Piper v. American Fidelity & Casualty Co.

• Decision Date: 12 June 1930
• Docket Number: 12938.
• Citation: 154 S.E. 106,157 S.C. 106
• Parties: PIPER v. AMERICAN FIDELITY & CASUALTY CO. et al.
• Court: South Carolina Supreme Court

154 S.E. 106

157 S.C. 106

PIPER v. AMERICAN FIDELITY & CASUALTY CO. et al.

No. 12938.

Supreme Court of South Carolina

June 12, 1930

Appeal from Common Pleas Circuit Court of Richland County; S.W. G Shipp, Judge.

Action by Charles F. Piper against the American Fidelity & Casualty Company and another. From the judgment, named defendant appeals.

Reversed in part, and remanded, with directions.

Ashley C. Tobias, Jr., and Nat Turner, both of Columbia, for appellant.

John Hughes Cooper and W. D. Simpson, Jr., both of Columbia, for respondent.

COTHRAN J.

This is an appeal from an order of his honor, Judge Shipp (1) overruling a demurrer by the casualty company to the complaint, upon the ground that it does not state facts sufficient to constitute a cause of action against that company, in that no actionable negligence is charged against it; (2) overruling a demurrer by the casualty company to the complaint, upon the ground that two causes of action, ex contractu and ex delicto, were improperly united in the same complaint; (3) refusing to strike out paragraphs 2, 11, 12 of the complaint upon the ground that the issuance of a policy of insurance by the casualty company upon the car which was the agency of injury was irrelevant to the issue between the plaintiff and the defendant bus company.

These questions are properly covered by the exceptions, but, as I view the matter, the controlling issue in the case is whether, in an action against the owner of an automobile, for damages on account of an injury sustained by his negligence, an insurance company, which has entered into a policy contract with the owner, binding itself to pay to the owner such sum as he may be held legally for, as a result of the operation of the car covered by the policy, for bodily injury or death to a person, or for injury to his property within a prescribed amount, may be joined as a party defendant. If not, the order refusing the several motions of the defendant company should be reversed and the action dismissed as to it; otherwise the order should be affirmed.

It appears that the defendant bus company at the time of the alleged collision with the plaintiff's car, was operating a car for the transportation of passengers for compensation in the city of Columbia, under a certificate or license issued by the State Railroad Commission, under the provisions of the Act April 8, 1925, 34 St. at Large, p. 252, as amended by the Act March 9, 1928, 35 St. at Large, p. 1238. The amendment of 1928 had the effect only of transferring jurisdiction in the matter from the State Highway Commission to the State Railroad Commission.

The act of 1925 provided: "The Commission shall, in the granting of a certificate, require the applicant to procure and file with said commission liability and property damage insurance, or surety bond with some casualty or surety company authorized to do business in this State, on such motor vehicle or vehicles to be used in the service aforesaid, in such amount as the commission may determine, insuring or indemnifying passengers and the public receiving personal injury by reason of any act of negligence, and for damage to property of any person other than the assured; such policy or bond to contain such conditions, provisions, and limitations as the commission may prescribe and the same shall be kept in full force and effect, and failure to do so shall be cause for the revocation of such certificate. ***" Section 5.

In an evident attempt to comply with the provisions of the act of 1925, the bus company, on March 16, 1929, entered into the following contract of insurance upon the alleged colliding car, with the defendant insurance company: "This company is hereby bound in such a sum for which (as?) the name owner of the motor vehicle herein described may be held legally (for?), as the result of the operation of said vehicle, limited to $5,000, for bodily injury or death to one person. ***" The remaining terms of the contract are not relevant to the issues now presented, and are omitted.

The complaint alleges that on March 25, 1929, at the intersection of certain streets in the city of Columbia, the passenger "bus" of the defendant bus company, collided with a car in which the plaintiff was riding, throwing him out and causing serious bodily injury to him, a result of the "negligent, wilful and wanton" operation of the "bus," for which he demands judgment in the sum of $25,000, actual and punitive damages.

The complaint sets forth the provisions of the act of 1925 as above quoted, the contract of insurance, and alleges: "That the above policy of insurance covers the above described bus and makes the defendant The American Fidelity & Casualty Company, Inc., liable for injuries arising from the careless or negligent operation of the Bus."

To this complaint the defendant insurance company interposed the demurrers and motion above referred to. They were heard by his honor, Judge Shipp, who filed an order dated October 10, 1929, as follows:

"On hearing the demurrer of the American Fidelity Casualty Company to the Complaint, and its two motions, also the motion of the Columbia Bus Company, it is

"Ordered that the demurrer to the complaint, the motion to dismiss the American Fidelity and Casualty Company from the action, the motion to strike out paragraphs 2, 11 and 12 of the complaint, and the motion of the Columbia Bus Company to make one Allen Rembert a party defendant, be, and the same are, overruled and refused.

"I am of the opinion that under the Act No. 170 of 1925 as amended by Act 663 of 1928, 34 Statutes at Large, pages 255-6 requiring auto transportation companies to procure liability and property damage insurance or surety bond, for the benefit of passengers and the public receiving injury through the negligence of the transportation company and each motor vehicle used by them, a traveler on a public highway so receiving such injury through a collision with a motor vehicle of such transportation company, proximately due to the latter's negligence, may join the insurer as a defendant along with the transportation company in an action to recover the resulting damages. The cause of action against the transportation company and that against the insurer grow out of, and are connected with, the same transaction, and may properly be joined.

"There could be only two possible objections to such joinder:

"1. The joining of a cause of action in tort with a cause of action in contract, and

"2. Lack of privity of contract between the plaintiff and the Insurance Company.

"I am of the opinion that under the code pleading of this State it is permissible to join tort and contract in the same action if they arose out of the same transaction or actions connected with the same transaction. Code of Civil Procedure, 1922, Section 430, Subsection 1.

"In regard to the question of privity of contract, it appears to me that since the statute requires the Bus Company to carry insurance for the benefit of any persons injured thru the negligent operation of the Buses, the contract of insurance is made for the benefit of just such third parties as the plaintiff and that the plaintiff can sue on it. Devoto v. United Auto Transportation Co. et al., 128 Wash. 604, 223 P. 1051; American Auto Insurance Co. v. Struwe (Tex. Civ. App.) 218 S.W. 534; Caldwell v. Carroll, 139 S.C. 166, 137 S.E. 444.

"Otherwise, it would be necessary to bring two suits in order to enforce a common liability growing out of the same transaction and in the second action against the insurer, it might be urged that it was not bound by the judgment against the transportation Company, which it had no opportunity to defend.

"The defendant, The American Fidelity & Casualty Insurance Company shall have twenty days, after the date of this order, to answer the complaint."

From this order the defendant insurance company has appealed.

The first question to be decided is the nature of the contract of insurance. Is it a contract of indemnity in favor of the bus company against any recovery by a passenger against it for an injury sustained by reason of the negligence of the bus company; or is it a contract to respond to any liability which the bus company may legally incur? The difference between a contract of indemnity and one to pay legal liabilities is that upon the former an action cannot be brought and a recovery had until the liability is discharged; whereas upon the latter the cause of action is complete when the liability attaches.

Applied concretely to the present case: If the contract of insurance should be considered as simply a contract to indemnify the bus company from any damages which it might be compelled by law to pay to one injured by its negligence (that is, a contract made solely for the benefit of the Bus Company) it seems perfectly clear that the person injured would have no interest therein, and that the insurance company would not be liable to pay to the bus company anything except by way of reimbursement for what it had been obliged to pay.

But if it should be construed as a contract to answer for any liability incurred by the bus company under such circumstances, it seems equally clear that it would inure to the benefit of such injured person immediately upon the imposition or incurring of the liability, and that it would not be essential that the bus company had paid out anything.

In 1 Joyce, Ins. (2d Ed.) § 27b, it is said: "A distinction is made between contracts for indemnity against liability, and those of indemnity against loss. In the former case the insurer's obligation becomes fixed when liability attaches to the insured. In the latter case the insurer's liability does not attach until loss has been suffered, that...