Court Opinion

ID: 7973271
Source: CourtListenerOpinion
Date Created: 2022-09-09 00:57:12.831401+00
Date Added: 2024-06-11T16:34:50.168441
License: Public Domain

LEWIS, J.
Demurrer to a complaint upon the ground that it does not state facts sufficient to constitute a cause of action.
Appellant company entered into a contract of insurance with respondent whereby it agreed to compensate respondent for any loss from the common-law or statutory liability for damages on account of bodily injuries accidentally suffered by his employees. The contract, which is made a part of the complaint, among other things provided that the corporation would pay the assured, subject to certain conditions : (a) The full amount of such sum for which a settlement might be effected by the corporation’s representative; (b) eighty per cent, of such sum for which the assured shall, in his discretion, effect a compromise with the injured person, when, in the judgment of the assured, he is legally liable for the injury, subject to certain conditions unnecessary to set out; (c) eighty per cent, of all medical, surgical, and all other expenses for which the assured should render himself liable; (d) the full amount of such sum as the assured shall pay upon a judgment recovered against him after final determination of the litigation; the total liability being limited to $5,000. The contract further provides that the assured shall, upon the occurrence of an accident, give immediate notice thereof, with all the information obtainable, to defendant, *481and of all claims on account of any accident that may be rendered against the corporation, and give all co-operation and assistance in his power, and that the assured shall not interfere with any negotiations for settlement which the corporation may be conducting, or in any legal' proceedings, without the corporation’s consent. The assured shall also, when requested, aid in securing information, evidence, and attendance of witnesses, and in effecting settlements, conducting the litigation, and furnishing bonds or undertakings on appeal. The assured is also required, if an action is brought against him for damages on account of an injury covered by the policy, to immediately forward to the' head office of the company every summons as soon as served upon him; and defendant company agrees, at its own cost, to defend against all such proceedings in the name and on behalf of the assured, and shall have the absolute right to determine whether the appeal shall be taken from any judgment or order.
The policy contained the following clause: “This policy does not cover any loss from liability for injuries to, or caused wholly or in part by, any child employed by the assured contrary to law.”
The complaint then states that, while the contract was in force, respondent employed a minor fourteen years old, James Elmer Perry, who during such employment was injured by having his foot caught in the machinery, which resulted in an’amputation of the leg; that he had been employed contrary to the provisions of chapter 171, p. 386, Eaws 1895, which require respondent to procure and keep on file a certificate from the school superintendent and school board permitting such employment.
It is alleged that immediately after respondent gave notice of the accident to appellant, with all the information obtainable, as required by the contract, appellant inquired into and ascertained the facts and circumstances of the employment and the accident, and the nature and character of the claim, and thereupon advised respondent that he was not liable therefor, and informed him that it would take up and conduct negotiations in the matter of the claim with Perry’s attorney, and give it such further attention as it might require, and requested respondent to furnish appellant with an itemized statement of the time and wages of the boy and his father, as the same appeared upon the payroll, all of which was duly furnished by respondent. It is then al*482leged that the boy, through his guardian, brought action against respondent in the district court to recover damages for his injuries, on the ground of negligence on the part of plaintiff in failing to furnish him with a safe place in which to work and with suitable appliances, and in neglecting to warn him of the danger of working around the machinery, and, further, that the employment was contrary to law.
The complaint further states that the summons and complaint in the action were duly served upon respondent, who thereupon gave notice thereof to appellant, as required by the contract, and immediately forwarded to its head office the summons and complaint, and surrendered full control of the defense to appellant, all in accordance with the terms of the policy; that defendant accepted the control and defense of the action in the full belief on the part of both respondent and appellant that the claim so made against respondent was a loss within the terms of the policy; that, with full knowledge of the nature and character of the claim, appellant assumed the defense of the action, and employed an attorney, who conducted the defense in the name of plaintiff, as provided by the contract; that the cause came on for trial, and resulted in a verdict for the boy of $7,750. One of the issues presented by the pleadings and submitted at the trial was whether the boy had been employed by respondent contrary to law, and the trial court instructed the jury that such employment was illegal.
Appellant moved for a new trial of that action, which being denied, appeal was taken to this court, for which purpose respondent executed a certain indemnity security bond for the benefit of appellant upon such appeal. The action was duly prosecuted upon appeal, and the order of the trial court was affirmed denying the motion for a new trial, and judgment was thereupon entered in the district court for $8,269.12, of which amount appellant’s attorney agreed to pay $5,000, provided respondent should pay the judgment in full; that thereafter the judgment was paid by respondent, and fully satisfied, and demand was made upon appellant company for $5,000, with interest, which is refused upon the ground that no liability attached under the provisions of the contract on account of such accident.
The complaint also alleges that, prior to the commencement of the action for damages, Perry, through his attorney, informed appellant, through one of its adjusters, who had in charge the adjustment of the *483claim, that he would settle and discharge respondent from all liability for $5,000; that appellant refused the offer, and never advised respondent that it had been made; and it is averred that, had' appellant informed respondent of the fact that it denied liability to respondent under the terms of the policy, then, had it been necessary, respondent would have taken control of the matter and settled the case for $5,000.
The trial court sustained the complaint, and respondent justifies the decision upon the following grounds -. First, that the clause with reference to employment of children contrary to law should be construed as though it read, “This policy does not cover any loss from liability for injuries to any child employed by the assured contrary to law, which is the proximate result of his employment contrary to law;” second, that the clause referred to is ambiguous, and the parties to the policy adopted a practical construction thereof to the effect that the employment was not necessarily illegal, and consequently that appellant was liable under the policy; third, that appellant, by its conduct, waived the right to claim the policy did not extend to the loss sustained by respondent in the suit brought by Perry, and that appellant is estopped by its conduct from denying its liability under the policy.
These propositions are vigorously assailed by appellant, and we consider the first and second positions of respondent untenable. We are not inclined to the view that the condition proposed by respondent should be read into the clause in question. The clear intent of the language is that, where a child was employed by the assured contrary to law, there should be no liability on the part of appellant, and whether such child should be employed contrary to law did not depend upon whether or not the injuries sustained were the proximate result of such illegal employment. We do not regard the language of the clause in the policy referred to as ambiguous, and hence the subsequent conduct of the parties is not to be accounted for upon the theory of practical construction.
But the third position taken by respondent is sound. The complaint sufficiently sets forth facts which create an estoppel in pais. In other words, appellant, by its conduct with reference to the litigation, is es-topped from denying its liability under the terms of the policy. It is alleged that both parties assumed appellant was liable in indemnity; but the question of estoppel is not necessarily determined by the fact *484that they were mistaken as to the law. The position of respondent, as the insured party, did not prevent him from taking the most favorable view of the facts likely to be developed at the trial; and if, for purposes of its own, appellant chose to proceed as though liable upon the contract, it cannot change positions simply because it was mistaken as to the effect of the law. At the trial of the damage case the position was taken by appellant that under the statute the employment was not illegal, for the reason that the work engaged in by the boy was not of a dangerous character; and the further defense was made that there was no liability, because the boy was guilty of contributory negligence. At that time appellant was furnished all the information with reference to the accident, and, as required by the terms of the policy, three courses of action were open to it: It might have taken the position that there was no right of indemnity, even if respondent was liable; it might have taken charge of the litigation, and conducted it to a termination, for the benefit of respondent, provided he were given to understand that appellant did not consider itself bound by such conduct and liable under the terms of the policy; or appellant might have considered that there was a possible liability of indemnity, and preferred to take charge of the litigation, rather than turn it over to respondent. According to the statements of the complaint, appellant took the last course — assumed charge of the defense, submitted to the court in that action its theory of the law and facts, and attempted to sustain the position that there was no liability. Relying upon such course of conduct, respondent changed his attitude in respect to the case, and, instead of reserving to himself the right to select his own counsel, conduct a trial, or make settlement, he turned over to appellant the entire matter, and executed the surety bond at its request.
While it may be that the acts of appellant were not such as to constitute a waiver, strictly speaking, yet there was at least an election of positions ; and, having pursued a course of action consistent with its liability, such conduct ripened into an equitable estoppel. No doubt appellant acted in good faith; but bad faith is not always necessary to estoppel, and it does not always follow that no estoppel will arise when the party to whom the representation is made has knowledge as to the truth of all the facts. Appellant comes within the rule that a person is precluded from taking, merely because his interests may change, *485a position inconsistent with the pne previously assumed by him, and to the prejudice of a third person. 1 Am. & Eng. Enc. subd. 6, p. 46.
We think the position of appellant in this case is analogous to that of a party who has taken advantage of an unconstitutional law to stay execution against him by putting up a bond. In such case it has been held that he would not be permitted to question its validity thereafter, notwithstanding that the law under which he was proceeding was after-wards declared unconstitutional. Davis v. Wakelee, 156 U. S. 680, 15 Sup. Ct. 555. In that case the following general statement was made: “It may be laid down as a general proposition that where a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position, especially if it be to the prejudice of the party who has acquiesced in the position formerly taken by him.” So, in this case, simply because it may be for its interest, appellant will not be permitted to change its position to the prejudice of the party who acquiesced in its line of conduct. By its own election appellant put the question of indemnity at rest.
Order affirmed.-