Svea Assurance Co. v. Packham

Boyd, J., delivered the opinion of the Court: Eldridge Packham, Jr., who traded as E. Packham, Jr., & Co., had his stock of goods and merchandise insured in nine companies for the sum of $22,500, which included a policy-issued by the appellant for three thousand dollars. While the policies were in force a fire occurred and Mr. Packham furnished proofs of loss to the companies, amounting in the aggregate to $18,660, but the appraisers, appointed under the provisions of the policies, only allowed $17,360, which he received, less certain discounts. It was claimed that the fire, which occurred on December 22nd, 1898, was the result of the negligence of the Consolidated Gas Company of Baltimore City, and, on February 1st, 1899, before the insurance money was paid, Mr. Packham instituted a suit against that company claiming $50,000 for the destruction of the stock in trade and other losses which we will have occasion to refer to. That suit resulted in a verdict for the plaintiff for $18,000, the amount having been agreed upon after the trial commenced.

Interrogatories were submitted to the j ury to ascertain the loss on the stock of merchandise and the loss to the profits in plaintiff’s business and each was answered by fixing the amount at nine thousand dollars. Judgment was entered on the 28th day of November, 1899, for the $18,000 and on the 1st day of December it was paid to the plaintiff and the judgment was entered satisfied. On the next day Mr. Packham prepared a statement, showing his calculation of the distribution of the nine thousand dollars, less expenses and costs, to the insurance companies, which was sent to their representatives, with the request that they examine it and advise him whether they found it correct. Six of the companies accepted ⁴⁷² the amounts thus distributed to them, and since the bill was filed one of the original complainants in this cause, the Palatine Insurance Company, Limited, of Manchester, England, accepted that distributed to it and the bill was dismissed as to that company.

The Svea Assurance Company by that distribution would only receive $805.37, whilst it claims $2,317.27, being the amount it paid Packham. This bill was filed by those two companies against Eldridge Packham,"Jr., and the Consolidated Gas Company of Bahimore City to prohibit the latter from paying and the former from receiving the amount of the judgment, to require the gas company to bring it into Court for distribution -and to have the Court take jurisdiction over the fund. The theory upon which the bill seeks relief is that the complainant and the other companies were entitled to be subrogated to the rights of Packham to the fund recovered from the gas company, to the extent of the amounts paid by them respectively, and the appellant denies his right to compromise the claim against the gas company, to retain one-half of the amount received and 'to allow counsel thirty per cent of the amount recovered. 1. The policy of the appellant contains the following clause : “ If this company shall claim that the fire was caused by the act or neglect of any person or corporation, private or municipal, this company shall, on payment of the loss, be subx'ogated to the extent of such payment to all right of recovery by the insured for the loss x-esulting therefrom, and such x-ight shall be assigned to this company by the insured on receiving such payment.” When the money was paid to Packham by the appellant, what is called a “ subrogation receipt ” was signed by him which, in effect, followed the provision of the policy.

In the x-ecent case of Packham v. German Fire Insurance Company, 91 Md. 515 , an insurer’s right of subrogation was considered and fully x'ecognized. That case arose out of the same transactions that ax-e now before us. Packham sued that company to recover the amount alleged to be due on a policy on office furniture and fixtures which wex-e desti'oyed by this fire. The question was presented there by a demurrer ⁴⁷³ to a plea of the defendant, setting up the suit against the gas company and the verdict entered by agreement, as a bar to the action.

The recovery against the gas company, by the direction of Packham, did not include any compensation for loss incurred under that policy, and there was no reservation of any right for the protection of that company. It was held that the plaintiff could not recover, as there could be no further recovery against the gas company and the plaintiff had destroyed the defendant’s right of subrogation under the policy. The general principle was thus stated, “ Contracts of marine and fire insurance are essentially contracts of indemnity, and, if the insured recovers the amount of his loss from any source, the insurer may recover from him pro tanto, and this right is called the subrogation of the insurer into the rights of the insured.” It is therefore useless to cite other authorities to sustain that doctrine which has been generally adopted by the Courts in this country and England. This case presents some facts, however, which distinguish it from the one above referred to in some important particulars. 2.

It will be remembered that the suit brought by Mr. Packham against the gas company was instituted in February, 1899, whilst the insurance companies did not settle the losses until several months afterwards. Messrs. Whitelock and Colton represented him under an agreement by which they received $250 as a retainer, and were to receive thirty per cent of the amount recovered from the gas company. When the insurance companies settled Mr. Whitelock communicated with the representatives of several of them, including Mr. McCaffrey, who represented the appellant, and stated to them he thought it desirable that all of the companies should cooperate with Mr. Packham and take such part as they deemed compatible with their interests, so far as it could be done without conflict with Mr. Packham’s rights.

Mr. Keech was subsequently employed by the appellant, and Mr. Whitelock told him that he had reached the conclusion that there could only be one recovery against the gas company, and that in the name of Mr. Packham, and as he, Mr. Keech, represented ⁴⁷⁴ two of the companies, he and Mr. Colton had determined to offer him a pro rata part of the fee for which they had arranged with Mr. Packham, if he would go into the case and assist at the trial. Shortly afterwards Mr. Keech wrote to Mr. White-lock and, after stating that he had been looking into the authorities, said : “ I have come to the clear conclusion not only that I cannot agree with the position you take, that one suit is all that can be brought, but I believe that the only way in which the rights of my clients can be adequately protected is by instituting several suits. This I shall do today. I will be very glad, however, to give you and Mr. Colton any aid in my power in the prosecution of your case, so as to develop the whole situation to the greatest advantage of all of us.

You must not hesitate to call on me if I can be of service to you.” That was dated October 19th, 1899, and the same day he did bring the two suits against the gas company for his clients. Those cases remained on the docket until January, when the gas company filed a petition in this case requiring those two companies to elect between the suits at law and this bill, and they elected to try this cause and the actions at law were dismissed on the 30th day of January, 1900. Mr. Whitelock testified that he did not communicate further with the complainant as he regarded Mr. Keech’s action as a refusal to unite 'with them in the prosecution of the suit against the gas company. In that he was evidently correct, for, although Mr. Keech did offer to give him and Mr. Colton any aid he could, he refused to go into the case brought by them and said he'had reached the conclusion that the only way his clients could be adequately protected was by separate suits by them, which he at once instituted.

After the judgment was obtained he ascertained, on further investigation of the subject, that he was mistaken in his original position and then for the first time made claim to any part of the amount to be recovered in the name of Packham for the benefit of his clients. He was probably misled by the decisions in jurisdictions where statutes or the rules of practice authorize such suits, and the casé of Packham v. German Fire Ins. Company, definitely settling the question in this State, had not then been decided. ⁴⁷⁵ The suit of Packham against the gas company came up for trial on November 27th, 1899. During the first day of the trial Judge Fisher, of counsel for defendant, suggested the possibility of reaching an agreement as to the amount of a verdict.

After Court an arrangement was made for a conference that night. Mr. Whitelock communicated with the representatives of other companies, but did not send word to Mr. McCaffrey because, to use his language, “I interpreted Mr. Keech’s letter of the 19th of October as a positive refusal to look to our case as a means of indemnification to his company.” After a number of interviews that night, the gas company finally agreed to a verdict of $ 18,000. Mr. Packham “refused absolutely at first to take it” and it was only when those representatives of the insurance companies who were present assented to a division of the fund in to two equal parts that he consented to it. The testimony shows that those present not only consented to it but deemed it a good settlement.

The next day a verdict was rendered for $ 18,000, and the interrogatories were answered as above stated. There is nothing in the record to suggest, much less prove, that it was not a wise settlement, nor is there anything from which we can infer any intention of defrauding or prejudicing the insurance companies. All of them had an opportunity to be represented in the litigation, those of them who took part in it were satisfied that the settlement should be made and the others refused the offer of Mr. Packham, made through his attorneys, to unite with him. It is true that the attorneys for the appellant and the Palatine company were not notified of the trial or the proposed settlement, but they had not only declined to unite with Mr. Packham, but were still proceeding with their separate actions against the gas company.

It was not a compromise of a claim for which the damages had been ascertained, but it would necessarily have depended upon the jury to determine what amount, if any, would be allowed. The gas company was not bound by the estimate placed on the stock of goods by the appraisers, as it was not a party to the contract of insurance. The uncontradicted evidence on that ⁴⁷⁶ subject is that the insurance companies only offered Mr. Pack-ham about thirty-three and a third per cent of his claim. If they were acting in good faith when they made that offer, surely they could not have, complained if the jury had only allowed that much.

They had paid more, but that was because they were required to do so by reason of the fact that the appraisers allowed it, but if the jury had adopted their view of the amount of loss, as indicated by their offer, it would have awarded them much less than the nine thousand dollars, which was obtained through this verdict. When, then, the representatives of the companies that did take part in the suit, instituted by Mr. Packham, urged it and this appellant had refused to recognize Mr. Packham’s right to sue for it, and there is nothing to show that it was not a desirable settlement to make, why should he be prohibited from making a compromise? It may be conceded that the insured cannot fritter away the rights of an insurer entitled to be subrogated, and'that he cannot ordinarily make a compromise without being responsible to the insurer for the amount paid by him, but under such circumstances as we have stated there can, in our opinion, be no question about his right to thus settle a suit for unliquidated damages, when the majority of those interested not only approved it but urged it. We are now speaking of the right of the insured to compromise the suit, and not his right to retain part of the amount received, which we will consider later.

In the case of Packham v. German Fire Insurance Company, supra, it was decided that only one suit could be brought, and that in the name of the insured, but neither that case nor any of those there relied on go to the extent of holding the insured responsible to an insurer who thus places the burden on the insured, and not only does not ask to use his name in the effort to recover but refuses to do so, if the insured makes a compromise in good faith, with the approval of the insurers who did take part and who represented the greater portion