Court Opinion

ID: 9885574
Source: CourtListenerOpinion
Date Created: 2023-10-06 13:07:40.056349+00
Date Added: 2024-06-11T08:43:55.566020
License: Public Domain

Dye, J.
(dissenting). These cross appeals bring up for consideration the liability of the State Insurance Fund (hereinafter called the Fund) under a policy issued by it to insure the appellant, a ship repairer (hereinafter called Cardinal) under the New York Workmen’s Compensation Law and the Federal Longshoremen’s and Harbor Workers’ Compensation Act. The issue turns on the construction to be given the policy provisions insuring “ against loss by reason of any liability imposed upon him by law for damages on account of such injuries to such employees wherever such injuries may be sustained ”, such obligations being limited, however, “ to the liability imposed by law upon the employer for negligence but specifically exclude * * * any liability assumed by the employer under any contract entered into with any other person, association or organization.” The policy also contained a standard form clause whereby the insurer undertook to defend “ in the name and on behalf of this employer, any suits or other proceedings which might at any time be instituted against him on account of such injuries, including suits or other proceedings alleging such injuries and demanding damages or compensation’therefor, although such suits, other proceedings, allegations or demands are wholly groundless, false or fraudulent ”.
While the policy was in effect, Cardinal undertook to make alterations and repairs to the S.S. Hilton, an ocean going vessel owned by the United States and berthed at the time in New York *420Harbor. During the progress of the work, a quantity of ammonia gas used in the vessel’s refrigerator system was carelessly allowed to escape into the confined area in which the insured’s employees were working, causing injuries to eighteen of them and death to another. The Fund thereafter paid in full the compensation awards made to the injured workmen and the death benefits made to the representative of the deceased worker. Subsequently, the same workmen and the representative of the deceased workman brought separate suits in the Federal Admiralty Court against the United States of America for damages aggregating $550,000, for personal injuries suffered by reason of the same accident. The suits were grounded in negligence for failure to provide a safe place to work. The United States of America then filed a petition to implead Cardinal as a third-party defendant and for judgment over, alleging two causes of action, one based on common-law tort liability and the other based on a contract by the terms of which Cardinal had expressly agreed to indemnify the United States against all claims made by third parties arising from the fault of Cardinal. The alleged second cause creates no difficulty here as the parties recognize that the liability thus assumed was specifically excluded from the policy coverage. Cardinal, nonetheless, demanded that the Fund undertake the defense of the impleading petitions but the Fund refused because, in its opinion, the claim was outside the terms of the policy coverage. Coincident therewith, Cardinal, through his personal attorneys, was negotiating with the United States for a settlement of the suits, the Fund being informed as to progress. By letter dated April 29, 1947, Cardinal’s attorney called the attention of the Fund to the case of American Stevedores v. Porello which had imposed liability on the stevedores by virtue of an indemnity agreement issued to the United States in a case where there was mutual fault.. The United States Supreme Court reversed however (330 U. S. 446), and remanded the case to the District Court for the taking of further proof on the meaning of the indemnity agreement. Cardinal’s attorney thought the principle of law enunciated therein might lead to the establishment of liability on the “ usual common law principles ” in the case under consideration. In response to this, the Fund offered in its letter dated *421May 14, 1947: “ to accept the defense of each impleading petition upon the express understanding that in the event judgments are recovered by the United States of America against Cardinal Engineering Co. on the impleading petitions, the State Insurance Fund will pay on account of all such judgments the total sum of Twenty-Five Thousand and 00/100 ($25,000.00) Dollars ” and requested confirmation if the offer was accepted. Cardinal, however, did not accept this offer and the Fund by letter dated September 11, 1947, advised Cardinal that: “ The State Insurance Fund stands on the position taken by it as outlined in * # * letter to you dated August 9, 1946.” In that letter the Fund stated that it ‘1 disclaims and disavows any liability or responsibility whatsoever under the cross-claims in each of the foregoing petitions,” as well as “ any liability or responsibility to undertake the defense of the same and/or the employment of counsel for that purpose.”
Thereafter the suits were settled prior to trial, the United States paying 40% of the settlement and Cardinal 60%, its share being the sum of $87,000. Cardinal then made demand on the Fund for reimbursement of the amount paid by him plus his attorney’s fees and disbursements in the sum of $14,000. On the Fund’s refusal the instant suit was then brought in the Court of Claims. The Court of Claims denied all relief and entered its judgment dismissing the complaint. The Appellate Division modified the Court of Claims judgment to the extent of allowing attorney’s fees and both parties cross-appealed here. No question is raised as to the reasonableness of either the sum paid in settlement or the amount paid to the attorney.
There is no longer any doubt that the Fund may be sued in the Court of Claims and we all agree that the policy, by its terms, purported to insure against third-party liability, that the Fund has statutory authority to issue such a policy, and that the $25,000 limited liability rider is not applicable to the instant claims.
The dispute turns on whether, under the circumstances of this case, Cardinal as impleaded defendant was under an obligation “ imposed by law ” to contribute to his joint tort-feasor; for if he was, then the coverage of the policy was available to him and the Fund should have reimbursed him for his contribution to the settlement and accepted defenses of the interpleading *422petition. Everyone agrees that unless there is a liability “ imposed by law ”, he may not recover for the indemnity obligation assumed by contract is specifically excluded. When the accident giving rise to the claims occurred on January 3, 1945, it is claimed that the admiralty law was not clear as to whether contribution between joint tort-feasors in noncollision cases was governed by the moiety rule (The North Star, 106 U. S. 17; The Chattahoochee, 173 U. S. 540; Aktieselskabet Cuzco v. The Sucarseco, 294 U. S. 394) or the comm on-law rule (Chapman v. Forbes, 123 N. Y. 532). The Federal courts have held, however, that when the third party is an employer covered by the Longshoremen’s and Harbor Workers’ Compensation Act (U. S. Code, tit. 33, § 933) the liability of the employer is not the kind of wrongdoing that will be regarded as creating a common responsibility, for the act has provided an absolute duty to pay the prescribed compensation (The Ira M. Hedges, 218 U. S. 264). The Longshoremen’s Act is also a valid defense to an asserted right of contribution (American Mut. Liability Ins. Co. v. Matthews, 182 F. 2d 322 [C. A. 2d]; see, also, Rich v. United States, 177 F. 2d 688 [C. A. 2d]).
The Fund took the position throughout, and was sustained in the courts below, that Cardinal had no liability imposed by law within the coverage of the policy. While the case was being litigated, albeit subsequent to the date of the accident giving rise to it, the United States Supreme Court settled any doubt as to contribution between joint tort-feasors in noncollision cases by holding that the common-law rule of noncontribution between joint tort-feasors is applicable (Halcyon Lines v. Haenn Ship Corp., 342 U. S. 282). We are bound by the rule of that decision. Our practice is well settled that we take the law as we find it at the time of the appeal, whether statutory (Matter of Kahn [National City Bank], 284 N. Y. 515; Robinson v. Robins Dry Dock & Repair Co., 238 N. Y. 271; Matter of Tartaglia v. McLaughlin, 297 N. Y. 419; Gilpin v. Mutual Life Ins. Co. of N. Y., 299 N. Y. 253), or decisional (Graybar Elec. Co. v. New Amsterdam Cas. Co., 292 N. Y. 246). The case of McFall v. Compagnie Maritime Belge (304 N. Y. 314), handed down herewith, suggests no different result for there we dealt with the rights of a passively negligent owner and active wrongdoers, while our *423present case arose out of a joint wrong* by active tort-feasors, a difference which points the distinction.
It is equally clear that the Fund was under no obligation to undertake the defense of the impleading petition. Its obligation to defend depended upon whether the liability sought to be imposed was within the coverage of the policy. It has long been the rule that an insurer’s duty to defend is determined by the allegations of the pleading matched against the terms of the policy. If the pleading states a cause of action within the coverage of the policy, even though the allegations “ are wholly groundless, false or fraudulent ” there is a duty to defend (Mason-Henry Press v. Ætna Life Ins. Co., 211 N. Y. 489; Goldberg v. Lumber Mut. Cas. Ins. Co., 297 N. Y. 148). The words “ false ” and “ groundless ” obviously mean false and groundless in fact. In the petition under consideration here no facts were pleaded showing a liability “ imposed by law ” and the State Fund was clearly justified in refusing to defend,
Furthermore, a careful reading of the correspondence passing between the parties as outlined above, clearly demonstrates that the Fund neither waived its defenses to the policy coverage nor became estopped from asserting them by reason of its offer to defend provided its liability was limited to $25,000. Patently the offer was made to compromise a disputed claim involving upwards of $550,000. In this case the parties themselves did not argue or even suggest that said offer was a waiver of the question of coverage. Moreover, even if the Fund’s offer is regarded as a withdrawal of all other grounds for contesting coverage, the authorities are in accord that no estoppel results unless the assured relied thereon to his detriment (45 O. J. S., Insurance, § 707, pp. 677-678, and cases cited therein; 29 Am. Jur., Insurance, § 871, pp. 667-668, and cases cited therein). Nowhere in this record does it appear that Cardinal placed any reliance on the offer and he was not misled in any way.
The judgment of the Appellate Division should be modified by reversing so much thereof as adjudges the State Insurance Fund liable to the plaintiff in the amount of $14,000 paid by him defense of the impleader petition.