S. S. Newell & Co. v. American Mut. Liability Ins. Co.
| Decision Date | 16 March 1942 |
| Docket Number | 15389. |
| Citation | 19 S.E.2d 463,199 S.C. 325 |
| Parties | S. S. NEWELL & CO. v. AMERICAN MUT. LIABILITY INS. CO. |
| Court | South Carolina Supreme Court |
Appeal from Common Pleas Court of Greenville County; C. C Featherstone, Judge.
Action by S. S. Newell & Co. against the American Mutual Liability Insurance Company to recover on a public liability policy. From a judgment for plaintiff, defendant appeals.
A highway contractor's public liability policy limiting insurer's liability to "construction" work did not cover "maintenance" of 18 mile strip of highway under state highway department contract executed after issuance of policy, whereby contractor was obliged to maintain highway to be repaired in good condition during repair and for 30 days after completion, and hence insurer was not liable to contractor who settled actions for injuries sustained by automobile occupants because of hole in highway about 12 miles from place where work was being done.
Stephen Nettles, of Greenville, and William Elliott, Jr., of Columbia, for appellant.
Price & Poag, of Greenville, for respondent.
The defendant, American Mutual Liability Insurance Company, on or about July 1, 1939, issued and delivered to the plaintiff, S S. Newell & Company, a public liability insurance policy for a term of one year. Some ten months later, in April 1940, the Newell Company, a corporation engaged in the construction and paving of highways, entered into a contract with the State Highway Department to grade and surface treat an 18 mile stretch of highway in Hampton and Jasper Counties. This contract required and obligated the contractor to "maintain in good condition and satisfactory to the engineer, the entire highway within the limits of his contract, from the time he first begins work until all work has been completed, including maintenance under traffic for at least thirty (30) calendar days." Newell & Company sublet the concrete and culvert work provided for in the contract to the firm of Pennell & Harley, and they commenced this work on the highway on May 17, 1940. Three days later, on May 19th, several persons riding in an automobile on the 18 mile section of roadway were injured when the car ran into a hole in the road which had been there for at least a week prior to the time Pennell & Harley commenced their culvert work. This hole, and the scene of the accident, was at least 12 miles distant from the place where Pennell & Harley were actually engaged in their operations. The occupants of the automobile who were injured brought suit against Newell & Company, the contractor, for damages, upon the ground that it had failed, as contractor, to maintain the highway in a proper state of repair, and had failed and neglected to safeguard the public under its contract with the Highway Department. Newell & Company thereupon demanded of the defendant that it assume liability under the policy issued by it, but liability was denied for the reasons hereinafter appearing. Following this denial, Newell & Company compromised and settled the various actions, and then brought this action on the insurance policy against the defendant to recover the aggregate amount of the settlement, including attorney's fees. In the trial below the Insurance Company admitted that the amount of the compromise settlements effected by Newell and the attorney's fees were reasonable, so that no question thereabout arises on this appeal.
While conceding the reasonableness of the compromise, the Insurance Company disclaimed liability, first, upon the ground that Newell & Company was not responsible to the injured persons because its liability was based solely on the contract with the State Highway Department to maintain the safety of the highway from and after the time work was commenced thereon, and that Newell had not commenced work when the accident occurred, --the evidence showing that while Pennell & Harley, the sub-contractor, had started the culvert work prior to the accident, Newell's own organization did not actually begin operations until the day following the accident; and, second, even if Newell & Company was liable to the injured persons, the Insurance Company was not answerable for the reasonable cost of settling the suits, or any amount whatever, because the policy of insurance issued by the defendant to Newell did not cover the latter's contractual obligation to the State Highway Department to maintain the safety of the highway.
Upon the conclusion of the evidence offered by the plaintiff and the defendant, both sides agreed that there was no issue to be submitted to the jury; that the decision of the case rested upon the undisputed testimony, the construction of the insurance policy, and the contract of Newell with the State Highway Department. Counsel for each party made a motion for a directed verdict. The Court refused the motion of the defendant, and directed a verdict for the plaintiff.
On this appeal two questions are raised by the defendant. It is first contended that Newell was not liable for the injuries suffered by the persons in the automobile, caused by the hole in the road, because work had not been commenced by him under his contract with the Highway Department when the accident occurred. It is alleged that Pennell & Harley were not the agents of Newell; that they were sub-contractors or independent contractors, and that they should be recognized as such. The evidence shows that although Newell's own organization was not set to work upon the highway until the day after the automobile accident, the firm of Pennell & Harley under the authority and direction of Newell, did enter upon the actual work preparatory to constructing a culvert thereon three days before the accident occurred. Newell's contract with the Highway Department provided (Section 801 of the Standard Specifications): "Any sub-contractor will be considered an agent of the principal contractor. ***"
Another section (Section 712) provides: "Until the acceptance of the work by the engineer as evidenced in writing, it shall be under the charge and care of the contractor."
Under its contract with the Highway Department, the duty of Newell & Company to maintain the 18 mile stretch of highway attached from the moment it "first begins work." Under this contract as we construe it, when Pennell & Harley went upon the highway on May 17, 1940, and started work on the culvert, Newell then had the exclusive possession of the entire strip of highway in his charge, and from that moment became liable for injuries resulting from negligence in the maintenance of the highway, or any portion thereof. It is a matter of no importance whether Pennell & Harley be considered a sub-contractor, independent contractor, employee or agent; irrespective of the legal relationship existing between Newell and Pennell & Harley, this latter firm went upon the highway as representatives at least of Newell & Company, and under its direction and authority, to commence the work of construction.
As we view it, the contract between Newell and the Highway Department became active in all of its parts and provisions on the day when Pennell & Harley commenced their work. It might be noted in passing, that Pennell & Harley had nothing whatsoever to do with the maintenance of the highway. The persons involved in the accident by reason of a defect in the highway 12 miles distant from the spot where Pennell & Harley were engaged, received no injury due to the latter's negligence. The obligation was upon Newell & Company under its contract with the Highway Department, to maintain the highway in safety, and that duty attached as soon as work was commenced upon the project.
We regard the next question raised by the appeal as a most serious one. Did the insurance policy issued by the defendant cover the contractual obligation of Newell & Company to the Highway Department to "maintain in good condition the entire highway" until the completion of the work, and for thirty...
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