128 N.Y.S. 822 | N.Y. App. Div. | 1911
Lead Opinion
The plaintiff is a manufacturing corporation and the defendant is an indemnity insurance company. The defendant issued to the plaintiff a policy whereby it agreed to indemnify the plaintiff “ against loss by reason of the liability imposed by law upon the assured for damages on account of bodily injuries ” sustained by any employee through accident while prosecuting his work in the plaintiff’s mill. The defendant’s liability was limited to $5,000 for injuries to or death of one person, and in addition all cost of litigation together with certain first surgical aid bills. It was further stipulated by the policy that immediately upon the happening of an accident written notice should be given to the company or its duly authorized agent, and ujion action being brought that the defendant should take over the defense of the suit, and that the plaintiff should not assume any liability or settle any claim or interfere with the litigation without the consent of the defendant. If action was brought the policy provided that “ the [defendant] company shall have the absolute right of determining whether an appeal shall be taken from any order or judgment in such suit.” The policy further provided that “ no action shall lie against the company to recover ■for any loss under this policy unless it shall be brought by the assured for loss actually sustained and paid in money by him after actual trial of the issue.”
One of the plaintiff’s employees was injured in its mill and brought suit against it, and the defendant took over the defense and a verdict of $5,000 was rendered upon which judgment was entered, with costs. The defendant appealed and the judgment was affirmed and the defendant paid $5,000 towards satisfying the judgment, besides all costs, but refused to pay $275 interest which had accumulated upon the judgment pending the appeal, on the ground that its liability under the policy was limited to $5,000 and the cost of the litigation.
The • facts are stipulated, and the question for determination is whether the plaintiff is entitled, as matter of law, to recover from the defendant the interest on the judgment which it was compelled to pay.
The plaintiff urges that the verdict and judgment being no greater than the limit of the defendant’s liability the appeal which it insisted
The defendant insists that the contract limited its liability to the specific sum of $5,000, and gave to it the express right of appeal, and that whether the accumulating interest amounted to much or little during its exercise of that right it can be made to pay only the sum which was agreed, and that no cause of action existed in favor of the assured until it had paid the judgment which -was entered against it, which was not done until after the interest complained of had accumulated.
There are but two decisions in this State having any bearing upon the question, to which counsel have called our attention or which we have been able to find. One is that of Munro v. Maryland Casualty Company (48 Misc. Rep. 183) where the non-liability of the insuring company for accumulated interest was placed upon the ground that the delay in appealing had not been unreasonable. Tbe other is Creem v. Fidelity db Casualty Company (141 App. Div. 493) where a judgment charging the insuring company with interest upon the judgment rendered was affirmed, the question of its non-liability not being raised.
The significance of the latter decision lies only in the fact that counsel for the insuring company conceded liability for interest accumulating pending an appeal by not challenging the correctness of its allowance. It is very doubtful whether the reasonableness or the unreasonableness of delay in prosecuting the appeal is of any importance in determining the liability of tbe insuring company for interest, at least in a pure action at law, and we prefer placing our decision upon the plain terms of the policy and the legal obligations which follow them.
Clearly the interest which accumulated on the judgment pending the appeal cannot be said to be any part of the cost of defense of the action which the insuring- company agreed to pay. The agreement of the defendant was that in case action was brought it
While the accumulation of interest was an incident to the appeal it was not a part of the cost of appeal, or of the taxable costs or of the defense of the action.
There is no claim in the present case that there was any express promise to pay interest. The general rule is that in the absence of an agreement to pay interest it is implied by law as damages for not discharging a debt when it ought to be paid. (Ledyard v. Bull, 119 N. Y. 62, 74.) Where a contract provides for the payment of money upon the happening of an event, it is not due until the event transpires and interest does not begin to run until that time. (Howard v. Johnston, 82 N. Y. 271.)
The contract embraced in the policy which the defendant issued to the plaintiff is one of indemnity merely. It is not an agreement to save harmless or to pay when liability shall be established. If the first part of the agreement was not qualified by a subsequent clause, and if the only provision contained in the policy was that the insuring company would indemnify the assured against loss by reason of liability because of an accident happening to its servant, obligation to pay would arise when judgment determining liability was entered against the assured (Stephens v. Pennsylvania Casualty Co., 135 Mich. 189), and whatever interest accrued in an ineffectual effort to get rid of the judgment the insuring company would be bound to pay. But this broad part of the agreement is qualified by a subsequent provision of the policy that no action shall lie against the company to recover for any loss under the policy unless it shall be brought by the assured for “ loss actually sustained and paid in money by him after actual trial of the issue.” This clause is a substantive part of the policy and has the effect of changing the policy from one of indemnity when liability shall be established to one for indemnity for money paid out on the occurrence of a particular event, to wit, payment of the judgment obtained because of such liability. The parties agreed, therefore, that the insuring company would indemnify the assured to the extent of $5,000, not because of the establishing of liability, but from loss for money actually paid out on account of liability. Hence the assured had no claim against the insuring company until it had paid the judgment which
Such interpretation of the policy is not only in accordaiice with the reading of its plain terms but accords with that given to like terms contained in similar policies by many of the courts of other States. (Kennedy v. Fidelity & Casualty Co., 100 Minn. 1; Frye v. Bath Gas & Electric Co., 97 Maine, 241; Connolly v. Bolster, 187 Mass. 266 ; Carter v. Etna Life Ins. Co., [Kans.] 11 L. R. A. [N. S.] 155 ; Stenbom v. Brown-Corliss Engine Co., 137 Wis. 564; Cushman v. Carbondale Fuel Co., 122 Iowa, 656 ; Allen v. Etna Life Ins. Co., 145 Fed. Rep. 881.)
In all the above cases it was held that payment of the judgment which the employee obtained against the assured was a condition precedent to a right of action against the insuring company, and that no cause of action existed until the judgment was so paid. Some of the decisions involved garnishment proceedings and relief was denied on the express ground that the judgment against the assured not having been paid by him no claim or cause of action existed in his favor against the insuring company which could be impounded. This being so, of course, interest could not commence until the assured had paid the judgment. »
A holding giving a like construction to the policy was made in our own State in Beyer v. International Alumninum Co. (115 App. Div. 853) where the employee had obtained a judgment against the assured, which had become insolvent, and by an action in equity sought to compel the insuring company to pay to him the amount of his judgment, which was within the limit of liability. The policy contained a like clause to that in the case at bar, to the effect that no action should lie against the company to recover for any loss “unless it shall be brought by the assured for loss or expense actually sustained and paid in money by him after actual trial of the issue.” It was held that the judgment creditor had no cause of action and that he could not reach the fund, and that the judgment debtor had no cause of action against the insurer because it had not paid the judgment.
In Beacon Lamp Co. v. Travelers’ Ins. Co. (61 N. J. Eq. 59), upon which the plaintiff relies, the assured was declared a bankrupt
Upon the particular point involved at bar the Rew Jersey case does not differ from the others cited, but in its ultimate holding it is opposed to our own decision of Beyer v. International Aluminum, Co. (supra).
Through a different method of reasoning it was held in Davison v. Maryland Casualty Co. (197 .Mass. 167) and in Maryland Casualty Co. v. Omaha Electric L. & P. Co. (157 Fed. Rep. 514) and in National & Providence Worsted Mills v. Franklin Insurance Co. (28 R. I. 126) that the insuring company was only liable for the amount stipulated by its policy and that it could not be compelled to ", pay interest accumulating on a judgment during pendency of appeals where the aggregate amount exceeded such limit.
On the other hand it was held in Paper Company v. Casualty Company (92 Maine, 574) and in Cudahy Packing Company v. New Amsterdam Casualty Co. (132 Fed. Rep. 623) that the insuring company was liable for interest upon the judgment obtained against the assured notwithstanding it exceeded the stipulated amount. _ These holdings appear to have been made without particular consideration and are criticised in some of the other cases cited and cannot be deemed to be controlling.
While it seems inequitable to compel the plaintiff to pay the interest on the judgment accruing while the defendant was engaged in an ineffectual attempt to relieve itself from liability, the answer to it is that the parties otherwise agreed. By its agreement the
It follows that judgment must be directed in favor of the defendant, with costs.
All concurred, except Kellogg, J., dissenting in opinion.
Dissenting Opinion
By its policy the defendant agreed “ to. indemnify the assured * * * against loss by reason of the liability imposed by law upon the assured for damages on account of bodily injuries,” etc. The policy provided: “ The company’s liability for an accident resulting in injuries to or in the death of one person is limited to Rive Thousand Dollars; ” that the assured shall not voluntarily assume any liability or settle any claim except at its own cost; shall not interfere with negotiations for settlement, or with legal proceedings, and that “no action shall lie against the company to recover for any loss under this policy, unless it shall be brought by the assured for loss actually sustained and paid in money by him after actual trial of the issue,” and that the assured will immediately deliver any paper, process or summons served upon it to the company, “and the company will at its own cost defend against such suit in his name and on behalf, or settle the same. The company shall have the absolute right of determining whether an appeal shall be taken from any order or judgment in such suit.”
The defendant, an accident insurance company formed to carry on that business, was insuring the plaintiff on account of accidents which might happen in its business to its employees. The policy was written by it. It had the choice of language in stating the contract, and its fanguage may be construed strictly against it. (Schumacher v. Great Eastern C. & I. co., 197 N. Y. 58, 64.) In that case Schumacher was insured against the effect of bodily
We need not go into an extended discussion of the various provisions of the policy in question. We find in it a separate independent clause providing what the rights and liabilities shall be in case the assured is sued on account of an accident. The policy provides that the assured shall not settle or litigate, but must turn the summons over to the insurer, which at its own cost will defend against the suit, or settle the same. The words “ at its own cost ” attach themselves as much to the words “ or settle the same ” as to the words “ defend against such suit,” so that we have the absolute agreement of the company to defend against any suit at its own cost, or to settle the suit at its own cost. An insurer does not at his own cost defend against a suit merely by employing lawyers, procuring the attendance of witnesses and then leaving the assured to pay the judgment which may follow and leaving it to another action against the insurer for reimbursement. When the company agreed to defend against a suit or settle the same at its own cost, the agreement is broken if the assured is compelled to pay the judgment. The language in question casts the duty of payment upon the insurer, and after the summons is delivered to it it assumes all responsibility with reference to the suit, with the sole proviso that the limit of its liability on account of the damages to one person shall not exceed $5,000. The damages were liquidated in this case at just $5,000, and, therefore, as between these parties, the plaintiff was absolved from all responsibility with reference to the lawsuit or
It would, therefore, be unjust to charge upon the plaintiff the damages which the law has imposed on account of the delay and the neglect of the defendant. The interest in- question does not represent any liability on account of or for the accident or the policy, but it is a liability imposed by law for the delay of the defendant in paying the judgment which, as between the parties, it was legally obligated to pay. The interest, therefore, is the obligation of the defendant and not of the plaintiff, and the plaintiff having been compelled to'pay the same, is entitled to recover it without reference to the terms of the policy other than that t[ie judgment was to be paid by the defendant.
The cases cited against these views give too much attention to the provision that the assured shall not recover in a lawsuit against the insurer except for money actually paid. They overlook the real object of the contract. In effecting insurance the plaintiff was not purchasing a lawsuit but indemnity. It was paying in advance for such accidents as might happen to it, and such accidents the defendant, for the premiums paid, agreed to defend against or settle at its own cost, but, as an additional precaution, it provided that it should only be liable in a lawsuit to the insured, and for money actually paid by the insured, thus making it clear that -the injured person could not recover against it, and rendered it impossible for the insured to make a collusive settlement with its employee to the detriment of the insurer. But that provision is merely incidental, and is of importance only after the company has made a breach of its agreement, at its own cost to settle the cause of action or defend against any suit. If the insurer fully performed its agreement, then this clause about a lawsuit was entirely immaterial. It was only inserted to regulate the rights of the contractors, not as parties to the contract, but as parties to a lawsuit which might follow the breach, of the contract by the defendant.
I think, therefore, that the interest in question is no part of the liability for or on account of the accident within the limitation of the policy, and is a charge arising from the defendant’s own act, for which as between the parties it is solely responsible. I favor judgment for plaintiff for the amount claimed, with costs.
Judgment directed for defendant, with costs.