Clark v. Bonsal & Co.

Hoke, J., after stating the case: In construing contracts of this character, the courts have generally held that if the indemnity is clearly one against loss or damage, no action will lie in favor of the insured till some damage has been sustained, either by payment of the whole sum or some part of an employee’s *273 claim; but if the stipulation is, in effect, one indemnifying against liability, a right of action accrues when the injury occurs or, in some instances, when the amount and rightfulness of the claim has been established by judgment of some court having-jurisdiction — this, according to the terms of the policy; but, unless the contract expressly provides that it is taken out for the benefit of the injured employees and the payment of recoveries by them, none of the eases hold that an injured employee may, in the first instance, proceed directly against the insurance company. In all of them, so far as examined, a right of action arising on the policy is treated and dealt with as an asset of the insured employer, and, in the absence of an assignment from him, the employee cannot appropriate it to his claim, except by attachment or bill in the nature of an equitable fi. fa. or some action in the nature of final process, incident to bankruptcy or insolvency. Certainly this position is supported by the great weight of authority: Connoly v. Bolster, 187 Mass., 266; Bain v. Atkins, 181 Mass., 240; Embler v. Hartford Boiler Co., 158 N. Y., 431; Cushman v. Fuel Co., 122 Iowa, 656; Hawkins v. McCalla, 95 Ga., 192; Carter v. Insurance Co., 76 Kansas, 275; Finley v. Casualty Co., 113 Tenn., 592; Keenan v. Casualty Co., 107 Ill. App., 406; Nance on Insurance, p. 608; 15 Cyc., p. 1038; 11 A. and E. (2d Ed.), p. 16. The doctrine, as announced and sustained in these citations, is very well epitomized in Nance on Insurance as follows: “The fund payable under a liability policy is not subject to any trust in favor of the person whose right to damages for personal injury gave rise to the insurer’s liability, nor has such third person any other right in connection with the insurance, save the common right of reaching the fund, when payable, by garnishment or other proper process.” The cases from other courts, chiefly relied upon by plaintiffs, are not, necessarily, in conflict with this position. In Fritchie v. Millers Co., 197 Pa. St., 401, and Hoven v. Employer's Liability, 93 Wis., 201; Anoka Lumber Co., 286, judgment had been first obtained against the employer, and garnishment was issued against the company. In Sanders v. Frankfort Insurance Co., 72 N. H., 485, judgment was first obtained and the action *274 was in the nature of an equitable fi. fa. seeking to appropriate claim as the property of the insured, and in Insurance Co. v. Moses, 63 N. J. Eq., 260, the insured employer had become bankrupt, and appropriation was had, to an amount of loss, as indicated by a pro rata distribution of the other assets among the creditors; reversing, in this respect, a decree. of the vice chancellor, in which the entire amount of claim had been held applicable to injured employee’s recovery. See same case, 61 N. J. Eq., 59. What amount may be recovered on proceedings of garnishment or bill in aid of collecting the judgment will depend on the nature of the stipulations of indemnity and the facts and circumstances of the particular case. Thus, when, as in the Massachusetts and Tennessee and Iowa cases, supra, the policy is clearly an indemnity against “loss actually paid” by the assured “to reimburse him for a loss actually sustained and paid in satisfaction of a judgment after the issue determined,” the language in the Iowa case, supra, and it appears that there has been nothing paid, it seems that no amount is applicable. In the New Jersey case, as stated, on similar stipulations, it was finally held that the loss would be considered paid by the insured and recoverable from the company to the amount indicated by the pro rata distribution of the other assets, etc. In the Minnesota and New Hampshire cases, supra — and we 'incline to the opinion that the present policy comes within the principle — it was held that the terms, “insured against loss from liability arising,” etc., in the first portion of the policy, was so modified by subsequent clauses that it amounted to insurance against liability, and the entire amount could be applied to the employer by appropriate process — process that recognizes and deals with it as an asset of the employer. The cases in our own Court, to which we were especially referred by counsel, do not sustain his contention. In Aiken v. Manufacturing Co., 141 N. C., 339, in which the Court said that a casualty company, while not a necessary, was a permissible party, the policy was not before the Court or made part of the record. The allegation concerning it was to the effect that the employer had a policy and stipulations to indemnify it against “all injuries to any of its employees, including the plaintiff, and to pay any *275 sum that might be recovered by any of said employees, including the plaintiff,” a direct stipulation to pay the recovery sought in the action. In case of Shoaf v. Frost, 127 N. C., 306, a policyholder in a fire insurance company brought his action directly against a reinsuring company, and the decision was made to rest on the ground that, by the express terms of the agreement, the reinsuring company was to pay the losses on policies already issued, and so, as between the two contracting parties, became the principal debtor, and on the further ground that the property of the original company, as part of the consideration, was assigned and transferred to the company sued, as it was in Johannes v. Insurance Co., 66 Wis., 50, a case cited and relied on in the Shoaf decision. And so, in all the decisions cited by plaintiff, where the claimant was allowed to sue the in-demnitor, by direct action, the contract, either in express terms of by fair intendment, was made for the benefit of the plaintiff, as in Gorrell v. Water Supply Co., 124 N. C., 328, or by the nature of the contract or by virtue of property passed and the attendant facts the party assumed towards the other the place of primary debtor, and was held bound to plaintiff, under the general' equitable principles of indebitatus assumpsit, as in Keller v. Ashford, 133 U. S., 610; Vorhees v. Porter, 134 N. C., 591, or the bond taken under statutory provision was for the benefit of claimant, or the action was permissible in tort for wrongful seizure of property and the bond of indemnity constituted the obligor a participant in the wrong; but no such facts are presented here. An ordinary indemnity' contract of this character is not made for the benefit of the employee, either in its express terms or in its underlying purpose. It is made for the protection and the indemnity of the employer, fortifying him against unexpected and uncertain demands which might otherwise prove disastrous to his business, and the rights arising under such a contract are his property, and actions to recover the same are and should be under his control. The nature of the contract and the principles applicable are well stated in one of the Massachusetts cases, above’cited, Bain v. Atkins, as follows: “The only parties to the contract of insurance were Atkins and the company. The consideration for the company’s promise *276 came from Atkins alone, and tbe promise was only to bim and bis legal representatives. Not only was tbe plaintiff not a party to either tbe consideration or tbe contract, but tbe terms of tbe contract do not purport to promise an indemnity for tbe benefit of any person other than Atkins. Tbe policy only purports to insure Atkins and bis legal representatives against legal liability for damages respecting injuries from accidents to any person or persons at certain places within tbe time and under tbe circumstances defined. It contains no agreement that tbe insurance shall inure to tbe benefit of tbe person accidentally injured, and no language from which such an understanding or intention can be implied. Atkins was under no obligation to procure insurance for tbe benefit of tbe plaintiff, nor did any relation exist between tbe plaintiff and Atkins which could give tbe latter tbe right to procure insurance for tbe benefit of tbe plaintiff. Tbe only correct statement of tbe situation is simply that tbe insurance was a matter wholly between tbe company and Atkins, in which tbe plaintiff bad no legal or equitable interest, any more than in any other property belonging absolutely to Atkins.” This being tbe correct position, tbe complaint as it' now stands sets forth no cause of action against tbe insurance , comp any, nor does it contain facts giving plaintiff any present right to recover against it nor to have judgment in any way directly affecting its rights. Tbe principle is very well stated in 30 Cyc., p. 125, as follows: “It is not sufficient reason for joining a person as defendant that tbe adjudication of tbe case at bar may determine points of law adversely to its interests. As a rule, tbe record must show a responsible interest in all tbe defendants,” citing among other cases Conkling v. Thruston and others, 18 Ind., 290; U. S. v. Pratt Coke and Coal Co., 18 Fed., 708. In our opinion, tbe casualty company has no interest or place in this controversy, and tbe judgment of bis Honor, sustaining the demurrer, must be Affirmed.