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MEYER KORNBLUM & SON v. EXCESS INS. CO. OF AMERICA

March 7, 1935

MEYER KORNBLUM & SON, Inc.,
v.
EXCESS INS. CO. OF AMERICA



The opinion of the court was delivered by: GALSTON

GALSTON, District Judge.

The motion is to dismiss the complaint on the ground of insufficiency.

On October 1, 1930, the Hudson Casualty Insurance Company issued its policy of insurance to the plaintiff to insure and indemnify the plaintiff against loss or damage resulting from an injury or injuries suffered by any person by reason of the operation of a motor vehicle belonging to the plaintiff. This policy likewise obligated the insurer to defend all actions for damage for personal injuries at its own expense, and further provided that, in the event of any judgment being rendered against the insured, it would pay such judgment.

 Thereafter the Hudson Casualty Insurance Company was merged with the Public Indemnity Company, whereby the latter company assumed all of the liability on policies of the Hudson.

 While the policy was in full force and effect, on or about March 9, 1932, one Anna Tesoriere, as administratrix of Salvatore Tesoriere, brought suit in the Supreme Court of the state of New York, Kings county, against the plaintiff herein for injuries alleged to have been sustained by the decedent, Salvatore Tesoriere, on or about September 1, 1931, by reason of the negligent operation of the automobile belonging to the plaintiff.

 The plaintiff notified the Public Indemnity Company of the institution of said action, and that company, pursuant to the contract of insurance, undertook the defense of the action. In that action a judgment was duly entered against the plaintiff in the sum of $10,968.45 on or about October 13, 1932.

 The Public Indemnity filed a notice of appeal from the judgment, and sought to stay execution of the judgment pending the determination of the appeal. In pursuance of sections 594 and 615 of the Civil Practice Act of the state of New York, the Public Indemnity Company, though it was primarily liable and obligated to pay the judgment, caused its own undertaking as surety to be filed in the office of the clerk of Kings county. To this undertaking the plaintiff in that action excepted to the sufficiency of the surety. Thereafter the parties appeared before one of the justices of the Supreme Court in Kings county and the justice refused to approve of the bond or undertaking of the Public Indemnity Company, but stayed the execution of the Tesoriere judgment until 2 o'clock of that afternoon so as to give the defendant, Kornblum, or the Public Indemnity Company an opportunity to furnish another bond or undertaking. It is next alleged that thereupon the Public Indemnity Company, for the purpose of protecting its own interests, and to stay the execution of the judgment, arranged with the Excess Insurance Company of America, the defendant herein, to issue a bond or undertaking in lieu of the rejected bond and undertaking. It is further alleged that, by reason of the limited time within which the Public Indemnity Company was able to act, there was filed by the Public Indemnity Company a binder from the Excess Insurance Company of America in the form of a letter. This letter reads as follows:

 "We hereby confirm 100% reinsurance of your undertaking on appeal from a judgment directing the payment in the sum of $10,968.45 for account of Anna Tesoriere, as Administratrix of the goods, chattels and credits which were of Salvatore Tesoriere, Deceased, Plaintiff and Respondent, against Meyer Kornblum & Son. Inc., Defendant and Appellant. Said bond executed November 9th, 1932 and numbered 225636."

 The Public Indemnity Company submitted the foregoing letter to the justice holding Special Term, Part II. Objections of Tesoriere's attorneys were overruled, and the justice directed the letter to be received and filed in lieu of the rejected undertaking of the Public Indemnity Company. It is also alleged in the complaint that the letter was intended to be accepted by the court as a bond or undertaking sufficient to stay the execution of the judgment, and that the court had no power under the statute to accept a contract of reinsurance, and that in fact it was now reinsurance, and that the defendant herein, with intent to deceive the Supreme Court, so worded the aforesaid letter as to enable it to claim in any suit which might be brought to enforce the same as a supersedeas bond that it was not such a bond but mere reinsurance, and therefore without privity except as between the two insurance companies.

 Thereafter the execution of the judgment was stayed pending the appeal; and on or about May 6, 1933, the Appellate Division dismissed the appeal.

 Prior to the dismissal on April 21, 1933, the superintendent of insurance of the state of New York, under direction of the Supreme Court of the state of New York, took over the assets of the Public Indemnity Company, and is now in possession of such assets as liquidator of the company, because of the insolvency of the Public Indemnity Company. In consequence the plaintiff, Kornblum, is unable to enforce the liability of the Public Indemnity Company on the judgment pursuant to the terms of the policy of insurance

 The plaintiff also alleges that the Tesoriere judgment was finally settled for the sum of $8,400, which money was paid by the plaintiff herein to Tesoriere. At the time of such payment, and at the instance of the plaintiff herein, the Tesoriere judgment and all claims arising therefrom were assigned to one Jacob D. Levinson. Thereafter, and prior to the commencement of this suit, Levinson reassigned the judgment and all claims arising therefrom to the plaintiff herein.

 As a first cause of action the plaintiff claims that the defendant is liable to the plaintiff for the amount of the judgment, and in the alternative asserts that, if the aforesaid letter of defendant is insufficient to make the defendant liable, a decree of reformation be granted by substituting therein the terms of the bond and undertaking filed by the Public Indemnity Company.

 For a second cause of action the plaintiff asserts that the agreement in question was one between the defendant and the Public Indemnity Company, and was made for the benefit of the plaintiff, Meyer Kornblum & Son, to which company ...


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