Travelers Indem. Co. v. East

• Decision Date: 19 October 1970
• Docket Number: No. 45905,45905
• Parties: The TRAVELERS INDEMNITY COMPANY v. Al L. EAST, III, and East Ford, Inc.
• Court: Mississippi Supreme Court

Page 277

240 So.2d 277

The TRAVELERS INDEMNITY COMPANY v. Al L. EAST, III, and East Ford, Inc.

No. 45905.

Supreme Court of Mississippi.

Oct. 19, 1970.

Watkins & Eager, Joe W. Hobbs, Jackson, for appellant.

Cox & Dunn, Jackson, for appellees.

RODGERS, Justice.

This is an appeal from the judgment of the Circuit Court of the First Judicial District of Hinds County, Mississippi, against The Travelers Indemnity Company in favor of Al L. East, III, and East Ford, Inc., in the amount of $2,500.

The dispute in this litigation grew out of appellant Travelers' refusal to defend appellees East and East Ford in their defense of the appeal to the Mississippi Supreme Court taken by the heirs of Thomas V. Dye. The Dye heirs had been plaintiffs in a suit for the wrongful death of Thomas V. Dye against A. E. Saxton, who was doing business under the trade name of S & W Construction Company, and who was the named insured in an automobile liability insurance policy issued by Travelers to Saxton. The Dye heirs contended in their declaration that East and East Ford were legally responsible for the operation of the Saxton truck at the time of the accident.

The appellant proceeded to defend all the parties defendant in this suit, including East and East Ford. At the conclusion of the trial, East and East Ford were released by a directed verdict, but judgment was obtained against Saxton and the operator of the automobile in the sum of $90,000.00.

The appellant, Travelers, had previously paid $5,000, one-half the amount of the policy, in settlement of a suit by other parties injured in the accident. When Travelers was served with a writ of garnishment on the judgment in favor of the Dye heirs, it paid the balance of its coverage under the policy ($5,000) into court. Thereafter, the Dye heirs appealed the case to the Mississippi Supreme Court contending on appeal that East and East Ford were erroneously released by the trial court.

It was, of course, imperative that East and East Ford defend the appeal. At this juncture, however, Travelers refused to participate in the proceedings in the Supreme Court based upon its contention that it was no longer required to defend the suit because it had paid the full amount due under its insurance contract and that it had no obligation to represent the insured after the face limit on coverage of the policy had been exhausted.

East and East Ford had an insurance policy with Western Casualty & Surety Company, the terms of which required it to defend East in suits in court. When Travelers refused to continue to participate in the proceedings on appeal, East called on Western Casualty & Surety Company to undertake the defense. Whereupon, Western Casualty employed the law firm of Cox & Dunn who agreed to represent East for a reasonable fee. The judgment of the trial court releasing East was affirmed on appeal. Thereupon, East sued Travelers for the fee due the attorneys.

The suit for the attorneys' fee was presented to the trial court upon a stipulated statement of fact, including a statement of the attorneys as to the work done on appeal in the case against East, and to which is attached the Travelers policy. A judgment was entered in favor of East for the fee due the attorneys.

Travelers Indemnity Company has appealed from the judgment and now contends here that its policy did not require it to represent East.

Travelers' contract, on which the suit is brought, contains the following agreement:

II. Defense, Settlement, Supplementary Payments. With respect to such insurance as is afforded by this policy, the company shall:

(a) defend any suit against the insured alleging such injury, sickness, disease 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;

Appellant argues that prior to 1955 the clause with reference to 'Defense, Settlement, Supplementary Payments' in a standard policy was different from the policy of Travelers here in litigation, and that this clause was changed by substituting: 'With respect to such insurance as is afforded by this policy.' It is said that this change was made 'to make clear that the obligation to defend was subordinate to the primary insuring clause of the policy and the limitations of coverage contained within. However, the change in wording in the 1955 revision was so slight that the intended change in meaning was not readily apparent * * * and a more precise revision was definitely needed.' It is then pointed out that in 1966 some of the insurance companies added the following clause: '* * * (B)ut the company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the company's liability has been exhausted by payment of judgments or settlements.' The 1966 Clause is not a part of the contract here in litigation.

There are two lines of authority on the issue here presented. The theory favorable to the appellant is that the primary obligation imposed upon the insurer is to pay the insured's legal liability for damages on account of the contingencies specified in the policy and the provision to defend the litigation is...