The opinion of the court was delivered by: PALMIERI
The question presented is whether a liability insurance policy issued by defendant covered the recovery by one Dioguardi for an injury suffered by him in the plaintiff's premises. The facts are substantially undisputed.
Plaintiff, hereinafter referred to as 'Refined', operated a large sugar plant in Yonkers, New York. It employed the Frank Angelilli Construction Corporation (Angelilli) as independent contractor to undertake construction work at its plant. Angelilli held a liability insurance policy purchased from defendant (Travelers); and an amendment to the policy provided that
'It is agreed that the interest of the Refined Syrups and Sugars Incorporated, ft. of Vark St., Yonkers, N.Y. is covered as an additional insured as respects to operations performed by the named insured for the Refined Syrups and Sugars Incorporated on a cost plus basis throughout the term of this policy.'
While this policy was in effect, Dioguardi, one of Angelilli's employees, suffered serious personal injuries when he was accidentally struck by the counter-weight of an elevator on Refined's premises. At the time of the accident, the elevator was being operated by one of Refined's employees for reasons unconnected with the construction work that was being performed by Angelilli. Dioguardi brought suit against Refined and recovered a judgment in the sum of $ 40,000 after three trials before the New York Supreme Court.
The first of the State Court trials resulted in a verdict set aside for inadequacy. The second resulted in a verdict for the defendant which was set aside by the Trial Court for its own error in excluding evidence. This evidence was to the effect that shortly before the accident, the plant manager of Refined had refused the request of the independent contractor, Angelilli, to shut down the elevator pending completion of the work task by the employee who was subsequently injured. The evidence adduced at the third trial established that at the time of the accident Refined's employee was operating the elevator, that this occurred shortly after the refusal of Refined's plant manager to shut it down temporarily upon the request of Angelilli; and that this refusal to shut down the elevator was caused by the plant manager's desire to perform repairs on an upper floor of the premises and to use the elevator for the purpose of transporting Refined's employees and materials to this floor. Whether the verdict upon the third trial was returned upon the theory of the plant manager's negligence in refusing to shut down the elevator or upon the theory of the elevator operator's negligence in running the elevator without warning to the contractor's employee who was injured, cannot be established. The charge of the Trial Court would have permitted a verdict on either theory and the verdict was general. However, even if it be assumed, as the plaintiff claims, that the sole basis for the verdict in the third trial before the State Court was the negligence of the plant manager in refusing to shut down the elevator upon the request of the independent contractor, Angelilli, the result here would be the same.
In addition to the policy of Travelers, there was another outstanding liability policy at the time of the accident. It had been issued by American Mutual Liability Insurance Company (American) in favor of Refined and provided for very broad personal injury coverage at the premises where the accident occurred. It covered, specifically, personal injuries arising out of the operation and maintenance of the elevators at Refined's premises. The elevators were identified on a schedule attached to the policy and the elevator involved in the accident was concededly included in that schedule. This elevator was also covered under the Elevator Collision Endorsement in this policy.
Endorsement 19 of the American policy excluded operations performed under cost plus contract 'whenever the assured's (Refined's) interest has been specifically included in such contractor's insurance and where, but for this exclusion, this policy would duplicate or otherwise contribute to such other valid and collectible insurance.' The only other insurance was that afforded by the Travelers' policy. Whether this was 'other valid and collectible insurance' under the exclusion provision just quoted not only poses the essential question in this case -- whether Refined was covered by the Travelers' policy under the circumstances of the Dioguardi accident -- but serves to provide the spark for the controversy here which, in effect, is one between the two insurance companies. The issue before me, therefore, turns on the scope of the insurance coverage provided by Travelers' policy.
Before examining Travelers' policy, however, a preliminary observation with respect to American's relationship to this suit seems appropriate. In point of fact, American defended the suit and incurred litigation expenses amounting to $ 10,576.42, the reasonableness of which has not been questioned before this Court. The amount of the judgment was paid by Refined but the money to pay it was loaned by American, as insurer, to Refined, as insured, under an agreement whereby the loan was to be repaid only out of any recovery in this litigation. Travelers' objection that Refined is not entitled to sue because it has sustained no damage is not well taken. Where, as here, the insurer makes a loan to the insured, instead of paying a loss, upon an undertaking by the insured to repay only out of any recovery against a third person, the insured, and not the insurer, is the real party in interest and entitled to sue. Luckenbach v. W. J. McCahan Sugar Refining Co., 1918, 24, U.S. 139, 39 S. Ct. 53, 63 L. Ed. 170; The Plow City, 3 Cir., 1941, 122 F.2d 816, certiorari denied Plow City S.S. Co. v. Texas Gulf Sulphur Co., Inc., 315 U.S. 798, 62 S. Ct. 579, 86 L. Ed. 1199; see also Sosnow, Kranz and Simcoe, Inc. v. Storatti Corp., 1st Dept. 1945, 269 App.Div. 122, 54 N.Y.S.2d 780, affirmed 1946, 295 N.Y. 675, 65 N.E.2d 326.
As I have already indicated, both American and Travelers had outstanding liability policies at the time of the accident, the former in favor of Refined, the latter in favor of Angelilli, with Refined as an 'additional insured'. Refined claims that since it was an additional insured under the Travelers' policy issued to Angelilli, Travelers had the duty to defend and indemnify Refined in the suit brought by Dioguardi; and that its breach of that duty makes it liable to Refined for the amount of the judgment in favor of Dioguardi and the expenses of the litigation.
Travelers' duties arise from and are circumscribed by the insurance contract, and I therefore turn to the contract to determine whether Refined's claim is justified. That contract provided:
'The insurance afforded is only with respect to such and so many of the following coverages and divisions thereunder as are indicated by specific premium charge or charges * * *;'
'The letter 'X' in any premium space shall mean that insurance is not afforded with respect to the hazard stated in the division opposite thereto.'
The policy form was so arranged that under the category of 'Bodily Injury Liability' the following 'Hazards' could be insured against: (1) 'Premises-Operations,' (2) 'Elevators,' (3) 'Independent Contractors,' (4) 'Products,' and (5) 'Contractual.' Premium charges were indicated for the hazards of 'Premises-Operations' and 'Independent Contractors,' and the premium spaces provided for the other hazards contained 'X's. Therefore, by the terms of the policy, insurance was afforded with respect to the hazards arising from 'Premises-Operations' and ...