Opinion ID: 1138073
Heading Depth: 1
Heading Rank: 4

Heading: admission of evidence of insurance

Text: Answers filed by each of the defendants set up several separate affirmative defenses in which the defendants alleged the exculpatory and fire insurance clauses of the contract; that the plaintiff secured fire insurance in accordance with the agreement and received payment under such insurance for the benefit of all parties affected by the fire and that thus plaintiff had received full satisfaction for the damage for which it sought recovery. It was further alleged that the insurance companies issuing the policies of insurance waived all rights of subrogation which they might have against any person to whom coverage was afforded under such insurance and that plaintiff failed and neglected to provide insurance coverage under such policies for any of the defendants. For all these reasons it was alleged that the defendants were entitled to an offset in the amount of the proceeds of such insurance against any judgment to which the plaintiff might be entitled. As a further defense it was alleged that the insurance policies contained a subrogation clause identical with that set out above in the discussion of estoppel. The defendants alleged that the insurance companies issuing the policies knew of the plaintiff's agreement to provide insurance for the parties furnishing and installing the lifts and included the provision above quoted in the policies in order to enable plaintiff to fulfill its agreement and thereby said insurance companies did in fact waive all rights of subrogation against the defendants. It is then alleged, in substance, that in order to deprive the defendants of the benefits of the proceeds of such insurance the plaintiff and the insurance companies agreed that they would pretend that the amounts paid to plaintiff by the insurance companies were loans and that plaintiff, as agent for the companies, would, without disclosing such agency, bring action against the defendants and, if successful; would repay to the companies the amount of the pretended loans but would not be so obligated if unsuccessful; that this action was brought in plaintiff's name solely for the benefit of the insurance companies and plaintiff is barred by the subrogation clause from further recovery of any moneys for the fire loss. To these answers the plaintiff set up an equitable reply pursuant to ORS 16.460. On motions of defendants the equitable reply was stricken and this ruling is made the subject of an assignment of error which is argued at great length in plaintiff's briefs. For reasons that will later appear it is not necessary to set forth in any detail the allegations of the equitable reply. On the trial Joseph L. Guthrie, Project Engineer for Crown Zellerbach, was a witness for the plaintiff. In his direct examination he testified: Q Well, what is the total that was necessarily and reasonably disbursed for the repair of the fire damage? A $352,540.87. Q Has any part of that been repaid to you by any defendant? A No, not that I know of. On cross-examination the following occurred: Q (By Mr. Morrison) Now, one other question. The last question that Mr. Bullivant asked you was this amount of damages of some $352,540.87 been paid to you by any of these defendants, and your answer was no. I will ask you as a matter of fact the drafts were issued by your fire insurance companies to your company for the full amount of that amount? MR. BULLIVANT: It's objected to as immaterial. THE COURT: Objection overruled. MR. BULLIVANT: If the Court pleases, are we trying  THE COURT: Mr. Bullivant, I don't care to hear argument. I think this matter has been fully argued prior to this time, and that's the reason I acted so quickly on the objection.      A My answer was no, not to my knowledge, and I don't know whether any of this money was paid by an insurance company or anyone else to these defendants. Thereafter, over the repeated objections of counsel for plaintiff, the court received in evidence nine proofs of loss submitted by plaintiff to nine insurance companies, 18 drafts in amounts totaling $352,540.87 issued by the insurance companies to the plaintiff pursuant to the loan agreements, 18 loan agreements, and a copy of the subrogation clause which appears as an endorsement on each of nine insurance policies, all of which had been introduced in evidence at the trial of the pleas in abatement. These documents were read to the jury in extenso and take up many pages of the transcript of testimony. 14. It should be observed at this point that, while the only objection made to the question put to the witness Guthrie was that it was immaterial, the position of counsel for plaintiff on the admission of evidence relating to plaintiff's insurance had theretofore been presented to the court, which, as indicated by the court's statement above quoted, was fully aware of the position of counsel for the plaintiff that introduction of such evidence was not only immaterial, but irrelevant and prejudicial. An additional ground of objection was that admission of the evidence violated the order of proof, inasmuch as it was admissible, if at all, only in defendants' case in support of their affirmative defenses; but this objection need not be further noticed, as we are of the opinion that the evidence was irrelevant and prejudicial. The trial judge may or may not have come to the same conclusion some ten days later on in the course of the trial when he ruled that because of the plaintiff's failure to do that (that is, furnish fire insurance on the cargo lift equipment) there could be no recovery for the damage to that equipment and that he would so instruct the jury. At any rate, the court, in its charge, instructed the jury as follows: You are not to consider in any way whatsoever any statements or evidence of insurance. You are not to consider the kind or amount of insurance that any party had or it was claimed that any party had. This evidence in these statements are [sic] not concerned with any issues remaining to be determined by you. As we have already held, the breach of the plaintiff's agreement to furnish fire insurance on the cargo lift equipment for the protection of MHS and Colby is a complete defense to the action so far as it related to that portion of the loss. This is the ground of decision of the landlord-tenant cases upon which the defendants rely, and not that the proceeds of insurance which the promisor obtained solely for his own protection constitute a trust fund for the promisee. That plaintiff procured policies of insurance for its own protection is, therefore, completely irrelevant. The affirmative answers of the defendants alleging payment of insurance to the plaintiff and the evidence introduced in support thereof were, regardless of the intentions of the defendants in asserting these defenses, in their necessary effect, an attempt to relitigate the issue adjudicated in the trial of the pleas in abatement. The attack on the judgment denying the pleas is scarcely disguised in the separate answer which challenged the pretended loan transactions between the plaintiff and the insurance companies and alleged that plaintiff, in instituting this action, was acting as agent for the insurance companies. This was the very question raised by the pleas in abatement. By this answer a contention or an argument is advanced which might very well be sustained in jurisdictions that frown upon such arrangements, but is of no avail in this state where they are approved. The subrogation clause gives the defendants no aid. There is no evidence to support the allegation of the answers that the insurance companies waived their rights of subrogation against the defendants. The subrogation clause itself permits the insured to release anyone from liability for loss caused by negligence prior to loss without prejudice to the insurance. No such release was ever executed by the plaintiff. The clause also waives the insurer's right of subrogation against anyone to whom coverage is afforded under the policy or against any corporation, firm, individual or other entity parent or subsidiary to, owned or controlled by or affiliated with the Insured. None of the defendants was so covered or comes within this description, and the argument advanced at the trial that the defendants, by virtue of their contractual relationship with the plaintiff, were affiliated with the Insured has been properly abandoned in this court. The whole argument about the insurance companies' release of their subrogation rights is, in truth, beside the point, for it rests upon the erroneous premise that the insurance companies were the real parties in interest, who had paid the loss and were without recourse against the defendants. That admission of the evidence was prejudicial there can be no doubt. We need not cite any of the numerous cases in which we have held that the injection of insurance into the trial of a case where it is irrelevant is ground for reversal. Ordinarily, these cases have involved personal injury and liability insurance. The rule may apply as well to evidence of fire insurance. Here, the prejudicial effect of the evidence is obvious. It not only served to divert the minds of the jury from the sole issues of negligence and contributory negligence which they were called upon to try, but it gave to the plaintiff the character of a pretender seeking to recover for a loss for which it had already been fully reimbursed, and attempting to conceal the true situation from the jury. And, although the court in the end instructed the jury to disregard the evidence, we think that no instruction, however strongly worded, could have had the effect of erasing the evidence from their minds or mitigating its influence on their verdict. We hold that the ruling complained of was reversible error. The equitable reply to which we have referred had as its purpose transferring to the equity side of the court  and thus keeping away from the jury  the trial of the issues concerning the payment of insurance made by the defendants' answers. We need not stop to determine whether, in the then state of the pleadings, the order striking the equitable reply was erroneous. It is sufficient to say now that, in view of our disposition of the insurance question, the objectionable features of the affirmative answers are eliminated and there is no longer need for the plaintiff to attempt to resort to equity.