Stuyvesant Insurance Company of New York v. Nardelli

• Citation: 286 F.2d 600
• Decision Date: 03 February 1961
• Docket Number: No. 18316.,18316.
• Parties: STUYVESANT INSURANCE COMPANY OF NEW YORK, Appellant, v. Vincent NARDELLI, Robert G. Nardelli and William Nardelli, Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

286 F.2d 600 (1961)

STUYVESANT INSURANCE COMPANY OF NEW YORK, Appellant, v. Vincent NARDELLI, Robert G. Nardelli and William Nardelli, Appellees.

No. 18316.

United States Court of Appeals Fifth Circuit.

February 3, 1961.

John P. Corcoran, Jr., William E. Henson, Jr., Tampa, Fla., for appellant.

Ralph C. Dell, Allen, Dell, Frank & Trinkle, Tampa, Fla., for appellees.

Before TUTTLE, Chief Judge, and RIVES and WISDOM, Circuit Judges.

RIVES, Circuit Judge.

On January 4, 1955, Aseguradora Del Sureste, S.A., filed an amended libel in rem against the motor vessel Narco and in personam against Nardelli (a partnership) as charterers for damages arising out of a collision between the Narco and the Lolita occurring in the Gulf of Campeche, approximately 12 miles off the coast of Mexico.

On March 5, 1956, Nardelli filed a petition against appellant Stuyvesant under Admiralty Rule 56, 28 U.S.C.A. In short, this petition alleged that a policy issued by Stuyvesant covered Nardelli's potential liability in the libel action. Stuyvesant answered that its insurance agreement did not cover Nardelli. The trial court, on December 17, 1956, entered judgment in rem against the Narco and in personam against Nardelli in the amount of $29,075.00, together with interest from July 24, 1953 (the date of the collision) in the sum of $5,756.85. The court dismissed Nardelli's petition against Stuyvesant.

Nardelli appealed that portion of the decree dismissing its third-party petition against Stuyvesant. This Court reversed and held that the "Running Down Clause extended the insurance to Nardelli as charterer for this collision and up to the full amount of the policy."¹

On remand, the district court declined to grant Stuyvesant's motion to set the cause for trial, but instead ruled that no factual issues remained for determination and entered judgment for Nardelli against Stuyvesant in the full amount of the policy, $25,000.00, plus interest on this sum from July 14, 1953. The district court also awarded Nardelli $6,000.00 as attorneys' fees.

Appellant argues, first, that the district court misconstrued the mandate of this Court in ruling that no factual issues remained to be tried. In particular, Stuyvesant argues that the policy under which it is liable to Nardelli is a policy of indemnity against loss rather than indemnity against liability.

"* * * there is a clear distinction between contracts to indemnify against liability incurred and those to indemnify against loss, the term `loss\' generally referring to an actual payment by the indemnitee. If the indemnity promised is against liability, the incurring of the liability, or, if disputed, the rendition of a judgment upon it, will entitle the indemnitee to enforce his indemnity. But if the indemnity is against losses paid, payment of course must have happened before the indemnity contract can be enforced. If this policy be of the latter class, since Wesley paid nothing on the judgment, neither he nor anyone in his right could have enforced it * * * *."²

The applicable policy provision is as follows:

"And it is further agreed that if the vessel and/or property insured shall come into collision with any other ship or vessel and the Assured or the Charterers or the Surety in consequence of the insured vessel being at fault, shall become liable to pay and shall pay by way of damages to any other person or persons any sum or sums in respect of such collision, we the underwriters, will pay the Assured or Charterers or the Surety, whichever shall have paid * * *." (Emphasis added.)

This language clearly provides that the insurer will not become liable under this section until Nardelli, as charterer, has made some payment and that the insurer is only liable to the extent those payments are made.³ Before Nardelli can recover under the policy for "damages to any other person or persons" it must prove payment in the amount of its recovery. In the proceedings on remand, Nardelli made no proof of payment on the libel judgment. Absent such proof, it was error for the district court to enter judgment in its favor for the full face amount of the policy.

Appellant also contends the district court erred in granting Nardelli $6,000.00 in attorneys' fees. The $6,000.00 includes both the costs of defending the libel action ($3500) and the expense of prosecuting the successful appeal to this Court ($2500).

Recovery of the expenses incurred in the defense of the libel action is based on the following contract clause:⁴ "And in cases where the liability of the vessel has been contested * * * with the consent in writing of a majority (in amount) of Hull Underwriters, we will also pay a like proportion of the costs which the Assured or Charterers shall thereby incur or be compelled to pay * * *." (Emphasis supplied.) Stuyvesant argues that it is not liable under this clause, because it was the only hull underwriter and the proceedings contesting liability on the part of Nardelli were not taken with its consent. We think Stuyvesant cannot rely on the consent proviso to be relieved of liability for the expenses of defending the libel action. At the time Nardelli was defending itself, Stuyvesant was taking the position that Nardelli was a stranger to it. Why, in those circumstances, Nardelli should have been required to obtain Stuyvesant's "consent in writing" before defending itself escapes us. We think that Stuyvesant waived its right to rely on the consent provision when it denied that its policy covered Nardelli. As was said in a similar context:

"When the insurer elected not to assume responsibility at that time * * * it took whatever risks attached to that action, and cannot now be heard to complain that legal fees and disbursements were incurred in the defense of the claim * * *. The plaintiff was at all times entitled to the benefits accruing under his policy, and should have received them at the time of making his claim. The fact that, because of the attitude of the defendant, he has been put to a great deal of trouble, annoyance and expense, certainly furnishes no valid reason for transferring the burdens of the defendant to the plaintiff. The plaintiff has done nothing which, under the terms of his policy, can deprive him of any of its benefits."⁵

As to this $3500.00, Stuyvesant disclaims liability on another ground. It argues that before it can be held liable for that sum, Nardelli must make proof of payment — a defense similar to that invoked by Stuyvesant in regard to its liability for the principal amount. Here, as there, the issue turns on the language of the policy. The policy provides that where liability is contested the charterer may recover of the insured such costs of defense as the "Charterers shall thereby incur or be compelled to pay * * *." The term "incur," when used in policies of insurance, has a fixed legal meaning. "A debt has been incurred when liability attaches; a contingency promise to pay has been incurred when the contingency upon which the payment depends occurs."⁶ Nardelli became liable to compensate its attorneys when those attorneys engaged in the defense of the libel action. It was then that the costs of the defense were "incurred." The difference between Stuyvesant's liability for the judgment rendered against Nardelli in the libel action and its liability for the costs of Nardelli's defense in that action is thus clear from an examination of the policy language. As noted above, as to the principal amount, the policy is clearly one that indemnifies against loss. But "where indemnity agreements use `incurred' the indemnity is against liability and not against loss or damage."⁷

The remaining $2500.00 was awarded for the expenses of prosecuting the appeal and are attributable solely to the action between Nardelli and Stuyvesant. This award is based on Florida law.

Appellant relies on Sections 625.32 and 625.33⁸ of the Florida Statutes, F.S.A. as barring the $2500.00 fee. Section 625.32 provides in part:

"In any action against an unauthorized foreign or alien insurer upon a contract of insurance issued or delivered in this state to a resident thereof or to a corporation authorized to do business therein, if the insurer has failed for thirty days after demand prior to the commencement of the action to make payment in accordance with the terms of the contract, and it appears to the court that such refusal was vexatious and without reasonable cause, the court may allow to the plaintiff a reasonable attorney fee and include such fee in any judgment that may be rendered in such action * * *."

Section 625.33 then provides:

"The provisions of §§ 625.28-625.32 shall not apply to any action, suit or proceeding against any unauthorized foreign or alien insurer arising out of any contract of insurance

"(1) covering reinsurance, ocean marine, commercial aircraft or railway insurance risks * * *." (Emphasis added.)

The difficulty with appellant's argument is that Sections 625.32 and 625.33 apply only to "unauthorized" insurers.⁹ And Stuyvesant was an authorized insurer under Florida law. Thus, as appellees contend, the matter of attorneys' fees expended in recovery against Stuyvesant comes under Section 625.08,¹⁰ Florida, Statutes, F.S.A.:

"625

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