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would be a far too technical application of ployé was entitled to have indebtedness of liathe rule referred to in the Girard Case. bility insurer to employer, arising from its Moreover, the city cannot be estopped by an failure to defend suit, applied to payment of his act of its agent beyond the authority con- insurer and employé, but because of rights as

judgment, not on basis of relation of employer's ferred upon him. Burton Co. v. City of Chi

judgment creditor. cago, 236 Ill. 383, 86 N. E. 93, 15 Ann. Cas. 965. This contention cannot be sustained.

On Petition for Rehearing. We are of the opinion that the findings of 6. Pleading em403(5)—Omission of allegation the chancellor on questions of fact and prop from creditor's bill by employé against emositions of law other than the validity of the ployer's insurer held supplied by answer. ordinance involved were correct, but that he In creditor's bill by injured employé against erred in holding the ordinance invalid. For employer's insurer, after return of his executhis error the decree is reversed, and the tion against employer unsatisfied, omission of cause remanded, with directions to enter a bill to allege breach by insurer of its contract decree granting the injunction as prayed.

to defend suit against employer held supplied

by averments in insurer's answer that it notiReversed and remanded, with directions.

fied employer that accident was not covered by
policy, and that employer defended suit.

7. Appeal and error 835(2)-Omission of (317 III, 251)

allegation not considered on rehearing, in KINNAN V. CHARLES B. HURST CO. et al. view of assumption of parties as to state of (No. 16263.)

record.

In creditor's bill by injured employé against (Supreme Court of Illinois. April 24, 1925. employer's insurer, omission to allege breach by Rehearing Denied June 5, 1925.)

insurer of its contract to defend suit against 1. Insurance 514–Liability indemnity policy employer cannot be raised, on petition for reheld to provide only for reimbursement of hearing, where question of liability of insurer actual payment of judgment.

for refusing to defend was recognized by both

sides as presented by record, was argued on Policy indemnifying assured against loss that basis, and question was submitted withfrom liability for bodily injuries, with condi

out objection, tion that no action should lie except for reimbursement of actual payment of judgment after trial on issues, provided only for reimburse

Error to Appellate Court, First District, on ment of money actually paid in satisfaction of Appeal from Superior Court, Cook County; judgment.

Denis E. Sullivan, Judge. 2. Insurance 59112-Employé has no right Suit by John Kinnan against the Charles

of action upon employer's liability indemnity B. Hurst Company and the Globe Indemnity policy.

Company of New York. From a judgment of Employé held not to have right of action the Appellate Court, First District, reverson employer's policy of indemnity against loss ing a decree for plaintiff, he brings error. from liability for bodily injuries.

Judgment of Appellate Court reversed, and 3. Insurance C388 (5)--Refusal of insurer to decree below affirmed.

defend suit wajver of requirement of pay. See, also, 301 Ill. 597, 134 N. E. 72. ment of judgment before recovery against

S. P. Douthart, Ossian Cameron, and Edformer. Where liability indemnity policy provided tiff in error.

ward H. S. Martin, all of Chicago, for plainfor reimbursement only of money actually paid in satisfaction of judgment, assured held to

Cassels, Potter & Bentley, of Chicago have cause of action for amount of judgment (Ralph F. Potter and Kenneth B. Hawkins, I against it and costs before payment of same, both of Chicago, of counsel), for defendant

where insurer refused to comply with provision in error.
requiring it to defend suit; such refusal con-
stituting waiver of former provision.

DUNN, J. The Appellate Court for the 4. Contracts Cam313(1)-On repudiation, other First District reversed a decree of the su

contracting party may sue for damages as perior court of Cook county requiring the for present breach,

Globe Indemnity Company of New York to Where one party to contract repudiates its pay $5,966.59 to John Kinnan and awarding obligation and declares his intention no longer execution therefor. The cause was remandto be bound by it, other party may treat re ed to the superior court, with directions to pudiation as wrongful putting of an end to con

dismiss the bill, and a writ of certiorari has tract and sue at once for damages as for pres- been allowed to Kinnan for a review of the ent breach.

record. 5. Creditors' suit 8(4)-Employé held to

The litigation had its origin in an accihave right to have insurer's debt to employer dental injury which Kinnan received on Sepapplied to payment of judgment.

tember 4, 1912, while engaged in the conWhere execution against employer on judg-struction of a silo for the Charles B. Hurst ment for injuries was returned unsatisfied, em- | Company as a servant of that company, for

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For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

(148 N.E.) which he brought suit and recovered a judg-, test accruing after entry of judgment upon such ment against that company on April 12, part thereof as shall not be in excess of the 1919, for $12,625 and costs. The Hurst company's limit of liability as appears in this Company was insolvent. Executions issued policy, and against it were returned not satisfied, and lief as shall be imperative at the time of the

"IV. To pay for such immediate surgical reno part of the judgment has been paid. The accident. The foregoing agreements are subGlobe Indemnity any had issued a lia-ject to the following conditions: bility policy to the Hurst Company which “A. The company's liability under this policy, was in force September 4, 1912, and Kinnan whether it be issued in the name of one assured filed his creditor's bill setting forth the fore or of more than one assured, shall be limited to going facts, alleging that upon the recovery the sum of $5,000 on account of bodily injuries of his judgment against the Hurst Com- to or the death of one employé, and subject to

the same limit for each employé the company's pany, the Globe Indemnity Company, by rea- liability shall be limited to the sum of $10,000 son of its policy, became liable to the Hurst

on account of bodily injuries to or the death of Company for $5,000 and interest from the more than one employé as the result of one acdate of the judgment, and praying, among cident, but in addition to these limits the comother things, that the debt so due from the pany will pay all sums for which the company Globe Indemnity Company to the Hurst' Com- may be liable under insuring agreements III and

IV. pany be applied to the payment of the judgment against the Hurst Company. The de

“G. The assured, upon the occurrence of an fendant in error, though notified of the acci- accident, shall give immediate written notice dent and the suit, denied that the accident thereof, with the fullest information obtainable was covered by its policy, and refused and at the time, to the home office of the company failed to defend the suit.

or to its duly authorized representative. The The question on which the case turns is assured shall give like notice with full particuthe liability imposed by the policy on the de- lars of any claim made on account of such acfendant in error, the Globe Indemnity Com- cident. If any suit is brought against the as

sured to enforce such claim, the assured shall pany. The contention of the defendant in immediately forward to the home office of the error, as stated in ef, is that there can company every summons or other process that be no recovery against it because it never | may be served upon the assured. became indebted to the Hurst Company, the “H. The assured shall not voluntarily assume assured; that the policy "was an indemnity any liability, nor incur any expense other than contract against loss or damage from liabil- for immediate surgical relief, nor settle any ity, and, until the assured paid the loss or in claim, except at the assured's own cost. The some manner became damnified, no liability for settlement, nor in any legal proceeding, but,

assured shall not interfere in any negotiation under the terms of the policy attached, and whenever requested by the company, the asthat the policy was solely for the benefit of sured shall aid in securing information and evithe assured and was not for the benefit of dence and the attendance of witnesses, and shall any third party." The following are the pro- co-operate with the company, except in a pevisions of the policy material to this con- cuniary way, in all matters which the company troversy :

may deem necessary in the defense of any suit

or in the prosecution of any appeal. "Globe Indemnity Company (herein called the "I. No action for the indemnity against loss company) in consideration of the premium here- provided for in insuring agreement I of this in provided and of the statements forming a policy shall lie against the company, except for part bereof, does hereby agree:

reimbursement of the amount of loss actually "I. To indemnify the assured against loss sustained and paid in money by the assured in from the liability imposed by law upon the as- full satisfaction of a judgment duly recovered sured for damages on account of bodily injuries, against the assured after trial of the issue, nor including death at any time resulting therefrom, unless brought within two years after such accidentally suffered or alleged to have been judgment shall have been paid. No action to suffered during the policy period defined in recover under any other insuring agreement statement 6, by any employé or employés of the shall lie against the company unless brought assured, while at the places designated in state- within twelve months after the right of action ment 4, by reason of the work therein de accrues.” scribed. "II. To make such investigation of all acci

[1, 2] The agreement in paragraph I of the dents reported to the company, and to which policy, “to indemnify the assured against this policy applies, and to undertake such negotiations for settlement or to make such settle- loss from the liability imposed by law upon ments of any claims for damages made against the assured for damages on account of bodthe assured, as the company may deem advisa- ily injuries,” etc., together with the condition ble, and, in the event that suit is brought contained in subdivision 1 of paragraph IV against the assured, to defend such suit, even of the policy, that “no action for the indemif groundless, in the name and on behalf of the nity against loss provided for in insuring assured, unless or until the company shall elect agreement I of this policy shall lie against to effect settlement thereof. "III

. To pay all expense of the company's in the company, except for reimbursement of Festigation and adjustment of claim, all costs the amount of loss actually sustained and taxed against the assured in any legal proceed- paid in money by the assured in full satising defended by the company, and all inter- faction of a judgment duly recovered against

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the assured after trial of the issue,” etc., y company. There was a breach of the declearly provides only for the reimbursement fendant in error's undertakings in paragraph of money actually paid in satisfaction of a II. Suit was brought against the assured judgment recovered against the assured after for damages for bodily injuries alleged to the trial of the issue, in an action for, bodily have been accidentally suffered by an eminjuries alleged to have been accidentally suf- ployé of the assured, and this suit, even fered within the terms of the policy. Davi- though groundless, the defendant in error son v. Maryland Casualty Co., 197 Mass. 167, was bound to defend unless and until it 83 N. E. 407; Connolly v. Bolster, 187 Mass. chose to settle it. It did not do this, and 266, 72 N. E. 981; Cushman v. Carbondale thereupon the assured defended the suit, with Fuel Co., 122 Iowa, 656, 98 N. W. 509; Puget the result which has been stated. Sound Improvement Co. v. Frankfort Ins. What was the effect of this breach of the Co., 52 Wash. 124, 100 P. 190; Coast Lum- contract by the defendant in error? It had ber Co. v. Ætna Life Ins. Co., 22 Idaho, 264, agreed to indemnify the assured against loss 125 P. 185; Frye v. Bath Gas & Electric Co., for liability imposed by law upon the as97 Me. 241, 54 A. 395, 59 L. R. A. 444, 94 sured on account of bodily injuries actually Am. St. Rep. 500; Finley v. United States received, only when payment had been acCasualty Co., 113 Tenn. 592, 83 S. W. 2, 3 tually made by the assured of a judgment Ann. Cas. 962; Stenbom v. Brown-Corliss recovered against it in an action defended Engine Co., 137 Wis. 564, 119 N. W. 308, 20 by the defendant in error. The agreement L. R. A. (N. S.) 956. The Hurst Company, did not extend to any other judgment, for the the assured in the policy, could not main- defendant in error expressly agreed to intain an action on this agreement until it ( vestigate all accidents reported to it, and, in had sustained a loss for which a judgment case of suit brought, to defend it, even if had been recovered and which it had paid.groundless, unless and until the defendant in The plaintiff in error had no connection with error should elect to effect a settlement, the policy, which was not issued for his while at the same time the assured agreed benefit, and could under no circumstances not to settle any claim or interfere in any maintain an action on it. Connolly v. Bol negotiation for settlement or legal proceedster, supra; Cushman v. Carbondale Fuel ing. The foundation of the rights of the parCo., supra; Finley v. United States Cas- ties under the contract was the assumption ualty Co., supra; Stenbom v. Brown-Corliss by the defendant in error of the investigaEngine Co., supra. If, however, the Hurst tion of all accidents, the negotiation of all Company had a cause of action which it settlements, and the defense of all suits of could enforce against the defendant in er- the character mentioned in the policy, and ror, whether upon this policy or for some the exclusion of the assured from all Interother cause, the plaintiff in error had a right, ference in any of these matters except to in equity, to compel the application of the aid the defendant in error at its request. proceeds of such cause of action to the pay- The refusal of the defendant in error to dement of his judgment against the Hurst fend the suit of the plaintiff in error against Company.

the assured would have destroyed the foun[3] The policy, however, contained other dation of the mutual obligation of the par. agreements on the part of the defendant in ties. The policy contemplated the payment error to which the condition of actual pay- of a judgment against the assured only in a ment in satisfaction of a judgment did not case defended by the defendant in error, and apply. By paragraph II of the policy the its refusal to defend therefore deprived the defendant in error agreed "to make such in- former of its remedy under paragraph I and vestigation of all accidents reported to the condition I of the policy, because such recompany and to which this policy applies, fusal prevented a compliance with the condiand to undertake such negotiations for set- tion precedent of the payment of a judgment tlement or to make such settlements of any recovered by the assured after the trial of claims for damages made against the as an action defended by the defendant in ersured, as the company may deem advisable. ror. This repudiation of the fundamental and, in the event that suit is brought against obligation of the contract completely deprivthe assured, to defend such suit, even if ed the assured of its benefit and was a waiv. groundless, in the name and on behalf of the er of the performance by the assured of the assured, unless or until the company shall conditions precedent to a recovery of the elect to effect settlement thereof." Condi- amount it would be entitled to if those conditions H and I of paragraph IV prohibited tions had been performed. the assured from voluntarily assuming any [4] Where one party to a contract repudiliability or incurring any expense other than ateg its obligation and declares his intention for immediate surgical relief, or for settling no longer to be bound by it, the other party any claim except at its own cost, or inter- may, if he thinks proper, treat the repudiafering in any negotiation for settlement or tion as a wrongful putting of an end to the in any legal proceeding except to aid in se-contract and bring an action at once, in curing information and evidence and the at which he may recover damages as for a prestendance of witnesses when requested by the ent breach. Lake Shore & Michigan South

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(148 N.E.) ern Railway Co. v. Richards, 152 Ill. 59, 38, dated in the first instance in an action beN. E. 773, 30 L. R. A. 33. The defendant in tween the assured and the assurer, where the error was bound to defend the action with latter has denied his liability under the polout interference by the assured unless and icy and refused to defend an action brought until it effected the settlement. By its fail- against the assured by the injured person? ure to do so it deprived the assured of the In the Dressed Beef Co. Case the assured remedy provided by the terms of paragraph was sued and settled with his employé. I and condition I. Had it defended success. There was no trial. In this case the assured fully, the assured would have been relieved was sued and notified the assurer, who failof all liability. Had its defense been unsuc-ed to defend, and the case went to trial and cessful, the assured would have been able to judgment. require the defendant in error to pay it the The court answered the first, second, amount of the judgment to the extent of $5,- fourth, and fifth in the affirmative, the third 000, with costs and interest. Having depriv- in the negative, and the sixth in the affirmaed the assured of this remedy, the defend- tive so far as the question was warranted by ant in error became liable to the assured for the facts set forth. In the opinion it is said, its value—that is, for the amount which the in reference to the condition that no action defendant in error would have been required shall lie against the company unless brought to pay if it had performed its contract. This by the assured himself to reimburse him was the judgment of the Supreme Court of for a loss actually sustained and paid by the United States in St. Louis Dressed Beef him in satisfaction of a judgment after trial Co. v. Maryland Casualty Co., 201 U. S. 173, of the issue: 26 S. Ct. 400, 50 L. Ed. 712, which was an

"That the only breach which that condition
action against the casualty company on a li- has in view is a refusal by the company to pay
ability policy similar in all its provisions after the decision in a case of which it has
material to the case to the policy in this taken charge, when, notwithstanding the judg-
case. The facts in the case were also the ment, it conceives itself to have a defense."
same in substance, except that the assured

It is further said:
compromised the suits brought against it
and paid the damages without a trial or

"To limit its (the defendant's] liability as if judgment. The Circuit Court of Appeals of its only promise was to pay a loss paid upon the United States certified to the Supreme a judgment is to neglect the meaning and purCourt certain questions of law indispensable pose of the reference to a judgment, and even

the words of the promise. The promise in form to the decision of the case upon which it de- is to indemnify against loss by certain kinds of sired the instruction of the Supreme Court. liability. The judgment contemplated in the These questions, in short, were:

condition is a judgment in a suit defended by (1) Did the denial of all liability by the the defendant in case it elects not to settle. assurer, and its refusal to defend the suits, The substance of the promise is to pay a loss constitute such a breach of the contract on

which the plaintiff shall have been compelled to its part as released the assured from its pay, after such precautions and with such safeagreement not to settle any claim except at guards as the defendant may insist upon. It

saw fit to insist upon none." its own cost, and from the provision that no action should lie against the assurer un This was also the judgment of the Court less for loss actually sustained and paid by of Appeals of the state of New York. In re the assured after a trial of the issue?

Empire Surety Co., 214 N. Y, 553, 108 N, E. (2) Were these provisions waived by the 825. The question arose there in an inassurer's denial of liability under the pol- solvency proceeding against the surety comicy and its failure and refusal to defend the pany as to its liability upon a policy similar suits against the assured?

to the one in question in this case. It was (3) Did the compromise of the suits by the held that these policies not only afforded inassured, after the assurer denied liability surance against loss, but also carried with and refused to defend them, and the pay- them the obligation of the company to dement of damages by the assured pursuant to fend suits brought against the assured, and the compromise, prevent the assured from that a failure to defend such suits constitutrecovering against the assurer on the policy ed a breach of the contracts, which released on account of the accident?

the assured from the agreement not to set(4) Was the right of the assurer to insist tle claims without the consent of the comon the condition of rendition of judgment pany, and was a waiver of the condition that after trial and its satisfaction by the assured the company should only be liable after the dependent upon the assurer's defense of the assured had paid the judgment rendered action against the assured?

ag inst him. It was said: (5) Was the assurer's denial of liability a

“When an accident against the consequences waiver of the condition respecting the rendi- of which the assured is insured has happened tion of judgment after trial and its satisfac- and suit has been commenced against the astion by the assured ?

sured, the insurer, under the terms of the pol(6) Might the liability of the assured to icy, incurred the obligation of assuming the the injured person, and its extent, be liqui- defense of such a suit. When the insurer vio

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lated the contract and refused to defend the begun, and alleged that it informed the suit or went into liquidation, thus making it im- Hurst Company that the accident was not possible for it to undertake the defense of such covered by the policy, and that the Hurst suit, it incurred a liability which was not con- Company knew that the accident was not covtingent. Where the insurer has failed to perform its contract and the accident against the ered by the policy, and accepted this stateconsequences of which the assured is insured ment, and employed attorneys of its own has happened, the liability of the insurer is to defend the suit. certain. In such a case the liability ceased to [6] The bill contained no allegation that be contingent although the amount of the lia- the defendant in error refused to defend the bility may have been unliquidated. The insur-suit, but the answer supplied the missing aler having failed to perform its obligation, the legation by its averment that the defendant amount of the liability would not become fixed in error told the Hurst Company that the until the loss which the assured sustained was determined, but the liability of the insurer accident was not covered by the policy, and would be certain and not contingent from the the Hurst Company employed its own lawmoment that it failed to perform its obligation yers to defend the suit. While the bill was to defend the suit brought against the assured." no doubt subject to demurrer, the answer

supplied its deficiency, and on the whole rec[5] The Hurst Company had a cause of ord it stands admitted in the pleadings that action against the defendant in error for its the defendant in error refused to defend this refusal to defend the suit brought against suit. The parties have assumed that this it by the complainant, the measure of dam- was the state of the record and have argued ages in which was the amount recovered the cause on this basis. The plaintiff in eragainst the Hurst Company by the complain- ror's first proposition. as stated in his brief, ant to the extent of $5,000, together with in- was: terest on that amount from the date of the "When the Globe notified Hurst Company that judgment, and costs. The complainant had a the accident was not covered by the policy and right to have the indebtedness which gave refused to defend the suit, the Globe not only rise to this cause of action applied to the then presently broke insuring agreement 2, but payment of his judgment, not because of any anticipatory breach of the entire policy, and

repudiated its contract, thereby committing an privity between the complainant and defend- excused Hurst Company from any further perant in error, but because of the right of any formance of conditions on its part." judgment creditor, under such circumstances, to have the property of his judgment debtor The point was presented at length in the applied to the payment of his debts.

argument, with the citation of a number of The Appellate Court erred in reversing the authorities. The defendant in error made decree of the superior court, and its judg- no contention that the pleadings presented ment will be reversed, and the decree of the no such issue. In its brief it said: superior court affirmed.

"No contention is made at bar that the Globe Judgment of Appellate Court reversed. Indemnity Company took any part in the deDecree of superior court affirmed.

fense of the suit in the circuit court of Cook

county in which John Kinnan recovered bis Subsequently, on petition for rehearing, judgment for personal injuries." the following additional opinion was filed:

Again it said: PER CURIAM. The defendant in error has filed a petition for a rehearing on the

"Moreover, if the Globe refused to defend a ground that the bill did not allege a breach suit, or refused to investigate an accident reby the defendant in error of its contract ported to it, that was a matter solely between

the defendant in error and its assured. The with the Hurst Company to defend the suit obligation did not run to the benefit of any third of the plaintiff in error against the Hurst party, such as Kinnan. No one but the as. Company. The bill alleged the occurrence of sured could complain, if the obligation was not the accident, notice to the defendant in error carried out." of the accident and of the plaintiff in error's claim, the bringing of the suit by plaintiff in [7] The question of the liability of the de error against the Hurst Company, negotia- fendant in error for refusing to defend was tion of the defendant in error with him, and recognized by both sides as presented by its offer of $100 to settle with him, and fur- the record; no suggestion was made of any ther alleged that the defendant in error question of pleading, but this question was helped the Hurst Company in the defense by submitted on the merits without objection. procuring and furnishing evidence. The an- The objection, even if it had been a valid swer admits that the defendant in error had one, cannot be made for the first time on a knowledge of the plaintiff in error's suit petition for rehearing. against the Hurst Company soon after it was

Rehearing denied.

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