Court Opinion

ID: 5305884
Source: CourtListenerOpinion
Date Created: 2022-01-08 03:28:40.974579+00
Date Added: 2024-06-11T08:29:08.600342
License: Public Domain

Proskauer, J.
The defendant issued to the plaintiff a liability insurance policy covering in the sum of $25,000 against liability arising out of personal injuries sustained by persons not employed by the assured while within or upon certain premises. On July 27, 1927, one Lesner, not employed by the plaintiff, was injured upon the premises. He brought an action against the plaintiff in the Supreme Court of Westchester county on September 2, 1927. Plaintiff’s president at once telephoned to his agent and the same day forwarded to him the summons and complaint, stating: “ This is the first official notice that came to my observation.” Thereafter, on September 21, 1927, the defendant caused an attorney to appear in that action for the plaintiff herein and secured an extension of time to answer until October second. The next day, September twenty-second, the defendant definitely ascertained that the secretary and certain employees of the plaintiff corporation had knowledge of the accident on the day it happened and that no notice of the accident was given to the defendant until after the summons and complaint had been served in the Westchester county action. The failure to give prompt written notice was concededly a breach of condition of the policy which entitled this defendant to disclaim liability under the policy. Until it received this information it may be conceded that it was misled into undertaking the defense by the letter of the president of the plaintiff corporation, which inclosed the summons and *518complaint and Avhich stated: “ This is the first official notice that came to my observation; ” but on September 22, 1927, it received full information and was fully apprised that the plaintiff corporation had breached the condition of the policy requiring it to give immediate notice of the occurrence of any accident. Up to this time the defendant had done nothing on behalf of the plaintiff other than to secure an extension of time to ansAver. Thereafter, on October first, eleventh and twenty-first, the defendant’s attorney secured further extensions of time in which to answer. On October twenty-second the insurance company caused to be served a notice demanding a change of venue from Westchester to New York county and a demand for a bill of particulars, and on October twenty-fifth it prepared and procured the verification of an answer which it caused to be served on that day. Its first protest to the plaintiff as to the claimed breach of condition was made toward the end of December, when the defendant submitted to plaintiff for execution a so-called non-waiver agreement, which was thereafter and on January twenty-ninth executed by the parties. Meanwhile plaintiff in the Westchester county action served on December twentieth a notice of trial and a notice of motion for a preference, and on December tiventy-second the casualty company through its attorney caused to be served a cross notice of trial on behalf of the plaintiff in the present action and opposed the motion for a preference; and on the 16th of January, 1928, made a motion for a bill of particulars. Thereafter, and on January twenty-ninth, the so-called non-waiver agreement was executed between the parties. It recited that the insurance company “ by undertaking the investigation and defense * * * does not waive any provision or condition of the policy * * * and in the event of any claim or suit under said policy for indemnity or for any other purpose, it shall not be claimed or asserted that the said insurance company has by any act or conduct waived any provision or condition of its policy or that it is estopped from setting up any defense or defenses which it may have.” The ensuing trial of the negligence action resulted in a large verdict against this plaintiff, which sues to recover the amount paid in settlement of the judgment against it and its expenses.
If this non waiver agreement was supported by consideration flowing from the defendant, it is a defense to this action. The crucial question on this appeal is whether there is consideration to support the contract. The trial justice ruled that there was and dismissed the complaint at the close of the plaintiff’s case. The defendant continued to act for the plaintiff in the conduct of the defense in the negligence case, Avithout question or protest, *519for almost three months after it admittedly had full knowledge of the claimed breach of condition. At the time of the execution of the so-called non-waiver agreement it was, therefore, absolutely bound to defend the negligence action. On September twenty-second, when it received notice of the breach of condition, it was competent for the company “ to stand upon its rights, and disclaim liability, leaving [this plaintiff] to defend the action.” (Farrell v. Merchants Mutual Automobile Liability Ins. Co., 203 App. Div. 118.) It chose not to follow this course, but with full knowledge to interfere with the defense of the negligence case in such vital respects as the drafting and service of the answer, the demand for a bill of particulars, the attempt to change the venue, and the opposition to a motion for preference. Thus, prior to and on the day upon which the non-waiver agreement was signed, the defendant had as a matter of law waived the condition of the policy requiring prompt notice of an accident and become irrevocably bound to proceed with the defense and to pay any judgment recovered. (Rosenwasser v. Globe Indemnity Co., 224 N. Y. 561; Utterback-Gleason Co. v. Standard Accident Ins. Co., 193 App. Div. 646, 653; affd., 233 N. Y. 549; Miller v. Union Indemnity Co., 209 App. Div. 455; Farrell v. Merchants Mutual Automobile Liability Ins. Co., 203 id. 118.)
The only consideration moving from the defendant in the non-waiver agreement was its implied undertaking to continue the defense of the action. This it was already bound to do; and it is fundamental “ that ‘ neither the promise to do a thing, nor the actual doing of it, will be a good consideration if it is a thing which the party is bound to do by the general law, or by a subsisting contract with the other party.’ ” (Vanderbilt v. Schreyer, 91 N. Y. 392.)
Mutual promises are generally sufficient consideration one for the other, but a promise “ made to induce a party to do that Which he is already bound by contract to perform is without consideration.” (Schwartzreich v. Bauman-Basch, Inc., 231 N. Y. 196, 202; McGovern v. City of New York, 234 id. 377, 387; O’Meara Co. v. National Park Bank, 239 id. 386, 399; 1 Williston on Contracts, §§ 130, 132.)
Undoubtedly the defendant was entitled to a sufficient time after it was advised of the breach of condition to perfect its arrangements with the plaintiff to withdraw from the defense of the action. But here it made no such effort for over two months and during that period performed definite and significant affirmative acts in the conduct of the litigation.
Ho, too, if the situation in January had been equivocal, so that *520there was an honest dispute between the parties based upon a real doubt as to their rights, it was competent for them to compose their differences by a contract based on mutual promises. But that situation did not here exist because there was no legal basis whatever for the defendant’s insistence upon the execution of the non-waiver agreement, when as a matter of law it was absolutely bound to continue the defense without such agreement.
For these reasons the judgment appealed from should be reversed and a new trial ordered, with costs to the appellant to abide the event.
Martin and O’Malley, JJ., concur; Finch and Merrell, JJ., dissent.