Indem. Ins. Co. Of v. Davis' Adm'r

• Decision Date: 24 May 1928
• Parties: INDEMNITY INS. CO. OF NORTH AMERICA . v. DAVIS' ADM'R.
• Court: Virginia Supreme Court

143 S.E. 328

INDEMNITY INS. CO. OF

NORTH AMERICA .

v.DAVIS' ADM'R.

Special Court of Appeals of Virginia.

May 24, 1928.

Error to Corporation Court of Danville.

Action by J. A. Covington, administrator of Hettie I. Davis, deceased, against the Indemnity Insurance Company of North America. Judgment for plaintiff, and defendant brings error. Affirmed.

Aiken, Benton & Bustard, of Danville, for plaintiff in error.

Harris, Harvey & Brown, of Danville, for defendant in error.

CRUMP, P. In this case J. A. Covington, administrator of Hettie I. Davis, was awarded a verdict for $4,623.03 against the Indemnity Insurance Company of North America, upon the trial before a jury, and, the trialcourt having overruled a motion to set aside the verdict, and then rendered judgment upon it, the defendant company obtained a writ of error..

The parties will be referred to in the positions occupied by them before the trial court; the administrator being the plaintiff and the indemnity company the defendant.

In the notice of motion for judgment, by which the action was instituted, the administrator alleged that the decedent, Hettie I. Davis, on April 5, 1926, lost her life while riding with Marion M. Barker in an Essex roadster car owned by Barker, and that in an action for wrongful death against Barker he had recovered a judgment on October 7, 1926. for $4,500 and costs; that execution upon this judgment had proved unavailing as Barker was insolvent; that at the time of the death of Miss Davis the defendant indemnity company had outstanding its liability insurance contract with Barker by which It was obligated to pay any judgment, not exceeding $5,000, recovered against Barker by any person injured or killed by reason of the ownership, maintenance, and use of the Essex roadster by Barker; that, under the statute law of Virginia, Barker being insolvent, and execution having proved fruitless, a cause of action accrued to the administrator to compel the company to pay to him the amount of the judgment and costs.

The company defended upon the ground that the administrator could claim only through Barker, and that Barker had violated the conditions of the policy by failing to co-operate with the company in preparing for a defense of the action for damages against him, and by declining to give the company's representative information concerning the circumstances of the accident, whereupon the company had disclaimed all liability; and further upon the ground that the judgment against Barker was not the result of a trial in fact, but was the result of an agreed verdict, wherein Barker had colluded with the plaintiff to obtain judgment against him, and that the judgment was voluntarily assumed, incurred, and allowed by Barker, without the written consent of the company, in violation of the terms of the policy.

The first assignment of error is to the ruling of the court refusing to set aside the verdict. The consideration of this question renders essential an understanding of the principles of law applicable to a case of this character. Cases arising under automobile indemnity or liability policies have, in the past several years, been before the courts with increasing frequency, and, while there is lack of harmony in the decisions: in some respects, the general rules of law are fairly well settled. The policy in the instant case Is clearly an insurance contract to indemnify the assured against liability arising out of claims for damages against him, and not merely an agreement to indemnify him against loss sustained and actually paid by him. The company was bound by the terms of the policy to indemnify the assured by paying any loss sustained by him "by reason of the liability imposed by law" in case of injury to or the death of third persons, and to pay as well the court costs in any suit against the assured as also the interest upon any judgment in the suit. The policy also contains the usual stipulation that it will defend "in the name of and on behalf of the assured all claims or suits for such damage for which the assured is, or is alleged to be, liable." Under such a policy the cause of action of the assured is complete, and the assured can recover upon the contract as soon as the liability of the assured has become fixed and established by a judgment against him, even though he has sustained no actual pecuniary loss or damage at the time he seeks to recover. 31 Corpus Juris, 438.

The policy in the instant case is similar to the policy construed by the court in Fentress v. Rutledge, 140 Va. 685, 125 S. E. 668, in which it was held that the company was liable, upon garnishee process, to the party injured who has secured a judgment against the assured. Combs v. Hunt, 140 Va. 627, 125 S. E. 661, 37 A. L. R. 621, presents an instance of a policy by the terms of which the company bound itself only to indemnify the insured for actual loss, and was under no obligation further than to reimburse the assured after he had himself paid a judgment against him. Combs v. Hunt is reported and annotated in 37 A. D. R. 621, and a more recent annotation may be found in 41 A. L. R. 526. In the instant case, when the liability of the company became reduced to the payment of a definite sum, by the recovery of the judgment against Barker, the obligation of the company under its contract to pay the judgment became fixed, subject to such defenses as it might have in an action to enforce compliance with its obligation. Quite recent cases are Barney v. Preferred Automobile Ins., etc., Co. (Mich.) 215 N. W. 372; Landaker v. Anderson, 145 Wash. 660, 261 P. 388.

By a statute passed by the Virginia Legislature in 1924 (Acts 1924, p. 504), it is enacted that:

"No policy of insurance against loss or damage resulting from accident to or injury suffered by an employee or other person and for which the person insured is liable, * * * shall be issued or delivered (to any person) in this state by any corporation or other insurer * * * unless there shall be contained within such policy a provision that the insolvency or bankruptcy of the person insured shall not release the insurance carrier from the payment of damages for injuries sustained or loss occasioned during the life of such policy, and stating that in case execution against the insured is returned unsatisfied in an action brought by the injured person, or his or her personal representative in case death results from "the accident, be-cause of such insolvency or bankruptcy, (that) then an action may be maintained by the injured person, or his or her personal representative, against such corporation under the terms of the policy for the amount of the judgment in the said action not exceeding the amount of the policy."

The policy here contained a provision inserted in compliance with this statute. The plaintiff relied upon this statutory and policy provision as authority for his right to sue the company. Even without such a stipulation in a policy, which nevertheless contains a promise to pay the amount of the judgment, and is not a mere agreement to indemnify the assured against pecuniary loss or damage suffered by him, it is clear that in Virginia the injured person can maintain an action after judgment directly against the insurance company under the comprehensive statute relative to contracts made in whole or in part for the benefit of persons not parties to the contract, contained in section 5143 of the Code of 1919. The agreement of the company is to pay the loss "imposed by law, " which is represented by the judgment. The injured person is the only one to whom this payment should be made, and the policy further stipulates in terms that the company will pay "all interest accruing upon any judgment in any such suit up to the date of the payment or tender to the judgment creditor, or his attorney of record, of the amount for which the company is liable, " thereby evincing the intention of the parties that the company should pay, or tender payment of, the judgment directly to the injured party or his attorney. The obligation or promise to pay the judgment necessarily inures to the benefit of the judgment creditor, the injured party. Indeed, there is a direct promise to pay the judgment to the injured party or his attorney.

In Montague Manufacturing Co. v. Homes Corporation, 142 Va. 301, 128 S. E. 447, the court held that section 5143 of the Code had greatly enlarged the right of action of beneficiaries under contracts to which they were not parties, and, while it was not the purpose of the statute to restrict the powers of the parties to contract, yet the intention was to entend the remedy on the contracts mentioned in the section to beneficiaries under the contracts, where such extension was not forbidden by the terms of the contract itself.

It is further there held that:

"The statute is highly remedial and should be liberally construed in order to accomplish the ends manifestly intended."

See, also, Smokeless Fuel Co. v. C. & O. Ry. Co., 142 Va. 355, 128 S. E. 624; Ætna Co. v. Earle-Lansdell Co., 142 Va. 435, 129 S. E. 263, 130 S. E. 235; Fidelity & Deposit Co. of Md. v. Mason, 145 Va. 138,, 133 S. E. 793; Burks' PI. & Prac. (2d Ed.) 36, 37. That the injured party, upon recovering a judgment against the assured, takes a benefit under the insurance contract, is no more open to question in this case than under the engagement of the party undertaking to pay the unnamed creditors of the other party to the contract which was under review in Montague Manufacturing Co. v. Homes Corporation, supra.

It is insisted, however, by the plaintiff that his action was upon a judgment, and therefore not subject to the defenses made by the defendant insurance company. This theory of the plaintiff was properly rejected by the trial court. The plaintiff administrator was not in the instant case relying upon the judgment as the ground for his right of recovery. On the contrary, in his notice of motion he places his cause of action...