Sanders v. Frankfort Marine, Accident & Plate Glass Ins. Co.

• Decision Date: 01 March 1904
• Citation: 57 A. 655,72 N.H. 486
• Parties: SANDERS v. FRANKFORT MARINE, ACCIDENT & PLATE GLASS INS. CO. et al.
• Court: New Hampshire Supreme Court

57 A. 655

72 N.H. 486

SANDERS

v. FRANKFORT MARINE, ACCIDENT & PLATE GLASS INS. CO. et al.

Supreme Court of New Hampshire. Grafton.

March 1, 1904.

Transferred from Superior Court.

Suit by Edward W. Sanders against the Frankfort Marine, Accident & Plate Glass Insurance Company and another. Facts found, and case transferred by the superior to the supreme court. Decree for plaintiff.

The policy in question was issued in October, 1897, and was to continue in force for one year. Its material provisions are set forth in the opinion. The plaintiff was injured on January 20, 1898, while in the employ of the paper company, and brought an action for negligence against that corporation in April, 1899. The case was tried at the November term. 1899; a verdict was returned for the plaintiff; and in May, 1900, judgment was rendered for him in the sum of $9,085.08 damages and $101.04 costs. The liability of the paper company for the plaintiff's injuries was one covered by the policy, and the insurance company undertook the investigation of the case and assumed the entire defense of the action; their counsel appearing in behalf of the defendants of record. The property of the paper company was attached upon the plaintiff's writ in the action at law, subject to prior mortgages, and the equity therein was sold to the plaintiff upon execution for the sum of $1. At the date of the judgment the liabilities of the paper company greatly exceeded the mortgage indebtedness, and there was no unincumbered property of the corporation applicable to the payment of the plaintiff's claim. At the time this bill was filed, the paper company had no property or assets upon which execution could be levied. The insurance company fixed the rate of premiums solely with reference to the class of business carried on by the insured. If an agent had insured an Insolvent concern, and the fact had come to the knowledge of the company, the risk would have been declined, as such a line of business is considered hazardous by casualty insurers.

Streeter & Hollis and Edward K. Woodworth, for plaintiff.

Arthur E. Dennison, for Strafford Paper Co.

Leslie P. Snow and John S. H. Prink, for other defendants.

PARSONS, C. J. The plaintiff has recovered judgment against the defendant paper company for some $9,000. The paper company have not paid the judgment, and have no property upon which a levy can be made, but they hold a policy of insurance issued by the defendant insurance company covering their liability for the injury which constituted the plaintiff's cause of action, to the extent of $5,000. The obligations imposed upon the insurer by the policy contract are in dispute. The plaintiff claims it constitutes, upon the facts, a subsisting obligation upon the insurance company to pay $5,000 to the paper company, and he contends that upon equitable grounds the money should be paid to him. The paper company, so far as appears, make no claim to the money, nor do they object to a payment to the plaintiff. If the insurance company are under an existing obligation to pay $5,000, it is immaterial to them whether they pay it to the paper company or to the plaintiff. The paper company cannot object to a decree for a payment of the money to the plaintiff in discharge pro tanto of his judgment against them, for thereby they are relieved from loss or discharged from liability to that amount, which is all they can claim under any construction of the policy. The insurance company concede the validity of the policy, that it covers the injury for which the paper company have been found liable, and that the amount of such liability has been judicially determined to be greater than the total claim under the policy. Their position is that, as the paper company have paid nothing, they have lost nothing, and the contingency upon which the liability of the insurance company was made to depend by the terms of the policy has not yet occurred. They rely upon the grant or covenant of the policy by which they "agree to indemnify * * * against loss from * * * liability for damages on account of bodily injuries, fatal or nonfatal, accidentally suffered by any person * * * and resulting from negligence of the assured," and the further agreement or condition in clause 8: "No action shall lie against the company as respects any loss under this policy unless it shall be brought by the assured himself to reimburse aim for loss actually sustained and paid by him in satisfaction of a Judgment after trial of the issue." Under these provisions the company claim that the only legal obligation resting upon them is to pay to the paper company such sum as may have been paid by the insured upon a judgment recovered upon the liability covered by the policy. Two cases similar to the present are cited in which this contention appears to have been adopted upon a similar policy: Prye v. Bath Gas & Electric Co., 97 Me. 243, 54 Atl. 395, 59 L. R. A. 444, 94 Am. St. Rep. 500; and Travelers' Ins. Co. v. Moses, 63 N. J. Eq. 260, 49 Atl. 720, 92 Am. St. Rep. 663. In the last case, in an earlier decision in the Court of Chancery, it was held that equity would apply the whole indemnity to the satisfaction of the plaintiffs judgment. Beacon Lamp Co. v. Insurance Co., 61 N. J. Eq. 59, 47 Atl. 579. This view was not followed in the Court of Appeals, which limited the amount so applied to a sum which the court, by a process of reasoning, construed had been paid. Travelers' Ins. Co. v. Moses, supra. In Bain v. Atkins, 181 Mass. 240, 63 N. E. 414, 57 L. R. A. 791, 92 Am. St. Rep. 411, which has also been cited by the defendants, the obligation of the insurance company had been performed. The question of the plaintiff's equitable right to compel the application of a subsisting obligation to indemnify against his claim to its satisfaction was not in the case, and was expressly excluded from consideration (p. 243).

Discussion has been had of the question whether the present contract was one of insurance against damage or of insurance against liability. In the following cases cited by the plaintiff the policies in question were held to be contracts of indemnity against liability: Anoka Lumber Co. v. Company, 63 Minn. 286, 65 N. W. 353, 30 L. R. A. 689; Hoven v. Company, 93 Wis. 201, 67 N. W. 46, 32 L. R. A. 388; Fritchie v. Company, 197 Pa. 401, 47 Atl. 351; American Ins. Co. v. Fordyce, 62 Ark. 562, 36 S. W. 1051, 54 Am. St Rep. 305; Fidelity & Casualty Co. v. Fordyce, 64 Ark. 174, 41 S. W. 420; Fen ton v. Company, 36 Or. 283, 56 Pac. 1096, 48 L. R. A. 770, 78 Am. St Rep. 792. The phraseology of the agreement or covenant in the policy before the court differs materially from that of the policies construed in those cases. The decisions, therefore, are not directly in point if it be conceded that the contract is one of indemnity against damage, merely, the question presented would not be whether an action at law is now maintainable by either the plaintiff or the paper company, but whether there is power in equity to grant the relief asked. But whether such power exists or not, the indemnitor has the right to perform his contract of indemnity by payment of the claim indemnified against. He may also, if he deems it necessary, stipulate for the right to perform the contract in this way, and may also agree that he will so perform it if there be any uncertainty as to the right of a creditor to claim payment in equity of one who has agreed to indemnify the debtor against his claim, there is no doubt of his right to do so against one who has assumed the debt or agreed to pay the claim. An agreement to assume a debt is a promise to pay it as the promisor's own debt, Locke v. Homer, 131 Mass. 93, 109, 41 Am. Rep. 199. "If one person agrees with another to be primarily liable for a debt due from that other to a third person, so that, as between the parties to the agreement, the first is the principal and the second the surety, the creditor of such surety is entitled, in equity, to be substituted in his place for the purpose of compelling such principal to pay the debt." Keller v. Ashford, 133 U. S. 610, 623, 10 Sup. Ct 494, 496, 33 L. Ed. 667. If the insurance company, by force of the policy and the plaintiff's loss, are now indebted to the paper company, it is plainly equitable that such indebtedness should be applied to the satisfaction of the plaintiff's claim. It is equally clear that equity has power to make such application. Hunt v. Association, 68 N. H. 305, 38 Atl. 145, 38 L. R. A. 514, 73 Am. St. Rep. 602. See, also, First Nat. Bank v. Hunton, 70 N. H. 224, 46 Atl. 1049; Barton v. Croydon, 63 N. H. 417; Holt v. Bank, 62 N. H. 551; Gerrish v. Gerrish, 62 N. H. 397; Bank v. Herrick, 62 N. H. 174.

These propositions do not appear to be seriously controverted, but the contention is, as has already been suggested, (1) that the insurers have not agreed to discharge the liability, and hence have not assumed the claim; and (2) that they do not now owe the paper company anything. The question for investigation is, therefore, the meaning of the policy contract; and, if the converse of either contention is sustained, the plaintiff is entitled to relief.

In addition to the provisions of the policy to which reference has been made, and upon which the defendant insurance company rely, and which are similar to those upon which the decisions in Maine and New Jersey are founded, the policy contains the following "general agreements, which are to be construed as co-ordinate" with the general covenant of the policy.

"(2) If thereafter any suit is brought against the assured to enforce a claim for damages on account of an accident covered by this policy, immediate notice thereof shall be given to the company and the company will defend against such proceedings, in the name and on behalf of the assured, or settle the same at its own cost unless it shall elect to pay to the assured the indemnity provided for in clause A [$5,000].

"(3)...