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Cosmopolitan Mutual Insurance Co. v. Continental Casualty Co.

Decided: January 5, 1959.

COSMOPOLITAN MUTUAL INSURANCE COMPANY AND ESSEX COUNTY NEWS COMPANY, NOW DOING BUSINESS AS NEWARK NEWSDEALERS SUPPLY COMPANY AND FRAZIER MCCOLLUM, PLAINTIFFS-RESPONDENTS,
v.
CONTINENTAL CASUALTY COMPANY AND U-DRIVE-IT COMPANY, DEFENDANTS-APPELLANTS



For modification -- Chief Justice Weintraub, and Justices Heher, Burling, Jacobs, Francis and Proctor. For affirmance -- Justice Wachenfeld. The opinion of the court was delivered by Proctor, J.

Proctor

This appeal involves the question of the respective obligations of two insurance companies under their automobile liability policies.

On June 10, 1956 the Essex County News Company hired a truck from U-Drive-It Company. While the truck was being used in the business of the News Company and operated by its employee, McCollum, it was involved in an accident with another vehicle operated by one Frese. Frese sustained personal injuries. Thereafter, he instituted an action for damages against McCollum and the Essex County News Company. At the time of the accident there was in effect a policy issued by the plaintiff, Cosmopolitan Mutual Insurance Company, to the Essex County News Company insuring it against liability for personal injury and property damage with a maximum coverage of $300,000. In addition to motor vehicles owned by the News Company, the policy extended coverage to any non-owned or hired motor vehicles used in its business. Under the omnibus clause of the policy, McCollum, as an employee, was an additional insured. Condition No. 14 of the policy relating to "other insurance" provides:

"If the insured has other insurance against a loss covered by this policy the Company shall not be liable under this policy for a greater proportion of such loss than the applicable limit of liability stated in the declarations bears to the total applicable limit of liability

of all valid and collectible insurance against such loss; provided, however, the insurance under this policy with respect to loss arising out of the maintenance or use of any hired automobile insured on a cost of hire basis or the use of any non-owned automobile shall be excess insurance over any other valid and collectible insurance." (Emphasis added)

At the time of the accident the U-Drive-It Company was insured under a policy issued by the defendant, Continental Casualty Company. This policy was acquired in accordance with N.J.S.A. 45:21-1 et seq., which requires one who engages in the business of renting motor vehicles to carry liability insurance for the benefit of persons suffering loss or damage by reason of the operation of any rented motor vehicle. Although the statutory requirement is for $5,000 for each person and $10,000 for each accident, the limits of the Continental (U-Drive-It) policy are $10,000 and $20,000. The lessee of a motor vehicle and his driver are included as "Insured" under the omnibus clause of this policy. The policy further provides:

"17. Other Insurance.

The insurance under this policy shall be excess insurance over any other valid and collectible insurance available to the insured, either as an insured under another policy or otherwise."

Cosmopolitan requested Continental to investigate the Frese claim and defend the action. Continental refused. Cosmopolitan then undertook the defense in behalf of its insured, the News Company and McCollum. At the same time it instituted the present action for declaratory relief in the Superior Court, Chancery Division. The complaint in this action alleged that Continental under its policy with U-Drive-It Company was the primary insurer and therefore should defend against Frese's claim and was obligated to pay any judgment entered against the News Company and McCollum. Continental filed an answer and counterclaim alleging that Cosmopolitan was the primary insurer and therefore it was obligated to defend the Frese suit and pay any judgment Frese might obtain. While the present action was pending, Cosmopolitan settled Frese's claim for $10,000

and incurred defense expenses totalling $1,800. Consequently, Cosmopolitan's case changed from one for declaratory relief to one for reimbursement. Cosmopolitan was given leave in the pretrial order to file a supplemental complaint seeking the above relief, and Continental's answer and counterclaim were accepted as joining issue with the supplemental complaint. The reasonableness of the settlement and expenses is not disputed.

The Chancery Division held Continental liable to pay the amount of the settlement and the expenses, and entered judgment for Cosmopolitan in the sum of $11,800. The court concluded that Essex County News Company obtained Continental's insurance coverage when it hired the truck from U-Drive-It Company; that such coverage was primary because it was required by N.J.S.A. 45:21-1. The court further reasoned that under the "other insurance" provision of Continental's policy, "no other valid or collectible" insurance existed because Cosmopolitan's policy was "excess" and ...


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