O'Dowd v. United States Fid. & Guar. Co.

• Decision Date: 22 January 1937
• Docket Number: No. 34.,34.
• Citation: 189 A. 97
• Parties: O'DOWD v. UNITED STATES FIDELITY & GUARANTY CO.
• Court: New Jersey Supreme Court

189 A. 97

O'DOWD

v. UNITED STATES FIDELITY & GUARANTY CO.

No. 34.

Court of Errors and Appeals of New Jersey.

Jan. 22, 1937.

Appeal from Supreme Court.

Suit by James O'Dowd against the United States Fidelity & Guaranty Company. Judgment for the plaintiff, and the defendant appeals.

Affirmed.

McDermott, Enright & Carpenter, of Jersey City (James D. Carpenter, Jr., of Jersey City, of counsel), for appellant.

John W. McGeehan, Jr., of Newark, for respondent.

PERSKIE, Justice.

The basic question involved in this cause is whether, under the proofs, the insurer who, under its policy of indemnity with its assured, defended the latter (in a suit brought by a third party against the assured for resultant damages for personal injuries sustained while not employed by assured) unconditionally, without obtaining from its assured either an agreement of nonwaiver, or without serving a notice of disclaimer upon assured, or without making a reservation of its rights in the premises, waived its right, and is estopped thereafter, to deny liability in a suit against it for the payment of the judgment recovered by the third party against the assured, or whether the insurer, under the stated circumstances and after the third party has recovered a verdict against the assured, may still, for the first time, serve a notice of disclaimer upon its assured and thus escape the payment of the judgment based on the verdict so recovered.

The pertinent facts are not in dispute. Respondent, who was the plaintiff below, was employed by Halback & Co. The latter had a contract, for the construction of the stairways in the National-Newark & Essex Bank Building, Newark, N. J., with Karl W. Koch, Inc. (hereafter referred to as Koch), who had the contract for the steel work for said building. On February 7, 1930, respondent was on the thirteenth floor of said building, and while "assisting in moving iron parts for such stairways from an elevator on the floor of said building" was struck by a drift pin negligently dropped by an employee of Koch. The latter reported the accident to appellant on March 12, 1930; report form is dated March 13, 1930. On November 14, 1930, respondent sued Koch and Starret Bros. Inc. (general contractors), for the resultant damages for the personal injuries which he thus sustained.

Appellant covered Koch on this and other buildings with a contract of indemnity (not exceeding $20,000 for each person) in which it agreed "to settle and defend * * * all claims resulting from liability imposed upon the assured by law, for damages on account of bodily injuries * * * accidentally suffered by any person * * * other than employees of the assured."

This contract or policy, which was in full force and effect, also contained, inter alia, the following provisions: "Agreements." "Defense." "II. To defend in the name and on behalf of the Assured any suit brought against the Assured to enforce a claim, whether groundless or not, for damages on account of bodily injuries including death at any time resulting therefrom accidentally suffered or alleged to have been suffered by any person or persons other than employees of the Assured." "Exclusions." "This policy does not cover loss * * * Condition A. * * * (3) Suffered by any person while in or on any elevator or hoisting device, or in any elevator well or hoistway, or while entering upon or alighting from any elevator or hoisting device."

Koch forwarded the summons and complaint to appellant. The latter accepted same and took charge and control of the suit. Counsel for appellant undertook and did, in fact, direct the preparation of the defense thereto and actually tried the case. It is interesting to observe, in the light of appellant's claims that it did not know prior to trial that the accident happened at a place excluded under paragraph 3 aforesaid, that appellant demanded and received additional particulars to amplify the allegation in the complaint that respondent was struck while "at work upon the thirteenth floor of said premises in and near said shaft."

Respondent's answer (7) to the demand for particulars disclosed that: "Plaintiff was working at the inner edge of the elevator shaft, which would be practically in line with the outer wall of the center of said building on the Commerce Street side, the said elevator shaft extending along said wall, the inner part being contiguous to the floors and the outer three sides extending outward from said wall. By the walls of the building is meant the point where the brick walls were later erected, the skeleton of the side of the said building only being present at the time of the accident."

We learn that the Travelers Insurance Company, who carried the workmen's compensation insurance, made a claim upon Koch for reimbursement of payments made to respondent; that appellant received notice of the fact in May of 1930 (Exhibit P-6), and that this exhibit contained a statement that the accident occurred while respondent was unloading material from an elevator hoist; that the letter (Exhibit P-7) of the superintendent of claims of appellant addressed to Koch, under date of June 8, 1931, indicates that appellant was not in ignorance of the claim made by respondent incident to the place and happening of the accident. The trial had begun on September 22, 1932, and on the second day thereof plaintiff testified as follows: "Q. You were partly on the lift when you got hit? A. Yes, We were taking the end of the stringer out. It was a long one. We had to move it out so we could get it down.

"Q. Do you know how far you had gotten the one end off the floor when this happened? A. We were just getting it right off the lift onto the plank, right onto the plank, I was partly on the lift yet. I had one foot on the lift.

"Q. And one foot where? A. On one of the planks that was between the lift and the buildings."

That employees of Koch, three in number, corroborated plaintiff's claim. That counsel for appellant then and there knew that the names of these employees were not on the list that Koch supplied to counsel for appellant on June 9, 1932, in response to a demand made on Koch, on June 6, 1932, to furnish a list of all its employees who were on the job at the time of the accident. The trial continued until September 27, 1932. The jury returned a verdict for $65,000. The general contractor apparently bought its peace; it is not here involved. A rule to show cause was obtained for Koch on the ground that the verdict was excessive and it was reduced to $45,000. Between the day of the allowance of the rule, October 3, 1932, and the disposition thereof, October 28, 1932, counsel for appellant, for the first time, did on October 14, 1932, orally and on October 27, 1932, in writing (Exhibit D-22), disclaim liability for appellant to its assured.

The respondent caused execution to be issued and because of the insolvency of the assured it was returned unsatisfied. Thereafter, on June 19, 1934, pursuant to chapter 153, P.L. 1924, p. 352, as amended by chapter 194, P.L.1931, p. 490 (N.J.St. Annual 1931, § 99—90e), and pursuant to provision of the policy (insolvency conditions providing that the insolvency or bankruptcy of the assured shall not release insurer from paying damages for injuries sustained by any person during the life of the policy), respondent sued appellant for the balance due him on said judgment. Appellant's answer denied liability; it set up several defenses which were, in substance, the reasons stated in its disclaimer of liability to its assured before the disposition of the rule to show cause. They were, in effect, as follows: (1) The accident was not covered because it happened at a place within the exclusion clause of the policy; (2) that assured failed to give prompt notice and details of the accident; (3) that assured failed to properly co-operate, in that it failed to give the names and addresses of all assured's employees who were actually on the job or who knew about the accident; (4) that assured did not pay the actual payments due it, and as a result thereof appellant recovered a judgment against Koch in Baltimore City court, Baltimore, Md, on March 19 1932, for $102,803.41 on which Koch paid $15,000, and that it was entitled to set off the balance of $87,803.41 against respondent; (5) that appellant was not liable in the premises.

Respondent moved to strike the defenses. The trial judge struck the fourth defense but refused to strike the others. In doing so the trial judge construed the defense and the exclusive provisions of the policy. He said: "It is my conclusion that the rational interpretation of this provision is that the policy excluded from coverage as against loss where the assured's liability is established by reason of the injuries suffered in the manner contained in Paragraph 3 and damages recovered by reason of any suit based on such injuries, and that the policy does not mean that the obligation of the assured (sic) under Paragraph 2 of the agreement entitled 'Defense' is excluded from coverage by the wording contained in Condition A under title of 'Exclusions.'"

Reply, rejoinder, and sur rejoinder were filed and these pleadings presented the...