I concur in the able opinion of Mr. Justice RAND, except as to the effect of clause (c) hereinafter quoted. In the "Oregon Voluntary Compensation Endorsement" the insurer, in consideration of the payment of the premium, agrees with the assured, as follows:
"as respects personal injuries sustained by employees in the course of their employment and covered by said policy, including death at any time resulting therefrom, to voluntarily pay to any person entitled thereto
(a) the entire amount of any sum due and all installments thereof as they may become due as would be payable to such persons if legally entitled to compensation under the provisions of Chapter 112, Laws of 1913, State of Oregon (Oregon Workmen's Compensation Law) and any laws amendatory thereof;
(b) for the benefit of such person, the proper cost of whatever medical, surgical, nurse, or hospital services, medical or surgical apparatus or appliances and medicines, or, in the event of fatal injury, whatever funeral expenses as are required by the provisions of such Workmen's Compensation Law,
Provided, However,
(a) that no claim, suit, or other legal Court proceeding is made, instituted, or prosecuted against the employer by an injured employee or his legal representative to enforce the liability of the employer under the laws of the State of Oregon applicable to such accident as respects any injury and/or death accidentally suffered by an employee because of such accident; *Page 643
(b) that the person entitled to such benefits shall execute valid release from all legal liability, and,
(c) that in any case such benefits may be withheld upon the joint agreement of the Company and Assured named in the declarations;"
The policy is, in its nature, a triparty contract. It is in regard to clause (c) that the right of the plaintiff to prevail depends, as stated by the majority opinion.
Noticing the statement of the learned counsel for the defendant in the reply brief, it is to the effect that:
"If we assume that this contract is for the benefit of the employees, then the interested parties are the insurance company and the employees, and not the Oregon Casket Company. The decision not to pay could not be made solely by the insurance company. The Oregon Casket Company had an equal voice in the matter. And whether payment was made or not, the Oregon Casket Company was in no better or worse position. Its position was neutral."
Therefore, the really interested parties, in accordance with this statement, are the insurer and the employee, or his representative in this case, and we think they are the ones most interested. Hence it is necessary to determine whether, after the employee or his representative had presumably refrained from instituting any claim or proceeding against the employer and evidently had relied upon the promise of the insurance company to the Oregon Casket Company for the benefit of the employee, the company who made the promise for a valuable consideration, by a joint act with the Oregon Casket Company, the assured, by virtue of this clause, could agree that the representative of the employee should not be entitled to recover. This, in effect, would be permitting the insurer, by permission of the Oregon Casket Company, to wholly determine its own liability and decide its own case. Such a clause in *Page 644 a policy of this kind, which is usually construed more favorably to the insured than to the insurer, I do not think is valid. I do not know that we will find any cases absolutely in point, but there are many that are governed by principles which apply to the present case.
In Patton v. Babson's Statistical Organization, Inc.,259 Mass. 424 (156 N.E. 534), we find the following:
"It is a general rule that an agreement purporting to oust the courts entirely of their jurisdiction is void. Rowe v. Williams,97 Mass. 163; Pearl v. Harris, 121 Mass. 390; White v. Middlesex Railroad, 135 Mass. 216; Lewis v. Brotherhood Acci. Co.,194 Mass. 1, 79 N.E. 802, 17 L.R.A. (N.S.) 714; Bauer v. International Waste Co., 201 Mass. 197, 203, 87 N.E. 637. See, also, London Tramways Co. Ltd. v. Bailey, 3 Q.B.D. 217; Hope v. International Financial Society, 4 Ch. D. 327."
In Employee's Bene. Ass'n of Calumet, etc. Co. v. Johns,30 Ariz. 609 (249 P. 764, 51 A.L.R. 1414), the syllabus reads:
"By-law of mutual benefit association, providing that decision of its board of trustees on appeal shall be conclusive, is void, as against public policy, as applied to controversy over property rights under policies, and does not preclude representative of member, for whose death financial benefits are sought, and who has expressly agreed to accept such by-laws, from suing in the courts."
In Supreme Council v. Grove, 176 Ind. 356 (96 N.E. 159, 36 L.R.A. (N.S.) 913), we read:
"The reason of the rule lies deeper than the mere matter of power to submit to arbitration, in the fact that it is entirely inconsistent with, and repugnant to, all ideas of justice that one should be an arbitrator in his own case, and that the laws of the land should be superseded, and the courts ousted of jurisdiction to interfere and enforce them, by the very contract which is in question." *Page 645
In Lewis v. Brotherhood Acci. Co., 194 Mass. 1 (79 N.E. 802, 17 L.R.A. (N.S.) 714), involving a policy of accident insurance, at the end of the policy, immediately before the attesting clause, was the following provision:
"In the event that this company and the certificate holder or beneficiary disagree as to the liability of this company under this certificate, it is agreed, and this certificate is issued upon the express condition, that such liability and the amount thereof shall be determined by arbitration; . . ."
Then follows a provision as to the persons of whom the board of arbitrators should consist. It was held that the provision quoted was an agreement to refer to arbitration questions of liability arising under other provisions of the contract, and was void as an attempt to oust the courts of their jurisdiction.
Stipulations in insurance policies and employees' profit-sharing agreements, which provide for a decision by a person who is directly interested in the claim, which is being made, are void as contrary to public policy. In addition to the authorities above cited, see Supreme Lodge v. Raymond,57 Kan. 647 (47 P. 533, 49 L.R.A. 373); Daniher v. Grand Lodge, 10 Utah 110 (37 P. 245); Kelly v. Trimont Lodge, 154 N.C. 97 (69 S.E. 764, 52 L.R.A. (N.S.) 823); Railway Conductors' Bene. Ass'n v.Robinson, 147 Ill. 138 (35 N.E. 168); Bond v. Grand Lodge, 165 Ill. App.? 490; McCullough v. Clinch-Mitchell Const. Co.,71 F.2d 17; American Bene. Life Ass'n v. Hall, 96 Ind. App. 498 (185 N.E. 344).
According to the principle that an action on a contract may be maintained by the person for whose benefit it was made, where a policy expressly provides that it is for the benefit of the person injured, such *Page 646 person may maintain an action thereon against the insurer: 36 C.J. 1132, § 132.
Undoubtedly the employees of the Oregon Casket Company are beneficiaries under the policy in question. Mr. Williston, on Contract, Vol. 1, § 396, discussing rescission or release, says, in effect, that in the case of a sole beneficiary it is like the attempted revocation of a gift. The promisor for good consideration has given the beneficiary a right, and later he seeks to take it away by procuring the extinction of the promise. If it be admitted that the beneficiary has a direct right of his own, it ought not to be extinguished without his consent. As to when the beneficiary's right arises, when the promise for his benefit was made or when he was notified of it, or assented to it, he states the question is analogous to that arising upon a gift of property or the creation of a trust for the benefit of another. As a gift is a pure benefit to the donee, there seems no reason why his assent should not be presumed, unless and until he expresses dissent. According to this view the sole beneficiary acquires a right immediately upon the making of the contract, and any subsequent rescission is ineffectual. There is weighty authority in support of this view, though there is contrary authority. We quote from that section:
"The almost universal doctine that the beneficiary of a life insurance policy acquires a vested right of which he cannot be deprived subsequently is in accord." Citing among numerous other cases, Mutual Bene. L.I. Co. v. Cummings, 66 Or. 272 (126 P. 982, 133 P. 1169).
We find in the Notes, 12 Columbia Law Review (1912), 551, referring to the interest of the beneficiary of a life insurance policy, as follows:
"When, however, the anomalous right of the beneficiary to sue upon a contract made for his benefit sprang up in *Page 647 general contract law, it was instantly and universally recognized in the field of insurance. Indeed this anomaly has here received an extension which produces a peculiar result. For, while it is generally admitted that the right of the beneficiary is destroyed by the mutual agreement and rescission of the principals to the contract, the overwhelming weight of authority regards the right of the beneficiary of a life insurance policy as vested and indefeasible. . . ."
Clause (c) contained in the policy, if given force, would annul the policy, as far as the protection to employees is concerned. It is strange that the policy should have passed the Insurance Commissioner of Oregon.
It is plain that this is an action ex contractu and not exdelicto. The insurance company plainly promises under certain conditions to pay the employees of the Oregon Casket Company certain amounts, the same as they would receive under the provisions of the Workmen's Compensation Act. Much is said in the brief of defendant to the effect that it was first necessary for the plaintiff to obtain a judgment against the Oregon Casket Company. In order for plaintiff to obtain such a judgment it would be necessary for plaintiff to show that the company was negligent in some manner, while the undertaking of the insurance company is in relation to personal injuries sustained by employees by accident arising out of and in the course of their employment, although there may be no negligence on the part of the employer, and the amount is governed by the provisions of the Workmen's Compensation Act. It is well known that there are many accidents that are compensable under the Workmen's Compensation Act, where there is no negligence of the employer involved.
Indeed it would be singular if, in every case under such policy where there was a claim for liability, to be paid in accordance with the Workmen's Compensation *Page 648 Act and no negligence was involved, the insurer and insured did not agree that the benefits should be withheld. The assured would not be liable, nor necessarily interested, and naturally would comply with the request of the insurance company and agree that there should be no recovery.
Clause (c) is in the nature of a stipulation for arbitration, and whatever may be said in regard to the consent of the insured, the decision of the insurance company passing upon its own liability renders such an arbitration unfair and illegal, and therefore clause (c) is invalid and contrary to public policy. Such a decision as to one's own liability ought to be as impossible as for a person to lift himself up by his own bootstraps.
Clause (c) vitiates the policy as far as the employees are concerned.
The judgment of the circuit court should be affirmed. *Page 649