Title: Waugh v. American Casualty Co.

State: kansas

Issuer: Kansas Supreme Court

Document:

190 Kan. 725 (1963)
378 P.2d 170
VIRGIL WAUGH, Appellant,
v.
AMERICAN CASUALTY COMPANY, Appellee.
No. 43,022

Supreme Court of Kansas.
Opinion filed January 26, 1963.
James H. Hope, of Topeka, argued the cause, and J. Wm. Townsend and John E. Jandera, both of Topeka, were with him on the briefs for the appellant.
E. Edward Johnson, of Topeka, argued the cause, and L.M. Ascough, John A. Bausch, and J.H. Eschmann, all of Topeka, were with him on the briefs for the appellee.
The opinion of the court was delivered by
PARKER, C.J.:
This is an appeal from an order sustaining a general demurrer to a third amended petition filed by a common carrier against his cargo insurer.
*726 The facts to which the legal principles are to be applied must be gleaned from the petition.
Virgil Waugh is a common carrier by motor vehicle and holds a certificate to operate as such from the State Corporation Commission and the Interstate Commerce Commission. Waugh carried cargo insurance under a policy issued by the American Casualty Company.
The determination of this controversy will depend largely on the interpretation of the provisions of the policy. The extended provisions, conditions and endorsements, insofar as here pertinent, will be summarized.
The primary policy was dated July 8, 1958, and was to continue in force and effect until cancelled. The total coverage was in the amount of $140,000.00 applying to property of the insured. The terms and conditions of the primary policy are not material here.
Attached to and made a part of the primary policy were provisions for motor-truck cargo insurance which provided in part as follows:
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Attached to the policy was an endorsement providing in part as follows:
On or about March 4, 1959, Waugh undertook to transport a swab tank in one of his trucking units for KNOT Contractors, Inc. The amended petition alleges:
On or about August 19, 1959, Waugh undertook to transport a pumping unit for Texaco, Inc., and as part of the consideration *728 agreed to carry cargo insurance as required by the laws of the State of Kansas, the rules and regulations of the State Corporation Commission and the Interstate Commerce Commission. With respect to this cargo the same pleading states:
The amended petition further alleges that as a result the defendant's denial of the coverage under the cargo insurance Waugh had to negotiate his legal liability for the cargo losses, and has become indebted and liable to KNOT Contractors, Inc. in the amount of $350.00 and Texaco, Inc. in the amount of $4,677.67.
In the prayer of the amended petition plaintiff asked for judgment in the amount of $5,027.66 with attorney's fees and costs.
Defendant demurred to the third amended petition on the ground it failed to state a cause of action. Subsequently the district court entered an order sustaining the demurrer. Neither the demurrer *729 nor the order state in what particulars the allegations of the petition were insufficient.
In its brief appellee states its position as follows:
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The appellee quotes a portion of the third paragraph of the syllabus in In re Estate of Rogers, 164 Kan. 492, 190 P.2d 857, as authority for its position. Quoted in toto such paragraph of the syllabus holds:
It is to be noted that in its brief appellee does not quote the above emphasized portion of the syllabus. The language emphasized was the crux of the decision in the Rogers case and is determinative of the controversy in the case at bar. The policy under consideration in Rogers was one of ordinary automobile indemnity covering liability for personal injuries and damage to property resulting to others from the operation of the automobile. Such policy contained the following provision:
We note further that the policy of insurance here involved does not contain the above quoted restriction. The distinction between automobile indemnity insurance and cargo liability insurance justifies the absence of the "no action" clause.
The liability of the owner of an automobile, for injuries resulting from its operation, is for common law negligence. Both the legal *730 liability and the amount of damage is dependent upon questions of fact usually disputed. The legal liability of a common carrier of cargo is more definitely determinable. Except as limited by the terms of the bill of lading the legal liability of a carrier is for all loss of goods intrusted to it for shipment, except those occasioned by act of God, a public enemy or the contributing negligence of the shipper. (Watkins v. Railway Co., 82 Kan. 308, 108 Pac. 116.) Absent the interference of an act of God or a public enemy the legal liability of the appellant, a common carrier, for injury to the goods in transit was absolute and therefore determined.
The policy does provide how the amount of loss or damage will be determined. It further provides that the books and records will be kept by the assured in such a manner that the exact amount of loss or damage can be accurately determined; that no goods shall be valued, for loss or damage, in excess of the net cost to the shipper to replace them; and that if replacement cannot be effected the limit of liability shall be the invoice price to the consignee.
Moreover, the policy anticipates that claims for loss or damage would be adjusted without the legal liability being reduced to judgment. It specifically provides:
The phrase "adjusted claim" carries a different connotation than the phrase "adjudicated claim." "Adjust" means "to settle; to free from differences or discrepancies; to bring to a satisfactory state, so that parties are agreed." "Adjudicate" means "to hear or try, and determine judicially; to settle by judicial decree." (Webster's New International Dictionary, Second Edition, Unabridged.)
The insurer contracted to pay "adjusted claims" not "adjudicated claims."
The words "legal liability" must be construed to encompass the contractual liability which appellant assumed on receipt of the cargo from the owner. (Brooklyn Clothing Corp. v. Fidelity-Phenix F. Ins. Co., 205 N.Y. App. Div. 743, 200 N.Y.S. 208.)
In 29A Am. Jur., Insurance, § 1343, the rule is stated thus:
The language in the policy is susceptible of but one construction. The word "indemnity" is not used in the policy and the policy covers "the legal liability of the assured as a carrier ... for direct loss or damage" consisting principally of oil field equipment or supplies.
As has been previously stated such policy does not contain a "no action" clause. This brings us to another general rule announced in 29A Am. Jur., Insurance, § 1343, where the following statement appears:
The Supreme Court of Oklahoma clearly indicates its view on the foregoing subject by including in the opinion in Tri-State Casualty Ins. Co. v. Stekoll, 201 Okla. 548, 208 P.2d 545, a quotation from one of its earlier decisions (Curtis & Gartside Co. v. Aetna Life Ins. Co., 58 Okla. 470, 160 Pac. 465) which reads:
See, also, Zinc & Lead Co. v. Insurance Co., 152 Mo. App. 332, 133 S.W. 156; and Globe & Rutgers Fire Ins. Co. v. United States, 202 F.2d 696.
The policy under consideration is one insuring against liability, rather than one of indemnity, and the coverage attaches when the liability attaches. A cause of action accrued to the insured when the insurer denied liability.
Appellee next suggests, in support of its demurrer, that because of the application of G.S. 1949, 66-1,128, now G.S. 1961 Supp., *732 66-1,128, under which the insurer assumes full liability for loss or damage to cargo 
We need not consider the effect of the statute in this controversy. The cargo owner is not suing. The statute does not change the terms and conditions of the cargo insurance as between the carrier and the insurer. The provisions of the statute are for the benefit of the cargo owner, not the insurer. There are only two parties to the insurance contract  the appellant, the insured and the appellee, the insurer. All adjusted claims are to be made good to the insured within thirty days after presentation and acceptance of satisfactory proofs of interest and loss at the office of the company. Under the terms of the policy the insured was the only party that could bring the action in the absence of 66-1,128, supra.
It should also be pointed out that the amended petition alleges the insurer denied all liability. A contention made by appellee in its brief appears to support such allegation. It states:
Appellant's legal liability to the cargo owners was clearly existing under the allegations of the petition. When the appellee denied all liability, the appellant had no recourse but to adjust the damages he had caused and sue his insurer under the terms of the cargo insurance contract.
In West v. Hartford Fire Ins. Co., 248 Iowa 993, 83 N.W.2d 465, the court had under consideration an action by an insured trucker against his insurer for damage to cattle while being transported. It is there stated:
The appellant is the party intended to be benefited under the terms of the original policy.
It would appear to be the very general rule that where an insurer disclaims liability on the ground of noncoverage, the insured may not only bring an action against the insurer, but that the insurer is bound by any reasonable compromise or settlement made by the insured.
In Keating v. Universal Underwriters, 133 Mont. 89, 320 P.2d 351, it is stated:
See, also, Southwestern Fire & Casualty Company v. Bendel (Tex. Civ. App.) 321 S.W.2d 183 (Headnote 3), which reads:
For another pertinent decision see Theodore v. Zurich General Accident & Liabil. Ins. Co. (Alaska), 364 P.2d 51.
Based on what has been previously stated and held we have no difficulty in concluding that under the cargo insurance contract the insured's right of action accrued when its liability attached and the insurer denied liability. It follows the trial court erred in sustaining the demurrer to the third amended petition. Therefore its action in that respect should be vacated and set aside and the cause remanded with directions to overrule the demurrer and proceed with the cause in accord with the views expressed in this opinion.
It is so ordered.