Court Opinion

ID: 9674656
Source: CourtListenerOpinion
Date Created: 2023-08-24 04:32:55.991452+00
Date Added: 2024-06-11T18:16:28.902908
License: Public Domain

STORCKMAN, Judge
(dissenting).
I do not disagree with that part of the majority opinion which holds the reinsurance agreement entered into between International and General to be insurance against liability and not an indemnity agreement, but I cannot concur with the holding that the judgment creditor Whiteley and the judgment debtor Higgins are third parties to the insurance agreement in preference to International and after its insolvency to the superintendent of insurance, the named beneficiaries.
I believe that Article III of the reinsurance contract is decisive and controlling not only on the question of whether the contract is one of liability or indemnity, but also on the question of who is entitled to collect the amount due under the policy. The majority opinion accepts the provisions of Article III as decisive of the liability issue but rejects and undertakes to explain away its designation of the Company and its liquidator as the named beneficiaries of the policy. Also the majority and concurring opinions fail to consider and give effect to the insolvency statutes applicable to all insurance companies, although the question was properly presented by the superintendent.
Article III is entitled “LIABILITY OF REINSURER” and reads as follows:
“The liability of the Reinsurer shall follow that of the Company in every case and shall be subject in all respects to all the general and special stipulations, clauses, waivers and modifications of the Company’s policy, binder, or other undertaking and any endorsements thereon; and no error or omissions in reporting any risks reinsured hereunder shall invalidate the *150liability of the Reinsurer, but the reporting of reinsurance not authorized by this Agreement or by special acceptance hereunder, shall not bind the Reinsurer, except for the return of premiums paid therefor.
"Payments under this Agreement shall be made directly to the Company or to its liquidator, receiver or statutory successor on the basis of the liability of the Company under the contracts reinsured, without diminution because of the insolvency of the Company.” Emphasis added.
The remainder of this article deals with the procedure for handling of claims in the event of the Company’s insolvency and with the reinsurer’s rights to participate in their investigation and defense. It is not material to the questions here involved.
The first paragraph of Article III provides a convenient yardstick to measure General’s liability under the reinsurance contract; in short it shall be liable when International is. But it does not say specifically to whom the insurer is bound. The second paragraph names the beneficiaries to whom the amount of the liability shall be paid. The payments to the Company or its liquidator are to be on the basis of the Company’s liabilities under the contracts reinsured. Unless the right of International to designate itself and its liquidator as beneficiaries is taken away by law, or otherwise released or dissipated, there is no valid reason for denying the superintendent’s right to recover as liquidator of International’s business.
I do not consider Homan v. Employers Reinsurance Corp., 345 Mo. 650, 136 S. W.2d 289, 127 A.L.R. 163, or O’Hare v. Pursell, Mo., 329 S.W.2d 614, to constitute any authority on the issue of whether the superintendent of insurance or the judgment creditor is entitled to recover. The superintendent was not a party to either of those cases. Homan was an equity action in the nature of an equitable garnishment. The plaintiff and his wife obtained judgments, a part of which were paid before the insurer of the original defendant became insolvent. The equity action was by the judgment creditor against the re-insurer of the primary insurer. The primary insurer became insolvent in 1931 and the receivership was concluded in 1934. The plaintiffs’ judgments were not final at the time of the receivership and no claim was made. The reinsurer had furnished counsel and defended plaintiffs’ actions. There were other circumstances indicating an assumption of the risk by the insurer. The plaintiffs were permitted to recover from the reinsurer the balance due on the judgments.
O’Hare v. Pursell was a third-party proceeding. The original defendant paid the judgment and sought to recover the amount so paid from Missouri Union Insurance Company, reinsurer of the primary company, the then insolvent Insurance Company of Texas. In other words, the judgment debtor paid the judgment against him and then proceeded against the reinsurer of the insolvent primary carrier. The opinion recites facts from which it concludes that the reinsurer took over and assumed the casualty business of the primitive company. Again this was a situation in which the court held that the contract was more than reinsurance, and that it was in effect an assumption of the business by the reinsurer. Again the liquidator of the reinsurer which was a Texas company was not a party to the action and there was no controversy to be determined between the liquidator and either the judgment creditor or the judgment debtor.
I think the results of the Homan and O’Hare cases are proper, but their application should be limited to the facts and circumstances in each case. They did not involve the additional questions present in this case. The superintendent’s rights as liquidator were not in issue and the reinsurance contracts in those cases had no provisions comparable to Article III of the present agreement.
*151The majority and concurring opinions are not entirely clear regarding the extent to which §§ 379.195 and 379.200 are relied upon to establish privity and a direct access to the proceeds of the reinsurance contract. At one place they are referred to as establishing a “public policy”. But if they are relied on at all, they would have to overcome the specific provisions of the contract and other cognate statutes. The rights of a judgment creditor against a policy of automobile liability insurance are derivative and ordinarily are the rights of the person insured. Pennsylvania Casualty Co. v. Phoenix, 10 Cir., 139 F.2d 823, 827.
There is specific statutory authority for an insurance company to reinsure itself. Section 379.125 provides: “Any company or association, other than life, organized under the provisions of sections 379.010 to 379.160, may cause itself to be wholly or partially reinsured against any loss arising from any risk which it may have undertaken, * * * or may join with any such corporation in any such risk, and may make and enter into all manner of contracts relating to such reinsurance and joint insurance, and the terms upon which the same shall be conducted.” Emphasis added. The statute is express authority for the sort of reinsurance contract which provides that payments in discharge of the reinsurer’s liability shall be made directly to the reinsured company or its liquidator. The Homan case recognizes that the contract may be so drawn. 136 S.W.2d 289, 301 [28],
This court has characterized the importance of statutes regulating insurance companies in this fashion: “The original Code and amendments thereto indicate an intention to regulate the business from beginning to end, thereby protecting individual and public interests. The enactment of this comprehensive Code made the state a real party in interest. The superintendent of insurance is the administrative officer in charge of that interest, and courts are without authority to interfere with his administration of the Code.” State ex rel. Missouri State Life Ins. Co. v. Hall, 330 Mo. 1107, 52 S.W.2d 174, 177[3], The Hall case prohibited the liquidation of an insurance company by anyone other than the superintendent in the manner provided by the insurance Code. See also Jacobs v. Leggett, Mo., 295 S.W.2d 825, and Barker v. Leggett, Mo., 295 S.W.2d 836.
The majority and concurring opinions do not undertake to say that §§ 379.195 and 379.200 apply to a reinsurance contract so as to establish a direct right of recourse by the judgment creditor and the judgment debtor to the proceeds of reinsurance. The opinions say these statutes establish a “public policy” but they do not evaluate the remainder of the insurance Code and especially the liquidation statutes although their application is presented by the superintendent as a question for decision. Under these statutes the superintendent is authorized to institute proceedings in the Circuit Court of Cole County to dissolve and wind up any insurance company including reciprocals for the reasons provided by law. Section 375.-560. Upon final judgment declaring a company insolvent and dissolving it, “all the assets of such company shall vest in fee simple and absolutely in the superintendent * * * who shall hold and dispose of the same for the use and benefit of the creditors and policyholders of such company and such other persons as may be interested in such assets.” Section 375.650. Emphasis added.
Section 375.670 provides for the presentation and allowance of claims against the insolvent company and § 375.700 for the distribution of the assets to certain categories of expenses and claimants. The category of “matured policy claims” are payable after expenses of liquidation and taxes but ahead of general creditors. Section 375.720 makes it a penal offense for a person to withhold property of the insolvent company. These statutes demon*152strate a plan for the orderly and equitable marshalling of assets of an insolvent company and the payment of claims in the court where the liquidation proceedings are pending. For example, the inherent powers of courts of equity to allow and impress a lien for attorney fees have been superseded by the insurance statutes. Robertson v. Missouri State Life Ins. Co., Mo.App., 136 S.W.2d 362; Strubinger v. Mid-Union Indemnity Co., Mo.App., 352 S.W.2d 397. In addition to the grant of specific powers, the liquidating court is vested with these broad and apparently all inclusive powers, § 375.700, subd. 4: “The court may make all orders and decrees necessary and proper with reference to the title, possession, disposition, and distribution of all assets and the allowance and satisfaction of claims against the dissolved company, and in any other manner relating to its affairs and business.” This would seem sufficient to provide a forum for the adjudication of all of plaintiff’s claims and still preserve the integrity of the insurance Code.
The automobile accident which gave rise to these personal injury claims occurred on December 12, 1953, while both the primitive and reinsurance contracts were in force. On August 27, 1954, Mr. and Mrs. Whiteley filed separate suits against Higgins. International employed attorneys to defend the actions. Mrs. Whiteley obtained a judgment in her favor for $7500 on February 14, 1956, which judgment was paid in full. On January 16, 1957, before the husband’s suit for loss of services was brought to trial, the superintendent instituted liquidation proceedings against International in the Circuit Court of Cole County. The attorneys hired by International then withdrew, and counsel for Mr. Whiteley notified both the superintendent and General, the reinsurer, of the action and invited them to defend but neither appeared for the trial at which on April 24, 1957, Mr. Whiteley obtained a judgment for $5000 against Higgins. This judgment is the basis of the pending garnishment proceeding against General. The superintendent over his protest was brought into the proceedings on motion of General. The trial court held that General was liable and that the superintendent was the person entitled to recover the amount due..
The superintendent was vested with title-to all of International’s assets before the plaintiff obtained his judgment. Further General did not take over the litigation and undertake to defend as the reinsurer did in the Homan case thereby establishing privity. 136 S.W.2d 289, 300 [17]. It is. my view that the plaintiff’s judgment at best became a claim which should have been asserted in the liquidation proceedings either on the trust theory which is Point III of plaintiff’s brief or as a “matured policy claim” under § 375.700, subd. 1(3). I am inclined to believe it belongs, in the latter category.
The force and effect of these liquidation-statutes are not determined by either the majority or concurring opinion. These issues were not in Homan v. Employers or O’Hare v. Pursell because the superintendent was not a party and there was no adverse claim on his behalf. The majority-opinion goes to great lengths to demonstrate that Whiteley, the judgment creditor, and Higgins, the judgment debtor, were-both third-party beneficiaries of the reinsurance but never quite, in my opinion, achieves that result and ends up by assuming it. On the other hand, both opinions ignore the superintendent’s statutory rights, and undertakes to explain away his specific designation as a named beneficiary or successor in interest to the Company in the event of its insolvency.
The reinsurance contract, Article III, clearly provides that: “Payments under this Agreement shall be made directly to-the Company or to its liquidator * * *.” Emphasis added. This portion of Article' III plainly designates to whom the amount of the reinsurer’s liability shall be paid. It is commonly referred to as an insolvency clause. The language is not ambigú- ■ *153■ous; hence there is no room for construction and the words must he given their plain, ordinary and usual meaning. State ex rel. Prudential Ins. Co. v. Bland, 353 Mo. 956, 185 S.W.2d 654, 656 [3].
I can find no basis for the implication •or supposition of the majority opinion that this clear and unlimited provision was intended to apply only when International had first paid the entire loss and General was obligated to reimburse it for the amount reinsured. If this were so, then the reinsurance contract would be in effect an indemnity policy as far as International or its liquidator is concerned (although they are specifically designated as beneficiaries) and a liability policy as to all other unnamed persons who may be held to be or become third-party beneficiaries.
Courts cannot by implication extend or restrict a contract in relation to any matter that is specifically covered by written terms; there can be no implication against the express terms of the contract. Forir v. Toman, Mo., 202 S.W.2d 32, 34 [4]; Cameron, Joyce & Co. v. State Highway Commission, 350 Mo. 389, 166 S.W.2d 458, 460 [3, 4] ; Sandy Hites Co. v. State Highway Commission, 347 Mo. 954, 149 S.W.2d 828, 833-834 [3, 4]. The majority opinion does not give the payment clause its plain and ordinary meaning. I can find no justification in the law or the facts for indulging in implication or speculation contrary to the express provisions of the contract.
As previously stated, a provision such as Article III was not in the reinsurance contracts involved in Homan v. Employers and O’Hare v. Pursell. Its effect has never been decided by any case in this state. In other jurisdictions a similar article and insolvency clause has been held to mean just what it says, that in the event of insolvency the amount due under the policy shall be paid to the liquidator. Melco System v. Receivers of Trans-America Ins. Co., 268 Ala. 152, 105 So.2d 43, 46; Stickel v. Excess Ins. Co. of America, 136 Ohio St. 49, 23 N.E.2d 839, 841; Greenman v. General Reinsurance Corp., 237 App.Div. 648, 262 N.Y.S. 569, 570, aff’d 262 N.Y. 701, 188 N.E. 128. I cannot agree that this issue was involved in or has been determined by the Homan case.
Alabama has statutes apparently identical with our §§ 379.195 and 379.200, but, nevertheless, in Melco System v. Receivers, its Supreme Court held that such statutes do no more than establish privity between the injured judgment creditor and the primitive insurer and that they do not apply to a reinsurer. Unless this court can make a clear cut decision that General joined in or assumed the risk so as to incur a direct contractual relation with Higgins, the result of the majority opinion is untenable. The majority opinion would wipe out all distinctions between reinsurance and joint insurance as recognized by § 379.125.
This court cannot be concerned with the wisdom of the legislative policy of distributing the assets of an insolvent company (including the proceeds of reinsurance) among creditors in various classes (including matured policy claims) rather than to one judgment creditor as a preferred creditor. The legislature has made that determination in the insolvency statutes of the insurance Code. In the circumstances of this case §§ 379.195 and 379.200 cannot be said to be controlling as a statement of “public policy” or to create a preference contrary to the liquidation statutes of the insurance Code and the express directions of the insolvency clause.
I doubt if the superintendent should have been made a party to this action, but that issue is not now before us. I am inclined to think that the entire controversy should have been litigated initially in the Circuit Court of Cole County. That seems to be contemplated by the insurance Code. Nevertheless, under the circumstances, I would affirm the judgment.