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November 8, 1996

TRAVELERS INDEMNITY CO. and UNDERWRITERS SERVICES INC., Defendants/Third-Party Plaintiffs, v. HOME INSURANCE CO. and CITY INSURANCE CO., Third-Party Defendants.

The opinion of the court was delivered by: IRENAS


 IRENAS, District Judge:

 Defendants Travelers Indemnity ("Travelers") and Underwriters Services, Inc. ("USI") filed motions for summary judgment, *fn1" claiming that City Insurance Co. ("City") is not entitled to subrogation. Travelers and USI argue that City's payment to satisfy the judgment against Atlantic City Showboat ("Showboat") was voluntary in nature, thereby depriving City of its right to subrogation. Because this court finds both that the policy under which the payment was made provides for subrogation, and that City did not act as a volunteer, City is entitled to subrogation--either under a conventional or an equitable subrogation theory. Accordingly, defendants' motions for summary judgment are denied.


 The underlying litigation in this subrogation action involved a personal injury claim by plaintiff Augusto Jorge ("Jorge"), resulting from a motor vehicle accident that occurred on November 29, 1988, while Jorge was a passenger in a limousine owned by Jiffy Executive Limousine Service ("Jiffy") t/a Best Executive Limousine and driven by Richard DeCecco ("DeCecco"), a Jiffy employee. Showboat contracted with Jiffy to transport casino patrons like Jorge. Jorge sued Showboat, Jiffy, and DeCecco alleging liability for the harm caused by the negligence of the limousine company and driver. Showboat cross-claimed for indemnification against Jiffy and DeCecco.

 City appointed counsel to represent Showboat, but neither Jiffy nor DeCecco were represented and defaults were taken against them on the complaint and cross-claim. Following a jury verdict on December 17, 1993, judgment was entered in favor of Jorge for $ 414,500 plus prejudgment interest equal to $ 93,055.25 for a total of $ 507,555.25 plus post-judgment interest and costs. Thereafter, Jorge obtained a default judgment against Jiffy and DeCecco's estate for the amount of the judgment entered on the jury verdict, and Showboat obtained a judgment for indemnity against the same defendants. On April 5, 1994, City paid $ 400,000 to settle Jorge's judgment against Showboat.

 During the course of the underlying litigation, there were disputes over whether City's policy covered Showboat for the Jorge accident. Jorge's claim was first reported to City on November 6, 1990. City began an investigation to determine coverage. At first, a City employee determined that there was coverage under the "garage keeper" liability provision of Showboat's policy. After that determination was made, the file was assigned to Carol Hamilton ("Hamilton") for further handling. Upon reviewing the file, Hamilton believed that coverage under the garage provision was erroneous but that coverage under the "business automobile" policy was more appropriate. Hamilton assigned the defense of the Jorge claim to Swartz, Campbell & Detweiler, who first entered an appearance for Showboat on November 20, 1990. *fn2" The question later arose as to whether the business auto provision applied to the Jiffy limousine because the provision may have limited coverage only to vehicles owned by Showboat. The investigation showed that Showboat did not own the limousine.

 On February 24, 1993, Hamilton sent a "reservation of rights" letter to Showboat, reserving City's right to disclaim coverage at a later date. On May 21, 1993, Hamilton rescinded the reservation of rights. When asked about the switch, Hamilton testified that City "determined that [they] would be estopped from disclaiming coverage since [they] had been handling [the defense] for two years at the time." Hamilton Dep. at 104-05.

 This subrogation action was brought by Showboat against Travelers and USI, the insurers of Jiffy and DeCecco, *fn3" seeking reimbursement for the $ 400,000 paid to settle the judgment against Showboat. Showboat also claims that it is entitled to recover $ 115,149.46 from Travelers and USI, which represents the difference between the amount of the judgment and the settlement payment of $ 400,000. *fn4" Jorge assigned all of his interests in his judgment against Jiffy and DeCecco to City and Showboat. The assignment provided that all proceeds recovered in excess of $ 400,000 should be split equally between Jorge and Showboat. See Def. Ex. W. Showboat further seeks post-judgment interest, attorney's fees, and costs incurred in this subrogation action. The instant motions for summary judgment were filed by USI and Travelers, on October 8, 1996, and October 17, 1996, respectively.


 Defendants argue that because City was not obligated to pay the $ 400,000 to Showboat under the written insurance policy, City should be deemed a volunteer, thereby forfeiting any right to subrogation. Whether City's status as a "volunteer" would defeat its subrogation claim depends on the operative subrogation theory. Subrogation rights are created in one of three ways: (1) an agreement between the insurer and the insured, (2) a right created by statute, or (3) a judicial device of equity to compel the ultimate discharge of an obligation by one who in good conscience ought to pay it. Culver v. Insurance Co. of North America, 115 N.J. 451, 455-56, 559 A.2d 400, 402 (1989); Aetna Ins. Co. v. Gilchrist Bros., Inc., 85 N.J. 550, 560, 428 A.2d 1254, 1259 (1981). In this case, subrogation could have been created by either the first or the third option. If the first option is satisfied and subrogation is due under the insurance policy, "conventional" (contractual) subrogation would be operative. If the agreement is not controlling, equitable subrogation may apply. This distinction is significant because the success of a subrogee's claims hinges on whether or not the payments were voluntary: volunteer status defeats a claim for equitable subrogation, but does not necessarily affect the rights of conventional subrogees. Nevertheless, because this court finds both that payment was made pursuant to the business auto policy and that City was not a volunteer, either conventional or equitable subrogation would be appropriate.

 A. Standard of Review

 Under Fed. R. Civ. P. 56(c), a court may grant summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." The non-moving party may not simply rest on its oppose a summary judgment motion but must affirmatively come forward with admissible evidence establishing a genuine issue of fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 324, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986).

 In deciding a motion for summary judgment, the Court must construe the facts and inferences in a light most favorable to the non-moving party. Pollock v. American Tel. & Tel. Long Lines, 794 F.2d 860, 864 (3d Cir. 1986) The role of the court is not "to weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial." ...

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