Pendlebury v. Western Cas. & Sur. Co., 9618

• Decision Date: 27 September 1965
• Docket Number: No. 9618,9618
• Citation: 89 Idaho 456,406 P.2d 129
• Parties: James E. PENDLEBURY, Plaintiff and Cross-Defendant, Respondent and Cross-Appellant, v. WESTERN CASUALTY AND SURETY COMPANY, Defendant and Cross-Plaintiff, Appellant and Cross-Respondent, and Blair Hammon, d/b/a Blair Hammon Garage, also known as Blair Hammon Volkswagen Sales, Defendant.
• Court: Idaho Supreme Court

Page 129

406 P.2d 129

89 Idaho 456

James E. PENDLEBURY, Plaintiff and Cross-Defendant, Respondent and Cross-Appellant, v. WESTERN CASUALTY AND SURETY COMPANY, Defendant and Cross-Plaintiff, Appellant and Cross-Respondent and Blair Hammon, d/b/a Blair Hammon Garage, also known as Blair Hammon Volkswagen Sales, Defendant.

No. 9618.

Supreme Court of Idaho.

Sept. 27, 1965.

Ferebauer & Barnard, Idaho Falls, for appellant and cross-respondent.

Kerr & Williams, Blackfoot, for respondent and cross-appellant.

SMITH, Justice.

We shall sometimes refer to James E. Pendlebury as the plaintiff or Pendlebury; Western Casualty and Surety Company as the surety company, and Blair Hammon as the defendant or Hammon.

Plaintiff Pendlebury brought this action October 26, 1962, for recovery of funeral expenses, under an automobile liability insurance policy issued by the surety company to defendant Blair Hammon insuring him against legal liability growing out of the operation of his Volkswagen automobile by himself or anyone with his consent; also for attorneys' fees incurred in this action and in another action. The policy covered liability for funeral expenses not exceeding $1,000 per person.

Prior to October 27, 1958, Hammon operated a garage and sold Volkswagen automobiles. Pendlebury worked for Hammon on a commission basis selling automobiles.

Some days prior to October 27th, Hammon gave Pendlebury and his wife permission to use the Volkswagen automobile for demonstration and personal purposes. On October 27, 1958, Mrs. Pendlebury, accompanied by her three children, was operating the Volkswagen for personal purposes. She became involved in a collision, caused by her negligence, with a truck owned by Theron O. Brown. Mrs. Pendlebury and the three children were killed in the accident. Their funeral expenses amounted to $1965.16. Brown's truck was damaged in excess of $1,000.

Hammon and a representative of the surety company knew of the accident a day or so after it happened and the surety company caused an investigation to be made.

Theron O. Brown on October 26, 1960, brought an action to recover the damage to his truck, directed against Blair Hammon as owner of the Volkswagen automobile, and Pendlebury individually and as administrator of his wife's estate. The surety company provided Hammon his defense in the Brown action. The company took the position, however, that Hammon had sold the Volkswagen to Pendlebury prior to the date of the accident and that the funeral coverage of the policy did not extend to Pendlebury. The conflict in interest between Hammon and his insurer on the one hand, and Pendlebury on the other hand, as to the ownership of the vehicle, resulted in the suggestion by the surety company's counsel that Pendlebury should employ independent defense counsel in that action, which he did.

The trial court, upon trial of the Brown action, found, however, that Hammon owned the Volkswagen on October 27, 1958, the date of the accident. The court thereupon dismissed the Brown action as to Pendlebury individually and as administrator; and entered judgment against Hammon in favor of Brown, for $1,000 damage to his truck and costs of $86.85, pursuant to I.C. § 49-1404, ¹ which the surety company paid, and it has not been reimbursed therefor.

In the instant action the surety company admits that Hammon owned the Volkswagen on October 27, 1958, and the trial court so found.

The surety company in its answer admitted and alleged that in addition to the funeral expense coverage, the policy insured Blair Hammon 'for loss on account of liability for bodily injury and death, or property damage, arising from negligence in the operation of the motor vehicle described in the complaint by the insured or by any person operating said vehicle with the consent of said insured.' (Emphasis supplied.)

Plaintiff and defendant surety company both submitted statements of fact which were admitted in evidence. Plaintiff's statement contained, inter alia, the following which the surety did not controvert:

'The policy of insurance involved provided among other things that the word 'insured' includes any person while using an automobile covered by said policy and any person or organization legally responsible for the use thereof, providing actual use of the automobile is by the named insured or with his permission.'

Plaintiff bases his right of recovery of the funeral expense under the medical and funeral benefits provision of the automobile liability insurance policy issued by the surety company to the defendant Hammon as the named insured, growing out of the operation of Hammon's Volkswagen automobile by Mrs. Pendlebury with Hammon's consent.

He based his claim for recovery of attorneys' fees ($650.00) and costs in this action under I.C. § 41-1839 ² on the ground that the claim for funeral expense is an action for recovery under the insurance policy; that payment thereof, due under the policy, was not made within 30 days after proof of loss was furnished, and that the surety company refused payment.

He asserts his right to recover his attorneys' fees ($750.00) and costs incurred in defending the Theron O. Brown action on the ground that the surety company, by reason of the contract of insurance was under the duty to defend him, Pendlebury, a defendant named in that action but, because of adverse interests between him and the surety, which the trial court concluded were unfounded, that he was compelled to employ his own defense counsel. He bases his claim on the theory that he is an 'additional assured' under the terms of the policy.

The surety company in its answer admits liability for plaintiff's funeral claim subject to the company's assertion of its entitlement to a set off under the provision of I.C. § 49-1404 (see footnote 1), of $1,086.85 which it paid on behalf of the insured Blair Hammon to Theron O. Brown in extinguishment of the judgment in the Brown action. The surety company claims such set off by right of subrogation under Hammon, the owner of the vehicle involved in the accident.

The surety company denies liability for plaintiff's claim for costs and attorneys' fees which he incurred in defending the Brown action. It bases its denial on the ground of failure of proof that plaintiff was insured under the terms of Hammon's policy as an 'additional assured,' or otherwise.

The surety company also denies liability for plaintiff's claim for attorneys' fees in the present action on the ground that plaintiff was not entitled to recover more than the funeral expenses, but that in any event the company was entitled to a set off against said sum, of $1,086.85 paid in extinguishment of the Theron O. Brown judgment.

The trial court allowed recovery in favor of plaintiff of funeral expense of $1965.16, and $750.00 for attorneys' fees and $48.50 costs incurred in defending the Brown action, less $1,086.85 as a set off to the surety company. The court disallowed plaintiff's attorneys' fees, but allowed costs of $39.65 incurred in the instant action. It entered judgment in favor of plaintiff in the sum of $1716.46.

Plaintiff and the surety company perfected appeals from the judgment.

Plaintiff assigns error of the trial court:

In failing to find and allow the amount of his reasonable attorneys' fees incurred in prosecuting the instant action, and in failing to render judgment therefor in his favor.

In finding and concluding that the surety company, by paying the judgment in the Theron O. Brown action, became subrogated to the rights of defendant Hammon to recover against plaintiff under the provisions of I.C. § 49-1404 and thus entitled to the set off of $1,086.85 paid on behalf of Hammon in extinguishment of the judgment in the Brown action.

In failing to adjudge plaintiff to be entitled to the full amount of $1,965.16 funeral expenses, without set off of $1086.85 which the surety company paid in the Brown action.

In failing to allow plaintiff interest from the date the surety company denied liability.

The surety company assigns error of the trial court:

In finding that the surety company was legally obligated to defend plaintiff in the Theron O. Brown action, and in ruling that plaintiff is entitled to recover from the company his attorneys' fees and costs in defending that action.

The surety company in arguing its assignments of error points out that the automobile liability insurance policy was not introduced in evidence; that since the policy itself is the best evidence of the contract and it not having been put in evidence or its absence duly explained, plaintiff failed to meet the burden of proving coverage under the policy.

Plaintiff on the other hand points to the answer of the surety company wherein it admitted and alleged the issuance of its policy insuring Blair Hammon against liability arising from negligence in the operation of his Volkswagen automobile, or by any person with the consent of the insured, and that the policy contained a provision for payment of funeral expenses caused by accident growing out of the use of such automobile while used by Hammon or with his permission, not exceeding a limit of $1,000 per person.

Moreover the surety did not controvert plaintiff's statement, introduced in evidence, that the policy contained an 'omnibus' provision to the effect that the term 'insured' included the named insured and also any other persons while using the automobile, or any person or organization legally responsible for the use thereof, at the time of the accident, provided the actual use is by the named insured or with his permission. 5A Am.Jur. Automobile Insurance § 90, p. 88.

Furthermore, the surety company in its brief admits the policy provides that in addition to the named insured, the insurance provided should extend to any person while using an automobile covered by the policy and any person or organization responsible for the use thereof, provided the actual use of the...