Court Opinion

ID: 3506157
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:16:23.699641+00
Date Added: 2024-06-11T14:05:28.448114
License: Public Domain

Our assumption "that the insurance company was not liable [originally] for items three and four if they were properly opposed" can be justified only by holding that recovery of the expense of medical care and hospitalization for the wife and damages for the husband's loss of consortium is on "liability for loss on account of" the injury to the wife. (The insurance, limited to $5,000 for liability "on account of" injury to any one person, had already been exhausted, in respect to the wife's injury, by defendant's payment of $5,000 to her.) Assuming the correctness of that view, I cannot agree that by waiver or estoppel defendant has become obligated for more insurance than it sold and was paid for. *Page 153 
Waiver is the intentional surrender of a right. In insurance law it is properly applied to breaches of policy conditions by the insured so as to deprive the insurer of a defense he might otherwise have. 5 Cooley, Briefs on Ins. (2 ed.) 4534. There is nothing of that kind here. No one can point to any word or act of defendant indicating an intention to waive its contract right to have the insurance on account of the wife's injury limited to $5,000, or a willingness notwithstanding that limitation to become liable, without further premium or other consideration, in the sum of $8,347.20. On the doctrine of this decision the amount of the excess is immaterial. It happens to be $3,347.20, but any excess, and as much larger as you like, could be as easily justified.
I respectfully submit that a contractual obligation so limited cannot be so increased by mere waiver. Inasmuch as the duty was not imposed on the insurer by the contract, "he cannot create such a new duty by a waiver without consideration." Vance, Ins. (2 ed.) p. 494. The doctrine of waiver should not be used to make a new contract for the parties. Its effect is limited, I repeat, to the prevention of forfeitures which otherwise would arise from breach of condition by the insured. "While a forfeiture of benefits contracted for may be waived, the doctrine of waiver * * * cannot be successfully invoked to create a liability for benefits not contracted for at all." McCoy v. N.W. M. R. Assn. 92 Wis. 577, 585, 66 N.W. 697, 699,47 L.R.A. 681.
Inseparable companions as they are in the literature of insurance law, waiver and estoppel are very different things. Waiver always accomplishes its result because of an intention expressed, or at least found to have been expressed. Estoppel, on the other hand, reaches its end regardless of and frequently contrary to the intention of the one estopped. However much the definitions of equitable estoppel may differ, they all agree that these two elements must be present: (1) The representation made or assurance given must have been acted upon by the one claiming the estoppel, and (2) his action thereon must have been to his prejudice. Vance, Ins. (2 ed.) p. 514. "To create an estoppel there must be fault in the one against whom it is sought to assert it and reliance by the one invoking it and *Page 154 
resulting injury." Farmers  M. State Bank v. Huschke,165 Minn. 71, 74, 205 N.W. 637, 638.
In this case, the estoppel (if the decision in fact proceeds upon that theory) is based on the fact that defendant took over the defense of the original actions and in so doing told the insured to "forget it." What of it? Defendant was obligated by contract to defend the lawsuits, no matter how many of them or how ill-founded. A main policy purpose was to enable the insured, after defendant took over the defense, to "forget it" except as co-operation was required. So all that defendant did was to perform a simple contract duty, and it does seem to me that we are holding defendant estopped simply because it has performed its contract and nothing more.
That conclusion is inescapable unless the chance remark of someone, the record does not disclose whom, to "forget it" is sufficient not only to prevent (by the negative operation of estoppel) a denial of liability by defendant, but also to impose on it (by the affirmative operation of a quasi contract) a new and additional contractual obligation. Before any such result follows such evidence, two things should appear — (1) that the person making the statement had authority to make it; and (2) where a new obligation is sought to be imposed, that there was a consideration for it.
By causing the insured to believe, when the insurer takes over the defense, that a cause of action is covered by the policy and by proceeding apparently on that theory, an insurer may estop itself from claiming, after the litigation has ended adversely, that the claim was not covered and it is not liable. Tozer v. Ocean A.  G. Co. 94 Minn. 478, 103 N.W. 509. In Patterson v. Adan, 119 Minn. 308, 315, 138 N.W. 281,48 L.R.A. (N.S.) 184., there was an estoppel to assert a breach of a mere condition precedent, payment by the insured of the judgment being the condition. But the liability of the insured to pay the judgment was expressly limited to an amount "not exceeding the sum stipulated in the policy." An agreement which by express terms both creates and limits an obligation cannot logically or justly be used to show the existence of the duty *Page 155 
and then ignored in determining its extent in money. That has been done here, although in Patterson v. Adan, 119 Minn. 308,138 N.W. 281, 48 L.R.A. (N.S.) 184, the possibility was denied. Notwithstanding, it is now held that the estoppel operates to save the contract as to defendant's liability but to abrogate the same contract as to the money limits it set for that liability. I am unable to understand how it is done, logically or legally.
This is not a case of disclaimer of liability by the insurer such as is presented in the cases cited in the majority opinion. It is, on the contrary, one of liability acknowledged by the insurer, who has strictly and properly performed its contract to defend. All defendant is doing now is to insist that its performance, on the money side, be measured by the contract and stop where the contract says it should stop. Defendant has never at any time taken a position legally or morally inconsistent with that. It could not know when it undertook the defense that the recovery would exceed the policy limits. Nobody could know that. Usually, but not always, it is assumed by all concerned that the policy figures will not be exceeded.
There is no showing that the insured was kept out of the defense or prevented from interposing her own personality to whatever extent she wanted. There is no showing that defendant took away the defense from her. The only tenable conclusion is that, having hired defendant to conduct the defense, Mrs. Johnson permitted her hireling to do simply what the contract called for. There is no intimation that it was not well and properly done. There is no suggestion that defendant was at fault or that the insured was prejudiced. Hence, there was no estoppel within Farmers  M. State Bank v. Huschke, 165 Minn. 71,205 N.W. 637.
It is said that there is among the cases none which relieves the insurer from liability under such circumstances. In my view, none of them impose liability upon the insurer in such a case. Neither do they suggest, to me, any rule or principle or disclose any holding that permits a contract limit of money liability to be increased by the mere performance of the contract and nothing more. This decision means, at least as to contracts of liability insurance, that in *Page 156 
order to escape a demand beyond the contract limits, the insurer, before doing its plain contract duty and taking over the defense of a suit, must in writing inform the insured what the contract means. Such a nonwaiver notice or agreement has always been a wise precaution. But never before, so far as I know, has it been held necessary in order to restrict to the policy limits the amount of recovery. I have always supposed heretofore that recovery on a contract to pay money was restricted, in every case, to the amount promised. But now a way has been found, by a new kind of estoppel, first to save the contract as to the promisee and then abrogate it as to the promisor. I cannot yield my assent to such a process.