171 F. 495 | U.S. Circuit Court for the District of Massachusetts | 1909
This is an action at law removed into this court from the superior court .of Massachusetts. The amended declaration is in tort, and alleges a policy of liability insurance for $5,000 issued by the defendant, hereinafter called the “Insurance Company,” to the plaintiff, hereinafter called the “Manufacturing Company.” The material parts of the policy are as follows: The Insurance Company agrees to indemnify the Manufacturing Company “against loss arising from legal liability for damages on account of bodily injury or death suffered by any employe or employes of the assured resulting from any and every accident of whatsoever nature or cause happening in, upon, or about the premises of the assured as described herein and in the application herefor;-but the liability of the company in respect to any one employé suffering injury or death shall in no case exceed the sum of five thousand dollars ($5,000), nor shall the total liability of the company in respect to any one accident resulting in injury to, or the death of, several employes in any event exceed the sum of ten thousand dollars ($10,000).” “That upon the occurrence of an accident, whether any claim be made in respect thereof or not, the assured shall give immediate notice in writing of such accident to the company, addressed to the Manager for the United States at the office of the company in New York, N. Y., or to the duly authorized representative of the company for the locality in which this policy is issued. If, thereafter, the assured shall receive notice of any claim growing out of an accident, duly reported to the company, as before provided, or of any legal proceedings to enforce such a claim, he shall give immediate notice thereof to the company in like manner. That if any legal proceedings are taken to enforce a claim, against the assured, covered by this policy, the company shall, at its own cost, undertake the defense of such legal proceedings in the name and on behalf of the assured and shall have the entire control of such defense. But, if the company shall offer to pay to the assured the full amount for which the company is liable in respect to the claim sought to be enforced, it shall not be bound to defend any legal proceedings nor be liable for any costs or expenses which the assured may incur in defending the same. The assured at all times shall under the direction of the company render all reasonable and necessary assistance to enable the company to effect settlements or to properly conduct a defense or to prosecute an appeal. That the company may undertake at its own cost the settlement of any .claim, duly reported to it as before provided, and the assured shall not, except at his own cost, settle any claim nor incur any expense without the consent of the company thereto previously given in writing; provided, however, that such immediate medical and surgical relief to the injured may be furnished as may be imperative at the time of the accident and reasonable expenses thus incurred shall be deemed a part of the liability of the company.” The declaration goes on to allege that one Hodde “while in the employ of the plaintiff did suffer bodily injury resulting from an accident in, upon, or about the said premises of plaintiff; that thereafter claim was made against plaintiff on behalf of said Hodde for damages growing out of said accident”; that Hodde brought suit against the plaintiff to enforce the claim, “and .that plaintiff gave
“Wherefore plaintiff states that it has been in the sum
In substance, the declaration alleged that the Insurance Company, having undertaken the defense of Hodde’s action under the circumstances stated, managed that defense so negligently that the verdict went against the Manufacturing Company in $17,000, of which it had to pay $12,000 or thereabouts beyond the indemnity furnished by the policy. The Insurance Company demurred on several grounds which are summarized in the opinion.
To set forth a good cause of action the declaration must show: (1) That the Insurance Company was under- duty to conduct with care the defense in the case of Hodde against the Manufacturing Company. If this duty be shown, it is not denied that a breach of duty is alleged. (2) That the Insurance Company’s liability for this breach of duty may be enforced in an action of tort.
First. The Insurance Company contends that no duty to defend the action was cast upon it by the terms of the policy. It propounds an ingenious dilemma by inquiring of the Manufacturing Company whether Hodde’s claim was well-founded or unfounded. If the former, the verdict against the Manufacturing Company was proper and inevitable, and anjr negligence of the Insurance Company in defending the suit was injuria absque damno. If the latter, the suit was not within the terms of the policy, and the Insurance Company, being under no duty to undertake the defense, was not liable for what it did or did not do in the litigation. Therefore the Manufacturing Company’s loss, though arising from the Insurance Company’s negligence, was damnum absque injuria. But this action is not based upon an alleged breach of the written contract. The Manufacturing Company does not sue for a failure of the Insurance Company to keep its contract to defend the Hodde suit. The insurance policy is, indeed, set forth in the declaration, but no breach of it is alleged.' It is inserted only as matter of inducement in order to make clear the history of the case. -The duty of the Insurance Company to defend the Hodde suit with care is not alleged to arise from a promise contained in the written contract, but rather to arise out of a certain act of the Insurance Company which was done after the contract was made, after the accident had occurred, and after Hodde’s suit was brought, viz., the assumption by the Insurance Company of the defense of the Hodde suit. So far as the plaintiff’s claim rests upon a contract, that contract is not the written policy of insurance, but an implied contract arising out of the conduct of the Insurance Company long after the policy was signed. In this respect the case at bar is like Getchell & Martin Co. v. Employment Liability Assurance Corp., 117 Iowa, 180, 90 N. W. 616, 62 L. R. A. 617, although in the Iowa case the subsequent contract was expressed rather than implied.
It follows, therefore, that this court is not required to decide, nor was the plaintiff required to allege, that Hodde’s suit was within or without the purview of the insurance policy. In common sense, at
There is nothing in the policy to create an exception to the general rule by authorizing the Insurance Company to sacrifice the interests of the Manufacturing Company either maliciously or negligently. Even if we admit, for the sake of the argument, that, under the terms of the policy, the former might have left the defense altogether to the latter, and might have satisfied its utmost liability under the policy by the payment of the damage's recovered in the suit up to $5,-
Second. The defendant further contends that, even if it is liable to the Manufacturing Company, yet it is not liable in an action of tort. Much of the argument on this head has been already dealt with. As the suit is not based upon a breach of the policy, the argument that a suit for a breach of the policy must be brought in contract is irrelevant. A contract or undertaking to carry on the defense did, however, exist.
That the Manufacturing Company might here have sued the Insurance Company in an action of contract for a breach of this implied contract I do not doubt. Is a suit in tort excluded ? Some negligent failures to discharge the duties of an agent lay the foundation for actions both of tort and contract. This is true of the negligence of an attorney. Even, in the absence of an express contract the attorney is said to undertake to act with due professional care, and for a failure to perform his undertaking is liable in tort as well as in contract. For a negligent failure to perform the ordinary duties of a common carrier or of a physician an action of tort may be maintained. This liability is not confined to attorneys, professional men, and common carriers. Shipherd v. Field, 70 Ill. 438; Heinemann v. Heard, 62 N. Y. 448; Savage v. Birckhead, 20 Pick. (Mass.) 167; Corbett v. Packington, 6 B. & C. 268; Nat. Bank v. City Bank, 103 U. S. 668, 26 L. Ed. 417. The basis of the liability is the agent’s duty to exercise care and to refrain from negligence about his principal’s business, apart from the provision of any express contract. It must be borne in mind that in the history of common-law pleading the action of assumpsit to recover damages for bréach of contract is a species of the action of trespass upon the case, to which genus belong, also, the action of trover and the special actions upon the case. Although the practice act of Massachusetts makes its principal distinction between actions of contract and actions of tort, yet some results of the common-law classification still persist. In the case at bar it was suggested that the