Opinion
Argued October 13, 1982
Decided December 8, 1982
Appeal from the Appellate Division of the Supreme Court in the First Judicial Department, FRANCIS N. PECORA, J.
Appeal from the Appellate Division of the Supreme Court in the Third Judicial Department, EDMUND L. SHEA, J.
Norman Bard and Beth J. Goldmacher for appellant in the first above-entitled action.
Richard C. Fitzmaurice, Raymond C. Green, Leonard M. Schnitzer, Mark Slotkin and Dennis Drucker for respondent in the first above-entitled action. A. Michael Gebo for appellant in the second above-entitled action.
Vincent F. Kirsch for respondent in the second above-entitled action.
The question on these appeals is whether an employer's general liability policy containing an exclusion for "any obligation of the insured to indemnify another because of damages arising out of" personal injury to an employee relieves the carrier of liability when the employer is sued for contribution pursuant to Dole v Dow Chem. Co. ( 30 N.Y.2d 143). In the County of St. Lawrence case the trial court held the exclusion inapplicable to suits for contribution but the Appellate Division, Third Department, reversed. The county appeals on the basis of the reversal. In the Dayton Tool company case both the trial court and the Appellate Division held for the insured and the carrier appeals by leave of the Appellate Division.
THE COUNTY OF ST. LAWRENCE CASE
In August, 1979 George Donnelly, employed by St. Lawrence County in the CETA program, was injured while operating a saw in the course of his employment at a local college. He sued the college and Rockwell International Power Tools, the manufacturer of the saw. They in turn brought third-party actions against the county seeking indemnification or contribution in the event Donnelly recovered in the main action.
The county sent notice of the suit to the defendant, Traveler's Insurance Co., which had issued a general liability policy to the county in May of 1979. The carrier, however, notified the county that it was disclaiming liability for the "third party lawsuit" pursuant to "Exclusion (j)". That exclusion states that the policy does not apply "to bodily injury to any employee of the insured arising out of and in the course of his employment by the insured or to any obligation of the insured to indemnify another because of damages arising out of such injury".
The county then commenced this declaratory judgment action claiming that the carrier is obligated under the policy to defend and indemnify the county in the third-party suit. The case was submitted to the court on stipulated facts.
The trial court held that the indemnity exclusion was inapplicable to third-party actions based on the Dole-Dow doctrine because they seek contribution not indemnification. The court noted that the Appellate Division, Second Department, had reached a contrary result in Green Bus Lines v Consolidated Mut. Ins. Co. ( 74 A.D.2d 136), but distinguished the case on the ground that the insurance policy there had gone into effect prior to the Dole decision. Here the court noted that the contract had been issued in 1979 when the case law and legislation initiated by Dole recognized indemnification and contribution as "separate and distinct concepts, with commonly accepted meanings". Thus the court concluded that the exclusion only relieved the carrier of the obligation to compensate the insured for any recovery based on indemnification. Accordingly, judgment was entered for the plaintiff to the extent of finding that the carrier was obligated to defend the third-party action and to compensate the plaintiff for any recovery based on contribution within the limits of the policy.
The Appellate Division, Third Department, reversed noting that (86 A.D.2d, at p 94) "[p]recisely identical exclusionary language was considered in" the Green Bus Lines case, and was held to relieve the carrier of liability for this type of third-party action. The court observed: "While plaintiff would have us distinguish Green Bus on the ground that the insurance policy there was issued before the Dole decision, a factor given some weight by the court, the overriding consideration was that '[a] Dole recovery * * * is merely a form of indemnification which [the exclusion clause] should be construed to include within its ambit'". (86 A.D.2d, at p 95.)
THE DAYTON TOOL CASE
In June, 1978 Hans Brandt, an employee of Dayton Tool Die Works, lost his left arm while operating a power press manufactured by Gulf and Western Corp. He sued the manufacturer who in turn brought a third-party action against Dayton Tool seeking full indemnity or, in the alternative, contribution for any recovery Brandt may obtain
Dayton Tool sent notification of the suit to the Insurance Co. of North America which had issued a general liability policy to the employer in September of 1977. The carrier subsequently disclaimed liability relying on "Exclusion (j)", which is identical to the clause at issue in the companion case. The carrier also commenced this declaratory judgment action claiming that because of the exclusion it was not obligated to defend or provide coverage in the third-party action.
The carrier moved for summary judgment but the court granted summary judgment to the insured employer holding that the "indemnity exclusion" did not apply to suits for contribution. The court made no effort to distinguish the Green Bus Lines case and dismissed the holding as being "in direct contravention" of two decisions of this court ( Rock v Reed-Prentice Div. of Package Mach. Co., 39 N.Y.2d 34; Riviello v Waldron, 47 N.Y.2d 297) which it held clearly show "that New York courts have traditionally treated contribution and indemnification as separate issues".
The Appellate Division, First Department, affirmed, without opinion, and, as noted, granted the insurance company leave to appeal to this court.
Initially we note that the insurance companies' arguments do not rest on the first portion of the exclusion which provides that the policy does not apply "to bodily injury to any employee of the Insured arising out of and in the course of his employment by the Insured". Although it has been urged in other cases that an employer's liability in a third-party action based on the Dole case is "ultimately" for bodily injury to an employee and thus encompassed within this portion of the exclusion, or a similarly worded provision, we have found such a broad interpretation unacceptable. The reason, we have noted, is because conceptually the Dole case does not render the employer directly responsible to the employee; it only affects the employer's liability to third parties ( Graphic Arts Mut. Ins. Co. v Bakers Mut. Ins. Co. of N.Y., 45 N.Y.2d 551, 556-558).
Thus in the cases now before us we are only concerned with the second portion of the exclusion which exempts from coverage "any obligation of the insured to indemnify another because of damages arising out of such injury". Although this speaks only of indemnity and makes no express reference to contribution the carriers urge that it nevertheless includes any obligation on the part of the insured to reimburse a third party pursuant to the Dole case. This argument is based on the assumption that the Dole decision merely established a right of "partial indemnification" and stresses the fact that in the Dole opinion we indicated that the newly announced right would have this "effect" (see Dole v Dow Chem. Co., supra, at p 147).
A similar observation was made in the Green Bus Lines case where, as noted, the Appellate Division, Second Department, held that an identically worded exclusion relieved the insurance company of any obligation to defend or pay a third-party claim based on Dole. That conclusion, however, was qualified by the fact that the policy in that case had gone into effect in 1970, two years prior to the Dole decision, so that the parties could not be said to have specifically intended to either include or exclude liability for such a suit. Under the circumstances the Appellate Division there found that the "indemnity exclusion" was not ambiguous because it evidenced a clear intent "to exclude from coverage the only type of derivative liability which the law then provided * * * namely common-law full indemnity". (74 A.D.2d, at p 151.) The court also observed that even after the Dole decision was handed down, "during the term of the policy", some authorities concluded that it represented an extension of the judicial indemnity theory and not an alteration of the rules of contribution which were then fixed by statute.
Although we subsequently denied the insured's motion for leave to appeal in that case ( 52 N.Y.2d 701), that denial, of course, is entitled to no precedential value ( Matter of Marchant v Mead-Morrison Mfg. Co., 252 N.Y. 284, 297-298). We note, however, that in seeking leave Green Bus Lines did not contend that the Appellate Division erred in equating contribution with indemnity under the peculiar facts of that case. It urged instead that the exclusion only applied to obligations to indemnify and not to claims for indemnification, and thus did not apply to this case because there had been a judgment in the defendant's favor in the main action. It was also urged that the Appellate Division erred in affirming on a theory different from that relied on by the trial court.
Whatever confusion may have initially existed concerning the nature of a Dole apportionment was dispelled by the time the policies in the cases now before us were issued. In 1973 we noted in Rogers v Dorchester Assoc. ( 32 N.Y.2d 553, 564-566) that the right of apportionment announced in Dole had no application to a claim for indemnity. In 1974 the Legislature codified the Dole principle by expressly expanding the right of contribution (L 1974, ch 742; CPLR 1402; see, also, General Obligations Law, § 15-108). Indeed this is not the first time it has been urged in this court that Dole merely establishes a right of partial indemnification. In 1976 we rejected such an argument in Rock v Reed-Prentice Div. of Package Mach. Co. ( 39 N.Y.2d 34, supra). There we discussed at some length the distinction between contribution and indemnity and explained that the reference to "partial indemnification" in the Dole decision served only as an analogy. Thus when the policies at issue on these appeals were issued in 1977 and 1979 contribution was not recognized as a form of indemnification and a clause which only excluded from insurance coverage an obligation to "indemnify" would not also exclude liability for a claim seeking apportionment under the Dole case.
The carriers argue nevertheless that the history of the clause shows that it was intended to exclude coverage for Dole recoveries. They note that within a few months of the Dole decision it was submitted to the Superintendent of Insurance as an amendment to the standard exclusion, accompanied by a memorandum indicating that it was intended "to avoid court decisions that have held * * * that the exclusion does not apply to situations where an employee of the insured recovers against a third party who in turn brings an action against the insured". The change was approved effective January 1, 1973. The employers, on the other hand, claim that the amendment was one of many changes adopted nationwide in general liability policies in 1972, and cannot be said to have been specifically intended to exclude contribution claims since most States did not recognize a right of contribution at that time. Indeed, as the Green Bus Lines case shows, the identical clause was employed in this State prior to Dole, and thus was evidently designed to eliminate the risk of common-law indemnification claims, the only basis for third-party liability then recognized at law. In any event the intent of the insurance company is not controlling when, as here, the words used in the policy do not adequately convey that intent.
Finally the carriers note that an insurance policy is not a statute and its terms should generally be construed as they would be understood by the ordinary person or customer (see, e.g., Johnson Corp. v Indemnity Ins. Co. of North Amer., 7 N.Y.2d 222). It is suggested that the average business person would consider the word "indemnify" to be synonymous with "reimburse" and "would, upon reading the policy be convinced that no coverage existed for third party actions for injuries to his employees, without regard to the theory of liability there asserted". If that is what was meant it could easily have been stated in those terms. Undoubtedly such a statement would have been more informative to the layman than the cryptic use of the term "to indemnify" assuming, as the carrier claims, that the exclusion was intended to be read in ordinary terms, and not in any technical legal sense. But, even accepting that assumption, the interpretation suggested is not the only reasonable interpretation of the exclusion clause. In common parlance "to indemnify" also means "to insure", thus conveying the impression, even to one not familiar with the law, that the exclusion would only apply if the employer had agreed to insure another's losses.
(See, e.g., Webster's New World Dictionary [2d Coll ed (1970)]; American Heritage Dictionary of the English Language [1970]; Longman Dictionary of Contemporary English [1978].)
In sum, the broad reading suggested by the carriers does not accurately state the law (cf. Graphic Arts Mut. Ins. Co. v Bakers Mut. Ins. Co. of N.Y., supra, at pp 556, 558) and, at best, simply reveals a potential ambiguity in the contract which, under settled principles, must be resolved against the insurance companies which drafted the policy (see, e.g., Thomas J. Lipton, Inc. v Liberty Mut. Ins. Co., 34 N.Y.2d 356).
Accordingly, in County of St. Lawrence v Travelers Ins. Cos., the order of the Appellate Division, Third Department, should be reversed, with costs, and the order of the Supreme Court reinstated. In Insurance Co. of North Amer. v Dayton Tool Die Works, the order of the Appellate Division, First Department, should be affirmed, with costs.
Chief Judge COOKE and Judges JASEN, GABRIELLI, JONES and FUCHSBERG concur with Judge WACHTLER; Judge MEYER dissents and votes to affirm in a separate opinion.
In Insurance Co. of North Amer. v Dayton Tool Die Works: Order affirmed, with costs.
In County of St. Lawrence v Travelers Ins. Cos.: Order reversed, with costs, and order of Supreme Court, St. Lawrence County, reinstated.
The majority's conclusion that exclusion of "any obligation of the insured to indemnify another because of damages arising out of * * * [bodily] injury [to an employee of the insured]" does not exclude an obligation by way of contribution for such an injury rests on three premises: (1) contribution differs from indemnification (at pp 497-498); (2) the exclusion was not written with specific reference to contribution (at p 498); and (3) "indemnify" is ambiguous because it encompasses the concept of "insure" (at p 499). Although I agree with the first premise as an abstract proposition of law, both the first and the second premises are irrelevant to the construction of the clause in question, and the third is mistakenly applied by the majority there being no true ambiguity in the context of the exclusion and the common speech of men. I, therefore, respectfully dissent.
At issue is not whether indemnity differs from contribution in the lexicon of the law, but whether in "the reasonable expectation and purpose of the ordinary business man" the obligation to contribute to another part of the money paid by him as damages for bodily injury to an employee of the insured is encompassed within the concept of "indemnify" as used in exclusion (j). The quoted phrase is taken from the oft-cited opinion in Bird v St. Paul Fire Mar. Ins. Co. ( 224 N.Y. 47). The issue there was whether damage to a vessel from concussion caused by an explosion resulting from a fire in a railroad freight yard some distance from the vessel was within the coverage of a fire insurance policy on the vessel. The Appellate Division had held space not a factor in causation. Overruling that conclusion and holding that the policy did not cover the loss, Judge CARDOZO, in reasoning which puts the issue in the present case in proper focus, stated (224 N.Y., at pp 51-52):
"The problem before us is not one of philosophy (Pollock Torts [10th ed.], p. 37). If it were, there might be no escape from the conclusion of the court below. General definitions of a proximate cause give little aid. Our guide is the reasonable expectation and purpose of the ordinary business man when making an ordinary business contract. It is his intention, expressed or fairly to be inferred, that counts. There are times when the law permits us to go far back in tracing events to causes. The inquiry for us is how far the parties to this contract intended us to go. The causes within their contemplation are the only causes that concern us.
* * *
"This view of the problem of causation shows how impossible it is to set aside as immaterial the element of proximity in space. The law solves these problems pragmatically. There is no use in arguing that distance ought not to count, if life and experience tell us that it does. The question is not what men ought to think of as a cause. The question is what they do think of as a cause. We must put ourselves in the place of the average owner whose boat or building is damaged by the concussion of a distant explosion, let us say a mile away. Some glassware in his pantry is thrown down and broken. It would probably never occur to him that within the meaning of his policy of insurance, he had suffered loss by fire. A philosopher or a lawyer might persuade him that he had, but he would not believe it until they told him" (emphasis in original).
Likewise here, it is the pragmatic view of the ordinary businessman that determines the result.
Because that is the rule, it is no more material to decision of this case that in the lexicon of the law contribution is distinguishable from indemnity than were the general definitions of proximate cause to which the Bird decision referred material to its determination. Here, as there, it is what is within the contemplation of the average man who speaks of an obligation to indemnify that controls.
For like reason I agree that what the carriers said to the Superintendent of Insurance when exclusion (j) was revised is not controlling. What is determinative is what a purchaser of the policy versed only in the common speech of man and without knowledge of what had been presented to the superintendent would understand from the language used. Moreover, the rule is the same whether the language in question is in a policy provision describing coverage or an exception from coverage ( Bird v St. Paul Fire Mar. Ins. Co., 224 N.Y. 51, 55, supra; Lionel Freedman, Inc. v Glens Falls Ins. Co., 27 N.Y.2d 364; North Amer. Iron Steel Co. v Isaacson Steel Erectors, 36 A.D.2d 770, 771, affd 30 N.Y.2d 640; see I Q Originals v Boston Old Colony Ins. Co., 58 N.Y.2d 651, affg 85 A.D.2d 21; Hellert v Travelers Ins. Co., 52 A.D.2d 751).
For the majority it is a sufficient answer to the pertinent inquiry that an ambiguity exists because "[i]n common parlance 'to indemnify' also means 'to insure'" (at p 499). While not intending to engage in a battle of dictionaries, I find it of some significance that many dictionaries do not include "insure" among the definitions of "indemnify" and that Webster's New Dictionary of Synonyms includes under "indemnify" only "reimburse, recompense, compensate, remunerate, pay, repay, satisfy." More important, however, is the fact that those dictionaries that do use the word "insure" do so only as but one of several meanings and then only in a secondary sense consistent with the connotation of "reimbursement" or "payment": "to protect against or keep free from loss, damage, etc.; to insure." Instructive is Webster's New Dictionary of Synonyms, which states (at p 599): "Indemnify implies promised or actual reimbursement for loss (as by fire), for injury (as by accident), or for damage (as by war or disaster) [the basic purpose for which insurance exists is to indemnify persons subject to loss when such loss occurs — Hedges]." Thus, "insure" in truth creates no ambiguity for it carries no connotation of insuring a risk; indeed it speaks to no more than reimbursement for loss, whether for all or only for part. Put another way, that insurance indemnifies does not mean that an ordinary businessman would read exclusion (j)'s reference to " any obligation * * * to indemnify" (emphasis supplied) not to exclude from coverage an obligation on his part to reimburse a joint tort-feasor for a share of the damages paid an employee of the insured, as well as to reimburse one held vicariously liable for the full account of the damages.
(See, e.g., Webster's Third New International Dictionary; Webster's New Collegiate Dictionary; Black's Law Dictionary [Rev 4th ed]; Black's Law Dictionary [5th ed].)
(Webster's New World Dictionary of the American Language [2d Coll ed].) Likewise the American Heritage Dictionary of the English Language includes as one meaning "To protect against possible damage, legal suit, or bodily injury; to insure."
Realistically the ordinary businessman purchasing both liability insurance and a separate workers' compensation policy, as did Dayton, would not think twice about the matter because he would, if he thought about it at all, be satisfied that whatever exclusion (j) of the liability policy excluded, coverage B of the compensation policy would protect against (cf. Lionel Freedman, Inc. v Glens Falls Ins. Co., 27 N.Y.2d 364, 368-369, supra; North Amer. Iron Steel Co. v Isaacson Steel Erectors, 36 A.D.2d 770, affd 30 N.Y.2d 640, supra). That the County of St. Lawrence self-insures its compensation liability does not require a different conclusion as to it; the common understanding of the word "indemnify" does not vary with whether other insurance is available, the more so because it is " any obligation * * * to indemnify" (emphasis supplied) which is excluded. To paraphrase the holding in Lionel Freedman, Inc. (27 N.Y.2d, supra, at p 368): The exclusion, considered as a whole, indicates that the term "indemnify" should be read in the sense of reimburse or repay "and the reasonable man reading the policy would draw no other conclusion."
"The words 'damages because of bodily injury by accident or disease, including death at any time resulting therefrom,' in coverage B include damages for care and loss of services and damages for which the insured is liable by reason of suits or claims brought against the insured by others to recover the damages obtained from such others because of such bodily injury sustained by employees of the insured arising out of and in the course of their employment."
Nothing in Graphic Arts Mut. Ins. Co. v Bakers Mut. Ins. Co. of N.Y. ( 45 N.Y.2d 551) or in our denial of leave in the Green Bus Lines v Consolidated Mut. Ins. Co. case ( 52 N.Y.2d 701) militates against the conclusion here reached. Graphic Arts dealt with a differently worded exclusion of "any obligation for which the insured or any carrier as his insurer may be held liable under any workmen's compensation * * * law" (45 N.Y.2d, at pp 556-557) and we held simply that "the Workers' Compensation Law does not require the employer to contribute to a nonemployee joint tort-feasor" ( id., at p 558). And as the majority footnote agrees, our denial of leave in Green Bus Lines is without precedential value, either way.
Because the rules governing construction of exclusion (j) allow for no other conclusion than that the obligation to indemnify for damages resulting from injury to an employee are not within the general liability coverage whether that obligation be by way of contribution or indemnification, I would reverse and grant plaintiff's motion for summary judgment in the Dayton Tool case and affirm in the County of St. Lawrence case.