
    Sydney Krause, as Trustee for the Benefit of the Class A Creditors of D. R. Comenzo & Co., Inc., Plaintiff-Appellant, v. American Guarantee and Liability Insurance Company, Defendant-Respondent and Third-Party Plaintiff-Respondent. American Express Company, Third-Party Defendant-Appellant. Charles Seligson, as Trustee in Bankruptcy of Ira Haupt & Co., Plaintiff, v. Fidelity and Casualty Company of New York, Defendant and Third-Party Plaintiff-Respondent. American Express Company, Third-Party DefendantAppellant.
    Argued January 9, 1968;
    decided May 16, 1968.
    
      
      Peter H. Kaminer, Edwin J. Wesely, Marie L. McCann, Arthur A. Munisteri and Elizabeth F. Defeis for third-party defendant-appellant in both actions.
    I. In both actions: Respondent has no right or color of a cause of action assertable either in a direct or third-party action against Affiexco unless and until it pays its insured. (Ross v. Pawtucket Mut. Ins. Co., 13 N Y 2d 233; Glens Falls Ins. Co. v. Wood, 8 N Y 2d 409; American Sur. Co. v. Diamond, 1 N Y 2d 594; American Sur. Co. v. Palmer, 240 N. Y. 63; Ocean Acc. & Guar. Corp. v. Hooker Electrochem. Co., 240 N. Y. 37; McGrath v. Carnegie Trust Co., 221 N. Y. 92; Madison Ave. Props. Corp. v. Royal Ins. Co., 281 App. Div. 641; St. Paul Fire & Mar. Ins. Co. v. United States Lines Co., 258 F. 2d 374; Lenzner Corp. v. Aetna Cas. & Sur. Co., 20 A D 2d 305; 50 New Walden v. Federal Ins. Co., 22 A D 2d 4.) II. In both actions: Respondent agreed in its own contract of insurance that it is not entitled to any recoveries from third parties until its insured has recovered his entire loss and, until its insured has been made whole, the insurer cannot succeed to any of its insured’s rights against third parties. (American Sur. Co. v. Gerold, 255 App. Div. 285; Northwestern Fire & Mar. Ins. Co. v. Ley & Co., 238 App. Div. 255, 264 N. Y. 427; New Jersey Equities Co. v. Mandel, 178 Misc. 783.) III. In the first above-entitled action: The settlement agreement between Comenzo, Comenzo’s assignee and Amexco confers no right upon the insurer to which it is not otherwise entitled.
    
      George J. Hirsch for plaintiff-appellant in the first above-entitled action.
    I. Defendant third-party plaintiff does not have legal capacity to sue. Its third-party complaint fails to state any cause of action. II. This court has the power to interpret a certified question by reading into it, from the record, the elements necessary to make it expressive of the issues in the case. (Drake v. Herrman, 261 N. Y. 414; Kelly v. Yannotti, 4 N Y 2d 603.) III. If a stay is not granted and the third party is permitted to continue with its unmatured claim, which until judgment is rendered in the action in main will remain hypothetical, the cestuis que trustent for whom plaintiff is acting will •be required to pay for the enormously involved third-party action which defendant insurance company will find it in its own interest to prosecute for years to come. IV. In the event of an affirmance, plaintiff is entitled as a matter of law to a stay of the third-party action pending further order of the court. The denial of that stay below was such an abuse of discretion as to be reviewable by this court. V. The ‘ ‘ prejudice ’ ’ to defendant third-party plaintiff by a stay is enormously outweighed by that which plaintiff and those for whom he is acting would suffer were defendant permitted to conduct its free-wheeling, wide-ranging, useless compaign of “ investigation ”. (People v. McClellan, 191 N. Y. 341; Matter of Superintendent of Banks, 
      207 N. Y. 11; Osborn v. Bank of United States, 9 Wheat. [22 U. S. ] 738.)
    • Covington Hardee, William C. Blind, Leonard P. Gaines, John T. Moran, Jr., and David J. Sweet tor respondent in both actions.
    I. Aninsurer sued on a broker’s blanket bond may implead a third party responsible for losses sustained by the insured notwithstanding the fact it has not paid the insured’s claim. II. Dismissal of the third-party complaint was not warranted under Ross (13 N Y 2d 233) nor under any decision that preceded or followed Ross. (Lenzner Corp. v. Aetna Cas. & Sur. Co., 20 A D 2d 305; American Sur. Co. v. Diamond, 1 N Y 2d 594; Glens Falls Ins. Co. v. Wood, 8 N Y 2d 409 ; 50 New Walden v. Federal Ins. Co., 22 A D 2d 4; Madison Ave. Props. Corp. v. Royal Ins. Co., 281 App. Div. 641; B. M. C. Mfg. Corp. v. Tarshis, 278 App. Div. 266; Psaty & Fuhrman v. Continental Cas. Co., 278 App.. Div. 159; Bunge Corp. v. London & Overseas Ins. Co., 267 F. Supp. 406; Lumbermens Mut. Cas. Co. v. Borden Co., 241 F. Supp. 683.) III. Only where the insurance contract conditions subrogation rights upon payment of the insured’s claim, as in Boss, is such payment necessary for a third-party action. (American Sur. Co. v. Palmer, 240 N. Y. 63; McGrath v. Carnegie Trust Co., 221 N. Y. 92; St. Paul Fire & Mar. Ins. Co. v. United States Lines Co., 258 F. 2d 374; Glens Falls Ind. Co. v. Atlantic Bldg. Corp., 199 F. 2d 60; Concordia Coll. Corp. v. Great Amer. Ins. Co., 14 F.R.D. 403; Putvin v. Buffalo Elec. Co., 5 N Y 2d 447 ; Brown v. Mechanics & Traders’ Bank, 43 App. Div. 173; 755 Seventh Ave. Corp. v. Carroll, 266 N. Y. 157; National City Bank v. Berwin, 240 App. Div. 550; Dunn v. Uvalde Asphalt Paving Co., 175 N. Y. 214.) IV. Since this court’s jurisdiction is limited to a determination of the question certified, it may not review other questions of law or the Appellate Division’s exercise of discretion in refusing to stay the third-party action. (Grannon v. Westchester Racing Assn., 153 N. Y. 449; Matter of McDonald, 211 N. Y. 272; Bowlby v. McQuail, 240 N. Y. 684; Waldorf-Astoria Hotel Co. v. City of New York, 212 N. Y. 97.) V. There is nothing in the nature of the right of subrogation which bars a third-party action by an insurer prior to payment of the insured’s loss. (Connecticut Mut. Life Ins. Co. v. Cornwell, 72 Hun 199.)
   Keating, J.

These two actions, both having their origins in the great ‘ ‘ salad oil swindle ’ ’, are here by leave of the Appellate Division on a certified question and present a common issue of procedural law. The plaintiff in each case is a trustee in bankruptcy for one of the victims of the financial and other manipulations of one Anthony De Angelis, president of the Allied Crude Vegetable Oil Refining Corporation. It was the collapse of De Angelis and Allied in November, 1963 which precipitated the disaster engulfing D. R. Comenzo, Inc., and Ira Haupt & Co., two brokerage houses and the cestuis of the plaintiffs.

Both Comenzo and Haupt had held warehouse receipts representing commodities in storage on Allied’s premises as security for credit extended by them. It is claimed the receipts were fraudulent, forged or counterfeit. Plaintiffs have brought separate actions seeking recovery on broker’s bonds issued by the defendant insurance companies to recover the losses incurred. The insurers have not made any payments and, moreover, contest their liability under their respective bonds.

Both insurers subsequently impleaded American Express Company (Amexco). They allege that the losses were the fault of the field warehouse companies which were charged with the duty of supervision of Allied’s tanks. They both allege that Amexco is also chargeable with the losses sustained because it so dominated and controlled its subsidiary, American Express Warehousing, Ltd., that the latter was the mere instrumentality of Amexco. The third-party complaints demand judgment over against Amexco if the plaintiffs recover against the defendant insurance companies.

In the Krause action, both the trustee and Amexco moved to dismiss the third-party complaint on the grounds that it failed to state a cause of action and that the insurer lacked legal capacity to sue (CPLR 3211, subd. [a], pars. 7, 3). Alternative relief in the form of a stay of all proceedings in the third-party action was also asked (CPLR 2201). Special Term granted the motions to dismiss, holding that the insurer’s action was premature. It had no standing, the court held, to bring the third-party action because its rights were based on a claim by way of subrogation and those rights accrued only on payment to the insured. On appeal, the Appellate Division, by a closely divided court, reversed, reinstated the third-party complaint and denied the motion for a stay. The majority held that the inter-pleader statute (CPLR 1007) permits a third-party action based on subrogation even where no payment has been made. The dissenting Justices were of the view that our decision in Ross v. Pawtucket Mut. Ins. Co. (13 N Y 2d 233) precluded a third-party action. [Wjhere an insurer has not made any payments under a policy ‘ it has not acquired the right or color of a present cause of action ’ in subrogation ” (27 A D 2d 353, 357).

Since the Appellate Division held that dismissal of the third-party complaint was improper, the court found it necessary to reach the question of the request for a stay on the ground it would delay and prejudice the main action. The majority concluded that, while a general stay was unnecessary, the denial would be ‘ ‘ without prejudice to an application to sever the third-party action in the event that the main action or any proceeding in it is sought to be delayed or adjourned by virtue of any proceeding in the third-party action or the incompleteness of any proceeding in that action ” (supra, pp. 356-357).

In the Seligson action, only Amexco is the moving party. The same relief in the alternative as in Krause is sought. Two additional grounds for a stay were urged. First, a settlement between Haupt and Amexco was then in the offing under the terms of which Haupt would deliver a general release to Amexco. Second, pending the consummation of such settlement, Haupt had agreed not to prosecute an action it had brought in Supreme Court, New York County, against Amexco. It was alleged that the latter provision was binding on the insurer. Special Term denied the motion to dismiss, but granted a stay. Amexco appealed from the denial of the dismissal, while the insurer did not appeal the granting of the stay. On Amexco’s appeal, the Appellate Division unanimously affirmed (28 A D 2d 672), one Justice concurring on constraint of the Krause decision.

We conclude that the disposition made by the Appellate Division in each action was correct. Were we writing on a completely blank tablet, there would be absolutely no difficulty in holding, on the basis of statutory language, policy and fairness to the defendant, that the decisions below are sound.

The language of CPLR 1007 permits the defendant to implead any person “ who is or may be liable to him ” and is certainly broad enough to encompass contingent claims based on subrogation (Madison Ave. Props. Corp. v. Royal Ins. Co., 281 App. Div. 641; see Twelfth Annual Report of N. Y. Judicial Council, 1946, pp. 202-203; St. Paul Fire & Mar. Ins. Co. v. United States Lines Co., 258 F. 2d 374 [interpreting the same language in subdivision (a) of rule 14 of the Federal Rules of Civil Procedure]). Logically, there is no difference in terms of maturity of an action based on subrogation, as opposed to indemnity, because in either situation the cause of action only accrues upon payment or the determination of liability. Moreover, a subrogee has as strong an interest in protecting its claim over as does an indemnitor.

Nor can it be denied that to permit impleader is in full accord with the spirit of an advanced practice code which seeks ‘ ‘ the avoidance of multiplicity and circuity of action, and the determination of the primary liability as well as the ultimate liability in one proceeding, whenever convenient (Eleventh Annual Report of N. Y. Judicial Council, 1945, p. 58; see, also, B.M.C. Mfg. Corp. v. Tarshis, 278 App. Div. 266).

It is, however, argued that to allow impleader would delay recovery by the insured, subject the alleged tort-feasor to multiple suits by all potential subrogees, involve the insured in a protracted and highly complex litigation in which it has no interest or concern, deprive the insured of control of its claim against the tort-feasor, impede a settlement between the insured and tort-feasor, create an incentive for the insurer to disclaim, and impose unnecessary litigation costs upon the plaintiff. Most of the arguments are without merit, and almost all those which do militate against permitting impleader can be adequately answered by the liberal and effective use of various procedural devices provided for in the Civil Practice Law and Rules. Severances, separate trials and stays can be employed to avoid any possible prejudice, and the Appellate Division in the Krause action expressly indicated it would grant a stay if plaintiffs made a showing of prejudicial delay. (See, e.g., Lenzner Corp. v. Aetna Cas. & Sur. Co., 20 A D 2d 305.) Likewise, any possible prejudice to the third-party defendant arising from multiple suits by subrogees can easily be cured by motions for consolidation or joint trials.

The argument that the insured is being involved in a case in which it has no interest or concern is difficult to understand.. If such is indeed the plaintiff’s position, the problem is easily resolved. The plaintiff need not participate in the preliminary phases of the litigation involving the third-party complaint and, when plaintiff’s own case is ready for trial, it can then move for a separate trial of the issues raised by the complaint.

The assertion that the insured will be deprived of control of his claim against the alleged tort-feasor is of no merit as is the similar argument that it will delay settlements between the two. The insured is free to press on with its claim or, if no payment has been made by the insurer, settle, as the insured desires. (Cf. Ocean Acc. & Guar. Corp. v. Hooker Electrochem. Co., 240 N. Y. 37.)

The contention that allowing impleader in this type of case creates an incentive for the insurer to disclaim is weakened by the fact that statutory interest is payable from the date of the loss. Moreover, where what is involved is a claim for several million dollars on a broker’s bond involving serious liability questions, it cannot reasonably be suggested that impleader substantially increases the incentive on the part of the insurer to litigate its liability. Simple prudence would require that the insurer carefully examine the validity of a two million dollar claim and litigate any issue it can in good faith raise.

The only significant difficulty arising from allowing impleader would be that the plaintiff might have to incur the expense of litigating the claim against the tort-feasor sooner than it might have wished or, if the insured is made whole by a recovery against the insurer, the insured would sustain an unnecessary expense. Countering this consideration is the fact that much of the cost of preparing the claim against the trot-feasor can be shared with the insurer.

Moreover, whatever additional expense to the plaintiff there may be is more than balanced by the advantages of judicial efficiency and the extreme injustice to the subrogee or, in this ease, the insurers, if they are required to await the disposition of the main claim before commencing a third-party action. The opportunity to gather evidence and prepare a claim may be irretrievably lost. Furthermore, the insurer’s subrogation claim may become time-barred if the plaintiff does not commence suit against the tort-feasor (see Exchange Mut. Ind. Ins. Co. v. Central Hudson Gas & Elec. Co., 243 N. Y. 75).

The dissent is premised upon the argument that the premiums paid by the insured purchased not only insurance but the right to foreclose an insurer from bringing any third-party action against a tort-feasor until such time as the insurer agrees to pay the insured’s claim. No language in the insurance policy supports this position. More importantly, the dissent would give the insured a powerful litigation weapon by which it may obtain substantial advantages unrelated to the merits of its claim. As a practical matter, were impleader denied, the insurer would have to make a choice between its defense to the main action and its subrogation rights. The decision would, of course, have to be made upon an evaluation of the relative merits of each claim and the probabilities of success in each instance, but it would be a decision made in partial or complete ignorance of the real merits of the claim against the alleged tort-feasor since the insurer would have no discovery rights. Thus, the insurer may be put in the position, on the one hand, of having to pay the insured substantial sums of money on questionable claims in order to preserve its subrogation rights, or, on the other hand, it may have to forego the opportunity to prepare what might well have proved to be an excellent case against the alleged tort-feasor. This should not be. Procedural rules exist to further the ends of justice, not to force parties to forego substantive rights and not to give parties advantages which the true merits of their claims or defenses do not warrant. Consequently, absent an unambiguous covenant by the insurer not to sue the alleged tort-feasor prior to payment of the insured’s claim, elemental fairness and the underlying policies of the Civil Practice Law and Rules demand that the insurer should not be required to make an election between its defense to the main action and its subrogation rights.

The dissent in Krause below and all the appellants here rely on Ross v. Pawtucket Mut. Ins. Co. (13 N Y 2d 233). Ross’ automobile was damaged in a collision with a car owned by one Moss. Ross brought an action against his collision insurance carrier when they were unable to agree as to the amount of damages. The carrier sought to implead Moss. We held that, absent payment, the insurer had no standing to implead the alleged tort-feasor.

The Appellate Division distinguished Ross on the ground that here there are no restrictions placed on the subrogation rights, while the policy in Ross provided that there would be subrogation only in the event that any payment for any collision loss is made ” (supra, p. 235).

It is true, as the Appellate Division noted, that the parties to an insurance contract can covenant that the insurer shall have no right to sue the third party until the insurer’s liability has been established or the claim paid in part or in full. Here, there was no such covenant. Therefore, in this connection, the Appellate Division’s analysis of Ross would seem correct. (Lenzner Corp. v. Aetna Cas. & Sur. Co., supra; 50 New Walden v. Federal Ins. Co., 22 A D 2d 4.) Still, Ross also rests on the broader ground that impleader should not be allowed to an insurer whose claim is based upon rights to be gained by subrogation, and, as has already been indicated, we do not accept this approach.

Although we are in disagreement with this particular rationale of the decision, on its facts Ross is clearly correct. Automobile collision cases are numerous and involve minor claims, and the very purpose of collision insurance is to permit the insured to collect his damages promptly and use the funds to repair his car. Consequently, as a matter of judicial discretion, impleader can properly be denied in such cases in order to reduce court congestion and' to assure that the prime object of the collision policy is not frustrated by the judicial process. (2 Weinstein-Korn-Miller, N. Y. Civ. Prac., par. 1007.02, pp. 10-86.1 — 10-86.2.)

These considerations do not arise in the instant cases since the primary purpose of a broker’s bond is not quick payment of small losses, but protection from ruinous losses. Thus, unlike the case with automobile collision policies, whatever additional delay might be incurred in permitting impleader here will not frustrate the main purpose for which the policy was purchased.

The order in each case should be affirmed, with costs, and the certified question answered in the negative.

Jasen, J. (dissenting in part).

We would affirm in Seligson and reverse in Krause. Since the plaintiff -in the Seligson action did not join in the motion for dismissal, any right of control over its cause of action can be held to have been waived by acquiescence. By the same token, plaintiff in Krause, having joined in the motion to dismiss, should be accorded the rights its bankrupt bargained for in the insurance contract.

The issue raised on this appeal is whether interpleader in the circumstances presented will ‘ ‘ prejudice the substantial rights ’ ’ of the plaintiff.

It seems clear to us that it will, and that this prejudice to the plaintiff as trustee of the policyholder far outweighs any interest the insurance company may legitimately assert. What the plaintiff’s bankrupt has contracted for is reimbursement if it suffers a loss — and not subrogation. The right of the insurance company to subrogation is no more than an incidental right by which the insurer may hope to recoup its payment to its insured, but it is not in any way a condition to such payment. The value of the right of subrogation does not even play a significant part, authorities have stated, in the formation of rate schedules. If the insurer should happen not to make good its subrogated claim after it has finally agreed or been compelled to pay its insured, it will only be bearing a risk it was paid to take.

However, if the insured is delayed or hampered in recovering under the policy—or if it loses control of its own right of action against a third party before the insurer has even acknowledged liability, much less paid-—-the insured loses a large part of that for which it paid its premium. It is precisely to avoid having to look, either directly or indirectly, to a tort-feasor for recoupment that the insured buys a casualty or fidelity policy. He needs the insurance proceeds as promptly as possible to replace what he has lost, pay his expenses or get on with his business.

In short, to give the insurer’s interest in subrogation parity with, or priority over, the insured’s interest in prompt recovery is to stand the insurance contract on its head.

Severance of the third-party claim for trial under CPLB 1010 is, in practical terms, an entirely inadequate protection for the insured. It is clear that severance will still leave control of the claim in the hands of the insurer who has not yet even conceded liability. Delay and additional expense are also inevitable. Motions, interlocutory appeals, attendance at examinations before trial in the third-party proceeding, limitations on the time and attention of attorneys are bound to frustrate the policyholder. Third-party procedure — as the language of CPLB 1010 makes clear — is not intended to affect substantial rights of policyholders in this way.

We disagree that Ross v. Pawtucket Mut. Ins. Co. (13 N Y 2d 233) should be limited to automobile collision cases. To adopt such a rationale is to vary the rule of law with the size of the stake involved. We are dealing here, as we did in Ross, with the limited class of cases in which an insured sues his insurance company on the policy, and the insurer, while resisting payment on the policy, seeks to implead a third party by right of subrogation. Our decision need not extend to the many other possible categories of third-party claims in which the consequences of impleader practice might be different.

Nor would dismissal here violate the spirit of CPLB 1007. That section must be read together with the closely related CPLB 1010, which does not limit the plaintiff’s procedural relief to severance of a third-party complaint for trial; it states explicitly that “ [t]he court may dismiss a third-party complaint without prejudice ” and that “ [i]n exercising its discretion, the court shall consider whether the * * * [third-party action] will unduly delay the determination of the main action or prejudice the substantial rights of any party.” (Emphasis supplied.)

In Krause v. American Guar. & Liab. Ins. Co.: Judges Burke, Scileppi, Bergan and Breitel concur with Judge Keating ; Judge Jasen dissents and votes to reverse in an opinion in which Chief Judge Fuld concurs.

In Seligson v. Fidelity & Cas. Co. of N. Y.: Chief Judge Fuld and Judges Burke, Scileppi, Bergan, Breitel and Jasen concur.

Orders affirmed, with costs. Questions certified answered in the negative. 
      
      . Plaintiff in the Krause action urges as a ground entitling him to a stay, an agreement by bank creditors of Comenzo to assume the litigation costs of Amexeo as part of an over-all settlement agreement. This is of no legal significance. An impleaded third-party defendant must always bear the cost of litigation even though the dismissal of the main action may ultimately render the costs completely unnecessary. The principal creditors of plaintiff’s bankrupt here have agreed to assume that burden. They, therefore, have no standing to complain that the agreement may prove burdensome.
     
      
      . The question of the effect, if.any, on the insured’s rights against the insurer in the event of any settlement between the insured and tort-feasor made without the insurer’s consent is not before us and would exist whether or not impleader were permitted. (Bunge Corp. v. London & Overseas Ins. Co., 64 Cir. 3440 [D. C. S. D. N. Y., Dec. 14, 1967], affd. in part and revd. in part, 394 P. 2d 496; cf. Jones v. Bacon, 145 N. Y. 446; Connecticut Fire Ins. Co. v. Erie Ry. Co., 73 N. Y. 399.)
     
      
      . 2 Richards, Insurance (5th ed., 1952), § 183, p. 654, quoting Patterson. Essentials of Insurance Law (1935), p. 122.
     