Merchants Indem. Corp. of New York v. Victory Iron Works, Inc.

• Decision Date: 28 June 1963
• Docket Number: No. A--168,A--168
• Citation: 80 N.J.Super. 7,192 A.2d 592
• Parties: MERCHANTS INDEMNITY CORPORATION OF NEW YORK, Plaintiff-Respondent, v. VICTORY IRON WORKS, INC., Martin Edson, Jr., Defendants, and John R. Henches, Defendant-Appellant.
• Court: New Jersey Superior Court — Appellate Division

Page 7

80 N.J.Super. 7

192 A.2d 592

MERCHANTS INDEMNITY CORPORATION OF NEW YORK, Plaintiff-Respondent, v. VICTORY IRON WORKS, INC., Martin Edson, Jr., Defendants, and John R. Henches, Defendant-Appellant.

No. A--168.

Superior Court of New Jersey, Appellate Division.

Argued May 27, 1963.

Decided June 28, 1963.

Seymour M. Karas, Paterson, for defendant-appellant.

William V. Breslin, Englewood, for plaintiff-respondent.

No appearance for Victory Iron Works, Inc. or Martin Edson, Jr.

Before Judges CONFORD, GAULKIN and KILKENNY.

The opinion of the court was delivered by

GAULKIN, J.A.D.

In this declaratory judgment action the trial judge held that the automobile liability policy issued by plaintiff Merchants Indemnity Corporation of New York (Merchants) to Victory Iron Works, Inc. (Victory) did not obligate Merchants to defend Edson from the action brought against him by Henches. Henches alone appeals.

It is agreed that Edson and Henches, employees of Victory traveling in a Victory vehicle on company business with Edson driving, were involved in a collision which resulted in Henches' injuries.

Merchants' policy contained the usual omnibus clause but it provided:

'* * * The insurance with respect to any person or organization other than the named insured or * * * spouse does not apply:

(2) to any employee with respect to injury to * * * another employee of the same employer injured in the course of such employment in an accident arising out of the maintenance or use of the automobile in the business of such employer.'

The reason for such a provision is stated in an annotation in 50 A.L.R.2d 78, 99 (1956) as follows:

'Probably as a result of the decisions * * * holding that an exclusion of liability for injury to an employee of 'the insured' was applicable only where the injured party was an employee of the tortfeasor in whose behalf the insurance protection was invoked, a number of insurers began to include in their policies, ordinarily as a limitation of the coverage provided by the omnibus clause, a stipulation that the insurance did not extend to liability arising from an action by one employee of the insured against another such employee. Such clauses have usually been held effective to protect the insurer in the situation where one employee of the insured brings an action or recovers against another such employee for negligence in the operation of the insured vehicle.'

Henches concedes that Cutone v. Massachusetts Bonding and Ins. Co., 53 N.J.Super. 165, 146 A.2d 782 (App.Div.1958), so held. However, he argues that under the special facts of the case at bar the quoted provision is void because (quoting from the pretrial order) 'both Victory and Edson were persons coming within the purview of the Financial Responsibility Act; that the policy issued by the pltf was required to comply with said act and * * * the provision which makes the insurance inapplicable by one employee against another is in violation of the Financial Responsibility Act * * *.' He bases this argument upon N.J.S.A. 39:6--46(a), which provides that a liability policy 'furnished as proof of financial responsibility' under the Motor Vehicle Security-Responsibility Law shall 'insure the insured named therein and any person using * * * such motor vehicle * * *' with the consent of the insured.

Henches tells us in his brief that the case was submitted to the trial judge for decision upon 'oral stipulations' made in the judge's chambers. Apparently no record was made of the stipulations. Henches' brief says that one of the stipulations was 'that Edson had previous accidents with company vehicles; that Merchants had knowledge of this and that the policy in question falls within the purview of the Motor Vehicle Financial Responsibility Act and is governed thereby.' The trial judge, in his opinion, reports the stipulation somewhat differently. He says: 'The parties also agree that defendant Edson had previous accidents with company vehicle and the insurance was required to cover him under the Financial Responsibility Law and the plaintiff insurance company had knowledge of this fact.' However, although Merchants admits that it stipulated that Edson had previous accidents with company vehicles, it denies that it agreed that the policy 'falls within the purview of the Financial Responsibility Act.' Parenthetically, this demonstrates the importance of making a record of all such stipulations.

We, of course, accept the judge's report that such a stipulation was made. However, being unable to determine what either Henches' or the trial judge's version of the stipulation meant, we asked the parties for further details. They advised us that the Merchants' policy was issued to Victory alone, and does not mention Edson; the Motor Vehicle Director never requested the filing of security or proof of financial responsibility; and Henches' only reason for asserting that 'the policy in question falls within the purview of the Motor Vehicle Financial Responsibility Act' was that Edson had had previous accidents while driving Victory vehicles.

It is clear that the only provisions of the Motor Vehicle Security-Responsibility Law, N.J.S.A. 39:6--23 to 57, implicated by the facts of which we were advised by counsel are those which, with certain exceptions, require operators and owners of motor vehicles which have been involved in accidents resulting in bodily injury or death, or damage to property exceeding $100, to deposit security to satisfy any judgments resulting from such accident. N.J.S.A. 39:6--25 et seq. But those provisions do not require the obtaining of liability insurance, although N.J.S.A. 39:6--25(c) exempts from the requirement of posting security those who are adequately insured.

Moreover, Edson is exempted from the operation of N.J.S.A. 39:6--25 by N.J.S.A. 39:6--26(c). That section provides that 'the operator if he was a chauffeur or operator employed by the owner of the motor vehicle and was operating with the permission of the owner * * *' need not comply with N.J.S.A. 39:6--25 if the only charge against him is that he had had such an accident. N.J.S.A. 39:6--31(a) to (f) (replacing R.S. 39:6--1(a) to (f)) requires the director to demand proof of financial responsibility to satisfy claims for future damages from those guilty of enumerated crimes or offenses. If Edson fell within these provisions, he would have been required to file proof of financial responsibility, or comply with N.J.S.A. 39:6--33; but it is not suggested that he did come within N.J.S.A. 39:6--31.

It appears to us that this stipulation must have been based upon the case of Standard Accident Ins. Co. v. Allstate Ins. Co., 72 N.J.Super. 402, 178 A.2d 358 (App.Div.1962). That case seems to have held, in part, 72 N.J.Super. at pp. 411--413, 178 A.2d at pp. 363, 364, that any policy relied upon as satisfying N.J.S.A. 39:6--25(c)(1) must comply with N.J.S.A. 39:6--46 to 48, which prescribes the form of policy to be submitted by those who must file proof of financial responsibility. Unfortunately, upon our further consideration of the question, we find that we must disagree with some portions of that opinion.

We hold, first that under the present Motor Vehicle Security-Responsibility Law, the mere fact that a person had an accident involving bodily injury or death or property damage over $100 does not automatically bring the automobile policy issued to him thereafter within the purview of sections 39:6--46 to 48, even if the insurance company knew of the previous accident. For reasons which no longer exist, as we shall demonstrate infra, it did under the old law, R.S. 39:6--1(g), repealed by L.1952, c. 173, § 34, p. 570. Steliga v. Metropolitan Casualty Ins. Co. of N.Y., 113 N.J.L. 101, 103, 172 A. 793 (Sup.Ct.1934), affirmed o.b., 114 N.J.L. 156, 176 A. 331 (E. & A. ...