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Allstate Insurance Co. v. Fidelity & Casualty Co.

Decided: March 30, 1962.

ALLSTATE INSURANCE COMPANY, A CORPORATION OF THE STATE OF ILLINOIS, ETC., PLAINTIFF-APPELLANT,
v.
THE FIDELITY & CASUALTY COMPANY OF NEW YORK, A CORPORATION OF THE STATE OF NEW YORK, ETC., DEFENDANT-RESPONDENT



Goldmann, Freund and Foley. The opinion of the court was delivered by Foley, J.A.D.

Foley

This is an appeal by plaintiff (Allstate) from a declaratory judgment entered in the Law Division in favor of the defendant (Fidelity). The case was tried without a jury.

On December 18, 1958 an automobile owned by Peter Petruzela and "driven" by a 15-year-old boy, Ronald P. Marsch, mounted a curb and struck a pedestrian, Martin P. Ryan, severely injuring him.

Fidelity insured the Petruzela car; Allstate insured a vehicle owned by Paul F. Marsch, father of Ronald. Both policies contained omnibus clauses, that of Marsch granting coverage where the insured (or additional assured) was involved in an accident while operating a vehicle other than that insured.

Ryan brought a negligence action against Petruzela (who was not in the car at the time of the accident), his son

Peter, Jr., to whom Petruzela had loaned the vehicle, and who was in the car, and Marsch.

When Marsch was served with process, Allstate forwarded it to Fidelity demanding that (1) Fidelity accept Ronald P. Marsch as an additional assured under the policy Fidelity had issued to Petruzela, and (2) Fidelity furnish Marsch with a defense in accordance with the policy terms. Fidelity rejected this demand and returned the process to Allstate. Allstate then assumed the defense of Marsch.

Subsequently, the present action was commenced, and later consolidated with the negligence case. The relief sought by Allstate is a judicial declaration that (1) Ronald P. Marsch is an additional insured under the policy of Fidelity; (2) Fidelity is obligated to provide Ronald P. Marsch with a defense in the negligence action; (3) Fidelity is obligated under the policy it issued to Petruzela to pay any judgment entered against Ronald P. Marsch in the negligence case; and (4) Fidelity is obligated to reimburse Allstate for the costs, expenses and counsel fees incurred by Allstate in the investigation and defense of Ronald P. Marsch in the negligence case.

The portion of the pretrial order relating to the declaratory judgment action defines the sole legal issue between the parties thus:

"7B. Between Allstate and Fidelity, the legal issue is whether defendant Ronald Marsch was an additional insured under the Fidelity policy issued to Petruzela."

Parenthetically, we note that although paragraph 6 of the pretrial order provided that Fidelity was then granted leave to file an answer to the complaint of Allstate within 20 days, no answering pleading was ever filed; and that, notwithstanding this state of the pleadings, the case went to trial and judgment. These breaches of the Revised Rules are disapproved. A case should not be pretried, much less tried on its merits, before the legal issues involved are raised by an answering pleading. R.R. 4:7-1 requires that there

shall be an answer filed. While amendments to filed pleadings may be allowed at the pretrial conference there is no warrant in the rules for the action here taken.

Evidently the declaratory judgment action was severed from the negligence case. In entering judgment therein for the defendant the trial court specifically denied the relief demanded by plaintiff in its complaint, holding that Marsch was not insured under the Fidelity policy, and therefore Fidelity was not obliged to furnish him with a defense, pay a judgment entered against him, or reimburse Allstate for expenses and counsel fees incurred by that company in investigation and defense. Thereafter Allstate undertook the present appeal.

During the pendency of the appeal the negligence case was settled by the payment to Ryan of $55,000. As a part of the settlement negotiations a stipulation was entered in open court by Allstate and Fidelity which provides that:

"If as a result of the determination of the pending appeal and any subsequent appeal in the declaratory judgment suit, Allstate is found not to be financially responsible in this present case, that ends the matter insofar as Allstate is concerned, subject, of course, to the recognized right of Fidelity & Casualty to appeal in the same matter. If as a result of that determination, Allstate is found to be financially responsible, it may indeed become necessary to try the issue of negligence only in the instant case as between the defendant Marsch and the defendants Petruzela in order to determine whether or not Allstate is financially responsible in this matter. * * * The simple remaining question is whether or not Allstate is financially responsible for any part of this settlement and if so, what part, whether it be a part or all. And when that question is determined, dependent upon the determination, Allstate will pay to the Fidelity & Casualty whatever sum, if any, is so determined, * * *." (Emphasis added)

We pause here to point out that the italicized portion of the stipulation refers to a matter which was not embraced by the complaint, pretrial order, or the judgment under appeal. What has been litigated, and what is before us, is the narrow question of whether Marsch was an additional insured under the Fidelity policy. If that is found not to be the case,

the amount Allstate will be called upon to pay Fidelity may depend upon a determination of the legal liability of the Petruzelas and Marsch inter sese and the effect of such determination upon the mutual obligations of the ...


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