
    The Bloom-Rosenblum-Kline Co. v. Union Indemnity Co.
    (No. 21537
    Decided June 12, 1929.)
    
      
      Messrs. Barnum, Hammond, Stephens <& Hoyt, for plaintiff in error.
    
      Messrs. Wilson, Hahn $ Wilson, for defendant in error.
   Matthias, J.

It is to be observed that by the policy of insurance issued to the plaintiff company the indemnity company agreed to insure plaintiff against loss from liability imposed by law upon tbe assured for damages on account of bodily injuries accidentally suffered, or alleged to have been accidentally suffered, by any person or persons, caused by the automobile vehicle described in statement No. 5 of the declarations, and that it further agreed that said policy should cover the operation of all automobiles and trailers of the type stated in the policy, hired by the assured during the term thereof and used for the purposes stated in the declarations, without specific description or specified premium charge for each automobile to be covered as required by the policy.

In the suit brought by Terihay against the assured his cause of action was based entirely upon the claim that he was injured while a passenger or guest in one of the automobiles hired by the assured and used for the purpose stated in the declaration of said policy of insurance, to wit, “commercial delivery,” and that such automobile was then being operated by this plaintiff through certain of its employees in the usual course of plaintiff’s business. Upon the institution of that action it became essential that the assured defend the same. The assured thereupon proceeded under the requirements of its policy in order that it might secure the benefit of the provision thereof, wherein it was assured that, if any suit were brought against it to enforce a claim for damages, the insurance company would “defend such suit whether groundless or not,” and that the expense incurred, including court costs, would be borne by that company. It is claimed that it was necessary that 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. Though it turned out that the automobile in which Terihay was riding was neither owned nor 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 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 its policy to satisfy that 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 contract of the company does not contemplate that its duty arises subsequent to the trial of such case and a final determination of the question of the liability of the assured. This agreement to make the defense on behalf of the assured whenever a suit is brought against it to enforce such claim for damages is a valuable provision of the policy, but it would have little value, and would be rendered almost meaningless, if the duty of the company with respect thereto did not arise when an action was brought against the assured based upon a claim of injury by an automobile covered by such policy. The position of the assured in this case evidently was that no automobile hired by it was involved in such transaction, and for that reason Terihay’s suit was groundless; but before the assured could be relieved from this potential liability it was essential that it defend itself against the action instituted by Terihay. The insurance company by the express provisions of its policy had agreed to conduct that defense and pay the expense thereof.

If an action be brought to recover damages for injuries claimed to have been inflicted by the owner of an automobile, which, as a matter of fact was nowhere in the vicinity of the accident and was therefore in no wise involved in the accident, the owner is nevertheless compelled to make a defense, though the claim against him be entirely groundless —whether it be groundless because the owner was in no wise at fault, or because his automobile was in fact not involved in the collision. It would of course be absurd to claim that the insurance company having entered into an agreement such as contained in the policy in question would not be liable for the expenses incurred in making such defense, because, as a matter of fact, the automobile covered by its policy was not involved in the accident. The use of the broad and general terms, “whether groundless or not,” does not warrant the claim that reference is had only to the matter of negligence of the owner of the automobile covered by the policy and involved in the accident. The innocence of the automobile of the claimed injury is as complete and effective whether established as the result of an alibi or by proving that, though present, neither the automobile, by reason of defective parts, nor its driver, by reason of his negligence, caused the collision. Certainly when an action is brought wherein an automobile covered by a policy containing such broad and general terms is alleged to have caused the injury for which recovery of damages is sought, the obligation assumed by the company under its contract “to defend such suit whether groundless or not” matures, and for default thereof it may be required to reimburse the assured for the expenses reasonably and necessarily incurred by the assured by reason of such default of the company.

While it does not appear that the precise question here presented has been previously considered by any reported case, the view herein expressed and conclusion reached upon the admitted facts are supported by the courts which have thus far had similar provisions before them for consideration, and no decisions are to the contrary. 2 Berry on Automobiles (6th Ed.), Section 2091, and the following cases, which are in point: Greer-Robbins Co. v. Pacific Surety Co., 37 Cal. App., 540, 174 P., 110 (rehearing denied by Supreme Court August 12, 1918); South Knoxville Brick Co. v. Empire State Surety Co., 126 Tenn., 402, 150 S. W., 92, Ann. Cas., 1913E, 107; Mayor, Lane & Co. v. Commercial Casualty Ins. Co., 169 App. Div., 772, 155 N. Y. S., 75; Butler Bros. v. American Fidelity Co., 120 Minn., 157, 139 N. W., 355, 44 L. R. A. (N. S.), 609; Sachs v. Maryland Casualty Co., 170 App. Div., 494, 156 N. Y. S., 419; Western Indemnity Co. v. Walker-Smith Co. (Tex. Civ. App.), 203 S. W., 93; Coast Lumber Co. v. Ætna Life Ins. Co., 22 Idaho, 264, 125 P., 185.

It is our conclusion, therefore, that the demurrer to the petition should have been overruled. For error in affirming the action of the court of common pleas sustaining the demurrer, the judgment of the Court of Appeals is reversed.

Judgment reversed.

Maeshall, C. J., Robinson and Allen, JJ., concur.

Kinkade, Jones and Day, JJ., dissent.

Jones, J.,

dissenting. The question involved, briefly stated, is this: Was the insurance company, under the terms of its policy, obligated to defend against a liability occasioned by a car not covered by the policy?

The petition carefully omits to state that a car covered by the policy of the insurance company was in any wise concerned in the accident that occasioned Terihay’s injuries; not only this, but plaintiff in error’s counsel concede that the car that caused the injury was neither owned nor hired by the assured. It therefore could not have been covered by insurance. In the personal injury case brought against the assured the . plaintiff had not alleged that the car causing his injuries was insured; nor was such an allegation necessary in order to recover damages against the Bloom-Rosenblum-IOine Company; for the plaintiff might recover from that company whether it had or had not insurance.

Although the argument advanced by counsel for plaintiff in error seems plausible, we will endeavor to demonstrate that it is not only legally untenable, but is based on a fallacious premise; it creates situations that are wholly absurd; nor was their argument persuasive in either of the lower courts. The fallacy underlying the contention of the plaintiff in error lies in the fact that it refrains from applying the provisions of the policy contract to the insured car only. By the exact terms of the policy the obligations of the insurance company attached only to bodily injuries suffered, and “caused by the automobile vehicles described in statement number 5” Under its terms the legal liability of the insurance company for property damages was for damages “resulting solely and directly from an accident due to the ownership, maintenance or use of any of the said automobiles.” Manifestly the “said” automobiles referred to comprised only the vehicles described and covered by the policy of insurance. Furthermore the policy contract contained an express provision that, in consideration of the determined premium, it was “understood and agreed by and between the named assured and the company that this policy shall cover the operation of all automobiles * * * of the type stated in the policy hired by the assured,” etc. (Italics ours.) Here it is conceded by counsel for plaintiff in error that the automobile concerned “was neither . owned nor hired” by the assured; it had no policy covering the car engaged in the accident.

Condition C of the policy provided that if suit were brought against the assured to enforce “such claim for damages” the company must “defend such suit, whether groundless or not.” Manifestly the suit contemplated by the contract, and therein explicitly referred to, was the suit for “such a claim for damages” and “caused by the automobile vehicles described in statement number 5.” There was no obligation to defend a suit for damages concededly occasioned by the automobile of a stranger, or by an automobile of the assured not covered by his policy. The policy agreement was to insure and to defend against damages resulting from the operation of the insured car; that vehicle, described in the policy, was the only car insured, and every agreement contained in the policy pertained to that car.

So that when the insurance company obligated itself to defend “such suit, whether groundless or not,” the terms of the policy disclose that it only agreed to defend groundless suits arising from the operation of automobiles covered by its policy. Another provision in the policy clearly limits the company’s obligation to cars covered by its policy, where the policy expressly states that in consideration of the determined premium it was understood and agreed between the assured and the company “that this policy shall cover the operation of all automobiles * * * of the type stated in the policy hired by the assured.” This is a definite agreement that the policy and its obligations provided coverage for the operation of automobiles described in the policy, and none other; it is conceded that the car in question was not owned or hired by the assured.

Any other construction of this policy would lead to legal conclusions wholly untenable, and to situations wholly absurd. To illustrate: Had the assured owned a half-dozen cars, insured in as many different companies, would each of the insurers be required under similar policy provisions to defend a lawsuit against the assured, where it was conceded that but one of the companies was liable? And, if neither of the six defended the suit, against whom could the assured bring his suit for neglect to defend? Manifestly he could bring it only against the insurer of the car concerned in the accident. Let us assume that a taxi company, operating 100 cars, had liability insurance covering only one of its cars. Must that company defend against a suit for damages concededly caused by either of the other 99 uninsured cars? Notwithstanding the fact that the insurance company had received a premium covering but a single car, a liability is here attempted to be imposed on the insurance company requiring it to pay the costs and expenses of defending against damages arising from the operation of all the uninsured cars — cars not covered by its policy. If this judgment prevails, a method is devised for obtaining cheap insurance.

To further illustrate the illogical claim advanced by counsel for plaintiff in error, let us assume that the following colloquy takes place between the insurer and the assured after a suit has been instituted against the latter:

Assured. I want you to defend a suit brought against me based on an automobile collision. Insurer. You have two cars — a Cadillac and a Ford. We insured your Cadillac, but we have no policy covering your Ford. "Which of your cars caused the accident?

Assured. My Ford caused it. Insurer. We have no coverage on your Ford; you paid no premium covering that car; why should we defend?

Assured. Because you agreed to defend “such suit whether groundless or not.” Insurer. Yes, we agreed to do that, and also to pay the expenses of defense, including court costs; but we did not agree to give coverage except to your insured car. Defend your Ford car; you paid us no premium for coverage for defending that car.

The adoption of the contention urged-by counsel for plaintiff in error necessarily leads to¡ the conclusion that an insurance company must defend every lawsuit brought against the assured, and must maintain its obligation to defendant after it discovers, or it is conceded that the insured car, the subject-matter of the insurance, was in no wise concerned in the accident. And we might well query: If the insurance company did defend such a suit unsuccessfully, could the plaintiff in error still claim that a judgment for damages must be paid by the insurance company under its policy contract, if its insured car was not involved? Obviously that claim cannot be sustained. That being so — there being no liability which the company must eventually pay— why should it be required to defend?

The majority opinion contains this statement: “If the facts set up in Terihay’s petition had been established in the trial of that case, and a judgment rendered therein, the company would have been required under the liability clause of its policy to satisfy that judgment to the extent of the amount specified in its policy.”

Logically, where the major premise is fallacious, the whole legal superstructure falls. The insurer is notified that the assured has been sued. The insurer, neglecting to defend, of course does so at its own risk; but, ascertaining beyond doubt that its insured car was not concerned in the accident, the insurer refuses to assume the burden of defense and its accompanying expenses. A judgment for heavy damages may be recovered by the plaintiff against the assured for negligence in the operation of one of his uninsured cars; all that the plaintiff needs to do is to prove that any car (insured or uninsured) caused his injuries. The insurance company is not a party to that suit. The majority hold that the insurance company is absolutely liable to pay the judgment. The mere statement of such a principle carries its own refutation and reveals its unsoundness. The suit of the assured is based on his contract of insurance.

Before he can recover he must allege and prove that the car alleged to have caused the plaintiff’s injuries was in fact covered by the policy. That is the plain requirement of our statute, which makes the liability of an insurance company “absolute” only “whenever a loss or damage occurs on account of a casualty covered by such contract of insurance.” Section 9510-3, General Code.

We admit that the obligations of the policy attach in favor of the assured in suits, whether groundless or not, where the insured car was involved; but we deny that any of the obligations in the policy contract attached to any car but that insured by the insurance company, and for which only it obtained a premium. No authority has been called to our attention which presents the question which we have here; nor, according to its opinion, were there any covering this situation presented to the Court of Appeals. The cases cited by counsel in their briefs relate to groundless prosecutions involving cars specifically covered by the contract; none of those cases enforce a liability where there was no policy covering a vehicle causing the damage.

We are of the opinion that, since the petition does not allege that the ear involved in the accident was covered by the policy, and it being conceded that it was not, there was no liability to defend upon the part of the insurance company.

The judgments of the lower courts should be affirmed.

Kinkade and Day, JJ., concur in the dissenting opinion.  