Kook v. American Sur. Co. of New York

• Decision Date: 28 May 1965
• Docket Number: No. A--601,A--601
• Citation: 88 N.J.Super. 43,210 A.2d 633,18 A.L.R.3d 784
• Parties: , 18 A.L.R.3d 784 Philip KOOK and Lionel Kronberg, Plaintiffs-Respondents, v. AMERICAN SURETY COMPANY OF NEW YORK, a corporation, etc., Defendant-Appellant.
• Court: New Jersey Superior Court — Appellate Division

Page 43

88 N.J.Super. 43

210 A.2d 633, 18 A.L.R.3d 784

Philip KOOK and Lionel Kronberg, Plaintiffs-Respondents, v. AMERICAN SURETY COMPANY OF NEW YORK, a corporation, etc Defendant-Appellant.

No. A--601.

Superior Court of New Jersey Appellate Division.

Argued March 22, 1965.

Decided May 28, 1965.

Walter E. Monaghan, Newark, for appellant (Schneider & Morgan, Newark, attorneys).

Harry Indursky, Jersey City, for respondents.

Before Judges CONFORD, KILKENNY and LEWIS.

The opinion of the court was delivered by

LEWIS, J.A.D.

Plaintiffs Philip Kook and Lionel Kronberg are partners in a plumbing business, under an alleged oral agreement of partnership. On May 31, 1960 defendant American Surety Company of New York issued a 'Comprehensive General Liability Policy' to 'Philip Kook & Lionel Kronberg T/A Harry Kook & Son 656 Grand St. Jersey City, New Jersey,' for a term of one year. That quoted designation is Item 1 of 'Declarations' reading, 'Name of Insured and Address.' Under the same Item 1, after the subheading 'Locations of all premises owned, rented or controlled by named insured,' is set forth 'Same.'

On June 8, 1960 a multiple-family dwelling at 359 Montgomery Street, Jersey City, New Jersey, was purchased in the names of Philip Kook and Lionel Kronberg, allegedly with funds of the partnership. Some time thereafter a personal injury suit was instituted against plaintiffs individually by one Flor Maria Rivera, whose cause of action was predicated upon the improper maintenance of the afore-mentioned residential property. It is undisputed that plaintiffs gave timely notice of the impending suit to defendant, and it is not contended that the contractual obligations of plaintiffs under the policy were unfulfilled. The insurance company, however, refused to defend the action on the ground that the liability claimed therein was outside the coverage of the policy it had issued. That litigation was ultimately settled between the parties for $400.

The instant proceedings were thereafter commenced by plaintiffs against American charging the latter with failure to meet its contractual insurance obligation. The damages sought were for the amount paid to Rivera in settlement of her tort action and the sum of $150 expended by plaintiffs for counsel fees in defending their interest. The Essex County District Court, sitting as the trier of facts, determined that American erroneously disclaimed liability under its policy and accordingly entered judgment in favor of plaintiffs. The amount of the judgment is not disputed.

Three issues are raised on appeal: (1) was evidence offered on behalf of defendant improperly excluded; (2) did the insurance coverage extend to the after-acquired dwelling structure purchased with partnership funds, and (3) was the property in question in fact an asset of the partnership?

I

The record before us contains a 'Statement of the Evidence' prepared pursuant to R.R. 1:6--3. It appears therefrom that plaintiffs' case was concluded upon the admission of the insurance policy in evidence and the reception of testimony proffered by plaintiff Lionel Kronberg; and that defendant rested its case after presenting in evidence a demand for admissions and answers thereto and the taking of the testimony of one John Rebeika. The examination of Rebeika and the trial court's rulings thereon were summarized in the agreed statement:

'He is engaged in the Underwriting Department of the defendant American Surety Company. He has a long association with said defendant and is familiar with the terms and provisions of various types of comprehensive policies. Upon examination, he testified that P--1 was an insurance policy issued by the defendant company. A series of questions was then presented to this witness calling upon him to describe the nature and scope of the policy issued, the type of coverage afforded, the type of incident or accident covered and what accidents the named insureds Philip Kook and Lionel Kronberg T/A Harry Kook and Son were insured against. These questions were objected to by counsel on the ground that they called upon the witness to characterize the provisions of a document which must be permitted to speak for themselves. The objections were sustained.'

The precise questions propounded to that witness, one of defendant's employees, are not revealed. It is not shown that he qualified as an expert for the purpose of adducing proofs concerning any special or trade-custom meaning or usage of any of the terms of the policy. Rather, it is inferable that he was produced to testify only as to defendant's intent regarding the scope of the insurance coverage. The uncommunicated subjective understanding or intent of one party to a written agreement as to its meaning is not admissible in a contest as to its interpretation or construction. Garden State Plaza Corp. v. S. S. Kresge Co., 78 N.J.Super. 485, 500, 189 A.2d 448 (App.Div.1963) certification denied 40 N.J. 226, 191 A.2d 63 (1963). That rule would have particular cogency in relation to an insurance contract and the insurer's intent. The trial court properly excluded the irrelevant testimony.

II

The insurance document we are called upon to construe is characterized as a 'Comprehensive General Liability Policy,' and by its terms, when considered as a whole, is susceptible of an interpretation of broad liability coverage. The following provisions therein are pertinent:

Item 5 under 'Declarations':

'The schedules disclose all hazards insured hereunder known to exist at the effective date of this policy, unless otherwise stated herein:'

Item I under 'Insuring Agreements':

'Coverage A--Bodily Injury Liability

To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person and caused by accident.'

Item III under 'Insuring Agreements':

'Definition of Insured

* * * If the named insured is a partnership, the unqualified word 'insured' also includes any partner therein but only with respect to his liability as such.'

Item IV under 'Insuring Agreements':

'Policy Period, Territory

This policy applies only to accidents which occur during the policy period within the United States of America, its territories or possessions, or Canada.'

A separately typed legend on the policy form states:

'Partners as Named Insured

It is agreed that the policy applies to named partners of the partnership named in the declarations only while acting within the scope of their duties as such.'

A Declaration Schedule #1 is headed 'Description of Hazards,' with the note 'The rating classifications under the Description of Hazards do not modify the exclusions or other terms of this policy,' and lists as its first item heading the following: 'a. Premises--operations.' Thereunder is set forth:

'PLUMBING N.O.C. (not otherwise classified)--GAS, STEAM, HOT WATER OR OTHER PIPE FITTING--INCLUDING HOUSE CONNECTIONS, SHOP AND RETAIL STORES OR DISPLAY ROOMS'

The following provisions appear under 'CONDITIONS':

'1. Premium

The premium bases and rates for the hazards described in the declarations are stated therein. Premium bases and rates for hazards not so described are those applicable in accordance with the manuals in use by the company.

2. Inpection and Audit

The company shall be permitted to inspect the insured premises, operations and elevators and to examine and audit the insured's books and records at any time during the policy period and any extension thereof and within three years after the final termination of this policy, as far as they relate to the premium bases or the subject matter of this insurance.' (Emphasis added)

The language relating to the adjustment of premiums for undisclosed hazards, with the right of the insurer to examine and audit the insured's books and records, plainly indicates that the parties contemplated possible changes in the insurable risks within the framework of the general policy coverage. Eleven exclusions are enumerated in a separate schedule, none of which relates to after-acquired property or comprehends limitations upon the nature or scope of the real estate holdings of the insured partnership. The same applies to a separate exclusion by endorsement for nuclear energy liability.

There are many ways in which American could have limited or excluded its exposure to liability for the claim here involved, but it chose not to employ language in its form of policy appropriate to do so. For example, an insurance company may afford coverage for a partnership in relation solely to its business activities without exposing itself to liability for the unrelated business operations of the individual partners. See McKinney v. Truck Insurance Exchange, 324 S.W.2d 773 (Mo.Ct.App.1959).

By its terms an insurance agreement might expressly restrict coverage to particular premises, or the same result might be achieved by stating coverage generally but including an exception of coverage elsewhere but on the insured premises. Note, 11 Couch on Insurance (2d ed. 1963), § 44:307, p. 721. An illustration is to be found in Deban v. Continental Casualty Co., 294 Mass. 412, 2 N.E.2d 212 (Sup.Jud.Ct.1936), which involved a policy indemnifying the insured against loss from liability for injuries sustained by persons upon a sidewalk, but excluding liability for injuries sustained by a person upon an elevator unless such was specifically described in the schedule and a premium was paid therefor. The insurer was held not liable to a pedestrian who was thrown to the sidewalk when an elevator was raised from below the walk level, where no elevator was described in the schedule of the policy. Compare Van Der Veen v. Bankers Indemnity Ins. Co., 30 N.J.Super. 211, 103 A.2d 900 (App.Div.1954), which dealt with an insurance carrier that classified the business of the insured as 'oil burner installation'...