Ford Hospital v. Fidelity & Casualty Co. of New York

183 N.W. 656, 106 Neb. 311, 1921 Neb. LEXIS 199

• Court: Nebraska Supreme Court
• Decided: June 23, 1921
• Docket: No. 21259
• Status: Published

Opinions

Rose, J.

This is an action on two insurance policies, each for $5,000, to recover the amount alleged to be due from the insurers for a loss reduced to a judgment for $5,500, which Mary Jane Hannah, an infant, recovered against the Ford Hospital Company, the insured, in a former action for personal injuries. One of the policies was issued by the Fidelity & Casualty Company and the other by the Maryland Casualty Company. Both are defendants, and insuxed is plaintiff herein; Each insurer, referring to its own policy, pleaded, among other defenses, that liability for the negligence resulting in the personal injuries to the child was not covered by its insurance, and that it was not bound by the judgment for damages. After the evidence had been adduced in this action on the liability insurance policies, each party requested a directed verdict in its favor. As a result the trial court excused the jury and entered judgment in favor of the Ford Hospital Company against the Fidelity & Casualty Company for the face of its policy, or $5,000, for interest amounting to $120.83, and for an attorney’s fee of $400. The action was dismissed as to the Maryland Casualty Company. The Fidelity & Casualty Company has appealed.

■ The principal argument is directed to the merits of the defense that the Fidelity & Casualty Company, insurer*, did not assume liability for the Ford Hospital Company’s negligence in injuring the child, and that the insurer is not bound by the judgment for damages for personal injuries. This requires consideration of the issues, evidence and findings in the former action for damages and of the terms of the liability insurance.

The child rvas born in the Ford Hospital August 16, 1917, while its mother was an inmate and a patient there for the purposes of accouchement. Within two or three weeks the mother went to her own home, taking her child with her, but returned to the hospital alone from time to time for the temporary treatment of ailments resulting from conditions attending childbirth. For this purpose she returned to the hospital November 7, 1917, but was detained until the next day on account of having to undergo an operation. In the meantime the child was brought to the mother for nourishment and was left in the exclusive care of the hospital. While a hospital nurse, ir the performance of her duties, pursuant to a rule of the hospital, was giving the child a bath November 8, 1917, its left hand, through the negligence or the mistake of • the nurse, came in contact with a hot appliance and was severely burned. It was for the injuries thus inflicted that the child recovered in the former suit for damages the judgment against the Ford Hospital Company for $5,500 It was alleged in the petition in the former case mentioned, among other things, that—

■ “Before and after the birth of said child at said hospital, its mother and said child were inmates of said hospital for some months under treatment; that said child remained at said hospital with its mother during said period of treatment; that during all of the time that the child’s mother was at said hospital she paid for the services rendered by said hospital in their care and treatment.”

The acts constituting the negligence on which the damages for personal injuries are based were pleaded in the petition of the child and denied in the answer of the Ford Hospital Company.

Was the liability of the hospital for the damages described covered by its policy in the Fidelity & Casualty Company, insurer? The hospital was insured “against loss from the liability imposed by laAV upon the assured for damages on account of bodily injuries or death suffered by any patient or patients at the hospital,” says the policy, “in consequence of any malpractice, error, or mistake- made, while this policy is in force, within the said hospital, * * by the assured in the giving of medical, surgical, or hospital treatment, or by any person employed by the assured, in the giving of any such treat.ment.”

It is argued that, within the meaning of this insuring clause, the child was a mere licensee when injured, that it was not a “patient,” that it Avas not receiving “hospital treatment,” that the petition in the action for damages alleged the child was an “inmate,” but not that it Avas a “patient,” that negligent injury to the child Avas not within the terms of the insurance contract, and that a loss covered by the policy was not within any material issue in the action brought by the child against the hospital to recover damages for personal injuries. * Is the position thus taken tenable?

The Fidelity & Casualty Company insured the Ford. Hospital Company. The latter had a department equipped for obstetrics. In that department the mother was both an inmate and a patient. The child was expected. It Avas born helpless. It had the same right to room and care -as the mother, and was not a- mere licensee. Both mother and child Avere under the care of hospital nurses. The liability of the hospital for mistakes or negligence in “hospital treatment” extendéd to both. These conditions and relations were obvious in a hospital with a department equipped for obstetrics. Accouchement included the right of the mother to return for any hospital treatment required as a result of conditions attending childbirth, and compensation for room and services furnished to her included the care of the child in the meantime while necessarily in the hospital. These conditions and relations existed Avhen the child Avas injured. After going to her home the mother -returned for treatment and Avas detained for an operation. In the meantime the child Avas brought to its mother for nourishment. Both were then under the care of hospital nurses. A rule of the hospital required a bath for the child. The mother Avas not consulted about the rule or its enforcement, and the child was not accorintable. The bath was usual, necesáary and proper. When given, it was “hospital treatment” within the fair import of that term as used in the policy. For the purpose of hospital care, while the mother Avas in charge of hospital nurses, the helpless child was both an “inmate” and a “patient” when being bathed by a hospital nurse in compliance with an established rule. Pecuniary gain is not the sole aim of a modern hospital equipped for obstetrics. It has a mission requiring a degree of care prompted by the ordinary dictates of humanity. Of this all are aware. The precaution which resulted in the procuring of liability insurance covering a loss for a negligent injury to the mother Avould naturally suggest protection from a like injury to her child. This liability, it may' be inferred, was within the contemplation of the negotiating parties, and it is fairly covered by the terms of their written contract. The nurse, while bathing the child in compliance with a rule of the hospital, was guilty of negligence. She made a “mistake” within the meaning of the insurance policy when she allowed the hand of the helpless child to come in contact with a hot appliance.

The trial judge in the former case of Mary Jane Hannah, an infant, plaintiff therein, against the Ford Hospital Company, defendant therein, permitted the child to recover damages only upon a finding that it was an “inmate” under the exclusive care and control of the hospital, and he submitted to the jury for a special finding the question, “Was the plaintiff at the time she sustained her injuries a patient in defendant’s hospital?” The answer thereto was “Yes.” The facts outlined are inferable from the evidence in the case at bar arid are established by the findings of the trial court.

The Fidelity & Casualty Company, insurer, is engaged in the business of writing liability insurance for profit. It is not a favorite of the law with the standing of individuals who become sureties or guarantors as mere accommodations. No narrow or technical construction of the pleadings in the former action for damages or of the policy in the case at bar is permissible to defeat the insurance. For the purposes of the liability insurance the word “inmate” as used in the petition to recover damages for personal injuries and the word “patienf’ as used in the policy of insurance, to repeat what has already been said, fairly include both mother and child. The conclusions, therefore, are that the relation of hospital and patient existed between the Ford Hospital Company and the child at the time of the latter’s injury, that the hospital was liable for resulting damages, and that the policy of the insurer covered the loss on account of that liability to •the extent of $5,000.

Gould the insurer have defended the action for damages and at the same time have preserved its right to assert that it did not insure the loss? The insurer by its policy had bound itself to defend any suit against the hospital company to enforce any claim for a liability covered by the insurance, “whether groundless or not.” The action against the hospital for damages was a suit to enforce such a claim. The action was well founded, but, even if it had been “groundless,” the insurer had agreed to defend it. Though notified of the action for damages and requested to make a defense, the insurer refused to do so, or to participate in a settlement of the controversy, or to supersede the judgment or to pay any part of it. The insurer could have performed its contract to defend the former action for damages without losing its right to interpose the defense that insured’s loss was not covered by the policy. In a note in 34 L. R. A. n. s. 491, the correct rule is stated as follows:

“An indemnity insurer will not be estopped to set up the- defense that the insured’s loss was not covered by the contract of indemnity, by the fact that the insurer paiticipated in the action against the insured, if, at the same time, it gives notice to the insured that it does not waive the benefit of such defense.” Sargent Mfg. Co. v. Travelers Ins. Co., 165 Mich. 87.

There was no justification whatever for the insurer’s failure' to perform the contract to defend the action against the hospital.

On one of the assignments of error it is argued that there is no judgment against the hospital in the former suit for damages, and that therefore the insurer is not liable in the present action on its policy. This contention is based on an order directing the child, upon the hospital’s motion for a new trial, to file a remittitur for $2,000 and permitting the hospital to satisfy the judgment for damages in the sum of $5,500 by payment of $3,500. The hospital, owing to financial stress and incumbrances on its property, was unable to pay $3,500 or to furnish a supersedeas, and the insurer upon demand refused to do either. The child, not having received payment, did not file the remittitur. The requirements for it were conditional. There was no compliance by the hospital or by the insurer with any of the conditions. The judgment for damages in the sum of $5,500, which had been entered on a verdict in favor of the child, therefore, remained in force.

It is further argued that the present action to recover insurance is not maintainable because the insurer’s liability under the policy depends on insured’s payment of the judgment in money — an unperformed condition. To the extent of $5,000 the judgment for damages in the sum of- $5,500, if paid by insured in money, was the adjudicated measure of the insurer’s liability under its policy. The insurer had an opportunity to discharge its liability to the hospital and to satisfy the judgment by the payment of $3,500, but upon demand refused. The hospital was unable to raise the money to make such a payment and its attorneys afterward bought the judgment with their own funds and satisfied it of record after having-taken a mortgage on the hospital property for $5,601.25. The judgment therefore was paid. In these respects counsel for the hospital acted in good faith, as shown by proper findings of the trial court. The policy declared that the hospital was insured “against loss from the liability imposed by law upon the insured for damages on account of bodily injuries or death suffered by any patient or patients at the hospital,” in consequence of error or mistake in hospital treatment. The insurer not only denied liability for any loss under its policy, but violated its contract to defend the suit for such a loss, even if groundless. Consequently the insurer is not in a position to insist on payment in money, under the circumstances, as a condition of its liability. It is- now well established by precedent that an insurer, having thus violated its contract to defend a suit against the insured, may not be allowed to defeat a recovery on the policy by objecting to the manner in which the judgment was paid.

Another argument is directed to the propositions that the hospital parted with its liability insurance before it brought its suit on the policy, that it is not the real party in interest, and that consequently it cannot maintain the present action. On these issues the findings of the trial court in favor of the hospital in the present case are supported by evidence that insured’s assignment did not transfer title to the policy, that insured, as collateral security for its indebtedness to its counsel, assigned to them any recovery or judgment it might obtain against the insurer, that insured and the latter’s assignees so understood their transaction, that the assignment was openly made in good faith, and that the present action to recover the insurance was properly prosecuted in the name of the insured.

It is finally insisted that in any event the recovery on the insurance policy issued by the Fidelity & Casualty Company should not exceed $3,500, the amount for which the attorneys for the hospital bought the judgment from the child. In this connection it is argued that counsel for the hospital acted for their client; that it was the duty of the hospital to make reasonable efforts to lessen the burden of the insurer; that beyond the loss paid in money by the hospital the latter could make no profit out of its insurance contract; and that its counsel could not speculate on the business or interests of their client. Is the partial defense to the claim of $5,000 for the loss covered by the policy available to the insurer? The money invested by the hospital’s counsel in the judgment was not the money of their client. It was their own. They thus invested $3,500, after the insurer upon demand had refused to do so, and after, the hospital had tried in vain to raise that amount of money while it would satisfy the judgment. What the insurer is demanding is the right to appropriate to its own use the profits on the personal investment of $3,500 by the attorneys for the hospital and also their services in negotiating in their own behalf for the purchase of the judgment. In other words, the insurer calls on the insured for a credit which, through its. inability to raise money, it was unable to procure for itself. The record discloses no good reason for allowing the insurer to make use of the individual investments and the personal services of the attorneys who represented the hospital, the adversary of the insurer in the litigation to recover the insurance. Neither the hospital nor its counsel, whether acting separately or jointly, did anything unlawful to make either accountable to the insurer as trustee in the purchasing of the judgment for damages. The evidence shows, and the trial court found in effect, that the hospital and its counsel acted in good faith. The law did not prohibit the attorneys who represented the hospital in the action on the policy from purchasing the former judgment for damages, nor prevent the insured from ratifying the purchase for the purpose of delaying* the execution sale of the hospital until the latter could raise funds to pay the judgment in full. The confidential relations between the attorneys for the hospital and their client, and'the ethical standards for testing conduct affecting those relations, are not invokable by the insurer under the circumstances mentioned. On this phase of the case, therefore, the conclusion is that the confidential relations between the hospital and its attorneys and the transactions of the latter in their own behalf in purchasing the judgment for damages are not available to the insurer as a partial defense. It follows that the Fidelity & Casualty Company, to the extent of its policy for $5,000, interest and costs, is bound by the judgment as rendered in favor of the child for damages.

The Maryland Casualty Company and the Ford Hospital Company filed cross-appeals, but discussion thereof is unnecessary in view of the decision on the appeal of the Fidelity & Casualty Company. No error prejudicial to the latter has been found in the record, and the judgment against it is Affirmed.