Standard Surety & Casualty Co. v. Metropolitan Casualty Co.

OPINION By SKEEL, P. J. The plaintiff filed this action in the Common Pleas Court to recover its expense incurred in defending The United Insurance Company in two separate actions brought by Mary F. Hoskins and her husband, seeking damages for personal injuries and loss of services. The actions of Mary F. Hoskins and her husband were originally filed against both The United Insurance Company and J. A. French. During the progress of the proceedings the plaintiffs dismissed their actions as to the defendant, French, and thereafter The United Insurance Company was the sole defendant. Plaintiff’s petition alleges that it was the claim of Mrs. Hoskins and her husband against The United Insurance Company that the said. French was an agent and employee of The United Insurance Company and that while acting in the course and scope of his employment he so. negligently operated his automobile as to injure Mary F. Hoskins. The plaintiff further alleges that the defendant, The Metropolitan Casualty Insurance Company of New York had issued a policy of insurance to J. A. French, agreeing to defend at its expense the said French, against any claim for damages growing out of the use of his motor vehicle and to pay such dam — 430 — ages within the policy limits as was caused, by the negligent operation of said vehicle. The policy, in defining the word “insured” provided as follows: “Definition of ‘Insured’: Except where specifically stated to the contrary, the unqualified word ‘insured’ wherever used in Coverages H and I and in other parts of this policy, when applicable to such coverages, includes not only the named insured but also any person while using the automobile and any person or organization legally responsible for the use thereof, provided the declared and actual use of the automobile is ‘pleasure and business’ or ‘commercial’ each as defined herein, and provided further the actual use is with the permission of the named insured.” The plaintiff’s petition further alleges that the defendant refused to defend The United Insurance Company 'against the actions of Mary P. Hoskins and her husband and that as a result this plaintiff who had issued a “non-ownership” liability policy to the United Insurance Company was compelled to conduct such defense and in so doing was compelled to expend the sum of $353.94. Plaintiff’s petition alleges that one of the provisions of its “non-ownership” liability policy with The United Insurance Company was as follows: “Other Insurance: The insurance afforded hereby shall be excess insurance over any other valid and collectible insurance available to the named insured, either as an insured under a policy applicable with respect to the automobile or otherwise, against a loss covered hereunder.” And further alleges that said policy provided in part: “Subrogation: In the event of any payment under the policy, the company shall be subrogated to all the insured’s rights of recovery therefor, and the insured shall execute all papers required and shall do everything that may be necessary to secure such rights.” The plaintiff attached to and made a part of its pleadings photostatic copies of both insurance policies as exhibits I and 2- and also copies of the petitions of Mary ,F. Hoskins and her husband as exhibits 3 and 4. The defendant demurred to the petition of plaintiff, claiming that because it did not allege in the petition that — 431 — The United Insurance Company was in fact legally responsible for the use of the automobile by French and did not set forth that the declared use of the automobile was “pleasure and business” or “commercial” it did not state a cause of action. The court overruled the demurrer and the defendant not desiring to plead further, judgment was rendered against it by the court. It is claimed by the defendant that the court erred. in overruling the demurrer. In giving consideration to this question it must be remembered that in the cases of Mary F. Hoskins and her husband against French and the United Insurance Company if there was any liability at all, French was primarily liable and the insurance company, because of the doctrine of respondeat superior, was secondarily liable, so that if the United Insurance Company was compelled to pay damages it could in turn recover such loss from French. This question was decided by this court in the case of Ohio Casualty Ins. Co. v Carmen Capolino, (44 Abs 564) decided December 3, 1945, Case No. 20119 (8th District Court of Appeals of Ohio), following the rule as stated in Restatement of Restitution, page 418 §96: “A person who, without fault, has become subject to tort liability for- the unauthorized act and wrongful conduct of another, is entitled to indemnity from the other for expenditures properly made in the discharge of such liability.”- The plaintiff under the provisions of its “non-ownership” liability policy above quoted, stands in the position of United Insurance. Company, the employer of French, in seeking to recover expenses incurred in defending the United Insurance Company against claims alleged to have resulted from the negligence of French. The contract of defendant by the policy it issued to French, bound it to defend any claim made against French, no matter how groundless, in which damages were claimed to have been sustained as a proximate result of his negligence in the operation of his automobile. The policy extended its coverage by the clause above quoted, to include: “* * * * * any person or organization legally responsible for the use thereof” * * * “provided declared and actual use of the automobile is ‘pleasure and business’ or ‘commercial’ * * — 432 — The allegations of plaintiff’s petition are that the petitions of Mary F. Hoskins and her husband that she was injured because of the negligence of French while operating his motor vehicle covered by defendant’s insurance policy issued to French and that the accident happened while he was acting for the United Insurance Company as its agent, in the furtherance of its business. These allegations bring the action clearly within the terms of the policy and even though such claims were without substance, the defendant was thereby bound to carry on the defense of the United Insurance Company. Failure to do so constituted a breach of its contractual duty to defend The United Insurance Company which under the facts pleaded was entitled to the benefit of the policy provisions. In the case of Bloom-Rosenbloom-Kline & Co. v Union Indemnity Co., 121 Oh. St. 220, the defendant had issued a policy of insurance to the plaintif against loss from the liability imposed by law upon the insured for damages on account of bodily injuries accidentally suffered or alleged to have been suffered by any person or persons, caused by the automobile (vehicles) described or referred to in the policy. The policy further provided that the insurance company, if suit was brought to enforce such claim for damages, would defend such action on behalf of the insured, no. matter how groundless the action might be. Such an action was brought by one who claimed to have been riding as a passenger in a vehicle hired by the assured and operated by one of its employees and by reason of the negligence of such employee a collision took place and the claimant was injured. After proper notice of the pending action the defendant filed certain pleadings and then refused to proceed further with the defense. The plaintiff brought action for the expenses incurred in defending itself against such pending action. The petition did not contain an allegation that the vehicle which it was claimed was operated negligently by the assured’s employee was covered by the policy. The trial court sustained a demurrer to the petition and the plaintiff not desiring to plead further, judgment was rendered against it. In reversing the trial court and the Court of Appeals, the Supreme Court on page 225-226 of the opinion says: “It is claimed that it was necessary that the plaintiff allege that the damages of the injured party were sustained while riding in an automobile in fact covered by the policy of insurance, or that an automobile covered by the policy was in fact involved in the accident. That begs the question. — 433 — Though, it turned out that the. automobile in which Terihay was riding was neither owned or hired by the assured and that the assured had no liability whatever, that fact was demonstrated and the defense established only at the end of a lawsuit. It is quite obvious that under the situation presented the assured could not aver that an automobile covered by the policy was involved in the accident. Its defense was that it had nothing to do with the automobile that caused the injury. The obligation specifically assumed by the insurance company to make defense against such action as that brought by Terihay required it to proceed to conduct the defense in behalf of the assured upon the giving of notice of such suit, and otherwise complying with the conditions of the policy in that respect. If the facts set up in Terihay’s petition had been established in the trial of that case, and a judgment rendered therein, the insurance company would have been required under the liability clause of ics policy to satisfy the judgment to the extent of the amount specified in its policy. Applying that test in this case, how can there be any question as to the liability of the company, under the defense clause of its policy, to make a defense to the claim set up in the action brought by Terihay?” The second paragraph of the syllabus provides as follows: “2. The petition in such action by the assured to recover from the company the cost and expense of maintaining its defense in the suit brought by the party claiming to have been injured, states a cause of action even though it does not contain an averment that the automobile covered by the policy was in fact involved in the accident resulting in the injury complained of.” Also, in the case of Socony-Vacuum Oil Co. v Continental Casualty Company, 144 Oh St 382, the first paragraph of the syllabus provides: “1. The duty of a liability insurance company under its policy to defend an action against its insured is determined from the plaintiff’s petition and when that pleading brings the action within the coverage of the policy of insurance, the insurer is required to make defense regardless of its ultimate liability to the insured.” The only distinction to be found between these cases and the case at bar, is that in the cases cited, the actions were — 434 — brought against the named insured while in the case here under considération, the plaintiff is one that is described in the omnibus clause, that is, one who was the employer of the assured and therefore ‘legally responsibile for his acts done while acting within the course and scope of his employment. The defendant relies strongly on the case of Southern Underwriters Co. v Dunn, 96 Fed (2d) 224 Circuit Court of Appeals, 5th Circuit, 1938, to sustain its claim that the petition does not state a cause of action. This case, however, is easily distinguishable. While it is true that the plaintiff’s petition in the Dunn case alleges that the defendant was the employer of the driver of the truck which injured the plaintiff and that at the time of the accident he was acting within the course and scope of his employment and that such allegations brought the defendant within the provisions of the driver’s policy as being legally responsible for his conduct, yet, upon trial, the parties stipulated: “That contrary to the allegations in said petition, the truck involved was owned solely by Kimmel (the driver); Dunn (whom plaintiff alleged was the owner of the truck and was hauling oil well pipe for Stanolind Pipe Line Co) and Stanolind Pipe Line Company had no ownership or interest in it, and Stanolind had had no interest or ownership in the oil well pipe and casing being hauled; that in truth and fact Kimmel was hauling the casing under an independent contract with Dunn, by the terms of which Kimmel agreed to and did furnish his own truck and did haul the pipe for an agreed price per foot for such casing and Dunn did not reserve or have any control or supervision over Kimmel or the truck he was using, or of the route, time or method of the hauling Sj! :ji * Sis # * Sk * The action was one for a declaratory judgment to determine whether under all the circumstances the insurance company under its omnibus clause by which it agreed to defend “one legally responsible” it was bound to defend Dunn and Stanolind Pipe Line Company. Under the stipulation of fact the court determined that neither Dunn nor Stanolind Pipe Line Company was legally responsible for the conduct of Kimmel, the assured, and therefore did not come within the terms of the policy. But without the judicial determination of such facts through the offices of a declaratory judgment action, the result would have been different. The headnote clearly brings put this point: — 435 — “A stipulation entered into in a suit by insurer -for a declaratory judgment to the effect that defendants were not ‘other insured’ within the meaning of policy at time of accident, relieved insurer from the obligation of defending actions against the defendants wherein the complaints alleged that the defendants were responsible for the use of the assured’s truck; notwithstanding provision in policy required insured (insurer) to defend actions against, ‘other persons’ responsible for the use of the Truck, even though the actions were groundless.” In Insurance Law & Practice, by Appleton, Vol. 7, page 131 §4355, it is stated: “Where a truck was driven by a person legally responsible for its operation with the permission of the named insured within a purpose permitted by the policy the operator was protected by the policy whether the owner was personally present or not. Of course the term ‘permission’ applies equally to one operating the vehicle as to one legally responsible for its use.” “The term ‘legally responsible’ includes a number of different types of persons, who may receive policy protection. First and foremost, of course, it includes persons actually operating the vehicle under the terms of the omnibus clause. It may include an employer, in whose business the driver was engaged at the time of the accident, even though liability to a deceased passenger, a fellow employee of the -driver, may have been limited by a state compensation act. It may include one having proper custody of a vehicle entrusted to him by a bailee of the insured. And instances of legal liability arising from the insured’s having signed a minor’s application for a license, or by reason of having permitted a person below the required age to drive have been held included within this term. A person not included within one of such categories is generally not protected by these policy terms.” In the case of Monroe v Heard et al, 168 So. 519 (Court of Appeals Louisiana, 1st Cir. 1936) action was brought by one injured through the claimed negligence of one who borrowed the car from the owner and with the consent of the owner was directing its operation by a third person. The petition alleged that the borrower of the automobile negligently directed the operation of the automobile. The court held, as is disclosed by the third paragraph of the headnotes, as follows: • — 436 — “Borrower using automobile with insured’s consent held within liability policy extending coverage to. any person riding in or legally operating automobile with, insured’s consent or legally responsible for operation thereof if borrower was riding in front seat and directing third person who was driving automobile.” And on page 521 we find: «* * * * * The car was placed under Mrs. Perkins unrestricted chargé by the owner. Was Mrs. Perkins responsible to plaintiff for the operation of the car? Does the petition set out such facts as would render Mrs. Perkins liable if she were made a party defendant? If she is liable for the operation of the car by Borsum, and if judgment could be rendered against her, it follows that she would be protected under the policy to the same extent as the insured owner.” In 5 American Jurisprudence, page 809, §543, it is said: “One v/ithin the protection of the omnibus clause in respect of an accident and his liability therefor, is an ‘assured’ within the meaning and effect of a policy provision giving to an injured person or his or her personal representative a right of action against the insurer, ‘in case execution against the assured is returned unsatisfied’ because of the latter’s insolvency or bankruptcy.” 72 A. L. R. 1430 part XVI. Clements v Preferred Accident Ins Co. 41 Fed (2d) 470, (C.C.A. 8th). It seems clear therefore that the plaintiff herein under the facts pleaded was entitled to the protection of the policy issued by the defendant to French (plaintiff’s employee) under the provisions of the omnibus clause and the court was correct in overruling the defendant’s demurrer, and the judgment, which was entered upon the defendant’s refusal to plead to the issues presented by plaintiff’s petition, must be sustained. LIEGHLEY, J., concurs. MORGAN, J., dissents. The Judgment of the Court of Common Pleas in the within entitled action is hereby affirmed. Exceptions. — 437 — LIEGHLEY, J., concurs. MORGAN, J., dissents.