Atlantic Mutual Insurance Co. v.f Cooney

The Army and Air Force Exchange Service (the Exchange) sent over $350,000 in merchandise to Robert J. Cooney, an export packer, who was preparing to ship the merchandise to military exchanges in other countries. Cooney had agreed to insure the Exchange for any loss of merchandise while the merchandise was in Cooney’s possession. While the merchandise was in Cooney’s possession, a fire destroyed it. The Exchange had also insured the merchandise through Atlantic Mutual Insurance Co. (Atlantic) (plaintiff). The Exchange’s insurance coverage of the merchandise was limited to $100,000, and the policy provided that Atlantic would pay the Exchange for the lost merchandise, up to $100,000, as a loan, with the Exchange only obligated to repay the amounts received from a bailee holding the merchandise at the time of the loss. Atlantic paid the Exchange, a valuable customer, $354,000 for the merchandise, well above the policy limit, which was the amount of the loss minus $25,000 that Cooney had paid the Exchange. In exchange for the payments, the Exchange assigned its claims against Cooney to Atlantic or gave Atlantic subrogation receipts. Atlantic sued Cooney for subrogation, and Cooney’s insurance company, National Union Fire Ins. Co. (National) (defendant), was joined as a defendant. Cooney and National (collectively, Cooney) argued that because Atlantic’s payment to the Exchange exceeded its policy limit, Atlantic had no legal obligation to pay the full $354,000, and therefore Atlantic acted as a volunteer and had no right to reimbursement from Cooney. The trial court agreed, and Atlantic appealed.