Smith v. Motor Club of America Ins. Co.

• Citation: 54 N.J.Super. 37,148 A.2d 37
• Decision Date: 28 January 1959
• Docket Number: No. C--873,C--873
• Parties: Jennie SMITH, Sarrak Smith and Frank Smith, etc., Plaintiffs, v. MOTOR CLUB OF AMERICA INSURANCE COMPANY, Defendant.
• Court: Superior Court of New Jersey

Page 37

54 N.J.Super. 37

148 A.2d 37

Jennie SMITH, Sarrak Smith and Frank Smith, etc., Plaintiffs, v. MOTOR CLUB OF AMERICA INSURANCE COMPANY, Defendant.

No. C--873.

Superior Court of New Jersey, Chancery Division.

Jan. 28, 1959.

Marcus & Levy, Paterson (Harry C. Chashin, Paterson, appearing), for plaintiffs.

Harkavy & Lieb, Newark (Jerome S. Lieb, Newark, appearing), for defendant.

SCHERER, J.S.C.

Plaintiffs Sarrak Smith and Frank Smith filed a complaint against the defendants Motor Club of America Insurance Company (hereinafter called 'Motor Club') and Jennie Smith on January 3, 1958. The defendant Jennie Smith was, on February 11, 1955, an insured of Atlantic Casualty Company, the predecessor of defendant Motor Club. Plaintiff Frank Smith, husband of Sarrak Smith, sued for medical expenses paid or incurred on her behalf. The complaint, in its caption, states that the suit is brought not only on behalf of the plaintiffs but also 'in the right of all other persons who have been or are entitled to coverage under the medical payments clause of automobile liability policies issued by the defendant, Motor Club of America Insurance Company, and who are similarly situated.' The plaintiffs alleged that they were entitled to reimbursement for medical expenses incurred when Sarrak Smith was injured on February 11, 1955, while a passenger in a car owned by the defendant Jennie Smith, and being operated by the latter's husband William Smith. The collision occurred apparently without any negligence on the part of the operator of the car of Jennie Smith.

Sarrak Smith and her husband instituted suit in the Law Division of this court, Passaic County, against Jennie and William Smith and Michael Czaban, the owner and operator of the other vehicle involved in the accident. A settlement of that suit was effected and the defendant Czaban paid to Sarrak Smith and her husband the sum of $8,000. No payment was made by the Motor Club as the insurance carrier of Jennie Smith. It is conceded that defendant Motor Club declined to make any payment solely as liability carrier. A general release, dated August 30, 1957, was given to Czaban by Sarrak and Frank Smith.

The policy which the Motor Club had issued to Jennie Smith provided, under coverage 'C,' that the company would pay all reasonable expenses incurred within one year of the date of the accident to each person sustaining bodily injury while in the insured's vehicle. The coverage limit was $2,000, as shown by a supplemental document submitted with the policy. The policy, in paragraph 17, under the heading 'Conditions,' states that upon payment of a medical expense claim under coverage 'C' and other coverages the company is entitled to subrogation of all rights of the insured or any other person to whom payment is made under such coverage.

It is admitted that in the suit in which the plaintiffs received the $8,000 part of the damages claimed was for medical expenses of Sarrak Smith and for the husband's claim for such expenses and Per quod. It is also admitted that the Motor Club 'offered to pay the whole of said medical expenses on condition plaintiff Sarrak Smith would execute and deliver a subrogation receipt, and alternatively offered to pay in full settlement of its obligations, both as liability carrier and under the medical payments provisions of said policy, but without subrogation, the sum of $300.00, which offers were rejected by plaintiffs.'

In the original complaint in this cause the plaintiffs sought recovery of $1,000 for medical expenses, based on the claim that, although plaintiffs' medical expenses due to the accident were in excess of that sum, $1,000 was attributable to the first year after the accident and therefore payable under coverage 'C.' The plaintiffs also sought a judgment: (a) reforming the policy so as to eliminate the subrogation clause; (b) declaring the subrogation clause to be illegal, void, against public policy and of no effect; (c) enjoining the defendant from using the clause in any policies until proper steps have been taken to protest the public interest; and (d) requiring the Motor Club to account for premiums paid for such coverage by policy holders upon the theory of unjust enrichment.

A motion was made by the Motor Club to strike the complaint as insufficient in law, for failure to set forth a claim upon which relief could be granted; for failure of the plaintiffs to bring the action in connection with their suit at law for damages arising out of the accident; and on the ground that the claim was barred by laches. Judge Gaulkin granted the motion to strike the complaint, but also granted the plaintiffs leave to amend.

An amended complaint was filed in which the Motor Club's insured, Jennie Smith (previously a defendant), became a co-plaintiff with Sarrak Smith and her husband. Plaintiffs apparently decided this course was necessary in order to properly assert a claim for reformation and for all of the other relief sought, except the recovery of the $1,000, since Jennie Smith was the holder of the contract of insurance. It is worthy of note that the husband of Sarrak Smith and the husband of Jennie Smith are brothers.

In the amended complaint Jennie Smith alleges that she did not know about the presence of paragraph 17 in connection with coverage 'C,' and that if she had known she would not have purchased the policy in question. It is also alleged that other companies issuing policies of this sort do not include in them provisions for subrogation and that the defendant fraudulently concealed this provision from the general public and, in particular, from Jennie Smith. The same demands for relief as were contained in the original complaint are made in the amended complaint. The cause of action in this amended complaint is set forth in three separate counts, whereas the original complaint contained but one.

The defendant Motor Club moves for summary judgment upon the grounds that the amended complaint fails to state a claim upon which relief can be granted and that there is no genuine issue of any material fact and defendant is entitled to judgment as a matter of law.

There is no dispute as to any material fact. Jennie Smith and her husband had insurance with the predecessor of the Motor Club for many years prior to the accident. They claim that they first knew about the subrogation clause when it was brought to their attention by counsel for Sarrak and Frank Smith, about February 1958, after the settlement of the other litigation and after the institution of the present suit on January 3, 1958.

Plaintiffs, at the argument of the motion, sought to inject a new issue into the case by requesting a further amendment to the complaint to allege that the $8,000 received in the settlement of the accident case 'was not in full compensation for their injuries and expenses.'

This would seem to be an attempt to create an issue of fact under the decisions in Breen v. Peck, 28 N.J. 351, 146 A.2d 665 (1958), affirming 48 N.J.Super. 160, 137 A.2d 37 (App.Div.1957), and Daily v. Somberg, 28 N.J. 372, 146 A.2d 676 (1958). In these cases it is stated that the just and true rule should be that, although a plaintiff who has received full satisfaction should be barred, a plaintiff who has received only part of his damages from one wrongdoer should not be barred from proceeding against the other wrongdoer who caused his damages.

But the above suits involved joint tortfeasors and were not suits on contract, as here. The joint tortfeasors in the claim of Sarrak and Frank Smith were Jennie and William Smith and Michael Czaban. The plaintiffs' present action against the defendant is on contract, not tort, and the rules stated in the Breen and Daily cases do not apply here.

Whether or not plaintiffs received full payment in the tort action is unimportant. The defendant does not rely upon the general release therein given as its defense. Its position is that under the policy provisions it is entitled to be subrogated when it pays the plaintiffs. It has offered to carry out its obligations under the contract, but plaintiffs have refused to accept.

No evidence was offered by plaintiffs to...