#### The Insurance Company of the State of Pennsylvania, Plaintiff, *v.*Jacob R. Telfair, as Receiver of the Pacific Mutual Insurance Co., Defendant.

(Supreme Court, New York Trial Term,

April, 1899.)

1. Reinsurance — Is a contract of indemnity and is to be construed liberally. '

Reinsurance is a contract of indemnity between the original and collateral insurer by which the former is to be indemnified by the latter as to the risk undertaken; such a contract is to be construed liberally and, so far as is just, in such a manner as to afford the greater indemnity.

*¡2.*Action against reinsurer — Establishment of loss by judgment — Statute of Limitations.

After a vessel had been damaged at sea the consignee of the cargo insured, and which had been partially reinsured, gave a general average bond upon which the owners of the vessel sued and made .the insurer a party as garnishee. The latter defended upon the ground of unseaworthiness and after thirteen years of litigation was defeated. It- thereupon paid the judgment and sued the reinsurer for its proportionate share of the loss. Held, that it was not necessary for the insurer to sue when the loss occurred, that it was entitled, before *248seeking indemnity, to wait until the loss had been established against it by the judgment,-, and tháj: the statute of limitations began to run against the insurer only from the latter date. *■:*

Actioh on contract of reinsurance.

. T. F. Humphrey, for plaintiff.

.. Coiidert Brothers,', for defendant.

McAdam, J.

On January 3, 1880, the plaintiff issued its policy of marine insurance to Charles S. Wilkes, -in the sum'of $38,322, upon a cargo of steel rails shipped from Philadelphia to Charleston, S. C„ by the schooner-Hattie A. Hand, loss,-if any, payable to the consignee. . On February 7, 1880, the Pacific Hutual Insurance Company reinsured the plaintiff in the sum of $15,172 against' loss in respect to said cargo. . The schooner sailed from the port, of Philadelphia,. and while proceeding upon the voyage was damaged by- perils of the seas.- Upon her arrival -at- the port of- destination, the .consignee gaye a general average bond, agreeing to pay .his share of all expense's which had been or thereafter might, he incurred for the general benefit, -Thereafter, and on September 23, 1880, the Owners of the vessel commenced an action in the Pennsylvania Court of Common Pleas .against the consignee, upon the general -average' agreement, and the plaintiff was summoned .'as garnishee and made a party to the action. The plaintiff pleaded in. defense Unseáworthiness of the vessel. On June 24, 1884, the. owners recovered a judgment against the-plaintiff, which ,was re..versed on-appeal, October 12, 1885. Upon the second trial the owners, on November 26, 1892, again recovered judgment against the .plaintiff for $3,45 6.44^ from which an appeal was also taken. This judgment'was affirmed, with" costs, October'6, 1893, malting an aggregate. judgment of. $3,846.70. This - judgment was: paid •by the plaintiff and satisfied of record October 26, 1893. The present action is on the policy of reinsurance to recover the defendant’s proportionate amount of the loss. The main defense- is. the Statute^ of Limitations, in/that the action was not commenced within'six years after the liability attached. Instead of suing.tin- ' mediately upon the occurrence of the loss, the reinsured may lawfully wait'until suit .brought and judgment obtained by the. insured •before seeking indemnity from the reinsurer; and the latter is then *249bound to pay. Joyce on Ins., § 1.35. If the -reinsured pays before judgment, he must, in order to recover from the reinsurer, make the same proof that would have been required in a suit by the person originally insured against his immediate insurer. Hastie v. De Peyster, 3 Caines, at p. 195; Hone v. Mut. Ins. Co., 1 Sandf. 137; affirmed, 2 N. Y. 235; Jackson v. St. Paul F. & M. Ins. Co., 99 N. Y. 124. If the reinsured pays after' judgment, the judgment establishes, *prima facie*at least, the amount of the liability. Reinsurance in respect of property is a contract of indemnity between the original and Collateral insurer, by which the first is indemnified, in whole or in part, by the latter as to the risk he has undertaken in respect of the subject insured. Biddle on Ins., § 379. *t*The contract is to be construed liberally, and where two interpretations equally fair may be given, that which, gives the greater indemnity will prevail. May on Ins., § 174. In Jackson v. St. Paul F. & M. Ins. Co., *supra,*the blank form of policy used for the reinsurance was that of the ordinary policy of insurance, and • contained the conditions that no action could be maintained thereon until after an award made as specified, fixing the amount of the ydaim, nor unless commenced within twelve months after the loss, and it was held that these conditions were not applicable to the .contract of reinsurance, and plaintiff’s right to recover was unaffected thereby. See also Mayor v. Hamilton Fire Ins. Co., 39 N. Y. 45; Hay v. Star Fire Ins. Co., 77 id. 236; Steen v. Niagara Fire Ins. Co., 89 id. 315. These cases seem to put that interpretation upon the contract respecting the operation of the limitations imposed as to commencing actions against the reinsured, which best accords with the principles of substantial justice, having in view the fundamental idea that- the undertaking of the reinsurer is one of indemnity for the protection of the original insurer. . It W'ould seem to follow that the reinsured had the right in good faith to contest by suit the claim against it, and that its right to recover indemnity from the reinsurer does not come within the operation of the Statute of Limitations until the contention had been finally decided against the original insurer. The liability here was -in *l)ona fide*contention until October, 1893, under a defense believed to be meritorious, and this action u'as brought within six years thereafter; it is, therefore, timely and not barred by statutory operation. There must be judgment in favor of the plaintiff for the defendant’s proportionate share of the loss, the amount tó be inserted in the decision when the form thereof is settled. The *250. items for expenses incurred by the plaintiff in defending the original action will be disallowed, because there is neither allegation nor proof that the defendant was notified of such action and permitted to join in the defense thereof. Richards on Ins. (2d ed.) 188, 189; N. Y. State Marine Ins. Co. v. Protection Ins. Co., 1 Story, 458. Settle form of decision on two days’ notice.

Judgment' accordingly.