On appeal from the Supreme Court.
For the appellants, Kellogg & Chance.
For the respondent, Heine & Laird (Charles J. Molloy, of counsel).
The opinion of the court was delivered by
HEHER, J. Plaintiff herein suffered physical injuries and property damage by reason of the negligent operation of a motor vehicle owned by one Martin, and recovered judgments for the damages sustained. His efforts to obtain from Martin satisfaction of the judgments were unavailing, and he instituted this action to recover the judgment debts from Martin's insurers. Recoveries were sought from appellant, New Jersey Manufacturers Association Fire Insurance Company, on a policy covering property damage, and from appellant, New Jersey Manufacturers Casualty Insurance Company, on a policy covering loss or damage resulting from bodily injury or death suffered by others, and occasioned by the use of the automobile covered by the policies. The answer alleged that Martin had, subsequent to the occurrence
which occasioned the injuries, breached the conditions of the policies, and that, in consequence thereof, appellants were relieved from all liability thereon, either to the insured or to any person who suffered injury by reason of the use of the automobile covered by the policies. The answer was struck out, and summary judgments for plaintiff entered. Defendants appeal from these judgments.
The answer specified the conditions breached as those "which required him to render co-operation and assistance in defending against claims and in adjusting and minimizing loss or damage, and which provided that the assured shall not commit or attempt any fraud or false swearing touching any matter relating to the insurance provided by said policies, or the subject thereof, either before or after loss."
This is, in substance, the single defense interposed by the answer. If Martin did not breach the contract in the particulars specified, appellants are concededly severally liable to respondent upon the policies issued by them, respectively. Respondent moved to strike out the answer upon the ground "that it is sham or frivolous." Assuming that the answer, in respect of each policy, properly and effectively pleaded a breach of the conditions that would deprive Martin of a right of action thereunder, the proofs submitted by appellants on this motion disclosed that it is patently sham, and upon that ground was properly struck.
The case presented by appellants follows: The happening, in which respondent suffered injury, occurred on January 9th, 1932. Three days later Martin, by letter, advised appellants of the occurrence. Therein he gave a detailed explanation of the event, which tended to exculpate him from negligent conduct. The statement contained the following question and answer: "Assured's speed 30 m.p.h." Appellants insist that, relying upon the truth of these statements, they concluded "that no claim could arise against" Martin, and therefore they "made no investigation and took no other steps for the protection of themselves or the said Martin." On January 28th, 1932, respondent instituted suit against Martin in the Second District Court of Paterson, to recover
the property damage sustained. Appellants were duly notified of the commencement of this action, and on February 5th, 1932, caused an appearance on Martin's behalf to be entered by its counsel. On that day Martin made a further statement, in writing, to appellants' counsel. Therein he said that the first statement did not contain a true version of the occurrence; that, inasmuch as suit had been instituted, he desired to give appellants "a true statement of all the facts, so that they may be guided accordingly;" that in order to keep an appointment, he was, at the time in question, "going no less than forty-five miles an hour, and I really think faster than that." He explained that he refrained from giving this information to appellants at the time of the first statement in order to avoid "difficulty with the motor vehicle department." On February 16th, 1932, appellant's counsel withdrew its appearance in the action, and on February 24th, 1932, appellant New Jersey Manufacturers Association Fire Insurance Company disclaimed liability upon the policy. The action was not tried until July 20th, 1932. On June 15th, 1932, respondent instituted his action in the same District Court to recover damages for the bodily injuries sustained. Appellant New Jersey Manufacturers Casualty Insurance Company promptly disclaimed liability on this policy, and refused to undertake the defense of the action. The prejudice which it is claimed resulted to appellants, by reason of the false statements made by Martin at the outset, is stated by appellants' general attorney, in the affidavit it submitted by him, as follows: "It is the belief of this deponent that * * * the failure of these defendants [appellants] to conduct a complete investigation of the alleged accident because of their reliance upon those statements, deprived them of the opportunity of making an advantageous settlement of the claim, caused additional and unnecessary costs to be incurred, and otherwise made them become potentially liable to financial loss."
It is a firmly established rule of construction that policies of insurance will be liberally construed to uphold the contract, and conditions contained in them which create forfeitures will be ...