New Amsterdam Cas. Co. v. Simpson

• Decision Date: 07 October 1941
• Citation: 300 N.W. 367,238 Wis. 550
• Parties: NEW AMSTERDAM CASUALTY CO. v. SIMPSON et al.
• Court: Wisconsin Supreme Court

238 Wis. 550

300 N.W. 367

NEW AMSTERDAM CASUALTY CO.

v.SIMPSON et al.

Supreme Court of Wisconsin.

Oct. 7, 1941.

Appeal from orders of the Circuit Court for La Crosse County; R. S. Cowie, Judge.

Affirmed.

This was an action commenced on January 18, 1941, by New Amsterdam Casualty Company, a foreign corporation, plaintiff, against Lavaughan L. Simpson, Eugene G. Wargus, Howard Reynolds, Eugene Barton, a sole trader doing business under the firm name and style of Barton Truck Line; the Equity Mutual Insurance Company, and the Connecticut Fire Insurance Company of Hartford, Connecticut, Defendants. The action is for declaratory relief and a temporary injunction restraining suits against plaintiff during pendency of these proceedings. The facts as set forth in the complaint may briefly be summarized.

Plaintiff is a corporation writing automobile liability Insurance. On June 12, 1940, it issued to Lavaughan L. Simpson a policy insuring Simpson against loss by reason of the liability imposed by law upon insured for damages suffered by a person or persons as the result of the maintenance by insured of the automobile described in the policy. The policy contains a provision excluding coverage as to any accident “which occurs after the transfer during the policy period of the interest of the named insured in the automobile, without written consent of the company”. It is alleged that on October 31, 1940, insured sold the car to defendant, Eugene G. Wargus and that on November 1, 1940, Wargus collided with a car driven by defendant, Howard Reynolds, and owned by defendant, Barton Transfer Line of St. Paul, Minnesota. Eugene Barton, owner of the truck, a sole trader doing business under the name of Barton Truck Line, and two insurance carriers, one of which insured the truck and the other the cargo against injury and accident, are also made defendants. Plaintiff asserts that it is threatened with suits by the several defendants and prays for a declaration that Wargus is not covered by the policy. Coupled with this is a prayer for a temporary injunction enjoining all defendants from commencing actions pending disposition of this litigation and supported by an affidavit to the effect that defendants are threatening action against plaintiff which will destroy the whole purpose of this litigation. The temporary injunction was granted but later dissolved, and the defendants demurred to the complaint and on March 4, 1941 the trial court sustained the demurrer. Plaintiff appeals from both orders.

Hale & Skemp, of La Crosse, for appellant.

Gordon, Law, Brody & Johns, of La Crosse, for respondents.

WICKHEM, Justice.

[1][2][3][4][5] This appeal seeks to raise a question that has aroused a vigorous controversy and resulted in a contrariety of judicial opinion. For a review of cases see 123 A.L.R. at page 285. Plaintiff has issued to insured a liability policy by the terms of which it undertakes to defend suits against the insured for damages arising out of the operation of an automobile owned by the insured and to insure the latter against loss by reason of the liability imposed by law upon insured for damages on account of damage, injuries or death sustained as a result of its operation. Coverage is excluded where without plaintiff's consent the automobile has been sold by the insured. Plaintiff claims that in this case the automobile was sold by insured and that the tortfeasor is consequently not protected by the policy. The accident has occurred. Suit is threatened, not only against the tortfeasor but against plaintiff. The facts which make or break its liability have all occurred. On the basis of these past events the company is either obliged to investigate and defend the threatened actions, or it is not. It is either liable for the amount of the judgments against Wargus or it is not, on the basis of facts already in existence. Plaintiff claims that it has a legal interest to defend and that it will sustain serious prejudice if a declaration is not made as to its liability under the policy because it will either have to defend the suit on behalf of the insured or take chances that the insured will either not defend or will conduct an indifferent and ineffective defense. Plaintiff particularly relies upon those subsections of 269.56 (constituting the Uniform Declaratory Judgments Act) which in substance provide that a person interested under a written contract or whose legal relations are affected thereby may have the contract construed and obtain a declaration thereof either before or after there has been a breach. Plaintiff contends that the situation as disclosed by the allegations of its complaint is plainly within the calls of the statute and a typical one for declaratory relief. It is further contended that subsection 12 of section 269.56 which declares the section to be remedial and its purpose to relieve from uncertainty and insecurity with respect to legal relations and directs that it be liberally construed and administered settles the point. There is much to be said and much has been said by courts and writers in support of the general proposition that at least where the negligence action is not pending a liability insurance company is entitled to have a declaration as to its liability upon the policy. See cases collected in 123 A.L.R. 285. See also Borchard, Declaratory Judgments, Second Edition, page 645. It will be noted, however, that in these cases liability under the policy and liability for negligence were separate transactions, and that the company was not a proper party to the negligence action or at most made so by statute for reasons of procedural convenience. Most states permit insurance companies to write ordinary policies of indemnity or liability. In the former, the insurer sustains no liability until the insured...