259 F. 55 | 6th Cir. | 1919
(after stating the facts as above).
“No action shall lie against the company as respects any loss under this policy, unless it shall he brought by the assured himself to reimburse him for loss actually sustained and paid by him in satisfaction of a judgment after a trial of the issue.”
Under such “no action” policy, it was held, in Massachusetts, that the plain and express language of the policy must be given effect, and that the duty to indemnify did not arise until the judgment was paid. Connolly v. Bolster, 187 Mass. 266, 72 N. E. 981. The result in this Massachusetts case has been quite generally adopted in cases involving “no action” policies; and the presence of this clause has usually been given the controlling force which it seems to merit.
The common intent of the parties must control, and there is, to say the least, serious difficulty in thinking that the parties intended that the duty to indemnify should arise before payment of the judgment, when they have, in express words, said that it shall not arise until after that event. However, this case does not require us to choose as between these conflicting views. This policy was drawn by the insurer; the company was presumably familiar with the common use and with the adjudged effect of this “no action” clause; and it omitted that clause from this policy. It chose rather to rely upon language which lacks that certainty and freedom from ambiguity which might have been had, and the language which it selected must be construed according to the usual rules for ascertaining its true intent.
The plaintiff contends that clause 2 and the later clauses, the substance of which has been stated, are inconsistent with clause 1, and so neutralize what might otherwise be thought the plain limitation of clause 1. We cannot find any substantial inconsistency. The phrase “loss from liability” necessarily contemplates the existence of two things: The precedent liability and the resulting loss. There can be
However, tire fact that the later clauses are not inconsistent with a limitation of the company’s ultimate liability to that which is measured by the' money paid by, or taken from, the assured, does not prevent these later clauses from serving to interpret clause 1. “Loss” is not a word of limited, hard and fast meaning. There are many kinds of loss, besides money out of pocket. No man would doubt that he might rightly call a “loss” that event which changed his status from solvency to insolvency, and compelled him either to go through bankruptcy or else be unable to own any property as long as he lived. Indeed, in the strictest sense of the word, the business man against whom a judgment of this kind became final during a fiscal year, so that at the end of that period he must carry it on his books as a liability, would, according to all familiar systems of bookkeeping, enter it as a loss for that-period, and treat it accordingly; and he would seem to have a right to deduct it from his gross income under the permission of the income tax law to deduct “losses.” It is clear to us that, as this word is used in clause 1, it is ambiguous, and may have attributed to it either of the meanings claimed by the respective parties here, according as the whole contract and the conceded circumstances may dictate.
It is the familiar rule that ambiguities in such contracts are solved against the interest of the insurer. “A policy of insurance, prepared with much care for the interests of the insurer, should be construed favorably to the other party if the language employed leaves the matter in doubt.” Casualty Co. v. Cumberland Co. (C. C. A. 6) 152 Fed. 961,
The inference which would naturally be drawn by the ordinary man is important to observe, in interpreting such a contract. The assured, in this class of contract, unless the contrary is clearly brought to his attention, must suppose that he is getting protection against the results of an adverse judgment. That he should carry what is called indemnity on account of damage suits, and find it of no help unless he first raised the money to pay the judgment, perhaps by stripping himself of all his property and at a sacrifice, would surely be a surprise to the ordinary policy holder; nor is it reasonable to suppose, unless it is made very plain, that he would deliberately take such a contract.
The solvency of all parties is the normal thing with reference to which contracts are made, and in interpreting the language used, we must suppose the assured was expected to discharge the obligations which the law might impose. If it is intended to provide for the abnormal situation where the assured refuses to perform his legal duty and because of insolvency the law cannot compel performance, language should be used which clearly reaches the unusual condition.
The peculiar results which would flow from adopting the company’s construction may be considered. If the insured, against whom a personal injury judgment is rendered, has no property, he may decline to pay anything, thereby making the company’s liability depend upon the assured’s future acquisition of property so that something may be collected, or he may borrow from friends as much as he can, perhaps giving the insurance policy as security, and then whatever he pays on the judgment becomes a claim under the policy. If the judgment against the assured is $5,000, but only $3,000 can be and is collected from him on the judgment, he may collect from the insurance company $3,000, whereupon he will have further assets from which the balance of the judgment may be made; but he would apparently have no further recourse against the company, since the policy gives only one cause of action. Several such complications suggest themselves; and it is not likely that the parties intended to make a contract where liability would be dependent upon the whim of one party, or where it only partly covered the damage the whole of which it purported to reach. “A contract ought not to be construed to an absurd conclusion, if a reasonable one is possible.” Casualty Co. v. Cumberland Co., supra, 152 Fed. at page 963, 82 C. C. A. at page 317, 12 L. R. A. (N. S.) 478.
Special difficulties to which the company’s theory leads, in case of the insured’s bankruptcy, are entitled to notice. Where, as here, there is only one creditor, the measure of damage is troublesome enough; but in the ordinary case there seems no satisfactory way of computation. Some of the difficulties were stated by the present Mr. Justice Pitney in Beacon Co. v. Travelers’ Co., 61 N. J. Eq. 59, 64, 47 Atl. 579,
Evidently, their minds were largely centered upon the judgment which should fix the' assured’s liability, a considerable part of the contract is devoted to that subject and to disposing of the attendant conditions, and this distinctly tends to show what sort of a “loss” was in contemplation. When we give due weight to these portions of the contract and to each of the considerations which we have mentioned as bearing on the construction of the whole, we are satisfied that when the parties, in clause 1, referred to a “loss from liability,” they intended that kind of a loss which, in ordinary nomenclature and thought, comes into existence when the liability of the assured becomes irretrievably fixed.
A careful review of all the cases cited from the various courts discloses not one, where the policy has indemnified against “loss from liability,” has contained the obligation to assume and conduct the defense to a final judgment, and has not contained a “no action” clause, and yet where the company’s liability has been limited to the assured’s money out of pocket.
In No. 3236, the order will be that the judgment below be reversed, and the case remanded for a new trial in accordance with this opinion; in No. 3232, the appeal is dismissed.
Frye v. Bath Co., 97 Me. 241, 54 Atl. 395, 59 L. R. A. 444, 94 Am. St. Rep. 500; Carter v. Ætna. Co., 76 Kan. 275, 91 Pac. 178, 11 L. R. A. (N. S.) 1155; Cushman v. Fuel Co., 122 Iowa, 656, 98 N. W. 509; Finley v. Casualty Co., 113 Tenn. 592, 602, 83 S. W. 2, 3 Ann. Cas. 962; Fidelity Co. v. Martin, 163 Ky. 12, 173 S. W. 307, L. R. A. 1917F, 924; Stenbom v. Brown Co., 137 Wis. 564, 119 N. W. 308, 20 L. R. A. (N. S.) 956; Allen v. Ætna Co.(C. C. A. 3), 145 Fed. 881, 76 C. C. A. 265, 7 L. R. A. (N. S.) 958.
Patterson v. Adan, 119 Minn. 308, 315, 138 N. W. 281, 48 L. R. A. (N. S.) 184. The New Hampshire case is fully approved in the dissenting opinion in Fidelity Co. v. Martin, 163 Ky. 12, at page 31, 173 S. W. 307, L. R. A. 1917F, 924, and its principle seems to have ruled Davies v. Maryland Co., 89 Wash. 571, 154 Pac. 1116, 155 Pac. 1035, L. R. A. 1916D, 395, 398.
“In the parlance of the business of insurance * * * the liability is called- a loss.” State v. Railway Co., 68 Ohio St. 9, 30, 67 N. E. 93, 96 (64 L. R. A. 405, 96 Am. St. Rep. 635).
Lowe v. Fidelity Co., 170 N. C. 445, 87 S. E. 250, may be sueb a case, though: tbe presence of the covenants to defend does not appear; and see Atlas Co. v. Georgia Co., 129 Tenn. 477, 483, 167 S. W. 109, so holding, but plainly obiter.
American Co. v. Fordyce, 62 Ark. 562, 568, 36 S. W. 1051, 54 Am. St. Rep. 305; Fidelity Co. v. Fordyce, 64 Ark. 174, 41 S. W. 420; Fenton v. Fidelity Co., 36 Or. 283, 56 Pac. 1096, 48 L. R. A. 770; Lewinthan v. Travellers, 61 Misc. Rep. 621, 113 N. Y. Supp. 1031; Anoka Co. v. Fidelity Co., 63 Minn. 286, 292, 65 N. W. 353, 30 L. R. A. 689; Hoven v. Employers’ Co., 93 Wis. 201, 207, 87 N. W. 46, 32 L. R. A. 388; Sheehan v. Farwell, 135 Mich. 196, 97 N. W. 728; Ross v. American Co., 56 N. J. Eq. 41, 38 Atl. 22; Fritchie v. Millers’ Co., 197 Pa. St. 401, 47 Atl. 351; Pickett v. Fidelity Co., 60 S. C. 477, 38 S. E. 160, 629.