Employers' Liability Assurance Corp. v. Aresty

Stevens, J.

This is an appeal from an order denying the plaintiff’s motion for summary judgment. June 19, 1957 the plaintiff issued and delivered to defendant Joseph Aresty in New York an automobile liability insurance policy covering a 1951 Plymouth suburban car.

Subsequent to the issuance of the policy the assured moved to Connecticut. Thereafter and on or about September 10, 1957, a change, of address was indorsed on the policy and a portion of the premium paid refunded. The indorsement was issued in New York.

On March 22, 1958, while the policy was in full force and effect the assured’s car was involved in an accident in Connecticut with another car. The wife of the assured brought suit in Connecticut against him for damages for personal injuries.

At the time of the issuance and delivery of the policy in New York, subdivision 3 of section 167 of the Insurance Law provided : “No policy or contract shall be deemed to insure against any liability of an insured because of death of or injuries to his or her spouse or because of injury to, or destruction of property of his or her spouse unless express provision relating specifically thereto is included in the policy.”

There was no such provision in the policy. Plaintiff seeks declaratory judgment that the policy does not cover liability for injury to the spouse of the insured, that it is not obligated to defend the Connecticut action, and that it is not obligated to pay any judgment that the assured may become obligated to pay as damages resulting from the alleged injuries to his spouse.

The defendant contends that the issuing of the indorsement changing his residence and the refunding of a portion of the premium in effect rewrote the contract of insurance so as to cover the liability of the assured to his spouse. He asserts that subdivision 3 of section 167 of the Insurance Law no longer applies.

By reason of the provision of the Insurance Law' above referred to, the policy, when issued, was subject to the terms of subdivision 3 of section 167 of the Insurance Law. The question to be resolved is whether the indorsement of change in residence to a Connecticut address and the refund in part of the premium constituted the making of a new contract so as to subject it in operation, construction and application to Connecticut law. Or briefly, is the plaintiff obligated to defend and may it be held subject to liability for alleged injuries to defendant’s spouse allegedly sustained through his negligence?

The execution, interpretation and validity of a contract is determined by the law of the place where the contract is made. The obligations of the parties thereunder are similarly determined. (Swift & Co. v. Bankers Trust Co., 280 N. Y. 135.) The exception to this general rule is where the parties at the time of the making of the contract entertained a different view or intention. If they had a view that the contract would be executed elsewhere then the contract is to be considered according to the law of such place. ' (See Hibernia Nat. Bank v. Lacombe, 84 N. Y. 367.) In Auten v. Auten (308 N. Y. 155) where, though the contract was executed in New York, Mr. Justice Fuld pointed out that the parties could not ‘ ‘ have expected or believed that any law other than England’s would govern the effect of the wife’s institution of a separation action” (p. 163). It is true that the “ grouping of contacts ” theory was there adopted and applied. Essentially the conclusion reached was based upon the intent of the parties and the place of expected performance as the court so found those facts. In that case the parties resided in England at the time the agreement was entered, and there was nothing to indicate their intention to live elsewhere.

At the time the contract was executed in the instant case there can be no doubt that the parties intended the measure of their obligation thereunder to be determined by New York law. Matters of performance of a contract are regulated by the laws of the place where the contract by its terms is to be performed. (Union Nat. Bank v. Chapman, 169 N. Y. 538; Swift & Co. v. Bankers Trust Co., supra.) When this contract was made there was, in effect, by intention of the parties a uniting of interpretation, execution and validity with that of place of performance, it being expected that such performance would occur in New York.

The assured elected not to include his spouse within the area of coverage and the insurer, not having assumed the additional obligation, could not demand an increased premium. While the language of the subdivision of the statute was not set forth, it is automatically a mandatory part of every motor vehicle liability policy issued in New York. (Globe Ind. Co. v. Anastasio, 5 Misc 2d 238; New Amsterdam Cas. Co. v. Stecker, 1 A D 2d 629, affd. 3 N Y 2d 1.)

That refund or adjustment of premium was possible under the express terms of the policy appears from the language of Condition 2, which makes provision therefor in the event of disposition or replacement of the car.

The basic nature of the underlying. contract of insurance was not changed or altered, nor was an additional risk or obligation assumed by the insurer merely by reason of the change of address indorsement. The indorsement and the refund here were no more than a recognition of the fact that the assured had moved into an area where the risk incidence was lower, the exposure less, and the premium charged should be commensurate therewith. A like result might have been achieved had the insured moved into a rural area of this State.

The indorsement and the policy are to be read together and the indorsement does not abrogate or nullify any provision of the policy unless so stated in the indorsement. (Thompson-Starrett Co. v. American Mut. Liab. Ins. Co., 276 N. Y. 266, 271; Birnbaum v. Jamestown Mut. Ins. Co., 298 N. Y. 305.) The indorsement is neither repugnant to nor in irreconcilable conflict with the basic provisions of the policy. No later or different intention is expressed nor can it be so inferred as to override that provision which as a matter of law was deemed included in the policy when issued. (Cf. Poel v. Brunswick-Balke-Collender Co., 216 N. Y. 310; Insurance Law, § 167, subd. 3.)

The assured seeks by reason of the notification of change of address to saddle the insurer with a new and additional obligation not contemplated by the parties at the time the contract was executed. The minds of the parties then met and agreed upon the exclusion from coverage of the spouse. The mere fact of indorsement of a change of address should not serve to foist liability upon the insurer or expand the area of coverage beyond that agreed upon. Express language or the existence of additional factors from which it may reasonably be inferred that it was the intention of the parties that the spouse be included in coverage is required.

New Amsterdam Cas. Co. v. Stecker (1 A D 2d 629, affd. 3 N Y 2d 1, supra) to which the parties refer, is not applicable here. In that case the insured was a resident of New York and the policy was issued in New York. The accident occurred in Connecticut and the husband brought suit there against his wife, the insured. In an action in New York by the insurance company for a declaratory judgment the court held the public policy underlying the statute (though the provision was not expressed in the policy) excluded coverage of liability between spouses whether the accident occurred in New York or without the State. (It should be noted that Connecticut has no comparable statute.) The decision reaffirms the view that insurance contracts are construed in light of existing law, legislative intent and purpose, and the language expressed within the four corners of the instrument.

Our law seeks to avoid “ excessive, inadequate, unfairly discriminatory or otherwise unreasonable ” insurance rates (Insurance Law, § 180). In other words, it seeks to assure that the rate charged shall bear reasonable relation to or be commensurate with the risk assumed and adequate for the class of risk to which they apply. (See Insurance Law, § 183, subd. 1, par. [b].) To accept the version of the assured is to frustrate the statutory objectives and run counter to the declared policy of the State.

Subdivision 3 of section 167 was designed to prevent collusion and fraud. (Cf. Fuchs v. London & Lancashire Ind. Co. of America, 258 App. Div. 603.) Before the right of coverage upon which a suit might be predicated could exist, it was requisite that such coverage be declared in specific language. (See General Acc. Fire & Life Assur. Corp. v. Ganser, 2 Misc 2d 18; cf. Jacobs v. United States Fid. & Guar. Co., 2 Misc 2d 428.)

In Merchants Ind. Corp. of N. Y. v. Seward (12 Misc 2d 638) an automobile liability policy issued in New York granted insured the right to garage his automobile in Connecticut for six months of the year and the balance of the time the car was to be garaged in New York. An accident occurred in Connecticut in which the wife was injured. The policy did not contain the provision for coverage of the spouse. The court considered and rejected the “center of gravity” or contact theory. A declaratory judgment was granted plaintiff. The court found that permission to garage the automobile at a specified address in Connecticut did not render inapplicable the provisions of subdivision 3 of section 167 of the Insurance Law, though Connecticut law contained no such restriction on insurer’s liability.

The order appealed from should be reversed on the law, the facts and in the exercise of discretion and declaratory judgment granted plaintiff, with costs.