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American Shops Inc. v. Reliance Insurance Co.

Decided: June 6, 1953.


Daniel J. Brennan, J.s.c.


[26 NJSuper Page 147] The action by the plaintiffs here is on a policy of insurance issued to them by the defendant designated as "yacht policy" No. Y 7866, wherein, for consideration of the stipulations in the policy and a premium of $328.38 the defendant insured the plaintiffs for the sum of $9,750 from the second day of July 1951 to the

second day of July 1952, on the vessel known as "Irene" 1946, 25' Chris Craft. The specific coverage here the subject matter of consideration appears as follows:

Page 1 of the policy, under the designation "coverages" enumerates such as "(1) Hull Insurance, as per Section A, on Page 2 of this Policy." Section "A" -- Hull Insurance, indicates that the property covered is "Upon the hull, spars, sails, tackle, apparel, machinery , boats, materials, furniture, fittings, of and in the vessel hereby insured." (Underscoring by the court)

A rubber stamp endorsement on the face of the policy reads as follows: "Not liable for loss or damage to the rudder, propeller, shaft or machinery, unless caused by stranding, sinking, burning or collision with another vessel." Subject to the special terms of this policy the policy also covers "loss of and/or damage to hull or machinery through the negligence of master, mariners, engineers, or pilots, or through explosions, bursting of boilers, breakages of shafts, or through any latent defect in the machinery or hull, provided such loss or damage has not resulted from want of due diligence by the owners of the vessel, or any of them, or by the manager." This is referred to by counsel as the Inchmaree clause.

On August 9, 1951, while the policy was in effect, the yacht was damaged by explosion, i.e. , "bursting of boilers, breakage of shafts, latent defect in the machinery or hull." The proof of loss filed by the plaintiff with the defendant company indicates that "As a result of said damage, the assured was forced to replace the motor at a total cost of approximately $1,300 * * * but said replacement was not as good as the motor which had been damaged, which damaged motor was worth $4,000 at the time of the loss and the latter sum is the amount the assured is entitled to and for which claim is made." The proof of loss, sworn to by the affiant on November 9, 1951, received by the defendant on November 19, 1951, was signed by Max Strelsin as the president of the American Shops, Inc. Demand for payment has been heretofore made by the plaintiffs and refused by

the defendant. The ad damnum clause in the complaint filed herein is in the sum of $4,000.

The defendant contends that the insurance policy issued by it did not cover the particular whereby the "Irene" was damaged. It denies that the loss was covered by any of the contingencies enumerated in the "rubber stamp" endorsement hereinbefore referred to, and that the loss in this case was occasioned by a literal disintegration of the engine caused by maldistribution of stress and strain, as a result of the separation of a counterweight from the shaft while the engine was in operation. The defendant urges further that the plaintiffs cannot maintain or recover in the present action since the plaintiffs failed to file a proof of loss within ninety days -- an essential condition of the aforesaid policy of insurance. The defendant also contends that fire or explosion was not the proximate cause of the damage.

The plaintiff urges that the filing of the proof of loss within the time stipulated by the policy, was waived by the defendant and that this conduct estops the defendant from entitlement to such defense. At the trial the defendant withdrew the defense as to proof of loss.

Another aspect of the instant cause has heretofore received judicial consideration on defendant's motion for summary judgment. That application was denied. Vide: American Shops, Inc. v. Reliance Insurance Co. of Philadelphia , 22 N.J. Super. 564 (Cty. Ct. 1952). Similar motion, made before the present trial court, was also denied.

At the trial counsel stipulated on the record that there is no issue of fire in this case, i.e. , the cause of action is not based upon the existence of fire as the inducing cause of the damages asserted to have been sustained. The plaintiffs also indicated that they are not claiming under the rubber stamp endorsement ...

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