DANIEL S. BRASSIL, Respondent,
MARYLAND CASUALTY COMPANY, Appellant.
APPEAL by the defendant, the Maryland Casualty Company, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 18th day of February, 1911, upon the verdict of a jury, and also from an order entered in said clerk's office on the 23d day of February, 1911, denying the defendant's motion for a new trial made upon the minutes.
James J. Mahoney, for the appellant.
Thomas F. Magner, for the respondent.
The plaintiff has recovered a judgment for the reasonable expenses incurred by him in prosecuting to a successful issue two actions brought against him, the defense of which the defendant undertook and assumed up to a certain point, and then abandoned and refused to proceed further with. The defendant appeals. The facts are not in dispute.
The plaintiff, a manufacturer, held an accident indemnity policy issued by the defendant by which it undertook to indemnify him for a term of three years 'against loss from common law or statutory liability' for damages for bodily injuries accidentally suffered by any employee or employees of the insured while engaged in the prosecution of his business. During the lifetime of the policy one of the plaintiff's employees named Loughlin, a minor, was accidentally injured, and shortly afterwards he and his father began actions for damages by reason of such injury. The plaintiff duly notified defendant, as his policy required, of the happening of the accident and of the commencement of the actions, and defendant thereupon exercised the option given it by the terms of the policy, and elected to undertake the defense of the actions. To this end its attorney appeared in said actions for the plaintiff, prepared the answers and carried on the defense. It does not appear that plaintiff was offered, or that he assumed any control over or direction of the defense, except that about two weeks before the actions came on for trial, defendant's attorney wrote a letter to plaintiff suggesting that verdicts might be recovered to an amount aggregating more than the total
liability of defendant under its policy, and that, for that reason, it might be advisable for plaintiff to retain private counsel to protect his excess of liability, and offering to co-operate with such counsel in the defense of the actions. The plaintiff accordingly did retain private counsel who appeared at the trial. How much part he took therein does not appear. Prior to the trial the plaintiff received from the plaintiffs in the damage suits offers to settle the suits and satisfy the claims for the sum of $1,500. These offers he communicated to the present defendant which, however, refused to consider them or to settle the suits. The actions proceeded to trial and resulted in verdicts against plaintiff aggregating $6,500. The defendant thereupon notified plaintiff that it would not prosecute an appeal, 'but holds itself ready to comply with the terms of its contract with you in case you should satisfy the judgment rendered against you.' Just what the defendant meant by its offer to 'comply with the terms of its contract' is not explained, but we assume that it meant to say that it would pay plaintiff the sum of $1,500 when he should have satisfied the judgments for $6,500 and costs. The plaintiff was then placed in an unfortunate position. He had been mulcted in damages in upwards of $6,500 as the result of actions at law, the defense of which had been virtually taken out of his hands; the defendant, which had thus far assumed his defense, refused to proceed further and offered to pay him only the face of the policy, more than $5,000 less than his total liability, and that only after he had paid and satisfied the judgments. He vainly protested to defendant that, having gone so far, it was under a duty to prosecute appeals, but met only a refusal. There was nothing left for him to do except to procure the substitution of his own attorney and to prosecute appeals on his own behalf. This he did with such success that both judgments were reversed by the Court of Appeals and new trials ordered. These, however, were never had, because the suits were ultimately dismissed for failure to prosecute. For the expense incurred in prosecuting these appeals the plaintiff now sues and has recovered judgment. The defendant, treating this action as one to recover the indemnity contracted for by the policy, insists that it can
be subjected to no liability for two reasons: First, because its only agreement was to insure plaintiff against loss arising from common-law or statutory liability for damages, and the final outcome of the actions against plaintiff demonstrates that he was never liable to such loss; and, secondly, because, by the terms of the policy, defendant's obligation to pay was to arise only after the insured had been actually subjected to loss by being obliged to pay damages, which, in consequence of the reversal of the judgment, he has not been obliged to do. If the action must rest upon the theory upon which the defendant supposes it to rest, its objections to the judgment are unanswerable. The contract of indemnity is only against loss from common-law or statutory liability, and if there be no such liability there can be no indemnity. (Cornell v. Travelers' Ins. Co., 175 N.Y. 239.) The policy provides that the defendant shall not be liable to reimburse the insured except for 'loss actually sustained and paid by him in satisfaction of a judgment after trial of the issue.' This clause undoubtedly creates a condition precedent to the recovery of indemnity that the insured shall have actually paid the loss. (White v. Maryland Casualty Co., 139 A.D. 179.) The respondent does not combat either of these propositions, but insists that he is not suing for indemnity against the claims for damages on behalf of the Loughlins, father and son, but for damages for the breach of the obligation assumed by defendant after it had been notified of the claim made by the plaintiffs in the damage suits, and had elected to undertake the defense thereof. In our opinion the judgment may be sustained upon this theory. The policy embraced a number of conditions or stipulations defining the rights and obligations of the parties. The first required the assured, upon the occurrence of an accident, to give immediate notice to the defendant. There is no claim that this condition was not complied with. The second condition prescribes what shall be done by the company, as follows: '2. If thereafter any suit is brought against the assured to enforce a claim for damages on account of an accident covered by this policy, immediate notice thereof shall be given to the company, and the company will defend against such proceeding in the name and on behalf of
the assured, or settle the same at its own cost, unless it shall elect to pay the assured the indemnity provided for in clause 'A' of Special Agreements as limited therein.' The third condition forbids the assured to settle any claim except at his own cost, or to interfere with any negotiations for settlement, or in any legal proceedings, without the consent of the company previously given in writing.
Of course it is open to the company, with respect to any given claim, to refuse to do either of these things, and to repudiate any liability whatever under the contract. If it adopts that course, and it be ultimately determined that the claim was one against which it did not undertake to indemnify the assured, it will be liable neither for indemnity against the claim nor for the ...