The Shawnee Fire Insurance Company v. Cosgrove

• Decision Date: 10 February 1912
• Docket Number: 16,963
• Citation: 86 Kan. 374,121 P. 488
• Parties: THE SHAWNEE FIRE INSURANCE COMPANY, Appellant, v. JAMES H. COSGROVE et al., Appellees
• Court: Kansas Supreme Court

121 P. 488

86 Kan. 374

THE SHAWNEE FIRE INSURANCE COMPANY, Appellant, v. JAMES H. COSGROVE et al., Appellees

No. 16,963

Supreme Court of Kansas

February 10, 1912

Decided January, 1912.

OPINION ON REHEARING.

Appeal from Johnson district court. Opinion on rehearing, filed February 10, 1912. Reaffirmed. (For original opinion, see 85 Kan. 296, 116 P. 819.)

Judgment reaffirmed.

SYLLABUS

SYLLABUS BY THE COURT.

1. INSURANCE--Loss--Settlement by Insured--Rights of Insurer. In an action by the insurer against the insured to recover insurance money paid on the contract of insurance, the general rule is that the insurer can recover only the excess which the insured has received from a wrongdoer, who caused the loss, after the insured is fully compensated for his loss and the costs and expenses of the recovery thereof.

2. INSURANCE--Same. Where the insured brings an action against an alleged wrongdoer for occasioning a loss, partially covered by insurance, and the insurer is informed, from time to time, by the insured of the prospects of recovery and that a settlement is being discussed between the parties; and the insurer contributes nothing to the prosecution of the claim and takes no steps to protect his interests therein; and thereafter the insured, in good faith, settles the action for less than his loss in excess of the insurance; held, the insurer can not recover the insurance money paid, in an action therefor against the insured.

3. INSURANCE--Same. Where a plaintiff in an action, having not only a personal interest but also representing the interests of others who may be benefited by his recovery therein, settles the suit, on the advice of counsel, for less than the amount claimed, to the apparent detriment of both himself and the others, it will be presumed, in the absence of evidence to the contrary, that the settlement was made in good faith.

Mulvane & Gault, and D. R. Hite, for the appellant.

C. L. Randall, for the appellees.

SMITH J. PORTER, J., dissents.

OPINION

SMITH, J.:

In the second paragraph of the syllabus in the opinion on the former hearing of this case (Insurance Co. v. Cosgrove, 85 Kan. 296, 116 P. 819) it was said that, on conditions therein specified, "it is the duty of the insurer to intervene in the action and protect his own interests."

This was said not with reference to an imperative legal duty but with reference to the interest of the insurer and the insured. In other words, that when a party has a clear right and opportunity to protect his own interests he has no moral right to lie quiescent and demand that another should protect his rights for him; nor was it intended as a determination of the only right of the insurer in the premises.

In section 501 of volume 2 of the second edition of Wood on Fire Insurance it is said:

"When such wrongdoer knowing that the insurer has paid the whole or a part of the loss under a policy of insurance upon the property, settles with the insured and takes a release from him, such settlement and payment is treated as a fraud in law, and he will still remain liable to the insurer in an action, in the name of the insured, for the amount paid by him under its policy. (Citing Monmouth Co. F. Ins. Co. v. Hutchinson et al., 21 N.J.Eq. 107.) The assured may, where the company is entitled to subrogation, be enjoined from settling with the party doing the wrong."

It is conceded in the briefs that the insurer had the right, when notified that negotiations for a settlement were pending between the insured and the railroad company, to intervene in the action pending. On the authority above quoted the insurer also had the right to enjoin the insured from settling the case; or the insurer might, after the settlement, have treated the settlement as void and have brought an action, in the name of the insured, against the railroad company for the amount it had paid the insured under its policy. The insurer therefore had three remedies to protect its rights, two before and one after the settlement was effected. If the insurer undertook either of these remedies, it assumed the burden of showing that the railroad company had destroyed the property, and the value thereof. It is evident the insurer sought to avoid this responsibility.

It is urged that at the time of the settlement the claim of appellant had been barred by the statute of limitations, but no finding or evidence is cited to sustain the claim. However,...