Court Opinion

ID: 5219288
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:30:05.85395+00
Date Added: 2024-06-11T08:27:29.606876
License: Public Domain

Kellogg, J. (dissenting):
By its policy the defendant agreed “ to. indemnify the assured * * * against loss by reason of the liability imposed by law upon the assured for damages on account of bodily injuries,” etc. The policy provided: “ The company’s liability for an accident resulting in injuries to or in the death of one person is limited to Rive Thousand Dollars; ” that the assured shall not voluntarily assume any liability or settle any claim except at its own cost; shall not interfere with negotiations for settlement, or with legal proceedings, and that “no action shall lie against the company to recover for any loss under this policy, unless it shall be brought by the assured for loss actually sustained and paid in money by him after actual trial of the issue,” and that the assured will immediately deliver any paper, process or summons served upon it to the company, “and the company will at its own cost defend against such suit in his name and on behalf, or settle the same. The company shall have the absolute right of determining whether an appeal shall be taken from any order or judgment in such suit.”
The defendant, an accident insurance company formed to carry on that business, was insuring the plaintiff on account of accidents which might happen in its business to its employees. The policy was written by it. It had the choice of language in stating the contract, and its fanguage may be construed strictly against it. (Schumacher v. Great Eastern C. & I. co., 197 N. Y. 58, 64.) In that case Schumacher was insured against the effect of bodily *859injuries “ caused directly and independently of all other causes by external, violent and accidental means,” etc. In the policy was a provision that “ For loss of life only resulting wholly or in part from sunstroke, freezing, septicaemia, hydrophobia or the involuntary or unconscious inhalation of gas or other poisonous vapor, the company will pay one-half of the principal sum provided in Schedule ‘ A.’ ” Schumacher died from septicaemia, which, however, was not the effect of bodily injury caused by external, violent or accidental means, and it was claimed the company»was not liable on this accident insurance policy. The court held that the clause quoted was a separate, independent provision in the policy, and might be enforced as such without regard to the other provisions of the policy, the defendant itself having inserted that language in the policy.
We need not go into an extended discussion of the various provisions of the policy in question. We find in it a separate independent clause providing what the rights and liabilities shall be in case the assured is sued on account of an accident. The policy provides that the assured shall not settle or litigate, but must turn the summons over to the insurer, which at its own cost will defend against the suit, or settle the same. The words “ at its own cost ” attach themselves as much to the words “ or settle the same ” as to the words “ defend against such suit,” so that we have the absolute agreement of the company to defend against any suit at its own cost, or to settle the suit at its own cost. An insurer does not at his own cost defend against a suit merely by employing lawyers, procuring the attendance of witnesses and then leaving the assured to pay the judgment which may follow and leaving it to another action against the insurer for reimbursement. When the company agreed to defend against a suit or settle the same at its own cost, the agreement is broken if the assured is compelled to pay the judgment. The language in question casts the duty of payment upon the insurer, and after the summons is delivered to it it assumes all responsibility with reference to the suit, with the sole proviso that the limit of its liability on account of the damages to one person shall not exceed $5,000. The damages were liquidated in this case at just $5,000, and, therefore, as between these parties, the plaintiff was absolved from all responsibility with reference to the lawsuit or *860judgment. It was between them virtually a judgment against this defendant. When the judgment was recovered it merged the original cause of action, and the liability thereafter rested upon the judgment itself and not upon the cause of action upon which it was founded. The interest in question is awarded by law as damages for non-payment of money when due. (Steiner v. Fourth Presbyterian Ghuroh, 17 App. Div. 500.)
It would, therefore, be unjust to charge upon the plaintiff the damages which the law has imposed on account of the delay and the neglect of the defendant. The interest in- question does not represent any liability on account of or for the accident or the policy, but it is a liability imposed by law for the delay of the defendant in paying the judgment which, as between the parties, it was legally obligated to pay. The interest, therefore, is the obligation of the defendant and not of the plaintiff, and the plaintiff having been compelled to'pay the same, is entitled to recover it without reference to the terms of the policy other than that t[ie judgment was to be paid by the defendant.
The cases cited against these views give too much attention to the provision that the assured shall not recover in a lawsuit against the insurer except for money actually paid. They overlook the real object of the contract. In effecting insurance the plaintiff was not purchasing a lawsuit but indemnity. It was paying in advance for such accidents as might happen to it, and such accidents the defendant, for the premiums paid, agreed to defend against or settle at its own cost, but, as an additional precaution, it provided that it should only be liable in a lawsuit to the insured, and for money actually paid by the insured, thus making it clear that -the injured person could not recover against it, and rendered it impossible for the insured to make a collusive settlement with its employee to the detriment of the insurer. But that provision is merely incidental, and is of importance only after the company has made a breach of its agreement, at its own cost to settle the cause of action or defend against any suit. If the insurer fully performed its agreement, then this clause about a lawsuit was entirely immaterial. It was only inserted to regulate the rights of the contractors, not as parties to the contract, but as parties to a lawsuit which might follow the breach, of the contract by the defendant.
*861We have seen that the policy contemplates that the assured shall practically remain passive after the accident — shall not settle or interfere with any settlement or litigation. Upon this subject we find the two provisions, first, that it shall not voluntarily assume any liability or settle any claim except at its own expense, and, second, that it shall not recover any money until the liability has been fixed after a trial of the issues. Perhaps, under this provision, it would only be safe for it to pay at the end of an execution. An agreement between these parties which contemplated that no claim, no matter how just, should be paid until it was reduced to judgment, and then at the end of an execution, might be against public policy and of doubtful validity. It cannot be that the plaintiff divested itself of all power to settle and pay just claims unless such duty was placed by the instrument upon another. These provisions give force to the agreement that the company is to defend against or settle actions at its own cost. In effect, the policy put the insurer in the place of the insured as the party to negotiate, to settle, to litigate, to pay. The insurer is the only person who has the right and, consequently, the duty of ascertaining the validity of the claim and of making the proper adjustment of it and of litigating it, if to it it seems unjust or unreasonable, or if for any reason it deems it for its interest so to do. The parties clearly contemplated that every just claim should be properly and promptly met, and have fixed upon the insurer as the only person to take care of such claim.
I think, therefore, that the interest in question is no part of the liability for or on account of the accident within the limitation of the policy, and is a charge arising from the defendant’s own act, for which as between the parties it is solely responsible. I favor judgment for plaintiff for the amount claimed, with costs.
Judgment directed for defendant, with costs.