Kindervater v. Motorists Cas. Ins. Co.

• Decision Date: 11 May 1938
• Docket Number: Nos. 12, 13.,s. 12, 13.
• Citation: 120 N.J.L. 373,199 A. 606
• Parties: KINDERVATER et al. v. MOTORISTS CASUALTY INS. CO.
• Court: New Jersey Supreme Court

199 A. 606

120 N.J.L. 373

KINDERVATER et al.

v. MOTORISTS CASUALTY INS. CO.

Nos. 12, 13.

Court of Errors and Appeals of New Jersey.

May 11, 1938.

Appeal from Supreme Court.

Actions by Anna Kindervater, by her next friend, Anna Kindervater, and Rudolph Kindervater, against Motorists Casualty Insurance Company (also known as the Motor Club Insurance Company), and now known as the Atlantic Casualty Insurance Company, for the pecuniary equivalent of personal injuries sustained in an automobile collision between defendant's insured, William Simoni, and another automobile. From an adverse judgment the defendant appeals.

Reversed and remanded, with direction to enter judgment for the defendant.

Harry Green, of Newark, for appellant. Henry H. Eisenberg, of Elizabeth, for respondents.

HEHER, Justice.

The Anna Kindervaters, mother and daughter, severally recovered judgment against defendant's assured, William Simoni, for the pecuniary equivalent of personal injuries attributable to a highway collision, on July 11, 1931, between the latter's automobile —driven by him and occupied by the Kindervaters as his "invitees" —and two like vehicles operated by David Doyle and Moe Brodsky; and Rudolph Kindervater, the husband and father, was likewise awarded his consequential damages. The parties waived trial by jury, and submitted the cause on a stipulation of facts.

Some two weeks after the mishap, Simoni, at the instance of a member of the Brodsky family, made the following written acknowledgment of responsibility for the collision: "William Simoni do admit colliding, damaging and injuring the occupants in automobile operated by Moe Brodsky on the highway to the Victory bridge named Scott Avenue, namely an Oldsmobile coach and my car, a Chevrolet coupe. * * * I admit liability in the above mentioned accident." And the decisive question is whether he thereby breached —so as to forfeit the benefit of the stipulated indemnity —the provision of his liability policy commanding him to render to the defendant insurer "all cooperation within his power," and not to "voluntarily assume any liability, settle any claim or incur any expense, except at his own cost, or interfere in any negotiations for settlement or legal proceedings without the consent of the Company previously given in writing." We resolve the inquiry in the affirmative.

This covenant is in the nature of a promissory warranty —a condition upon which the liability of the insurer to render indemnity depends. The insurer's obligation is expressly conditioned upon "compliance with the provisions" set out in the policy. That is a condition precedent to recovery upon the policy. This particular provision is obviously an essential term of the contract; and its breach operates as an avoidance of the insurer's contractual liability. Hudson Casualty Insurance Co. v. Garfinkel, 111 N.J.Eq. 70, 161 A. 195; Coleman v. New Amsterdam Casualty Co., 247 N.Y. 271, 160 N.E. 367, 72 A.L.R. 1443; American Automobile Ins. Co. v. Fidelity & Casualty Co. of N. Y., 159 Md. 631, 152 A. 523.

Concededly, the provisions of chapter 116 of the Laws of 1929, Pamph.L. p. 195, R.S.1937, 39:6-1 et seq., in effect when the policy was issued, are not applicable; and in such circumstances the rights of these judgment creditors under the policy coincide with those of the assured. Their rights are purely derivative. They stand in the shoes of the assured; and such defense as the insurer is at libery to interpose against the assured, arising out of a breach of this condition, is likewise available against them. Hutt v. Travelers' Insurance Co., 110 N.J.L. 57, 164 A. 12; Hudson Casualty Insurance Co. v. Garfinkel, supra.

Thus we are brought to a consideration of the question of whether the assured's admission of "liability" for the collision served to absolve the insurer from its contractual obligation to make indemnity for such liability to respond in damages as the law imposed upon the assured. This court answered that inquiry in the affirmative as regards the claim of George Brodsky, the owner of the vehicle driven by Moe Brodsky. Brodsky v. Motorists Casualty Insurance Co., 112 N.J.L. 211, 170 A. 243, affirmed 114 N.J.L. 154, 176 A. 143. But the learned trial judge read the policy condition in question as providing "a forfeiture by the assured of all his rights against the insurer under the policy" only "as to that liability for which he has assumed responsibility." Distinguishing the two cases, he found that the assured "was undoubtedly remiss in the performance of his obligations under the policy with respect to the Brodsky claim," while he "was not remiss in his obligations to the insurer so far as these plaintiffs are concerned." In so ruling, he fell into error.

The parties to a contract of insurance are free to enter into such engagements as they choose, if not in contravention of statutory inhibitions or public policy. Where the language employed to express the common intention is clear and unambiguous, giving to the words their ordinary significance and taking into consideration the general design and purpose, there is no occasion for the application of the canons of construction. As in the case of other contracts, the judicial function is limited to the effectuation of the plainly expressed intention of the parties to the contract.

The design of the provision in question was not only to obviate the risk of a covinous or collusive combination between the assured and the injured third party, but also to restrain the assured from voluntary action materially prejudicial to the insurer's contractual rights, especially in the exercise of its exclusive function to defend claims made under the policy. The assured is enjoined against the voluntary assumption of "any liability." This is a necessary corollary of the stipulations reserving to the insurer the exclusive direction and control of the defense of claims so made. The obligation thus imposed is as peremptory as the duty of cooperation laid upon him by the immediately preceding clause and of...