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American Surety Co. v. American Indemnity Co.

Decided: April 13, 1950.

AMERICAN SURETY COMPANY OF NEW YORK, A CORPORATION, PLAINTIFF,
v.
AMERICAN INDEMNITY COMPANY, ET AL., DEFENDANTS



Jayne, J.s.c.

Jayne

This action instituted in the former Court of Chancery has in consequence of intermediate occurrences been reduced to a single controversial issue between the American Surety Company and the American Indemnity Company. The factual background and the documentary exhibits are reciprocally conceded.

An epitome of the facts will sufficiently reveal the nature of the conflict. On April 6, 1946, the plaintiff issued its automobile liability policy with $25,000 and $50,000 limits to M. Feller, Inc., embracing within its coverage a group of motor vehicles owned by the insured. Under date of September 29, 1945, the defendant American Indemnity Company issued its policy with the same limits applicable to a group of vehicles owned by a partnership trading under the name of Ritter and Sussman.

Expedience and clarity will be patronized by hereafter denominating the American Surety Company as the "plaintiff," the American Indemnity Company as "Indemnity," M. Feller, Inc., as "Feller," and Ritter and Sussman as the "partnership."

Having suspended the use of one of its insured trucks for the purpose of repair, Feller borrowed from the partnership one of its trucks insured by Indemnity. The borrowed truck

was being operated on May 10, 1946, by an employee of Feller in pursuit of the latter's business when it was involved in a collision at Union Beach, New Jersey, with a passenger vehicle occupied by four persons, all of whom sustained bodily injuries, one was injured fatally.

At the time of the filing of the bill of complaint in this cause, the claims of the owner of the passenger car and of the four others were being prosecuted either in the United States District Court (New Jersey) or in the New Jersey Supreme Court. The defendants against whom the actions had been instituted were Feller, the partnership, and the driver of the truck, who was the employee of Feller.

By a consent order entered in the present cause on June 17, 1947, the plaintiff was "authorized to investigate and defend the suits at law * * * and to enter into and negotiate settlements with the claimants in any or all of said cases and to pay the amounts that may be agreed upon -- within its policy limits -- and to pay any judgment or judgments that may be rendered against" Feller and the driver, or "to take any appeal from any said judgment or judgments or post any bond required by said Court, without prejudice to its right to hereafter assert against the defendants" Indemnity, Feller, and the driver "that the insurance available is 'excess' insurance and to be applied only after the proceeds of the policy of the defendant," Indemnity, "have been exhausted * * *."

Since the entry of that order, formal consent judgments, adjudged to be fair, reasonable, and proper, were entered against Feller and its driver, amounting in the aggregate to $42,500. The plaintiff paid the judgments without prejudice to any of its rights against Indemnity.

Any denial of the initial litigious character of this suit seems to have been extinguished by the pretrial order, which states:

"The question involved is whether the policy of the plaintiff was concurrent with the policy of the defendant, American Indemnity Company, or whether it was excess. Defendant, American Indemnity Company, alleges among other defenses that the policy of the American Surety Company was primary insurance.

"It (plaintiff) seeks a decree for moneys paid out by the plaintiff herein as a result of litigation arising out of an automobile accident, which litigation has since been disposed of, together ...


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