
    Magnet Coal Company v. Donaldson, Receiver, Etc.
    (Decided February 23, 1923.)
    Appeal from Bell Circuit Court.'
    1. Insurance — Suit by Receiver of Insolvent Insurer. — Upon suit by tbe receiver of insolvent insurer against tbe insured to recover balance of agreed premiums for policy of insurance, tbe court did not err in overruling demurrer to petition, even if it showed tbe insurer was insolvent shortly before tbe expiration of tbe policy, since at that time most of tbe premiums sued for bad been earned.
    2. Insurance — Insolvency—Suit to Recover Premiums. — Tbe insured was not entitled to recover part of premium paid to insurer and which was less than pro rata part of premium that bad been earned before insolvency.
    
      3. Insurance — Insolvency.—The mere fact insurer has reinsured all of its risks does not prove insolvency as of the date of reinsurance.
    4. Insurance — Insolvency.—Where insolvency was not proven until after expiration of the policy, insurer was liable to the receiver for unpaid balance of agreed premium.
    5. Insurance — Set Off and Counterclaim. — The counterclaim of the insured for indemnity for amount paid in settlement of suit • against it was properly disallowed where it was not proven that the suit against it was for an injury covered by the policy, and the judgment disallowing the claim will be affirmed even though the trial court assigned an erroneous reason for disallowing F.
    JAMES M. GILBERT for appellant.
    N. R. PATTERSON for appellees.
   Opinion op the Court by

Judge Clarke

Affirming.

On April 1, 1913, the Employers’ Indemnity Company of Philadelphia issued a policy of insurance to appellant, insuring it against loss or expense from claims of its employes for accidental injuries occurring within twelve months thereafter. As premium for the policy, appellant paid $152.50 in cash, and agreed to pay a further sum dependent uporr'the average monthly pay roll for the year, and which it is agreed amounted to $248.79.

On May 18,1914, the indemnity company was declared insolvent, and appellee was appointed receiver therefor. Thereafter, as such receiver, he instituted this action to recover of appellant the $248.79 due upon its contract of insurance. Appellant demurred to the petition, and after that had been overruled, filed answer and counterclaim for return of’ the $152.50 paid for the policy and for $162.35 it had paid in settlement of a claim of J. M. Andrews for injuries from !an accident which occurred in June, 1913.

Upon a trial before the court without a jury, appellee was given a judgment for the $248.79 sued for, and appellant’s counterclaim was" dismissed.

The first insistence for a reversal is, that the court erred in overruling the demurrer to the petition, that same did not state a cause of action because it showed that the insurer, although not declared insolvent until May 18,1914, and after the expiration of appellant’s contract, was insolvent from and after January 1, 1914. Even if this were true, as it is not, and under the authorities cited by appellant, the contract was only void after January 1, 1914, because of breach, by tbe insurer and failure of consideration thereafter, and appellant was yet liable for tbe pro '¡rata part of tbe premium earned before insolvency. 22 Cyc. 1404; 14 R. C. L. 854. As under this view, tbe most favorable for appellant, appellee was entitled to recover a part of tbe sum sued for, it is apparent tbe court did not err in overruling tbe demurrer to tbe petition.

For tbe same reason, and upon tbe same authorities, it is equally clear that appellant was not entitled to recover tbe $152.50 paid on the premium, and that tbe court did not err in dismissing that item of tbe counterclaim, as there is no kind of proof of insolvency prior to January 1,1914.

In fact tbe only proof of insolvency prior to May 18, 1914, is tbe admitted fact that on January 1,1914, tbe insurer reinsured with tbe Hartford Accident & Indemnity Company of Hartford, Conn., all of its outstanding policies, and it was specifically provided in tbe contract of reinsurance that tbe reinsurer should be liable, not only to the insurer, but directly to tbe insured for any liability of tbe insurer under any of its policies. Whether or not this created a privity between the insured and tbe re-insurer, it is certain, it seems to us, that tbe mere fact of reinsurance rather than proving insolvency proves, or at least indicates, tbe contrary.

We are therefore of tbe opinion that there is no proof of insolvency prior to May 18, 1914, or until after tbe expiration of appellant’s policy, and that it was liable for tbe entire premium therefor. Hence tbe court did not err in rendering judgment against appellant for tbe $248.79.

Tbe counterclaim for tbe $162.35, alleged to have been paid by appellant in settlement of a claim for an injury which occurred in June, 1913, and while tbe policy was in force, was denied by tbe court, as we gather from its findings of law and fact, upon the ground that tbe appellant was amply protected by tbe contract of reinsurance against tbe insolvency of tbe insurer, and hence was not entitled to recover this sum, because tbe settlement was made without tbe knowledge or consent of tbe insurer or tbe reinsurer, in violation of tbe terms of tbe policy, and while tbe insurer was defending claimant’s action against it.

That tbe settlement was made without tbe consent of tbe insurer or tbe reinsurer, and while local attorneys for the insurer were defending the action against appellant, is amply sustained by the proof. But it is claimed for appellant that as a consequence of the insurer’s insolvency, it had a right to settle the claim.arising theretofore and recover of the insurer’s.receiver the amount so paid, without looking to the reinsurer.or awaiting the result of any defense interposed for it by either the insurer or the reinsurer.

This proposition of law seems to be supported by the authorities cited where the claim is for an acident covered by the policy, but it cannot, of course, be applicable unless the accident was one for which the insured, under his policy, would have been entitled to indemnity for loss sustained therefrom. As we are convinced that appellant failed to show that the claim was of this character, the judgment refusing to allow it must be affirmed, even if the reason given therefor is not sound; and we need not, therefore, discuss or decide an insurer’s status or rights under a contract of reinsurance to which he did not agree, or whether he may recoup from the insurer’s receiver his loss in settling a claim arising under the policy, where the settlement was made without the insurer’s consent after it had been declared insolvent.

There is no showing whatever that the insurer was liable under the policy for any part of this claim. The nature of the accident, how it occurred, and the extent of the claimant’s injury, if any, are not disclosed. There is neither allegation nor proof that the claimant was an employe of appellant, or so engaged at the time, or that the settlement was the best that could be obtained, or fairly made. It is simply shown a suit was filed against appellant by one Andrews for $5,000.00; that an answer was filed therein by local attorneys for the insurer, and that appellant settled this suit by paying $100.00 to claimant’s attorney and $50.00 to its own attorney, and the claimant paid the costs amounting to $12.35.

• Judgment affirmed.  