Lauritano v. American Fidelity Fire Insurance

Botein, J.

On May 21, 1952 plantiff was seriously injured when the car in which he was riding as a passenger was struck by a large tractor-trailer. The tractor-trailer, which was owned by one Joseph Forzano, was at the time of the accident rented to S. S. D. Trucking Corp. and was then on its way to make a pick-up.

Plaintiff brought action against Joseph Forzano and S. S. D. Trucking Corp. and obtained a default judgment against them in the sum of $50,189.75. This judgment has remained uncollected. Forzano having moved out of the State and S. S. D. Trucking Corp. having gone out of business, plaintiff invoked the provisions of section 167 of the Insurance Law and brought the present action directly against their automobile liability insurers. After trial by the court without a jury the complaint was dismissed, and from the judgment thereupon entered in favor of defendant insurance companies plaintiff appeals.

The judgment in favor of defendant Standard Accident Insurance Co., Forzano’s liability insurer, must be affirmed. The policy which Standard issued to Forzano, as owner of the tractor-trailer, afforded him only what was known as ‘ ‘ deadhead ’ ’ coverage, and was denominated “ Insurance for Non-Trucking Use ”. The policy specifically provided that it did not apply “ while the automobile is being used in the business of any person or organization to which the automobile is rented ”. The policy language is clear and unambiguous; and it appearing without dispute that at the time of the accident Forzano’s vehicle was rented to S. S. D. Trucking Corp., there can be no liability on the part of defendant Standard.

Different considerations apply to the defenses of defendants American Fidelity Fire Insurance Co. and American Universal Insurance Co., which were the primary and excess liability insurers, respectively, of S. S. D. Trucking Corp. Their policies specifically covered hired equipment being operated in the interest of S. S. D., and there would be no question of coverage of the insured under their policies were the policy provisions otherwise complied with.

However, S. S. D. gave no notice of the accident to its insurers. Plaintiff, unaware and unadvised of the fact that the vehicle had been rented to S. S. D., did not himself notify S. S. D.’s insurers of the accident and of his claim until June 12, 1953. This was almost 13 months after the date of the accident. The trial court held the delay to be excessive and dismissed the complaint.

The policies specified that no action should be maintainable “ unless, as a condition precedent thereto, the insured shall have fully complied with all the terms of this policy ”. They called for the giving of notice of the accident “ as soon as practicable”, and also required the “ immediate ” forwarding of every demand, notice, summons or other process. Undeniably S. S. D., the insured, failed to comply with either condition.

At one time, the liability insurance policy was regarded as the concern only of the insured and his insurer, as exclusive parties to the contract. Any act or omission by the insured which would have released his insurer from liability would inevitably have precluded recovery by those whose claims against the insurer were wholly derivative. However, the Legislature, recognizing that an injured party, while not privy to the insurance contract, had a genuine interest in it and should be enabled to invoke its protection, enacted section 109 of the Insurance Law, forerunner of the present section 167, to create, as its heading indicates, an independent right of the injured person to proceed directly against the liability insurer (L. 1917, ch. 524). Successive amendments have profoundly altered what was once commonly accepted—that the liability policy existed solely for the protection of the insured.

Today the injured party is no longer wholly dependent upon the diligence and conscientiousness of the person who caused him injury. It was precisely because accident victims could be deprived of all possibilities of recovery through the irresponsibility, obduracy or neglect of the insured that section 167 of the Insurance Law was amended (L. 1939, ch. 882) to require every liability policy to contain:

“(c) A provision that notice given by or on behalf of the insured, or written notice by or on behalf of the injured person or any other claimant, to any licensed agent of the insurer in this state, with particulars sufficient to identify the insured, shall be deemed notice to the insurer.

“ (d) A provision that failure to give any notice required to be given by such policy within the time prescribed therein shall not invalidate any claim made by the insured or by any other claimant thereunder if it shall be shown not to have been reasonably possible to give such notice within the prescribed time and that notice was given as soon as was reasonably possible. ’ ’

While the policies in suit did not contain such provisions, they must be construed as though they did conform to the statutory requirements (Insurance Law, § 143). Hence, it is clear that when the insured has failed to give proper notice, the injured party, by giving notice himself, can preserve his rights to proceed directly against the insurer.

All members of this court are in agreement that the standards by which the notice given by the injured party must be judged differ from those governing notice given by the insured. The statute having granted the injured person an independent right to give notice and to recover thereafter, he is not to be charged vicariously with the insured’s delay (Pitts v. Aetna Cas. & Sur. Co., 218 F. 2d 58, 62 [2d Cir., 1954], cert, denied 348 U. S. 973). When the injured party has pursued his rights with as much diligence ‘1 as was reasonably possible ’ ’ the statute shifts the risk of the insured’s delay to the compensated risk-taker who can initially accept or reject those for whom it will bear such risks.

The injured person’s rights must be judged by the prospects for giving notice that were afforded him, not by those available to the insured. What is reasonably possible for the insured may not be reasonably possible for the person he has injured. The passage of time does not of itself make delay unreasonable. Promptness is relative and measured by circumstance. Thus, in Solomon v. Continental Fire Ins. Co. (160 N. Y. 595) notice given a considerable time after the event insured against had occurred, but within three days after plaintiff, an assignee of the original insured, was able to ascertain the identity of the insurer, was held to be timely. In Greenwich Bank v. Hartford Fire Ins. Co. (250 N. Y. 116, 131) it was held, although the policies required immediate notice, that notice given by a receiver of an insured corporation, as soon as he learned of the existence of insurance policies and the names of the insurers, was given within a reasonable time. And in Bazar v. Great Amer. Ind. Co. (306 N. Y. 481, 489) it was observed that a notice given to a liability insurer over 20 months after an accident would not have been untimely in the absence of prior knowledge, had the notice been in writing. Notice can hardly be given until there is knowledge of the facts upon which notice can be predicated (Trippe v. Provident Fund Soc., 140 N. Y. 23).

The majority finds as a fact that the notice given to S. S. D.’s liability insurers was given by plaintiff as soon as it was reasonably possible for him to do so. Plaintiff did not know at the time of the accident who was responsible for the operation of the tractor-trailer, which bore Alabama license plates. Plaintiff’s original attorney and his successor constantly and aggressively pressed the search for the necessary information, following up their letters with telephone calls, personal visits, and inquiries directed to the Motor Vehicle Bureaus of New York and Alabama, the Police Department, the Public Service Commission and the Interstate Commerce Commission. The owner, Forzano, remained inaccessible despite the barrage of letters and telephone calls directed to him. It was not until seven months after the accident that plaintiff’s attorney was able to communicate directly with Forzano. Only then was it learned, for the first time, that at the time of the accident Forzano’s tractor-trailer had been hired out to S. S. D.

Plaintiff immediately communicated with S. S. D., moved to join it as a party defendant in the action that had been commenced, and then served it with a supplemental summons and complaint. But despite a succession of promises, S. S. D. did not divulge the identity of its insurers. Plaintiff attempted to invoke the aid of the court and moved to compel disclosure through an examination. However, S. S. D. managed to put off the examination several times, so it was not until another six months had elapsed that plaintiff finally ascertained the identity of S. S. D.’s insurers.

As soon as plaintiff’s attorney obtained the names of S. S. D.’s insurers he wrote them, giving them detailed notice of the accident and offering to furnish them with the suit papers and to give them an opportunity to interpose an answer and defend on the merits. Of course, it is conceivable that plaintiff could have taken other and further steps to discover the identities of the insurance companies involved at an earlier date. There are few investigative activities, when analyzed retrospectively against the background of the known facts, that will not yield up faster and more direct avenues to the truth — particularly when the investigation is pursued against obstructive tactics. But plaintiff’s efforts must be judged by the standard of what appeared reasonable at the time. Viewed in that light, plaintiff’s notice to S. S. D.’s insurers immediately upon learning their identities must be deemed to have been given as soon as it was reasonably possible for him to do so.

Nevertheless, defendants urge, even if plaintiff himself be deemed to have given timely notice of the accident under the statute, recovery would still be barred because S. S. D. failed to comply with the additional policy condition that ‘ ‘ If claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons or other process received by him or his representative ”. This is a condition which defendants contend could be complied with only by the insured; and there is at the least a serious issue of fact as to whether S. S. D. did forward the suit papers served by plaintiff within the time specified in the policies. It should be observed, however, that this condition of the policy appears under the heading “ Notice of Claim or Suit ”, immediately after the provision for “ Notice of Accident ”.

In giving notice of the accident the insured must on his own initiative‘compile and transmit the necessary information, but he can give notice of claim or suit merely by forwarding whatever papers are received by him. The requirement that all. suit papers be forwarded is, by the very provisions of the policies, but another species of notice; and the statute (Insurance Law, § 167, subd. 1, par. [d]) provides that “ failure to give any notice required to be given by such policy within the time prescribed therein ” (italics supplied) is not to invalidate any claim if such notice is given as soon as reasonably possible. The comprehensive statutory language embraces the entire notice complex. There is no justification for differentiating among notice of accident, notice of claim and notice of suit.

The injured person, having been accorded an independent statutory right, must be given an opportunity to exercise that right. It would avail him little to be allowed to give notice of the accident himself, if he still were barred because the notice of claim and suit papers could be transmitted only by the insured. The accident victim’s independent right of notification must also include the forwarding of suit papers or the right is completely illusory. We cannot consistently hold that plaintiff’s notice of accident on June 12, 1953 was timely and nevertheless rule that the notice of suit he gave in the same letter on the same day was ineffective and came too late.

An insurer can be seriously prejudiced by the failure of the insured to furnish it with a prompt report of the accident, with a description of the time, place and circumstances and the names and addresses of persons injured and of witnesses. Nevertheless, the carrier’s right to an early investigation must, under the mandate of section 167 of the Insurance Law, yield to the paramount right of the accident victim to protection, no matter how dilatory the insured may have been.

The right to the immediate transmission of whatever papers have been served upon the insured is by no means of comparable value to the carrier. The opportunity for investigation while the facts are still fresh, once missed, is gone forever. Notice of the accident, when furnished by the injured person, may not make available the same facts that the insured may have been able to supply. On the other hand, delayed transmission of claims notices or suit papers by the insured, or the receipt of such documents directly from the claimant, will be less likely to cause irremediable harm. It would be a rare occasion indeed when the carrier could not be placed in just as good a position as it would have enjoyed had the insured complied fully with his obligations. Here, plaintiff offered to waive any defaults, to make the entire plaintiff’s file available, and to allow a complete defense on all issues.

Nor can the failure of the insured to act as the conduit of transmission be taken as a violation of the condition requiring the insured to co-operate with the company. While the defense of the insured’s refusal to co-operate is reserved to the insurer (Insurance Law, § 167, subd. 5), the obligation to give notice is independent of the duty to co-operate (Rochon v. Preferred Ace. Ins. Co. of N. Y., 118 Conn. 190; Rushing v. Commercial Cas. Ins. Co., 251 N. Y. 302, 305). If the co-operation clause were to be construed literally, every failure of the insured to give timely notice of any kind would constitute a violation of that condition. The acts of co-operation called for by that provision unlike the giving of notice, do not admit of adequate performance by anyone other than the assured; i.e., attendance at hearings and trials (Briskman v. Glens Falls Ind. Co., 251 App. Div. 319), disclosure of pertinent information (Coleman v. New Amsterdam Cas. Co., 247 N. Y. 271), the furnishing of evidence (Seltzer v. Indemnity Ins. Co. of North America, 252 N. Y. 330), the signing of necessary papers and pleadings (American Sur. Co. v. Diamond, 206 Misc. 309, affd. 285 App. Div. 1138) and the like. The insured is also required to refrain from collusion in assisting in a recovery by claimants (Roth v. National Automobile Cas. Co., 202 App. Div. 667). At times, co-operation must be requested before it can be said to have been refused (American Sur. Co. v. Sutherland, 35 F. Supp. 353; Shalita v. American Motorists Ins. Co., 266 App. Div. 131, 133, motion for leave to appeal denied 266 App. Div. 885). In any event, a defense of lack of co-operation may be waived (Ohrbach v. Preferred Acc. Ins. Co., 227 App. Div. 311).

In this case defendant insurers made no attempt to defend under a reservation of rights or otherwise, let alone to enlist the co-operation of the insured. The unavailability of a breach of this condition as a defense was apparently recognized by the defendants, who failed to allege the breach of the co-operation condition as an affirmative defense. The point cannot be raised now.

The judgment in favor of the defendant Standard Accident Insurance Co. should be affirmed, with costs to said defendant, and the judgment for the defendants American Fidelity Fire Insurance Co. and American Universal Insurance Co. should be reversed and judgment entered for the plaintiff against said defendants American Fidelity Fire Insurance Co. and American Universal Insurance Co. in the sum of $50,000, with costs. Settle order. ,