Insurance of New York v. Associated Manufacturers' Mutual Fire Insurance

McLaughlin, J.: On the 1st of September, 1897, the plaintiff entered into a contrast by which it insured, to the extent of $60,000, the Santa’ Fe and Pacific Railroad Company against loss or damage by fire for a specified term upon certain property contained in or on cars awaiting movement while in transit and until unloaded at destination. Subsequently it applied to and obtained from the defendant a contract of reinsurance to the extent of $5,000 against a portion of the risk. The contract of reinsurance provided that it was “ subject to the [70] same risks, valuations, endorsements (excepting transfers of location) and conditions as the original insurance, and loss, if any, to be settled and paid pro rata with the reinsured and at the same time and place, and upon the same conditions.” During'the term of the policy property covered by the original insurance was destroyed by lire. Notice was given, of the loss by the insured to thé plaintiff, and it, in turn, notified the defendant. The plaintiff, through its adjuster, proceeded to adjust the loss, and after such adjustment a settlement was made with the railroad company by which the plaintiff paid, in satisfaction of its liability under its policy, the sum of $33,633.04, and it thereupon requested the defendant to pay its share of such loss,-in accordance with the terms of the..policy of reinsurance. The defendant refused, and thereupon this action was brought to recover such sum. At the close of the trial the court directed a, verdict for the plaintiff for the amount claimed, and from the judgment thereafter entered the defendant appealed. During the course of the trial upwards of one hundred exceptions were taken, and we are asked to hold that “ every exception * * * was well taken.” We are unable to see any merit whatever in any of the exceptions.. Indeed none, of them are deserving of consideration, except those relating to the evidence as to the adjustment of the loss and payment of the same by the plaintiff to the railroad company. What is claimed in this respect is that the defendant is. not bound by the adjustment made by the plaintiff, but that in order to entitle the plaintiff to recover against this defendant it was required to prove every fact which the railroad would have been required to prove had the plaintiff resisted its claim and an action been brought to recover under the original policy. We think that a proper construction of the contract of reinsurance fails to sustain this claim. The defendant agreed that the reinsurance should be subject to the same risks, valuations and conditions as the original insurance, and that the loss should “ be settled and paid pro rata with the reinsured and at the same time and place and upon the same conditions.” Not only this, but it will be observed that the defendant admitted upon the trial that under a policy of this kind it is customary for the reinsurer to pay the reinsured its proportion of the adjustment expenses. In the absence, therefore, [71] of fraud or bad faith on the part of the plaintiff, the defendant, by the terms of its policy, as well as by the construction placed upon it by the admission, is in no position to object to the mode of adjustment as made hy the plaintiff. When, therefore, the plaintiff had ascertained by a proper investigation that it was legally liable to pay a certain amount to the railroad company under its contract; and such payment had been made, the defendant could not question the validity of the plaintiff’s act, unless it alleged and proved that the plaintiff had acted fraudulently or collusively to its injury. The amount of the loss to be paid by the defendant was to be evidenced by the plaintiff’s adjustment and payment. This sum it had agreed to and was obligated to pay, unless, as already said, it proved that the plaintiff, in making such adjustment and payment, had acted fraudulently and collusively with the railroad company. (Jackson v. St. Paul Fire & Marine Ins. Co., 99 N. Y. 124; Consolidated Real Estate & Fire Ins. Co. v. Cashow, 41 Md. 59.) There is nothing to show, either by allegation or proof, that the plaintiff did not act in entire good faith in adjusting the loss and in making the payment which it did, and no reason is suggested why the defendant should not pay to the plaintiff the sum which it agreed to by its contract of reinsurance, and for this reason the trial court properly directed a verdict for the plaintiff. It follows that the judgment and order appealed from must be . affirmed, with costs. Van Brunt, P. J., Patterson, O’Brien and Laughlin, JJ., concurred. Judgment and order affirmed, with costs.