Liberty Mut. Ins. Co. v. Jones

• Decision Date: 05 July 1939
• Docket Number: 36137
• Parties: Liberty Mutual Insurance Company, a Corporation; American Mutual Liability Insurance Company, a Corporation; Lumbermen's Mutual Casualty Company, a Corporation; Hardware Mutual Casualty Company, a Corporation; Employers' Mutual Indemnity Corporation, a Corporation; Paul C. Kinsey, Arnold M. Stephenson, Francis S. Mulholland, John M. Siebert and Glen E. Kohl, Appellants, v. E. W. Jones, General Chairman of Bar Committees of the State, and John C. Grover, Grover C. Sibley, Fielding P. Stapleton and H. E. Shepherd, Members of the Advisory Committee to the General Chairman of Bar Committees of the State
• Court: Missouri Supreme Court

130 S.W.2d 945

344 Mo. 932

Liberty Mutual Insurance Company, a Corporation; American Mutual Liability Insurance Company, a Corporation; Lumbermen's Mutual Casualty Company, a Corporation; Hardware Mutual Casualty Company, a Corporation; Employers' Mutual Indemnity Corporation, a Corporation; Paul C. Kinsey, Arnold M. Stephenson, Francis S. Mulholland, John M. Siebert and Glen E. Kohl, Appellants, v. E. W. Jones, General Chairman of Bar Committees of the State, and John C. Grover, Grover C. Sibley, Fielding P. Stapleton and H. E. Shepherd, Members of the Advisory Committee to the General Chairman of Bar Committees of the State

No. 36137

Supreme Court of Missouri

July 5, 1939

[Copyrighted Material Omitted]

Rehearing Granted, Reported at 344 Mo. 932 at 968.

Appeal from Boone Circuit Court; Hon. W. M. Dinwiddie Presiding Judge, and Hon. Eldridge M. Dearing and Hon. J. W. McAfee, Associate Judges.

Judgment of trial court reversed; prayer of cross-bill denied; injunction granted by trial court dissolved; rights of appellants are decreed as stated.

Hogsett, Murray, Trippe, Depping & Houts, of Kansas City, for appellants.

Woodward & Evans, of St. Louis, and Mosman, Rogers, Bell & Buzard, of Kansas City, for appellant Liberty Mut. Ins. Co.

Leahy, Walther, Hecker & Ely, of St. Louis, for appellant American Mut. Liability Ins. Co.

Stringfellow & Garvey, of St. Joseph, for appellant Lumbermens Mut. Casualty Co.

Grover C. James, of Joplin, for appellant Hardware Mut. Casualty Co.

James R. Sullivan, of Kansas City, for appellants Employers Mut. Indemnity Co. and Employers Mut. Liability Ins. Co.

Mark Eagleton, of St. Louis, Clif Langsdale, of Kansas City, Robert P. Elam and Harry Gershenson, both of St. Louis, Chet D. Vance, of Kansas City, Staunton E. Boudreau, of St. Louis, Frank Brockus, Charles V. Garnett, and W. F. Woodruff, all of Kansas City, Roy D. Williams, of Boonville, Stephen K. Owen, of St. Joseph, J. R. Baker, of Fulton, Ben Neale, of Springfield, Franklin E. Reagan, of Jefferson, and William H. Becker, of Columbia (Clark, Boggs, Peterson & Becker and E. W. Jones, all of Columbia, of counsel), for respondents.

W. Marvin Woodall, Roderick Beddow, George R. Stuart, Jr., Harold M. Cook, and Horace C. Wilkinson, all of Birmingham, Ala., and A. A. Carmichael, Atty. Gen. of Alabama, for Alabama State Bar Ass'n, and Birmingham Bar Ass'n.

R. M. Kelly, of Vicksburg, Miss., President of State Bar of Mississippi, amicus curiae.

Jones, Hocker, Gladney & Grand, of St. Louis, for Travelers Ins. Co., Aetna Casualty & Surety Co., Hartford Accident & Indemnity Co., New Amsterdam Casualty Co., Fidelity & Casualty Co. of New York, and Association of Casualty & Surety Executives, amici curiae.

Joseph A. Padway, of Washington, D. C., for American Federation of Labor, amicus curiae.

C. D. Cass, of Washington, D. C., Charles L. Carr, of Kansas City, and Henry H. Fryling, of Newark, N.J., for American Transit Ass'n.

Paul Vallee, Marion P. Betty, and Jerry Giesler, all of Los Angeles, Cal., Harry L. Price, of Oakland, Cal., and Esmond Schapiro, of San Francisco, Cal., for State Bar of California, amicus curiae.

Cutbert S. Baldwin, of New Orleans, La., for New Orleans Bar Ass'n.

John Doerfer, of West Allis, Wis., and Rudolph A. Schoenecker, John Waddleton, and Joseph Doucette, all of Milwaukee, Wis., for Junior Ass'n of Milwaukee Bar.

Cave & Hulen and A.D. Sappington, all of Columbia, for Association of Farmers County Mutual Fire Ins. Companies of Missouri, amicus curiae.

OPINION

Ellison, J.

The appellants are six mutual casualty insurance companies doing business in this State, and their respective Missouri claims managers. They appeal from a decree of the Circuit Court of Boone County, which dismissed their petition for a declaratory judgment under Laws 1935, page 218 (Mo. Stat. Ann., sec. 1097a et seq., p. 1388), and granted an injunction prayed by respondents' crossbill. The injunction enjoined appellants from adjusting claims against their insured (and other related activities) through lay employees, on the ground that such acts constitute "law business" and the performance thereof is the unlawful "practice of law." The respondents are the General Chairman of the Bar Committees of the State of Missouri and the members of his Advisory Committee, appointed under subdivisions 13 and 14 of Rule 36 of this court. By stipulation the parties adopted the unusual course, not provided for by the law of this State, of trying the case before three circuit judges: Hon. Walter M. Dinwiddie, regular judge of the Boone County Circuit Court, together with Hon. James Wesley McAfee of St. Louis, one of the judges of the Eighth Circuit, and the late Hon. E. M. Dearing of Potosi, judge of the Twenty-first circuit, sitting as "advisory" judges. Judge McAfee filed an opinion substantially concurring in the decree. Judge Dearing filed an opinion dissenting therefrom.

The record is long, containing 1053 pages. In addition to the elaborate briefs of counsel for the respective parties, briefs have been filed supporting the position of the appellants by amici curiae representing the Association of Farmers' County Mutual Fire Insurance Companies of Missouri; the American Federation of Labor; five casualty insurance companies and the Association of Casualty & Surety Executives; and the American Transit Association. In support of respondents' contentions briefs are filed by amici curiae: Hon. A. A. Carmichael, Attorney General of Alabama, representing the Alabama State Bar Association and the Birmingham Bar Association; the Committee on Claims Adjusters of the State Bar of California; the Junior Association of the Milwaukee Bar; Hon. R. M. Kelly, President of the State Bar of Mississippi; and Hon. Cuthbert S. Baldwin, individually and as President of the New Orleans Bar Association. Altogether the briefs contain 1205 pages.

The appellant companies are licensed under Section 5854, Revised Statutes 1929 (Mo. Stat. Ann., p. 4472), and have been doing business in this State for periods ranging from four to eighteen years, each maintaining one or more claims offices in charge of a manager who is not a lawyer. Altogether they employ 33 claims adjusters, of whom 19 are laymen. Under authority of Section 5844, Revised Statutes 1929 (Mo. Stat. Ann., p. 4468), they write numerous kinds of casualty insurance including that protecting the insured against liability to third persons for negligence in specified circumstances, or under the Workmen's Compensation Act; also insurance protecting the insured against bodily injury or death by accident, disability by sickness, and damage to his own property from various causes.

Where the insurance protects the insured against liability to third persons, under Section 5898, Revised Statutes 1929 (Mo. Stat. Ann., p. 4499), the obligation of the insurance company runs directly to the third party claimant -- it is not a mere indemnitor of the insured. The same is true under the Compensation Act. [Sec. 3325, R. S. 1929, Mo. Stat. Ann., p. 8262.] The insurance company adjusts all such claims or assumes the defense thereof in court through its own counsel, even though the amount of the claim exceeds the insurance coverage and the policyholder is personally liable for the excess. In such event, however, the company usually invites the insured to employ personal counsel representing him in the trial. Sometimes, where the company disputes or is doubtful of its liability for the casualty, it defends the case under a "non-waiver agreement," whereby it reserves the right to dispute liability on any judgment that may be recovered by the claimant. In this case we are chiefly if not entirely concerned with the handling of claims before they enter litigation.

Taking the usual course of a typical claim, suppose John Smith has a policy in the Alpha Casualty Company protecting him against liability to third persons for negligence in the operation of his automobile, and also insuring him against property damage thereto. He has a collision with another motorist, and sends in a notice to the company stating the facts. On receipt thereof a clerk makes up a file including the office copy of any applicable policy, and presents it to the claims manager. The latter, for technical and administrative reasons, first makes a tentative "reserve" or estimate of what the claim will cost, and sends it in to the home office. Unless it is clear that there is no liability, as where the policy has lapsed, or covers some automobile other than the one mentioned in the notice, the manager next assigns the claim to an adjuster for investigation.

The adjuster interviews the insured, the claimant, the witnesses takes statements, makes measurements, photographs and the like. He views the wrecked automobiles, consults experts as to the amount of property damage and the extent of the personal injuries, and makes a report to the claims manager, giving his views as to the probable amount required to settle the claim. But he expresses no opinion on legal questions to the company or the claimant, though he may quote what counsel for the company has said. In each claims office there is a salaried attorney who passes on all legal questions arising there. Subject to supervision of the home office the lay claims manager passes on the amount to be paid in the settlement of all claims. The facts are digested in the claims office and perhaps referred to the home office. Thereafter, the adjuster is sent out again to negotiate with the claimant for a settlement. If he succeeds, he selects the appropriate form of release out of a number prepared by the insurance company's counsel, fills in the blanks, has it executed by the claimant, gives him a voucher or draft, and...