Case Name: Aetna Casualty and Surety Company, Appellant, v. Bekins Van Lines Co., Respondent and Third-Party Plaintiff. Gerald Smith, Third-Party Defendant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1985-10-08
Citations: 114 A.D.2d 308
Docket Number: 
Parties: Aetna Casualty and Surety Company, Appellant, v Bekins Van Lines Co., Respondent and Third-Party Plaintiff. Gerald Smith, Third-Party Defendant.
Judges: 
Reporter: Appellate Division Reports
Volume: 114
Pages: 308–312

Head Matter:
Aetna Casualty and Surety Company, Appellant, v Bekins Van Lines Co., Respondent and Third-Party Plaintiff. Gerald Smith, Third-Party Defendant.

Opinion:
Order, Supreme Court, New York County (Robert White, J.), entered October 2, 1984, granting defendant and third-party plaintiff Bekins Van Lines Co.'s motion for summary judgment dismissing the complaint, and denying the cross motion of plaintiff the Aetna Casualty & Surety Company for summary judgment on the complaint in the main action, affirmed, with costs.
The facts are adequately set forth in the dissenting opinion. The issue presented by the unusual factual pattern seems to us to require the application of principles other than those found dispositive by our dissenting colleague.
Undeniably it is the general rule that the subrogation rights of the insurer who pays the insured for damages caused by the fault or wrongdoing of a third party may not be defeated by a settlement entered into between the insured and the third party after the third party has notice of the payment. (See, Ocean Acc. & Guar. Corp. v Hooker Electrochemical Co., 240 NY 37.) However, a leading New York Court of Appeals decision at least suggests as a possible qualification of that general rule that it may not apply where the third party has fully paid the damages for which it is liable. Thus, in Hamilton Fire Ins. Co. v Greger (246 NY 162, 167-168) the Court of Appeals said: "The release has certainly not destroyed the right to recover against the railroad company which the insurance company obtained by subrogation when it paid Greger for the loss sustained by the destruction of the automo bile, if the railroad company paid less than the full damages caused by its negligence and obtained the release with knowledge that the insurance company had paid to Greger part of these damages under the insurance policy."
To the same effect is a comment in a leading annotation on the general subject, "Rights and remedies of property insurer as against third-person tortfeasor who has settled with insured" (Ann., 92 ALR2d 102, 124), where the general rule is set forth in the following words: "[Where, after the insurer has paid the claim, the tortfeasor, with notice of the insurer's payment procures a full or general release by voluntarily making a settlement with the insured to which the insurer is not a party and without the consent of the insurer, the courts generally agree that such release and settlement will not bar an action to enforce the insurer's right to subrogation, at least where the tortfeasor paid less than the full damages caused by his negligence."
We think it unnecessary here to determine whether the limitation on subrogation rights suggested in these authorities is one of universal applicability. The issue appears never to have been squarely addressed by any New York court, and indeed our attention has not befen called to any authority in any court that has directly addressed the question. In this case, however, in addition to the payment by the common carrier, Bekins Van Lines Co. (Bekins), of the entire damages for which it was liable, there appear other factors that are persuasive against sustaining the insurer's subrogation claim.
The principle is of course clear that the insurer is entitled by way of subrogation, not to the amount paid the insured, but only to the insured's claim against the third party. However, the record is clear that the value of the destroyed property stated by the insured was considerably less than its true value. Accordingly, the insurer's right to recover for the amount it paid the insured with regard to the vehicle would at best be limited to an amount determined by establishing the relationship between the stated value of the property that was damaged and its true value. Implicit in the approach contended for by the insurance company, and indorsed in the dissenting opinion, is the view that Bekins should have withheld from the insured the amount that had been paid by the insurance company to the insured for the loss of the car. But this would have required Bekins to withhold from the insured at least some money to which the insured was entitled, or alternatively to have undertaken itself to make an apportionment of the amount paid by the insurance company to the insured between that which was due to the insurance company and that which was due to the insured. Under the circumstances, we do not believe that Bekins can fairly be faulted for promptly paying the full extent of its liability to the party with whom it had contracted, leaving the disputed issue to be determined between the insurer and the insured, the parties primarily concerned in the dispute.
In short, we are persuaded on an evaluation of the situation as a whole that the case should be controlled by the essential principle set forth in 16 Couch, Insurance 2d § 61:21 (rev ed): "To entitle one to subrogation, his equity must be strong and his case clear, since it will not be enforced where the equities are equal, or the rights are not clear, or where it will prejudice the legal or equitable rights of others." Concur—Sandler, J. P., Ross, Milonas and Ellerin, JJ.