146 A. 571 | Pa. | 1929
Argued January 30, 1929. A judgment in excess of $5,000 was recovered against appellee as damages for personal injuries, the result of a collision between appellee's car and that of the injured person. Appellee was insured under a personal liability contract, and the insurance carrier was duly notified of the action against him. It appeared and undertook the entire defense of appellee's liability. After verdict for plaintiff it did not prosecute its motion for a new trial, and when payment on the policy was demanded it denied all liability thereunder, on the ground that appellee was not the sole owner of the car, as warranted, but held it under a bailment lease.
Appellee then filed a petition for a declaratory judgment under the Act of June 18, 1923, P. L. 840. In the petition all the facts were reviewed. The material parts of the policy read as follows: "The Indemnity Exchange of America, agree to indemnify Leon A. Malley and/or Kathryn L. Malley as their interests may appear. __________ Against loss and/or expense by reason of the liability imposed by law upon the insured for damages on account of bodily injuries and/or death accidentally suffered, by any person or persons, other than employees of the insured, by reason of the ownership, maintenance and/or use of the automobile. __________ The insured warrants, and this contract shall be void if the insured conceals *220 or misrepresents the interest of the insured in the property, __________ The insured upon the occurrence of any accident, in any way relating to any automobile insured hereunder, shall send immediate written notice thereof with the fullest information. __________ If suit be brought against the insured to enforce a claim for damages covered by this contract, the insured shall forward immediately to The Indemnity Exchange of America, every summons or other process and every other paper as soon as the same shall have been served on the insured. The Indemnity Exchange of America shall defend such suits in the name and on behalf of the insured. The expense of such defense shall be treated as a loss under the contract. The insolvency or bankruptcy of the insured shall not release The Indemnity Exchange of America. __________ The insured shall not voluntarily assume any liability or interfere in any negotiation for settlement, or in any legal proceedings, or incur any expense, or settle any claim, without the written consent of attorney-in-fact, previously given."
The contention of the appellee may be stated in this manner, — that while ordinarily actual payment on an indemnity policy may be necessary before recovery, defendant, in assuming entire charge of the litigation adopted the insured's liability and payment should be made at once. Otherwise, as appellee's petition averred, he could not pay or do anything in relief of the injured plaintiff's damages and defendant would escape its contract liability unless the question was determined whether the insurance policy was a valid, binding contract with immediate liability thereunder. As the judgment against appellee in the damage case was a continuing liability, it could always be collected if he came into funds, hence he had a decided interest in being relieved of this outstanding burden, against which he believed he was protected by this policy, at least to the extent of $5,000. Appellant admits that if appellee is entitled to relief it is entitled to it under the Declaratory *221 Judgments Act, but denies the right to relief because he has not paid the judgment, and the policy is unenforceable from a breach of the warranty of ownership. The court below granted relief.
Section 3 of the Declaratory Judgments Act reads: "A contract may be construed either before or after there has been a breach thereof." In Girard Trust Co., Agent, v. Tremblay Motor Co.,
The questions are purely ones of law. Must appellee pay before proceeding against the insurance company, and was there a breach of warranty, or, if such were the case, is appellant estopped from asserting it?
There are two types of indemnity insurance, sometimes called indemnity against liability or "liability contracts" and indemnity against damage or "indemnity contracts." In the first class, the liability of the insured determines enforceability, in the other the policy is only enforceable when the insuredhas sustained actual loss, as by paying a judgment against him coming within the scope of the policy. The class into which particular policies fall depends on the intention of the parties *222
as shown by their contract: Pfeiler v. Penn Allen P. Cement Co.,
Where the policy, indemnifying insured against loss arising out of legal liability, provides that the insured shall immediately notify the company in case of injury, and the company will defend all suits growing out of injuries, in the name of insured, and insured will not settle any claim without consent of the company, it is usually held to be a policy ofindemnity against liability for damages or an indemnity against liability, and is not a mere contract of indemnity againstdamages: Fentress v. Rutledge,
The principle is thus adequately expressed in the last-named case: "By undertaking the defense the company elected to treat plaintiff's cause of action, if he had any, as covered by its contract; and when it substituted itself and its judgment for that of the defendant, both plaintiff and defendant have a right to insist that the final judgment establishes the liability and debt of the company to the assured. The undertaking to defend is of no value, and may be of great danger, to the assured, where he thus abandons all control of the suit to the company, *223
if it does not mean that whatever liability is established shall be discharged. The company admits that where the assured is perfectly solvent the practice of the company is to carry the defense to a successful issue by paying the judgment without waiting for the assured to pay it. It is even more important to an assured who is in financial stress that no judgment be allowed to stand unsatisfied against him than it is to one who has abundant means to satisfy it with." Consequently, in such cases, after recovery of a judgment against the insured, the party injured may have a remedy against the company by garnishee process or by resort to a suit in equity: Fentress v. Rutledge, supra; Reilly v. Linden,
Loss does not have an inflexible meaning and may consist of many different situations of varying gradations. Voluntary or involuntary separation from one's money is not the only criterion of loss. Any shrinkage in value of estate or property may on proper occasions be rightfully so termed. Any depreciation or depletion of property values, as well as the destruction of all property value through judicial sale or otherwise would likewise come within the definition; the concrete result of these factors, as it affects the owner, is a loss. See Schambs v. Fidelity Casualty Co., 259 Fed. 55 and 263 Fed. 895. Therefore, following the above line of decisions, under a policy such as we have before us, we hold there is a potential loss, though money may not have been actually paid; the insured may sue the company directly after judgment and before he pays anything, or his creditor may institute garnishment against the company. The presence of these direct remedies would not affect the right to a declaratory judgment, for reasons unnecessary to state.
The accident occurred on August 30, 1926, and the damage case was tried January 10, 1928. At the trial, *224
appellant appeared and actually engaged in the defense, and it was not until after the suit was lost that it abandoned the case and claimed plaintiff had violated the absolute warranty of the policy concerning total ownership of the car. It further stated it had no knowledge of the falsity of the statements made by the plaintiff until after the trial of this case. Where an insurance company, under an indemnity contract, takes charge of the defense of an action on which liability rests, it will be estopped from thereafter questioning the claim either because it was beyond the terms of the policy or because the latter was procured by a breach of some warranty: Fairbanks v. London Guaranty Accident Co.,
Judgment affirmed.