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them. But the case is not so simple; nor is the transaction able to be separated from the existing agreement between the parties with regard to the delivery of material. As already observed, the money obtained was obtained in direct response to an application by the marble company for an advance on account of the agreement and the delivery of material to be made under it, and by the arrangement which was made for its repayment it was expressly tied up to this. No doubt, as to the bank, it was a'loan; but as to the others it was essentially an advance of money upon the agreement, to be repaid by a delivery of the material there contracted for. This also was the course pursued; the value of the material subsequently delivered being turned over to the bank by Mr. Van Houten, and the marble company credited accordingly, no payments on account of material being otherwise made so long as there were these outstanding notes. It is true that the 10 per cent. was still withheld from the amounts credited, but that does not help the matter. The point is that, instead of being paid as marble and granite were delivered, as provided in the agreement, the marble company had put in its hands by the transaction a large sum of money in advance and anticipation of this. Thereafter it was not a question of payment according to deliveries, where the agreement puts it, but a repayment by deliveries outside of it. This deprived the surety of the protection and the incentive of restricted payments, and was just as prejudicial as if the advance were less disguised. The money so obtained not only helped to swell the grand total of overpayments made, but until material to correspond had been delivered, if this, indeed, was ever entirely the case, it carried these payments meanwhile by just so much more beyond bounds; the surety in either case being released by the plain departure from the terms of the agreement.
There are other questions which might require discussion, if the case were going back for a retrial, such as the deduction of freight bills before the calculation of the percentages to be withheld, instead of afterwards, and whether, upon a default by the marble company, the surety was liable to the extent contended for at the trial. But the case is to stop here, and it is not material. The point now made for the first time that the contract in the bond was something more than one of mere surety, the final clause of the condition being to indemnify and save harmless from all damages in the premises, is not only open to the objection that it was not raised in the court below and so its influence upon the disposition of the case cannot be determined ; but there is no force to it, in our judgment, if it had been. It may have imposed on the surety, as argued, something more than the mere obligation to see to the fulfilment of the agreement so far as the delivery of material was concerned, but it none the less made the obligation one of suretyship, imposing the reciprocal duty on the opposite party of not departing from it to the detriment of the surety in respect of what is involved in this issue, as was clearly done.
The judgment is reversed.
In Erro District of
Clarence Wm. L. C
Before SE RAN, Distri
SEVEREN defendant in against the pla pany," upon a "against loss fron of bodily injuries persons not emplo, sured described in the assured, and against the expense
While the policy Thomas Ware, an the city of Owenst wire resting upon city, heavily charger became operative, a:
"(1) The assured, upo notice thereof in writing tice, with full particular
pany at New York City,
"(2) If thereafter any s for damages on account o
NEW AMSTERDAM CASUALTY CO. V. CUMBERLAND TELEPHONE &
(Circuit Court of Appeals, Sixth Circuit. March 21, 1907.)
INSURANCE-EXTENT OF LIABILITY OF INSURER-INDEMNITY INSURANCE.
A policy, issued by a casualty company, insured against loss from liability for damages on account of bodily injuries accidentally suffered by any person caused by the negligence of the assured, "and against the expense of defending any suit for such damages.” It limited the company's liability arising from the injury or death of one person to $5,000, and provided for notice to the company of any injury and any claim or suit for damages therefor, that the company should defend or settle any such suit, and prohibited the assured from making any settlement or incurring any expense or interfering in any negotiations for settlement or in any legal proceeding without the company's consent. Held, that the limitation did not include the costs and expenses of a suit on a claim for damages for the death of a person which was defended by the company pursuant to the terms of the policy, and that on recovery of a larger sum by the plaintift therein the assured was entitled under the policy to be reimbursed for the costs and expenses which it was compelled to pay in addition to the $3,000 indemnity against the damages recovered.
In Error to the Circuit Court of the United States for the Middle
Clarence T. Boyd, for plaintiff in error.
Before SEVERENS and RICHARDS, Circuit Judges, and COCH-
SEVERENS, Circuit Judge. This is an action brought by the defendant in error, hereinafter called the “Telephone Company" against the plaintiff in error, hereinafter called the “Casualty Company," upon a policy of insurance "against loss from common law or statutory liability for damages on account of bodily injuries fatal or nonfatal, accidentally suffered by any person or persons not employed by the assured at or about any of the work of the assured described in the schedule indorsed hereon, caused by the negligence of the assured, and resulting from the work described in said schedule, and against the expense of defending any suit for such damages.”
While the policy was in force, and on or about February 8, 1901, Thomas Ware, an employé of the Telephone Company was killed at the city of Owensboro, Ky., by coming in contact with a telephone vire resting upon the wire of the Electric Light Company in said ity, heavily charged with electricity, and the provisions of the policy ecame operative, as follows: “(1) The assured, upon the occurrence of an accident, shall give immediate tice thereof in writing, with full particulars to the home office of the comzy at New York City, or its duly authorized agent. He shall give like no, with full particulars, of any claim which may be made on account of such dent. 2) If thereafter any suit is brought against the assured to enforce a claim iamages on account of an accident covered by this policy, immediate no1.52 F.-61
suit brought to recovt court below, that whe contract, as it should I against two kinds of 1 count of bodily injury for expenses in defent vision was not include made, the insurance ag cost and expenses of a not the necessary cor have been within the reason the restriction juries resulting from a penses of a suit, for s that the parties had abundant reason showi that the parties should tions of the insurance, making any settlemen any negotiation for se Casualty Company sh any defense it pleased and prolong the litiga
tice thereoi sball be given to the company, and the company shall defend such suit in the name and on behalf of the assured, or settle the same.
“(3) The assured shall not settle any claim, except at his own cost, nor incur any expense, nor interfere with any negotiation for settlement or in any legal proceeding without the consent of the company previously given in writing, but he may provide at the time of the accident such immediate surgical relief as is imperative. The assured, when requested by the company, shall aid in securing inforniation and evidence and in effecting settlements, and in case the company calls for the attendance of any employé or employés as witnesses at inquests and in suits, the assured will secure his or their attendance, making no charge for his or their loss of time.”
Notice of the accident was given by the Telephone Company to the Casualty Company. Suit was brought by the administrator of Ware against the Telephone Company for damages arising from his death under a statute of Kentucky, and notice of that was also given to the Casualty Company, and that company thereupon employed counsel to defend said suit in the name and on behalf of the Telephone Company, and upon the trial judgment was rendered against the latter company for $12,500 and costs. An appeal from said judgment was prosecuted to the Court of Appeals of the state of Kentucky, and final judgment was rendered against the Telephone Company by said Court of Appeals of Kentucky for the sum of $12,500 with interest at 6 per cent. per annum and 10 per cent. damages additional. The total judgment of the Court of Appeals of Kentucky, including interest, damages, and costs, amounted to $15,417.26, which was paid by the Telephone Company on November 25, 1903. ·
Of the expenses of the suit on the trial and the appeal the Casualty Company paid $989.15. The Telephone Company paid the costs of the plaintiff in that suit and other costs and expenses to an amount in all, which, upon the proportion of $5,000 to the entire judgment appealed from, as directed by the court below, resulted in a balance in favor of the Telephone Company of $1,167.98. The judgment was for $5,000 plus this balance of $1,167.98 wit, the interest thereon from the date of the judgment of the trial court in the Ware Case. Upon the trial, which was before the court without a jury and upon an agreed statement of facts, the Casualty Company contended that its liability under a limitation in the policy did not extend beyond the sum of $5,000, and that the judgment should be limited accordingly, without enlargement from the costs and expenses which the Telephone Company had incurred by reason of the suit. And it further contended that the $5,000 should be reduced by the $989.15, which it had paid of the expenses of the suit, as above stated. Both of these contentions were overruled by the court below, and the plaintiff in error renews them here.
The policy contained the following provision: “(A) The company's liability as aforesaid arising from an accident resulting in injuries to or in the death of one person is limited to five thousand dollars ($5.000,00), and subject to the same limit for each person the total liability arising from any one accident resulting in injuries to or in the death of any number of persons is limited to ten thousand dollars ($10,000.00).”
And the Casualty Company contends that this limitation includes all the consequences of the accident, such as the expenses of a law
thie accident were conv could be done withou prospect for the assur any. A contract oug sion, if a reasonable ance prepared with me be construed favorabl leaves the matter in that when the Casualt defence to actions bro ty for the accident an Company “against the ages," although it mu on in the name of the would go against that
Casualty Company w and for the purpose C the expenses of any would be for it to d chances of deieating t
It makes no differe: lished against the Tele the Casualty Company regard to the amount and the Telephone Co where the amount whi as where it might no
suit brought to recover damages therefor. But we think, as did the court below, that when construed with the other provisions of the contract, as it should be, that is not its meaning. The insurance was against two kinds of liability-one of which was for damages on account of bodily injury sustained by any person, and the other was for expenses in defending any suit brought therefor. This last provision was not included in the first, and if it had not been expressly made, the insurance against the accident would not have included the cost and expenses of a suit to recover on account of it. They were not the necessary consequences of the accident, and so would not have been within the contemplation of the parties. For the same reason the restriction of the liability of the company in respect to injuries resulting from an accident would not extend to costs and expenses of a suit, for such language without more would not import that the parties had that subject in contemplation. And there is abundant reason shown by the contract why it would be most unlikely that the parties should intend such a limitation. By one of the conditions of the insurance, the Telephone Company was prevented from making any settlement, or incurring any expense, or interfering in any negotiation for settlement, or in any legal proceeding. If the Casualty Company should see fit to resist the claim, it could make any defense it pleased, hire such and as many lawyers as it wanted, and prolong the litigation to the last extremity. If its liability for the accident were converted into a fund for carrying on the contest, it could be done without the ordinary risks of litigation, and the only prospect for the assured would be in the remnant, if there should be any. A contract ought not to be construed to an absurd conclusion, if a reasonable one is possible. Moreover, a policy of insurance prepared with much care for the interests of the insurer should be construed favorably to the other party, if the language employed leaves the matter in doubt. These considerations lead us to think that when the Casualty Company reserved all power of control of the defence to actions brought by injured persons to establish the liability for the accident and recover damages, and insured the Telephone Company "against the expense of defending any suit for such damages, although it must needs be that the defense would be carried on in the name of the Telephone Company, and an adverse judgment would go against that company for damages and costs, yet in fact the Casualty Company would be defending the cause in its own interest, and for the purpose of performing its contract of indemnity against the expenses of any such suit; and at all stages of the litigation it would be for it to determine what expenses it would risk in the chances of defeating the claim.
It makes no difference that ultimately a larger liability was established against the Telephone Company than the limit of insurance, for the Casualty Company reserved the right to make the defense without regard to the amount claimed by the party injured by the accident, and the Telephone Company was as completely excluded in a case where the amount which might be recovered was as much as $25,000 as where it might not exceed $5,000. By its agreement it was ex
place which posed to the hazard of the course which the Casualty Company might
excess oť tl. see fit to pursue. If the defense proved successful, the Casualty
principal. Company would have done no more than it had agreed to do. If
In Error to unsuccessful, still that company had done only that. There is no
District of Ne room for holding that the liability of the Casualty Company for the
Writ of errc expenses of making the defense were at all dependent upon the result of the litigation. The court below gave judgment to the plaintiff
judgment for t for the $5,000, and for only a proportionate part of the expenses of
H. E. Lippinc the defense, upon a theory of an equitable division between the par
F. W. Bird,
defendant in err ties. The Casualty Company has no ground for complaint. It was not entitled to deduct from the amount insured what it had paid in
Before WALL making the defense, and it was bound to make good to the Telephone Company the expenses which the latter had been compelled to pay
PER CURIA because primarily liable.
sureties on a bo The judgment must be affirmed, with costs.
they undertook ti companying, dated at Larchmont Har
60 days from the BROWN et al. v. UNITED STATES.
would, within 10 (Circult Court of Appeals, Second Circuit, March 26, 1907.)
a contract with the
work proposed by No. 61.
accordance with th 1. PRINCIPAL AND SURETY-BOND OF BIDDER FOR GOVERNMENT WORK-LJABIL
viting said proposa ITY OF SURETIES.
sufficient sureties for A bond given by a bidder for government work conditioned that if his bid was accepted he would enter into a contract and furnish a bond for
tract; and they fur its performance within 10 days, or, in case of his failure to do so, the
case Frey should fai sureties would pay to the United States “the difference in money be
within 10 days afte tween the amount of the bid of said bidder so accepted and the amount
money between the for which the proper officer of the United States may contract with an
and the amount for other party to do the work proposed, if the latter amount be in excess of the former," contemplates that, if the bidder fails to enter into a formal
may contract with a and binding contract in accordance with his proposal, the government
latter amount be in e may relet the work and enter into an essentially similar contract with an
By the advertisem other party, and then look to the sureties for indemnity to the extent
invited proposals from of its loss. When such second contract is let, the measure of the sureties'
and the court directed a ve
toward the constructia liability is fixed at the difference in price under such contract and the bid of their principal, and cannot be affected by the fact that the con
stone, “dependent upon tractor fails to complete the work and a third contract is made whether
furnished in place for $ at greater or less cost to the government.
in the bond was to "fur 2. SAME-DEFAULT OF BIDDER-MEASURE OF SURETY'S LIABILITY.
ton." Frey's bid was Defendants became sureties on the bond of a bidder for a government
notification thereof, he contract for furnishing and laying in place toward the construction of a
than 10 days after such riprap breakwater such a quantity of stone “dependent upon the price per ton of stone bid” as could be furnished in place for $45,000; the bond
readvertised the work a being conditioned that if the bid was accepted and the bidder failed to en
inally invited, and, havi ter into the contract defendants would pay to the United States the differ
suant thereto, entered int ence in money between the amount of the bid so accepted, and the amount
ling he undertook to furn for which the government might contract with another party to do the work proposed, if the latter amount should be in excess of the former.
of 51 cents per ton. C. The bid was accepted, but the bidder failed to enter into contract, and
subsequently abandoned the work was let under the same conditions to a second bidder at an in
tracted with Anderson & creased price per ton for stone: the necessary result being that the second
performed it. bidder was required to furnish a smaller quantity of stone. Held, that such fact did not render the second contract one for doing substantially
Upon the trial both par different work from that proposed by the first bid, so as to relieve defendants from liability, but that they were liable for the value of the stone in