Kenton, County Fire Insurance Co., 128 Ky. 389, 108 S.W. 325; Ostrander on Ins., 192; Wood on Insurance, 274; 19 Cyc. 381.

Welch & Cooper, for appellees.

To appellant's "first proposition" we say: 1. Construing the policy against appellant, the framer thereof, "legally liable," if it refers to a "loss," means a liability to which the law would hold it liable, regardless of its source. 2. The phrase "and for which they are legally liable" refers not to the "loss" but to "cars." In other words, appellant is liable only for cars for whose possession they are legally liable. 3. The bill of complaint shows a legal liability in contract on appellees' part to the G. M. & N. as well as liability in tort. To the second proposition we say: 1. The agreement between appellees and the G. M. &. N. is an original undertaking and not within the statute of frauds. 2. If it be conceded that it was an undertaking to answer for the default of Canal Lumber Company, that company was the agent of appellees and the tort is that of appellees because of the relationship of principal and agent. 3. The contract is between appellees and the G. M. & N. R. R. Company. Appellant may not question its validity as that is personal to the parties. 4. The bill of complaint shows legal liability of appellees to the G. M. & N. both in contract and tort. To the third proposition we say: 1. Appellant admits its ineffectiveness. 2. No such negligence as the authorities cited by counsel require appears here.

The policy insures appellees against loss by fire of cars delivered by the G. M. & N. Railroad and while in appellee's possession or on sidetrack of G. M. & N. Railroad or the Canal Lumber Company's logging railroad, and for which complainant's are "legally liable." Appellant says that "legally liable" as used in the policy means a liability not contractual in its nature but one imposed by law as distinguished from contract. But see Shivers v. Ins. Co., 55 So. 956.

Second proposition. See Myer-Bridges Co. v. Bodeau, 90 Miss. 27, 43 So. 609; Insurance Co. v. Heimann, 93 Ind. 24, 25 R. C. L. 738, sec. 389; Grisham v. Lutric, 76 Miss. 444, 24 So. 169.

The third proposition is that appellees were guilty of gross negligence and there should be no recovery. All authorities cited by appellant are to the effect that the negligence or misconduct must be such "as to show a wilful and fraudulent purpose or design to destroy the property." There is no proof that appellees sat idly by and let the property be destroyed. It was a case of a failure to guard the property. It may have been once out of many times. It may have been under unusual circumstances. But this court would not, and could not, say it is gross negligence within the authorities cited by appellant.

OPINION

MCGOWEN, J.

Appellees, Moore & Rawls, filed their bill in the...