Meridian Trading Corp. v. National Auto. & Cas. Ins. Co.

• Decision Date: 19 October 1964
• Citation: 258 N.Y.S.2d 16,45 Misc.2d 847
• Parties: MERIDIAN TRADING CORPORATION, Plaintiff, v. The NATIONAL AUTOMOBILE AND CASUALTY INSURANCE COMPANY, Defendant.
• Court: New York Supreme Court

Page 16

258 N.Y.S.2d 16

45 Misc.2d 847

MERIDIAN TRADING CORPORATION, Plaintiff, v. The NATIONAL AUTOMOBILE AND CASUALTY INSURANCE COMPANY, Defendant.

Supreme Court, Special Term, New York County, Part I.

Oct. 19, 1964.

Dorsey, Burke & Griffin, New York City, for defendant.

Zock, Petrie, Sheneman & Reid, New York City, for plaintiff.

MITCHELL D. SCHWEITZER, Justice.

Plaintiff, a New York corporation, sues for damages allegedly caused by the defendant-insurance company's breach of an indemnity insurance policy issued in 1958, wherein defendant insured a third party (Kingston Steamship Corp.) against certain risks to a vessel then owned by Kingston. An endorsement was then issued which named another corporation--Inland Credit--as loss payee, as first preferred ship mortgagee. It appears, however, that Kingston's debt to Inland was later paid and Inland's status as first mortgagee extinguished, although the endorsement itself was never changed to reflect this fact. Kingston thereafter issued a first preferred ship mortgage to another corporation--Empire Commercial--which then assigned the mortgage to plaintiff. Plaintiff's rights asserted herein allegedly arise out of this assignment and a later agreement between Kingston and plaintiff wherein plaintiff's status as mortgagee was expressly affirmed. After execution of this agreement Kingston defaulted in the payment to plaintiff of the indebtedness secured by the mortgage. In 1960, pursuant to rights granted in the mortgage, plaintiff libeled the vessel. In the libel proceeding, in a federal district court in Texas, another party--Todd Shipyards Corp.--interposed an intervening libel wherein it sought to recover damages allegedly caused it by the vessel in 1958, when the vessel was entering one of Todd's drydocks. Plaintiff then requested defendant, as insurer of the vessel at the time of the alleged negligent act, to enter the Texas litigation and defend against this claim. Defendant did not do so, and plaintiff thereafter negotiated with Todd and settled that claim by payment of $10,000 to Todd.

Plaintiff, after fruitless correspondence with defendant, then instituted this action to recover the amount of the settlement paid, plus its expenses incurred in the settlement. The action was instituted by the service in proper form of the summons and complaint upon the Superintendent of Insurance of this state, purportedly pursuant to Section 59-a of the Insurance Law; for defendant is a California corporation.

Defendant now moves to dismiss the complaint on the grounds that (a) this court does not have jurisdiction over defendant, for Section 59-a is inapplicable under the circumstances herein; (b) the cause asserted is time barred; and (c) the complaint is legally insufficient and fails to allege a cause of action. The portions of the motion denominated (a) and (c) above are interrelated, for both are founded in part upon the claim that plaintiff has no legally cognizable rights under the insurance policy concerned. If this assertion is correct, the manner of service would be improper (for Section 59-a may be used only by an insured or a beneficiary of certain insurance contracts), and this court would lack jurisdiction in the premises. As a necessary corollary thereto, the cause asserted would be defective. Accordingly this question will be first discussed.

The general rule prevents suits on insurance policies by those not party to the insurance contract, save where a contrary result is dictated by statute (see Burke v. London Guaranty & Accident Co., 47 Misc. 171, 93 N.Y.S. 652, affd. 126 App.Div. 933, 110 N.Y.S. 1124, affd. 199 N.Y. 557, 93 N.E. 1117). No such statute is here operative, for Insurance Law, Section 167, which does extend the right to sue on the policy to certain other parties, excludes marine protection and indemnity policies from its scope. Plaintiff, however, claims that by virtue of the status, above described, it is an equitable beneficiary under the policy and, therefore, entitled to the benefits of section 59-a and to maintain the action. In the mortgage and first supplemental agreement thereto, Kingston covenanted to insure the vessel for plaintiff's benefit and appointed plaintiff its attorney in fact to collect the insurance proceeds (Article II, section 18, subds. (4) and (21)). As there is no apparent controversy over the fact of Kingston's default in payment of the mortgage, these provisions of the agreement and plaintiff's other rights flowing from the mortgage put it in a status above that of a mere third party to the insurance contract (see Farmers' Loan & Trust Co. v. Penn. Plate-Glass Co., 3 Cir., 103 F. 132, 56 L.R.A. 710, affd. 186 U.S. 434, 22 S.Ct. 842, 46 L.Ed. 1234; Cromwell v. Brooklyn Fire Ins. Co., 44 N.Y. 42). However, its rights may still be limited by the terms of the insurance contract, which provides, in pertinent part, that 'No person, excepting a legally appointed receiver of the property of the Assured, shall acquire any right against the company by virtue of this insurance without the expressed written consent of the company.' The general rule applied in such cases has been stated in a case cited by plaintiff--Central Union Bank of South Carolina v. New York Underwriters' Insurance Company, 4 Cir., 52 F.2d 823, 824, 78 A.L.R. 494: '* * * an assignment, not of the policy itself with its obligations, but of the owner's rights thereunder by way of pledge or otherwise as security for a debt, is held valid, in the absence of express restriction to the contrary * * *'. (Emphasis added.) Insurance contracts have long been considered personal in nature (Matter of Kolb v. Brummer et ano., 185...