165 A.D.2d 141 | N.Y. App. Div. | 1991
OPINION OF THE COURT
Defendant is the president of Wheeler Brothers Brass Founders, Inc., a closely held corporation which has been owned and operated as a brass foundry in the City of Troy, Rensselaer County, by several generations of defendant’s family. At the pertinent time involved in this case, the corporation employed seven people. A fire occurred at the premises of the foundry on July 30, 1987. The corporation submitted a proof of loss to plaintiff, its insurer, under the fire insurance coverage provided in a comprehensive business insurance policy issued by plaintiff. The property portion of the policy covering, inter alia, fire loss provided that the insured could apply "up to $2,500 to cover direct loss * * * to personal effects while located on * * * the designated premises, belonging to * * * officers, directors, partners or employees”. Defendant was specifically included as a named insured in the automobile liability portion of the policy. Also, the comprehensive general liability portion of the policy extended coverage as an additional insured to "any executive officer” of the corporation, while acting within the scope of that person’s duties, for injury to person or to property not owned by the corporation.
There should be a reversal. In our view, the equitable principles and public policy considerations underlying the denial of any right of subrogation by an insurer against an additional insured under its policy, as set forth in Pennsylvania Gen. Ins. Co. v Austin Powder Co. (68 NY2d 465), apply here sufficiently to bar plaintiff’s claim. The Court of Appeals in Pennsylvania Gen. Ins. Co. characterized an insurer’s attempt to recoup its payment to a primary insured from a person who is an additional insured under the same policy as an "unseemly result [which] would not be consistent with the equitable principles that govern subrogation claims” (supra, at 471). Subrogation by an insurer, the court noted, has traditionally applied to claims against "third parties” whose active wrongdoing caused the loss for which the insurer was required to indemnify its insured. The court pointed out, however, that "[a] third party, by definition, is one to whom the insurer owes no duty under the insurance policy through which its loss was incurred” (supra, at 471 [emphasis supplied]). Permitting recovery against an insured is inequitable because it "would permit an insurer, in effect, 'to pass the incidence of the loss * * * from itself to its own insured and thus avoid the coverage which its insured purchased’ ” (supra, at 471, quoting Home Ins. Co. v Pinski Bros., 160 Mont 219, 226, 500 P2d 945, 949).
Another court described the same inequity, in a fire loss subrogation claim, as follows: "An overwhelming percentage of all insurable losses sustained because of fire can be directly traced to some act or acts of negligence. Were it not for the
In our view, the equities clearly favor defendant here. Defendant was an additional insured under the policy for up to $2,500 as to any fire loss of his personal effects at the insured premises. He was a named insured on the automobile liability coverage of the policy and would have been an insured had he somehow caused a fire at other premises while acting within the scope of his duties with the corporation. Thus, defendant can hardly be characterized as a "third party * * * to whom [plaintiff] owe[d] no duty under the insurance
More importantly, plaintiff must be presumed to have known at the time the policy was issued of the nature of defendant’s relationship to the insured, i.e., president and principal shareholder of a closely held corporation. Had defendant operated the foundry as a single proprietorship or partnership, undoubtedly he would have been a named insured against whom the subrogation claim made here would not lie. Having agreed to insure the business enterprise here in a corporate form, plaintiff certainly is charged with awareness that the entity it insured could only act through its officers and employees. If subrogation against a corporate insured is ever to be barred under the doctrine that an insurer completely assumes the risk of a fire loss due to the negligence of the insured, at the very least the risk assumed must extend to the negligence of a corporate officer of the insured, thus barring plaintiff’s claim in the instant case.
The alternative equitable and public policy rationale for the denial of subrogation against an insured cited in Pennsylvania Gen. Ins. Co. is also applicable here, namely, "the public interest in assuring integrity of insurers’ relations with their insureds and in averting even the potential for conflict of interest in these situations” (supra, at 472). The insurance policy imposed the obligation on the insured, on a fire loss claim, to "submit to examination under oath” and to furnish a sworn statement of loss setting forth, inter alia, the "cause of loss”. And as already noted, the policy required the named corporate insured to subrogate any claim for the loss it might have against another person and to do whatever else was necessary to secure plaintiff’s right of recovery. Again, because the insured here is a closely held corporation essentially operated by defendant, it was defendant upon whom devolved the corporate insured’s duties of full disclosure to plaintiff of the circumstances giving rise to the loss and of cooperation with respect to any subrogated right of recovery on behalf of plaintiff. Intentional suppression or distortion of material facts by defendant as a corporate officer in dealing with plaintiff could have resulted in the forfeiture of the corporation’s rights under the policy (see, Seawide Fish Mkt. v New York Prop. Ins. Underwriting Assn., 111 AD2d 137, 138; Kantor Silk Mills v Century Ins. Co., 223 App Div 387, 388, affd 253 NY 584).
Thus, defendant, as the principal officer of the named
Order reversed, on the law, with costs, motion granted, summary judgment awarded to defendant and complaint dismissed.