The same dangers of collusion in the initial action negate Travelers' claim that it is prejudiced by the late advancement of the partial summary judgment motions. In particular, where the defendant has not raised a defense that would bar the action by Keystone against it and even submits that this defense is without merit, the timing of the third-party defendants' motions cannot be scrutinized strictly. As stated in a somewhat different context: "When it appears that circumstances indicate collusion between the parties to the initial action, the third-party defendant should not be held to the third-party plaintiff's inaction." Wright & Miller, supra, § 1457. In the same manner, the third-party defendants have been presented with a situation of possible undue prejudice to their positions. Because the ramifications of this situation may not have been readily apparent throughout these proceedings, and because larger questions of public policy are presented, the same rationale applies. In the normal course of events, Neemar would have brought this defense. Thus, in part, Keystone is requesting that the third-party defendants be held to Neemar's inaction.
Moreover, Travelers is not being unduly prejudiced by my consideration of these motions. By its own allegations, it is admitting liability for any judgment against Neemar. Thus, it is difficult to envision the prejudice that would result from denying Travelers the opportunity to recover against itself. Transport, which is relied upon by Travelers, is inapposite. In that case, the insurer did not have liability to the defendant for any judgments against it arising from that suit.
It is true that, if I grant the motions at hand, Travelers may lose the ability to pass this loss to the third-party defendants in whole or in part. However, this possibility is the product of a method of proceeding for which Travelers alone is responsible. It has not been lulled into inactivity by any affirmative acts of the third-party defendants, nor was this the only manner in which it could seek recovery from these parties.
I further find that Travelers' argument that Keystone will be prejudiced by hearing these motions is without merit. Keystone has recovered from Travelers all but $2,000.00 of its damages, and these motions request only that the suit by Keystone be barred to the extent that Travelers has subrogated to its rights. Accordingly, in ruling that this defense should be heard, I do not apply a rule of law mechanically, without consideration of possible prejudice to the parties. Rather, the motions present serious public policy questions concerning conflicts of interests and misuse of judicial procedures.
B. The Rule Barring Subrogation Against One's Insured.
Keystone, as represented by Travelers, admits the general rule that an insurer may not pursue a subrogation action against its insured but claims that the rule should not be applied here. Travelers distinguishes many of the cases barring subrogation actions against an insured on the grounds that these decisions involve builder's risk policies. Accordingly, under the "Louisiana rule," as it is known, an insurer cannnot pay a general contractor for its losses and then seek to recover from a subcontractor who is named, directly or indirectly, as an additional insured in the same policy. See e.g., Chrysler Leasing Corp. v. Public Adm'r, New York County, 85 A.D. 2d 410, 448 N.Y.S.2d 181 (1982) and cases cited therein. Travelers also states that the other single policy cases are distinguishable on the same grounds. See also, Royal Exchange Assurance of America, Inc. v. SS President Adams, 510 F. Supp. 581, 583 (W.D. Wash. 1981) ("Clearly there can be no recovery for damages caused by insured activities . . ." under the same policy).
However, this argument ignores that the courts have extended the rule beyond single insurance policy instances to cases such as the present one, where two unrelated policies, one for property and one for liability, are involved. See Royal Exchange, supra, 510 F. Supp. at 584; Stafford Metal Works, Inc. v. Cook Paint and Varnish Co., 418 F. Supp. 56 (N.D. Tex. 1976); Home Insurance Co. v. Pinski Brothers, Inc., 160 Mont. 219, 500 P.2d 945 (1972). The reasons for applying the rule in these instances are perhaps best set forth by the court in Pinski:
To permit the insurer to sue its own insured for liability covered by the insurance policy would violate . . . sound public policy. Such action, if permitted would (1) allow the insurer to expend premiums collected from its insured to secure a judgment against the same insured on a risk insured against; (2) give judicial sanction to the breach of the insurance policy by the insurer; (3) permit the insurer to secure information from its insured under the guise of policy provisions available for later use in the insurer's subrogation action against its own insured; (4) allow the insurer to take advantage of its conduct and conflict of interest with its insured; and (5) constitute judicial approval of a breach of the insurer's relationship with its own insured.