Dransfield v. Citizens Cas. Co. of N. Y.

• Decision Date: 27 June 1950
• Docket Number: No. A--149,A--149
• Citation: 5 N.J. 190,74 A.2d 304,18 A.L.R.2d 887
• Parties: , 18 A.L.R.2d 887 DRANSFIELD v. CITIZENS CASUALTY CO. OF NEW YORK.
• Court: New Jersey Supreme Court

Page 190

5 N.J. 190

74 A.2d 304, 18 A.L.R.2d 887

DRANSFIELD v. CITIZENS CASUALTY CO. OF NEW YORK.

No. A--149.

Supreme Court of New Jersey.

Argued June 10, 1950.

Decided June 27, 1950.

Isadore Rabinowitz, Paterson, argued the cause for plaintiff-appellant and cross-respondent (Nathan Rabinowitz, Paterson, on the brief).

Jerome S. Lieb, Newark, argued the cause for defendant-respondent and cross-appellant (Harkavy & Lieb, Newark, attorneys).

The opinion of the court was delivered by

HEHER, J.

The question under consideration here is whether one injured through the negligent operation of an automobile may recover from an insurer who holds a decree in equity voiding for fraud a policy of indemnity insurance covering the vehicle, entered in a proceeding against the named insured alone begun after the injuries were sustained.

The policy was issued May 19, 1945, to Zambrano Trucking Company for a term of one year. The indemnity covered the named insured and any person while using the automobile with the permission of the named insured. On March 31, 1948, plaintiff recovered a judgment for $50,000 against the named insured and the operator of the automobile covered by the policy for injuries sustained on September 22, 1945, as a result of negligence in operation. The operator had the permission of the named insured to use the vehicle. Execution against both judgment debtors was returned unsatisfied; and this action was instituted pursuant to a condition of the policy providing that any person 'who has secured such judgment * * * shall thereafter be entitled to recover under this policy to the extent of the insurance afforded by this policy.' R.S. 17:28--2, N.J.S.A., enjoins the inclusion in such policies of a provision that the insolvency or bankruptcy of the insured 'shall not release the insurance carrier from the payment of damages for injury sustained or loss occasioned during the life of the policy,' and that 'in case execution against the insured is returned unsatisfied in an action brought by the injured person, or his personal representative in case death results from the accident, because of the insolvency or bankruptcy, then an action may be maintained by the injured person, or his personal representative, against the corporation under the terms of the policy for the amount of the judgment in the action not exceeding the amount of the policy.' All such policies are 'deemed to include the provisions required' by that section. The insurance carrier's liability under the policy for bodily injuries 'sustained in one accident by one person' was limited to $10,000.

The first and second counts of the complaint, directed against the named insured and the operator of the vehicle, respectively, demanded payment of the judgment under the policy, irrespective of the liability imposed by the Motor Vehicle Financial Responsibility Act, R.S. 39:6--1 et seq., N.J.S.A.; and the third and fourth counts, likewise directed to the named insured and the operator, respectively, alleged that both the named insured and the operator had been involved in prior motor vehicle accidents, and therefore their liability to plaintiff under the policy was absolute by virtue of the provisions of the Motor Vehicle Financial Responsibility Act, cited supra.

The answer pleaded, Inter alia, that on April 21, 1947, a decree was entered in a proceeding brought in the old Court of Chancery by the insurance carrier against the named insured adjudging that, for fraud practiced upon the complainant carrier, the purported policy of insurance 'is and was from the day of date void and of no effect,' and that the carrier 'is under no liability' and 'never was under any liability' thereunder to the insured. Vide Citizens Casualty Company of New York v. Zambrano Trucking Co., Inc., 140 N.J.Eq. 378, 54 A.2d 721 (Ch. 1947), affirmed 141 N.J.Eq. 310, 57 A.2d 17 (E. & A. 1948). There was a plea of Res judicata based upon this decree. The fraud alleged was a false representation that no other insurance carrier had cancelled an automobile liability policy written in the name of the assured within one year immediately preceding the issuance of the policy in suit. Neither the plaintiff nor the operator of the automobile was a party to this proceeding. Plaintiff by...