Before the court for determination, after trial of an action for a declaratory judgment, is the question of whether, under the circumstances hereinafter detailed, liability insurance coverage was afforded to either or both individual defendants under automobile liability insurance policies issued by defendant insurance companies.
Basic to a resolution of that question is the construction to be given exclusionary clauses in each of the policies providing inter alia that: "This policy does not apply * * * to (an owned) (a non-owned) automobile while used in the automobile business." The other issues posed by the pretrial order, as amended and supplemented at the trial, present no difficulty.
Nor are the facts in substantial dispute.
Defendant Nasarow, owner of a 1949 Oldsmobile automobile, was the "named insured" in an automobile liability insurance policy covering that automobile issued by defendant Aetna Insurance Company (Aetna).
Defendant Bracigliano, owner of a 1953 Packard automobile, was the "named insured" in an automobile liability insurance policy issued by defendant Phoenix Insurance Company (Phoenix) covering that automobile.
Bracigliano was employed as a truck driver and mechanic by Curbit Trucking Co. of Paterson. On occasion and outside of his regular working hours, he would do repair work on automobiles other than those of the trucking company, although he "never openly advertised [he was] in the repair business." Most of his outside repair work was either to his own automobile or to those of his family or friends; on occasion he did repair work for others. For
about a year prior to April 28, 1959 he and two friends had rented a garage on Straight Street, Paterson, where each did his own repair work.
On April 27, 1959 Nasarow stopped at the garage of Curbit Trucking Co. on Prince Street, Paterson, and met Bracigliano for the first time. What caused Nasarow to stop at the garage -- whether it was, as he says, to have his automobile repaired, or, as Bracigliano says, to negotiate for the purchase of Bracigliano's Packard automobile -- is of no moment. It is undisputed that after driving the Oldsmobile around the block Bracigliano diagnosed the source of the noise of which Nasarow complained to be in its "rear end"; and it was agreed that Bracigliano should complete required repairs for $40. The car was driven to Bracigliano's garage on Straight Street where Nasarow was to pick it up two days later.
Bracigliano obtained a used "rear end" from a dealer in used car parts, installed it in the Nasarow Oldsmobile, and then, early in the evening of April 28, 1959, took the automobile out for a test run.
He had reached the intersection of West Broadway and Barbour Street, about two miles from the Straight Street garage, when a collision occurred between the front of the Oldsmobile and the rear of an automobile owned by plaintiff Reuben LeFelt and being driven by his wife, plaintiff Lillian LeFelt.
On June 6, 1959 plaintiffs filed a complaint in an action for damages against Nasarow and Bracigliano, charging that the collision and injuries allegedly sustained by plaintiff Florence LeFelt were caused by the negligent operation of the Oldsmobile, alleged to have been driven by Bracigliano as Nasarow's agent. Plaintiffs say their automobile was standing still when it was hit. Bracigliano says that the Oldsmobile was standing still and that plaintiffs' car backed into it.
Aetna undertook the defense of the negligence action on behalf of Nasarow, its named insured. Attorneys selected
by it filed an answer for him which, among other things, denied that Bracigliano was Nasarow's agent.
But both Aetna and Phoenix disclaimed coverage as to Bracigliano and refused to defend him. An answer was filed on his behalf by an attorney designated by the Unsatisfied Claim and Judgment Fund Board (see N.J.S.A. 39:6-61 et seq.) to whom plaintiffs had given notice of claim (N.J.S.A. 39:6-65).
With consent of counsel in the negligence action, that action was placed on the inactive list pending the determination of the present suit for a declaratory judgment.
Plaintiffs contend that liability insurance is afforded to Bracigliano by both the Aetna and the Phoenix policies and that such coverage is afforded to Nasarow by the Aetna policy.
At the trial, Aetna withdrew all defenses other than its claim that coverage is excluded by paragraph (g) of the "Exclusions" in its policy.
Phoenix abandoned its defense of lack of cooperation, asserted that coverage is excluded by paragraph (h) of the "Exclusions" in its policy and urged two other defenses. The first of these is based on the alleged failure of Bracigliano to forward the summons and complaint in the negligence action to Phoenix. But counsel for Phoenix, describing what the evidence in support of that defense would show, conceded that Bracigliano had tendered the suit papers to an agent of Phoenix and had been told to forward the papers to Aetna. There was thus a waiver of the policy provision requiring the summons and complaint to be sent to the company (Yannuzzi v. United States Casualty Co. , 19 N.J. 201 (1955)) and Phoenix is estopped from asserting that defense (Weil v. Pennsylvania Fire Insurance Company , 58 N.J. Super. 145 (App. Div. 1959)).
Phoenix also urges that the declaratory judgment action cannot be maintained prior to entry of judgment in the negligence action because its policy provides:
"No action shall lie against the company * * * until the amount of the insured's obligation to pay shall have been finally determined either by judgment against the insured after actual trial or by written agreement of the insured, the claimant and the company."
But under the settled law of this State the "no action" clause does not bar maintenance of an action for a declaratory judgment as to liability insurance coverage prior to judgment in the negligence action. Condenser Service, etc., Co. v. American, etc., Insurance Co. , 45 N.J. Super. 31, 41 (App. Div. 1957); Hartford, etc., Indem. Co. v. Selected Risks Indem. Co. , 65 N.J. Super. 328 (App. Div. 1961).
Judge (now Justice) Francis said in Condenser, supra , 45 N.J. Super. , at p. 41:
"* * * [The 'no action' clause] was never intended to serve, nor can it be construed to serve, the purpose of avoiding a declaration of rights when the insurer allegedly has repudiated the contract and declined to furnish an agreed defense of a covered damage action. To attribute such a significance to the restriction would be to render sterile the Declaratory Judgments Act in a substantial area of the insurance contract field. * * *."
In Hartford, etc., Indem. Co. v. Selected Risks Indem. Co., supra , 65 N.J. Super. , at p. 332, Judge Freund said:
"As this court has previously remarked, 'no more fertile ground exists for the use of the declaratory judgment procedure than in the field of insurance * * *.' Condenser Service & Engineering Co., Inc. v. American Mutual Liability Insurance Co. , 45 N.J. Super. 31, 38 (App. Div. 1957); see Annotation , 142 A.L.R. 8-76 (1943). This is an area in which the construction of contractual language -- a function for which the declaratory judgment machinery is tailormade -- is a constantly recurring event. * * *"
Further, under the Unsatisfied Claim and Judgment Fund Act (N.J.S.A. 39:6-61 et seq.), if plaintiffs recover judgment in the negligence action, they would have to establish, in order to obtain an order directing payment of the judgment out of the Fund that:
"The judgment debtor at the time of the accident was not insured under a policy of automobile liability insurance under the terms of which the insurer is liable to pay in whole or in part the amount of the judgment." N.J.S.A. 39:6-70(f).
Resolution of that question before rather than after trial of the negligence action would be of benefit to all concerned. It would put the onus of trying the case, or of settling it if that course is deemed desirable, on the party which would pay the judgment if one is recovered, whether that party be the Fund or either or both of the insurance companies.
Examination of the Aetna and Phoenix policies discloses that except for the designation of the "named insured" and the "owned automobile" in the respective policies, the pertinent provisions of the two policies are identical. By each, the respective insurance companies "agree * * * subject to all the terms of this policy * * *:
"* * * To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of:
A. bodily injury, sickness or disease, including death resulting therefrom, hereinafter called 'bodily injury,' sustained by any person;
B. injury to or destruction of property, including loss of use thereof, hereinafter called 'property damage';
arising out of the ownership, maintenance or use of the owned automobile or any non-owned automobile, and the company shall defend any suit alleging such bodily injury or property damage and seeking damages which are payable under the terms of this policy, even if any of the allegations of the suit are groundless, false or fraudulent; but the company may make such investigation and settlement of any claim or suit as it deems expedient."
"Owned" and "non-owned" automobile are defined as follows:
"'owned automobile' means a private passenger, farm or utility automobile or trailer owned by the named insured, and includes a temporary substitute automobile."
"'non-owned automobile' means an automobile or trailer not owned by or furnished for the regular use of either the named insured or any relative, other than ...