Pioneer Mut. Compensation Co. v. Cosby, 16601

• Decision Date: 12 May 1952
• Docket Number: No. 16601,16601
• Parties: PIONEER MUT. COMPENSATION CO. v. COSBY et al.
• Court: Colorado Supreme Court

Page 1089

244 P.2d 1089

125 Colo. 468

PIONEER MUT. COMPENSATION CO. v. COSBY et al.

No. 16601.

Supreme Court of Colorado, en Banc.

May 12, 1952.

Rehearing Denied June 2, 1952.

George F. Harsh, Denver, for plaintiff in error.

Love & Cole, Colorado Springs, Wolvington & Wormwood, Denver, for defendants in error.

KNAUSS, Justice.

We will herein refer to plaintiff in error as Pioneer, or Insurance Company. The other parties to the action will be designated by name.

On July 16, 1948, near the Town of Fountain, Colorado, a tractor and trailer unit operated by Charles F. Cosby collided with an automobile owned by Louis T. Miller. The tractor was owned by Audren A. Cosby. Attached to the tractor was a trailer owned by Rio Grande Motor Way, Inc. Miller brought suit against the Cosbys and Rio Grande Motor Way, Inc., alleging ownership of the tractor in Audren A. Cosby; that Charles F. Cosby, then a servant of the Rio Grande Motor Way, Inc. negligently drove said tractor and trailer into Miller's vehicle. Rio Grande Motor Way, Inc. filed a cross-claim against the Cosbys seeking recovery from them of any judgment which Miller might obtain against it. The issues made up by these pleadings are not here presented for review.

The Cosbys filed a third-party complaint against Pioneer, alleging that at the time of the accident there existed a valid contract of insurance between the Cosbys and Pioneer wherein Pioneer agreed to pay, on behalf of Cosbys, all damages arising out of the ownership and use of the tractor. The Cosbys prayed judgment against the Insurance Company for all sums they should become obligated to pay Miller.

A motion to dismiss the third-party complaint having been overruled, the Insurance Company filed its answer in which, after certain admissions and denial of liability under the policy, it alleged that the policy of insurance covered only Audren A. Cosby while he was operating said tractor, without a trailer; that the policy provisions excluded coverage 'while hauling a trailer not covered by like insurance in the company'; and that, the 'policy does not pay * * * while the automobile is used for towing of any trailer owned or hired by the named insured and not covered by like insurance in the company.'

Trial was to the court. Miller had judgment against the Cosbys and Rio Grande Motor Way, Inc. for $1,200.00. Rio Crande Motor Way, Inc. had like judgment against the Cosbys, and they in turn had judgment against Pioneer on their third-party complaint for $1,200.00. The Insurance Company prosecutes a writ of error to review the judgment against it.

The position of Pioneer on this review is set forth in its brief, wherein we find the following:

'This plaintiff in error does not question the right of Miller to judgment against the owner of the tractor, Audren A. Cosby, nor the judgment of Rio Grande Motor Way, Inc., against the Cosbys, the Cosbys having admitted in open court that if the Rio Grande Motor Way, Inc. is liable to the plaintiff Miller, they are liable to the Rio Grande Motor Way, Inc. in like amount. This plaintiff in error is only concerned with the judgment in favor of the Cosbys on the Third-Party Complaint against the Third-Party defendant, the Pioneer Mutual Compensation Company. And this plaintiff in error seeks to have said judgment reversed, dismissed and held for naught.'

The points specified by the Insurance Company may be classified as follows:

1. The right of the Cosbys to make the insurance company a third-party defendant.

2. The proper interpretation of the insurance contract and the liability of Pioneer thereunder.

The policy under consideration contains the following provision:

'No action shall lie against the company unless, as a condition precedent thereto, the insured shall have fully complied with all the terms of this policy, nor until the amount of the insured's obligation to pay shall have been finally determined either by judgment against the insured after actual trial or by written agreement of the insured, the claimant and the company.'

Pioneer contends that this provision, which its counsel calls a 'no action' clause, bars the third-party plaintiff from impleading it as a third-party defendant.

Rule 14(a) of our Rules of Civil Procedure provides that a defendant may bring in a third party who is or may be liable to him 'for all or part of the plaintiff's claim against him.' If the Insurance Company has by its policy agreed to insure against liability on the part of the Cosbys, or either of them, then this third-party procedure is justified and the third-party plaintiffs are only seeking to compel the Insurance Company to do that which it contracted to do but now refuses to do. The rule does not eliminate a multiplicity of suits and creates judicial procedure for the determination of the insured's liability to the injured party, and then affords a procedural method of enforcing the provisions of the insurance contract, if liability is present in the first instance. If the policy were one of indemnity rather than of liability, then this procedure would not be applicable, the insurer not being liable until an actual loss is sustained. Thus, if the insured failed to satisfy the judgment against him in favor of the injured party, the insurer might never be liable.

The general purpose of Rule 14(a), supra, is to settle as many conflicting interests as possible in one proceeding and thus avoid circuity of action, save time and expense, as well as eliminate a serious handicap to the defendant of a time differerence between the judgment against him and a judgment in his favor against the third-party defendant. 3 Moore's Federal Practice, Sec. 14.02.

'The second objection to the third-party complaint is made because of the alleged claim of liability of the third-party defendants arising on a contract which is separate and distinct from the cause of action forming the basis of plaintiffs' suit. We see no merit in this contention, because the rule permits a defendant to bring in a third party, 'who is or may be liable to him or to the plaintiff for all or part of the plaintiff's claim against him.'' Kravas v. Great Atlantic & Pacific Tea Co., D.C., 1939, 28 F.Supp. 66, 67.

As was said in Jordan v. Stephens, D.C., 7 F.R.D. 140, 142:

'The 'no-action' clause is directly opposed to Rule 14. It poses a question as to whether the court should permit litigants to circumvent rules of court by contractual arrangements. Rule 14 was promulgated not only for the purpose of serving litigants but as a wise exposition of public policy. The object of the rule was to facilitate litigation, to save costs, to bring all of the litigants into one proceeding, and to dispose of an entire matter without the expense and the labor of many suits and many trials. The no-action provision of the policy is neither helpful to the third-party defendant, to the courts, nor generally is it in the interest of the public welfare. Its object is to put weights on the already too slow feet of justice.'

The same rule is announced in Axton-Fisher Tobacco Co. v. Ziffrin Truck Lines, D.C., 36 F.Supp. 777, which decision was approved in 6 Cir., 126 F.2d 476. The procedure herein approved is possible only because of Rule 14(a), Colo.R.C.P.

The policy issued by Pioneer to Audren A. Cosby obligated it to pay 'on behalf of the insured all sums which the insured shall become obligated to pay by reason of the liability imposed upon him by law for damages * * * sustained by any person or persons caused by accident and arising out of the ownership, maintenance, or use of the automobile.'

There are two types of no-action clauses. Under the first, no action will lie against the insurer unless it be for a loss or expense actually sustained and paid by assured in accordance with a judgment or agreement. Under such provisions the policy is one of indemnity rather than one of liability. Carter v. Aetna Life Insurance Co., 76 Kan. 275, 91 P. 178, 11 L.R.A.,N.S., 1155; Fidelity & Casualty Co. of New York v. Martin, 163 Ky. 12, 173 S.W. 307, L.R.A.1917F, 924; Combs v. Hunt, 140 Va. 627, 125 S.E. 661, 37 A.L.R. 621; Luger v. Windell, ...