Court Opinion

ID: 9674297
Source: CourtListenerOpinion
Date Created: 2023-08-24 04:26:14.77132+00
Date Added: 2024-06-11T18:16:26.762396
License: Public Domain

STEAKLEY, Justice
(dissenting).
I respectfully dissent.
Without much ado, the majority has taken the large step of recognizing the right in subrogation of a performing pro rata liability insurer to reimbursement from its defaulting co-insurer; but as to a lesser step, has gone to great length to deny the equitable plea of contribution as an appropriate and additional remedy for enforcing the right. The stumbling block is a sweeping and somewhat summary statement in Traders & General Ins. Co. v. Hicks Rubber Co., 140 Tex. 586, 169 S.W.2d 142 (1943), and the view of the majority that the only remedy against the defaulting co-insurer under the circumstances here is “through contractual or conventional sub-rogation.” The reason given for this rigid limitation is that “[t]he obligations of Employers Casualty and Transport were separate and independent, and they did not share a common liability.”
We should first establish certain premises. The basic problem in the decided cases has not been subrogation versus contribution, but whether recovery is precluded in any event under the volunteer or sever-alty of contracts theories of defense. It does happen, as is apparent from the résumé of the cases in the majority opinion, that consideration of the problem has usually been in cases in which subrogation has been invoked. In no sense can it be said, however, that sustaining a right in subrogation when it, and it alone, has been asserted, is a denial of the additional remedy of contribution. Actually, considerable confusion in terminology is encountered in the cases and in treatises upon the problem. The term “contribution” is sometimes used interchangeably or in the sense of reimbursement or recoupment, and subrogation cases are cited as supportive of a right to contribution. In all events, however, the emphasis in granting relief, whether in subrogation or contribution, is upon the propositions that a performing insurer is not a volunteer; that a denial of contribution would unjustly enrich the defaulting insurer; and that one who pays money for the benefit of another is entitled to be reimbursed. See, as to contribution, Carolina Casualty Ins. Co. v. Oregon Auto. Ins. Co., 242 Or. 407, 408 P.2d 198 (1965) ; and compare Massachusetts Bonding & Ins. Co. v. Car & General Ins. Corp., 152 F.Supp 477 (D.C.Pa.1957); and Clow v. National Indemnity Co., 54 Wash.2d 198, 339 P.2d 82 (1959).
More to the point here is the decision in Hicks where the denial of “any recovery” [in both subrogation and contribution ?] was rested upon the general rule applicable to fire insurance contracts containing proportionate loss clauses. This is evident from the opinion in which the rule is stated in terms of “destruction of the thing insured,” and in the cases supporting the cited text from 29 American Jurisprudence. By its very nature, however, public liability insurance has significant and different characteristics from property insurance. For example, the Court stated in the case of Hanover Fire Ins. Co. of City of New York v. Brown, 77 Md. 64, 25 A. 989, at 991 [one of the supporting cases cited in 29 Am.Jur., relied upon in Hicks] that payment of the whole fire loss by one insurer would not have discharged any portion of the liability to the insured of another insurer. This is not a characteristic of liability insurance *612where a discharge by one insurer of the liability of the insureds to injured third parties necessarily discharges and releases all insurers. Nor is there the moral hazard of self-injury; cf. Hardware Dealers Mutual Fire Ins. Co. v. Farmers Insurance Exchange et al., Tex., 444 S.W.2d 583, also this day decided. Notwithstanding, Hicks is typical of the early cases which denied recovery on the premise of the severalty and independence of the contracts. Other courts have relied less on the severalty of contracts idea and more on the theory that an insurer who pays more than his proportion of liability is a volunteer and precluded from readjusting the burden of the loss to the pro rata proportions of the policy limits. See, e.g., Farm Bureau Mut. Auto. Ins. Co. v. Buckeye Union Cas. Co., 147 Ohio St. 79, 67 N.E.2d 906 (1946).
In my opinion, Hicks is unsound and should be overruled. I subscribe to the view that recognizes a right to contribution where a pro rata liability insurer has paid a fair settlement under circumstances where the other insurer has refused to enter the case, or to defend the insured against suit by the injured party, or to participate in a settlement which discharges the common liability of both. Otherwise, the nonparticipating insurer is unjustly enriched and thus rewarded for dishonoring its contractual obligations. The Couch treatise states that the courts allowing contribution do so “on the basis that the excess part of the payment made by the prorata insurer was in effect the payment of part of the sum which the other insurer was required to pay under its policy, that by making such excess payment, the other insurer has been relieved of its liability to the extent of such payment, and that to refuse to allow contribution on the behalf of the overpaying insurer would allow the other insurer to be unjustly enriched.” 16 Couch on Insurance 2d § 62:157, at 569 (2d ed. 1966). The Appleman treatise speaks in this manner: “The majority of cases now recognize the undesirability of rewarding the insurer which refuses to honor its contractual obligations, and hold that payment by an insurer which properly undertakes a burden of settlement or defense does not render it a volunteer, not entitled to recover.” 8 Appleman, Insurance Law and Practice § 4913, at 398 (3962).
The foregoing considerations are particularly applicable here. Transport, whose named insured was Hunsaker, originally disclaimed coverage of Prior Products, the named insured of Employers, and refused defense of the suit. It thereby thrust upon Employers potential liability for all sums which Prior Products became obligated to pay the Siegels. Proportionate liability between Employers and Transport — “valid and collectible insurance against” the loss in question, in the terms of the pro rata clause — would exist only if both insurers were on the liability risk in favor of Prior Products. Employers was obligated to defend its insured and had no alternative but to seek the discharge of its contractual liability at the lowest cost, whether by settlement or trial defense. Cf. Clow v. National Indemnity Co., supra. Surely the pro rata clauses did not require Employers to settle only a fractional part of the liability of Prior Products to the Siegels, or defend only a fractional part of the Siegels' suit, at the peril of assuming Transport’s later established 1 pro rata share of liability. Nor should it be said, and the majority does not purport to say, and for good reason, that Employers was a volunteer in negotiating the settlement that discharged the common liability to Prior Products.
So, we are in agreement that since the insured has a right to enforce the pro rata obligation of each liability insurer to the maximum limits of the policy, it may prop*613erly be said that an insurer paying the entire loss is subrogated to the rights of the insured against the other. We part in the unwillingness of the majority to recognize the community of risk and obligation inherent in pro rata insurance contracts, and the fact that a performing insurer suing its risk partner for contribution under circumstances as here is also enforcing a right of its own. This is its right against the other insurer to a proportionate reduction of liability — to a readjustment of the burden of the loss — in conformity with the mutual pro rata clauses. This right is translated into one for money reimbursement upon discharge by one insurer of the common burden of liability. Compare the proration rationale in Hardware Dealers Mutual Fire Ins. Co. v. Farmers Insurance Exchange et al., Tex., 444 S.W.2d 583, this day decided. The rule of contribution is stated in 18 Am.Jur.2d, Contribution § 8, at 16, as follows:
“It is essential to the application of the principle of contribution that the party claiming contribution be in aequali jure with the others; the principle applies only in cases where the equities of the parties are equal. This requirement is satisfied and the equities are deemed equal, so as to give rise to the subordinate or inchoate right or obligation of contribution, when the parties are under a common burden, obligation, or liability, regardless of whether such common burden is one assumed by the parties through contract, one devolving upon them as co-owners of property, one imposed by statute, or one which the law imposes equally on the parties in certain classes of cases as a result of their concurring acts or because of a community of risk. If the burden thus assumed or imposed is one which is common to all of the parties, it is immaterial whether there is a joint, several, or joint and several liability.” (Italics are added.)
The Pomeroy treatise draws these conclusions :
“'Finally, the most important doctrine, perhaps, which results from the principle, Equality is equity, is that of contribution (see § 1418) among joint debtors, co-sureties, co-contractors, and all others upon whom the same pecuniary obligation arising from contract, express or implied, rests. This doctrine is evidently based upon the notion that the burden in all such cases would be equally borne by all the persons upon whom it is imposed, and its necessary effect is to equalize that burden whenever one of the parties has, in pursuance of his mere legal liability, paid or been compelled to pay the whole amount, or any amount greater than his proportionate share. No more fust doctrine is found in the entire range of equity; * * *.” 2 Pomeroy, Equity Jurisprudence § 411, at 157-58 (5th ed. 1941).
It has been said that “[i]n insurance law the term ‘contribution’ has a fixed, legal meaning. It is a principle sanctioned in equity, and arises between coinsurers only, permitting one who has paid the whole loss to obtain contribution from other insurers who are also liable therefor.” National Fire Ins. Co. v. Dennison, 93 Ohio St. 404, 113 N.E. 260, 262, L.R.A.1916F, 992 (Ohio 1916). It is grounded on general principles of justice not resting on contract. I perceive no convincing reason why this principle should not be applicable to pro rata liability insurers who are coinsurers of the same risk. Inherent in their respective legal obligations is a common burden, a joint interest of liability. Under circumstances of default by one, as here, the existence or not of liability of each for the entire loss should not be a determining consideration in resolving the right of a performing insurer to contribution to the extent it has paid the proportionate obligation of the other.
In the trial court, Employers moved for summary judgment upon the proposition that Prior Products was an insured under the policy issued by Transport to Hunsaker from whom Prior Products leased the truck *614involved in the accident; and that, such being the case, Transport was under the obligation of defense and of pro rata satisfaction of liability from the accident in question. Transport asserted in its reply that there were issues of fact with respect to the breach by Prior Products of certain notice conditions in the policy issued to Hun-saker and in requiring the immediate forwarding of process served on Prior Products ; Transport also asserted that its policy of insurance was excess insurance over the policy issued by Employers to Prior Products, if applicable at all. The trial court granted Employers’ motion for summary judgment, and in so doing necessarily found that there were no genuine issues of material fact in the respects asserted by Transport. Transport in its appeal to the intermediate court did not assert by point of error or otherwise the existence of issues of fact. Its whole position there was, and here is, that, as a matter of law, Employers was not entitled to contribution from Transport. I would hold that Employers may invoke the remedy of contribution which would require an affirmance of the error-less judgment of the trial court. See Scott v. Liebman, 404 S.W.2d 288 (Tex.Sup.1966).
GREENHILL and REAVLEY, JJ., join in this dissent.

. Prior Products was subsequently determined to be a common insured, the trial court necessarily concluding that the Transport policy extended liability coverage to Prior Products since it decreed that Employers was entitled to contribution from Transport. This was not challenged by Transport in its appeal from the adverse summary judgment.