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Creem v. Fidelity & Casualty Co. of New York

Supreme Court of New York, Appellate Division

May 7, 1909

CREEM ET AL.
v.
FIDELITY & CASUALTY CO. OF NEW YORK.

Appeal from Trial Term, New York County.

Action by Daniel J. Creem and another against the Fidelity & Casualty Company of New York. From a judgment in favor of plaintiffs, and from an order denying a motion for a new trial, defendant appeals. Reversed, and new trial ordered.

Laughlin, J., dissenting in part.

Defendant issued to plaintiff contractor for the erection of a bridge, a liability policy, and also insured the bridge company, and when a pedestrian who was injured, incidental to the construction of the bridge, brought an action against the bridge company, insurer's attorneys assumed the defense and notified plaintiff that it would be liable to the bridge company in case of a recovery. In an action on the policy by plaintiff, the complaint alleged that in response to such notice, and at insurer's request, and upon its promise that every opportunity would be afforded plaintiff to protect his interest, plaintiff assisted in the defense of such action. Held, that such allegation was not sufficient to admit proof of waiver or estoppel precluding insurer from defending on the ground that the action was barred under limitations prescribed by the policy.

[116 N.Y.S. 1043] Charles C. Nadal, for appellant.

Herbert C. Smyth, for respondents.

Argued before PATTERSON, P. J., and INGRAHAM, LAUGHLIN, McLAUGHLIN, and CLARKE, JJ.

[116 N.Y.S. 1044] MCLAUGHLIN, J.

The plaintiffs, who are copartners in the contracting business under the firm name of Daniel J. Creem & Co., undertook to build the foundations for the pillars of an elevated railroad which the Phœ nix Bridge Company was under contract to construct for the Brighton Beach Railroad Company. This action was brought on a policy of liability insurance by which defendant indemnified them for the term of one year commencing April 1, 1896, against damages recovered for personal injuries sustained by their employés or by the public generally through the negligence of their employés. On the 6th of June, 1896, one Kate Johnston, while passing along a public street, sustained personal injuries alleged to have been caused by an obstruction placed and suffered to remain therein by the bridge company in connection with the work which they had contracted to do. Some time thereafter she and her husband each brought an action in the Supreme Court against the bridge company and others to recover damages resulting from the injury. The action brought by Kate Johnston was tried on the 6th and 7th of April, 1899, and the complaint dismissed, apparently upon the ground that the plaintiffs in this action were responsible for the obstruction in the street, and, they being independent contractors, the bridge company was not liable for their negligence. An appeal was taken from the judgment; and the Johnstons also commenced actions against these plaintiffs to recover damages for the same injury. On the appeal the judgment dismissing the complaint against the bridge company was reversed, and a new trial ordered. 44 A.D. 581, 60 N.Y.Supp. 947.From this order the bridge company appealed to the Court of Appeals, giving a stipulation for judgment absolute, and the order was affirmed and judgment ordered for the plaintiff. 169 N.Y. 581, 62 N.E. 1096.The damages were thereafter assessed at $6,500 and judgment for some $7,300 entered against the bridge company. The action brought by Bernard Johnston against the bridge company was tried in May, 1902, and he obtained a verdict for $4,000. Both of these judgments were paid, and thereafter, on July 1, 1902, the actions which the Johnstons had brought against these plaintiffs were, by consent, discontinued. After the bridge company had paid the two judgments referred to, and on June 3, 1902, it commenced two actions against Creem & Co. to recover the amount of the same. Action No. 1, which was predicated on the Kate Johnston judgment, resulted in a verdict in favor of Creem & Co., on which judgment was entered January 6, 1904. On appeal this judgment was affirmed. Phœ nix Bridge Co. v. Creem, 104 A.D. 618,93 N.Y.Supp. 1145.When action No. 2, which was predicated on the Bernard Johnston judgment, was tried, proof was given that the bridge company had notified Creem & Co. of the pendency of the action brought against it by Bernard Johnston, and the court thereupon excluded testimony tending to show that Creem & Co. had not been guilty of negligence, and at the conclusion of the trial directed a verdict for the bridge company, upon which judgment was entered against Creem & Co. for $5,636.32. This judgment was subsequently affirmed by the Appellate Division ( 102 A.D. 354, 92 N.Y.Supp. 855), and in June, 1906, by the Court of Appeals ( 185 N.Y. 580, 78 N.E. 1110). After the judgment had been affirmed [116 N.Y.S. 1045] by the Court of Appeals, and on the 3d of July, 1906, the present action was commenced, by which the plaintiffs seek to recover the expenses incurred by them in defending action No. 1 and the amount paid in satisfaction of the judgment obtained in action No. 2.

At the trial the principal defenses relied upon were: (1) That the action was not commenced within the time required by the policy, and for that reason a recovery could not be had; and (2) that the policy was void because the plaintiffs had been guilty of a breach of warranty by stating in their application, which was annexed to and made a part of the policy, that their business was that of " General Contractor, sewer construction," whereas they were actually engaged in building foundations for an elevated railroad. At the conclusion of plaintiffs' case the defendant moved for a nonsuit, which was denied and an exception taken, whereupon defendant rested without offering any evidence, and asked that a verdict be directed in its favor. The plaintiffs also asked for the direction of a verdict. The court directed a verdict for the plaintiffs for $5,000, the maximum liability, under the policy of insurance referred to, of the defendant for injuries to any one person; $898.33, expenses incurred in action No. 2; and $506.68, expenses incurred in successfully defending action No. 1, together with interest-amounting in all to $7,045.51. From the judgment entered thereon, and from an order denying a motion for a new trial, the defendant appeals.

It urges that the judgment appealed from cannot be sustained for the reason that the action was not commenced within the time provided in the policy. The parties had a right to prescribe a shorter limitation for the commencement of an action under the policy than that provided by statute. Such right is recognized in section 414 of the Code of Civil Procedure, which provides that the general provisions of chapter 4, tit. 3, shall not apply to " a case, where a different limitation is specially prescribed *** by the written contract of the parties." Id. subd. 1. The policy in question provided that:

" No action shall lie against the company after the expiration of the period within which an action for damages on account of the given injuries *** might be brought by such claimant *** against the assured, unless, at the expiration of said period there is a suit arising out of such accident pending against the assured, in which case an action may be brought in respect to the claim involved in such action against the company by the assured within thirty days after final judgment is rendered in such suit and not later."

Mrs. Johnston was injured on the 6th of June, 1896, and an action to recover damages therefor, or for loss of her services, had to be brought within three years thereafter. Code Civ. Proc. § 383, subd. 5; Maxson v. D., L. & W. R. R. Co., 112 N.Y. 559, 20 N.E. 544.Three years thereafter-June 6, 1899-the two actions which the Johnstons had brought against the plaintiffs were pending, but as already stated, after the Johnstons had recovered their judgments against the bridge company these actions were, by consent, discontinued. The orders of discontinuance, while not, in effect, final judgments, terminated the actions, and it necessarily follows that the present action, which was not begun until July 3, 1906-more than four years [116 N.Y.S. 1046] later-is barred by the terms of the policy so far as these actions are concerned. But it is urged that the discontinuance of such actions cannot be resorted to for the purpose of defeating a recovery here, since the defendant through its attorneys undertook their defense and consented to the discontinuance without Creem & Co.'s knowledge or consent. This was neither alleged in the complaint nor proved at the trial, and if it had been it would not have aided the plaintiffs. The plaintiffs in these actions had an absolute right, upon payment of costs to discontinue ( Janssen v. Whitlock, 58 A.D. 367, 68 N.Y.Supp. 1086; Walsh v. Walsh, 33 A.D. 579, 53 N.Y.Supp. 881), and the court was without power to prevent it ( Matter of Butler, 101 N.Y. 307, 4 N.E. 518; Schlegel v. Roman Catholic Church of Most Holy Trinity, 124 A.D. 502, 108 N.Y.Supp. 955; Telephonine Co. v. Douthitt, 115 A.D. 362, 100 N.Y.Supp. 781). Those actions were at law. Defendants had not asked for any affirmative relief, and the plaintiffs could no more be compelled to continue the litigation than they could have been to commence it. The actions which the Johnstons brought against the bridge company were, as we have already seen, pending at the expiration of three years- June 6, 1899-but this court held in Tolmie v. Fidelity & Casualty Co., 95 A.D. 352, 88 N.Y.Supp. 717, affirmed 183 N.Y. 581, 76 N.E. 1110, that an action upon a policy which contained a provision similar to the one here under consideration was barred in three years unless a suit was pending against the assured. In that case Wood & Tolmie had done work under a contract with the city of New York. A person injured through their negligence brought an action against the city to recover damages. The city notified Wood & Tolmie of the commencement of the action, and they, in turn, notified the insurance company, which assisted in the defense. Judgment was recovered against the city within three years after the accident. When the three years expired no action was pending against the assured, but the city, more than 30 days thereafter, brought an action against Wood & Tolmie and their surety on a bond given to indemnify it against the claim, and recovered judgment. Tolmie, as surviving partner, then brought an action to recover from the insurance company on the policy, but it was held that the action was barred, in that it was not commenced within the period provided in the policy.

The final judgments in the actions against the bridge company were entered in January and May, 1902, respectively, and, even if these could be deemed actions against the assured within the meaning of the policy, the present action was not brought within 30 days after the final judgments were rendered. It is true this action was brought within 30 days after judgment was entered upon the remittitur from the Court of Appeals in action No. 2, brought by the bridge company against these plaintiffs, but this fact cannot possibly affect the limitation clause in the policy. It was not " a suit arising out of such accident pending against the assured." It was an action brought against Creem & Co. by the bridge company to subject the former to a liability growing out of a contract which they had entered into with the latter. It seems to me, therefore, that the defense that the action was not commenced within the time specified in the policy was a bar [116 N.Y.S. 1047] to the maintenance of the action, and defendant's exception to the refusal to direct a verdict in its favor was well taken.

It is suggested by the respondents that the defendant waived the limitation clause of the policy, or, at least, is estopped from resorting to it to prevent a recovery, but such waiver or estoppel was neither alleged nor proved. In this connection our attention is called to the fact that the defendant had also insured the bridge company, and, when Kate Johnston commenced an action against it, it notified the defendant of that fact, and defendant's attorneys assumed the defense of the action, and ...


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