Coleman v. New Amsterdam Cas. Co.

• Decision Date: 14 February 1928
• Citation: 247 N.Y. 271,160 N.E. 367
• Parties: COLEMAN v. NEW AMSTERDAM CASUALTY CO.
• Court: New York Court of Appeals Court of Appeals

247 N.Y. 271

160 N.E. 367

COLEMAN

v.NEW AMSTERDAM CASUALTY CO.

Court of Appeals of New York.

Feb. 14, 1928.

Suit by Edward Coleman against the New Amsterdam Casualty Company. Judgment of trial court, dismissing the complaint, was affirmed by the Appellate Division (220 App. Div. 748, 222 N. Y. S. 788), and plaintiff by permission appeals.

Affirmed.

See, also, 126 Misc. Rep. 380, 213 N. Y. S. 522.Appeal from Supreme Court, Appellate Division, First Department.

Harold Cohn and Joseph Fried, both of New York City, for appellant.

Richard F. Weeks and Frederick Mellor, both of New York City, for respondent.

CARDOZO, C. J.

The defendant issued to the Endicott Drug Store, Incorporated, its policy of insurance ‘indemnifying the assured against loss from the liability imposed by law * * * as a result of any error or mistake * * * in the preparation of drugs or medicines or in filling any prescription or order for the same.’ The insurance was subject to conditions. One of these (condition B) is to the effect that ‘the assured shall give immediate written notice of any alleged error or mistake of which he has knowledge, with the fullest information obtainable at the time’; that, ‘if a claim is made on account of such error or mistake,’ he ‘shall give like notice thereof with full particulars'; and that he ‘shall at all times render the company all co-operation and assistance in his power.'

Plaintiff, a customer, sued the assured for damages, claiming error in filling a prescription for a mixture of belladonna and nitroglycerine. The prescription called for twelve capsules. By error the full quantity prescribed was put into each of the capsules, instead of being divided among all. The attorney for the insurer made ready to defend the suit. He sent for the secretary of the assured, one Weiss, who had compounded the prescription. Weiss said there had been a mistake, and refused to say more, unless the insurer would undertake to pay any judgment recovered against him, as well as any judgment recovered against his corporation, the assured. On the refusal of the attorney to enlarge the liability, Weiss announced that he would neither sign an answer nor tell anything he knew. Letters were written to the assured, requesting that some officer be sent to verify an answer, and later requesting a conference as to the merits of the claim, at any time or place desired. The letters were ignored. In the end the insurer gave notice that it disclaimed liability, since the assured was unwilling to aid in the defense. Judgment for damages followed by default. The assured was adjudged a bankrupt, and execution was returned unsatisfied.

Plaintiff brings this action under Insurance Law (Consol. Laws, c. 28) § 109, providing that insolvency or bankruptcy of the assured ‘shall not release the insurance carrier from the payment of damages,’ and ‘in case execution * * * is returned unsatisfied * * * because of such insolvency or bankruptcy, then an action may be maintained by the injured person * * * against such corporation under the terms of the policy.’ The insurer defends upon the ground that there was a breach of a condition, vitiating the policy. The trial judge, after taking the verdict of a jury, dismissed the complaint. The Appellate Division unanimously affirmed.

The argument is made that the effect of section 109 of the Insurance Law is to create an original obligation in favor of the injured claimant for the amount of any judgment recovered against the holder of the policy without reference to any breach of condition as between insurer and assured. We see no basis for such a ruling. Cf. Schoenfeld v. New Jersey Fidelity 3 Plate Glass Ins. Co., 203 App. Div. 796, 800, 197 N. Y. S. 606;Roth v. National Automobile Mut. Casualty Co., 202 App. Div. 667, 669, 195 N. Y. S. 865;Lorando v. Gethro, 228 Mass. 181, 185, 186, 117 N. E. 185, 1 A. L. R. 1374. By express provision of the statute, the action is to be ‘maintained by the injured person * * * against such corporation under the terms of the policy.’ If the terms could be disregarded, insurers would be helpless to defend themselves against chicanery or covin. They might then be held, though there had been neither notice of the claim nor opportunity reasonably prompt to investigate the merits. Cf. Lorando v. Gethro, 228 Mass. 181, 185, 117 N. E. 185, 1 A. L. R. 1374.

The plaintiff argues that a bankrupt holder of a policy, colluding with an insurer, could refuse to co-operate, and thus enable the insurer to cheat the statutory remedy. With equal force, the defendant can argue that a bankrupt assured could collude with a claimant to fasten upon the insurer...