This case involves the interpretation of a policy of liability insurance, commonly known as a “home owner’s policy”, issued by the corporate defendant to defendant Gallagher and wife. The facts are not materially in dispute. On January 17, 1957, defendant Gallagher was sole stockholder and manager of 2 corporations carrying on separate businesses on the same premises. Said corporations are referred to as the Lansing Pfeiffer Distributing-Company and the Novi Sales & Service. Plaintiff Morrill was an employee of the first named corporation.
The United States Fidelity & Guaranty Company was notified of the suit and caused an appearance’ to be entered on behalf of Gallagher. Subsequently this appearance was withdrawn. In a letter to Gallagher written by the insurer under date of May 8, 1958, it was stated by the superintendent of claims of said company that the withdrawal was due to the alleged fact that the policy did not afford Gallagher coverage because of the injury sustained by Morrill.-Attention was directed to certain exclusions from-liability provisions as set forth in the policy, which will be hereinafter quoted.
Following the withdrawal from the case of the-attorneys retained by the insurer, Gallagher procured counsel to represent him. At the pretrial hearing of the case in August, 1958, counts 2 and 3 of the declaration were stricken. Shortly thereafter counsel for Gallagher moved for summary judgment, basing such motion, in part at least, on the provisions of the workmen’s compensation act
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of the State, and particularly on CLS 1956, § 413.15 (Stat
Under date of July 23, 1959, the parties to the case by their respective attorneys stipulated for a dismissal of the appeal to the Supreme Court by plaintiff Morrill, and for the entry of an order setting aside and vacating the order of dismissal as to defendant Gallagher. It was also stipulated that the motion for summary judgment might be stricken and the case placed on the jury calendar for trial during the fall term of 1959. An order was entered in accordance with the said stipulation and the case was subsequently brought on for trial before a jury at the September, 1959, term of the circuit court. At the conclusion of the proofs counsel for plaintiff moved that counts 2 and 3 be deleted from the declaration. There was no objection to said motion and it was granted. Accordingly the case was submitted to the jury under the first count which, as before noted, was based on the theory of negligence on the part of defendants Gallagher and Canfield. Verdict was returned in the sum of $35,000 and judgment was entered accordingly.
“(a) to any business pursuits of an insured, other than activities therein which are ordinarily incident to nonbusiness pursuits, or to the rendering of any professional service or the omission thereof, except with respect to voluntary civilian defense activities; or to any act or omission in connection with premises, other than as defined, which are owned, rented or controlled by an insured;
“(b) * * *
“(c) to injury, sickness, disease, death or destruction caused intentionally by or at the direction of the insured;
“(d) to bodily injury to or sickness, disease or death of (1) any employee of the insured while engaged in the employment of the insured, if benefits therefor are either payable or required to he pro^ vided under any workmen’s compensation law; or (2) any residence employee of the insured while engaged in the employment of the insured if the insured has in effect on the date of the occurrence a policy providing workmen’s compensation benefits for such employee.”
The disclosure further relied on the claims advanced in counts 2 and 3 of the declaration and on the granting of defendant Gallagher’s motion for summary judgment by way of dismissal of the suit against him, asserting in effect that the order of dismissal constituted an adjudication that plaintiff’s remedy was under the workmen’s compensation act. As before noted, the order granting the motion was subsequently set aside and counts 2 and 3 were de
Following tbe filing of tbe disclosure counsel for plaintiff moved to strike claims on behalf of garnishee defendant other than those based on tbe exclusion provisions of tbe insurance policy. Garnishee defendant moved to dismiss tbe case. Plaintiff’s motion was granted, and defendant’s motion was denied. In the order entered by tbe circuit judge it was directed :
“that tbe garnishee defendant defend the pending action on tbe basis of tbe 3 exclusions set forth in its letter to James P. Gallagher of May 8,1958, and that tbe garnishee defendant may defend tbe pending action on tbe basis of alleged fraud and conspiracy as contained in its affidavit denying liability.”
Tbe controversy was submitted to tbe trial judge in accordance with tbe understanding of tbe parties and an opinion was subsequently filed in tbe case in which tbe conclusion was expressed that defendant had not sustained tbe burden of proof with reference to tbe exclusion clauses of tbe policy of insurance and that, in consequence, it was liable to the plaintiff on the theory on which tbe garnishment proceeding was based. Judgment was accordingly entered in the sum of $29,597.80, with costs. Tbe said sum included tbe maximum liability under tbe policy, which was fixed at $25,000, together with interest and tbe court costs incurred in tbe case brought by plaintiff against tbe insured. From such judgment, garnishee defendant has appealed.
On behalf of appellant it is insisted that tbe court bad no jurisdiction in tbe original action and that
Having elected to rely on the exclusion provisions of the contract of insurance appellant was not, and is not, entitled to assert other grounds as a defense to its liability in garnishment. In
Dickinson
v.
Homerich,
“The record shows that the insured sought to do this promptly. Mr. Chellis testified:
“ ‘When he came into my office with the summons, * * * I told him his policy had lapsed, that his policy was not in force. He acknowledged that he knew that it had lapsed. I told him his policy had been canceled, and he said he knew it.’
“Having thus based its nonliability solely upon the ground that the policy had lapsed, the circuit judge was right in holding that other defenses were waived by the insurance company. And such denial of liability constituted a waiver of other possible defenses notwithstanding the provision that the terms of the policy cannot be altered or waived except by written indorsement, et cetera.
Improved-Match Co.
v.
Michigan Mutual Fire Ins. Co.,
The above decision was cited with approval in
Bowyer
v.
Professional Underwriters,
“As a general rule and in the absence of fraud and collusion, if a liability insurer who has a right to defend actions against the insured has timely notice of such an action and defends or elects not to defend, the judgment in such case is binding upon the insurer, as to issues which were or might have been litigated therein, when the insurer is later sued by the injured person. In several cases, it has been
The trial judge was correct in his holding that the garnishee defendant could not challenge the validity of the judgment entered in the original action instituted by plaintiff, and that the defense should be limited to the issues indicated in the order above quoted. This brings us to the question whether the exclusion provisions of the policy should be interpreted as barring liability on the part of appellant. In relying on the exclusion clauses appellant assumed the burden of proof as to their application. In 29A Am Jur, Insurance, § 1854, p 918, it is said:
“If a risk is excepted by the terms of a policy which insures against other perils or hazards, loss from such a risk constitutes a defense which the insurer may urge, since it has not assumed that risk, and from this it follows, at least as a general rule, that an insurer seeking to defeat a claim because of an exception or limitation in the policy has the burden of proving that the loss, or a part thereof, comes within the purview of the exception or limitation set up. In other words, the principle generally applied by the courts is that if proof is made of a loss apparently within a contract of insurance, the burden is upon the insurer to prove that the loss arose from a cause of loss which is excepted or for which it is not liable, or from a cause which limits its liability.”
The holding of this Court in
Roddis Lumber & Veneer Company
v.
American Alliance Insurance Company,
Some emphasis is placed on exclusion (c) on the ground that in the instant case the firecracker was thrown intentionally. Unquestionably such was the case, but it will be noted that under the language of the excluding clause the injury must be caused “intentionally.” There is nothing in this case to justify a conclusion that either Gallagher or Can-field intended to cause any physical harm to plaintiff. The language of the policy is binding on appellant, and if ambiguous it must be construed against appellant’s claims in the instant controversy. It may not be interpreted as barring liability under the policy.
Neither may it be said on this record that exclusion (d) precludes recovery against the garnishee defendant. As before pointed out, the issue whether plaintiff and Gallagher were acting as fellow employees at the time of the occurrence in question might have been properly litigated in the original action which appellant refused to defend in accordance with its policy of insurance. It certainly cannot be said on this record that the judgment there rendered in favor of plaintiff was void. Whether the workmen’s compensation law was applicable under the facts of the case could not rest properly on the basis of an assumption. Its determination required competent evidence. Insofar as exclusion (d) is concerned it
We think that the trial judge correctly decided the issues presented in the case, and the judgment rendered is affirmed. ' '
Notes
PA 1912 (1st Ex Sess), No 10,' -as -amended (CL 1948, §411.1 et seg., as amended [Stat Ann 1960 Rev § 17.141 et seg.]).