State Ex Rel. Automobile Insurance v. Trimble , 297 Mo. 659 ( 1923 )

The matters submitted for consideration are of such importance, not only as involving a proper interpretation of the insurance law but the right of individual contract, that I am constrained to record at length my reasons for disagreeing with the ruling of the majority.

This was a proceeding by certiorari to quash the judgment of the Kansas City Court of Appeals, affirming a judgment of the Circuit Court of Johnson County rendered in the case of Pickel v. Western Automobile Insurance Co.

The Western Automobile Insurance Company is a corporation authorized to issue indemnity policies of insurance on the mutual plan to owners of automobiles. These policies constitute the contracts which define the liability of the company to its members. They are made up of the principal obligation, or the policy proper, and the by-laws of the company. To illustrate, the principal obligation is couched in the following language: "In consideration of the application for membership in the Western Automobile Indemnity Association, heretofore executed by Ben Pickel, which said application for membership is hereby referred to and made a part of this contract, and in consideration of the admission fee paid, the said Western Automobile Indemnity Association does hereby receive said Ben Pickel of Warrensburg, State of Missouri, as a member of said association. . . . There shall be payable to said member, his heirs or legal representatives, such sums of money as are guaranteed to said member by the by-laws of this association by reason of any claim or demand made upon said member on account of bodily injuries or death suffered or alleged to have been suffered by any person or persons through the ownership, maintenance or use of the automobile," etc.

The sections of the by-laws pertinent to the matter at issue are as follows:

"Article I. NAME, LOCATION, OBJECT. Section 3. The object of this association is to perfect and maintain a mutual association for the purpose of indemnifying and protecting its members against claims for loss and damage to others arising from the ownership, use and maintenance of an automobile."

"Article VIII. INDEMNITIES OR BENEFITS. Section 1. Each member of this association will be indemnified for any sums paid by such member in satisfaction of any judgment imposed by law on such member on account of bodily injuries," etc. . . . "This association's liability under its certificate of membership, on account of such bodily injuries or death, shall not exceed the sum or sums stated and fixed in such certificate; this association will, however, pay the expense of litigation in any case in addition to such stated limit of liability."

"Section 14. Unless otherwise provided by law of the state within which this certificate is issued, no action shall lie against this association to recover for any indemnity or benefit guaranteed by this certificate, until final judgment has been rendered against the member, after an actual trial of the issues on the merits, in a suit duly instituted within the period limited by the Statute of Limitations; and then, only, provided such action against this association be brought by the member personally for loss or expense actually paid in money by such member in satisfaction of such final judgment. This clause shall not in any way limit, restrict or abridge this association's defense to any such action."

While Pickel was driving his automobile mentioned in the indemnity policy, he collided with another automobile and injured two persons therein, named Hanna and Walker. Pickel was also injured in the collision and notified the insurance company of the accident. Eleven days thereafter, while he was in the hospital being treated for the injuries received, he was notified in writing that the company declined to assume any liability in the case. Hanna and Walker each brought suit against him to recover damages for the injuries they received. He transmitted the summons served upon him to the insurance company which denied liability. He thereupon assumed the defense of these cases. Walker's was tried before a jury in the regular way, and resulted in a verdict and judgment in his favor for $600. Thereafter Hanna's case was tried. A jury was waived and the cause was submitted to the court upon the pleadings and evidence, and a judgment was rendered in his favor for $500. Each judgment carried the costs; and in Walker's case these amounted to $93.40, while in Hanna's they were $10.35. Pickel paid these costs in cash. The fee for the attorney defending Pickel in the two suits was $300, which Pickel paid by giving his unsecured promissory note. In payment and satisfaction of the two judgments, Pickel gave to each of the respective holders thereof his promissory note for the amount of the judgment, which notes were secured by deeds of trust upon land belonging to him, whereupon the two judgments were released upon the margin of the records thereof.

Pickel then brought suit upon the policy of indemnity insurance to recover the total amount he had been required to expend in satisfaction of the judgments rendered against him and the expense of litigation, all of which was within the terms of the policy.

There is no occasion for controversy concerning the correctness or application of the general rule for the construction of the language of contracts. While it is true that "contracts of insurance differ in no respect from other contracts, as to the rules for their interpretation" this general rule is subject to well-defined limitations, especially applicable to this class of contracts; one of which is that when the language of a policy or contract of insurance is open to two constructions, the one most favorable to the insured will be adopted because the language employed in the drafting of the obligation is that of the insurer (Mathews v. M.W.A., 236 Mo. l.c. 342); and the further salutary rule that the terms employed should be strictly construed against the company when they tend to limit or remove the range of the principal obligation. We cannot do better by way of exemplifying the wisdom of the application of this last limitation than to quote from Dezell v. Fidelity Casualty Co., 176 Mo. l.c. 266, as follows: "The legislatures in most of the states have recognized that in the act of making a contract for life insurance the company by its peculiar technical knowledge has an advantage over a man of ordinary business capacity, not trained in that art, and have imposed certain conditions upon such contracts for the protection of the insured, which will be enforced even against the express terms of the policy. And not only have the legislatures exerted their authority in such matters, but the courts of the country also have strained the discretion that lies in the scope of judicial interpretation to prevent a forfeiture of the insurance."

To this rule of construction as applied to the character of insurance companies here under review, we give our unqualified approval. The authority for their creation and the only reason for their recognition by the law is that they are to afford protection within the terms of their articles of association and by-laws to their members.

What, therefore, is the general purpose of the company in question? We are told in no uncertain terms in Section 3 of the initial article of its by-laws that it is "the indemnifying and protecting of its members against claims for loss and damage to others arising from the ownership and maintenance of an automobile." Looking further to the by-laws for the conditions under which this protection will be extended, we find in Section 1 of Article 8 that members "will be indemnified for sums paid by them in satisfaction of judgments imposed by law on account of bodily injuries" etc. It is evident, therefore, that the primary purpose of this company is protection, and that this purpose will become operative upon a compliance with the condition stated.

But it is contended under a subsequent phrase appearing in Section 14 of Article 8 of the by-laws that notwithstanding every other condition required of the member has been complied with unless the loss or expense which the member has incurred be actually paid in money in satisfaction of the judgment therefor, there is no such liability on the part of the company as is contemplated by its by-laws. To thus construe the limit of the company's liability necessitates a disregard of or an ignoring of not only the purpose of its creation, but of all the other specified conditions a compliance with which was to render the company liable. Such a strained and narrow construction not only violates the spirit of the rule unequivocally stated in the Mathews and Dezell cases, supra, but is at variance with such a wholesome interpretation of the by-laws as will effect and not defeat the purpose of the creation of the company. The liability of the company to the members having been fixed by the rendering of the judgment against the latter, of what possible concern can it be to the company as to the manner in which the judgment has been satisfied. "Paid in money" therefore should not under the facts at bar be held to mean a satisfaction in the coin of the realm or the recognized medium of exchange, but such a payment or satisfaction as will release the member from the burden of the judgment and afford proof of that fact to the company. If there were no precedents, therefore, authorizing a liberal interpretation to be given the word money, as used in these by-laws, it is vital to a just administration of the law and a proper defining of the company's liability, that one be made now. We are therefore of the opinion that the phrase "paid in money," as used in Section 14 means such a satisfaction of the final judgment against the member as will relieve him from any further liability thereon. Any other construction of this contract authorizes the application of that well known maxim quihaeret in litera haeret in cortice. In thus ruling there remains no tenable ground for this action, and our writ, which was improvidently issued, should be quashed.