National Grange Mut. Liability Co. v. Fino

• Decision Date: 23 March 1961
• Citation: 13 A.D.2d 10,212 N.Y.S.2d 684
• Parties: NATIONAL GRANGE MUTUAL LIABILITY COMPANY, Plaintiff-Respondent, v. William FINO, Laura Fino, Charles Cypher and Erwin Rhodes and Georgiana Rhodes, Defendants-Appellants.
• Court: New York Supreme Court — Appellate Division

Page 684

212 N.Y.S.2d 684

13 A.D.2d 10

NATIONAL GRANGE MUTUAL LIABILITY COMPANY, Plaintiff-Respondent, v. William FINO, Laura Fino, Charles Cypher and Erwin Rhodes and Georgiana Rhodes, Defendants-Appellants.

Supreme Court, Appellate Division, Third Department.

March 23, 1961.

Roy L. Featherstone, Milton, for defendants-appellants Fino.

Thomas F. Saccoman, Kingston, for defendant-appellant Cypher.

Michael Nardone, Highland, for defendants-appellants Rhodes.

Ewig and Beck, Kingston (Arthur B. Ewig and George A. Beck, Kingston, of counsel), for plaintiff-respondent.

Before BERGAN, P. J., and COON, GIBSON, HERLIHY, and REYNOLDS, JJ.

REYNOLDS, Justice.

The plaintiff-respondent on July 13, 1957 issued to Erwin Rhodes and Georgiana Rhodes, an automobile garage liability policy of insurance 'agreeing to pay on behalf of the insured all sums which the insured shall become legally obligated to pay * * * caused by accident and arising out of the hazards hereinafter defined'. Coverage A of the insuring agreements covered, among other things, 'bodily injury' and coverage B 'injury to or destruction of property'. Under the definition of hazards, division 1, the respondent covered owned automobiles, and under division 2, covered nonowned automobiles used in connection with the operation of the garage business. The insurance was subject to conditions. One of these (condition 10) is to the effect that 'if claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons or other process received by him or his representative'; and (condition 11) 'Assistance and Cooperation of the Insured--Coverages A, B and D: The insured shall cooperate with the company and, upon the company's request shall attend hearings and trials and shall assist in * * * securing and giving evidence * * * and in the conduct of suits'.

On December 24, 1957, defendants-appellants William and Laura Fino were injured as the result of a collision between their car and a truck owned by Charles Cypher. With Cypher in the truck was the insured Erwin Rhodes, the garageman. Suit was brought by the Finos against Cypher as owner of the truck. Both Cypher and Rhodes had represented that Rhodes was driving the vehicle at the time of the accident; that he had just completed repairs on the truck and was giving it a road test. This story was related by both Cypher and Rhodes to their insurance companies, to the police officer who investigated the accident, in a report of accident sent to the Bureau of Motor Vehicles and in testimony at a motor vehicle hearing. Cypher impleaded Rhodes for indemnity, in the suit brought by the Finos, on the theory that Rhodes was the active tort-feasor should negligence in the operation of the truck be found. In the verified pleadings connected with this third-party action both parties again stated that Rhodes had been the driver.

National Grange Mutual Liability Company, the plaintiff-respondent in the instant action and Rhodes' insurer under the garagemen's liability policy, undertook to defend Rhodes in the action under the terms of the policy.

In June, 1958, some six months after the accident and institution of the above-described action, during the course of an examination before trial, Rhodes and Cypher admitted that their prior account concerning the identity of the driver was false; that Cypher really had been driving his own truck and that Rhodes had merely been a passenger. Thereafter, over a year later in July, 1959, the Finos commenced a new suit against Cypher and Rhodes on the theory that the former was driving as the agent of the latter. Rhodes did not give respondent the summons in this action until November, 1959. During the interim, between the time of the recantation and institution of the second suit, respondent Rhodes' insurer, took no action. The first suit apparently was still pending, however, long after the institution of the second suit since respondent's lawyer attended a pre-trial conference in December, 1959, in connection with the third-party complaint in that action merely to state that respondent was no longer involved with the suit. On December 14, 1959, respondent sent a letter of disclaimer to all the parties and instituted the instant action in March, 1960.

In this declaratory judgment action the respondent obtained an order of summary judgment in its favor, and thereby has been released from any obligation to defend any actions against its insured or Cypher and is held not liable for any judgments that may arise out of the subject automobile-truck accident. The basis of the judgment was a finding, as a matter of law, that the insured had breached a condition of the policy, the co-operation clause of the insurance contract. The Finos appeal, contending that there was a question of fact as to whether or not there was a breach of the co-operation clause in the contract between respondent and Rhodes; that respondent has waived the alleged defense; that respondent has shown no prejudice; that, in any event, the provisions of Article 7, Vehicle & Traffic Law, the 'Safety Responsibility Act' mandate that respondent may not use a breach between it and its insured to escape liability to them, the innocent victims.

1. There is no doubt but that the insured's conduct in giving false evidence was, as a matter of law, a breach of the condition requiring co-operation (United States Fidelity and Guaranty Company v. Von Bargen, 7 A.D.2d 872, 182 N.Y.S.2d 121, affirmed without opinion 7 N.Y.2d 932, 197 N.Y.S.2d 736; Lumbermens Mutual Casualty Company v. Goldwasser, 7 A.D.2d 849, 181 N.Y.S.2d 439). No question of fact existed.

2. The lack of prejudice to the insurer is immaterial in a situation where there has been a breach of a condition. Coleman v. New Amsterdam Cas. Co., 247 N.Y. 271, 160 N.E. 367.

3. Whether the respondent waived the defense of breach of condition must be answered, of course, by examining its actions and conduct subsequent to the time knowledge of the false information was gained. Although waiver or estoppel was not pleaded, we prefer to treat this facet of the case on the merits. In connection with the first action brought by the Finos against Cypher who impleaded Rhodes thus bringing respondent in to defend, there was no reason for it to take any affirmative action of disclaimer following the change in the story as to who was driving. The new set of facts exonerated them from any obligation inasmuch as Rhodes, the insured could no longer be a third-party defendant. After the recantation there was no contract obligation or any other obligation toward the insured since it was simply a case of noncoverage. There is no question of waiver where there is no coverage (Gerka v. Fidelity & Casualty Co. of New York, 251 N.Y. 51, 167 N.E. 169). The duty to disclaim...