Opinion ID: 1838947
Heading Depth: 1
Heading Rank: 7

Heading: application of the precepts

Text: Applying the foregoing precepts, we conclude that the loss or damage alleged does not involve personal injury or corporeal property damage, but that the insurance contract is ambiguous as to whether the parties intended that it insure against liability or indemnify against loss with respect to the damage claimed, and that, therefore, the ambiguity should be resolved by interpreting the policy in this respect to be one against liability rather than one of indemnity against loss actually paid by the insured. Accordingly, because we construe the policy to be one of liability with respect to the plaintiffs' claims, it follows that the Direct Action Statute applies to allow them to bring a direct suit against the insurer. A summary of the arguments of the plaintiffs and the insurance company illustrates that the insurance contract is susceptible to more than one reasonable interpretation. First, the company points out that the Action Against Company clause refers to indemnity: No action shall lie against the Company, unless as a condition precedent thereto, the Insured shall have fully complied with the terms of this contract. In the event of the bankruptcy or insolvency of the Insured, the Company shall not be relieved of the payment of such indemnity hereunder as would have been payable but for such bankruptcy or insolvency. Second, the plaintiffs argue that the condition defining the term Loss with respect to the relevant coverage is couched in terms of insurance against liability: [A]ny amount the Insured is obligated to pay as respects his legal liability, whether actual or asserted, for any negligent act, any error, any omission or any breach of duty, and, subject to the applicable limits and terms of this policy, shall include damages, judgments, settlements, costs of investigation (excluding salaries of officers and employees), and costs, charges and expenses incurred in the defense of actions, suits or proceedings and appeals therefrom. Finally, the parties draw opposite reasonable inferences from the Loss Payable condition: Recovery under this contract in respect to claim or loss arising out of any occurrences covered hereunder shall not be made unless and until the Insured's liability has either been rendered fixed and certain by final judgment or admitted by the Company in writing; but in no event shall recovery be made hereunder unless proof of claim is made upon the Company within ninety (90) days after final judgment or admission. It is not the intention of this Policy that it shall operate as or be construed to be additional insurance. The Company shall not be required to pay any portion of its coverage unless and until the Insured has actually and in fact paid to the claimant or claimants the full limit of its retention. Proof of payment by the Insured of its full liability shall be a condition precedent to any and all liability and claim against the Company under this contract. Regarding the Loss Payable condition, the company argues that the provision requiring that the insured's liability be fixed and certain is consistent with an indemnity contract; that unlike a liability policy the contract permits recovery when proof of claim is made within 90 days after final judgment or admission; and that the final sentence indicates that the contract is an indemnity agreement by providing that proof of the insured's payment of its full liability is a condition precedent to the company's liability. But the plaintiffs argue plausibly that the proviso requiring that the insured's liability be fixed by judgment or the insurance company's admission in order to bind the insurer is not in conflict with the proposition that the policy is a liability contract. The chief distinction between a liability policy and an indemnification policy is that under a liability policy a cause of action accrues when liability attaches, whereas under an indemnification policy there is no cause of action until the liability has been discharged, as by payment of the judgment by the insured. Meloy v. Conoco, 504 So.2d at 839; Appleman, supra § 4261, p. 72. Furthermore, plaintiffs contend, since recovery against the company is in order when the insured's liability becomes fixed by judgment or the insurer's admission, the final two sentences of the provision cannot be interpreted to require that the insured pay the judgment or the settlement before recovery may be had from the insurance company. Instead, they argue, these sentences refer only to the insured's obligation to pay the full limit of its retention prior to making a claim against the insurer. From these and other somewhat less cogent arguments of the parties, and from our own examination of the insurance contract, we conclude that the policy is indeed ambiguous and should therefore be interpreted to be a contract of insurance against liability in the present case rather than as a contract of indemnity against loss.