Freed v. American Fire Insurance

Wi-iiteield, O. J., delivered the opinion of the court. It is insisted by the learned counsel for the appellee that the subrogation agreement and assignment arose out of an agreement of the insured and assignor with appellee, the assignee, for no purpose relative to the business of the alleged trust and combine; and again it is insisted that the appellant committed a tort, and the right of action, eo instante, vested in a third person because thereof; that said right was, by the subrogation agreement sued on, transferred and assigned to appellee; that such third person was in no way connected with any of the acts or facts alleged by way of defense, and that the right of action so vested in him is maintainable by appellee as assignee of such sindependent right aforesaid; and that therefore the pleas are an answer to the declaration, and.that Laws 1900, pp. 125-127, ch. 88, are not shown to be any bar to this suit. We cannot concur in all the criticisms made by learned counsel for appellee of the provisions of this act, but we think the first of the two propositions which we have stated above is sound. The subrogation of the insurer to the right of the insured for a wrongful destruction of the property insured can certainly not be held to be “any purpose relative to” the business of the trust of which the appellee was a conceded member. Subrogation is a right arising out of and by the operation of the law, and is an incident to the contract of indemnity. In Cooley’s Briefs on Insurance, vol. 4, p. 389, it is said, citing a great number of authorities: “If the insurer has paid the loss, the fact that it might have successfully con [81] tested the claim under the policy, and relieved itself from liability to the insured, does not affect its right of subrogation. The equity between the insurer and the insured is not matter with which the wrongdoer has any concern.” In Sheldon on Subrogation, sec. 223, it is said: “This subrogation of the insurers to the remedy against the wrongdoer who has caused the loss which the insurers have stood is only to the remedies and rights of action which were vested in the insured, or which the insured might have succeeded in obtaining from the party at fault, subject to all the liabilities and duties which rested on the insured, even in favor of third parties. It is not an independent right of action in the insurers themselves, and not subject to any estoppel existing against the insurers in their own right. The insurers succeed merely to the means of redress which were possessed by the party whom they have indemnified against the party whose wrongful act caused the loss.” In Cooley’s Briefs on Insurance, vol. 4, p. 3898, it is said: “Though the right of subrogation is in some cases based on the clause in the policy providing for the assignment to the insurer of the cause of action against the wrongdoer (Egan v. British & Foreign Ins. Co., 61 N. E., 1081), it is generally held that an assignment is not necessary to support the right” —citing a large number of cases. And again it is laid down in Cooley’s Briefs on Insurance, vol. 4, pp. 3895, 3896, that “this right of subrogation does not depend on the presence of a special clause in the policy conferring the right, nor is the insurer’s right of subrogation affected by the failure of the insurer to comply with the laws regulating insurance companies” —citing a number of authorities. And finally it is said in Phœnix Ins. Co. v. Erie & Western Transportation Co., 117 U. S., 312, at page 321, 6 Sup. Ct., 750, at page 753, 29 L. Ed., 873, that “from the very nature of the contract of insurance as a contract of indemnity, the insurer, when he has paid to the insured the amount of the indemnity agreed on between them, is entitled by way of salvage to the benefit of anything that may be [82] received, either from the remnants of the goods, or from damages paid by third persons for. the loss. But the insurer stands in no .relation of contract or' of privity with such persons. His title arises out of the contract of insurance, and is derived from the insured alone, and can only be enforced in the right of the latter. In a court of common law it can only be asserted in his name; and even in a court of equity or admiralty it can only be asserted in his right. In any form- of remedy the insurer can take nothing by subrogation but the rights of the assured.” From these authorities it seems to be clear that on the facts of this ease the appellee was entitled to enforce against the appellant the right which the‘insured had against the appellant, having paid the loss to the insured. What the insurer has is just precisely the right of action which the insured had, growing out of the appellant’s wrongdoing. The insurer’s right to sue at all is wholly derivative, and it is impossible to see, in this view of the matter, how this right has anything to do with, or can be said to have any relation to the business of the trust or combine. But, again, it is earnestly insisted that the right of action asserted by the appellee, the insurer, is independent of, and arises from a source entirely distinct from, the insurance contract. It is a right ivhich accrued in favor of a third person, the insured, who was in no way connected with the trust or combine. Such right of action is maintainable by the insurer only in the right of the assured, and it can only be successfully maintained by proof of the commission of a tort by the appellant, which certainly presents an issue entirely collateral to the original contract of insurance. The insurer maintains this right of the assured, if at all, quite independently of the stipulation for subrogation in the policy of insurance. He succeeds, if he does succeed, in the suit against the appellant, not because of the form in which he sues as assignee under the subrogation clause of the policy; but he has been substituted by equitable principles to the right of the insured himself to re [83] cover against the appellant, and in this view it certainly cannot be claimed that that right of action is anything other than wholly collateral to the contract of insurance. The case of Connolly v. Union Sewer Pipe Co., 184 U. S., 540, 22 Sup. Ct., 431, 46 L. Ed., 619, is claimed to be decisive in favor of appellee on this point. The supreme court in that case, after holding that, even if the combination was illegal, nevertheless the purchases by appellant had no connection with the alleged illegal combination, and therefore that the question of the existence of such combination was entirely collateral to the right asserted by the appellee against the appellant, and that the contract between the appellee and the appellant was in every sense collateral to the alleged -illegal agreement of appellee and other associations and corporations, whereby an illegal combination was formed to fix the price for the sale of sewer pipe, and that as'the action was not to enforce the terms of such an agreement, the existence of a combination was entirely collateral to the question- of debt or liability on the part of the purchaser of sewer pipe to the seller thereof. We, however, prefer not to rest our judgment on this second ground insisted on by learned counsel for appellee in this case, but rather upon the ground first above stated. The language' of our act of 1900 is exceedingly broad, and we do not find it necessary in this case to affirm the judgment of the court below on the ground secondly argued under the authority of Connolly v. Union Sewer Pipe Co., to-wit, that the contract of insurance in this case is collateral to the trust agreement which relates only to the fixing of rates. The United States supreme court, in a very recent case, Chattanooga Foundry & Pipe Works v. City of Atlanta, 203 U. S. 390, said, in a case where the city of Atlanta sued for threefold damages to business or property authorized by Anti-Trust Act July 2, 1890, ch. 647, see. 7, 26 Stat., 209 [U. S. Comp. St. 1901, p. 3202], in a case of violation of that act, that “the fact that'the sale of the pipe was not so connected in its terms with the unlawful combination as to84 be unlawful (Connolly v. Union Sewer Pipe Co., 184 U. S., 540, 22 Sup. Ct., 431, 46 L. Ed., 679), in no way contradicted the proposition that the motives and inducements to make it were so affected by the combination as to constitute a wrong,” and added that, “in most cases where the result complained of as springing from a tort is a contract, the contract is lawful and the tort goes only to the motives which led to its being made, as when it is induced by duress or fraud.” We cite this by way of caution merely, and out of the same abundant caution prefer to rest our judgment in this case on the ground first hereinbefore set forth. Affirmed.