Summary
explaining that the burden is on the insurer to show an exclusion applies because, "[w]hen an insurance policy contains a general liability clause, followed by a clause or clauses which except specified cases from the operation of the policy," the exceptions are in the nature "of [an] affirmative defense," as to which "the onus of allegation and proof is . . . upon the defendant"
Summary of this case from Snell v. United Specialty Ins. Co.Opinion
6 Div. 816.
April 10, 1924.
Appeal from Circuit Court, Jefferson County; D. A. Greene, Judge.
David J. Davis and Metz Griffith, all of Birmingham, for appellant.
Waiver or estoppel does not operate to extend a contract of insurance to cover a liability which the parties understood and expressly agreed it should not cover. Goodman v. Georgia Life Ins. Co., 189 Ala. 130, 66 So. 649; Hollings v. Brown, 202 Ala. 504, 80 So. 793; McCoy v. N.W. Mutual Ass'n, 92 Wis. 577, 66 N.W. 697, 47 L.R.A. 681; Two Rivers Dredge Co. v. Maryland Cas. Co., 168 Wis. 96, 169 N.W. 291; Rosenthal v. Insurance Co., 158 Wis. 550, 149 N.W. 155, L.R.A. 1915B, 361, Ann. Cas. 1916E, 395.
Weatherly, Birch Hickman, of Birmingham, for appellee.
The insurance company having undertaken the defense of the action, and having assumed liability with full knowledge of the facts, and by its act precluding plaintiff from making a reasonable settlement, could not thereafter disclaim liability. Joseph Gordon v. Mass. B. I. Co., 186 App. Div. 630, 174 N.Y. Supp. 844; Rosenbloom v. Maryland Cas. Co., 153 App. Div. 23, 137 N.Y. Supp. 1064; Fairbanks Canning Co. v. L. G. A. Co., 154 Mo. App. 327, 133 S.W. 664; Royle Min. Co. v. Fid. Cas. Co., 126 Mo. App. 104, 103 S.W. 1098; Globe Nav. Co. v. Maryland Cas. Co., 39 Wn. 299, 81 P. 826; Empire State Surety Co. v. Pac. Nat'l Lbr. Co., 200 Fed. 224, 118 C.C.A. 410; Humes Const. Co. v. Phila. Cas. Co., 32 R.I. 246, 79 A. 1, Ann. Cas. 1912D, 906; Tozer v. O. A. G. Corp., 99 Minn. 290, 109 N.W. 410.
The question of decisive importance presented by the appeal is upon the validity and sufficiency of the estoppel set up by the plaintiff in its replication to the defendant's special plea numbered 3.
When an insurance policy contains a general liability clause, followed by a clause or clauses which except specified cases from the operation of the policy, it is not necessary for the complaint to negative the exceptions — their existence being a matter of affirmative defense, as to which the onus of allegation and proof is placed upon the defendant. Standard L. A. Ins. Co. v. Jones, 94 Ala. 434, 437, 10 So. 530; 1 Corp. Jur. 490, § 248; Id. 493, § 265. We do not understand, however, that this rule shifts the general burden of proof from plaintiff to defendant; and when the defendant has offered evidence showing prima facie that the case is one of specified nonliability, the burden of showing a case within the operation of the policy remains upon the plaintiff. 1 Corp. Jur. 496, § 284; Id. 498, § 289.
The defense set up by plea 3 is that the liability incurred and discharged by plaintiff is a liability imposed upon it by the Employers' Liability Law of Alabama, and that loss from such a liability is expressly excluded from the indemnity obligation of the policy.
The facts relied upon by plaintiff under plea 5, as constituting an estoppel against defendant's assertion of that exemption, or as imposing a new liability, are: (1) Defendant knew that the action against plaintiff was under the Employers' Liability Act of Alabama; (2) with that knowledge defendant elected to defend the suit, and assumed control and direction of it; (3) plaintiff was thereby induced to omit the employment of its own counsel, and to surrender the conduct and control of the cause to defendant; and (4) plaintiff relinquished its right and opportunity to make a settlement of the case with the injured party for approximately $175.
Under plea 6, the facts relied on as constituting an estoppel are: (1) After investigating the accident, defendant advised plaintiff that plaintiff was not liable, and that defendant would assume conduct and control of the claim; (2) plaintiff surrendered the conduct and control of the matter to defendant; (3) the injured party offered to settle with plaintiff for his actual loss of about $175, of which offer plaintiff advised defendant; (4) defendant advised plaintiff that there was no liability, and said the matter was in defendant's hands, and not in plaintiff's; and (5) acting on that course of conduct by defendant, plaintiff relinquished its right to make a settlement, and failed to make a settlement on the terms mentioned.
It is settled by the decisions of this court that a liability not covered by an indemnity insurance policy will not be ingrafted on the policy by the mere act of the insurer in assuming control of the litigation and conducting the defense when the beneficiary is sued upon such a liability. Goodman v. Ga. Life Ins. Co., 189 Ala. 130, 66 So. 649; Hollings v. Brown, 202 Ala. 505, 80 So. 792. In such a case there is no field for the application of any doctrine of waiver or election, for original, primary obligations are not created in that way. McCoy v. N.W. Mut. Ass'n, 92 Wis. 577, 66 N.W. 697, 47 L.R.A. 681; Two Rivers, etc., Co. v. Maryland Casualty Co., 168 Wis. 96, 169 N.W. 291.
It is clear, therefore, that plaintiff's replications to defendant's special plea 3 must be grounded upon an estoppel, the essential constituents of which must be alleged. We think the replications do show the elements of a complete estoppel: (1) A position of authority assumed by defendant under color of right; (2) submission to and reliance upon that assumption, by plaintiff; and (3) injury suffered by plaintiff as a proximate consequence of such submission and reliance. That such an estoppel is sufficient, and is a valid answer to such a defense has been affirmed by a number of well-considered decisions. Globe Navigation Co. v. Maryland Casualty Co., 39 Wn. 299, 81 P. 826; Fairbanks Canning Co. v. L. G. A. Co., 154 Mo. App. 327, 133 S.W. 664; Empire, etc., Co. v. Pacific Nat. Lbr. Co., 200 Fed. 224, 118 C.C.A. 410; Rosenbloom v. Maryland Casualty Co., 153 App. Div. 23, 137 N.Y. Supp. 1064; Joseph Gordon, Inc., v. Mass. Bond Ins. Co., 186 App. Div. 630, 174 N.Y. Supp. 844. We approve the principle upon which those cases are rested, and think that its application to these replications justifies the action of the trial court in overruling demurrers thereto.
It may be that technical propriety in pleading would require that an estoppel of this character should be declared upon in the complaint; and that these replications, setting up as they do a primary liability by estoppel, are a technical departure from the complaint which declares upon an express contract. See 26 Corp. Jur. 496, § 702. However, this objection is not pointed out by any ground of the demurrer, and the question is not presented. The evidence offered by plaintiff sufficiently supported the estoppel pleaded, and the trial judge correctly instructed the jury upon that issue.
In stating this issue to the jury, or rather in defining the contention of plaintiff, the trial judge traveled somewhat beyond the terms and scope of the pleading, or, to borrow a figure of speech from a great Georgia jurist, he embellished the main air of the music with too many grace notes and variations. But the objection to this part of the oral charge is not specific, and fails to separate the objectionable portions from the mass of good and bad. The assignment of error based on this objection cannot, therefore, be sustained.
Abstractly considered, the instructions to the jury that "contracts are decided by custom and interpretation"; that "each party has a right to interpret for himself the meaning and purpose of the contract"; that "it is a party's right and duty to act in accordance with that contract, or his own interpretation of that contract"; and "when, in the exercise of that duty, he does interpret it, then he is bound by that interpretation, if the other party has done or omitted to do something in consequence of that interpretation, and has been injured thereby," — are certainly misleading in their tendencies. But, considered in connection with the rest of the oral charge, those statements, expressly qualified as they were, cannot be regarded as erroneous or prejudicial to defendant.
While the evidence is not as clear and direct as it might have been, the jury could properly infer that the motor truck which caused the injury was the truck described in the indemnity policy. Defendant was not entitled to an affirmative instruction for failure of proof in that respect.
As original evidence, what plaintiff stated to defendant company in his letter to them on July 27, 1920, after the damage judgment had been rendered against plaintiff, was not admissible. But, defendant having brought out portions of the letter on the cross-examination of plaintiff, it was competent on rebuttal to show all that was said in the letter about the matter under discussion.
What the injured man, Alexander, said to plaintiff about the settlement of his claim, and the terms upon which he would settle — it having been shortly afterwards communicated by plaintiff to defendant — was competent evidence upon a material issue in the case, and was properly admitted.
The complaint sufficiently showed a breach of defendant's obligation under the indemnity policy, and was not subject to any of the grounds of demurrer. We think the demurrers were properly sustained to defendant's rejoinders to the plea of estoppel.
Provisions like that set up in rejoinder 2 are effective, if at all, only with respect to express agreements of waiver or alteration. Security Mut. Life Ins. Co. v. Riley, 157 Ala. 553, 563, 47 So. 735, and cases cited therein. They are not applicable to implied waivers, nor, a fortiori, to estoppels in pais.
As to rejoinder 3, it shows an invitation to plaintiff, a short while before the trial, to employ its own counsel to assist defendant's counsel, but it does not show any relinquishment of authority or control over the suit; and it must be presumed from its allegations that the invitation, and the accompanying warning that defendant's continuance in the case should not be construed as a waiver of its rights under the policy, came after the estoppel relied on was already complete. This defect was pointed out by several apt grounds of demurrer.
We have examined all of the assignments of error, and find none of them can be sustained.
Affirmed.
ANDERSON, C. J., and THOMAS and BOULDIN, JJ., concur.