Capece v. Allstate Ins.Capece v. Allstate Ins.
Plaintiff Vito Capece (Capece) obtained a final judgment against one Bartholemew Giordano arising out of an accident which occurred on October 25, 1960. By its third-party complaint defendant Allstate Insurance Company (Allstate), Giordano‘s carrier, seeks indemnification or contribution from the third-party defendants State Farm Mutual Automobile Insurance Company (State Farm) and United States Fidelity and Guarantee Co. (U.S.F. & G.), which insured the automobile and the premises, respectively, which were involved in the accident.
Capece was the owner and operator of a service station and garage located at 30 Franklin Street, Belleville, New Jersey. On the morning of the accident, in accordance with a prior arrangement made with Capece, Mrs. Linda Magnano brought her automobile to the garage for servicing. She explained to Capece that the brakes “felt low,” and he agreed to effect the necessary repairs for her. Capece was working on another car and directed her to leave her car outside. The place where she left it was near the lift. She was to check back in the afternoon to see if it was ready.
Giordano was insured for public liability by Allstate under its so-called “Crusader” automobile policy. It covered the operation of his own and “other automobiles.” He duly reported the accident to Allstate and received a letter, on November 16, 1960, advising him that the policy did not cover him for the accident in question. In July 1961 Capece instituted suit against Giordano in the Essex County Court. Giоrdano promptly forwarded the summons and complaint to Allstate. On August 21, 1961 Allstate declined to defend and returned them to Giordano. Giordano filed no answer, and on November 30, 1961 judgment was entered against him and in favor of Capece for $9,395 damages.
On April 10, 1962 Capece instituted suit in the Law Division against Allstate to recover the amount of the judgment. Allstate filed answer on June 7, 1962. On August 16, 1962 Allstate filed a third-party complaint against State Farm and U.S.F. & G. seeking indemnification from State Farm on the ground that it was primarily liable to pay the judgment since it insured the Magnano car, and from U.S.F. & G. on the ground that it was liable by reason of its coverage of the operations of the Capece service station, including the operаtion of customers’ cars, at the time of the accident.
A motion for summary judgment in favor of plaintiff and against Allstate was thereafter made and granted. The judgment has since been paid by Allstate. The undetermined issues posed by the third-party complaint were the subject of a pretrial conference, the order being dated October 8, 1963. In the order Allstate, in substance, contended that, by the terms of their respective policies, the third-party defendants
All of the parties stipulated that the matter should be determined by the court without a jury, and proofs were submittеd over a four-day period.
Based upon the evidence adduced, Allstate now contends that State Farm, as insurer of the car involved, is primarily liable for the injuries sustained by Capece, as is also U.S.F. & G. which covered the operation of the car while in the possession of Capece at his service station. As to the failure to give notice of suit or to forward suit papers, Allstate asserts that both third-party defendants had unequivocably disclaimed coverage, thus eliminating the necessity for the giving of notice. State Farm, while admitting that in January 1961 it denied coverage to Capece for his bodily injuries or medical payments on the ground that it did not cover Giordano‘s operation оf the car, contends that its liability to Capece on behalf of Giordano did not come within the terms of the policy. U.S.F. & G. admits that on October 4, 1961 it disclaimed liability for medical payments to Capece, but asserts that the evidence establishes that it never took a stand as to its liability on behalf of Giordano for the bodily injuries sustained by Capece. Both State Farm and U.S.F. & G. assert that neither Allstate nor Giordano had knowledge of their alleged disclaimer at the time of the failure to give them notice of suit and to forward them the suit papers. In
Allstate‘s policy contained an “other insurance clause” which read as follows:
“IF THERE IS OTHER INSURANCE
Allstate shall not be liable under this part 1 for a greater proportion of any loss than the applicable limit of liability stated on the supplement page bears to the total applicable limit of liability of all collectible insurance against such loss; provided, however, the insurance with respect to a temporary substitute automobile or a non-owned automobile, shall be excess insurance over any other collectible insurance.”
It urges that since the automobile which Giordano was driving wаs not owned by him, and since he was an additional insured under the omnibus clause of the policies issued by State Farm and U.S.F. & G., its coverage may not be resorted to until the coverage of State Farm and U.S.F. & G. has been exhausted. Alternatively, if Allstate‘s coverage is not determined to be excess, State Farm and U.S.F. & G. should be required to contribute pro rata to payment of the judgment.
Allstate‘s policy contained a subrogation clause. In effect, it seeks recovery as subrogee of Giordano and asserts such claim as he would have under the policy. It is also subject to such defenses as State Farm and U.S.F. & G. may assert against Giordano or it. It stands in Giordano‘s shoes and its rights can rise no higher than his. N.J. Asphalt & Paving Co., Inc. v. Mutual Boiler Ins. Co., 19 N.J. Super. 445, 448 (Law Div. 1952); Annotation, “Right to subrogation, as against primary insurer, of liability insurer providing secondary сoverage,” 31 A.L.R.2d 1324. Cf. Standard Accident Insurance Co. v. Pellecchia, 15 N.J. 162 (1954); Maryland Casualty Co. v. New Jersey Manufacturers Casualty Insurance Co., 48 N.J. Super. 314
We now turn to a consideration of the liability of the respective third-parties defendant.
AS TO STATE FARM
State Farm‘s policy insured Mrs. Magnano against liability for bodily injury and property damage. By its terms State Farm became obligated:
“To pay all damages which the insured shall become legally obligated to pay because of
(A) bodily injury sustained by other persons * * * caused by accident arising out of the ownership, maintenance or use, * * * of the owned automobile.”
State Farm also contraсted to defend any suit against the insured and to pay any costs taxed or interest on any judgment against the insured. It also agreed to pay reasonable medical expenses incurred within one year from the date of the accident:
“To or for any other person [than the named insured and each relation] who sustains bodily injury, caused by accident, while occupying or through being struck by the owned automobile, provided said automobile is being used by an insured.”
Under the policy, coverage was extended to the named insured, to his relatives and to:
“(3) any other person while using the owned automobile, provided the actual use of such automobile is with the permission of the named insured, * * *.
(4) Under coverаges A and B (Bodily Injury and Property Damage Liability) any person or organization legally responsible for the use thereof by an insured * * *.”
In compliance with the policy requirements, State Farm received timely notice of the accident from Mrs. Magnano and, during the course of its investigation, interviewed Giordano.
“We * * * unfortunately will not be able to extend coverage to you under either the bodily injury section of the policy, because the car was being used in what is defined in the policy as the autоmobile business at the time of the accident, and for the further reason that the car was not being operated by an insured, and therefore we would be unable to extend medical payments coverage to you for this accident.
We wish to take this opportunity to inform you that we unfortunately have to disclaim coverage in the matter, both as to liability and for medical payments coverage, for the simple reason that under the interpretation of the policy there is no way that we can extend coverage to you. We therefore must respectfully refuse to make any payment under any of the coverages on the policy on your behalf for the reasons above stated, and for any other reason which may have existed or might exist in the future.” (Emphasis added)
On January 18, 1961 State Farm wrote to its insured, Mrs. Magnano, with a copy to Giordano, advising as follows:
“Under your policy number 150-495-F28-30 there is no coverage to Mr. Capece because of the fact that Mr. Giordano who was operating your car at the time of the accident was not a permissive user of the car, and because of the fact that there is an exclusion in the policy which removes bodily injury coverage for any other persons driving your car except yourself when the car is used in the automobile business.
* * * * * * * *
Mr. Capece has been informed of the decision of our claim committee and we are now placing you on formal notice of this fact as well as Mr. Giordano.
* * * * * * * *
If there is any question in your mind concerning the above matter, don‘t hesitate to call me at Prescott 3-4902 but this letter is designed to serve notice upon you that there is no coverage under your policy for Mr. Giordano because of the above described exclusion and definition of insured and for any other reason which may have existed prior to, during or after this accident.” (Emphasis added)
In the same letter State Farm agreed to defend any action brought against Mrs. Magnano, and directed her to give it
When, in July 1961, Giordano was served with suit papers, he forwarded them to Allstate, even though it had previously advised him that its policy did not cover the accident. Allstate returned the suit papers with a letter dated August 21, 1961, to the effect that:
“On November 16, 1960 we advised you that your policy with us does not cover you for your accident of October 25, 1960. Exclusion 4 of Part 1 of your Crusader Policy provides that the coverage does not apply to a non-owned automobile while used in an automobile business by the insured.
In view of said exclusion, I am returning the enclosed summons and complaint which you forwarded to us. Since we do not cover this accident, I suggest that you consult your personal attorney so that the necessary legal action may be taken on your behalf.” (Emphasis added)
Giordano thus was never advised to forward the suit papers to State Farm or to U.S.F. & G., and never did so. There was no further communication with State Farm on bеhalf of Allstate or Giordano until the filing of the third-party complaint. As noted, Allstate urges that none was necessary in view of State Farm‘s unqualified denial of liability.
The conclusion is inescapable, and the court finds, that Giordano was operating the automobile with the implied permission of Mrs. Magnano, the named assured. The omnibus clause referred to the “use” of the automobile, not its operation. Indemnity Ins. Co., etc. v. Metropolitan Cas. Ins. Co. of N.Y., 33 N.J. 507 (1960). It was delivered to Capece with the intention that the necessary repairs and adjustments would be made. It was left outside the garage working area. This implied authorization to move it to the place where the work was to be performed and to place it on the lift if this was necessary for the doing of the work. Capece could have moved it himself or delegated another, for whom he would be responsible, to do so. Accordingly, Giordano, the man whom Capece authorized to move it, qualified as an additional insured under State Farm‘s policy.
An additional insured under a policy of insurance is required to comply with the conditions of the policy in the same manner as the named insured. Costanzo v. Pennsylvania Threshermen, etc., Ins. Co., supra, at pp. 271-272. Thus, Giordano was required to give written notice of the accident as soon as practicable and immediately forward to State Farm every demand, notice, summons or other process reсeived by him. Whittle v. Associated Indemnity Corp., 130 N.J.L. 576 (E. & A. 1943); Bankers Indemnity Ins. Co. v. A.E.A. Co., Inc., 32 N.J. Super. 471 (App. Div. 1954). It is asserted that he did neither. But State Farm received timely written notice of the accident from Mrs. Magnano. In it she revealed Giordano as the driver of the car. Giordano was then interviewed by State Farm‘s representative. Prior to the interview, he had no knowledge that State Farm covered the Magnano car. In view of these facts, his failure personally to give written notice of the accident does not bar State Farm‘s liability under the policy. Costanzo v. Pennsylvania Threshermen, etc., Ins. Co., supra; see also Indemnity Ins. Co. of North America v. Forrest, 44 F.2d 465 (9 Cir. 1930). Additionally, since neither of its letters mentioned above referred to the failure of Giordano to give such notice as a ground for denying coverage, such notice was waived. Mariani v. Bender, 85 N.J. Super. 490, 499 (App. Div. 1964); cf. Rosenberg v. Maryland Casualty Co., 3 N.J. Misc. 1132, 130 A. 726 (Sup. Ct. 1925), affirmed 102 N.J.L. 724 (E. & A. 1926); Apfelbaum v. Prudential Ins. Co. of America, 12 N.J. Misc. 62, 169 A. 677 (Cir. Ct. 1933).
However, the Capece suit papers were nеver forwarded to State Farm, and it never had notice of the pendency of the suit. Unless legal justification for the omission
By its letters of December 1960 and January 1961 State Farm unequivocally denied liability to Capece, refused to extend the coverage of the policy to Giordano, and gave formal notice that it would not defend any suit which might be brought against the latter. By so doing, it waived notice of the suit or the forwarding of suit papers when the Capece suit against Giordano was filed in July 1961. Guarraia v. Metropolitan Life Ins. Co., 90 N.J.L. 682, 684 (E. & A. 1917); Radwanski v. Scottish Union & National Ins. Co., 100 N.J.L. 192, 193 (Sup. Ct. 1924); Ciccone v. Colonial Life Ins. Co., 110 N.J.L. 276, 280 (E. & A. 1932); McNamee v. Metropolitan Life Ins. Co., 137 N.J.L. 709, 713 (E. & A. 1948); cf. Evans v. Farmers’ Reliance Ins. Co., 110 N.J.L. 159 (E. & A. 1932). Having determined not to pay in any case, the giving of such notice and delivery of the suit papers would have been an idle formality, a vain and useless thing. Haskell v. Eagle Indemnity Co., 108 Conn. 652, 144 A. 298 (Sup. Ct. Err. 1929). If, therefore, the policy covered Giordano‘s liability to Capece, State Farm, as the insurer of the automobile involved, would become primarily liable. American Surety Co. v. American Indemnity Co., 8 N.J. Super. 343 (Ch. Div. 1950); cf. Cosmopolitan Mutual Ins. Co. v. Continental Cas. Co. 28 N.J. 554 (1959). Since State Farm‘s insurance coverage
In disclaiming coverage, Stаte Farm, in addition to its contention that Giordano lacked permission to use the Magnano automobile, relied upon an exclusion in the policy which removed bodily injury coverage from its terms, as to anyone but the named insured, when the car was used in the automobile business. The law is to the contrary. A customer‘s automobile which is left in the custody of the proprietor of a service station for servicing or repairs is not being used in the automobile business within the meaning of an exclusion clause such as the one here involved. LeFelt v. Nasarow, supra (71 N.J. Super., at p. 555). Thus, neither ground referred to afforded any basis for State Farm‘s denial of coverage.
State Farm urges, however, that, by virtue of another policy exclusion, it was not liablе to Capece. The provision in question reads as follows:
“This insurance does not apply under: (g) coverage A(1) * * * or (2) to bodily injury to the insured or any member of the family of the insured residing in the same household as the insured.” (Emphasis added)
Specifically, it asserts that Capece, as the one to whom the car had been entrusted for repairs, was a person responsible for the use of the automobile and thus also qualified as an insured within the terms of the policy. The proofs establish that while he was not actually driving the car, he was, nevertheless, directing its operation. The very fact that he was standing in front of the lift guiding Giordano, placed him in a position to be struck by the car when Giordano lost contrоl of it.
Allstate vigorously objects to the court‘s consideration of the foregoing clause in determining State Farm‘s liability. It urges that (1) the claimed interpretation of the clause in
As to the first objection, the third-party complaint contained a paragraph which asserted that State Farm‘s policy provided liability coverage for the benefit of Capece. State Farm answered in the form of a general denial. An amended third-party complaint was thereafter filed containing a similar paragraph, numbered 7, which asserted that liability for the benefit of Capece was provided under the omnibus clause and other provisions of State Farm‘s policy. The answer to the amended complaint contained a specific denial of the allegations of this paragraph. In the pretrial order, the interpretation of the contract of insurance was set up as an issue. At the trial of the case the point was raised at the beginning of the presentation of plaintiff‘s case, and an objection to its consideration at that time was overruled by the court. It is therefore in issue before the court.
The second contention advanced by Allstate is likewise without merit. We are not dealing here with an attempt to declare a forfeiture for reasons not set forth in the letter denying liability. The question is one of policy coverage. A loss which is not within the coverage of the policy cannot be brought within it by invoking the principle of waiver. Goldberg v. Commercial Union Ins. Co. of N.Y., 78 N.J. Super. 183, 191 (App. Div. 1963), and cases cited therein. In Merchants Indemnity Corp. v. Eggleston, 37 N.J. 114, 129 (1962), the court distinguished between waiver and estoppel and pointed out that in cases not within the coverage of the policy it was inaccurate to speak of a waiver at all, since there was nothing to waive. Here, too, if the policy did not provide coverage for the injuries sustained by Capece, waiver cannot be invoked to conjure up a new contract between the parties.
Assuming that, under proper circumstances, the defense of estoppel would be available to a party in connection
Additionally, there was no prejudice or injury to Allstate by reason of the failure to mention the provision in question as an additional basis for denial of coverage. There was no change in its position in reliance thereon. See Bertrand v. Jones, 58 N.J. Super. 273, 285 (App. Div. 1959), certification denied 31 N.J. 553 (1960). The inclusion of State Farm as a party defendant in the present suit, which was started one year and seven months later, did not constitute such a change of position as would call for application of the doctrine of estoppel. Presumably, Allstate examined the policy before instituting suit. The over-all obligation of establishing that the injuries sustained by Capece came within the ambit of the policy, rested upon Allstate. The interpretation of the policy was for the court, and State Farm‘s letters, assuming that they came to the attention of Allstate, in no wise impaired its ability to enforce its rights under the policy. It did not pay the Capece judgment by reason of any omission by State Farm — it paid because summary judgment was entered requiring it to do so.
Accordingly, State Farm is not estopped from asserting that its policy affords no сoverage for the injuries to Capece. Allstate‘s rights, therefore, depend upon the interpretation to
As To U.S.F. & G.
U.S.F. & G. issued its garage liability policy to Capece as the named insured. The policy covered “the ownership, maintenance or use of the premises for the purpose of an automobile repair shop, service station, storage garage or public parking place, and all operations necessary or incidental thereto.” It also covered “the use, in connection with the above defined operations, of any automobile not owned or hired by the above named insured * * *.” In the policy, coverage was extended not only to the named insured, Capece, but to any person while using an automobile covered by the policy, provided the actual use thereof was with the permission of the named insured. The policy also provided for payment of medical expenses to or for each insured who sustained bodily injury caused by accident through being struck by an automobile.
Under the terms of the policy Giordano qualified as an insured since he was operating an automobile, not owned or hired, in the performance of an operation incidental to the use of the insured premises as an automobile repair shop. As such, he was obligated, under the policy terms, to give written notice of the accident to the company, or any of its authorized agents, as soon as practicable, including particulars sufficient
U.S.F. & G. denies that it received notice of either the accident or the suit. It further asserts that there was a breach of the co-operation clause by the failure of either Allstate or Giordano to forward the suit papers to it. Contrariwise, Allstate contends that notice of the accident was given by Capece and that this sufficed to cover Giordano‘s obligation. In addition, it contends that the further requirements of the policy were waived by U.S.F. & G.‘s unqualified denial of liability.
It is undisputed that Giordano never gave written or oral notice of the accident to the company, so that it is not necessary to determine whether such notice was a sufficient compliance with the requirements of the policy or whether it was given “as soon as practicable.” Miller v. Zurich Gen. Accident and Liability Ins. Co., 36 N.J. Super. 288 (App. Div. 1955); Figueroa v. Puter, supra.
The court is satisfied that the first actual knowledge that U.S.F. & G. had of the accident to Capece was in the form of a letter from his attorney, Leonard J. Felzenberg, dated July 28, 1961, making a claim for medical payments under the policy. It thereafter conducted an investigation, during the course of which it took a statement from Capece and obtained the police report of the accident. At that time it opened a “Medical Payments file.” Payment of the claim was thereafter refused by letter dated October 4, 1961.
While there may have been some talk with Genovese regarding the accident at an indefinite time after the discharge of Capece from the hospital, if Genovese was directed to report it to U.S.F. & G., he never did so. This is confirmed by the fact that when James Genovese (not the one referred to) was produced with the agency file, it revealed only the October 4, 1961 letter from the company denying payment of medical expenses, and a postcard receipt, postmarked September 14, 1962, from U.S.F. & G. acknowledging a “claim report” (Claim No. 9 AL 34562). The latter apparently followed the transmission of the third-party complaint to the company. The medical payments claim number had been 9 AL 32919.
The Genovese Agency was then a local agent for U.S.F. & G. under an agency agreement which authorized it to solicit and submit applications for insurance and to issue and deliver policies which the company “may from time to time authorize to be issued and delivered.” Capece characterized Genovese as “his agent,” and James Genovese referred to Capece as one of his “brother‘s accounts.” It is difficult to believe that Genovese would have failed to report the accident had it been reported to him. It is unnecessary to consider whether such oral notice, if given to Genovese, satisfied the requirements
I am satisfied and find that in August 1961 the company had written notice of the accident from Capece, through Felzenberg, and by reason of its investigation, was thereafter chargeable with knowledge of the happening of the accident and the participation of Giordano therein. It is unnecessary to determine whether this notice was received “as soon as practicable,” since the company, by its letter of October 4, 1961, made no reference to the delay and thus may be considered as having waived it. Mariani v. Bender, supra. While the letter in question had reference to medical payments, the notice of accident requirement was common to all claims. Such being the case, the company should not be permitted to rely on Giordano‘s personal failure to give earlier notice as a ground for avoidance of liability, in the absence of proof that he knew at the time that he was an additional insured under the policy. Costanzo, supra (30 N.J., at p. 272). The evidence is to the contrary.
It is undisputed that no notice of suit was given U.S.F. & G., and the suit papers were not forwаrded to it but to Allstate. In contrast to Giordano, Allstate had knowledge of the U.S.F. & G. policy since December 1960. Notwithstanding this, it failed to forward the papers to U.S.F. & G. but returned them to Giordano without advising him of the potential obligation of U.S.F. & G. to defend him. To the contrary, its letter left the definite impression that there was no coverage and advised Giordano to “consult your personal attorney so that the necessary legal action may be taken on your behalf.”
Allstate, in view of its prior knowledge of U.S.F. & G.‘s policy, may not invoke Costanzo. It contends, however,
U.S.F. & G.‘s letter of October 4, 1961 could not have constituted such a denial of liability. Its very date precludes this since, as noted above, it was on August 21, 1961 that Allstate failed to forward the suit papers to Giordano or notify him to do so. Aside from this, the company was never called upon to defend Giordano, and the letter in question made no reference to the company‘s liability in connection with the defense of any suit against him. It was confined solely to U.S.F. & G.‘s direct obligation to Capece under its medical payments coverage. The letter does not even refer to the use of an automobile but to the acсident “wherein you sustained injuries while operating your service station on the premises insured by the above noted policy.” Denial of coverage was based solely upon the definition of medical payments in the insuring agreement.
Nor do I find that there was any denial of liability prior to the letter in question. While there is some intimation in the testimony that some time prior to November 12, 1960 Rosenthal, an investigator for Allstate, had visited Capece in the hospital and been told by Capece that his agent had told him that the policy did not cover him, I am inclined not to credit such testimony. On the contrary, I am satisfied that Capece, if he ever did so, did not talk to Genovese until after he had been discharged from the hospital and was back at work at his service station. Further, assuming arguendo that Genovese was authorized to act for the company, there is lack of proof as to
While Allstate may have assumed that U.S.F. & G., like State Farm, would join it in denying coverage, I am satisfied that U.S.F. & G. never did deny liability coverage to Giordano. I am unable to reconcile Allstate‘s contention tо the contrary with the fact that on July 6, 1962 Rosen, its claims supervisor, telephoned Morse, U.S.F. & G.‘s representative, to ascertain U.S.F. & G.‘s position with respect to covering the accident. Rosen, as claims supervisor in October 1960, had assigned the investigation to Rosenthal, and presumably would have been familiar with the alleged 1960 denial of liability.
If Allstate intended to hold U.S.F. & G. to the terms of its policy, it, too, was required to conform to such terms. Allstate possessed more than the ordinary layman‘s knowledge of the reasons underlying the requirement of notice of suit and the forwarding of suit papers. While prejudice would not be a sine qua non to a denial of recovery based upon the omission of Allstate to give the notice referred to, it is hardly to be disputed, and I find, that U.S.F. & G. was prejudicеd by such omission. It had no other knowledge of the pendency of the suit. In March 1961 Felzenberg, who represented Capece, had sent a claim letter to Magnano and Giordano requesting that they turn the letter over to their insurance carriers (State Farm and Allstate), but he did not then communicate with U.S.F. & G. In July of that year, when Felzenberg wrote U.S.F. & G. concerning his client‘s medical payments claim, he had already instituted suit against Giordano. Yet, his letter made no mention of this fact or of U.S.F. & G.‘s potential liability to defend Giordano. Giordano‘s default followed. Not until September of
By reason of its failure to give notice of the suit and to forward suit papers to U.S.F. & G., Allstate is entitled to neither indemnification nor contribution from the latter.
So that the issues may conform with the proofs, and since the matter has been argued by the parties, an order may be submitted amending the pretrial order to permit the third-party plaintiff Allstate to set up the defense of waiver and estoppel to the contention of the third-party defendant State Farm that the exclusionary clause in the latter‘s policy, when properly interpreted, precludes liability for the injuries sustained by Capece.