240 F. 36 | 9th Cir. | 1917
The General Bonding & Casualty Insurance Company, plaintiff below, here called the “Bonding Company,” recovered judgment against the Pacific Coast Casualty Company, here called the “Pacific Company.” The Pacific Company sued out writ of error. The case as found by the District Court is this:
The Pacific Company of California issued to Elmo Rock Company a policy of employer’s liability insurance by which the Pacific Company insured the Rock Company, a Texas corporation, for the term of a year ending June 18, 1912, on account of an accident to any of its employes “against loss and expense arising from claims upon the assured for damages on account of bodily injuries accidentally suffered or alleged to have been suffered during the period of the policy.” Under the policy the Pacific Company agreed that, if suit should be brought against the Rock Company on account of an accident, the Pacific Company would at its own expense settle or defend the suit whether groundless or not, and that the moneys expended in such defense would not be included in the limits of the liability fixed by the policy. The policy also contained this clause:
“Tbe assured shall not assume any liability, nor interfere witb any negotiation for settlement or any legal proceeding, nor incur any expense nor settle any claim except at its own cost, without tbe written consent of tbe company.”
The policy further provided that no action would lie for any loss or expense thereunder unless it was brought for loss or expense actually
In 1911 when the policy was in force, one J. B. Sowders, an employé of the Rock Company, suffered personal injuries in crushing rock for the Rock Company. Sowders sued the Rock Company in the state courts of Texas. The Pacific Company defended and managed and controlled the action in accordance with the provisions of the policy, conducting the defense through John Davis, Esq.,' of the firm of Meador & Davis, attorneys at law of Dallas, Tex., who were generally employed by the Pacific Company in litigation in the neighborhood of Dallas. In June, 1912, Sowders recovered judgment against the Rock Company for $5,000 with interest and costs. By letter dated June 28, 1912, the Pacific Company advised Meador & Davis to proceed with an appeal in the case, the letter also saying, “But you will understand that we do not furnish a supersedeas bond staying execution.” Meador & Davis then requested the Rock Company to furnish a su-persedeas bond, but the company refused to do so upon the ground that the Pacific Company should do this. Davis wrote again urging that the Rock Company furnish the bond. A copy of this correspondence was forwarded to the Pacific Company at San Francisco, and on July 30, 1912, it wrote to Meador & Davis, saying:
“We indorse your action taken in this matter and will ask you to proceed with the appeal, hut the assured must furnish its own supersedeas bond.”
Leeds, managing partner of Miller-Stemmons Company of Galveston, agents of the Pacific Company, then urged the Bonding Company to make a supersedeas appeal bond. That company agreed to give the bond if indemnity bond were obtained from the Pacific Company, and later indemnity bond was procured through Messrs. Meador & Davis, and supersedeas bond was executed on August 6, 1912. The indemnity contract was signed, “Pacific Coast Casualty Company, by John Davis, Its Attorney at Law and in Fact.” The contract, after reciting the bringing -of suit by Sowders against the Rock Company, the desire to appeal from the judgment, and that a supersedeas bond of $11,000 was required to perfect the appeal, and that the General Bonding Company had agreed to execute the supersedeas bond, provided that the Pacific Coast Casualty Company would indemnify tire General Bonding Company against any and all loss, charges, fees, damages, and expenses which might be sustained by reason of having executed the supersedeas bond as surety. The premium for the supersedeas bond was paid to the Bonding Company by the Pacific Company through the agents of the Pacific Company in Galveston, Tex. The lower court found that Stephenson, who was president of and acted for the Bonding Company, did not know of any limitations upon the authority of Davis, but dealt with him believing that his authority was that which was “usual in such -cases and was apparently possessed” by Davis ; but both Davis, attorney, and Leeds, who was the managing partner of the agents of the Pacific Company, knew of the transaction with Stephenson and of the giving of the indemnity contract already referred to'. In due time the judgment in favor of Sowders against the
The District Court held that: (1) When the Pacific Company authorized Davis, its attorney, to take an appeal, it empowered him to do all that was necessary to make the appeal effective, notwithstanding the clause in the letter of the company to Davis saying that the assured must furnish the supersedeas bond; and (2) that under the evidence the Pacific Company by payment of the premium on the bond and the acceptance of the benefit of the bond for the purpose for which it was issued ratified the acts of its own agents and should not be heard to question them.
The Pacific Company, acting upon its clear right under the terms of the .policy, controlled and conducted the defense in the suit of Sow-ders against the Rock Company for damages. The provisions of the policy contemplated that the Rock Company should refrain from interference with any of the legal proceedings in that action, and the record discloses that the Rock Company undertook no responsibility in connection with the trial or proceedings. Under such a situation, it became the right of the insuring company, if not satisfied with the judgment of the trial court awarding Sowders a recovery, to appeal the case; but in doing so it had the correlative duty of protecting the Rock Company from injury while the appeal was pending. It was not for the Rock Company to stay proceedings by giving the necessary bond, because in giving a supersedeas' bond the Rock Company would have been assuming a liability from which it was expressly relieved by the provisions of the policy. We do not doubt that it might have given such a bond, as it might have done other things relating to the legal proceedings connected with the action in which the judgment was recovered, provided it had obtained the written consent of the insuring company. But, as it is not contended that there was such written consent, we need not dwell upon that point. The provision in the policy that action would not lie against the company for loss or expense under the policy, unless it should be brought for loss or expense actually sustained and paid in satisfaction of a final judgment within 90 days from the date of judgment, was inserted for the benefit of the company, with a view to preventing settlement of a claim by the assured company with the expectation of holding the insuring company liable before a court of last resort had passed upon the validity of the claim. In this way the Pacific Company could be assured that the claim was one provided for by the policy and upon which liability would ensue. But the protection which was afforded to the Pacific Company by such a clause is to be considered with the obligation it assumed, to conduct at'its own expense any legal proceedings brought against the assured Rock Company. The way by which the assured could be relieved of any liability in connection with the legal proceedings was for the Pacific, the insuring company, to give the supersedeas bond necessary to prevent the levy of execution pending an appeal which the Pacific Company had the right to take. It would be unjust to hold that the Rock Company could not recover unless the judgment of Sowders against it had been affirmed by the highest court of the state of Texas, yet to say that the Pacific Company was alone authorized to carry on the defense, and if unsuccessful appeal, but decline to give the bond to make the appeal effective as against execution under the judgment. Rochester Mining Company v. Maryland Casualty Company, 143 Mo. App. 555, 128 S. W. 204.
We therefore hold that it was incumbent upon the Pacific Company to give the supersedeas bond, and that it is but just that the Bonding
The rule to be applied is that which strictly follows the limitation of the contract and that, where a liability is limited to $5,000 and there is a covenant* that the insuring company will defend and that the moneys expended in defense shall not be included in the limits of the liability fixed under the policy, such sum as has been expended in the necessary conduct of the litigation may be recovered, but that the interest’which accrued after the original judgment was rendered in the state court and pending the appeal in the Court of Civil Appeals in-Texas was not an expense nor outlay incident to the defending of the suit. The question directly involved was presented in Maryland Casualty Company v. Omaha Electric Light & Power Company, 157 Fed. 514, 85 C. C. A. 106, where the Court of Appeals of the Eighth Circuit cited the conflicting cases and held that a contract to pay the cost of making a defense might fairly contemplate attorney’s fees, court costs, stenographer’s fees, and other expenditures necessary and directly related to the presentation of the defense, but did not include the collateral and indirect results of doing so. Munro v. Maryland Casualty Co., 48 Misc. Rep. 183, 96 N. Y. Supp. 705; Davison v. Maryland Casualty Co., 197 Mass. 167, 83 N. E. 407; National & Providence Worsted Mills v. Frankfort Marine, etc., Ins. Co., 28 R. I. 126, 66 Atl. 58.