Case ID: ny-2d_61/html/0569-01.html
Source: Caselaw Access Project
Author: {"author": "Meyer, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Hartford Accident and Indemnity Company, Individually and as Subrogee of L.A.D. Associates, Inc., and Another, Respondent, v Michigan Mutual Insurance Co., Appellant, et al., Defendant, and Montfort, Healy, McGuire and Salley et al., Respondents.
    Argued March 22, 1984;
    decided May 3, 1984
    
      POINTS OF COUNSEL
    
      Kevin B. Lynch, Asher Marcus and Peter James Johnson for appellant.
    I. As a matter of law, Hartford’s payment to Mr. and Mrs. Gobin of the amount required under the terms of the settlement agreement of July 13-14,1981 was voluntarily made and, therefore, was not recoverable from Michigan. (Yonkers Fur Trading Co. v Royal Ins. Co., 247 NY 435; Trojcak v Wrynn, 45 AD2d 770; Flower v Lance, 59 NY 603; Forrest v Mayor of N. Y., 13 Abb Prac 350; Neufeld v City of New York, 93 App Div 591; Kienle v Gretsch Realty Co., 133 App Div 391; Matthews v Frank Brewing Co., 26 Misc 46; Felder v Old Falls Sanitation Co., 39 NY2d 855; Page v State of New York, 56 NY2d 604; Long v Forest-Fehlhaber, 55 NY2d 154.) II. Assuming, arguendo, that because of Mr. Berels’ announcement after the terms of settlement were spread on the court record the Yonkers Fur Trading doctrine was inapplicable, Michigan, nevertheless, committed no wrong against L.A.D. and DeFoe by ignoring Hartford’s demand that D.A.L. be impleaded into Gobins’ Supreme Court action. (Raleigh Assoc. v Henry, 302 NY 467; Madawick Contr. Co. v Travelers Ins. Co., 307 NY 111; Sullivan Co. v International Paper Makers Realty Corp., 307 NY 20; Harris v Allstate Ins. Co., 309 NY 72; Leaseway. of Cent. N. Y. v Climax Mfg. Co., 54 NY2d 822; Gorhan v Arons, 282 App Div 147, 306 NY 782; Long Is. R.R. Co. v Interboro Mut. Ins. Co., 84 AD2d 809; Beck v Renahan, 46 Misc 2d 252, 26 AD2d 990; Vescera v Dancy, 52 Misc 2d 830.)
    
      Steven B. Prystowsky for Hartford Accident and Indemnity Co., respondent.
    I. Hartford properly reserved its right to proceed against the parties in this action when it stipulated to settle the underlying cause of action. In any event, it is a question of fact which cannot be determined by affidavits. (Stevenson v News Syndicate Co., 302 NY 81; Town of Poland v Transamerica Ins. Co., 53 AD2d 140.) II. The court below correctly denied Michigan Mutual’s motion to dismiss Hartford’s complaint because Hartford stated a cause of action for bad faith. (St. Paul Fire & Mar. Ins. Co. v United States Fid. & Guar. Co., 43 NY2d 977; Brown v United States Fid. & Guar. Co., 314 F2d 675; Vencill v Continental Cas. Co., 433 F Supp 1371; Cornwell v Safeco Ins. Co., 42 AD2d 127; Dole v Dow Chem. Co., 30 NY2d 143; Tallarico v Long Is. Light. Co., 45 AD2d 845; Biss v Town of Conquest, 45 AD2d 914; Farrell v Royal Crown Bottling Co., 72 AD2d 531, 53 NY2d 619; Berardi v Getty Refining & Marketing Co., 107 Misc 2d 451; Fidelity Gen. Ins. Co. v Aetna Ins. Co., 27 AD2d 932.)
   OPINION OF THE COURT

Meyer, J.

An insurer which carries both the general liability coverage and the workers’ compensation coverage of three affiliated companies may be liable, when an employee of one of the companies sues the other two for injuries incurred in the course of his employment, for failure to comply with the demand of the excess carrier for the same three companies that the two companies sued implead the employer company, if the primary carrier cannot show a good-faith basis for its refusal. The order of the Appellate Division should, therefore, be affirmed, with costs.

Michigan Mutual Insurance Co. insured DeFoe Corporation and its two subsidiaries, L.A.D. Associates, Inc., and D.A.L. Construction Corporation, under a general liability policy with coverage of $1,000,000. It was also the workers’ compensation insurer for the same three companies. Hartford Accident and Indemnity Co. provided excess coverage of $5,000,000 to the same three companies. An employee of D.A.L. (Davor Gobin) was injured in the course of his employment. Though prevented by the exclusivity provision of the Workers’ Compensation Law (§ 11) from suing D.A.L., Gobin began a negligence action against DeFoe and L.A.D. Notwithstanding that Hartford, as excess carrier, demanded that D.A.L. be impleaded in the Gobin action, Michigan Mutual and the attorneys representing it failed to do so. The Gobin action was settled for $1,400,000, Hartford paying $400,000, but as part of the settlement proceeding stating that it reserved the right to pursue any remedies against Michigan Mutual.

Hartford then began the present action against Michigan Mutual and the law firm which at its behest represented DeFoe and L.A.D. in the Gobin action. Involved on this appeal are only the fourth through seventh causes of action against Michigan Mutual for inducing breach by DeFoe of the cooperation clause of Hartford’s policy, for inducing a like breach by L.A.D., for bad faith in failing to cause D.A.L. to be impleaded in the Gobin action, and for conspiracy to deprive DeFoe and L.A.D. of an adequate defense and representation in the Gobin action by not impleading D.A.L. Michigan Mutual moved for summary judgment as to those causes of action. Special Term treated the motion as one to dismiss and dismissed insofar as the causes of action were stated to be in favor of Hartford in its individual capacity but otherwise denied. On appeal the Appellate Division dealt with the motion as one for summary judgment but found triable issues of fact and, one Justice dissenting, modified by reinstating the causes of action by Hartford in its individual capacity and otherwise affirmed. It also granted Michigan Mutual’s motion for leave to appeal and certified to us the question whether its order was properly made.

Michigan’s contention that the cooperation clause of the Hartford policy did not obligate DeFoe and L.A.D. to implead D.A.L. is. based upon American Sur. Co. v Diamond (1 NY2d 594). The subrogation clause in the policy there involved (see 1 NY2d, at p 598) contained no agreement giving rise to an obligation to implead. Hartford’s policy, however, obligated its insured to “enforce any right of contribution or indemnity against any person or organization who may be liable to the insured”.

Michigan’s reliance on the rule that an insurer may not maintain a subrogation action against its own insured is likewise misplaced for that rule speaks to an insured under the same policy. Here Michigan Mutual provided two policies, one a general liability policy and the second a compensation policy which covered not only D.A.L.’s obligations under the Workers’ Compensation Law, but also under paragraph 1(B) of the standard policy required Michigan to “pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury by accident * * * by any employee of the insured arising out of and in the course of his employment by the insured” (4 Larson, Workmen’s Compensation Law, Appendix E-2-1). Michigan Mutual would, therefore, under its compensation policy, be obligated to defend D.A.L. had it been impleaded in the Gobin action and to indemnify D.A.L. against payment of damages on the impleaded cause of action should it be held liable. That obligation would arise, however, not under the liability policy under which it was defending DeFoe and L.A.D., but under the separate compensation coverage of D.A.L.

Moreover, Michigan Mutual as the primary liability insurer owed to Hartford as the excess carrier the same duty to act in good faith which Michigan owed to its own insureds, DeFoe and L.A.D. (St. Paul Fire & Mar. Ins. Co. v United States Fid. & Guar. Co., 43 NY2d 977; see 2 NY PJI 243 [1983 Supp]). Whether Michigan Mutual acted, as it claims, in the interest of protecting its insureds against the harassment of multiple claims, or in its own interest so as to activate Hartford’s excess liability without having to share in or substitute for that liability as the insurer under the 1(B) coverage of its compensation policy is, therefore, a question to be determined upon trial of the action rather than on motion for summary judgment, as also is the question whether Hartford’s payment was “voluntary” (cf. Trojcak v Wrynn, 45 AD2d 770).

The order of the Appellate Division should, therefore, be affirmed, with costs, and the certified question answered in the affirmative.

Chief Judge Cooke and Judges Jasen, Jones, Wachtler, Simons and Kaye concur.

Order affirmed, etc.