Kuntz v. Spence

• Court: Texas Supreme Court
• Writing for the Court: Critz
• Citation: Kuntz v. Spence, 67 S.W.2d 254 (Tex. 1934)
• Decision Date: 24 January 1934
• Docket Number: No. 1705-6229.,1705-6229.
• Parties: KUNTZ et al. v. SPENCE et al.

Page 254

67 S.W.2d 254

KUNTZ et al. v. SPENCE et al.

No. 1705-6229.

Commission of Appeals of Texas, Section A.

January 24, 1934.

Error to Court of Civil Appeals of Second Supreme Judicial District.

Suit by Sam B. Spence and another against J. Earl Kuntz and others. Judgment in favor of plaintiffs was affirmed by the Court of Civil Appeals [48 S.W.(2d) 413], and defendants bring error.

Reversed and remanded.

T. R. Boone, E. T. Duff, and Gladys Reed, all of Wichita Falls, for plaintiffs in error.

Davenport & Crain, C. C. McDonald, W. E. Fitzgerald, and Robert K. Crain, all of Wichita Falls, for defendants in error.

CRITZ, Judge.

This suit was filed in the district court of Wichita county, Tex., by Sam B. Spence and wife, against J. Earl Kuntz and wife, and Employers' Casualty Company, a corporation, to recover damages for the death of Toy Spence, minor child of the Spences, alleged to have resulted from the negligent operation of an automobile by Mrs. Kuntz, and which belonged to the Kuntzes. The basis of the action against the Kuntzes is for tort. The casualty company is attempted to be held on an insurance policy issued by it to J. Earl Kuntz covering the car in question here. Trial in the district court, where the case was submitted to a jury on special issues, resulted in a verdict and judgment for the Spences against all defendants. On appeal this judgment was affirmed by the Court of Civil Appeals. 48 S.W.(2d) 413. The Kuntzes and the casualty company bring error.

The insurance policy contained, among others, the following provision:

"Agreement `A'

"Bodily Injury Liability

"To pay all sums which the Assured shall become liable to pay as damages imposed upon him by law for bodily injury including death at any time resulting therefrom (herein called `Bodily injury') accidentally sustained by any person or persons if caused by the ownership, maintenance or use of the automobile described in the Declarations for the purpose therein stated. The Company's limit of liability, regardless of the number of Assured, as respects each automobile described, for bodily injury to or death of one person, shall be as first set forth in Item 1, Paragraph C, of the Declarations and subject to that limit for each person its total liability on account of any one accident resulting in bodily injury to or death of more than one person, shall be as second set forth in said Item."

"Agreement B," and many other provisions of the policy are not material to this opinion. Other parts of the policy which are pertinent to this opinion read as follows:

"In connection with agreements A and B the company further agrees:

"(a) To investigate and defend in the name and on behalf of the Assured any suit seeking damages for such bodily injury or property damage even if such suit is groundless, false or fraudulent.

"Determination of Company's Liability for Accident.

"(3) No recovery against the company shall be had under agreements A or B until the amount of loss or expense shall have been determined, either by final judgment against the Assured after actual trial in an action defended by the Company or by a written agreement of the Assured, the claimant, and the Company, nor in either event unless suit is instituted within the time herein limited.

"Notice of Accident under agreements A and B.

"(10) In the event of accident covered under agreements A and B of this policy, written notice shall be given, by or on behalf of the Assured, to the Company or to any of its authorized agents as soon as is reasonably possible thereafter, irrespective of whether or not any injury or damage is apparent at the time. Such notice should contain information respecting the time, place and circumstances of the accident, with the name and address of the injured and any available witnesses. If such information is not reasonably obtainable, particulars sufficient to identify the Assured shall constitute notice. The Assured shall keep the Company advised respecting further developments in the nature of claims or suits when and as they come to his knowledge. The Assured shall cooperate with the Company and, upon the Company's request shall assist in effecting settlement, securing evidence, and the attendance of witnesses, but the Assured shall not voluntarily make any payment, assume any obligation or incur any expense other than for immediate surgical relief, except at his own cost.

"Bankruptcy and Insolvency.

"(17) The bankruptcy or insolvency of the Assured shall not relieve the Company of liability under agreements A or B hereof. Any person, or his legal representatives, who shall obtain final judgment against the Assured because of any such bodily injury, or injury to or destruction of property, may proceed against the Company under the terms of this policy to recover the amount of such judgment, either at law or in equity, but not exceeding the limit of this policy applicable thereto. Nothing in this policy shall give to any person or persons claiming damages against the Assured any right of action against the Company except as in this paragraph provided. The Company reserves the right to settle any claim or suit, and to make such investigation or negotiation as may be deemed expedient by the Company."

At the proper time, and in due form, the Kuntzes and the casualty company filed and presented, in the trial court, separate pleas of misjoinder of parties and causes of action. These pleas were all overruled. On appeal by the Kuntzes and the casualty company this ruling of the trial court was sustained by the Court of Civil Appeals. This ruling of the Court of Civil Appeals is presented as error in this court by the Kuntzes and the casualty company by proper assignments.

As we understand its opinion, the Court of Civil Appeals bases its ruling that it was proper to join the Kuntzes and the casualty company in this suit on the theory that the insurance policy above mentioned is a contract of primary liability, and not one of mere indemnity. We think this ruling was error.

We are aware of the fact that the general rule is that an insurance policy or contract which is merely one of indemnity, that is, which only binds the company to indemnify and save harmless the assured, will not form the basis of a cause of action against the insurance company by a person who has been injured by the negligent act of the insured. On the other hand, it is also the general rule that, where the policy creates a primary liability on the part of the insurance company in favor of any person who may be injured by the negligence of the insured, such injured person may sue the insurance company alone or join it in a suit against the insured. 5 Tex. Jur. pp. 661, 662, and authorities there cited.

In spite of either rule where the liability of the insurance company to the person injured rests solely on the insurance policy or contract, he must bring his suit within its terms before he can recover thereon. This is because the insurance company has committed no wrong against the injured party, and its liability is purely contractual.

When we come to examine the insurance policy made the basis of this cause of action, we find that it contains what is known in legal parlance as a "no action clause." This clause is set out and quoted above under "Determination of Company's Liability for Accident (3)." Also this no action provision is carefully preserved where necessary throughout the policy. When the policy is read in the light of the "no action clause," contained therein, and as fully preserved throughout the contract, it does not bind the casualty company as for primary liability to an injured party so that it can be sued alone prior to a judgment against the insured, or sued with the insured before such judgment against him is obtained. On the other hand, it fully guards against such suit. If there is any reason why such provision in the contract should not be given effect, we are unable to think of it. Such provision violates no statute, and is certainly not against public policy. Ray v. Moxon (Tex. Civ. App.) 56 S.W.(2d) 469, 470, and authorities there cited. Furthermore, it is certainly very important to the insurance company that it be not sued with the insured. In this respect we judicially know that juries are much more apt to return a verdict for the injured party, and for a larger amount, if they know the loss is to ultimately fall on an insurance company.

In the case of Ray v. Moxon, supra, Judge Martin of the Court of Civil Appeals at Amarillo has exhaustively reviewed and discussed the authorities touching the question here involved. We are unable to improve on that opinion, and therefore here take the liberty to quote and adopt the following therefrom:

"`Right of Recovery, Time Limit. No Action shall lie against the Company to recover any loss or expense under Section One of the Schedule of Perils unless the Assured shall have fully complied with all the requirements hereof and unless such action shall be brought by the Assured or his heirs or legal representatives for loss and/or expense actually sustained and paid in money by the Assured after the amount thereof shall have been fixed and rendered certain, either by final judgment against the Assured after actual trial of the issue or by agreement between the parties with the written consent of the company. * * *'

"The last clause above quoted has come to be known in judicial parlance as a `no action clause,' and will be frequently referred to in this opinion.

"As supporting his contention that this policy gives a direct right of action against the insurer and creates primary liability, plaintiff cites, among others, the following authorities: Texas Landscape Co. v. Longoria (Tex. Civ. App.) 30 S.W.(2d) 423, 425; American Automobile Insurance Co. v. Struwe (Tex. Civ. App.) 218 S. W. 534; American Indemnity Co. v. Fellbaum, 114 Tex. 127, 263 S. W. 908, 37 A. L. R. 633; Monzingo v. Jones (Tex. Civ....