On appeal from the Supreme Court.
For the plaintiff-respondent, Pearce R. Franklin, Luke A. Kiernan, Jr.
For the defendant-appellant, Frank G. Turner.
The opinion of the court was delivered by
CASE, J. Having previously obtained a $10,000 judgment against Michael King for injuries received in an automobile accident, plaintiff sued The Preferred Accident Insurance Company of New York, appellant herein, as King's insurer and got judgment for $5,797.72, the maximum recoverable under the policy.
Two questions were fully tried out and put to the jury in the instant suit: First, was Michael King an insured under the policy? and, second, if an insured, did he forfeit the indemnification because of lack of co-operation with the insurer in the defense of the action against him? The named insured was the owner, Blanche King, who was not an occupant of the car at the time of the accident and who, in the action by plaintiff against her and her husband, Michael King, received a directed verdict in her favor. Michael King, with plaintiff and one Fred Petersen, was in the car when the accident happened.
Appellant first complains of the striking, on motion before trial, of three separate defenses. The first of the struck defenses was that King was not the operator of the car. The operation of the car by King was charged in the damage suit and was adjudicated affirmatively, otherwise judgment could not have gone against him. True, the appellant was
not a party to that action in the sense of being named in the record and served with process, but it made the investigation, prepared the case for trial, and, by its attorney, actually conducted the trial. Its services were not limited to the interests of Blanche King, the named assured, because after she was, by directed verdict, out of the suit, appellant's attorney proceeded, without disclaiming, to sum up on behalf of Michael King. The defending of an assured by the company was, from the company's standpoint, both a duty and a right; a duty under the policy provision section II, 4, a, wherein the company agreed to defend, and a right under section V C, wherein was imposed as a condition of recovery against the company that unless there was a tripartite agreement to the contrary there must have been a final judgment against the assured in an action defended by the company. The policy also contained the usual right of subrogation by the company in the event of making payment. Appellant, in defending the damage suit for the Kings, was also making its own defense because a judgment against either of the Kings was potentially, to the extent of the coverage, a judgment against the insurer. The reality of that assertion is emphatically demonstrated by the present judgment. If King, after the recovery against him, had paid the judgment and as an insured had then turned to the appellant for reimbursement, could the latter, having in its capacity as King's insurer prepared and tried the case in which King's operation of the car had been determined as a prerequisite to the judgment, deny liability upon the ground that King had not, after all, operated the car? We think not. The insurer was interested in the subject-matter of the suit. It had and exercised the right to make defense, control the proceedings, examine and cross-examine witnesses. Further, it had the right to appeal from the judgment. The identity of the insurer with the assured was too complete, and the control by the insurer over the lawsuit and the trial, particularly in determining what proofs should go in and what be kept out, too great to permit of that cleavage of interest.
The court below struck the defense upon the theory that
the question involved was res adjudicata. The policy not only was, by its terms, made to conform with chapter 116 (Pamph. L. 1929, p. 195), sometimes known as the "Financial Responsibility act," but in addition contained the following provision:
"The liability of the company under this policy shall become absolute whenever loss or damage covered by the policy occurs, and the satisfaction by the assured of a final judgment for such loss or damage shall not be a condition precedent to the right or duty of the company to make payment on account of such loss or damage. Upon the recovery of a final judgment against the assured for any such loss or damage the judgment creditor ...