General Acc. Fire & Life Assur. Corp. v. Piazza

• Decision Date: 25 June 1958
• Citation: 4 N.Y.2d 659,152 N.E.2d 236,176 N.Y.S.2d 976
• Parties: , 152 N.E.2d 236 GENERAL ACCIDENT FIRE & LIFE ASSURANCE CORPORATION, Ltd., Appellant, v. Salvatore PIAZZA, Defendant, and Stone's Express, Inc., et al., Respondents.
• Court: New York Court of Appeals Court of Appeals

Page 976

176 N.Y.S.2d 976

4 N.Y.2d 659, 152 N.E.2d 236

GENERAL ACCIDENT FIRE & LIFE ASSURANCE CORPORATION, Ltd., Appellant, v. Salvatore PIAZZA, Defendant, and Stone's Express, Inc., et al., Respondents.

Court of Appeals of New York.

June 25, 1958.

Bernard Meyerson, Brooklyn, and Richards W. Hannah, New York City, for appellant.

Alexander Gangel, New York City, for Stone's Express, Inc., and another, respondents.

BURKE, Judge.

Plaintiff, General Accident Fire & Life Assurance Corporation, Ltd. (hereinafter referred to as General) commenced this action seeking a declaratory judgment with respect to the obligations of itself and the defendant, Globe Indemnity Company (hereinafter referred to as Globe) arising out of a pending negligence action.

The important facts, all of them undisputed, are as follows: Defendants, Stone's Express, Inc (hereinafter Stone) and Ben Franklin Lines, Inc. (hereinafter Franklin) are both common carriers for hire engaged in the motor transportation of goods. Each has a certificate of public convenience and necessity from the Interstate Commerce Commission. In September of 1952 Franklin hired a truck from Stone under a written lease. The leased vehicle was employed generally in Franklin's business which included from time to time both interstate and intrastate commerce. On the 23d of September, 1952 the truck was assigned by Franklin to pick up coils of copper wire at a plant located in Yonkers, New York, for delivery to a pier in Brooklyn, New York. This was the first stage of a trip that saw the goods ultimately delivered to certain western States. The second stage was by way of the American-Hawaiian Steamship Company to the west coast. Little evidence was adduced as to the precise nature of the shipping arrangements. It does appear that Franklin was aware of the eventual destination of the goods it carried. Apparently, however, the only part it played in the shipment was to transport the goods from Yonkers to the pier where they were turned over to the steamship line. In return for the goods Franklin received American-Hawaiian's dock receipts listing the consignee, Los Angeles as the destination and Franklin as the 'delivering carrier to dock'. Franklin was paid by the shipper for delivering the goods to the dock.

While being loaded on the truck at the Yonkers plant some of the wire coils fell and struck one Piazza who brought suit for personal injuries against Franklin, its driver-employee O'Brien and the owner of the truck, Stone. That suit is now pending in the Supreme Court, Bronx County.

Franklin is covered by liability insurance as named insured in a policy written by plaintiff General. Stone, as named insured, is covered by Globe. Both policies are standard in form and for the most part similar. Each contains the usual omnibus clause extending coverage to any person while using the vehicle and any person or organization legally responsible for its use, provided the actual use is with the named insured's permission. However, the policy issued by plaintiff to Franklin specifies that in the case of hired vehicles coverage is limited to 'excess insurance over any other valid and collectible insurance available to the insured, either as an insured under a policy applicable with respect to the automobile or otherwise, against a loss covered hereunder'.

As noted, the Globe policy contains an omnibus clause, which if operative here would enlarge coverage to include as insured both Franklin and O'Brien. But indorsement in the Globe policy excludes from the purview of the omnibus clause, and in effect from all coverage as an insured, 'any person or organization, or any agent, employee or contractor thereof, other than the named insured, who is required to carry automobile liability insurance under any motor carrier law because of transporting property for the named insured or for others'.

Disagreement between the insurance companies as to the effect of the stated provisions prompted the commencement of this declaratory judgment action by General. Globe, Franklin, O'Brien, Stone and Piazza were served as defendants. All but Piazza appeared. The action prayed for a declaration with respect to these questions: (1) whether the truck leased to Franklin by Stone came within the hired automobile indorsement in the General policy, (2) whether that indorsement limited General's coverage to excess insurance over any other valid and collectible insurance available to Franklin, (3) whether the Globe policy covering Stone as named insured also covered O'Brien and Franklin by its omnibus clause thus making it other insurance within the meaning of plaintiff's 'excess' provision, and (4) whether plaintiff is obliged to indemnify and defend the action brought by Piazza and cross complaint by Stone. The prayer for relief also requested an injunction against defendants restraining them from bringing an action on plaintiff's policy except insofar as it provides for excess insurance over the insurance afforded by the defendant Globe.

It is not now disputed that the answer to the first question must be in the affirmative. The truck leased by Franklin is, within the meaning of the General policy, a hired motor vehicle. The remaining questions are more difficult.

Plaintiff contended that Globe's policy, by virtue of the omnibus clause, covered both Franklin and O'Brien and that consequently its, plaintiff's, policy was limited to excess over the coverage provided by Globe. Globe's response to this contention was that Franklin at the time of the accident was required to have liability coverage under the Interstate Commerce Act and regulations of the commission and was thereby excluded from coverage (and O'Brien as well) under the Globe policy. In turn plaintiff argued that the exclusionary provision in the Globe policy was ineffective for two reasons: first, because such an attempted exclusion would violate section 59 of the Vehicle and Traffic Law, and second, because even if valid, Franklin was in fact not required to carry insurance under the Federal regulations for the use of the truck which led to the Piazza accident.

The Referee concluded that General 'is liable to defendant Ben Franklin Lines, Inc., to defend it in the above pending personal injury action * * * and to indemnify it as its insured under its policy and the provisions thereof described'. As more fully described in the judgment, the Referee held that as between plaintiff and Globe the obligation to defend and indemnify Franklin and O'Brien lay solely with plaintiff. It may be implied that the Referee found Globe's policy had successfully excluded Franklin and O'Brien as insureds.

The Appellate Division unanimously affirmed the judgment without opinion.

We differ with the courts below. In our view the exclusionary clause, although not in contravention of section 59 of the Vehicle and Traffic Law, was inapplicable here since it has not been shown that Franklin was required by law to carry insurance for the trip in question.

Appellant contends in effect that section 59 requires that all policies of liability insurance issued to the owner of a motor vehicle not only afford coverage to the owner for his vicarious liability, created by the statute, but in addition that they cover every user with permission as an additional insured. This contention was made and rejected in Kuhn v. Auto Cab Mut. Indemnity Co., 244 App.Div. 272, 279 N.Y.S. 60, affirmed 270 N.Y. 587, 1 N.E.2d 343. In that case plaintiff recovered a judgment against the operator of an automobile but had not joined the owner as a defendant. Execution was issued upon the judgment and returned wholly unsatisfied, whereupon plaintiff brought an action against the owner's insurer. That policy did not by its terms cover the operator but plaintiff contended, as does plaintiff here, that such coverage was required by statute. Both the Appellate Division and the Court of Appeals rejected the contention. The Appellate Division said: 'The statutes do not provide any such coverage. Section 109 of the Insurance Law does not provide coverage to the employee or permittee of an owner of a car. That statute, therefore, does not project into the policy in suit any such coverage. Neither is there any such coverage contained in section 59 or section 17 of the Vehicle and Traffic Law. The coverage required by those statutes is coverage of the owner as the assured, for the acts of his employee or permittee in the course of the operation of the owner's car.' 244 App.Div. at page 273, 279 N.Y.S. at page 61.

This holding was reaffirmed in Chesher v. United States Cas. Co., 303 N.Y. 789, 105 N.E.2d 99, 32 A.L.R.2d 568, and cited with approval in the recent case of Phoenix Ins. N.Y. 589, 105 N.E.2d 99, 32 A.L.R.2d 161 N.Y.S.2d 874, 877. Neither the case of Switzer v. Merchants Mutual Casualty Co., 2 N.Y.2d 575, 161 N.Y.S.2d 867, nor the dissents in the Phoenix case call for any other result. Although we did permit an action against the owner's insurer on a judgment obtained against the operator in the Switzer case, that action was predicated upon the insurance contract as written. We held that the policy, by its terms, covered the operator as an insured. Here, of course, if the exclusionary clause in the Globe's policy is otherwise applicable then by its terms that policy does not cover Franklin and O'Brien. Indeed, if appellant's view had been adopted by our court in the Switzer case there would have been no need to construe the actual language of the policy. Coverage of the operator by the dealer's insurer would have flowed as a matter of law by virtue of section 59. We think it is clear that it does not.

Although not violative of section 59, the exclusionary clause is nonetheless inapplicable here for Franklin was, as a matter of fact, not 'required to...