Travelers Indem. Co. v. Israel

Travelers Indem. Co. v. Israel

Opinion

 [*489]  FRIENDLY, Circuit Judge:

Plaintiff insurance companies brought this action of interpleader in the District Court for the Southern District of New York against the insured and others to determine their liability on five fire insurance policies. Four policies had been issued to Sam and Dorothy Mindich covering property used by them in a laundry and dry cleaning establishment known as Camay Cleaners and Launderers; a fifth policy covered machinery conditionally sold them by Excell Laundry Machinery Corp., with certificates of insurance issued to Camay. On September 5, 1962, Sam Mindich merged Camay into a new enterprise, Jay Cee Shirt Laundry, Inc., which carried on business in the former location of Camay. In return for one-third of the Jay Cee stock, he agreed to transfer to the new corporation the assets of Camay, including the insurance policies. Three of the Mindich policies and the certificates of insurance covering the conditionally sold machinery were duly endorsed by the insurers in favor of Jay Cee; the fourth Mindich policy, issued by United States Fidelity and Guaranty [**2]  Company (Fidelity), was not transferred, and remained in the name of the Mindiches. On February 2, 1963, Jay Cee sustained a total loss of the insured property by fire; reduced to insolvency by the catastrophe, it made a general assignment to Stanley Israel for the benefit of creditors shortly thereafter.

On October 8, 1963, the insurance companies brought this action of interpleader in the District Court, under 28 U.S.C. § 1335, alleging they had been served with claims by various assignees of Jay Cee and holders of chattel mortgages, a notice of levy by the Internal Revenue Service, and an order in a turnover proceeding by Israel in a New York court. All the plaintiffs save Fidelity admitted liability on their policies; Fidelity denied it because of the Mindiches' failure to procure an endorsement in favor of Jay Cee. After rather facile disposition of the claims conflicting with Israel's, there remained Fidelity's denial of liability, which it sought to buttress by two further arguments: that, notwithstanding Israel's prompt answer in the interpleader action claiming the full amount under all the insurance policies, recovery was barred by a clause in [**3]  the policy requiring action to be brought within twelve months after inception of the loss; and that the issue of insurable interest, on which recovery under the policy depended, had been conclusively and adversely established by a default judgment entered August 10, 1964, decreeing that Sam and Dorothy Mindich had no interest in the policy from and after July 22, 1964. ¹ On these issues Judge Croake granted summary judgment against Fidelity, at the same time declining to make any allowance for plaintiffs' counsel fees and costs.

 [*490]  To say that Fidelity's objections were technical would be an understatement. It does not lie in the mouth of an insurer who, within the period allowed the insured for bringing an action, serves a complaint for interpleader with the usual prayer for an injunction against the initiation of all suits, to complain that an [**4]  insured complied with its own request. The equitable remedy of interpleader was not devised by the chancellors and codified by the legislature in order to assist insurers in the entrapment of unwary insureds. Cf. Wilkinson v. First Nat'l Fire Ins. Co., 72 N.Y. 499, 503 (1878).

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