Moseley v. Liverpool & London & Globe Ins. Co.

• Decision Date: 17 March 1913
• Docket Number: 15,847
• Citation: 61 So. 428,104 Miss. 326
• Parties: MARY L. MOSELEY v. LIVERPOOL & LONDON GLOBE INSURANCE COMPANY
• Court: Mississippi Supreme Court

61 So. 428

104 Miss. 326

MARY L. MOSELEY v. LIVERPOOL & LONDON GLOBE INSURANCE COMPANY

No. 15,847

Supreme Court of Mississippi

March 17, 1913

APPEAL from the chancery court of Yazoo county, Hon. G. G. LYELL Chancellor.

Suit by Mrs. Mary L. Moseley against the Liverpool & London & Globe Insurance Company. From a judgment for defendant, plaintiff appeals.

The facts are fully stated in the opinion of the court.

Affirmed.

Campbell & Campbell and E. L. Brown, for appellant.

Other than the question of amount to be recovered, the sole question argued at the bar on the hearing of the demurrer to the amended bill was the right of the appellant to recover of the appellee, it being conceded on both sides that if appellee be held, under its contract with the Mississippi Home Insurance Company, to be merely liable to that company to indemnify it against any loss it might sustain, as against appellant, there was no liability to the appellant on the part of appellee.

The position of the appellant was that the so-called contract of reinsurance, between appellee and the Mississippi Home, was not one of reinsurance, that is, a contract to indemnify the latter company against loss to appellant under its policy in her favor, but that the so-called reinsurance contract was an obligation, on the part of the appellee to pay its pro rata of the loss which might be sustained by appellant and against which the Mississippi Home has insured her. In other words the appellee agreed to pay its pro rata of any loss that appellant might sustain, and not to indemnify the Mississippi Home for a pro rata of any sum it might have to pay appellant on account of such loss.

We think it will be conceded that, if our construction of the contract is correct, that is, that it is an obligation to pay a pro rata of the loss, as distinguished from an obligation to indemnify the Mississippi Home for a pro rata of such sum as it might have to pay appellant, the appellant was entitled to recover. We think all of the authorities so hold.

The question is analogous to the one presented in Pool v Doster, 59 Miss. 258, and the authorities there cited but we have no direct adjudication of this court on the point. It is there held that, if a debtor give a security to his surety as an indemnity against his liability as surety, the creditor may not have recourse to the security given; but that, if the debtor give the surety a security for the payment of the debt, the creditor may have the benefit of the security, even though he be not a party to, or know of, the contract creating the security. By parity of reasoning, it may be held that, if the pretended reinsurer obligate to pay the loss, or a pro rata thereof, such obligation is available directly by the assured. There is no question of subrogation in either case. That takes place in favor of the surety, and makes a security, contracted for by the creditor, available to the surety, because the security is one for the payment of the debt. The two propositions are entirely in harmony, in that both rest upon the fact that the security contract secures the payment of the debt, and are analogous in that, in the one case the creditor, though getting the benefit thereof, is not a party to the security contract, and in the other, the surety, though not a party thereto, gets the benefit thereof.

Another familiar principle upon which our contention rests is this: If A, on receipt of a sufficient consideration, agrees with B to pay a debt by the latter to C, then C may enforce the promise in a suit directly against A, though C was not privy to the contract between A and B and no consideration moved from C to A. Shoaf v. Palatine Ins. Co., 80 A. S. R. 804.

This seems to be the usual ground upon which the so-called reinsurer is held liable in a suit by the assured.

Still another principle upon which the contention rests is that of avoiding circuity of action, under equitable doctrines, an instance of which is Hunt v. Ins. Co., 38 L. R. A. 514. If this doctrine be not also available at law, we are in equity here, and it is available to us.

Whether one basis of the doctrine or another be maintained, "there is no doubt that a policyholder may sue the reinsurer, in case of loss, upon a contract of reinsurance, which includes a promise or agreement on the part of the reinsurer to assume and pay the losses of the policyholders." Freeman's Note 45 A. S. A. 447:

The only question, then, is, does the contract between the appellee and the Mississippi Home contain a promise or agreement to pay the loss, or some part thereof, sustained by the appellant? We think it unquestionably does.

Hirsch, Dent & Landau and McLaurin, Armistead & Brien, for appellee.

Whether this is a contract of copartnership, or of principal and agency, or of a new-fangled principle of reinsurance, is a question gravely submitted to this court to decide. Contracts of reinsurance have been in existence for some two centuries and have been construed time and time again by the courts.

As stated by the Supreme Court of the United States with reference to the contention, made in that case: "We do not think that the language of these two subdivisions was intended to entirely nullify and tear up by the roots the construction given to the contract of reinsurance for so many years throughout the civilized world, and upon which its chief value is based. The nature of the contract is accurately described in its commencement. It is described as 'a compact of reinsurance' and there has been no doubt as to the meaning of such contract for the last two centuries." Allemannia Fire Ins. Co. v. Fireman's Fire Ins. Co., 209 U.S. 326-337.

In view of the strenuous efforts of appellant to induce this court to impart a new meaning to "a contract of reinsurance," we trust we will be pardoned when we cite at some length from the textbooks and the leading cases.

In the case of Allison v. Fidelity Mutual Fire Insurance Company, decided by the supreme court of Nebraska, April 3, 1908, 116 N.W. 274-275, the supreme court held:

"At this point it seems proper to consider the nature of a contract of reinsurance. In Barnes v. Hekla Fire Ins. Co., 56 Miss. , 57 N.W. 314, 45 Am. St. Rep. 438, it was said 'Reinsurance is a contract of indemnity in which the insurer reinsures risks in another company, and is solely for the benefit of the latter, and not of the policyholders.' In Hunt v. New Hamshire F. U. A., 68 N.H. 305, 38 A. 145, 38 L. R. A. 514, 73 Am. St. Rep. 602, it is said: 'By a contract of reinsurance, in whatever language expressed, the obligation of the reinsurer is to indemnify the insured against his liability for the loss by fire of the property insured. They stand in a relation to each other much like that of principal and surety. The only material difference is that the reinsurer is not in law directly liable to the insured.' In the case of Appeal of Goodrich, 109 Pa. 523, 2 A. 209, it is said: 'Reinsurance is properly applied to an insurance affected by one underwriter with another, the latter wholly or partially indemnifying the former against the risks which he has assumed; that is to say, after an insurance has been effected, the insurer may have the subject of insurance reinsured to him by some other.' It is apparent therefore, that the contract of reinsurance is not to insure the owner of the property against its loss by fire, or other casualty, but is a contract to indemnify another insurance company or underwriter. Strictly speaking, it is purely a contract of indemnity, not against fire or other hazard provided in the original policy, but against loss by or on account of the outstanding contract of insurance with the owner of the property. A contract of reinsurance is simply to indemnify the original insurer for a loss he may sustain upon his contract of insurance."

"A contract of reinsurance--as usually used--designates a new contract by which a company secures partial or entire indemnity for losses which it may suffer under risks which it continues to carry." 19 Cyc. 638.

Mr. Cooley in his Briefs on Insurance, vol. 4, p. 3942, says:

"The ordinary contract of reinsurance is only between the original insurer and the reinsured."

The author of the Am. & Eng. Ency. of Law, vol. 24, pages 248-9 says: "Nature of Reinsurance--A Contract of Indemnity. Although in a certain sense reinsurance may be an insurance upon property, it is really a contract of indemnity against risk incurred in the original insurance."

It is equally well settled that in a contract of reinsurance a policyholder has no right of action against the reinsured.

"The original insured has no such interest as will entitle him to proceed directly against the reinsurer." Strong v. Phoenix Ins. Co., 62 Mo. 289, 21 Am. Rep. 417; Carringtan v. Commercial Fire & Marine Ins. Co., 14 N.Y.S. 152; Delaware Ins. Co. v. Quaker City Ins., 3 Grant Cas. (Pa.) 71.

"The theory of reinsurance is that, when reinsurance is made, it should be made in the name and for the benefit of the company, and not of the individual policyholder." Casserly v. Manners, 48 How. Prac. (N. Y.) 219. Consequently the contract of reinsurance inures to the benefit of all creditors of the original insurer, and the policyholder has no equitable lien on the proceeds. Herckenrath v. American Mut. Ins. Co., 3 Barb. Ch. (N. Y.) 63; Blackstone v. Allemannia Fire Ins. Co., 56 N.Y. 104; Consolidated Real Estate & Fire Ins. Co. of Baltimore v. Cashor, 41 Md. 59; Appeal of Goodrich, 109 Pa. 523, 2 A. 209.

Cooley's Briefs on Insurance, vol. 4, p. 3942. "There is no privity between the original policyholder and the reassuring company." Consolidated Real Estate Co. v. Cashow, supra; Strong v. Phoenix Ins. Co., 62 Mo. 289, 21 Am. St Rep. 417,...