Ruder & Finn Inc. v. Seaboard Sur. Co.

• Decision Date: 04 December 1979
• Citation: 71 A.D.2d 216,422 N.Y.S.2d 85
• Parties: , 1980-1 Trade Cases P 63,130 RUDER & FINN INCORPORATED, Plaintiff-Appellant, v. SEABOARD SURETY COMPANY, Defendant-Respondent.
• Court: New York Supreme Court — Appellate Division

Page 85

422 N.Y.S.2d 85

71 A.D.2d 216, 1980-1 Trade Cases P 63,130

RUDER & FINN INCORPORATED, Plaintiff-Appellant, v. SEABOARD SURETY COMPANY, Defendant-Respondent.

Supreme Court, Appellate Division, First Department.

Dec. 4, 1979.

Stuart C. Sloame, New York City, of counsel (Abraham J. Backenroth, New York City, with him on the briefs; Hershcopf, Graham & Sloame, New York City, attys.), for plaintiff-appellant.

James F. Rittinger, New York City, of counsel (Robert M. Callagy and George L. Mahoney, New York City, with him on the brief; Satterlee & Stephens, New York City, attys.), for defendant-respondent.

Before MURPHY, P. J., and KUPFERMAN, BIRNS and FEIN, JJ.

MURPHY, Presiding Justice:

On July 2, 1972, defendant Seaboard Surety Company (Seaboard) issued a policy of insurance to plaintiff Ruder & Finn (R. & F.). To the extent here relevant, Seaboard agreed:

"1. To pay on behalf of the Insured all sums which the Insured shall become obligated to pay by reason of the liability imposed upon him by law, or assumed by him under contract as defined herein, as the result of any final judgment for money damages resulting from:

(a) libel, slander, defamation or

(b) any infringement of copyright or of title or of slogan or

(c) piracy, plagiarism or unfair competition or idea misappropriation under implied contract or

(d) any invasion of rights of privacy committed in any advertisement, publicity article, broadcast or telecast and arising out of the Insured's business of Advertising Agents.

2. To defend, in the name and on behalf of the Insured, any suit seeking damages for any of the above causes, even if such suit is groundless, false or fraudulent . . . ".

While this policy was in force, a firm called A.T.I., Inc. sued R. & F. in the Federal District Court, and later, in the State Supreme Court. The substance of A.T.I.'s charges against R. & F. in both complaints have been summarized in a prior decision of the Court of Appeals and need not be repeated herein. (ATI, Inc. v. Ruder & Finn, Inc., 42 N.Y.2d 454, 455-457, 398 N.Y.S.2d 864, 864-865, 368 N.E.2d 1230, 1230-1231). Seaboard refused to defend those actions since it maintained that those actions were outside the stated coverage in the policy. R. & F. retained private counsel and successfully defended the underlying actions. The complaint in the District Court action was dismissed because it did not allege a Sherman Act violation (ATI, Inc. v. Ruder & Finn, Inc., U.S.D.C., S.D.N.Y. (dated March 4, 1976), Owen, J.). The complaint in the State Supreme Court action was subsequently dismissed for failure to state a cause of action (ATI, Inc. v. Ruder & Finn, Inc., N.Y.L.J., 7/23/76, p. 5, col. 1, Asch, J., aff'd. 55 A.D.2d 540, 389 N.Y.S.2d 796, aff'd. 42 N.Y.2d 454, 398 N.Y.S.2d 664, 368 N.E.2d 1230). R. & F. now seeks summary judgment awarding it damages of $74,966.18 for the legal expenses and disbursements incurred in the defense of the two actions. Seaboard cross-moves for summary judgment dismissing this complaint. It is not clear from the instant complaint whether R. & F. is suing for breach of contract or declaratory judgment. To be consistent with the Court at Special Term, the complaint will be considered one seeking declaratory judgment.

It has frequently been remarked that the duty to defend is broader than the duty to pay. A policy of insurance protects the insured not only against suits for which there is unquestioned liability, but also against suits on their face within the compass of the risk against which insurance was taken, no matter how groundless, false or baseless those suits may be. (Goldberg v. Lumber Mutual Casualty Ins. Co., 297 N.Y. 148, 154, 77 N.E.2d 131, 133). It is also well-settled that if a policy is written in such language as to be doubtful or uncertain in its meaning, all ambiguity must be resolved in favor of the insured against the insurer (Hartol Products Corp. v. Prudential Insurance Co., 290 N.Y. 44, 49, 47 N.E.2d 687, 690).

In this regard, a leading treatise has made the following observations: (14 Couch on Insurance 2d, § 51:45, p. 538):

"The insurer's duty to defend against a claim coming within the policy coverage is not discharged by the fact that the plaintiff's pleading is not perfect: that is the insurer's obligation is not merely to defend in cases of perfect declarations, but also in cases where by any reasonable intendment of the pleadings liability of the insured can be inferred, and neither ambiguity, inconsistency, nor duplicity in the plaintiff's complaint or declaration can justify escape of the insurer from its obligation to defend . . . "

Finally, it should be emphasized that an insured's right to be accorded legal representation is a contractual right and consideration upon which his premium is in part predicated. This right exists even if debatable theories are alleged in the pleading against the insured (International Paper Co. v. Continental Casualty Co., 35 N.Y.2d 322, 325, 361 N.Y.S.2d 873, 875, 320 N.E.2d 619, 621). Thus, the duty to defend includes the defense of those actions in which alternative grounds are asserted, some within and others without the protection purchased (Freedmen, Inc. v. Glens Falls Ins. Co., 27 N.Y.2d 364, 368, 318 N.Y.S.2d 303, 305, 267 N.E.2d 93, 94).

With the foregoing principles in view, the complaints in the underlying actions must be examined to determine whether they set forth any theory of recovery that should have prompted Seaboard to defend under the subject policy. While both underlying complaints were dismissed on motions addressed to their legal sufficiency, that fact is not determinative of the issue now presented. Even though the complaints were found to be legally insufficient under the "acid test" provided by a motion to dismiss, it is quite possible that they still stated a viable basis for relief that would activate the "defense" provision of the subject policy. As has been mentioned above, Seaboard was obligated not merely to defend in cases of perfect declaration, but also in cases where by any reasonable intendment of the pleadings liability of R. & F. could be inferred. (14 Couch on Insurance 2d, § 51:45, p. 538).

The "three count" complaint in the Federal District Court proceeding is rambling, overlapping, repetitive, vague and otherwise inartfully drafted. Upon its face, that complaint seems to touch upon requests for relief grounded in (i) anti-trust violations under the Sherman Act, (ii) conspiracy, (iii) commercial extortion, (iv) tortious interference with contractual...