Rhymer v. Federal Life Ins. Co.

• Decision Date: 08 January 1936
• Citation: 13 F. Supp. 181
• Parties: RHYMER v. FEDERAL LIFE INS. CO.
• Court: U.S. District Court — Eastern District of Kentucky

13 F. Supp. 181

RHYMER v. FEDERAL LIFE INS. CO.

District Court, E. D. Kentucky.

January 8, 1936.

James S. Golden and N. R. Patterson, both of Pineville, for plaintiff.

Low & Bryant, of Pineville, for defendant.

FORD, District Judge.

The petition in this case alleges that on January 1, 1931, the defendant, Federal Life Insurance Company, entered into an insurance contract known as "Group Policy No. 1122" with the Harlan Star Coal Company, a corporation organized under the laws of Kentucky and then engaged in operating certain coal mines in this state. The pertinent provisions of the insurance contract are as follows:

"Part I

"Formula and Schedule of Indemnity

"A — This insurance covers all employees of the Assured for death resulting within two (2) years, from injuries received by accident arising out of and in the course of their employment and who would be compensated according to law under the provisions of the Workmen's Compensation Act of Kentucky, for an amount equal to seventy-five (75%) percent of the amount which would be payable under said Act for such death, not to exceed the sum of three thousand ($3000.00) Dollars, provided, however, that the total indemnity payable under this policy shall in no event exceed $10,000.00 as a result of one accident.

"B — This insurance covers all employees who are totally and permanently disabled while this policy is in force, including the loss of both arms, or both legs, or the irrecoverable loss of the sight of both eyes, for a sum equal to the amount which would be payable for such death, which amount shall be in lieu of all other indemnities under this policy." * * *

"Beneficiary

"Payment of any claim shall be made to the Insured employee or to the employer for the employee. Payment of any claim to the employer shall be a full discharge and release of the Company for such claim and the Company shall not be responsible for the application of the proceeds by the Employer."

It is alleged that on February 20, 1931, while the said insurance contract was in effect, the plaintiff suffered an accident in the course of his employment as a laborer for the said Harlan Star Coal Company, at which time both the plaintiff and his said employer were working and operating under the provisions of the Workmen's Compensation Law of Kentucky (Ky.St. § 4880 et seq.); and that the Workmen's Compensation Board adjudged him totally disabled as the result of said injuries and awarded him the sum of $9.75 per week from the 20th day of February, 1931, for a period of eight years, less one week, together with interest at the rate of 6 per cent. per annum on his past-due payments from February 20, 1931, no part of which has been paid, except the defendant paid him on March 17, 1931, $19.50, April 8, 1931, $19.50, and May 22, 1931, $19.50.

By an amended petition, it is alleged that the provision of the said insurance policy limiting the defendant's liability to 75 per cent. of the amount awarded by the Compensation Board is null and void by reason of certain provisions of the Workmen's Compensation Law, and the full amount of the award is claimed.

By demurrer the defendant challenges the sufficiency of this petition, as amended, upon the grounds, (1) since the plaintiff was not a party to the contract of insurance, he has no legal right to maintain an action thereon, and (2) if plaintiff has right to sue on the contract, he cannot, in any event, recover beyond the limit prescribed by its terms.

The insurance contracted for by the Harlan Star Coal Company was solely for the benefit of its employees, to whom it owed a duty or obligation as employer, under the Workmen's Compensation Law of Kentucky. The purpose of the contract was not, in terms, to provide indemnity to the employer from loss nor against its own liability, but was, by the terms of the policy, for the sole and direct benefit of the employees of the said assured and payable directly to them or to the employer for them. As a general rule, an action for the breach of a contract can only be brought by one who is a party thereto. However, there is a well-recognized exception to this rule under which a third party for whose benefit a contract is made may maintain an action against the obligor, if it be made to appear that, when the contract was made, some obligation or duty was owing from the promisee in the contract to the third party for whose benefit it was made. Fidelity & Casualty Co. of New York v. Martin, 163 Ky. 12, 173 S.W. 307, L.R.A.1917F, 924; Hendrix Mill & Lumber Co. v. Meador, 228 Ky. 844, 16 S.W.(2d) 482.

The allegations of the petition bring this case squarely within the exception to the general rule, and hence the first ground of demurrer referred to is not tenable and must be overruled.

The second ground of the demurrer relates to that feature of the plaintiff's claim by which the plaintiff seeks to make the defendant responsible for the full amount of his awarded compensation upon the theory that under section 4953 of the Kentucky Statutes (a part of the Workmen's Compensation Law) it is provided: "Every policy or contract of workmen's compensation insurance under this act, issued or delivered in this state, shall cover the entire liability of the employer for compensation under this act to each and all of his employees covered by such policy, except as otherwise provided in § 4947 hereof."

Plaintiff claims that this provision is to be regarded as written into and controlling in application to the contract of insurance here in question. However, this provision of the statute, making workmen's compensation insurance contracts complete coverage of the risks insured, upon which plaintiff relies, is subject to a clearly expressed exception, viz., "except as otherwise provided in § 4947 hereof." The latter section (4947) referred to in the excepting clause deals with the authority of the Workmen's Compensation Board to permit an employer to take advantage of the Workmen's Compensation Law, upon furnishing satisfactory evidence of his financial responsibility, without requiring coverage of his liability by insurance. It is a well-established rule of pleading in this state that one who asserts a right under the provision of a statute which is subject to a specified exception, contained in the sentence or paragraph of the statute that creates and defines the right relied upon, must negative the exception. Marshall v. Tully, 193 Ky. 246, 235 S.W. 726; Central Kentucky Asylum v. Penick, 102 Ky. 533, 44 S. W. 92; Bush v. Wathen, 104 Ky. 548, 47 S. W. 599, and Louisville & N. R. Co. v. Belcher, 89 Ky. 193, 194, 12 S.W. 195. Since the pleading in this case does not negative the exception contained in the same sentence of the provision of the statute relied upon, the pleading is insufficient to support the contention set out in the amended petition, and the demurrer thereto should be sustained.

Without waiving the demurrer filed to the petition, the defendant filed its original answer and two amendments. The first paragraph of the original answer, while in effect an admission of the execution of the contract of insurance relied on, denies that the plaintiff has any right of action thereunder coupled with a denial of the alleged injuries. The second paragraph of the original answer admits the three payments of $19.50 each, but asserts that they were made by the defendant to the Harlan Star Coal Company on proof of, and in full settlement of, alleged partial disability of the plaintiff, and pleads same in full settlement of the plaintiff's claim; but further asserts that, if mistaken in that claim, it is entitled to be credited upon its...