Zieman v. United States Fidelity & Guar. Co. of Baltimore, Maryland

Decision Date29 September 1931
Docket Number40698
Citation238 N.W. 100,214 Iowa 468
CourtIowa Supreme Court


Appeal from Clay District Court.--F. C. DAVIDSON, Judge.

Action at law, by the plaintiff, against the defendant insurance company, on a policy of indemnity issued to the World Amusement Service Association, which Association promoted professional racing at the County Fair in Clay County, Iowa.

The defendant filed a demurrer which the court overruled. The defendant stood on the demurrer, permitted judgment to be entered against it, and appeals. The facts appear in the opinion.


Cornwall & Cornwall and H. E. Narey, for appellee.

Brackney Farr & Stockman and Buck & Kirkpatrick, for appellant.

GRIMM J. STEVENS, KINDIG, ALBERT, WAGNER, and DE GRAFF, JJ., concur. MORLING, J., FAVILLE, C. J., and EVANS, J., (dissenting).



The sufficiency of the petition to state a cause of action was challenged by a demurrer. The demurrer was overruled, and the defendant electing to stand on its demurrer and refusing to plead further, judgment was entered against it, as prayed. The petition, supplemented by a stipulation of the parties, discloses substantially the following facts:

The defendant, the United States Fidelity & Guaranty Company of Baltimore, Maryland, is, and at all times herein material was, a corporation organized and operating under the laws of the state of Maryland, engaged in the business of writing general liability insurance. It was licensed to do business in the State of Iowa at and before the time of the accident in controversy.

On or about January 14, 1927, the Clay County Fair Association of Spencer, Iowa, entered into a contract, in writing, with the World Amusement Service Association of South Dakota, hereinafter called the "Amusement Company," by the terms of which the Amusement Company agreed to promote and conduct automobile races as a part of the program and entertainment of the Clay County Fair for the year stated. The Amusement Company agreed to furnish seven racing cars and professional drivers for automobile races for six events on the Fair program. The plaintiff (appellee) attended the County Fair. The contract was carried out between the parties and the agreed automobile races took place. The plaintiff (appellee) was a guest or patron of the Fair Association and received injury during one of the races which he alleges was caused by the negligence of the Fair Association and the Amusement Company.

A portion of the contract concerning said professional races is as follows:

"The first party (the Fair Association) agrees to promote and conduct Automobile Races as a part of the 1927 Clay County Fair at Spencer, Iowa, on, to wit: Saturday, October 1st, which automobile races shall be advertised as a special feature. The second party (the Amusement Company) agrees to have present for said Automobile Races seven (7) racing cars and professional drivers and to furnish a program of six (6) events."

Prior to the convening of the County Fair and on or about July 1, 1927, in contemplation of possible damages to result from the races, the Amusement Company obtained a policy from the appellant to indemnify and protect said Company from the consequences of any damages that might result from the automobile races.

Attached to the policy and as a part thereof is an exhibit designated "Schedule of Statements." The liability assumed by the insurer as stated in said schedule was conditioned upon the auto races. The policy contained, among other provisions, the following:

"(1). To Indemnify the Assured Against Loss Arising or Resulting from Claims Made Upon the Assured for damages on account of bodily injuries, including death, at any time resulting therefrom, suffered or alleged to have been suffered as the result of an accident occurring while this policy is in force.

"A. By an employe or employes of the Assured on account of the prosecution of the business, trade, or profession described in the Schedule of Statements, while within or upon the premises described therein, or elsewhere when engaged in the discharge of any duty in connection with said business, trade or profession of the Assured. Drivers, chauffeurs and their helpers included, while engaged in work upon the premises described in the Schedule of Statements.

"B. By any person or persons not employed by the Assured while within or upon the premises stated in the Schedule, or upon the sidewalks, ways or premises adjacent thereto, except that accidents caused by drivers and chauffeurs and their helpers are excluded when occurring away from the premises as described in the Schedule."

"When Company May Be Sued.

"Condition J. No action shall lie against the Company under the Indemnity Clause herein, unless brought by and in the name of the Assured for loss actually sustained and paid in money by the Assured in satisfaction of a judgment after trial of the issue. No action shall lie against the Company under any other agreement herein, unless brought by and in the name of the Assured for money actually paid by him. In no event shall any action lie against the Company, unless brought within two years after the right of action accrues. The Company does not prejudice by this condition any defense to any such action in which it may be entitled."

The material parts of Section 8940 and the whole of Subsection 5-e of said section of the Code of 1927 are as follows:

"Kinds of insurance. Any company organized under this chapter or authorized to do business in this state may: * * *

"5. * * * e. Insure against liability for loss or expense arising or resulting from accidents occurring by reason of the ownership, maintenance, or use of automobiles or other conveyances, resulting in personal injuries or death, or damage to property belonging to others, or both, and for damages to assured's own automobile when sustained through collision with another object; provided, that should an execution on a judgment against the insured be returned unsatisfied in an action by a person who is injured or whose property is damaged, when such owner or operator has insured his liability for such personal injury or damage, the judgment creditor shall have a right of action against the insurer to the same extent that such owner or operator could have enforced his claim against such insurer had such owner or operator paid such judgment."

The sole question raised by the demurrer and discussed by counsel goes to the scope and nature of the thing which the appellant assumed to do in its policy. It is the contention of the appellant that its contract is one of indemnity only and that by its contract it agreed only to reimburse the insured for such sums as the insured may have paid in satisfaction of judgments secured against the insured.

As against this contention of appellant's, it is strongly urged by appellee that appellant's sole authority to do business in this state, as appears from the record of the Insurance Commissioner, is under Chapter 404 of the Code of 1927. Particular reliance is placed by appellee upon the provisions of subsection 5-e, Section 8940, Code of 1927, which is hereinbefore quoted.

I. We have hereinbefore set out certain provisions of the contract marked (1) A and B and "When Company May Be Sued."

The distinction between "indemnity against loss" and "indemnity against liability" in insurance contracts is not always kept clearly in mind. The term "indemnity insurance" is applied to contracts which provide indemnity against loss and not the contracts which provide for indemnity against liability, the latter being called "liability insurance." The distinction between these two forms of contract is very clearly set up by Simpson in his very recent work on "The Law Relating to Automobile Insurance," issued in 1928. Section 286 reads as follows:

"There is a well recognized difference between contracts of indemnity against loss and contracts of indemnity against liability. In the former the insurance company does not become liable until the loss has actually been suffered, and the amount of the insurance does not become available until the insured has paid the loss, whereas in the latter the obligation of the insurance company becomes fixed when the liability attaches to the insured. Klotzbach v. Bull Dog Auto Fire Ins. Assn., (1924) (Mo. App.) 267 S.W. 39."

A still more recent textbook entitled "Sunderlin on Automobile Insurance," issued in 1929, Section 786, contains the following statement of the law:

"'No Action' clause. Indemnity policy. * * * The provision oftentimes contained in the automobile indemnity policy that 'no action shall lie against the company to recover for any loss * * * or expense under this policy unless it shall be brought by the assured for loss * * * or expense actually sustained and paid in money by him after actual trial of the issue,' or words to that effect, by the weight of authority, creates an obligation of indemnity as distinguished from liability, and, under such conditions, the insurance company is not liable to the claimant unless and until the liability is established by a judgment and that judgment is paid by the assured. Such is the rule in a great many liability insurance cases, other than automobile, where the policies contained the 'no action' clause."

In Cushman v. Carbondale Fuel Co., 122 Iowa 656, 98 N.W 509, this court had before it a contract which provided "that no action should lie against the company for loss under the contract, unless brought 'by the assured himself to reimburse him for loss actually sustained and paid in satisfaction of a...

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