Plaintiff Vito Capece (Capece) obtained a final judgment against one Bartholemew Giordano arising out of an accident which occurred on October 25, 1960. By its third-party complaint defendant Allstate Insurance Company (Allstate), Giordano's carrier, seeks indemnification or contribution from the third-party defendants State Farm Mutual Automobile Insurance Company (State Farm) and United States Fidelity and Guarantee Co. (U.S.F. & G.), which insured the automobile and the premises, respectively, which were involved in the accident.
Capece was the owner and operator of a service station and garage located at 30 Franklin Street, Belleville, New Jersey. On the morning of the accident, in accordance with a prior arrangement made with Capece, Mrs. Linda Magnano brought her automobile to the garage for servicing. She explained to Capece that the brakes "felt low," and he agreed to effect the necessary repairs for her. Capece was working on another car and directed her to leave her car outside. The place where she left it was near the lift. She was to check back in the afternoon to see if it was ready.
Thereafter, as a preliminary to working on the car, it was necessary that it be placed upon the lift. At the request of Capece, Giordano, his brother-in-law, attempted to drive the automobile onto the lift. As he did so Capece was standing directly in front, observing and directing. During the course of the operation, apparently due to Giordano's foot's slipping off the brake and hitting the gas pedal, the car shot forward, striking Capece and pinning him against the wall.
Giordano was insured for public liability by Allstate under its so-called "Crusader" automobile policy. It covered the operation of his own and "other automobiles." He duly reported the accident to Allstate and received a letter, on November 16, 1960, advising him that the policy did not cover him for the accident in question. In July 1961 Capece instituted suit against Giordano in the Essex County Court. Giordano promptly forwarded the summons and complaint to Allstate. On August 21, 1961 Allstate declined to defend and returned them to Giordano. Giordano filed no answer, and on November 30, 1961 judgment was entered against him and in favor of Capece for $9,395 damages.
On April 10, 1962 Capece instituted suit in the Law Division against Allstate to recover the amount of the judgment. Allstate filed answer on June 7, 1962. On August 16, 1962 Allstate filed a third-party complaint against State Farm and U.S.F. & G. seeking indemnification from State Farm on the ground that it was primarily liable to pay the judgment since it insured the Magnano car, and from U.S.F. & G. on the ground that it was liable by reason of its coverage of the operations of the Capece service station, including the operation of customers' cars, at the time of the accident.
A motion for summary judgment in favor of plaintiff and against Allstate was thereafter made and granted. The judgment has since been paid by Allstate. The undetermined issues posed by the third-party complaint were the subject of a pretrial conference, the order being dated October 8, 1963. In the order Allstate, in substance, contended that, by the terms of their respective policies, the third-party defendants
were primarily liable to pay the amount of the Capece judgment. State Farm, while admitting issuance of the policy, denied Giordano's agency or his authority to operate the Magnano car and denied receipt of notice of suit or the forwarding of suit papers, conditions precedent to its liability. State Farm also pleaded estoppel as against Allstate by reason of Allstate's failure to notify it of the suit or to forward the suit papers to it so that it could defend. As an additional defense, it set up lack of cooperation by the insured. U.S.F. & G. denied coverage and set up lack of notice of the accident or of the suit, and failure to forward suit papers, as a bar to any recovery against it. Additional factual and legal contentions of the parties will be referred to hereafter.
All of the parties stipulated that the matter should be determined by the court without a jury, and proofs were submitted over a four-day period.
Based upon the evidence adduced, Allstate now contends that State Farm, as insurer of the car involved, is primarily liable for the injuries sustained by Capece, as is also U.S.F. & G. which covered the operation of the car while in the possession of Capece at his service station. As to the failure to give notice of suit or to forward suit papers, Allstate asserts that both third-party defendants had unequivocably disclaimed coverage, thus eliminating the necessity for the giving of notice. State Farm, while admitting that in January 1961 it denied coverage to Capece for his bodily injuries or medical payments on the ground that it did not cover Giordano's operation of the car, contends that its liability to Capece on behalf of Giordano did not come within the terms of the policy. U.S.F. & G. admits that on October 4, 1961 it disclaimed liability for medical payments to Capece, but asserts that the evidence establishes that it never took a stand as to its liability on behalf of Giordano for the bodily injuries sustained by Capece. Both State Farm and U.S.F. & G. assert that neither Allstate nor Giordano had knowledge of their alleged disclaimer at the time of the failure to give them notice of suit and to forward them the suit papers. In
addition, U.S.F. & G. contends that the proofs show that the accident was not reported to it, as required by the policy terms, until September 1962, which was long after Capece had obtained his judgment against Giordano, and after the filing of the third-party complaint against it.
Allstate's policy contained an "other insurance clause" which read as follows:
"IF THERE IS OTHER INSURANCE
Allstate shall not be liable under this part 1 for a greater proportion of any loss than the applicable limit of liability stated on the supplement page bears to the total applicable limit of liability of all collectible insurance against such loss; provided, however, the insurance with respect to a temporary substitute automobile or a non-owned automobile, shall be excess insurance over any other collectible insurance."
It urges that since the automobile which Giordano was driving was not owned by him, and since he was an additional insured under the omnibus clause of the policies issued by State Farm and U.S.F. & G., its coverage may not be resorted to until the coverage of State Farm and U.S.F. & G. has been exhausted. Alternatively, if Allstate's coverage is not determined to be excess, State Farm and U.S.F. & G. should be required to contribute pro rata to payment of the judgment.
Allstate's policy contained a subrogation clause. In effect, it seeks recovery as subrogee of Giordano and asserts such claim as he would have under the policy. It is also subject to such defenses as State Farm and U.S.F. & G. may assert against Giordano or it. It stands in Giordano's shoes and its rights can rise no higher than his. N.J. Asphalt & Paving Co., Inc. v. Mutual Boiler Ins. Co., 19 N.J. Super. 445, 448 (Law Div. 1952); Annotation, "Right to subrogation, as against primary insurer, of liability insurer providing secondary coverage," 31 A.L.R. 2 d 1324. Cf. Standard Accident Insurance Co. v. Pellecchia, 15 N.J. 162 (1954); Maryland Casualty Co. v. New Jersey Manufacturers Casualty Insurance Co., 48 N.J. Super. 314
(App. Div. 1958). Unless Giordano could have recovered against one or both of the third-party defendants, Allstate cannot recover.
We now turn to a consideration of the liability of the respective third-parties defendant.
State Farm's policy insured Mrs. Magnano against liability for bodily injury and property damage. By its terms State Farm became obligated:
"To pay all damages which the insured shall become legally obligated to pay because of
(A) bodily injury sustained by other persons * * * caused by accident arising out of the ownership, maintenance or use, * * * of the owned automobile."
State Farm also contracted to defend any suit against the insured and to pay any costs taxed or interest on any judgment against the insured. It also agreed to pay reasonable medical expenses incurred within one year from the date of the accident:
"To or for any other person [than the named insured and each relation] who sustains bodily injury, caused by accident, while occupying or through being struck by the owned automobile, provided said automobile is being used by an insured."
Under the policy, coverage was extended to the named insured, to his relatives and to:
"(3) any other person while using the owned automobile, provided the actual use of such automobile is with the ...