of co-insureds or other innocent parties. Fine gradations ranging from outright deception, knowing toleration of it, deliberate ignorance, and negligence to lack of diligence or complete innocence are frequently at issue and can only be evaluated in such a way that by acute attention to the "steady pressure of facts and events," all interests are adequately protected. H.F. Stone, Law and Its Administration 37, 45 (1915).
To decide such questions without a full adversary presentation would be imprudent in view of the wide ramifications of creating an ill-advised precedent pointing either way. Such a precedent might (a) encourage dissembling by officials of an entity seeking insurance, or (b) encourage carriers to use lack of candor by a single officer to avoid a policy on which many others have counted for protection. I decline to seize either nettle because to do so is unnecessary here and, indeed, contrary to the objectives of the Article III case or controversy requirement.
There is insufficient adversarial interest to permit an appropriate evaluation to be made with respect to rescission and thus these questions need not be confronted here. But there is ample uncontradicted evidence to determine the proper disposition of the current controversy between carriers.
Aetna and Federal, in lieu of contesting Republic's claim to have been misled, rely on procedural objections such as waiver, untimeliness in disclaiming coverage and estoppel, all based upon delay in the nature of laches, none of which has merit. There is no indication that Aetna or Federal were prejudiced because of any delay on Republic's part. See Bourne Co v. Tower Records, 976 F.2d 99 (2d Cir 1992); Daingerfield Island Protective Soc'y v. Lujan, 287 U.S. App. D.C. 101, 920 F.2d 32 (DC Cir 1990) (R. Ginsburg, J.), cert. denied 112 S. Ct. 54, 116 L. Ed. 2d 31 (1991). Republic secured no advantage, and the other carriers incurred no disadvantage, from and such delay.
Aetna and Federal were independently liable for the defense costs at issue here, and would have had to pay the legal costs paid by Republic; under the 1990 order had Republic not done so at least in part. Now Republic has discovered, and established as between it and Aetna and Federal, that Republic was misled by some plan officials when deciding to issue its policy, whereas there is no indication that Aetna and Federal were so misled. Under these circumstances the equities, between Republic on one hand and Aetna and Federal on the other, lie with Republic.
A misled carrier clearly is entitled to appropriate relief. See Stipcich v. Metropolitan Life Ins Co, 277 U.S. 311, 317, 72 L. Ed. 895, 48 S. Ct. 512 (1928); Mutual Benefit Life Ins Co v JMR Elec Corp, 848 F.2d 30, 32-33 (2d Cir 1988); Friedman v. Prudential Life Ins Co, 589 F. Supp. 1017 (SDNY 1984); Erwin DeMarino Trucking v. Jackson, 838 F. Supp. 160, 1993 WL 525240, 1993 U.S. Dist. LEXIS 17723, Dkt No 92 Civ 1821 (SDNY Dec 13, 1993).
Here, the funds saved by other carriers who are unquestionably liable for defense costs in the main case, paid by Republic in order to permit the main case to proceed without delay while responsibility for defense costs was litigated, are properly treated as constructively in trust for a carrier which became one of the group of insurers in this case based on erroneous information. See Channel Master v. Aluminium Sales, 4 N.Y.2d 403, 151 N.E.2d 833 176 N.Y.S.2d 259 (1958); Drabkin v. District of Columbia, 263 U.S. App. D.C. 122, 824 F.2d 1102 (DC Cir 1987).
Such a step is analogous to subordination of the position of the unequivocally liable carriers to Republic which was the victim of misconduct contributing to its entry into the matter. See In re Clark Pipe & Supply Co, 870 F.2d 1022 (5th Cir 1989).
Republic is not entitled to interest under any applicable contract provision. Payments made by Republic under the 1990 order may be recovered to avoid unjust enrichment of other carriers at Republic's expense. But damages in the form of interest or otherwise for obedience to a court order are generally unavailable absent an injunction bond, or waiver of the injunction bond rule, neither of which was obtained here. See WR Grace & Co v Local 759, 461 U.S. 757, 770 n 14, 76 L. Ed. 2d 298, 103 S. Ct. 2177 (1983); Philips Business Systems v. Executive Communications, 744 F.2d 287, 290-91 (2d Cir 1984); Commerce Tankers Corp v. National Maritime Union, 553 F.2d 793 (2d Cir), cert. denied 434 US 923 (1977); Continuum Co v. Incepts, 873 F.2d 801 (5th Cir), modified 883 F.2d 333 (5th Cir 1989); Little Tor Auto Center v. Exxon USA, 822 F. Supp. 141, 144 (SDNY 1993); see also In re Anthony Sicari, 151 Bankr. 60 (SDNY 1993).
Summary judgment is granted to Republic to the extent of exonerating it from further payment of legal fees in connection with the above case; Aetna is directed to pay to Republic any fees paid by Republic pursuant to my 1990 order. Except as indicated above, all motions of the parties, including Federal and Aetna's motions for summary judgment, are denied.
Republic may submit a proposed judgment within thirty (30) days of the date of this memorandum order, and shall provide twenty (20) days' notice to all other parties.
Dated: White Plains, New York
February 24, 1994
VINCENT L. BRODERICK, U.S.D.J