
    The Mason-Henry Press, Respondent, v. Ætna Life Insurance Company, Appellant.
    Fourth Department,
    July 11, 1911.
    Insurance — indemnity against liability for • injuries to employees — judgment against insured, how far conclusive — provision that insurer shall not be liable for injuries to those employed in violation of law — defense by insurer, when no waiver of exemption from liability.
    A j udgment in an action by a servant against his master based upon findings that the master employed the servant, being under sixteen years of age, without the certificate prescribed by section 71 et seq. of the Labor Law and that the master did not have reasonable grounds to believe that the plaintiff was above the statutory age, is conclusive, as against one who insured the employer against liability for injuries to employees, as to the liability of the employer to respond in damages, the amount of the charge against the insurer if liable at all on its contract of indemnity, and also conclusively establishes as against the insured that he employed the servant in violation of the law.
    But where the policy provided that it did not cover any loss or expense resulting from injuries or death to persons émployéd “ in violation of law, or any child under the age of fourteen'(14) years where there is no legal restriction as to age of employment,” the insurer is not liable over to-the insured on a judgment recovered by an employee on findings that, being under sixteen years of age, he was employed in violation of the Labor Law and that the master had no reasonable ground to believe that he was over the statutory age.
    Dor does the insurer waive the benefit of the said exception from liability by defending the action brought by the employee pursuant to a clause of the policy authorizing the insurer to defend where, being apprised of the fact that the employee’s complaint, in addition to other grounds of negligence, alleged that the plaintiff, being under sixteen years.of age, was employed without a certificate contrary to the Labor Law, the insurer notified the insured that the policy did not cover the case if the employment was in violation of law and at no time departed from that contention. This, because it was the duty of the insurer to defend, there being charges of negligence other than the one excepted from the policy.
    Appeal by the defendant, The LEtna Life Insurance Company, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Onondaga on the 27th day of May, 1910, upon the verdict of a jury, and also from an order entered in said clerk’s office on the 27th day of May, 19.10, denying the defendant’s motion for a new trial made upon the minutes. z
    The plaintiff, a domestic corporation, has recovered a judgment upon an employers’,liability insurance policy issued to it by the defendant, a foreign corporation, on the 5th of July, 1906, and which,.by its terms, ran for three years from its date and at an annual premium of forty-two dollars and ninety cents. In May, ■ 1908, a boy named - Krause, under sixteen years of age, while in the service of the • assured, was injured on a printing press and recovered a judgment for the injuries suffered by him and the recovery was based upon the negligence of the- employer in hiring him in violation of the Labor Law.
    The plaintiff paid the judgment and has recovered the amount of the same in this action. The defendant contested the claim, alleging that by the express terms of its contract with the plaintiff it-is not liable.
    
      Charles E. Spencer, for the appellant.
    
      G. W. O’Brien and Albert J. Oot, for the respondent.
   Spring, J.:

By-the policy in controversy the defendant insured the plaintiff “against loss or expense arising or resulting from claims upon the assured for damages on account of bodily injuries or death accidentally suffered, by reason of the, operation of the trade or business described herein, by any employee or employees of the Assured while within the factory, shop, or yard described herein.” The policy provided that “this insurance is subject to the following conditions: ” In the subjoined paragraph “A,” the liability of the company is limited to $5,00.0 for injuries or death of. “one person” in the assured’s employ. Under the head of “ Exclusions ” it is provided as follows: “B. This policy does not cover loss or expense arising on account of or resulting from injuries or death to, or if caused by (1) any person employed in violation of law, or any child under the age of fourteen (14) years where there is no legal restriction' as to age of employment.”

The injured employee, Krause, in his complaint against the manufacturing company charged that it 'was negligent in employing him when only fifteen years of age without the employment certificate prescribed by section 71 et seq. of the Labor Law (Gen. Laws, chap. 82 [Laws of 1897, chap. 415], § 71 et seq., as amd. by Laws of 1903, chap. 184, and Laws of 1907, chap. 291); that he was set to work on a dangerous machine when out of repair and was negligently instructed in its operation.

There was a conflict in the testimony as to the age of Krause and as to whether if in fact he was under sixteen years of age the employer was negligent in employing him for the reason it claimed it had been informed at the time of the- commencement of the service by Krause and his father that the boy was sixteen years of age. The other grounds of negligence alleged were not submitted to the jury. The two issues for determination were whether Krause was in fact under sixteen years of age, and, second, assuming that fact and assuming that the machine on which he was employed was dangerous, did the defendant exercise due care in ascertaining the truth of the statements made to it as to his age %

The court summed up its discussion of the two issues, in this language: “ That is substantially the case which you have to determine. First, was the boy ás a matter of fact, at the time of this accident, sixteen years of age. If he was not conced.ed.ly he had no certificate such as the statute requires, and the employment of him by the defendants, in the absence of such certificate, and in the absence of reasonable - ground to believe that he- was sixteen - years of age, is evidence from which you may infer negligence on the defendants’ part. So if this machine was a dangerous machine and the boy .was under sixteen years of age you may infer negligence from the ■ fact that he was put. to work on it in the absence of reasonable ground on the master’s part to believe that the boy was in fact sixteen years of age. If you find that the master, whatever the truth is as to the boy’s age, had reasonable ground to believe that the boy was over sixteen, years of age;" that the master made all the reasonable-inquiries on that subject that a reasonably prudent man in the master’s place, knowing all that the master knew or that the master should have known, would have made and then believed the boy was over sixteen years of age, then, whatever the fact is, whether this machine was dangerous or not, whether the boy was sixteen years of age or not, your verdict must be for the defendant.”

The jury rendered a verdict in favor of the plaintiff and the judgment, from which no appeal was taken, was paid and conclusively determined as against the present plaintiff that Krause "at the time he was injured was under sixteen years of age and that it did not have reasonable ground to believe otherwise, and the- court so advised the jury in the submission of the case we are reviewing.

The judgment in the former action established conclusively, as against the present appellant, the liability of the assured to respond in damages to the employee Krause, and fixed the amount of the charge against the appellant if any liability at all existed by virtue of its indemnity contract with the assured. (Mayor, etc., v. Brady, 151 N. Y. 611; City of New York v. Corn, 133 App. Div. 1, 3; Oceanic S. N. Co. v. Co. T. E., 134 N. Y. 461.)

The judgment is also of conclusive effect in establishing against the present plaintiff that it employed Krause in violation of law. The judgment if conclusive in its favor must be given a like binding effect against it when made the basis of' recovery in this action.

In Fulton County G. & E. Co. v. Hudson River Tel. Co. (200 N. Y. 287) the court states the rule thus (at p. 291): The principle is- well settled that, hy notice and opportunity to defend an action, the party notified becomes a party thereto, so as to be concluded in any subsequent litigation between the same parties as to all questions determined in the action which are material to the right of recovery in the second action, and the judgment in-the first action is conclusive upon the defendant in the first action in the character of plaintiff in the second action, as to the facts thereby determined / therefore, if it appears that the judgment in the Horning action was based upon a finding of fact fatal to the recovery in this action, it cannot be maintained. The judgment in the Horning action is conclusive proof that the plaintiff in this action was legally liable to Horning upon the ground adjudicated in that action, if a ground were adjudicated, in the amount of the verdict therein. The record therein may 'disclose a state of facts showing that the defendant is or is not liable over to the plaintiff.”

The appellant alleged in its answer, and now contends, that the plaintiff in employing Krauge when he was under sixteen years of age without the certificate prescribed by the Labor Law violated that law, and its claim is, therefore, within the condemnation of paragraph “B” of its policy, already quoted. The trial court, however, permitted the jury to find from the conduct of the defendant, connected with its defense and management of the prior action, that it had waived the benefit otherwise inuring to it of the excepted condition quoted, and that was the only question of fact submitted to the jury.

A brief recital of the salient facts pertaining to this issue seems to be essential to its proper appreciation. On the day after the accident the plaintiff gave to the defendant notice thereof in writing in conformity to the terms of the policy, stating that Krause was sixteen years of age. The notice of claim in pursuance of the Employers’ Liability Act (Laws of 1902, chap. 600) was not executed until August twenty-ninth and was received by the defendant on the first of September. In that notice it was stated that Krause was fifteen years of age when injured. The service of the notice was the first information the defendant had of this fact and its manager promptly wrote to the plaintiff calling attention to this statement and asking if there was “on file at your office a. copy of employment certificate.” On the day following the plaintiff answered this letter to the effect that it had on file a statement from the father, Adolph Krause, of the age of the son, reading “Emil is 16 years old, (signed) Adolph Krause,” and that the mother stated there was no record of his birth.

The Krause action was commenced November tenth, and the complaint charged the defendant in that action with negligence in employing and directing the plaintiff to work on a dangerous machine when he was only fifteen years of age. .

The policy contained this provision: “D. If thereafter any suit is brought against the Assured to enforce a claim for damages on account of an accident covered by this Policy, the Assured shall immediately forward to the Company’s Home Office every summons or other process as soon as the same shall have been served on'him, and the Company will, at its own cost, defend such suit in the name and on behalf of the Assured, unless the Company shall elect to settle the same or to pay the' assured the indemnity as provided for in condition A, hereof.”

In the succeeding paragraph, the assured, “ whenever requested by the Company ” was required to aid in “securing information and evidence, the attendance of witnesses,” etc. The assured accordingly delivered to the manager of the defendant at Syracuse the summons and complaint in the Krause action. The manager acknowledged receipt promptly and in his letter adverted to the fact that' the contract of indemnity gave it the right to employ attorneys and to take charge of the action; yet as “sometimes judgments are obtained in excess of the limits in the policy contract, as a matter of courtesy, we allow the assured to have their counsel present at the trial, at their own expense, if they feel so- disposed, and if you wish, you are at liberty to do so in this case.We notice- that the complaint in this case alleges that injured ■was under 16 years of age and that no certificate as required by the Labor Law had been issued by the Board of Health. ■ You will permit us, therefore, to call your attention to- that provision of the policy which says that the policy does not cover any case where a person is employed in violation of law. If, therefore, it should develop at the trial of this case that injured was employed contrary to law, this case would not fall to us for attention. In accordance with the request of Mr. Mason, we are requesting our attorneys to keep in touch with your attorney, Mr. Ayling, and to submit a draft of the answer to this complaint to him before same is served.”

There was no response to this letter. The present defendant employed its attorneys, who prepared and served the answer, which was submitted to the attorney for the assured and verifled by its agent. The trial was taken charge of by the attorneys for ■ the appellant on behalf of the assured, hut its regular attorney was present, participating as fully as he desired in the trial, and was requested to sum up, which he declined to do. While the two attorneys, representing the insurer and assured respectively, discussed the effect of paragraph “ B” in the policy and did not agree as to its meaning, there was no discord or disagreement in the trial of the action. The appellant, as soon as it was advised of the claim of Krause that he had been employed in violation of the Labor Law, asserted to the assured that it was not liable on its indemnity policy for injuries to this employee if the claim made was established, insisting that it was expressly excluded from the opera-, tion of the insurance contract. At no time did it ever depart from this position, and the present plaintiff was well advised of its attitude.

I think the facts established on the trial did not constitute a waiver on the part of the defendant,. Its contract gave it the right to appear and defend on behalf of the assured. The complaint in the former action charged several grounds of negligence. The question of the age of the employee was one of fact. That issue might he determined favorably to the defendant in that action and the contest might turn on the other issues presented. For its own protection it was justified in defending the action. The record contains the judgment roll and a transcript of the stenographer’s minutes of trial in in the former action, and there is nothing in the record to indicate and there is no claim that any deception was practiced upon the assured, or that it was overreached or ^ treated unfairly. '

Again, it was' a duty imposed upon the insurance company to defend the former action and at its own expense. When it undertook the defense it was simply performing its contract obligation, and the present plaintiff, although aware of the claim , of the appellant that it disclaimed any liability if -Krause was under sixteen years of age when injured, made no suggestion that it preferred to conduct the defense itself, or even, to participate in the. trial. In view of these facts, it was too late after the trial for the assured to claim the defendant had waived the provision in the contract for its benefit which it unvaryingly insisted was operative if’ the facts developed which made it applicable.

Waiver is the intentional abandonment or relinquishment of an existing right. (Draper v. Oswego County Fire Rel. Assn., 190 N. Y. 12; Kiernan v. Dutchess County Mut. Ins. Co., 150 id. 190.)

The doctrine of waiver is usually asserted to afford relief against forfeiture. If the assured employed Krause in violation of law the insurance contract was not, therefore, terminated of avoided. The provision B was an exception, and its • violation relieved the defendant from liability to respond in .damages by reason ‘of that infraction of law. The contract remained in force, and for other injuries not within the exceptions the liability of the insurance' company continued unimpaired to the full limit prescribed in the contract.

In Draper v. Oswego County Fire Rel. Assn. (supra) the action was on a fire insurance policy. A -by-law of the defendant printed on the policy provided that the association would not be £ £ liable for any loss resulting from any open fire; bufit-by the insured with his knowledge or consent, within fifty feet from any insured building.” The plaintiff’s buildings within the life of the policy were destroyed by fire caused by a spark from an open fire built by the insured forty feet from the barn. It was claimed that the action of the directors of the association after the fire in summoning the insured to appear before them, at some .inconvenience • and expense to himself, in subjecting him to an examination and other facts along the same line amounted to a recognition of the policy and a waiver of the by-law- referred to, and the question of • waiver was the only one submitted to the jury. A recovery was had by the plaintiff and the judgment was reversed in this court (115 App. Div. 807), which decision was affirmed by the Court of Appeals.

, The court say (at p. 17): “As already said, the doctrine of waiver is to relieve against forfeiture; it.requires no considera- • tion for a waiver, nor any prejudice or injury to the other-party. The provision cited from the policy in this case, however, is not a condition the breach of which works any forfeiture. . It is simply an exception from the risk insured against. In other words, the policy does not cover a loss arising from any of the causes specified, in the by-law; but, nevertheless,, it remains in full force and effect •until the subject-matter of the insurance is destroyed. During the burning of this bonfire had the plaintiffs’ barn caught fire from any other cause, even from another bonfire inore than fifty feet distant from the building, the plaintiffs would have been entitled to their insurance.” And again, after stating that the plaintiff was informed that the ‘loss could not be adjusted because the association was not liable, and after commenting upon the furnishing of the proofs of loss, the court continue: “This was the course of procedure prescribed by th'e by-laws. There was no misrepresentation by any of the officers of the. defendant. The plaintiff knew how the fire was caused and his attention had been called to the exceptions in the risks insured against. The expenditures incurred by him in preparing the proofs of loss and attending the meeting of the directors were made with full knowledge of the facts.” ;

• The case of Sargent Mfg. Co. v. Travelers’ Ins. Co. (Supreme Court of* Michigan, reported in Detroit Legal News, Ho. 2, April 8, 1911, vol. 18, p. 58) is quite closely parallel to the present case in its facts. The defendant issued an employ•ers’ liability policy to thó plaintiff which contained an exempting provision similar to paragraph B in the policy in suit. An employee, fifteen years' of age, was injured in the service of the assured, and the employment was in violation of a statute of that State. He sued his employer and the jury found spécifically that it was negligent in employing the plaintiff in violation of the statute, prohibiting employment of a child under the age of sixteen years. The insurance association, as soon as it learned of the claim of the employee, advised the assured that if the hiring proved to be illegal and “ contrary to the statute ” it could not pay the judgment. It participated in the trial, taking charge of the defense, assisted, however, by the counsel for the assured. The plaintiff recovered and the defendant in that action sued the. insurance association and a verdict was directed for the plaintiff on the ground that the defendant after appearing and defending the' former action could not repudiate its liability. The judgment was- reversed by the Supreme Court.’ The insurance policy involved in that action contained a provision that in case an action was commenced to recover damages for injuries the association would defend at its own expense. The allegation of illegal employment was contained in an amended declaration and the association noti-. fied the assured that it would not pay any judgment recovered,, based on an employment which transgressed the statute. The court in its opinion, said (at p. 60): Plaintiff must,be held to have acted thereafter with full knowledge of defendant’s attitude as to. liability. By its silence and subsequent participation ' through its counsel, in the defense of the action, it acquiesced therein. It -is quite clear that defendant could not, with safety to itself, have repudiated liability under the policy. If Lund [the employee] succeeded in recovering under his allegations of common-law liability, defendant was liable. Under- . the amendment defendant could not, as a matter of law, determine for itself whether or not the assured had employed Lund at labor dangerous to life and limb, in violation of the statute. That contention raised a question of fact for the determination of the jury, as we have repeatedly held.”

• I think the facts in this casé were not sufficient to justify the submission of the question of waiver to the jury.

The judgment.and order should be reversed and a new trial granted,, with costs to appellant 'to abide event.

All concurred.

■ Judgment and order reversed and new trial granted, with costs to appellant to abide event.  