Shermoen Ex Rel. Shermoen v. Lindsay

163 N.W.2d 738, 1968 N.D. LEXIS 93

• Court: North Dakota Supreme Court
• Decided: December 30, 1968
• Docket: Civ. 8478
• Status: Published

Opinions

RAY R. FRIEDERICH, District Judge.

This is an appeal from two orders entered preliminary to trial by the District Court of Cass County. The first order granted a defense motion to strike certain allegations in the Plaintiff’s Complaint, and the second dismissed the Complaint as to one of the defendants named in the action.

The facts for purposes of this appeal have, in part, been stipulated to by the parties through their respective attorneys. By this stipulation, it appears that on July 24, 1963, at approximately 8:00 P.M. the Plaintiff, Scott Shermoen, a boy of ten years of age, was swinging on a rope which had been tied to the limb of a tree adjacent to Sixth Street in the 800 Block, South Fargo, North Dakota. As the boy swung out over the street, a portion of the rope trailed behind him and was caught on an automobile being driven along Sixth Street by the Defendant Fred C. Lindsay. The boy fell to the street and sustained bodily injuries.

The tree from which the boy was swinging was on Hawthorne School Playground, used by the Fargo Park District for its summer supervised playground program. The rope had been tied to the limb by a playground supervisor of the Park District for a rope-climbing event in this program.

It is also agreed that the Park District is a duly organized and existing political subdivision, and the playground program was for the benefit of the general public and paid for with public funds. At the time of the injury, the Park District was insured under a general comprehensive liability policy issued by Western Casualty and Surety Company.

In the original action as commenced by the Plaintiff, negligence was alleged against the Defendant, Fred C. Lindsay, and the Park District. Both Defendants denied such negligence; alleged contributory negligence as an affirmative defense, with the Park District further alleging that if contributory negligence was not the sole proximate cause of the injuries claimed by the Plaintiff, the injury was caused by persons other than the Park District. Governmental immunity was not specifically alleged as a defense on the part of the Park District. A motion for summary judgment urged by the Park District on the ground of governmental immunity was denied by the District Court.

Subsequent to the decision on the motion for summary judgment, the Plaintiff was permitted to file an amended complaint in which Western Casualty and Surety Company, a foreign corporation, was named as a party to the action, with the amended complaint containing all the allegations of of the original complaint, except one additional paragraph, as follows:

“That at all times material hereto, the Defendant Park District had in existence and in full force and effect a policy of liability insurance with the Defendant Western Casualty and Surety Company of Fort Scott, Kansas, insuring said Defendant, Park District, against liability and damages for the injuries sustained by Scott Shermoen as hereinbefore alleged all in accordance with the provisions of § 40-43-07 NDCC; and that pursuant to said statute, the defense of governmental immunity is not available to the Defendant, Western Casualty and Surety Company.”

To the Amended Complaint, the Park District interposed its Amended Answers specifically alleging the defense of governmental immunity. Western Casualty and Surety Company moved to strike the reference to insurance in the Amended Complaint, and to dismiss the complaint as against this defendant. Both motions were granted by the Trial Court in separate orders and the appeal is from these two orders.

At the time the alleged injury was sustained by the Plaintiff, § 40-43-07 of the North Dakota Century Code was the existing statute governing authority for the procurement of liability insurance, and made reference to the defense of governmental immunity as it might he claimed by the political subdivision and the insurance carrier as follows:

40-43-07. Political Subdivisions Authorized to Carry Liability Insurance— Defense of governmental immunity not available to insurers. — Any political subdivision of the state may insure against claims of loss, damage, or injury against such political subdivision or any department, agency, or function, or officer, agent, or employee, of such subdivision. This section shall not deprive any political subdivision of the state of its right to claim governmental immunity, but such immunity shall not be available to the insurance carrier furnishing such insurance and all policies providing for such insurance shall contain a waiver of such defense. (S.L.1955, ch. 261, § 1; R.C. 1943, 1957 supp., § 44-0115).

Since the alleged injury and the filing of this appeal, the foregoing statute has been amended by the North Dakota Legislature at its 1965 and 1967 sessions. The Amendments are not pertinent to a determination in this action.

It is the Plaintiff’s contention that by the order striking all reference to the existence of insurance in the Amended Complaint, the Court has precluded the Plaintiff from proving the existence of liability insurance, which in turn would prevent the application of § 40-43-07 NDCC. It is the Plaintiff’s further claim that by dismissing the action against the Defendant, Western Casualty and Surety Company, the Court is permitting the insurance carrier to avail itself of the defense of governmental immunity on behalf of the political subdivision in complete contravention of the statute.

The Defendants, Park District and Western Casualty and Surety Company challenge the appealability of the two orders as not being within any of the subsections of § 28-27-02 NDCC under which appeals may be carried to this Court. If the orders fall within any of the subsections of this statute, it would be § 28-27-02(5) NDCC which provides as follows:

“What orders reviewable. — The following orders when made by the court may be carried to the supreme court:

"* * * * * *

“5. An order which involves the merits of an action or some part thereof;

"* * * * * *

In the case of In Re Fettig’s Estate, 129 N.W.2d 823 (N.D.1964), the foregoing subsection is discussed at Page 827 with reference to an earlier case:

“In Bolton v. Donavan, 9 N.D. 575, 84 N.W. 357, this Court expanded upon the term ‘merits’ and held that the phrase ‘involves the merits’ must be so interpreted as to embrace orders which pass upon substantial legal rights of the suit- or, whether such rights do or do not relate directly to the cause of action or subject matter in controversy.”

See also Nord v. Koppang, 131 N.W.2d 617 (N.D.1964); Swiggum v. Valley Investment Co., 73 N.D. 422, 15 N.W.2d 862; Hauser v. Security Credit Co., 66 N.D. 399, 266 N.W. 104.

The orders under consideration in the foregoing cases were not held to be appeal-able, but neither were they determinative in the case. In other words, the orders were not decisive of the questions involved, but left them still pending before the Trial Court. To the same effect was the result in Nordenstrom v. Swedberg, 123 N.W.2d 285 (N.D.1963) and Ferguson v. Jensen, 76 N.D. 647, 38 N.W.2d 560.

The order of the Trial Court on each of the motions here, although an intermediate order, prevents either pleading or proving the existence of liability insurance in-terms of § 40-43-07 NDCC. We believe an analogy exists to the holding in Granger v. Deaconness Hospital of Grand Forks, 138 N.W.2d 443 (N.D.1965) in that the portion stricken is not provable under the remaining allegations of the Complaint and yet “involves the merits of an action or some part thereof.” See also La Duke v. E. W. Wylie Co., 77 N.D. 592, 44 N.W.2d 204. The issues raised by the appeal will be considered.

The specifications of error as the same refer to the two separate orders of the Trial Court are related, and will be covered under a single heading. No attempt is being made at an exhaustive discussion of the American Doctrine of governmental immunity. There is such a conglomeration of case law, however, and such confusion on the subject that some general observations may be of help as a preface to the specific issues in the case.

Law is a viable science which during the history of our country has been able to adapt itself reasonably well to the needs and circumstances of the times. Where this is particularly apparent is in the field of immunity ' from tort liability. It was argued that the threat of tort liability might jeopardize the continued existence of the state and its political subdivisions, charitable institutions, and intra-family amity. In each of these three categories, immunity was deemed necessary in order to preserve a socially desirable service or condition. To accomplish this result a vast body of law has developed over the past years and is still tenaciously being preserved in many jurisdictions, notwithstanding the fact that the procurement of liability or indemnity insurance would seem to negate any justification which may exist for the concern, or completely destroy it. Defender v. City of McLaughlen, 228 F.Supp. 615 (D.C.S.D.); Coste v. City of Superior, 343 F.2d 100 (C.A.7 Wis.); Maffei v. Incorporated Town of Kemmerer, 80 Wyo. 33, 338 P.2d 808 (Wyo.1959) Rehearing denied 340 P.2d 759; Sayers v. School Dist. of Argentine & Deerfield, 366 Mich. 217, 114 N.W.2d 191, 60 A.L.R.2d 1198.

Governmental immunity from tort liability in the cited cases, among others, was preserved on the basis of three general classifications:

(1) The sovereign is immune from suit, which under our system of government would include the state and political subdivisions of the state who are considered to be representatives or agencies of the sovereign;

(2) The curious philosophy that it is more expedient that isolated individuals should suffer than that society in general be inconvenienced; and

(3) That from a practical view of public policy, governments and governmental agencies will perform their duties more efficiently and effectively if not jeopardized by the threat of tort liability.

The doctrine has been under attack in recent years, and is being abrogated in an increasing number of states either by legislative action or judicial decision. Some of the most forceful language condemning it can be found in the following cases: Thomas v. Broad Lands Community Consolidated School District, 348 Ill.App. 567, 109 N.E.2d 636, 640. Annotation, 75 A.L.R. 1196, Williams v. City of Detroit, 364 Mich. 231, 111 N.W.2d 1 (1961); Pierce v. Yakima Valley Memorial Hosp. Ass’n., 43 Wash.2d 162, 260 P.2d 765, 774 (1953); Muskopf v. Corning Hospital District, 55 Cal.2d 211, 11 Cal.Rptr. 89, 359 P.2d 457 (1961); Holytz v. City of Milwaukee, 17 Wis.2d 26, 115 N.W.2d 618 (1962); McAndrew v. Mularchuk, 33 N.J. 172, 162 A.2d 820, 832, 88 A.L.R.2d 1313 (1960).

The disfavor which the Courts have shown towards immunity from tort liability in general follows a pattern, in that frequently a reappraisal of the doctrine of charitable immunity and intra-family immunity is followed by a reappraisal of the doctrine of governmental immunity with many of the same arguments, both pro and con. This Court has only in recent years expressed its position on the doctrine of charitable immunity in Granger v. Deaconness Hospital of Grand Forks, supra, and on the subject of intra-family immunity in the case of Nuelle v. Wells, 154 N.W.2d 364 (N.D.1967).

The legislature in this state has deemed it necessary to enter into the field of governmental immunity by the enactment of Chapter 261, Session Laws 1955, (herein referred to as § 40-43-07 North Dakota Century Code). Legislative attempt to remedy the chaos and confusion which exists in this area of the law and to remedy at least in part the harsh effect of the doctrine is not without justification.

In enacting § 40-43-07 NDCC, the North Dakota Legislature has demonstrated its awareness of the undesirable features of governmental immunity. We are inclined to agree that it is manifestly unfair that an innocent victim of a tort should be without recourse when the tort is perpetrated by a governmental agency, employee or agent. Although inroads have been piece-meal in that two subsequent amendments have been made to this statute since its origin in 1955, in each instance, these amendments have resulted in diminishing the consequences of this doctrine.

We consider first the effect if any of liability insurance upon the continued existence of the defense of governmental immunity.

The first paragraph of the insurance contract between the Park District and the insurance carrier provides as follows:

“ * * * The Western shall defend any suit alleging such bodily injury or property damage and seeking damages which are payable under the terms of this policy, even if any of the allegations of the suit are groundless, false, fraudulent; but The Western may make such investigation and settlement of any claim or suit as it deems expedient.”

Section 40-43-07 NDCC provides:

“ * * * but such immunity shall not be available to the insurance carrier furnishing such insurance and all policies providing for such insurance shall contain a waiver of such defense.”

What construction must be placed upon the insurance contract in the light of the statutory directive? We read the insurance contract as controlled by the statutory language to mean that the insurer shall defend against any claims for bodily injury brought against the Defendant Park District, but that such insurer cannot and will not avail itself of the defense of governmental immunity ordinarily available to the Park District. The insurer has contracted to be in control of the defense or settlement of the claim in behalf of the insured, "and to pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury.

The statute made the procurement of insurance permissive on the part of the political subdivision. The political subdivision need not enlarge its scope of liability unless it elects to do so by insurance. The insurance carrier need not elect to insure against claims of loss, damage, or injury, unless it is willing to do so in the absence of and upon waiver of the defense of governmental immunity.

It is important to note that the statute does not read: “The procurement of insurance shall not deprive * * * ” but rather, “This section shall not deprive any political subdivision of the state of its right to claim governmental immunity * * *.” We believe the legislature included the words “This section” as a precaution against any interpretation that the enactment of § 40-43-07 NDCC might imply the preclusion of a political subdivision raising the defense of governmental immunity whether protected by liability insurance or not. It does not afford the political subdivision with liability insurance the right to exercise the defense of governmental immunity whenever it should elect to do so, and waive the defense whenever it chooses to do so. Schoening v. United States Aviation Underwriters, Inc., 265 Minn. 119, 120 N.W.2d 859; Flowers v. Board of Commerce of Venderburgh County, 240 Ind. 668, 168 N.E.2d 224, overruling Hummer v. School City of Hartford City, 124 Ind.App. 30, 112 N.E.2d 891 (Ind.).

As was pointed out earlier, the defense of governmental immunity raised by the insurer makes it imperative that the existence of liability insurance be alleged in the amended complaint.

Such an allegation cannot be prejudicial to the defendant Park District, however, in view of our law which prohibits, during the course of trial, any reference to pleadings which may he prejudicial to the adverse party. Reuter v. Olson, 79 N.D. 834, 59 N.W.2d 830; Hoffer v. Burd, 78 N.D. 278, 49 N.W.2d 282; Peterson v. Bober, 79 N.D. 300, 56 N.W.2d 331.

Our law equally prohibits any reference to insurance during the course of trial, where the insurance carrier is not a party to the action. Bischoff v. Koenig, 100 N.W.2d 159 (N.D.1959). This is a proper subject for pre-trial procedure before the Court. Once the existence of insurance is established, it is for the Court to rule on the defense of governmental immunity. Spielman v. State, 91 N.W.2d 627, 629 (N.D.1958).

That portion of the Trial Court’s order striking the allegation of liability insurance from the Plaintiff’s amended Complaint is accordingly reversed. For reasons hereinafter explained the portion of the order striking the name of Western Casualty and Surety Company, a corporation, from the title of the action and a portion of Paragraph II of the amended Complaint referring to this defendant is affirmed.

We consider next the order of the Trial Court dismissing the action against Western Casualty and Surety Company.

There is a general reluctance among Courts to permit direct actions by an injured party against the insurer. Courts seem to be fearful of undue jury liberality in a negligence suit where the carrier is joined as a defendant. Aside from this general reluctance, however, there are other more specific reasons why such an action cannot be permitted in this case and why the order of the Trial Court dismissing the action against the insurer should be sustained.

Unless there is implied language in the statute authorizing a direct action against the insurer, as claimed by the Plaintiff, such an action would have to be based upon the premise that the insurance contract between the insurer and the Park District is for the benefit of third parties. There is some basis in the argument that the insurance contract was not entered into for the protection of the political subdivision since it already enjoys immunity from tort liability and therefore must be for the benefit of third parties. Courts, however, have restricted the third party beneficiary theory to cases brought under a statute providing for compulsory insurance. The rule is best expressed at 20 A.L.R. 1131:

“Where the policy provisions were clearly against the joinder of the insured and the insurer in the same action, and no statutory provision existed inconsistent with such provision, the right to join the insurer and the insured in the same action has been denied to the injured person.” See James v. Young, 77 N.D. 451, 43 N.W.2d 692, 20 A.L.R.2d 1097 (N.D.1950).

In the absence of statutory language to the contrary, recognition must then be given to the contract between the insured and the insurer. In this respect, the contract of insurance between The Western and the Defendant Park District is not unique. It contains the conventional “no action clause” which provides as follows:

“Action Against The Western: No action shall lie against The Western unless, as a condition precedent thereto, the insured shall have fully complied with all the terms of this policy, nor until the amount of the insured’s obligation to pay shall have been finally determined either by judgment against the insured after actual trial or by written agreement of the insured, the claimant and The Western.

“Any person or organization or the legal representative thereof who has secured such judgment or written agreement shall thereafter be entitled to recover under this policy to the extent of the insurance afforded by this policy. No person or organization shall have any right under this policy to join The Western as a party to any action against the insured to determine the insured’s liability, nor shall The Western be impleaded by the insured or his legal representative.”

Only a so-called direct-action statute, which would permit suit directly against the insurer notwithstanding the “no action clause,” would permit the joinder of Western Casualty and Surety Company, as the plaintiff has attempted in this case. North Dakota has no such direct-action statute, and our interpretation of § 40-4-3-07 does not authorize such actions.

The dismissal of Western Casualty and Surety Company as a party defendant, as herein affirmed, in no way implies that an ultimate responsibility may not devolve upon this company should judgment in favor of the plaintiff and against the defendant Park District be subsequently entered. The basis of the dismissal of the action against the insurance company is that the action against it, at this stage of the proceedings, is premature.

The case is remanded to the District Court of Cass County for further proceedings consistent with the holding herein.

STRUTZ, ERICKSTAD, and KNUD-SON, JJ., concur. PAULSON, J., deeming himself disqualified, did not participate; Honorable RAY R. FRIEDERICH, one of the Judges of the Second Judicial District, sitting in his stead.