Howard P. Foley Co. v. Employers-Commercial Union

488 P.2d 987, 15 Ariz. App. 350, 1971 Ariz. App. LEXIS 768
CourtCourt of Appeals of Arizona
DecidedSeptember 27, 1971
Docket2 CA-CIV 951
StatusPublished
Cited by11 cases

This text of 488 P.2d 987 (Howard P. Foley Co. v. Employers-Commercial Union) is published on Counsel Stack Legal Research, covering Court of Appeals of Arizona primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Howard P. Foley Co. v. Employers-Commercial Union, 488 P.2d 987, 15 Ariz. App. 350, 1971 Ariz. App. LEXIS 768 (Ark. Ct. App. 1971).

Opinion

HOWARD, Judge.

The sole question on this appeal is whether Employers was entitled to recover from Foley legal fees which it had paid its own attorneys to defend an action brought against its insured.

The undisputed facts are as follows. Foley and Robert E. McKee, Employers’ insured, were defendants in a wrongful death action. The claim arose out of work performed by Foley, a sub-contractor for McKee, the general contractor. The subcontract -agreement between Foley and McKee provided:

“Sub-Contractor hereby agrees to defend at its own cost and to indemnify and hold harmless the Contractor, its agents and employees, from any and all liability,, damages, losses, claims, and expenses, howsoever caused, resulting directly or indirectly from or connected with the performance of this agreement, irrespective of whether such liability, damages, losses, claims and/or expenses were actually or allegedly caused wholly or in part through the negligence of Contractor or any of its agents, employees or other Sub-Contractors.”

A liability insurance policy issued by Employers covered McKee and, pursuant to its policy obligation to defend, Employers retained its attorneys to defend McKee. McKee’s defense of the lawsuit was tendered to and declined by Foley. An out-of-court settlement was subsequently effected by Foley to which neither McKee nor Employers contributed. McKee’s liability insurance policy contained the following :

“Subrogation. In the event of any payment under this policy, the company shall be subrogated to all the insured’s rights of recovery therefor against any person or organization and the insured shall execute and deliver instruments and papers and do whatever else is necessary to secure such rights. The insured shall do nothing after loss to prejudice such rights.”

Employers filed the instant suit against Foley, alleging in its complaint that it had defended McKee in the wrongful death action and had expended the sum of $4,695.41 in so doing. It claimed that as subrogee of McKee it was entitled to indemnity for the costs and expenses of the defense. Both parties subsequently moved for summary judgment. Appended to Employers’ motion was an affidavit signed by John K. Mesch of the law firm of Mesch, Marquez & Rothschild, the substance of which was that the sum of $4,165 had been charged Employers for legal fees and that the sum of $466.03 had been expended on additional costs. The parties stipulated that no factual issues existed, that one of the motions *352 for summary judgment should be granted and that if Employers was entitled to recover, the amount in controversy was $4,-695.41. Employers’ motion was granted and this appeal followed.

Foley concedes that the subject indemnity agreement includes indemnity for attorney’s fees and other expenses involved in defending a claim. Its position, however, is that the subrogee, Employers, stepped into the shoes of its insured and since McKee neither paid for nor was legally obligated to pay the attorney’s fees and expenses of its defense in the wrongful death suit, McKee had no “right of recovery” and therefore neither did Employers. Foley further concedes that if McKee had been legally obligated to obtain and pay for legal representation, it could have asserted a claim against Foley under the indemnity agreement. It argues, however, that the monies paid by Employers were paid because only Employers was obligated to pay them, citing the cases of John Wanamaker, New York, Inc. v. Otis Elevator Co., 228 N.Y. 192, 126 N.E. 718 (1920); Fireman’s Fund Ins. Co. v. North Carolina Farm Bureau Mutual Ins. Co., 269 N.C. 358, 152 S. E.2d 513 (1967); Rohm & Haas Co. v. Lessner, 168 Pa.Super. 242, 77 A.2d 675 (1951), Hartford Accident & Indemnity Co. v. South Carolina Ins. Co., 252 S.C. 428, 166 S.E.2d 762 (1969), to support its argument.

Of these four cases, only the Rohm case involves a factual situation such as we have here- — in other words, an express indemnity agreement between a contractor and sub-contractor and an insurer’s right of subrogation, and this case has been overruled in Boiler Engineering & Supply Co. v. General Controls, Inc., 443 Pa. 44, 277 A.2d 812 (1971).

We are inclined to follow those cases which have recognized the right of an indemnitee's insurer, who has defended an action against the indemnitee, to recover costs and attorney’s fees from the indemnitor. See Safway Rental & Sales Co. v. Albina Engine & Machine Works, Inc., 343 F.2d 129 (10th Cir. 1965); Lesmark, Inc. v. Pryce, 118 U.S.App.D.C. 194, 334 F.2d 942 (1964); General Accident Fire & Life Assurance Corp. v. Smith & Oby Co., 272 F.2d 581 (6th Cir. 1959), rehearing denied 274 F.2d 819, (6th Cir. 1960) ; Wiseman v. North Central Airlines Co., Inc., 246 F.Supp. 775 (S.D.S.D.1965) ; New Amsterdam Casualty Co. v. Kilroy Structural Steel Co., Ohio App., 81 Ohio Law Abst. 527, 159 N.E.2d 797 (1959); St. Paul Mercury Indemnity Co. v. Kopp, Ohio App., 70 Ohio Law Abst. 259, 121 N.E.2d 23 (1954); Broce Construction Co., Inc. v. Traders of General Ins. Co., 465 P.2d 475 (Old. 1970); St. Paul Fire & Marine Ins. Co. v. United States Nat. Bank, 251 Or. 377, 446 P.2d 103 (1968); Boiler Engineering & Supply Co. v. General Controls, Inc., supra; National Farmers Union Property & Casualty Co. v. Farmers Insurance Group, 14 Utah2d 89, 377 P.2d 786 (1963).

In the Lesmark case, it was stated:

“We turn now to Lesmark’s contention that the Charrons [indemnitee] are not entitled to indemnification for counsel fees because their insurance carrier furnished the counsel who appeared for them and they 'are neither obligated nor responsible for the fee.' We cannot agree. The fact that the Charrons carried liability insurance which covered the claims of Pryce and Ash [judgment creditors] did not relieve Lesmark of its obligation to indemnify the Charrons against such claims, and Lesmark does not contend otherwise. Similarly, it is not relieved of its liability for litigation expenses arising from those claims, which were also covered by insurance.

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Bluebook (online)
488 P.2d 987, 15 Ariz. App. 350, 1971 Ariz. App. LEXIS 768, Counsel Stack Legal Research, https://law.counselstack.com/opinion/howard-p-foley-co-v-employers-commercial-union-arizctapp-1971.