TATE, Justice ad hoc.
Plaintiff partnership appeals from judgment dismissing its suit to recover a sum allegedly due, under a policy issued to it by defendant insurer, in reimbursement of damages to the property of another paid by plaintiff. The "Comprehensive General Liability Policy" in question insured plaintiff contractor against liability imposed by law upon said insured for damages because of injury to property caused by accident. Excluded from coverage of the policy was property in the "care, custody or control" of the insured.
On January 16, 1953, during the term of the policy and while plaintiff was fulfilling its contact with the City of New Orleans to dismantle the statue of Robert E. Lee and the supporting stone column located in Lee Circle, a portion of the column fell from a crane and damaged a large ornamental cast-iron urn situated at the base of the monument, as well as some granite slabs.
Defendant seeks to evade liability under its insurance contract because: (a) the damaged property allegedly was under the "care, custody or control" of the plaintiff insured and thus excluded from coverage of the policy; and (b) plaintiff allegedly violated clauses of the policy prohibiting the insured from voluntarily settling or paying claims prior to final judgment obtained against it by the third person (the City) whose property was damaged. The trial court, in dismissing plaintiff's suit, sustained the latter defense.
As the District Court held, the attempted first defense that the damaged property was within the "care, custody or control" exclusion clause is clearly without factual or legal merit.
Plaintiff's dismantling contract concerned the Lee statue and its supporting column and did not include the base of the monument (upon which the column was situated) or the ornamental urns at the corners of the base, accidental damage to one of which urns is the subject of the present suit.
The uniform jurisprudence holds that damaged property or premises merely incidental or adjacent to the contracted
The cases cited by defendant recognize this principle; although, on the basis of facts distinguishable from the present, recovery was denied to the insureds therein on the basis of the aforesaid exclusion clause. These cases found the damaged property therein to be within the "care, custody or control" of the insured as the actual subject of the insured's repair, installation, construction, or transportation contract, or as equipment actually used by the insured in the performance thereof. International Derrick & Equipment Co. v. Buxbaum, 3 Cir., 1957, 240 F.2d 536, Hardware Mut. Cas. Co. v. Mason-Moore-Tracy, Inc., 2 Cir., 1952, 194 F.2d 173, L. L. Jarrell Construction Co. v. Columbia Cas. Co., D.C. 1955, 130 F.Supp. 436; Root Motor Co. v. Massachusetts Bonding & Ins. Co., 1932, 187 Minn. 559, 246 N.W. 118; Maryland Cas. Co. v. Holmsgaard, 1956, 10 Ill.App.2d 1, 133 N.E.2d 910, and John G. Speirs & Co. v. Underwriters at Lloyd's London, 1948, 84 Cal.App.2d 603, 191 P.2d 124.
The defendant insurer's denial of coverage and liability upon such first ground, in the face of the uniform jurisprudence and the uncontradicted facts, would seem to subject it to the penalties and attorney's fees as demanded by plaintiff's supplemental petition, as a refusal to pay a covered loss (after due proof thereof) which is "arbitrary, capricious, or without probable cause", LSA-R.S. 22:658.
Moreover, such assessment of penalties seems especially justified under the facts of the present case. Before the plaintiff entered upon the performance of the dismantling contract, upon specific inquiry by plaintiff's senior partner concerning the subject he was informed by defendant's underwriting agent (on the basis of underwriting information available to the latter, which of course was based upon the above jurisprudence) that portions of the premises such as that damaged were not within his "care, custody or control" so as to be excluded from the protection of the present policy.
However, despite the undoubted coverage by defendant's policy of the damages herein concerned, defendant insurer not only denies liability for penalties for its refusal to pay same, but denies liability for the damages themselves by a supplementary defense (sustained by the trial court) arising from the plaintiff insured's alleged violation of the "no action" clause
Nevertheless, defendant insurer insists that recovery should be denied because, although it initially and consistently thereafter denied policy coverage as to the damages herein concerned, it never specifically refused to defend a suit brought by the owner of the damaged property against its insured—and indeed had no opportunity to do so because its insured settled the claim and avoided such suit.
Without the exception of a single American jurisdiction, it is noted in summary of a great number of cited cases in the Annotation, "Consequences of liability insurer's refusal to defend action against the insured upon the ground that claim upon which action is based is not within coverage of policy", 49 A.L.R.2d 694, at page 744, that:
A practical reason for this holding is stated in St. Louis Dressed Beef & Provision Co. v. Maryland Cas. Co., 1906, 201 U.S. 173, at page 26 S.Ct. 400, at page 404, 50 L.Ed. 712, the grandfather case of this line of jurisprudence:
Although most of the cases involved not only (as here) an unjustified denial of liability but also a specific refusal to defend an action brought against the insured, the reasoning therein as well as the equitable reasons therefor support the conclusion that by the mere denial of the insurer to its insured of any liability under the insurance policy for the damages claimed by a third person, the insurer forfeits its right to claim the benefits of the "no action" clause, and the insured policyholder even in the absence of litigation may compromise the claim against him without prejudicing his right to recover from the insurer the amount of a reasonable and
Although this precise question has never previously been passed upon in any reported Louisiana decision, several cases from other jurisdictions wherein the policyholder compromised the contrary claim in advance of suit, following a denial of liability by the insurer or its inaction thereasto following notification as to said claim, specifically support our conclusion herein:
Albert v. Maine Bonding & Cas. Co., 1949, 144 Me. 20, 64 A.2d 27, (Cf., "A distinct denial of all liability by an insurance company is equivalent to a declaration that it will not pay even if the amount of loss is determined," 64 A.2d 29); Interstate Cas. Co. v. Wallins Creek Coal Co., 1915, 164 Ky. 778, 176 S.W. 217, L.R.A.1915F, 958 (Cf., Where the insurer "made up its own mind that it was not liable" and by inaction over several months "in effect denied its liability", "the insured had the right to treat this inaction of the insurance company as a denial of liability on its part, and to act on the assumption that it would further refuse to recognize its liability by failing to undertake to defend any suit that the injured party might bring if living, and to make the best settlement it could", 176 S.W. 220); Great American Indem. Co. v. City of Corpus Christi, Tex.Civ.App., 1946, 192 S.W.2d 917 (Cf., In rejecting the identical defense here tendered, the court stated that "the duty to defend suits does not exist independently of the duty to pay the loss from the liability imposed by law upon the assured should such liability be established. * * * The unequivocal denial of all liability to pay a loss under its insurance policy * * * disqualifies the [insurer] from defending a suit against the assured for the recovery of damages which the insurance company says is not covered by its policy", 192 S.W.2d 917, 919); Murphy & Co. v. Manufacturers' Cas. Co., 1926, 89 Pa.Super. 281 (Cf, "The insurance company's initial repudiation of the contract in denying liability under the policy relieved the insured of strict performance of those provisions intended for the protection of the insurer only if it recognized its liability and assumed charge of the matters relating to the claim", 89 Pa.Super. 286).
The cases to the contrary cited by defendant such as Marvel Heat Corp. v. Travelers Indem. Co., 1950, 325 Mass. 682, 92 N.E.2d 233, insofar as not factually distinguishable from the present, we regard as against the better and more preponderant authority.
Alternatively defendant insurer might argue that, in the absence of prior Louisiana decision as to the availability of the defense under the "no action" clause thus unsuccessfully raised by it herein, such conflict in the jurisprudence should at least enable it to escape penalties for the arbitrary non-payment to its insured of damages due under the contract. However, considering the circumstances of this particular case as a whole and that the initial arbitrary denial of liability by defendant insurer caused plaintiff policyholder to settle the claim by compromise, we regard as untenable the argument that the insurer should escape liability for penalties resulting from its own initial arbitrary denial of coverage, when subsequently to the mutual benefit of policyholder and insurer the policyholder by reasonable compromise and avoiding the expenses of litigation reduced the amount for which the insurer is ultimately held liable, when penalties upon a greater amount had the insured not so minimized the loss by settling in advance of final judgment would concededly have been assessable.
Plaintiff's petition demanded $730.50 as reasonable attorney's fees. In the absence of evidence in the record as to the value of such reasonable attorney's fees, cf., Melancon v. Texas Co., 230 La. 593, 89 So.2d 135 (syllabi 16, 17), or of a finding by the trial court under the eye of which the services were performed as to the reasonable valuation thereof, cf., Thigpen v. Thigpen, 231 La. 206, 91 So.2d 12 (syllabus 29) this appellate court will non-suit plaintiff's claim in this regard.
For the reasons assigned, the judgment of the trial court is reversed and set aside and it is now ordered that there be judgment in favor of the plaintiff and against the defendant in the amount of $4,870, together with legal interest thereupon from date of judicial demand until paid; together with 12% penalties under LSA-R.S. 22:658 upon such amount. Plaintiff's claim under LSA-R.S. 22:658 for attorney's fees for the prosecution of the present case is non-suited. All costs to be paid by defendant.
Reversed and rendered.
SIMON, J., concurs in part and dissents to that part of decree invoking penalties.
HAWTHORNE, J., takes no part.