Court Opinion

ID: 7142316
Source: CourtListenerOpinion
Date Created: 2022-07-24 15:30:37.635943+00
Date Added: 2024-06-11T16:14:51.129399
License: Public Domain

Dissenting Opinion by
Judge Nunn.
On the idea that the policy in question was not written for the protection of the injured party, or employe, the court holds that if the owner or employer cannot, or will not, pay the damages sustained, then the insur*32anee company heed not. In my opinion, such a construction of the policy outlaws it, and the business at once becomes a menace to industry and a threat to the life of employes.
Out of deference to the opinion of my associates, and in view of the weight of authority which supports their opinion, I have hesitated to take a contrary view. But, in the light of legislation and adjudication in Kentucky on the subject of compensation for injured employes, I feel constrained not only to dissent, but to give the reasons which- to me seem sufficient to justify a contrary view.
This form of insurance — and I can make nothing else out of it, although called indemnity — is as worthy and desirable, properly considered, as life or fire insurance. The purpose of all insurance or indemnity is, or should be, to furnish financial aid or security against casualty or misfortune. Insurance or indemnity against death of a parent, or loss of a home, or against liability arising from injury to an employe, if taken and held in the right spirit, is a wise precaution for any one to take who has incurred duties of support or has assumed duties imposing legal liabilities. It is true a great many abuses have from time to time crept into the business of insurance, and, from these abuses, the companies, as well as the public, have frequently been imposed upon. But, in the main, the business has afforded the relief contemplated, although it has, no doubt, caused the loss of many uninsured homes and the death of some persons in oases where the insured’s care for his own life was less than for the beneficiary; and in others where the beneficiary desired the proceeds- more than the life of the insured. In its ineipiency insurance policies' were deemed wager contracts, and, therefore, illegal, but the paramount necessity for indemnity of this sort obtained for them a legal status in all eases where there is an insurable interest — that is, such an interest as would outweigh any inducement or incentive for either party to precipitate or bring about the contingency which renders the policy payable. By limiting insurance benefits to those having such interests, an insurable interest, and to the extent of that interest, the business of insurance has grown to large proportions, and has beneficially affected a large portion of society. But if the principle of insurable interest be overlooked or disregarded, then *33the business is indefensible, and becomes a ourse to society. This rule of insurable interest applies to all forms of insurance, and the kind in question should never be permitted to become an exception. There are three necessary parties or incidents to an insurance contract —the insurer, the person or property insured, and the beneficiary. The law requires the beneficiary to have an insurable interest. As construed by the court, the employer is not benefited by the policy, neither has he an insurable interest in the employe. If it be said that the employe is not a beneficiary and has no interest, insurable or otherwise, in liability insurance, then the opinion of the court — supported by the weight of authority-though it be — eliminates the most necessary party to the contract, the beneficiary, whether he be an individual employe or one of a class of persons, and obliterates the only interest that is legitimately insurable in such cases. The inducements and incentives in the two remaining parties are so dangerous as to leave the contract without a redeeming feature, and render it more pernicious than an undisguised gambling contract. As already indicated, some features of employers’ liability insurance are questionable at best. Por instance, there is a provision that the insurance company will secretly defend in. the name of the insured every claim presented by an employe, whether groundless or not, and, to the exclusion of the employer, will employ attorneys and take general charge of the case. The employer cannot interfere with the proceedings nor can he settle the claim. Any attempt at compromise or payment voids the policy. Such contracts in reality constitute the offenses of barratry, maintenance, and champerty, frequently and severely denounced by statute and common law, because they encourage strife and litigation and are injurious to public interests. It is also questionable if the employer who owes so many duties to his employe can properly be permitted to contract for indemnity against his own breach of those duties. It certainly is not conducive to safety of employes, because a reckless employer, feeling secure in the indemnity, will be careless and indifferent to the safety of places, tools and appliances where and with which his servants work. But these dangers, disadvantages, and legal obstacles in the way of the contract have been deemed, heretofore, to be counter-balanced by the protection given to industry against sudden and some*34times heavy liability arising from accident to employes, and the security given to them by affording a fund with which the liability may be met and the injured employe compensated. But the opinion of the court nullifies these redeeming features of the contract. It leaves no protection to industry against unexpected liability. It, in fact, makes insolvency or bankruptcy more probable. The contract, as construed-by the company, and upheld by the court, means that the employer voids the policy if he pays the loss, and if he does not pay it, there is no liability on the company. It follows that there is a complete defense if the company, by withholding aid to the employer, makes it impossible for the employer to pay. So construed, the contract necessarily promotes and encourages bankruptcy. I do not believe the contract should.be given any such construction, for, when taken as a whole, it is fairly susceptible of another construction compatible with principles of public policy, and in harmony with the public welfare. The right construction is to recognize an insurable and enforcible interest in the party or class who may have such a claim against the insured as amounts to a liability which may be imposed by law.
The company calls it an “Employers’ Liability Policy.” It is so printed in large type on both sides of it, and the main clause of the contract, printed in equally large type, is a covenant to indemnify the assured against loss from the liability imposed by law upon the assured for damages on account of bodily injuries or death suffered by any person or persons as the result of an accident occurring while the policy is in force. That idea runs through the policy, and it is clearly the purpose of it, unless a fine-print clause, hid away near the middle of the policy, gives to it an altogether different meaning. The hidden clause reads:
“No action shall be brought against the company unless for a loss that the assured has actually sustained by the assured’s payment in money.”
Taking that single clause as controlling the whole policy, there can be no mistake of its- meaning, and a recovery cannot be had by any one unless the assured has actually paid the loss; but, if that is the meaning of it, then the contract as a whole is meaningless, if not vicious. It is unreasonable to presume that it was intended that after the assured had surrendered all control of *35the litigation to the insurer, and after the insurer had exercised absolute control of the defense until judgment, then the assured must convert his assets into money, if he can, or be driven to the brink of bankruptcy or insolvency to pay a judgment in order that the company may be compelled thereafter to pay the insured.
Payment of a debt indemnified against and not existing when the covenant is made, as a condition precedent to the indemnifier’s liability, has more than once been repudiated in Kentucky. In Robinson v. Morgan, 92 Ky., 307, the court said:
“It has been determined by this court that, though a condition or a covenant to indemnify against a debt or a duty already incurred is not broken without suit brought against the covenantee, yet when the covenant is to indemnify against a debt or duty which may accrue in the future, a liability to suit is a breach. Louis v. Crockett, 3 Bibb., 197. If Morgan’s right of action did not depend upon the institution of suit against him, much less can it be made to depend upon his payment of money to the creditor.”
It is absurd to say one possessing contractual ability and actuated by right motives would accept a policy, and pay his money for it, at the time understanding that he must go into his pockets and, perhaps at great inconvenience, pay over a large sum in settlement of the liability in order to have a cause of action against the company, or, if unable to pay, go into bankruptcy, when bankruptcy was the thing that he was contracting against. I am aware that it is no business of the courts to make contracts for litigants, but, where the whole contract is capable of two interpretations, that one should be adopted which is more favorable to the beneficiary, because the language used is that of the insurer. Mutual Life Ins. Co. v. Dunn, 106 Ky., 597; American Accident Company v. Reigert, 94 Ky., 549. And I am sure no method of construction should be adopted which would afford an incentive for the insurer to destroy the insured financially, or one that would create an inducement for the employer to be careless of the safety of his employes, without at the same time giving the employe a right under the contract to' be compensated for an injury growing out of .the increased hazard which the contract caused.
*36Clause 2 of the contract obligates the company to defend the suit. To defend means to protect, ward off, or repel the danger. It is not an obligation to attempt to defend. The purpose was to successfully defend and save the insured from liability and loss. The obligation is not satisfied by employing attorneys and interposing a defense in court. If that be the extent of the contract, it ought to be called an “Employers’ Non-Liability Policy.”
I believe the New Hampshire courts have rightly construed and enforced such a policy of insurance. In Sanders v. Frankfort & Marine Accident Plate Glass Company, 57 Atl., 658, 72 N. H., 485, the Supreme Court of that State, in construing a policy almost exactly like the one at bar, used the following language-.
“In this case the insurance company undertook the investigation of the case, and, after suit was brought, assumed the entire defense by their counsel, and conducted the same to final judgment. The present action is not one respecting a loss by the insured under the policy. The defendant’s contention that the assured has lost nothing because they have paid nothing, may, so far as the case is concerned, ""be conceded. The proceeding was not even to enforce the agreement of the policy to assume the liability, but the plaintiff’s case stands upon the legal result of the assumption of liability by the company, because they assume — in legal effect, agreed to pay — the assured’s liability to this plaintiff to the extent of $5,000. Equity requires them to perform their agreement by payment to him * * * The view that the contract means that the insurance company, after taking control of the proceedings in a suit against .the assured, cannot thereafter be discharged except by payment of the indemnity to the assured or securing his discharge from the claim is thought to best conform to the intent of the parties, and is adopted.”
This court has often recognized the doctrine that where one takes charge of the defense to an action, controls it, employs counsel, produces evidence, and pays the expense of me nominal party to the .suit, he is bound by the judgment of record, although the record does not show him to be a party thereto. Schmidt v. L. C. & L. Ry. Co., 99 Ky., 143; Clark County v. Ecton, 150 Ky., 778; Heavrin v. Lack Malleable Iron Co., 153 Ky., 329.
*37The position I take is not unfair or inimical to the interest of the company. It certainly contemplated, payment of the loss whenever liability is fixed on the employer. It has been paid to take that very risk. If insurer be relieved because the insured is unable to pay the loss, then a large per cent, of their policies are unenforcible, because they are held by insolvent people.
Judge Hannah concurs in this dissent.