160 N.Y.S. 883 | N.Y. App. Term. | 1916
Lead Opinion
On April 22, 1913, the defendant agreed to indemnify the plaintiff for liability for damages on account of bodily injuries suffered by any person by reason of certain work which was to be prosecuted on premises owned by the plaintiff. The defendant also agreed to defend any suit, even if groundless. The policy contained a provision that:
“No action shall lie against the company to recover for any loss or expense under this policy unless it shall be brought by the assured for loss or expense incurred and paid in money by the assured, after trial of the issue; nor unless such action is brought within 96 days after the payment of such losá and expense.”
At the trial it appeared that the plaintiff’s watchman was injured by a fall into a hole on the premises left by a contractor engaged in the prosecution of the work described in the policy of insurance. The watchman died as a result of the injuries. His administratrix then began suit against the plaintiff, and the insurance company refused to defend the suit on the ground that the accident was not covered by the policy of the insurance. Thereafter, on the 30th day of December, 1913, the plaintiff, upon the advice of his counsel and with the approval of the surrogate, compromised the said action by payment of the sum of $500. On December 7, 1915, the plaintiff started the present action for breach of the defendant’s agreement to defend the action, claiming that the damages for such breach are the sum of $500, paid in settlement of the original action, and $100 counsel fee, paid therein. The defendant conceded at the trial that the counsel fee was reasonable, but no proof was presented to show that the plaintiff was actually liable in the negligence action. At the close of the trial both sides moved for the direction of a verdict, and the learned trial justice directed a verdict for the plaintiff, but reserved decision on the motion to set aside the verdict. Thereafter he set aside the verdict and dismissed the complaint, on the ground that the action was not brought within 90 days after the payment of the loss and expense. The defendant now seeks to sustain the judgment of dismissal
“When * * * the assured saw fit to settle before a recovery, he assumed the risk in an action against the insurer of showing not only a liability covered by the policy but the amount of the liability.”
The rule of law there announced is clearly binding upon us, if it is applicable to the present case. The opinions in that case show, however, that the court construed the action as one to enforce the covenant to indemnify, and not as an action for breach of contract to de
There remains, however, the question whether the amount paid upon the settlement was also proximate damages. In the case of St. Louis Beef Co. v. Casualty Co., 201 U. S. 173, at page 182, 26 Sup. Ct. 400 at page 404 (50 L. Ed. 712), the court stated:
“We assume that the settlement was reasonable, and that the plaintiff could not * * * escape at less cost by defending the suits. If this were otherwise, no doubt the defendant would profit by the fact. The defendant did not agree to repay a gratuity, or more than fairly could be said to have been paid upon compulsion. But a sum paid in the prudent settlement of a suit is paid under the compulsion of the suit as truly as if it were paid upon execution.”
As I read this case, as well as the various cases in New York, in which this question has been considered and the doctrine of the federal decision followed (Mayor, Lane & Co. v. Commercial Casualty Insurance Co., supra; Matter of Empire State Surety Co., 214 N. Y. 553, 108 N. E. 825), the true rule is that, where a settlement is made after failure of the insurance company to defend the action the insured is entitled to recover the amount paid in settlement of the action only upon proof of actual liability, where the amount paid is more than the reasonable and probable cost of defending the action but •may recover the amount so paid without such proof where the settlement is no more than the reasonable cost of defending the action, even though the insured would be ultimately not liable. In the one case the claim against the insurer would obviously be for indemnity; in the second case, the claim for damages would obviously be for the damages directly caused by the failure of the insurer to defend the action. In this case, therefore, the real question is whether there is any evidence in this case that the settlement of the action brought by the administratrix was a reasonable settlement of a groundless action. ■
Upon this poiiit the evidence showed that the deceased met his death' by negligence for which it was claimed that the plaintiff was responsible. We must therefore assume that the administratrix would have recovered substantial damages if the insured had been responsible, and the amount of possible liability would be one element in determining the value of the attorney’s services in defending such an action. It was also conceded that the reasonable value of the services of the attorney without a trial was $100. It seems to me that under these
The order setting aside the verdict should therefore be reversed, and the verdict reinstated, with $30 costs of the appeal.
Concurrence Opinion
(concurring). Plaintiff was having a building constructed in the Bronx, and defendant had issued to him a policy of insurance against accident. The work was being done by contractors. Plaintiff had a watchman on the work, but no other employes. The contractor left an open hole on the work, into which the plaintiff’s watchman fell and was killed. The administratrix of the deceased watchman made a claim against plaintiff for damages based upon his
The final settlement was made, and the money was paid to the administratrix and to plaintiff’s attorney, on January 3, 1914. This action was not begun until December, 1915. The defendant bases its defense upon three grounds: First, that the plaintiff was not justified under the terms of the policy in settling the claim, and was required to show on this trial the legal liability of the defendant and the reasonableness of the sum paid in settlement; second, that there was a breach of warranty by reason of plaintiff having represented that he had no employés upon the work; third, that the plaintiff was required in any event to begin his action within 90 days after the money in settlement had been paid.
The provisions of the policy in so far as they are material provided as follows:
“In consideration of the premium herein provided, the Massachusetts Bonding & Insurance Company, of Boston, Massachusetts (called the company), hereby agree to indemnify the assured referred to in the schedule of warranties, and subject to the limits hereinafter provided for, against loss from the liability imposed by law upon the assured for damages on account of bodily injuries, including death resulting therefrom, accidentally suffered by any person or persons whomsoever, by reason of the prosecution of the work described in the schedule, and caused by the negligence of any contractor or subcontractor engaged in such work, or any part thereof, provided such bodily injuries or death are suffered as the result of accident within the period stated in the schedule.”
“B. It is agreed that all work mentioned in the schedule is to be done by written contract at the risk of the contractor or contractors, and that the assured has not and will not by contract or otherwise' voluntarily assume any liability for loss on account of injuries or death suffered by any person or persons. It is agreed that no employé of the assured shall be engaged on work in the premises herein described, except watchman caring for premises and material, nor shall the assured furnish any material or appliances, or assume any supervision of the work herein described, unless an agreement to the contrary is specifically indorsed thereon.”
“D. If thereafter any suit, even if groundless, is brought against the assured to enforce a claim for damages on account of an accident covered by this policy, the assured shall immediately forward to the company every summons or other process as soon as the same shall have been served on him, and the company will, at its own cost, and subject to the limitations contained in condition O hereof, defend or at its option settle such suit in the name and on behalf of assured.”
“E. No action shall lie against the company to recover for any loss or expense under, this policy, unless it shall be brought by the assured for loss or expense incurred and paid in money by the assured, after trial of the issue, nor unless such action is brought within ninety (90) days after the payment of such loss or expense; hut if any provision of this condition is in conflict with the statutes of any state within which this policy covers, the condition*889 shall be inoperative within such states, in so far as the statutes conflict with such provision.”
“Q. The following warranties, numbered 1 to 10, inclusive, are hereby made a part of this contract, and are acknowledged and warranted by the assured to be true upon the acceptance of this policy, except such as are declared to be matters of estimate only:
“Warranties.
“(1) Name of assured: Gustavus L. Lawrence.
“[Description of property and unnecessary warranties omitted.]
“7. No employé of the owner is engaged in any work on the premises herein described, except as follows: No exceptions.”
This being so, the defendant waived its right to insist upon an actual trial of the issues, in the suit brought against the plaintiff. It was fully in its power to have had such a trial, it was actually requested to do so, and it refused. Defendant should not, therefore, be allowed to take advantage of its own wrong to the disadvantage of the plaintiff, who upon his part had fully lived up to the terms of the contract. The foundation of defendant’s defense in this respect is based upon its own wrong. As was held in the case of Cornell v. Travelers’ Insurance Co., supra, the defendant, by refusing to defend the suit, took its chances of any future liability that might be imposed upon the plaintiff. The defendant waived its right to insist upon a suit and judgment determining the amount of liability. Mayor, Lane & Co. v. Commercial Casualty Co., 169 App. Div. 772, 155 N. Y. Supp. 75; Matter of Empire State Surety Co., 214 N. Y. 553, 108 N. E. 825.
There was only one other manner in which to determine the amount and liability of plaintiff and that was by the plaintiff using a reasonable care and discretion in such determination, and I think the facts disclosed by the record are ample to show that such reasonable care and discretion were used. At least there was, in my opinion, ample proof shown upon the trial to have cast the burden upon the defendant of showing the settlement was not a proper one. It would certainly be impracticable, if not impossible, upon this trial for the plaintiff to establish his legal liability in the action brought against him. by the administratrix of Eilardo, the decedent. He admitted his liability after advice of counsel, and if the defendant waived the right to have plaintiff’s liability settled by a trial in that action there is no reason why the waiver should not apply to this action. If there was
I do not think, therefore, that when the court in the case of Mayor, Lane & Co. v. Commercial Casualty Co., supra, used the phrase, “When however, the assured saw fit to settle before recovery, he assumed the risk in an action against the insurer of showing, not only a liability covered by the policy, but the amount of the liability,” it meant to hold that such liability and the amount thereof must be determined by requiring the plaintiff in this action to virtually try the case against himself in the other action in the same manner that it would have been tried had no settlement been made. To quote tire phrase used by Mr. Justice Holmes, and which was approved by the Court of Appeals in the Matter of the Empire State Surety Co., supra:
“The defendant by its abdication put the plaintiff in its place with all its rights.”
I think, therefore, the plaintiff was justified in settling the claim, and that there was sufficient evidence to show plaintiff’s legal liability, and that the amount paid on the settlement was a reasonable amount, and that the plaintiff used sufficient care and discretion in the settlement, to sustain the verdict directed by the court.
Concerning the second ground of defendant’s defense, that there was a breach of warranty by reason of plaintiff having represented that there were no employés: The body of the policy expressly states that it was agreed that no employé of the assured shall be engaged in work in the premises described “except watchman caring for the premises and material.” This provision expressly eliminates watchmen, and shows clearly a plain intention to exclude watchmen from the term “employés.” Furthermore, there was no evidence that at the time the policy was issued there was ,a watchman on the premises employed by plaintiff. Therefore the warranty may have been perfectly true when made, and it only relates to the time when made. Mayor, Lane & Co. v. Commercial Casualty Co., supra. I do not think that this defense is maintainable.
My first reason for differing with him is that the decisions of the Court of Appeals and the Appellate Division are direct authority for holding that there was a clear waiver of the requirement that there
My second reason is I do not agree with the construction given the policy by the Municipal Court. The provision in question is paragraph E of the policy and reads as follows:
“No action shall lie against the company to recover for any loss or expense under this policy, unless it shall be brought by the assured for loss or expense incurred and paid in money by the assured, after trial of the issue, nor unless such action is brought within 90 days after the payment of such loss or expense.”
There are certain well-recognized rules of interpretation and construction which apply and which must be observed: First, the intention of the parties must govern, if ascertainable; second, the contract having been drawn by the defendant, it must be construed most strongly against it; third, insurance contracts, where there is any ambiguity, must be given a meaning most favorable to the assured. The actual reading of this clause shows that no provision is made for money paid in settlement of a claim, unless the “issues have been tried,” and discloses clearly that there is no limitation placed upon actions to recover for loss or expense, where there has been no “trial of the issues.” As matter of fact it is perfectly clear that the defendant never intended that there should be any such' limitation, because it expressly repudiates the claim that an action is maintainable at all where there has been no such trial. And the defendant is inconsistent when it says, under the terms of the policy, no action will lie to recover for a settlement where there has been no “trial of the issues.” Nevertheless you must, under the terms of the policy, bring such an action within 90 days. The policy contains no 90-day limitation which is applicable to the case at bar, and the defendant never intended that it should contain any such limitation. Its limitation is only against actions to recover “loss and expenses” where there has been a “trial of the issues.”
Inasmuch, however, as there is apparently considerable divergence of opinion upon the proper construction to be placed upon this provision, two courts and two able members of the bar having differed, under the rules of interpretation above referred to, the question should, I think, be resolved in favor of the appellant, and that the order should be reversed, with $30 costs to appellant, and the verdict in favor of plaintiff reinstated, with costs.
Concurrence Opinion
(concurring).
Order setting aside the verdict reversed, and verdict reinstated, with $30 costs of appeal.