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St. Paul Fire and Marine Insurance Co. v. Indemnity Insurance Co.

Decided: March 21, 1960.

ST. PAUL FIRE AND MARINE INSURANCE COMPANY, PLAINTIFF-RESPONDENT,
v.
INDEMNITY INSURANCE COMPANY OF NORTH AMERICA, A PENNSYLVANIA CORPORATION, DEFENDANT-APPELLANT



For reversal -- Chief Justice Weintraub, and Justices Burling, Jacobs, Francis, Proctor, Hall and Schettino. For affirmance -- None. The opinion of the court was delivered by Schettino, J.

Schettino

This is a contract action in which defendant appeals from a Superior Court, Law Division judgment which requires it to pay one-half the expenses incurred by plaintiff in defending certain claims against an insured whom both covered by separate policies. The cause was tried by a judge without a jury. While the appeal was pending in the Appellate Division, we certified it on our own motion.

New Jersey Natural Gas Company was self insured for $5,000. Plaintiff insured that Company for amounts between that figure and $15,000 for claims relating to bodily injury and property damage. Another carrier, not a party to this action, insured the Gas Company for liability in excess of $15,000 and up to $25,000. Defendant insured the Company for claims between $25,000 and $500,000.

Plaintiff's policy provides that it would bear the expenses of defending any suit brought against the Gas Company for bodily injury or property damage. Defendant's policy does not require it to defend but gives it the right and opportunity to associate in the defense and control of any claim or suit when that claim or suit may involve defendant's coverage. That policy also provides that defendant shall pay no costs if the claims are adjusted prior to trial for a sum not in excess of the retained limits; and even where the claims appear likely to exceed the retained limits, defendant shall not be obligated unless it first gives consent to incurring the charge. But if defendant consents to "trial court proceedings continuing" and if the settlement or judgment exceeds the retained limits, then it agrees to contribute to the costs in the ratio that its proportion of liability bears to the whole amount of the settlement or judgment.

On July 23, 1953 the Gas Company had an accident covered by the above policies upon which suit was instituted. Plaintiff undertook to defend. Plaintiff after that trial demanded of defendant a proportionate share of the costs and expenses of the trial and defendant refused to pay. The costs and expenses of that trial involved in the present case amount to $10,256.84. Plaintiff holds an assignment of the Gas Company's alleged claim against defendant.

Plaintiff claims that defendant is liable (a) pursuant to an express contract (defendant's policy with the insured), and (b) also because defendant requested plaintiff to proceed with the defense and impliedly agreed to reimburse plaintiff for a proportionate share of legal expenses, or (c) on a quasi-contractual theory.

Plaintiff's claims manager testified that during the course of the litigation against the Gas Company he had many dealings with defendant's representatives. He wrote 26 letters to defendant's claims department, frequently attaching documents such as a copy of summons and complaint, plaintiff's correspondence concerning the claim, copies of investigation reports, interrogatories, depositions, file materials and photographs. He and others in his company had numerous telephone discussions with defendant's claims manager and other members of defendant's claims department.

Additionally, plaintiff followed certain suggestions made by defendant's representatives, i.e., that a third party be joined as defendant, that other material be sent to defendant, that plaintiff follow certain lines of investigation and that a copy of a bill rendered to plaintiff by an investigator be sent to defendant. In answer to the latter request a copy was sent with a letter containing the following:

"* * * While you have not requested it we attach copies of the other allocated claim expenses we have paid to date.

As you know we have heretofore billed you at the conclusion of the case on these cases, but if it is your wish to have copies of the

various bills with the reports as we send them to you, please so inform us so that we may handle in ...


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