On appeal from a judgment of the District Court of the Third Judicial District of the County of Union.
For the appellants, Clarick & Clarick (Jacob R. Mantel, of counsel).
For the respondents, Lum, Fairlie & Wachenfeld (Charles S. Barrett, Jr., of counsel).
Before Justices Bodine, Heher and Perskie.
The opinion of the court was delivered by
HEHER, J. Plaintiffs used to recover damages for negligence in the performance of an undertaking by defendant Naiman to make certain repairs and adjustments to an oil burner set up in their dwelling house in Roselle Park. The house was damaged by fire. Conrad was Naiman's servant assigned to do the work. The District Court Judge, sitting without a jury, resolved the issue in favor of plaintiffs; and defendants appeal from the consequent judgment.
The first point made is that there was error in the denial of defendants' motion for a nonsuit on the ground that plaintiffs and their mortgagee had received full indemnification for the loss from the Concordia Fire Insurance Company of Milwaukee, their insurer against damage by fire, and therefore the right of action, if any, is by subrogation exclusively vested in the insurer, and that, at all events, the insurer, as "the real party in interest, must join in the suit" -- citing R.S. 2:27-24.
But there has not been indemnification in the strict, technical sense. The state of the case settled by the trial judge discloses that, after the loss had been sustained, the insurer made to plaintiffs and their mortgagee "a loan, without interest," of the money equivalent of the loss, under a stipulation providing for its repayment "only in the event and to the extent that any net recovery is made by them" from a third person on account of the loss, which recovery was pledged "as security for such repayment," and obligating the borrower "to promptly present claim and, if necessary, to commence, enter into and prosecute suit against such" third person "through whose negligence the * * * loss was caused, or who may otherwise be responsible therefor, with all due diligence," in their own names, "but at the expense of/and under the exclusive direction and control" of the insurer.
This would seem, in substance and effect, to secure to the insurer merely the protection afforded by general law, independently of special agreement, after indemnification in fact has been made, i.e., the preservation to the insurer, under
the doctrine of subrogation, of the insureds' claim against the tortfeasors. It has the sanction of usage where essential to serve the legitimate interests of the parties. It constitutes a valid exercise of the fundamental right of liberty of contract. Vide Fire Association of Philadelphia v. Shellenger, 84 N.J. Eq. 464; Luckenbach v. McCahan Sugar Refining Co., 248 U.S. 139; 39 S. Ct. 53; 63 L. Ed. 170.
And, even though the "loan" thus made be deemed in the nature of an unconditional indemnity under the policy, the action was properly instituted in the names of the insureds. Subrogation is a device of equity, imported from the civil law, to serve the interests of essential justice between the parties; but it was not unknown to the courts of common law jurisdiction. If there was indemnification in fact here, the insurer was thereby subrogated to the rights of the insureds against the tortfeasors, and it may on well settled principles proceed against them in the names of the insureds, even without their consent. Monmouth Co. Fire Insurance Co. v. Hutchinson and C. & A.R.R. Co., 21 N.J. Eq. 107; Fire Association of Philadelphia v. Wells, 84 Id. 484; Weber v. Morris and Essex Railroad Co., 35 N.J.L. 409; Martin v. Lehigh Valley Railroad Co., 90 Id. 258. At common law, the insurer's right of action by subrogation is enforceable in the name of the insured for the use of the insurer. The insurer recovers only in the right of the insured. Here, the policy contained an express reservation to the insurer of the right of subrogation upon payment of the loss; and the quantum of the loss does not exceed the insurance coverage.
There is no occasion to consider the question of whether the insurer may, by force of section 2:27-24, supra, join with the insureds as a party plaintiff in an action against the ...