London Guarantee & Accident Co v. C. B. White & Bros. Inc

• Court: Virginia Supreme Court
• Writing for the Court: BUCHANAN, Justice
• Citation: London Guarantee & Accident Co v. C. B. White & Bros. Inc, 188 Va. 195, 49 S.E.2d 254 (1948)
• Decision Date: 08 September 1948
• Parties: LONDON GUARANTEE & ACCIDENT CO., Limited. v. C. B. WHITE & BROS., Inc.

188 Va. 195

49 S.E.2d 254

LONDON GUARANTEE & ACCIDENT CO., Limited.

v.C. B. WHITE & BROS., Inc.

Supreme Court of Appeals of Virginia.

Sept. 8, 1948

Error to Court of Law and Chancery of City of Norfolk; J. Hume Taylor, Judge.

Action by C. B. White & Brothers, Inc., against London Guarantee & Accident Company, Limited, for reimbursement for damages paid a third party under a liability policy. Judgment for plaintiff, and defendant brings error.

Judgment affirmed.

Before HUDGINS, C. J, and EGGLES-TON, BUCHANAN, STAPLES, and MILLER, JJ.

Eastwood D. Herbert, of Norfolk, for plaintiff in error.

Rixey & Rixey, of Norfolk, for defendant in error.

BUCHANAN, Justice.

The defendant below, London Guarantee & Accident Company, Ltd, herein referred to as defendant or insurance company, issued its policy of liability insurance to C. B. White and Bros, Inc., plaintiff below, herein referred to as plaintiff or insured, covering a dump truck used by the plaintiff in its business of retail coal dealer in Norfolk.

While plaintiff was delivering coal to a customer, under the circumstances to be related, a Mrs. Gurganus was injured by falling over a lump of coal on the sidewalk. She brought suit against plaintiff for damages, which the insurance company refused to defend. It was settled at a cost to plaintiff of $613.50. Plaintiff thereupon brought this suit against the insurance company for reimbursement and recovered a judgment for said amount. Its right to that judgment is the question at issue on this appeal.

The trial court instructed the jury that there was an obligation on the insurance company under the policy to defend the action brought by Mrs. Gurganus. The parties stipulated that if there was anything due the plaintiff, the whole amount of $613.50 was due. We are, therefore, not concerned with the amount of the verdict or its items.

By the policy, in "Coverage A, " the insurance company contracted, among other things, to pay all damages for which the insured is made liable by law for bodily injury sustained by any person caused by accident and arising out of the ownership, maintenance or use of the truck. Use of the truck was stated to be "commercial, " which was defined as use principally in the business occupation of the insured (coal and fuel dealer), including "the loading and unloading thereof."

The policy further provided that "as respects such insurance as is afforded by the other terms of this policy" under Coverage A, the company shall defend "any suit against the insured alleging such injury * * * and seeking damages on account thereof, even if such suit is groundless, false or fraudulent."

The notice of motion in the suit of Mrs. Gurganus, after amendment, alleged that the insured and its co-defendant, Old Dominion Paper Company, negligently threw or placed lumps of coal on the sidewalk, "said coal having been unloaded upon the said sidewalks, in violation of the ordinances of the City of Norfolk by C. B. White and Brothers, Incorporated, from a truck or trucks owned, operated and controlled by said C. B. White and Brothers, Incorporated, which coal was ordered to be unloaded at said place by the Old Dominion Paper Company, " and that the defendants negligently permitted said lumps of coal to remain on the sidewalk and failed to give warning thereof, thereby rendering said sidewalk unsafe for pedestrians.

The insurance company argues that in order for it to be required to defend that suit, it was necessary that the notice of motion allege facts which brought the case within the terms of the policy, and that it did not do so. On the other hand, the plaintiff asserts that the basis of liability stated by the notice, "in part at least, " is the negligence of the plaintiff "in the act of unloading the coal on the sidewalk;" and that consequently there was an obligation to defend, regardless of the merits of the suit or the truth of the statement in the notice.

We agree that the insurance policy cast upon the defendant the duty to defend, initially at least, only if the suit against its insured stated a case covered by the policy. So we have held and so it seems to be generally held.

In Ocean Accident & Guarantee Corp. v. Washington Brick & Terra Cotta Co, 148 Va. 829, 138 S.E. 513, 514, a clause was considered likewise making it the duty of the insurance company to defend any suits against its insured, although "wholly groundless, false, or fraudulent". It was.contended there that the insurance company was bound by the terms of its policy to defend all suits. But it was held that it would be illogical to say that this provision concerning the obligation to defend was intended to bind the insurer to defend a suit in which, under the terms of the policy, it had no interest; that this language of the policy must be read in connection with the fundamental contractual obligation appearing upon the face of the contract between the parties, which was that the insurer would indemnify the insured only in case of recovery of damages by employees legally employed. It was said:

" * * * In our opinion the only reasonable construction of the policy here is that the insurer was under no obligation to defend the case against the insured when it would not be liable under its contract for any recovery therein had. On the contrary, it should refrain from interfering in any way with the insured in respect to its defense of the case." 148 Va. at page 844, 139 S.E. at page 517.

Cf. Maryland Casualty Company v. Cole, 156 Va. 707, 158 S.E. 873, in which the basis of the action was the failure of the insurer to defend, under a policy which the record on file shows bound the insurer to "investigate all accidents and claims covered hereunder, and defend in the name and on behalf of the Assured all suits thereon, even if groundless, * * *."

In Fessenden School v. American Mut. Liability Ins. Co., 289 Mass. 124, 193 N.E. 558, 561, it was said:

" * * * We think the contention of the defendant is sound, that the obligation of the defendant insurance company is to be determined by the allegations of the declaration and it is not required to defend if it would not be held bound to indemnify the defendant in the action if the plaintiff prevailed upon the allegations of the declaration. * * *" Citing Ocean Accident & Guarantee Corp. v. Washington Brick & Terra Cotta Co., supra, and many other cases.

See also Brodek v. Indemnity Ins. Co. of North America, 292 Ill.App. 363, 11 N.E. 2d 228; Luchte v. State Automobile Mut. Ins. Co., 50 Ohio App. 5, 197 N.E. 421; Daniel v. State Farm Mut. Ins. Co, 233 Mo. App. 1081, 130 S.W.2d 244; Duval v. Ætna Casualty & Surety Co, 304 Mich. 397, 8 N. W.2d 112.

When we look to the notice of Mrs. Gurganus, it is at least uncertain whether it alleges a case covered by the policy. It alleges that the piece of coal stumbled over was one "having been unloaded, " a past transaction; and which "was ordered to be unloaded at said place by the Old Dominion Paper Company." The time of unloading and the place of unloading are two vital elements in the question of liability under the policy, and the allegations of the notice are not such as to be conclusive upon the question, as we shall show.

While the duty to defend is, in the first instance, to be determined by the allegations of the notice of motion, yet if those allegations leave it in doubt whether the case alleged is covered by the policy, the refusal of the insurance company to defend is at its own risk; and if it turns out on development of the facts that the case is covered by the policy, the insurance company is necessarily liable for breach of its covenant to defend. The defendant admits that to be true and states in its brief that "if this Court upholds the lower court in extending coverage of the policy to the facts of this case, then the defendant is liable for the agreed damages."

The evidence shows that the plaintiff had contracted to deliver the coal that was being hauled by this truck to its customer, Old Dominion Paper Company, in the bin under the customer's store. Access to this bin was through a manhole in the sidewalk in front of the store, located 4 feet 8 inches from the front of the building and 13 feet 10 inches from the curb. The first load of the order had been delivered by a conveyor truck, not covered by the policy. This method would not work, so the balance was being delivered by the dump truck. Two employees of the plaintiff went with the conveyor truck and remained at the store to handle the coal from the dump truck into the customer's bin. No coal had been left on the sidewalk from the conveyor truck. The dump truck dumped its load at the edge of the curb and from there the twoemployees shoveled it into the manhole. They were thus engaged when Mrs. Gurganus came along walking between the store and the manhole. She tripped, or in some manner fell over a piece of the coal and was injured. The truck was then about 100 feet away from the dumping place, returning to its loading place for another load of the coal to be delivered.

The sidewalk sloped from the building to the curb and one of plaintiff's men, who was shoveling the coal, testified that none of the coal rolled on to the sidewalk when it was dumped. The necessary inference is that the piece of coal which caused Mrs. Gurganus to fall was there as a result of shoveling the load of coal which had been dumped by the truck from the curb through the manhole into the bin where the plaintiff had contracted to deliver it.

There are two theories in regard to liability under the "loading and unloading" clause of the policy in judgment. One is called the "coming to rest" doctrine. Under this doctrine "unloading" is given a narrow construction and is held to extend only to the actual lifting of the article from the motor vehicle to a place of rest outside the vehicle, and the connection of the vehicle with the process of unloading has ceased. A leading case adopting this theory is Stammer v....