Opinion
15491
January 21, 1943.
Before R.W. SHARKEY, County Judge, Florence County, March, 1942. Affirmed.
Action by the Carolina Veneer Lumber Company against the American Mutual Liability Insurance Company to recover the amount of an employee's judgment against plaintiff plus the costs of an defending the employee's suit and costs of prosecuting the instant action, the present action being based upon a policy issued plaintiff by defendant, conditioned to indemnify plaintiff against common-law liability for injuries received by plaintiff's employees. From a judgment for plaintiff, defendant appeals.
The order of County Judge Sharkey, adopted as the opinion of the Court, follows:
The above-entitled action was tried at the December, 1941, term of this Court, and at the conclusion of all the testimony it was agreed that there was no issue of fact for the jury to pass upon, with the possible exception of the amount to be allowed as an attorney's fee for counsel for plaintiff in the event it should be held that plaintiff's cause of action should be sustained. On this point I ruled that the evidence as to the nature and extent of the services rendered by plaintiff's attorney being undisputed, that question became one of law for decision by the Court. The case was then withdrawn from the jury and, following full arguments on both sides on the controversial issues made by the pleadings and the evidence, it was taken under advisement.
The questions at issue have been fairly raised and clearly stated in the grounds of the defendant's motion for a direction of the verdict in its favor, to wit:
"1. That the evidence is susceptible of only one inference, in fact there is no controversy or dispute on the fact that L.H. Hyman, the alleged injured employee, assuming that he was an employee of Carolina Veneer Lumber Company, was not covered by the policy of insurance involved, for the reason that no premium was agreed to be paid on him or for him and in fact no premium was paid on or for him under the provisions of the policy.
"2. That the alleged employee, L.H. Hyman, was not at the time he received the injury engaged in an activity covered by the policy.
"3. That L.H. Hyman was not an employee of Carolina Veneer Lumber Company at the time he received his injury but assuming that he was an employee he was not employed or at work in the business of the Carolina Veneer Lumber Company covered by the provisions of the policy."
These, in substance, are the material allegations of the complaint:
The issuing by the defendant of the insurance policy, whereby it agreed with plaintiff to indemnify it against loss by reason of liability for damages on account of personal injuries received by employees of plaintiff sustained within the territorial limits of the United States or the Dominion of Canada. An injury while said contract was in force, sustained by one L.H. Hyman while employed by the plaintiff, caused by the negligent operation by plaintiff of a skidder. The prosecution by Hyman of an action against plaintiff for personal injury damages resulting from plaintiff's negligence. The refusal of defendant, upon demand, to defend said action on behalf of plaintiff, in accordance with the provisions of the insurance contract. The recovery by Hyman of a verdict against plaintiff in the sum of $2,000.00. The entry of judgment against plaintiff for the amount of the aforesaid verdict and costs, and, by reason of the refusal of defendant to defend the action, the incurring by plaintiff of expense amounting to $1,000.00 in the defense thereof.
By its answer the defendant admits the issuing of the insurance contract and the recovery of judgment by Hyman against plaintiff as alleged in the complaint. Its defense and denial of liability are grounded upon the affirmative allegation that under the terms of the contract it had no responsibility or liability to defend the Hyman suit or to indemnify plaintiff against loss by reason thereof for the following reasons: That at the time of his injury Hyman was not an employee of the plaintiff. That if he was in plaintiff's employ, the operations then engaged in by him were not those declared under the provisions of the policy; and also, that assuming that Hyman was an employee of plaintiff, he was not one whose remuneration was considered in any respect either at the inception of the contract or in the later adjustment of the premium.
The inquiry resulting from the foregoing analysis of the pleadings, and from a consideration of the undisputed evidence, is entirely a legal one. Under other circumstances the question of the status of Hyman at the time of his injury might be a question of fact, but even this question becomes one of law, because of its previous adjudication in the original action between Hyman and Carolina Veneer Lumber Company. In that action the relationship of master and servant, between Hyman and plaintiff, was one of the chief questions at issue. That question, along with the issues of negligence and the amount of Hyman's damage, was prosecuted to a final determination in the Court of Common Pleas and was resolved against plaintiff. The record of the former action, which is in evidence in this case, must be held to import absolute verity of the facts which it shows have been adjudicated, and the defendant cannot now be heard to contend to the contrary, in the face of the record, and in the face also of its refusal, upon demand to defend that action. Blue Bird Cab Co. v. American F. C. Co., 219 N.C. 788, 15 S.E.2d 295; Aetna Life Insurance Co. v. Maxwell, 4 Cir., 89 F.2d 988. I therefore find and hold that at the time of his injury Hyman was an employee of plaintiff.
A careful consideration of the entire policy can lead to no other conclusion but that the plaintiff is entitled to recover in this action. The contract, being one prepared by the defendant company, must be construed liberally in favor of the plaintiff. Lane v. New York Life Ins. Co., 198 S.C. 250, 17 S.E.2d 539. That construction should be reached from a consideration of the entire contract. Patterson v. Courtenay Mfg. Co., 196 S.C. 515, 14 S.E.2d 16. Under Section I, Subdivision (a), the contract makes the defendant liable for any injuries resulting to an employee covered by the Workmen's Compensation Act, Act July 17, 1935, 39 St. at Large, page 1231, and under Section I (b) it agrees "to indemnify this employer against loss by reason of the liability imposed upon him by law for damages on account of such injuries to such of said employees as are legally employed wherever such injuries may be sustained within the territorial limits of the United States of America or the Dominion of Canada." The term, "legally employed," as used in this provision, does not mean whether or not there was a contract of employment but whether or not a legal contract of employment could be made. Ocean Accident G. Cooperation v. Washington Brick T.C. Company, 148 Va., 829, 139 S.E., 513. The claim of Hyman was not made against the plaintiff under the Workmen's Compensation Act of South Carolina, but the terms of that provision are quite persuasive that the liability of the defendant extended to the case at bar. In the opening paragraph of the policy the defendant "does hereby agree with the employer, named and described as such in the declarations, forming a part hereof, as respects personal injuries sustained by employees, including death at any time resulting therefrom as follows:
"I. (a) To pay promptly to any person entitled thereto under the workmen's compensation law and in the manner therein provided, the entire amount of any sum due, and all installments thereof as they become due."
By the terms of the provision last cited, it will be seen that had Hyman claimed against Carolina Veneer Lumber Company under the Workmen's Compensation Act, the question of whether or not he was an employee of that company would necessarily have had to be decided by the trial commissioner and on review by the full commission as one of the questions of fact in the claim. This would be the initial question of fact because, if Hyman was not an employee, he, of course, could not recover. Had the issue been tried out before the Workmen's Compensation Commission and this question of fact decided in favor of Hyman and an award made, there can be no question but that under the terms of the policy the defendant would have been liable to pay the award and to save the plaintiff harmless therefrom.
No other reasonable construction can be put upon Section I (b) but that the defendant extended to the plaintiff the same protection against common-law liability to alleged employees as to alleged employees claiming under the Workmen's Compensation Act. The language used in this section sustains this construction. It is "to indemnify this employer (Carolina Veneer Lumber Company) against loss by reason of the liability imposed upon him by law." There could be no liability imposed by law until Hyman recovered. When he recovered and the judgment was paid by the plaintiff, the loss had been established. It is admitted by defendant's counsel that under Section I (a) had Hyman claimed under the Workmen's Compensation Act and an award been made, the defendant would have been obliged to pay Hyman. It would have been precluded upon the question of Hyman's status as an employee of Carolina Veneer Lumber Company by the award of the Industrial Commission. If the defendant should be sustained in its contention that Section I (b) gave the defendant the right to question the status of Hyman as an employee after he recovered in this action, the contract would give to Hyman a greater protection than it does to Carolina Veneer Lumber Company, which is the assured and purchaser of the policy. A proper construction of the policy, considering all its terms, leads to no other conclusion but that when the loss of the plaintiff was established by the recovery of Hyman in his action against the plaintiff in the Court of Common Pleas for Florence County, the question of his status as an employee had been determined in so far as the parties to this suit are concerned.
The remaining questions involve a construction of the terms of the insurance contract.
It is, in the first place, insisted that the operations conducted by plaintiff and in which Hyman was engaged at the time of his injury were outside and apart from the specified operations as declared in the policy.
The policy must be construed and considered as a whole, and in the event of a conflict those provisions most favorable to the insured must be adopted. There is no need for the citation of authority in support of this postulate.
The defendant's chief contention is that the declarations which form a part of the policy restrict and limit the coverage to employees engaged in work at the particular site or location therein specified. Standing alone, and without reference to any other portion of the contract, there would be much merit in the defendant's position. But when resort is had to other pertinent sections of the policy it becomes abundantly clear that the coverage is sufficiently broad to include the Hyman claim. In language that is unequivocal and devoid of any trace of ambiguity, the defendant contracts to indemnify the plaintiff against loss by reason of legal liability due to injury to any employee of plaintiff, wherever the same may be sustained, and also to defend on behalf of plaintiff any action, however groundless, that may be brought against it by reason of such injuries. For the purpose of insurance coverage the defendant also agrees that the business operations of plaintiff as defined in the aforesaid declarations shall include all incidental operations connected therewith, even though they may not be conducted at the site or location described in the declarations. These stipulations are stated in the policy in the following language:
"I. (b) To indemnify this employer against loss by reason of the liability imposed upon him by law for damages on account of such injuries to such of said employees as are legally employed wherever such injuries may be sustained within the territorial limits of the United States of America or the Dominion of Canada. In the event of the bankruptcy or insolvency of this employer the company shall not be relieved from the payment of such indemnity hereunder as would have been payable but for such bankruptcy or insolvency. If, because of such bankruptcy or insolvency, an execution against this employer is returned unsatisfied in an action brought by the injured, or by another person claiming by, through, or under the injured, then an action may be maintained by the injured, or by such other person claiming by through, or under the injured, against the company under the terms of this policy for the amount of the judgment in said action not exceeding the amount of this policy.
* * * * *"III. To defend, in the name and on behalf of this employer, any suits or other proceedings which may at any time be instituted against him on account of such injuries, including suits or other proceedings alleging such injuries and demanding damages or compensation therefor, although such suits, other proceedings, allegations, or demands are wholly groundless, false, or fraudulent.
* * * * *"VI. This agreement shall apply to such injuries so sustained by reason of the business operations described in said declarations which, for the purpose of this insurance, shall include all operations necessary, incident, or appurtenant thereto or connected therewith, whether such operations are conducted at the work places defined and described in said declarations or elsewhere in connection with, or in relation to, such work places."
To hold that the benefits of the contract before the Court in this case should be denied to plaintiff because of the limitations appearing in the aforesaid declarations would result in completely nullifying the foregoing clearcut provisions of the policy.
There can be no question, under the evidence in this case, that Hyman when injured was engaged in work pertaining to ordinary and incidental operations connected with the business of plaintiff as defined in the declarations. While so engaged he received injuries to his person sustained within the scope of such employment. His injury resulted in an action for damages brought by him against plaintiff, in which, among other things, he alleged that there existed between himself and plaintiff the legal relationship of master and servant. The defendant insurance company was notified of the pendency of this action and was requested to defend the same on behalf of plaintiff. This the defendant refused to do. The action was prosecuted to final judgment in favor of Hyman, and his status as an employee of plaintiff was conclusively established thereby, as well as the liability of plaintiff for damages on the issue of actionable negligence. Under these established facts, considered in the light of all the provisions of the insurance contract, it would, it seems to me, be out of harmony with both reason and authority to deny to plaintiff in this action the right of recovery.
Considerable stress is laid by defendant upon the fact that the remuneration of Hyman as an employee of plaintiff was not taken into consideration in the computing or in the final adjustment of the premium. It would be inequitable to hold that this would be sufficient to defeat the right which plaintiff would otherwise have to recover against defendant. The pertinent provision of the policy is as follows:
"A. The premium is based upon the entire remuneration earned, during the policy period, by all employees of this employer engaged in the business operations described in said declarations together with all operations necessary, incident or appurtenant thereto, or connected therewith whether conducted at such work places or elsewhere in connection therewith or in relation thereto; * * *. If any operations as above defined are undertaken by this employer but are not described or rated in said declarations, this employer agrees to pay the premium thereon, at the time of the final adjustment of the premium in accordance with condition C hereof, at the rates, and in compliance with the rules, of the manual of rates in use by the company upon the date of issue of this policy."
The only claim that defendant could successfully assert on this ground would be for the payment by plaintiff of such additional sum as might be proper because of the failure to consider Hyman's remuneration in the adjustment of the premium.
It follows from the foregoing conclusions that plaintiff is entitled to the relief demanded in the complaint. As to the amount of the judgment and costs in the Hyman suit there is no dispute. The evidence shows that the amount paid by plaintiff in settlement of the judgment, interest, and costs is the sum of $2,135.00. It is also undisputed that plaintiff was required to incur the expense of the employment of counsel to defend the action, following the refusal of defendant to do so. The nature and extent of the services rendered by plaintiff's counsel have been established by competent evidence which is undisputed. Under these circumstances the reasonableness of the amount of the attorney's fee becomes a question for the Court. Without entering upon a detailed review of the testimony on this point, it is sufficient to say that the sum of $1,000.00 would be reasonable compensation for the services which plaintiff's attorneys rendered in the Hyman action. However, plaintiff, by allegations and the prayer of the complaint, is limited to a total recovery of $3,000.00 — hence no more than the sum of $855.00 can be allowed as an expense item.
It is therefore ordered that defendant's motion for a directed verdict be and it is hereby overruled.
It is further ordered that plaintiff have judgment against defendant in the sum of $3,000.00.
Mr. Stephen Nettles, of Greenville, and Messrs. Royall Wright, of Florence, Counsel for Appellant, cite: As to "Coverage" limitations of the Indemnity Policy: 199 S.C. 325, at page 333, 19 S.E.2d 463; 196 S.C. 515, 14 S.E.2d 16; (Ala.), 199 So., 868, at page 869.
Messrs. McEachin Townsend, of Florence, Counsel for Respondent, cite: As to "Coverage" of Indemnity Policy: 194 S.C. 67, 9 S.E.2d 27; 87 F.2d 988; (C. C.A.), 297 F., 580; 123 A.L.R., 1149; 190 S.C. 252, 2 S.E.2d 796; 53 S.Ct., 380, 288 U.S. 162; (N.C.), 4 S.E.2d 507; (Ind.), 14 N.E.2d 919; 16 N.E.2d 698, 117 A.L.R., 1293; (Ala.), 199 So., 868. As to Obligation of Insurer to Defend Action Against Employer: 89 F.2d 988; 130 A.L.R., 178, Annot.; (C.C. A., Pa.), 117 F.2d 845; 190 S.C. 252, 2 S.E.2d 796.
January 21, 1943.
This Court being of the opinion that the judgment of the trial Court in this case should be affirmed, and that the issues herein are correctly decided in the order of the trial Judge, for the reasons stated in that order, this Court, therefore, adopts the aforesaid order of the Honorable R.W. Sharkey as the opinion of this Court in this case, and directs that the order be reported.
Judgment affirmed.
MR. CHIEF JUSTICE BONHAM, MESSRS. ASSOCIATE JUSTICES BAKER, FISHBURNE and STUKES, and CIRCUIT JUDGE G. DEWEY OXNER, ACTING ASSOCIATE JUSTICE, concur.