Sindelar v. Liberty Mut. Ins. Co.

• Decision Date: 19 June 1947
• Docket Number: No. 9123.,9123.
• Parties: SINDELAR et al. v. LIBERTY MUT. INS. CO.
• Court: U.S. Court of Appeals — Seventh Circuit

161 F.2d 712 (1947)

SINDELAR et al. v. LIBERTY MUT. INS. CO.

No. 9123.

Circuit Court of Appeals, Seventh Circuit.

May 9, 1947.

Rehearing Denied June 19, 1947.

Vincent O'Brien, John Merrill Baker, John H. Letsinger, and Defrees, Fiske, O'Brien & Thomson, all of Chicago, Ill., for appellants.

James J. McKenna and B. S. Quigley, both of Chicago, Ill., for appellee.

Before SPARKS and MAJOR, Circuit Judges, and LINDLEY, District Judge.

MAJOR, Circuit Judge.

This is an appeal from a judgment dismissing plaintiff's suit for failure to state a cause of action. The complaint so far as now material alleges that Joseph C. Sindelar while president of E. W. A. Rowles Co. was accidently injured on March 23, 1944, in an automobile accident while engaged in the performance of duties for and on behalf of E. W. A. Rowles Co.; that, as a result of these injuries, he was totally incapacitated and was confined to a hospital for medical, surgical and nursing care for a period beginning with the date of his injury on March 23, 1944, and ending with his death on December 1, 1944; that on March 31, 1943, the defendant issued to the E. W. A. Rowles Co. the standard workmen's compensation and employers' liability policy set out haec verba in the complaint; that said policy was in full force and effect from March 31, 1943 to March 31, 1944, and that during said period the defendant required E. W. A. Rowles Co. to pay, and it did pay, to defendant premiums thereon computed on the remuneration earned by its employees, including the remuneration earned by Joseph C. Sindelar as president.

The complaint contained two counts. In the first, the plaintiff Robert J. Sindelar, as executor of the estate of Joseph C. Sindelar, deceased, sought recovery for medical, surgical and hospital expenses incurred following decedent's fatal accident on March 23, 1944, and for disability benefits accruing to decedent. In the second count, Carolyn L. Sindelar, surviving widow of Joseph C. Sindelar, deceased, seeks recovery for death benefits.

The sole question for decision is whether the policy sued upon provided insurance against accidental injuries sustained by Joseph C. Sindelar, president of E. W. A. Rowles Co., such injuries having been sustained while performing duties in his official capacity, which he or persons acting in his behalf are entitled to recover by direct action against the insurer.

A decision requires a construction of the policy sued upon and therefore presents a question of law. The meaning attributed by the respective parties to certain provisions of the policy is such that it appears essential to relate and analyze in some detail those in dispute.

The policy is entitled "Standard Workman's Compensation and Employers' Liability Policy," the introductory clause reading as follows:

"Does hereby agree with this Employer, named and described as such in the Declarations forming a part hereof, as respects personal injuries sustained by employees, including death at any time resulting therefrom as follows * * *."

Then follow a number of paragraphs included in the basic policy and also an endorsement entitled "Workmen's Compensation Endorsement" (afterwards referred to as the endorsement), which also contains a number of paragraphs. Paragraph One (a) to some extent, paragraph One (b) to a lesser extent, and particularly paragraph Five and certain provisions contained in the endorsement afford the main subject matter of the controversy. In fact, plaintiffs' cause of action is predicated largely upon paragraph Five in connection with the provisions contained in the endorsement. Notwithstanding this, it is necessary to have in mind the language of One (a) and One (b), and particularly the former, in order to understand the controversy relating to Five and the policy endorsement. Paragraph One (a) agrees:

"To pay promptly to any person entitled thereto, under the Workmen's Compensation Law Ill.Rev.Stat.1945, c. 48 § 138 et seq. and in the manner therein provided, the entire amount of any sum due, and all installments thereof as they become due,

"(1) To such persons because of the obligation for compensation for any injury imposed upon or accepted by this Employer under such of certain statutes, as may be applicable thereto, cited and described in an endorsement attached to this Policy, each of which statutes is herein referred to as the Workmen's Compensation law, and "(2)".

Then follows the promise to pay for medical, surgical, funeral and like expenses as required by the Workmen's Compensation Law. By the endorsement, the Workmen's Compensation Act referred to is that of Illinois (afterwards referred to as the Illinois Act).

It is plain that this paragraph standing alone limits the protection to the liability imposed by the Illinois Act. While there is no dispute but that the word "employees" contained in the introductory clause is sufficiently broad to include officials of a corporation, it is conceded by plaintiffs that an employer corporation is not liable under the Illinois Act to its officers unless they are injured while performing duties which are common to an ordinary workman. It is also conceded that the deceased at the time of receiving his injuries was acting in his capacity as president of the corporation and therefore was not covered by the Illinois Act.

By paragraph One (b) the company agrees to indemnify the employer against damages sustained by its employees as a result of the employer's negligence. We need not set forth this paragraph in detail as we think it has little if any materiality to the question before us. Plaintiffs concede, consistent with their complaint, that the injury sustained by the deceased was not the result of negligence on the part of the corporation. Furthermore, plaintiffs, even though such injury had been sustained as a result of the employer's negligence, could not proceed against the insurer until a judgment had been obtained against the employer. Paragraph G of the policy so provides. In other words, One (b) is solely an indemnifying provision. On the other hand, One (a) is an insurance provision running directly to such employees as come within its terms, the amount recoverable for injuries being fixed by the Illinois Act.

The real controversy, therefore, is whether the coverage provided by One (a) was enlarged or extended by subsequent provisions to include the decedent who admittedly was not covered by the Illinois Act because of the character of service he was performing at the time of his injury.

This brings us to paragraph Five, which in the main forms the basis for plaintiffs' contention. It provides:

"This agreement shall apply to such injuries sustained by any person or persons employed by this Employer whose entire remuneration shall be included in the total actual remuneration for which provision is hereinafter made, upon which remuneration the premium for this Policy is to be computed and adjusted, and, also to such injuries so sustained by the President, any Vice-President, Secretary or Treasurer of this Employer, if a corporation. (Italics ours.) The remuneration of any such designated officer shall not be subjected to a premium charge unless he is actually performing such duties as are ordinarily undertaken by a superintendent, foreman or workman."

The last sentence of this paragraph indicates that it was the purpose to collect premiums only upon that part of a corporate officer's salary earned while performing the duties of a workman. In other words, that sentence is consistent with defendant's contention that a corporate officer was to be insured under One (a) only when he was performing services within the Illinois Act. However, this sentence is completely nullified by paragraph Six of the endorsement which provides:

"If this Employer is a corporation, the entire remuneration of the President * * * shall be disclosed and premium shall be paid thereon * * *."

Plaintiffs argue that paragraph Five, in connection with the endorsement, has the effect of increasing the coverage by including employees not covered by One (a) and particularly the officials of a corporation, regardless of the work in which they were engaged at the time of receiving an injury. On the other hand, defendant contends that the purpose of this paragraph is to define the class of employees who are protected under One (a) and One (b). In other words, this paragraph was merely to clear an ambiguity residing in One (a) and One (b) as to the class of employees who were intended to be protected.

We are of the opinion that there is not the slightest ambiguity as to those who are covered under either One (a) or One (b). As already shown, One (a) applies to all employees entitled to the protection of the Illinois Act, and such Act is made a part "of this contract as fully and completely as if written herein." The Illinois Act specifically defines those who are covered and those who are not. If an employee is under the Illinois Act, he is automatically entitled to the coverage provided by One (a). Otherwise, he is entitled to nothing. It would be just as reasonable to argue for an ambiguity in One (a) as to the amount of coverage. This, however, even though not specified, is made certain and definite by reference to the Illinois Act. Paragraph One (b) is equally free from ambiguity. It indemnifies the employer for all liability imposed by law on account of damages awarded its employees because of injuries. From its very nature, there could have been no reason for classifying the employees against whom the employer was indemnified.

We have had much difficulty in attempting to...