Insurance Co. of North America v. L.C. Young Painting & Decorating Co.
| Decision Date | 26 April 1968 |
| Docket Number | Docket No. 2758,No. 1,1 |
| Citation | 11 Mich.App. 304,161 N.W.2d 24 |
| Court | Court of Appeal of Michigan — District of US |
| Parties | INSURANCE COMPANY OF NORTH AMERICA, a Pennsylvania corporation, Plaintiff-Appellant, v. L. C. YOUNG PAINTING & DECORATING COMPANY, a Michigan corporation, Defendant-Appellee |
Hiram Y. Popkin, Frazer & Popkin, Detroit, for appellant.
Ralph H. Adams, Detroit, for appellee.
Before T. G. KAVANAGH, P.J., and LEVIN and VANDER WAL, * JJ.
This is an action by an insurance company against its insured. The insurer settled claims against the insured by paying amounts less than the $100 deductible, and now seeks recovery of the aggregate amount paid by it in effecting such settlements.
Plaintiff-appellant, Insurance Company of North America, insured the defendant-appellee, L. C. Young Painting & Decorating Company, under a comprehensive general liability policy. Plaintiff claims the defendant, when spray painting a certain building, permitted particles of paint to fall upon and damage cars which were parked in the building's vicinity, and that, pursuant to the policy, the plaintiff settled with the claimants, paying them the aggregate sum of $1,925.80, which amount, plaintiff claims, the policy requires the defendant to repay to the plaintiff.
At the trial's conclusion, the judge stated that the policy requires the plaintiff to establish the defendant was 'legally obligated' to pay the claimants the amounts paid them in settlement, and, there being no showing the defendant was so obligated, judgment would be entered for the defendant. The trial judge added there was ambiguity in the policy which should be resolved in favor of the defendant.
On this appeal the parties entered into an agreed statement of facts which was transmitted as the record of testimony in the case. 1 The statement of facts contains the text of the relevant language of the insurance policy and states the plaintiff settled 39 claims (each for less than $100) for the aggregate sum of $1,925, and the claims were settled prior to the institution of suit or judgment in favor of the claimants against the defendant.
The parties agree the questions we are to answer are whether the policy is ambiguous, and whether the phrase 'legally obligated to pay' in the policy means that the claims against the insured must have been reduced to judgment before the insurer was authorized to pay.
The language of the insurance policy, to the extent set forth in the agreed statement of facts, follows:
'(a) defend any suit against the insured alleging such injury, sickness, disease or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent; but the company may make such investigation, negotiation, and settlement of any claim or suit as it deems expedient.
'Endorsement No. 1 contains the following provision:
'1. $100.00 shall be deducted from the total amount of all sums which the insured shall become legally obligated to pay on damages on account of injury to or destruction of all property of one person or organization, including the loss of use thereof.
'2. The terms of the policy, including those with respect to notice of accident, and the company's right to investigate, negotiate and settle any claim or suit apply irrespective of the application of the deductible amount.
We find no inconsistency between (i) the clause that states $100 shall be deducted from such amounts as the insured 'shall become legally obligated to pay', and (ii) the clauses that authorize the plaintiff to settle 'any claim or suit as it deems expedient' (which authority applies 'irrespective of the application of the deductible amount') and obligate the defendant to reimburse the plaintiff for any portion of the deductible amount paid by the plaintiff to effect settlement of any claim or suit.
The policy must be read as a whole. The right the policy confers on the plaintiff to settle any claim or suit would in our opinion be rendered meaningless, or almost meaningless, were we to accept the defendant's contention that the plaintiff could exercise such right only after a judgment had been entered against the defendant. 2
Far from being ambiguous, we think it is the plain meaning of the policy that plaintiff could settle a claim or suit even though the $100 deductible provision applied and could require the defendant to reimburse it for such part of the deductible amount as plaintiff paid to effect settlement; it was not incumbent on the plaintiff to await judgment against the defendant before seeking to settle the claims against the defendant.
The defendant, pursuing the theme that plaintiff had the burden of establishing defendant's legal obligation to pay the claims, asserts that plaintiff failed to prove the defendant was negligent, that the claimants were free of contributory negligence, that the amount paid each claimant was reasonable, and that defendant's obligations to the claimants were at least 'tantamount to a judgment' against the defendant or would 'form the basis of a judgment' against it.
We have already stated our view that the plaintiff was not obliged to wait until judgments were entered against the defendant. Similarly, we do not think it was...
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