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Merchants Indemnity Corp. v. Victory Iron Works Inc.

Decided: June 28, 1963.

MERCHANTS INDEMNITY CORPORATION OF NEW YORK, PLAINTIFF-RESPONDENT,
v.
VICTORY IRON WORKS, INC., MARTIN EDSON, JR., DEFENDANTS, AND JOHN R. HENCHES, DEFENDANT-APPELLANT



Conford, Gaulkin and Kilkenny. The opinion of the court was delivered by Gaulkin, J.A.D.

Gaulkin

In this declaratory judgment action the trial judge held that the automobile liability policy issued by plaintiff Merchants Indemnity Corporation of New York (Merchants) to Victory Iron Works, Inc. (Victory) did not obligate Merchants to defend Edson from the action brought against him by Henches. Henches alone appeals.

It is agreed that Edson and Henches, employees of Victory traveling in a Victory vehicle on company business with Edson driving, were involved in a collision which resulted in Henches' injuries.

Merchants' policy contained the usual omnibus clause but it provided:

"* * * The insurance with respect to any person or organization other than the named insured or * * * spouse does not apply:

(2) to any employee with respect to injury to * * * another employee of the same employer injured in the course of such employment in an accident arising out of the maintenance or use of the automobile in the business of such employer."

The reason for such a provision is stated in an annotation in 50 A.L.R. 2 d 78, 99 (1956) as follows:

"Probably as a result of the decisions * * * holding that an exclusion of liability for injury to an employee of 'the insured' was applicable only where the injured party was an employee of the tortfeasor in whose behalf the insurance protection was invoked, a number of insurers began to include in their policies, ordinarily as a limitation of the coverage provided by the omnibus clause, a stipulation

that the insurance did not extend to liability arising from an action by one employee of the insured against another such employee. Such clauses have usually been held effective to protect the insurer in the situation where one employee of the insured brings an action or recovers against another such employee for negligence in the operation of the insured vehicle."

Henches concedes that Cutone v. Massachusetts Bonding and Ins. Co. , 53 N.J. Super. 165 (App. Div. 1958), so held. However, he argues that under the special facts of the case at bar the quoted provision is void because (quoting from the pretrial order) "both Victory and Edson were persons coming within the purview of the Financial Responsibility Act; that the policy issued by the pltf was required to comply with said act and * * * the provision which makes the insurance inapplicable by one employee against another is in violation of the Financial Responsibility Act * * *." He bases this argument upon N.J.S.A. 39:6-46(a), which provides that a liability policy "furnished as proof of financial responsibility" under the Motor Vehicle Security-Responsibility Law shall "insure the insured named therein and any person using * * * such motor vehicle * * *" with the consent of the insured.

Henches tells us in his brief that the case was submitted to the trial judge for decision upon "oral stipulations" made in the judge's chambers. Apparently no record was made of the stipulations. Henches' brief says that one of the stipulations was "that Edson had previous accidents with company vehicles; that Merchants had knowledge of this and that the policy in question falls within the purview of the Motor Vehicle Financial Responsibility Act and is governed thereby." The trial judge, in his opinion, reports the stipulation somewhat differently. He says: "The parties also agree that defendant Edson had previous accidents with company vehicle and the insurance was required to cover him under ...


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