133 N.Y.S. 187 | N.Y. App. Div. | 1911
Lead Opinion
The plaintiff has recovered a judgment for the reasonable expenses incurred by him in prosecuting to a successful issue two actions brought against him, the defense of which the defendant undertook and assumed up to a certain point, and then abandoned and refused to proceed further with. The defendant appeals. The facts are not in dispute.
The plaintiff, a manufacturer, held an accident indemnity policy issued by the defendant by which it undertook to indemnify him for a term of three years “ against loss from common law or statutory liability” for damages for bodily injuries accidentally suffered by any employee or employees of the insured while engaged in the prosecution of his business. During the lifetime of the policy one of the plaintiff’s employees named Loughlin, a minor, was accidentally injured, and shortly afterwards he and his father began actions for damages by reason of such injury. The plaintiff duly notified defendant, as his policy required, of the happening of the accident and of the commencement of the actions, and defendant thereupon exercised the option given it by the terms of the policy, and elected to undertake the defense of the actions. To this end its attorney appeared in said actions for the plaintiff, prepared the answers and carried on the defense. It does not appear that plaintiff was offered, or that he assumed any control over or direction of the defense, except that about two weeks before the actions came on for trial, defendant’s attorney wrote a letter to plaintiff suggesting that verdicts might be recovered to an amount aggregating more than the total
Of course it is open to the company, with respect to any given claim, to refuse to do either of these things, and to repudiate any liability whatever under the contract. If it adopts that course, and it be ultimately determined that the claim was one against which it did not undertake to indemnify the assured, it will be liable neither for indemnity against the claim nor for the expenses incurred by the assured in defending himself against it. (Cornell v. Travelers’ Ins. Co., supra.)
If, however, the company undertakes to abide by and fulfill the contract with the assured three courses of conduct are open to it, and it has the absolute and unqualified right to determine which it will adopt.
It may (a) defend against such proceeding in the name and on behalf of the assured, or (b) settle the claim at its own cost, or (c) pay the assured the stipulated amount of indemnity, leaving him to defend himself against the claim as best he may.
The appellant, in the case at bar, chose the first of these alternatives and elected to assume the defense of the actions brought to enforce the claims. In so doing it did not merely undertake to defend itself to the limit of its possible liability, but to defend the actions “on behalf of” the assured, and to secure to itself the absolute control and direction of such defense the assured was required to stipulate that he would not interfere with the actions unless expressly permitted so to do by the company, and then only, of course, to the extent that the company permitted interference. When the company had thus exercised its option a new contract came into existence between the company and the assured. The company no longer stood in the position of an indemnitor as to a limited class of liabilities, but it had assumed a definite obligation to defend certain actual suits “on behalf of” the plaintiff, and
Our conclusion is that by its election to defend the Loughlin actions the defendant incurred an obligation to plaintiff to act in his interest and behalf as well as its own, and this obligation was not fulfilled. (Creem v. Fidelity & Casualty Co., 141 App. Div. 493, 497, 498; Humes Const. Co. v. Phila. Casualty Co., 19 Atl. Rep. 1.) The amount awarded by the jury was reasonable.
The judgment should be affirmed, with costs.
Miller and Dowling, JJ. concurred; Ingraham, P. J., and Laughlin, J., dissented.
Dissenting Opinion
The defendant issued a policy of insurance whereby it insured the plaintiff against “ loss from common law or statutory liability for damages on account of bodily injuries, * * * accidentally suffered by any employee or employees of the assured * * * caused by the negligence of the assured ” to an amount not exceeding $1,500. During the term of this policy one of the plaintiff’s employees named Loughlin was injured. He was an infant and he and his father commenced actions for damages against the plaintiff claiming an amount largely in excess of the limit of insurance. The plaintiff gave notice of this accident to the defendant which undertook the defense of the action. The action was subsequently tried by the defendant’s counsel, the plaintiff being also represented by counsel on the trial, and there resulted two judgments against the plaintiff for upwards of $6,000. The defendant’s liability being limited to $1,500, the result to the plaintiff was that if these judgments were sustained he would be compelled to pay more than $4,500, and the defendant would be compelled to pay $1,500. After the judgments were obtained the defendant decided that it would not undertake the prosecution of an appeal and, therefore, wrote to the plaintiff that it “has arrived at the conclusion that the prosecution of an appeal would not be advantageous,” and offering to substitute the plaintiff’s attorney for the attorney who had represented the insurance company in defending the action., Such a substitution was had, the plaintiff prosecuted the appeal, and the Court of Appeals reversed the judgments appealed from and ordered a new trial. Subsequently the plaintiff’s attorney succeeded in getting the actions dismissed fcr want of prosecution which ended any liability of the plaintiff for the accident. The plaintiff, then, commenced this, action and has recovered a judgment for the amount that he was compelled to pay to his attorney in obtaining a reversal of the judgments and a dismissal of the action.
' It is quite clear that. the plaintiff cannot sustain an action upon the policy. The policy contained the usual provision that no action would lie against the insurance company as respects any loss under the policy unless it should be brought by the
It seems to me, therefore, that on this record no cause of action was either alleged or proved and the judgment appealed from should be reversed and a new trial ordered, with costs to the appellant to abide the event.
Laughlin, J., concurred.
Judgment and order affirmed, with costs.