State ex rel. Boney v. Central Mutual Insurance Co. of Chicago

Barnhill, J. "Wliile tbe Insurance Company denied liability and declined to investigate tbe claims against tbe insured, or to defend tbe actions instituted thereon, and tbe receiver disallowed tbe claim upon tbe contention that no valid contract existed between tbe Central Mutual Insurance Company of Chicago and Tbomas-Howard Company, it is now agreed that there was a valid and subsisting binder and policy of insurance issued by tbe defendant Insurance Company. It is also agreed as to tbe amounts paid out by tbe agency in behalf of tbe insured in settlement of claims against it, which were covered by tbe Central Mutual policy. It tben appears that two of the reasons assigned by tbe receiver for disallowing tbe claim no longer exist. Only one other question remains for determination. Was claimant such a pure volunteer as to be deprived of tbe right of subrogation? If so, its payment of tbe claims against tbe insured extinguished tbe liability both as against tbe insured and tbe insurance company. If not, tbe claimant is entitled to reimbursement from tbe insurance company under tbe doctrine of subrogation and by reason of tbe assignment of tbe claims to it. Under tbe agreed statement of facts “. . . when Central Mutual agreed to issue its policy as aforesaid and bad bound tbe risk tbe Home Insurance Agency advised Tbomas-Howard Company that it bad secured [566] a policy in Central Mutual and further advised Thomas-Howard Company that it was fully covered in accordance with its order, and Thomas-Howard paid Home Insurance Agency the premium which Home Insurance Agency had advised was due and Home Insurance Agency forwarded premium to Central Mutual.” Had the Home Insurance Agency merely informed Thomas-Howard that the defendant had issued a policy in its favor and nothing more, it could be argued that its duty as broker there ended. However, this is not the case. Claimant agency affirmatively assured Thomas-Howard Company that it was “fully covered in accordance with its order,” and Thomas-Howard, relying upon this advice, paid the demanded premium for the protection it had ordered. “A broker who fails to perform his duties faithfully becomes liable to his principal for damages suffered as a consequence of his breach of duty. . . . Furthermore, the broker is liable for failure to procure or keep up insurance on the principal’s property where he is under a duty to do so.” 8 Am. Jur., “Brokers,” sec. 98. In 18 A. L. R., at page 1214, the general rule applicable to brokers and agents is stated as follows broker or agent who, with a view to compensation for his services, undertakes to procure insurance on the property of another, and who fails to do so, will be held liable for any damage resulting therefrom.” Elam v. Realty Co., 182 N. C., 599, is there correctly cited as one of the cases supporting this rule. In the instant case the broker not only undertook to secure for Thomas-Howard a particular, specified insurance coverage, but Thomas-Howard Company relied upon this assurance, paid the named premium, and made no further negotiation with respect to insurance coverage.' By its own conduct and representations in the course of dealing as broker the Home Insurance Agency was estopped from ■ denying that Thomas-Howard Company was protected by the insurance ordered. “Either the principal or the broker may be estopped by his representations or conduct from repudiating a given transaction between the parties.” 9 0. J., “Brokers,” sec. 43. As Thomas-Howard Company had not dealt with defendant company but had dealt solely with the Home Insurance Agency and looked to it exclusively for its protection, it naturally turned to that agency when the accident claims were filed. The defendant company then denied the existence of its contract and all liability thereunder. This left the insured without protection contemplated by the policy at a time when it was most needed, except for the intervention of the claimant on the demand of the insured. Even if it be conceded that there was no legal liability resting upon the Home Insurance Agency to intervene and investigate said claims and defend said suits, it was morally bound to do so by reason of its assurance of coverage and the failure of the company with which it had placed the policy to comply with its contract. [567] The claimant agency, therefore, upon discovering that the defendant did not intend to discharge its contract and realizing that Thomas-Howard had relied upon the agency’s representation that defendant had contracted to protect the insured from loss, assumed the obligation of defendant Insurance Company. This was done upon the express demand and request of the insured. It is agreed “that the payments made by Home Insurance Agency in settlement of the suits were wise settlements and resulted in substantial savings; that in all probability verdicts would have been rendered in each case for very much larger amounts if the suits had not been defended and settled.” The claimant now seeks protection and reimbursement under the doctrine of subrogation. Davison, v. Gregory, 132 N. C., 389; Moring v. Privott, 146 N. C., 558; Bank v. Bank, 158 N. C., 238. However, “the doctrine of subrogation is not applied for the mere stranger or volunteer, who has paid the debt of another, without any assignment or agreement for subrogation, being under no legal obligation to make the payment, and not being compelled to do so for the preservation of any rights or property of his own.” Sheldon, The Law of Subrogation, 2nd Ed., sec. 240. Accordingly, we must determine whether the agency comes within the protection of the doctrine. First, was the agency a volunteer; and, second, if it was a volunteer, has it by assignment brought itself within the protection of the doctrine? A payment made under compulsion is not voluntary; payment made under a moral obligation, or in ignorance of the real state of facts, or under an erroneous impression of one’s legal duty, is not a voluntary payment. 60 C. J., “Subrogation,” see. 27. “If he bona fide claims an interest he is not a mere volunteer, and may be subrogated, but he must show that he had or supposed he had some interest to be protected.” Quoted with approval by Walker, J., in Publishing Co. v. Barber, 165 N. C., 478, 485, from Sheldon, The Law of Subrogation. “He was not an intermeddler, if he acted in good faith, nor was it a mere act of ‘unauthorized forwardness’ beyond his known obligations and duty. Sanders v. Sanders, 17 N. C., 262.” Publishing Co. v. Barber, supra. “Cases in our own reports illustrate the doctrine that though the party who makes the payment may, in fact, have no real or valid legal interest to protect, he may yet be subrogated when he acts in good faith, in the belief that he had such interest.” Publishing Co. v. Barber, supra. In this connection it is agreed “. . . that Home Insurance Agency, acting in good faith upon a bona fide belief that in view of its representation of coverage to Thomas-Howard Company, it was liable in damages to Thomas-Howard Company if it did not defend, and further in view of the flat refusal of Central Mutual to pay or defend and the denial by the Central Mutual that it had ever issued a contract of insurance, and further in view of the fact that the suits were pending and [568] something had to be immediately done to minimize the losses/’ paid the smaller claims, employed counsel to defend both suits, and finally made a reasonable and satisfactory settlement of the claims. It is sufficient to invoke the doctrine of subrogation if (1) The obligation of another is paid; (2) “for the purpose of protecting some real or supposed right or interest of his own.” 60 C. J., “Subrogation,” sec. 118. “In the law of subrogation, the distinction between a mere volunteer or intermeddler and one who pays in the protection of a right or interest, believed to be good, though it may turn out afterwards to be an invalid one, is well marked by the authorities.” Publishing Co. v. Barber, supra. The doctrine of subrogation originated in equity; “it is designed to promote and to accomplish justice, and is the mode which equity adopts to compel the ultimate payment of a debt by one who in justice, equity and good conscience, ought to pay.” 60 C. J., “Subro-gation,” secs. 3, 5. It is because of this equitable origin and basis that subrogation “will not be decreed in favor of a mere volunteer, who, without any duty, moral or otherwise, pays the debt of another; for such a person can establish no equity, and can obtain the right of substitution by contract only.” 25 R. C. L., “Subrogation,” sec. 11. Likewise, it is because of the sound basis of the doctrine in equity and good conscience that the term “volunteer” as an exception or limitation should be narrowly and strictly interpreted to the end that the doctrine of subrogation may be expansively and liberally applied. “It (the doctrine of subrogation) is a remedy which is highly favored and is not so restricted in its application as formerly. The courts are inclined rather to extend than to restrict the principle so that although formerly the right was limited to transactions between principals and sureties, now it is broad and “expansive and has a very liberal application. It is no longer confined to cases of suretyship, but the doctrine has been steadily growing and expanding in importance, and becoming more general in its application to various subjects and classes of persons, the principle being modified to meet the circumstances of cases as they have arisen.” 60 C. J., “Subrogation,” sec. 17. Conceding without deciding that the Home Insurance Agency was not legally obligated to assume the defense of the claims filed against Thomas-Howard Company, it is admitted that the agency was “acting in good faith upon a bona -fide belief ... it was liable to Thomas-Howard Company if it did not defend the suits,” and that it accordingly settled the claims. This is sufficient to bring the agency under the protection of the doctrine of subrogation in asserting its claim. Furthermore, the agency paid the claims against the insured at the request and upon the demand of the insured. Even if claimant had been a mere volunteer or intermeddler under the doctrine of subrogation, the [569] .assignment by tbe Thomas-IIoward Company to tbe claimant of its rights growing out of tbe policy worked a valid transfer to claimant of tbe full right to be reimbursed by defendant under tbe policy. “Tbe general test of assignability has been given, as to whether tbe claim would survive to or against tbe personal representative of tbe decedent. As a general rule, all ordinary business contracts are assignable, and actions for tbe breach may be in tbe name of tbe assignee, unless such • assignment is prohibited by law, or would be in contravention of some principle of public policy, or tbe performance of tbe contract involved tbe element of personal skill or credit.” McIntosh, N. C. Prac. and Proc., p. 199, and cases cited. “Yolunteers, in tbe absence of some special circumstance upon which they can base their claims, can obtain tbe equal right to be subrogated only by virtue of an agreemeiit, express or implied, or by request from tbe debtor to pay, which is in effect an implied contract, or by ratification, or by taking an assignment of tbe debt.” Publishing Co. v. Barber, supra. Tbe claimant not only paid in good faith under its representation that tbe insured was fully covered, but it took an assignment from tbe insured and is by reason thereof entitled to maintain its action. We conclude that there was error in tbe judgment below and that tbe same should be reversed to tbe end that tbe Home Insurance Agency claim may be duly allowed. Reversed.