Oltarsh v. Aetna Ins. Co.

• Decision Date: 14 January 1965
• Citation: 256 N.Y.S.2d 577,204 N.E.2d 622,15 N.Y.2d 111
• Court: New York Court of Appeals Court of Appeals
• Parties: , 204 N.E.2d 622 Edna OLTARSH et al., Appellants, v. AETNA INSURANCE COMPANY, Respondent.

Page 577

256 N.Y.S.2d 577

15 N.Y.2d 111, 204 N.E.2d 622

Edna OLTARSH et al., Appellants, v. AETNA INSURANCE COMPANY, Respondent.

Court of Appeals of New York.

Jan. 14, 1965.

James H. Reidy, New York City, for appellants.

Leonard Sheft, Emile Z. Berman, A. Harold Frost and Paul M. Brown, New York City, for respondent.

FULD, Judge.

In this action the wife's for personal injuries suffered and the husband's for loss of her services and for medical expenses incurred the complaint has been dismissed, and we are called upon to determine whether a statute of a foreign jurisdiction authorizing direct actions against liability insurance companies may be enforced in this State.

While on a visit to Puerto Rico with her husband in April of 1963, Mrs. Oltarsh slipped and fell in a building owned by a Puerto Rican corporation solely in consequence, it is alleged, of the latter's negligence. The defendant AEtna Insurance Company, incorporated in Connecticut and doing business in New York and Puerto Rico, had issued and delivered in Puerto Rico a policy of public liability insurance covering the premises where the accident occurred and, some time after their return to New York City where they both resided, the plaintiffs instituted this action in our Supreme Court against the insurance carrier, based upon a statute of the Commonwealth of Puerto Rico sanctioning such a direct action (Laws of Puerto Rico, tit. 26, §§ 2001, 2003). ¹

The defendant moved to dismiss the complaint on the ground that the court lacked jurisdiction of the subject matter of the action (CLR 3211, subd. (a), par. 2). The court at Special Term, agreeing with the position taken by the defendant, granted the motion, stating that '(the) action is objectionable to the public policy of this State and as such is not enforcible in our courts (Morton v. Maryland Cas.Co., 1 A.D.2d 116 (148 N.Y.S.2d 524) affd. 4 N.Y.2d 488 (176 N.Y.S.2d 329, 151 N.E.2d 881)).' ² The Appellate Division affirmed the dismissal of the complaint and granted the plaintiffs leave to appeal to this court.

The Puerto Rican statute before us resembling in general purpose legislation in several other jurisdictions (La.Rev.Stat., tit. 22, § 655; R.I.Gen.Laws 1956, tit. 27, ch. 7, § 27-7-1; Wis.Stats.Ann., tit. 25, ch. 260, § 260.11, subd. (1)) provides (1) that the insurer issuing a liability policy shall become 'liable' whenever a covered loss occurs and that payment of such loss under the policy 'shall not depend upon payment by the insured of or upon any final judgment against him arising out of such occurrence' (Laws of Puerto Rico, tit. 26, § 2001) and, further, (2) that any person sustaining damages or loss shall have an option to bring 'a direct action' against the insurer alone or against the insurer and the insured jointly (§ 2003, subd. (1)). This State has no similiar legislation, and it is this difference which gives rise to the question presented on this appeal. And, in seeking an answer, we must first decide whether the issue the right of the plaintiffs to sue the insurer directly is (to employ traditional rubrics) 'procedural' and, by that token, necessarily governed by the law of the forum or 'substantive' and, hence, governed by the law applicable under choice of law principles.

By making the insurer immediately liable whenever a covered loss occurs and rendering ineffectual 'no action' clauses in insurance contracts, ³ Puerto Rico's statute did more than simply redefine the proper parties to suits involving insurance contracts and went beyond merely providing a procedural shortcut for those injured by insured tort-feasors. Rather, the statute created a separate and distinct right of action against the insurer where no such right had previously existed and thus effected a radical change in the rights accorded injured persons.

There can be no doubt, then, that such direct action legislation transcends mere procedure and, indeed, in Morton v. Maryland Cas. Co. (4 N.Y.2d 488, 493, 176 N.Y.S.2d 329, 330, 151 N.E.2d 881, 882, affg. in this respect 1 A.D.2d 116, 120, 148 N.Y.S.2d 524, 527), we implicitly recognized the substantive character of the somewhat similar Louisiana direct action statute for purposes of the conflict of laws. (See also, Collins v. American Auto. Ins. Co., 2 Cir., 230 F.2d 416, 419-422; Lumbermen's Mut. Cas. Co. v. Elbert, 348 U.S. 48, 51, 75 S.Ct. 151, 99 L.Ed. 59; Watson v. Employers Liab. Assur. Corp., 348 U.S. 66, 75 S.Ct. 166, 99 L.Ed. 74; West v. Monroe Bakery, 217 La. 189, 46 So.2d 122; Kertson v. Johnson, 185 Minn. 591, 595, 242 N.W. 329, 85 A.L.R. (involving Wisconsin's direct action statute); Note, 57 Col.L.Rev. 256, 272.) And, although it is the settled rule that the forum undertakes its own characterization of a foreign statute (see Kilberg v. Northeast Airlines, 9 N.Y.2d 34, 41, 211 N.Y.S.2d 133, 137, 172 N.E.2d 526, 528; Murray v. New York, O. & W. R. R. Co., 242 App.Div. 374, 275 N.Y.S. 10; Collins v. American Auto. Ins. Co., 230 F.2d 416, 422, supra; Restatement, Conflict of Laws, § 584), it is relevant that the United States Court of Appeals for the circuit which includes Puerto Rico has treated that Commonwealth's direct action statute as substantive for purposes of the Erie doctrine (Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188), declaring that that statute 'relate(s) to the substance of the liability of the insurance company.' (Aponte v. American Sur. Co. of N. Y., 1 Cir., 276 F.2d 678, 680; see, also, Bosco v. Firemen's Fund Ins. Co., D.C., 171 F.Supp. 432, 434; Santiago v. United States Fid. & Guar. Co., D.C., 183 F.Supp. 676.) A principal Erie purpose, like that of the conflict of laws, is to assure, so far as possible, that the result in a particular case is the same regardless of forum.

It is clear that the aim of Puerto Rico's legislation is to substantially add to the rights of '(a)ny individual sustaining damages and losses' covered by the insurance policy under which suit is brought. While the Puerto Rican statute furnishes no concrete clue to legislative intention concerning its reach where a person is injured or insurance is contracted outside of Puerto Rico (cf. Watson v. Employers Liab. Assur. Corp., 348 U.S. 66, 75 S.Ct. 166, 99 L.Ed. 74, supra), its applicability to a case such as the present involving an injury in Puerto Rico, occasioned by alleged wrongful conduct there committed, which is within the coverage of an insurance policy delivered in Puerto Rico by an insurer doing business there cannot be doubted.

Moreover, the statute is so broadly drawn that, contrary to the defendant's contention, it may not reasonably be read to cover only injuries to Puerto Rico's own citizens. Puerto Rico has a legitimate interest in safeguarding the rights of any persons injured within its borders. Enactment of the statute emphasizes the Commonwealth's understanding that such injured persons might have to be cared for by it (or its inhabitants) and evidences its intention that certain and prompt compensation, from the tort-feasor's insurer, be available both to those injured and to those who care for them. What the Supreme Court wrote in Watson v. Employers Liab. Assur. Corp. (348 U.S. 66, p. 72, 75 S.Ct. 166, p. 170, supra), in upholding the constitutionality of Louisiana's direct action statute, is to the point: 'Persons injured or killed in Louisiana are most likely to be Louisiana residents, and even if not, Louisiana may have to care for them. Serious injuries may require treatment in Louisiana homes or hospitals by Louisiana doctors. The injured may be destitute. They may be compelled to call upon friends relatives, or the public for help. Louisiana has manifested its natural interest in the injured by providing remedies for recovery of damages. It has a similar interest in policies of insurance which are designed to assure ultimate payment of such damages.' (See, also, Note, 74 Harv.L.Rev. 357, 379.)

It follows, therefore, that on the issue concerning the defendant's direct liability to the plaintiffs we should look to the law of Puerto Rico. As we have already seen, that is the place where the wrong and injury occurred, where the insurance policy was issued where the insured tort-feasor was incorporated and where the insurer did business. ⁴ In short, Puerto Rico is the jurisdiction which has the most significant relationship and contacts with respect to the matter in dispute and, accordingly, its law should be applied (see, e. g., Babcock v. Jackson, 12 N.Y.2d 473, 240 N.Y.S.2d 743, 191 N.E.2d 279, 95 A.L.R.2d 1; Auten v. Auten, 308 N.Y. 155, 124 N.E.2d 99, 50 A.L.R.2d 246; see, also, Restatement, Second, Conflict of Laws, § 383b, Comment c (Tentative Draft No. 9, 1964)) unless there is some local public policy which prohibits our courts from assuming jurisdiction of the suit. (Cf. Loucks v. Standard Oil Co., 224 N.Y. 99, 120 N.E. 198.) And such is, in effect, the defendant's contention. It urges that it would be contrary to this State's public policy to enforce the statute in our courts. The argument is predicated on decisions holding that it is reversible error to disclose to the jury the fact that the alleged tort-feasor carries insurance (see Simpson v. Foundation Co., 201 N.Y. 479, 95 N.E. 10; Akin v. Lee, 206 N.Y. 20, 99 N.E. 85; cf. Kelly v. Yannotti, 4 N.Y.2d 603, 176 N.Y.S.2d 637, 152 N.E.2d 69), and it was on the strength of such cases that the Appellate Division concluded in Morton (1 A.D.2d 116, 123-124, 148 N.Y.S.2d 524, 530-531, supra) that the Louisiana direct action statute violated New York's public policy.

The argument misapprehends the import of those decisions. Our rule precluding disclosure of insurance has never been absolute. Reference to insurance is condemned only where the fact of its existence is irrelevant to the issues and where such reference is, in all likelihood, made for the purpose of improperly influencing the jury. (See Leotta v. Plessinger,...