St. Paul Fire & Marine Ins. Co. v. Thompson

• Decision Date: 06 December 1967
• Docket Number: No. 11313,11313
• Citation: 433 P.2d 795,27 A.L.R.3d 1048,150 Mont. 182
• Parties: , 27 A.L.R.3d 1048 ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Plaintiff, v. Bruce THOMPSON, Defendant Third-Party Plaintiff and Respondent, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a Corporation, Third-Party Defendant and Appellant.
• Court: Montana Supreme Court

Page 795

433 P.2d 795

150 Mont. 182, 27 A.L.R.3d 1048

ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Plaintiff, v. Bruce THOMPSON, Defendant Third-Party Plaintiff and Respondent, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a

Corporation, Third-Party Defendant and Appellant.

No. 11313.

Supreme Court of Montana.

Submitted Sept. 15, 1967.

Decided Oct. 27, 1967.

Rehearing Denied Dec. 6, 1967.

William A. Brolin (argued), Anaconda, Lyman H. Bennett, Jr. (argued), Bozeman, for appellant.

Donald A. Nash (argued), Morrow & Nash, Berh, O'Connell & Angel, Charles F. Angel (argued), Edmund P. Sedivy (argued), Bozeman, for respondent.

CASTLES, Justice.

This is an appeal from a judgment entered on a motion for summary judgment in favor of third party plaintiff Thompson for the amount of $2,500 attorney fees and other costs, the judgment running against the third party defendant.

St. Paul Fire & Marine Insurance Company brought an action against Bruce Thompson. Thompson in turn filed a third-party complaint against State Farm Mutual Automobile Insurance Company. The parties will be hereinafter called, for brevity, St. Paul, Thompson, and State Farm.

St. Paul insured Haggerty-Messmer Company and sues as subrogee. Haggerty-Messmer Company was the employer of Thompson. One Welch, in 1963, recovered judgment in the amount of.$61,500 against Haggerty-Messmer Company and Thompson as joint tort feasors in an action arising out of an automobile accident. Thompson, the employee, negligently drove his own automobile while acting in the course and scope of his employment by his employer; and thus, Haggerty-Messmer Company was the subject of the joint judgment against itself and Thompson. (See our Opinion affirming the judgment in Welch v. Thompson, 145 Mont. 69, 399 P.2d 748.) The instant suit by St. Paul as subrogee, is on what we will term a theory of indemnity against Thompson; that is, a suit seeking indemnity by a joint debtor, the employer who was found liable by reason of the doctrine of respondeat superior.

Thompson had an insurance policy covering his own liability with State Farm. State Farm actively defended Thompson in the Welch case referred to above.

St. Paul paid $57,240.61 on the Welch judgment. State Farm paid $11,204.64 on the same judgment. State Farm's policy limits were, generally speaking, $10,000 for bodily injury and $5,000 for property. The judgment was for bodily injury.

After Thompson was sued in the instant case, he notified State Farm and requested State Farm to defend him in said action. State Farm did commence to defend Thompson by a motion to dismiss, which motion was subsequently overruled. Shortly thereafter the insurer, State Farm, advised the insured, Thompson, that it would not further defend him. As a result, Thompson filed a third party complaint against the insurer seeking damages for the insurer's breach of contract to defend the suit.

The relevant portion of the contract read:

'(1) To pay all damages which the insured shall become legally obligated to pay because of (A) bodily injuries sustained by other persons, and (B) injury to or destruction of property of others, caused by accident arising out of the ownership, maintenance or use, including loading or unloading of the owned automobile.

'Limits of Liability-Coverages (A) and (B) unless specifically amended in the declarations, the company's limit of liability shall not exceed under coverage (A) $10,000 for all damages arising out of bodily injuries sustained by one person in any one accident and subject to this provision $20,000 for two or more persons in any one occurrence; coverage (B) $5,000 for all damages to all property of one or more persons or organizations in any one occurrence.

'The inclusion herein of more than one insured shall not increase the limits of liability.

'(2) As respects the insurance afforded under coverages (A) and (B) and in addition to the applicable limits of liability;

'(a) To defend any suit against the insured alleging such bodily injury or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent; but the company may make such investigation, negotiation and settlement of any claim or suit as it deems expedient;

'(b) To pay costs taxed against the insured in any such suit and, after entry of judgment, all interest accruing on the entire amount thereof until the company has paid or tendered such part of such judgment as does not exceed the limit of the company's liability thereon * * *.' (Emphasis supplied.)

As far as this appeal is concerned, the judgment was rendered on a motion for summary judgment entered in favor of Thompson for $2,500 attorney fees for defense of the suit and for other costs.

The issue presented is whether, under the terms of the insurance policy, State Farm had a duty to defend this action for indemnity between joint tort-feasors, one of whom was its insured under the quoted contract above.

An aside as to the issue is that appellant's brief set up numerous issues which involved St. Paul as well as Thompson. On oral argument and in a supplemental brief, the issues mentioned were abandoned, leaving Thompson as the sole respondent.

Now then, we observe as did appellant's brief, the exact issue could have been brought to issue in the first trial as Haggerty-Messmer Company was a party to that action and did nothing then about attempting to assert a cross-claim as against Bruce Thompson, although that right was available. (See M.R.Civ.P., Rule 13(g).) Of course, again as an observation, Haggerty-Messmer's position in the first trial was that Thompson was not in the course of employment at the time of the accident. Thus, to have asserted the claim of indemnity would have been somewhat inconsistent at that time. Now, however, since the judgment then was against both Thompson and Haggerty-Messmer, the subrogee seeks indemnity.

Appellant State Farm's position is that the policy imposes no duty to defend this suit of indemnity because its only duty was, 'to defend any suit against the insured alleging such bodily injury or destruction and seeking damages * * *.'

The respondent Thompson's position is since the continuing language of sub-para. (a) partially quoted immediately above is 'any suit * * * on account thereof, even if such suit is groundless, false or fraudulent'; that such language should be interpreted to mean that this action by St. Paul against Thompson is merely a continuation of the original action by Welch in which the insurer defended the insured. To support this, the respondent looks also to the language in paragraph 1, 'arising out of bodily injury'; and in addition paragraph 2 as hereinbefore underlined.

The district court found the respondent's position correct, and we affirm.

We have found no case specifically interpreting the contract language here. Our statute, R.C.M.1947, § 13-270, has been interpreted to mean, among other things that, 'in case of uncertainty, every doubt should be resolved in favor of the insured and the policy should be construed strictly against the insurer.' (Niewoehner v. Western Life Insurance Co. (Mont. 1967) 422 P.2d 644.)

In Eby v. Foremost Insurance Co., 141 Mont. 62, 66, 374 P.2d 857, this court quoted Prickett v. Hawkeye-Security Ins. Co., 10 Cir., 282 F.2d 294, 301, 83 A.L.R.2d 1224, in stating the Kansas rule in part as follows:

" But if the terms of the policy are ambiguous, obscure, or open to different constructions, the construction most favorable to the insured or other beneficiary must prevail." (And see Johnson v. Equitable Fire & Marine Ins. Co., 142 Mont. 128, 131, 381 P.2d 778.)

We hold that the language of the contract is uncertain in this regard. We think the recognition previously mentioned that the indemnification matter might have been litigated in the Welch trial under Rule 13(g), at a time when the duty to defend was clear, is sufficient to support this finding. Again, looking to the Kansas rule which we have adopted, we find that, 'the test is not what the insurer intended the words of the policy to mean but what a reasonable person in the position of an insured would understand them to mean.'

A reasonable person in the position of Thompson would understand that his insurance carrier, State Farm had a duty to defend him in 'any suit * * * on account thereof, even if such suit is groundless, false or fraudulent.'

Appellant State Farm goes even further, though in asserting that it had paid the policy limits. State Farm cites Commercial Union Insurance Company of New York v. Adams (D.C.Ind.1964), 231 F.Supp. 860; Lumbermen's Mutual Casualty Company v. McCarthy, 90 N.H. 320, 8 A.2d 750, 126 A.L.R. 894; Denhan v. LaSalle-Madison Hotel Co., (C.C.A. 7th Cir. 1948), 168 F.2d 576; Mead Corporation v. Liberty Mutual Ins. Co., 107 Ga.App. 167, 129 S.E.2d 162; and General Casualty Co. of Wisconsin v. Whipple (C.C.A. 7th Cir. 1964), 328 F.2d 353.

First of all, the payment of policy limits is clearly distinct and separate from the duty to defend. The policy provides that. Interestingly, the Mead Corporation v. Liberty Mutual case, supra, holds the same. In ...