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Coverage Pointers - Volume I, No. 14

For those interested in following HOT CASES from other jurisdictions covering a broad range of legal issues, visit the HOT CASES section of the Federation of Insurance and Corporate Counsel website: www.thefederation.org.

01/06/00: MATTER OF NATIONWIDE INS. ENTERPRISE v. LEAVY

New York State Supreme Court, Appellate Division, Third Department

Inability to Identify Owner of Vehicle and Limits of Coverage Despite Due Diligence Results in SUM Coverage under Auto Policy

The insured sustained an ankle injury in an auto accident in February 1997, and filed a no-fault accident claim with her carrier. She was originally diagnosed with an ankle contusion, but a fracture was detected in a subsequent visit to her orthopedist in June 1997, which was confirmed by a second opinion. The insured then underwent arthroscopic surgery and retained an attorney in August of that year. The insured’s attorney claimed he made several unsuccessful attempts to contact the driver and owner of the other vehicle – he was aware of the identity of the driver, but not the owner. Therefore, the insured claimed she was unable to obtain the coverage limits on the applicable policy. In November 1997, the insured’s attorney wrote to the insurer with respect to a potential supplemental uninsured motorist (SUM) claim in the event the owner of the other vehicle was un/underinsured. After the owner’s identity and limits of coverage were revealed, the insurer denied the claim on the ground that it was untimely, since the policy required notice of a SUM claim "as soon as practicable." The court concluded that because the extent of the insured’s injuries were not apparent until June, and the owner of the other car could not be located until December despite due diligence, the insured presented reasonable excuse for her failure to provide notice of her underinsurance claim nine months after the accident. Application to permanently stay arbitration was dismissed accordingly.

01/06/00: UNWIN v. NEW YORK CENTRAL MUTUAL FIRE INS. CO.

New York State Supreme Court, Appellate Division, Third Department

SUM Coverage Lost Where Insured Reasonably Aware Extent of Injuries and Offers no Excuse for Late Notice

Plaintiff sustained injuries in March 1994 while riding in an auto insured by New York Central. The other vehicle involved in the collision was insured by Nationwide. Plaintiff sought treatment for her injuries the following day, which continued for a significant period of time. In September 1995, plaintiff was referred to a neurosurgeon who performed spinal surgery in January 1996. By letter dated February 5, 1996, plaintiff’s attorney requested Nationwide divulge its policy limits and, upon learning its limits, made a written claim to New York Central for SUM coverage. New York Central disclaimed coverage on the ground that notice was not provided "as soon as practicable." Here, the court held that plaintiff’s 23-month delay was unreasonable. Conclusory assertions in plaintiff’s affidavit that he treated with the understanding that there were "no significant problems and that he should recover from the soft tissue injuries" were unavailing, since the record established that treatment was not ameliorating his condition. Moreover, plaintiff failed to submit evidence from which it could be determined that he was not reasonably aware of the severity of his condition until February 1996, when the claim was made. The claim was therefore dismissed.

12/30/99: HOBBY v. CNA INSURANCE CO.

New York State Supreme Court, Appellate Division, Fourth Department

"Maximum Medical Improvement" -- Long a Basis for Denying No-Fault Benefits -- Disapproved

For years, New York No-Fault arbitrators have denied claims for medical expenses under the statute where they have found plaintiff has reached "maximum medical improvement". Here, the Appellate Division, Fourth Department, finds that arbitrators' rulings are not stare decisis and that there is no basis, in No-Fault statute or regulations, for using this standard to deny benefits. So long as plaintiff can establish treatment is necessary, fact that he or she has reached maximum medical improvement is of no moment.

12/30/99: KLAPAN v. DRYDEN MUTUAL INS. CO.

New York State Supreme Court, Appellate Division, Fourth Department

Policy Reformation Improper Where Policy Reflects Intention of Parties When Issued

Plaintiffs commenced this action to recover under a homeowner’s policy following a fire in 1995. The insurer disclaimed coverage because the insured sold the property to plaintiffs before the fire and neither was a named insured on the policy. Plaintiffs moved to reform the policy to name them as additional insureds, which Supreme Court granted. The Appellate Division reversed, holding that a written instrument accurately reflecting the intention of the parties when it was executed is not subject to reformation. Here, the named insured was the sole owner of the property when the policy was issued in 1989 and renewed in 1994.

12/30/99: BOYD v. ALLSTATE LIFE INS. CO.

New York State Supreme Court, Appellate Division, Fourth Department

Life Insurance Policy Declared Void for Material Misrepresentations Despite Agent’s Instructions to Withhold Condition

Life insurance policy was properly declared void and unenforceable where insured materially misrepresented alcoholism on insurance application. Plaintiff’s argument that decedent was advised by agent not to disclose the condition was rejected because, by signing the application, decedent declared "that all answers written on this Application are full and correct" and acknowledged that the insurer "is not presumed to know any information not in this application." The application also provided that no agent "may change this Application or waive a right or requirement." The court also held that estoppel may not be premised upon proof that, after death, the insurer accepted two premium payments automatically deducted from a joint bank account – the automatic deductions were errors that were promptly corrected.

12/30/99: TOPS MARKETS, INC. v. MARYLAND CASUALTY

New York State Supreme Court, Appellate Division, Fourth Department

Insured’s Self-Insured Retention could not be Recouped From Co-Insurer

Tops contracted with Broadcast International to provide background music at its facilities. Pursuant to that contract, Broadcast International was required to and did obtain liability insurance naming Tops as an additional insured on its Maryland Casualty policy. At the same time, Tops had its own liability policy with Royal Insurance, which policy had a $250,000 self-insured retention. In 1988, an employee of Broadcast International was injured at a Tops facility and sued it for damages. Royal tendered the defense to Maryland Casualty, and, in 1992, Maryland asked Royal, as coinsurer, to contribute equally to a settlement or verdict. The carriers then contributed equally to a post-verdict settlement of $950,000, and, pursuant to its policy with Tops, Royal charged back $250,000 to Tops. Tops commenced this action against Maryland claiming Maryland was obligated to pay that sum as damages for the suit covered by Maryland’s policy.

The Appellate Division decided that Tops was "stuck" with the policy it purchased from Royal – it purchased one with a $250,000 "deductible" – which Royal was entitled to enforce – and Tops could not recover that amount from a co-insurer. Tops also argued that Maryland’s action seeking contribution was the equivalent of a denial of coverage and that they had waived their right by not doing so earlier, an argument that the court summarily dismissed

12/28/99: MULLEN v. INDEPENDENCE SAVINGS BANK

New York State Supreme Court, Appellate Division, First Department

Material Misrepresentation in Application Renders Policy Void

A life insurance policy was declared void based upon insured’s material misrepresentation of substance abuse in her policy application. The insurer established that the insured misrepresented her history of substance abuse and that, based on its underwriting practices, it would have issued a less favorable policy then the one it had issued.

 

 

12/27/99: MATTER OF TRANSPORTATION INS. CO. v. SELLITTO

New York State Supreme Court, Appellate Division, Second Department

Insurer Waived "Business Pursuits" Exclusion in Auto Policy Based on Late Disclaimer

Police officer was injured by an underinsured motorist while investigating another motor vehicle accident, and promptly served his insurer with both notice of intention to make a claim and the pleadings in his action against the tortfeasor. The court found that the notice and pleadings adequately apprised the insurer of the circumstances of the accident, including that the police officer was acting in the scope of his employment at the time of the accident. Therefore, the insurer’s failure to disclaim coverage under the "business pursuits" exclusion of the policy, until this proceeding was filed five years later was unreasonable as a matter of law.

Editor’s Note: The Court of Appeals -- and the various Appellate Division Departments -- are still struggling with the question of whether a late disclaimer based on an exclusion waives coverage defenses in New York in the absence of prejudice. Stay tuned for more on this subject in issues to come.

12/27/99: CONRAD R. SUMP & CO. v. HOME INS. CO.

New York State Supreme Court, Appellate Division, Second Department

Insured’s Dual Role as Investment Advisor and Accountant Results in Defense Obligation under Professional Liability Policy

In this action for declaratory judgment, the insured sought defense and indemnification from its insurer pursuant to a professional liability policy. The underlying action alleged that the insured, an accounting firm, had engaged in a pattern of recommending "high risk, illiquid and speculative investments which were totally unsuitable for [client], self dealing, and negligent accounting practices." The insurer disclaimed coverage on the ground that all claims against its insured arose solely from the accounting firm’s role as investment advisor, which claims were expressly excluded from the policy. The policy excluded claims "arising out of services performed for a client for which the Insured also received a commission, fee, reciprocity or revenue for the sale or promotion of securities . . . or other investments" and claims "based upon or arising out of representations or opinions made to a client by the Insured in connection with the performance or non-performance of a specific security . . . or other investment". The court held the insurer was obligated to defend its insured in the underlying action because the complaint alleged the insured’s negligent accounting practices, not its investment advice, distorted the value and nature of investments and deprived its client of the opportunity and ability to exercise independent judgment concerning the investments. The complaint also alleged that the insured, in its capacity as accountant, failed to accurately and consistently report commissions paid to a co-defendant charged with actionable investment advice and self-dealing.

12/27/99: FAILLA v. NATIONWIDE INS. CO.

New York State Supreme Court, Appellate Division, Third Department

Findings that Insured’s Conduct was Negligent in Underlying Action not Entitled to Preclusive Effect in Later Declaratory Judgment Action

Plaintiff and insured were hunting turkeys when plaintiff’s gun discharged, striking the insured in the back. The insured then turned and fired three rounds in the direction of the shot, striking the plaintiff. As a result of the incident, the insured pleaded guilty to reckless endangerment in the second degree. Plaintiff then commenced an action against the insured for damages sustained as a result of the insured’s negligent or intentional conduct. The insurer advised its insured that it would provide a defense to the entire action, but would not indemnify him in the event his actions were found to be intentional. Shortly before trial, the insurer sent its insured another letter indicating it had concluded the insured’s conduct was intentional and was therefore denying any indemnification obligation. During the course of the trial that followed, the court instructed the jury that the insured was negligent as a matter of law.

In this declaratory judgment action for coverage under the policy, the court first rejected the insured’s contentions that disclaimer letters were untimely because "if [the insured’s] actions are found to be intentional, untimely notice of disclaimer cannot create coverage where none exists." Therefore, the dispositive issue was the nature of the insured’s conduct. In this regard, the insured argued that the insurer was collaterally estopped from relitigating that issue in the declaratory judgment action because it had provided a defense to its insured in the underlying action and, therefore, had every opportunity to litigate the issue of the insured’s conduct. The court disagreed. The insurer was not a party in the underlying action and, despite the fact that it would have been in the insurer’s best interest to establish that the insured’s conduct was intentional, counsel was obligated to pursue a defense that was in the insured’s best interest, i.e., that the insured’s conduct was negligent and therefore within coverage under the policy. Under those circumstances, the insurer’s interests were not represented in the underlying action and it could not have fully and fairly litigated the issue without breaching both the insurance contract and its fiduciary duty to the insured.

12/23/99: COMMERCIAL UNION ASSURANCE CO. v. OAK PARK MARINA, INC.

United States Court of Appeals for the Second Circuit (applying New York law)

Hidden Video Surveillance Cameras were Placed in a Marina's Restroom and Shower Facilities and the Films Shown in a Bar -- No Matter How the Claims Are Couched, No Coverage Under Liability Policies

The policy's Bodily Injury Endorsement provided coverage for "any and all claims for which [the Assured] may be held liable for damages arising out of accidents occurring during the term of this insurance as respects: (1) bodily injuries accidentally sustained . . . ." The District Court had reasoned that under governing New York law, the term "bodily injury" extends to mental distress, even without physical manifestation. It concluded that the insured's conduct was "accidental" and, thus, covered by the Bodily Injury Endorsement because the defendants never "intended" to make the videos public and thereby cause plaintiffs emotional distress. The Second Circuit Court of Appeals reversed, holding that there was nothing "accidental" about the alleged conduct in this case. The insured "intentionally installed the concealed video cameras. Then they intentionally exhibited the resulting footage in a bar." Whether or not the emotional distress was inflicted negligently, the harm "arose out of" conduct that was indisputably an intentional, albeit furtive, wrong. The only unintended or negligent aspect of this case was the insureds' expectation that their victims would never discover the video voyeurism. The mere fact that the insureds got caught does not constitute an "unintended . . . [subsequent] event" sufficient to make the resulting damage to plaintiffs "accidental." Moreover, the emotional distress did not occur until the injured parties learned of the videotape -- after the policy period had expired. Finally, while the insured enjoyed "personal injury" coverage for "invasion of privacy" claims, exclusion for "loss due to . . . any act of a dishonest character" makes that coverage inapplicable.

 

 

12/23/99: SYVERSTEN v. GREAT AMERICAN INS. CO.

New York State Supreme Court, Appellate Division, Third Department

Fraudulent Misrepresentation, Concealment and Civil Right Violations Not Accidents or Occurrences and Carriers Have Neither an Obligation To Defend Nor Indemnify

Plaintiffs owned a building, which they sold to Orezzoli. The building had numerous code violations. Prior to the sale, plaintiffs obtained variances on some of the violations and were given a certificate of compliance. Orezzoli purchased the building relying on the certificate and plaintiffs’ representations that the building was in habitable condition. After taking possession, Orezzoli discovered that the code violations had not been remedied and that the building was in a state of general disrepair. Orezzoli sued the prior owners alleging common law fraud and civil conspiracy. She also sued the chairman of the Housing Board who granted the variances for a violation of her civil rights. The plaintiffs turned the suit over to they various carriers for defense and indemnification. All the carriers denied coverage. Court found that claims of fraud and claims of civil rights violations were not claims of either accidents or occurrences and were intentional in nature. Similarly, umbrella policies specifically excluded civil rights claims. No duty to defend or indemnify existed under any policy.

ACROSS BORDERS

From time to time we highlight significant cases of interest from other jurisdictions. This week we offer a decision from Ohio:

12/29/99: STATE EX REL. HAYLETT v. OHIO BUREAU OF WORKERS’ COMP.

Ohio Supreme Court

Managed Care Program, Under Workers Compensation Statute, Ruled Constitutional
At issue in this case is the constitutionality of the Managed Care Organization (MCO) program. It was argued that the MCO program violates Section 35, Article II of the Ohio Constitution because it is an improper delegation of authority to a private entity. The Supreme Court disagrees. It was also argued that MCOs violate due process when they terminate a claimant’s medical treatment without providing prior notice and a prior hearing. The Court agrees that the MCO program as currently administered can lead to deprivations of due process, however, based on the facts of this case, it determined that the plaintiff was not deprived of due process.

 

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REPORTED DECISIONS

 

CONRAD R. SUMP & CO. v HOME INSURANCE COMPANY

DECISION & ORDER

In an action to recover damages for breach of contract based on the failure of the defendant Home Insurance Company to defend and indemnify the plaintiff under a professional liability policy in an action against it brought by the St. Labre Indian School Education Association, the defendant appeals from an order of the Supreme Court, Suffolk County (Emerson, J.), dated July 22, 1998, which denied its motion pursuant to CPLR 3211(a)(1), (c) to dismiss the complaint and granted the plaintiff's cross motion for summary judgment on the issue of liability.

ORDERED that the order is affirmed, with costs.

The plaintiff, Conrad R. Sump & Co. (hereinafter Sump), provides, inter alia, accounting services. The defendant, Home Insurance Company (hereinafter Home) issued a professional liability policy to Sump covering Sump's accounting services. In 1995 Sump was named as one of several defendants in a complaint by a former client, the St. Labre Indian School Education Association (hereinafter St. Labre). Sump had provided both accounting services and investment advice to St. Labre. The St. Labre complaint alleged, among other things, that Sump, both individually and in concert with the other defendants, had engaged in a pattern of recommending "high risk, illiquid and speculative investments which were totally unsuitable for St. Labre", self-dealing, and negligent accounting practices. Sump sent the St. Labre complaint to Home and demanded that Home defend and indemnify it. However, Home disclaimed coverage, asserting, inter alia, that all claims against Sump arose solely from Sump's role as investment advisor. Home asserted that such claims were not covered under the subject policy, and were subject to express exclusions for claims "arising out of services performed for a client for which the Insured also received any commission, fee, reciprocity or revenue for the sale or promotion of securities, tax shelters, real estate or other investments" and claims "based upon or arising out of representations or opinions made to a client by the Insured in connection with the performance or non-performance of a specific security, tax shelter, real estate or other investment". Ultimately, the St. Labre complaint was submitted to arbitration, after which St. Labre withdrew all claims against Sump.

Sump then commenced this action against Home to recover damages for breach of contract. Sump alleged that Home improperly declined to defend it against the St. Labre claims and sought reimbursement for litigation expenses incurred in the St. Labre proceedings. Home moved to dismiss the complaint, contending that it had properly declined to provide a defense to Sump because, although the St. Labre complaint contained "one conclusory reference" to Sump as an accountant, St. Labre's claims were "predicated solely upon [Sump] having acted as an investment manager and advisor for St. Labre, having received improper commissions, and having rendered inappropriate investment advice", matters not covered under, or expressly excluded by, the subject policy. Sump opposed the motion and cross-moved for summary judgment on the issue of liability. Sump argued that the claims made by St. Labre, both facially and as litigated, included claims against it that did not arise from its role as investment advisor. In the order appealed from , the Supreme Court denied Home's motion and granted Sump's cross motion. We affirm.

The duty of the insurance carrier to defend, which is "exceedingly broad" ( Colon v Aetna Life & Cas. Ins. Co., 66 NY2d 6, 8; see, Continental Cas. Co. v Rapid-Am. Corp., 80 NY2d 640, 648), is triggered whenever the four corners of a complaint, liberally construed, suggest a reasonable possibility of coverage, or when the insurance carrier has actual knowledge of facts establishing such a reasonable possibility (see, Frontier Insulation Contrs. v Merchants Mut. Ins. Co., 91 NY2d 169; Continental Cas. Co. v Rapid- Am. Corp., supra; Seaboard Sur. Co. v Gillette Co., 64 NY2d 304; Nancie D. v New York Cent. Mut. Fire Ins. Co., 195 AD2d 535). The insurance carrier may be relieved of its duty to defend only if it can establish as a matter of law that there is no possible factual or legal basis on which it might eventually be obligated to indemnify its insured, or by proving that the claim falls within a policy exclusion (see, Frontier Insulation Contrs. v Merchants Mut. Ins. Co., supra ; Servidone Constr. Corp. v Security Ins. Co. of Hartford, 64 NY2d 419; Nancie D. v New York Cent. Mut. Fire Ins. Co., supra). For denials based on claimed policy exclusions, the insurance carrier "bears the heavy burden of demonstrating that the allegations of the complaint cast the pleadings wholly within that exclusion, that the exclusion is subject to no other reasonable interpretation, and that there is no possible factual or legal basis upon which the insurer may eventually be held obligated to indemnify the insured under any policy provision" (Frontier Insulation Contrs. v Merchants Mut. Ins. Co., supra , at 174). If any claim arguably arises from a covered event, the insurance carrier must defend the entire action, and assumes the risk and the consequences of making its own decision as to what is alleged or what might be proven against its insured (see, Frontier Insulation Contrs. v Merchants Mut. Ins. Co ., supra; McGroarty v Great Amer. Ins. Co., 36 NY2d 358).

Here, although certain of the allegations made by St. Labre against Sump fell within the coverage exclusions relied upon by Home , Home did not meet its heavy burden of demonstrating that the allegations were wholly within such exclusions and that there was no possible factual or legal basis upon which it may have been held obligated to indemnify Sump under the policy. The St. Labre complaint sought damages from Sump due to, inter alia, allegedly negligent accounting practices that were not "based upon or arising out of" investment advice and/or alleged self-dealing by Sump. The complaint, in effect, alleged, among other things, that accounting negligence by Sump distorted the value and nature of certain investments and deprived St. Labre of the opportunity and ability to exercise independent judgment concerning the investments. The St. Labre complaint also alleged that Paul L. Morigi and the Paul L. Morigi Company, Inc. (hereinafter referred to collectively as Morigi), defendants in that action, engaged in a pattern of actionable investment advice and self- dealing. Indeed, specific allegations in the complaint against Sump in its capacity as accountant included , inter alia, the failure to have accurately and consistently reported certain commissions paid to Morigi . Further, the St. Labre complaint did not allege that Morigi was an employee or officer of Sump, or that all of the allegedly actionable conduct by Morigi involved concerted efforts with Sump. Accordingly , Home might have been called upon to indemnify Sump for damages arising from negligent accounting practices based on or arising out of investment advice and/or self-dealing by Morigi (cf., Mount Vernon Fire Ins. Co. v Creative Housing Ltd., 88 NY2d 347). Accordingly, the Supreme Court properly granted Sump summary judgment on the issue of liability.

RITTER, J.P., SANTUCCI, THOMPSON , and GOLDSTEIN, JJ., concur.

FAILLA v. NATIONWIDE INSURANCE COMPANY

Crew III, J.

Appeal from an order of the Supreme Court (Kane, J.), entered February 8, 1999 in Sullivan County, which, inter alia, granted plaintiffs ' motion for summary judgment and declared that defendant Nationwide Insurance Company is required to indemnify defendant Albert L. Amodeo in an underlying action.

On May 27, 1991, plaintiff Robert Failla and defendant Albert L. Amodeo each were hunting turkeys in the Town of Fallsburg, Sullivan County. While tracking a turkey, Failla discharged his weapon, striking Amodeo in the back. Amodeo then turned and fired three rounds in the direction of the shot, striking Failla. As a result of this incident, Amodeo pleaded guilty in August 1991 to the reduced charge of reckless endangerment in the second degree.

In April 1992, Failla and his spouse, derivatively, commenced an action against Amodeo (hereinafter the underlying action) seeking to recover for damages allegedly sustained as the result of Amodeo's negligent or intentional conduct. Amodeo answered and counterclaimed for the injuries he allegedly suffered. By letter dated June 11, 1992, defendant Nationwide Insurance Company advised Amodeo, its insured, that it would provide him with a defense as to the entire action but would not indemnify him should his actions be found to have been intentional in nature. Amodeo further was advised, due to the competing theories of liability advanced in the complaint, of his right to obtain a personal attorney, for which Nationwide would pay a reasonable fee.

Shortly before the trial in the underlying action commenced, Amodeo was advised by letter dated February 7, 1994 that Nationwide had concluded that Amodeo's conduct was intentional in nature and, pursuant to the exclusionary portion of the policy between Amodeo and Nationwide, Nationwide would not indemnify Amodeo against any judgment obtained by plaintiffs. During the course of the trial that followed, Supreme Court (Ceresia Jr., J.) instructed the jury that Amodeo's conduct was negligent as a matter of law. The jury thereafter returned a verdict in favor of plaintiffs but attributed 50% of Failla's injuries to his own negligence . The jury also made an award as to Amodeo's counterclaim. Supreme Court thereafter granted the parties ' posttrial motions to set aside the verdict as to damages and ordered a new trial in this regard. Upon appeal, we affirmed (see, Failla v Amodeo, 225 AD2d 965).

Plaintiffs thereafter commenced this declaratory judgment action against Nationwide seeking, inter alia, a declaration that Nationwide was obligated to indemnify Amodeo for any judgment obtained against him. Nationwide answered and raised various affirmative defenses, including that plaintiffs lacked standing and failed to join necessary parties. Plaintiffs subsequently moved for summary judgment and Nationwide cross-moved for summary judgment dismissing the complaint. Supreme Court (Kane, J.) denied the respective motions except to the extent that plaintiffs were directed to join Amodeo as a necessary party.

Following the service of supplemental pleadings, the parties resubmitted their respective motions to Supreme Court which, inter alia , granted plaintiffs' motion for summary judgment in its entirety. In so doing, Supreme Court concluded , inter alia, that Nationwide was estopped from litigating whether Amodeo's conduct in shooting Failla was negligent or intentional. This appeal by Nationwide ensued.

As to the timeliness of Nationwide's notice of disclaimer, the parties debate whether Nationwide's June 11, 1992 letter to Amodeo constituted a notice of disclaimer or, rather, merely a reservations of rights letter and, further , whether either the June 11, 1992 or February 7, 1994 letters constituted a timely disclaimer of liability based upon Nationwide's determination that Amodeo's conduct was intentional in nature. This issue ultimately need not detain us, however, for Nationwide concedes in its brief that if Amodeo's actions are found to be negligent, there is coverage under the subject policy. On the other hand, if Amodeo's actions are found to be intentional, it is well settled that an untimely notice of disclaimer cannot create coverage where none exists. Hence, the dispositive issue before this court is not the form or timeliness of Nationwide's notice of disclaimer but, rather, the nature of Amodeo's conduct.

In this regard, plaintiffs argue and Supreme Court found that Nationwide, having provided a defense to Amodeo in the underlying action, had every opportunity to litigate the issue of Amodeo's conduct and , hence, is collaterally estopped from relitigating that issue in the context of the instant declaratory judgment action. We cannot agree.

To be sure, "'[t]he doctrine of collateral estoppel , a narrower species of res judicata, precludes a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party or those in privity, whether or not the tribunals or causes of action are the same'" ( Mulverhill v State of New York, 257 AD2d 735, 737-738, quoting Ryan v New York Tel. Co., 62 NY2d 494, 500). "In order to establish privity, 'the connection between the parties must be such that the interests of the nonparty can be said to have been represented in the prior proceeding'" ( Comi v Breslin & Breslin, 257 AD2d 754, 757, quoting Green v Santa Fe Indus., 70 NY2d 244, 253). A party seeking to defeat the doctrine's application bears the burden of demonstrating "the absence of a full and fair opportunity to litigate the issue in the prior action" ( Kaufman v Lilly & Co., 65 NY2d 449, 456).

In our view Nationwide, which was not a party to the underlying action between plaintiffs and Amodeo, cannot be said to have been in privity with Amodeo for purposes of applying the doctrine of collateral estoppel. Based upon the allegations set forth in the underlying complaint, Nationwide was required to, and did indeed, provide a defense to Amodeo (see generally, Merrimack Mut. Fire Ins. Co. v Carpenter, 224 AD2d 894, lv dismissed 88 NY2d 1016 [duty to defend triggered when the allegations of the complaint fall within the scope of the risks undertaken by the insurer]) and, in light of the competing theories of liability advanced, further advised Amodeo of his entitlement to a personal attorney. Once Amodeo elected to proceed with the attorney provided by Nationwide, however, counsel was obligated to provide Amodeo with a unified defense. In other words , despite the fact that it plainly would have been in Nationwide's best interest to attempt to establish that Amodeo's conduct was intentional, counsel was obligated to pursue a defense that was in Amodeo' s best interest -- namely, establishing that his conduct was negligent and, hence, within the coverage of the policy provided by Nationwide (see generally, Nelson Elec. Contr. Corp. v Transcontinental Ins. Co., 231 AD2d 207, lv denied 91 NY2d 80 2; Wiley v New York Cent. Mut. Fire Ins. Co., 210 AD2d 829). Under such circumstances, it simply cannot be said that Nationwide's interests were represented in the prior proceeding. Indeed, Nationwide could not have fully and fairly litigated the issue of Amodeo's conduct in the underlying action without breaching both the insurance contract and its fiduciary duty to its insured.

Having concluded that Supreme Court's finding in the underlying action that Amodeo's conduct was negligent as a matter of law is not entitled to preclusive effect, we turn our attention to the parties' respective motions for summary judgment. Although Amodeo testified that he did not intend to harm anyone, the fact remains that upon being shot, he immediately turned and fired three rounds in the direction from which the shot came and subsequently pleaded guilty to reckless endangerment in the second degree. Under such circumstances, we find that the record presents a question of fact as to the nature of Amodeo 's conduct and whether coverage indeed is afforded by the policy issued by Nationwide. Accordingly, plaintiffs' motion for summary judgment is denied.

Cardona, P.J., Mikoll, Yesawich Jr. and Mugglin, JJ., concur.

ORDERED that the order is modified, on the law, without costs, by reversing so much thereof as granted plaintiffs' motion for summary judgment and declared that defendant Nationwide Insurance Company is required to indemnify defendant Albert L. Amodeo in the underlying action; motion denied; and, as so modified, affirmed.

SYVERTSEN v. GREAT AMERICAN INSURANCE COMPANY

Peters, J.

Appeals (1) from an order of the Supreme Court (Ingraham , J.), entered August 21, 1998 in Otsego County, which granted defendants' motions for summary judgment and declared that they were not obligated to defend or indemnify plaintiffs in a Federal action, and (2) from two amended judgments entered thereon.

Plaintiffs purchased a building in November 1972 that had been operated as a college fraternity house in the City of Oneonta, Otsego County . In March 1987, an inspection of the premises resulted in a finding of 41 violations of the City's Housing Code, ordered to be repaired within 30 days of receipt of the notice of violation. It is alleged that the notice further contained a statement that the electrical wiring violations listed on a report of the New York Board of Fire Underwriters, dated June 19, 1985, had never been reinspected as corrected and that such violations were continually cited on inspection notices to plaintiffs between June 19, 1985 and March 10, 1987.

Between March 10 and July 27, 1987, plaintiffs purportedly made certain repairs on the building in an attempt to obtain a certificate of compliance from the City for the purpose of facilitating a sale. After the issuance of the notice of violation but prior to a sale, the City Housing Board of Appeals, then chaired by plaintiff Stanley A. Syvertsen,[1] granted variances to plaintiffs with respect to certain code requirements cited in the notice of violation. In July 1987, a certificate of compliance was issued. At or about such time, plaintiffs entered into an agreement with a corporation to sell these premises and said contract was assigned to Margaret Orezzoli , who is not a party to this action. Orezzoli purchased this building in reliance on the certificate of compliance and the representation by plaintiffs that the building was in habitable condition.

After taking possession, Orezzoli discovered that most of the code violations had not been remedied and that the building was in a general state of disrepair. The City's Code Enforcement Officer thereafter issued a series of inspection reports, beginning July 29, 1988, which alleged numerous old and new violations of various codes, laws and regulations. Later it revoked the certificate of compliance and the City Zoning Board of Appeals terminated the prior nonconforming use of the building as a fraternity house.

In July 1990, Orezzoli commenced an action against plaintiff and others[2] in the US District Court for the Northern District of New York alleging causes of action in common-law fraud, civil conspiracy and the violation of her civil rights under 42 USC § 1983 (hereinafter the Orezzoli action). As to these plaintiffs, Orezzoli charged a civil conspiracy, fraudulent misrepresentation and, as to Syvertsen, a violation of her constitutional right to due process and equal protection based upon his membership in and acts undertaken by the City 's Housing and Zoning Boards of Appeal.

Upon their receipt of the complaint in the Orezzoli action, plaintiffs requested that their insurers -- defendant Utica Mutual Insurance Company , defendant Great American Insurance Company and defendant Royal Insurance Company of America -- defend the action. All three disclaimed coverage, contending that under the terms of the relevant policies they had no obligation to defend or indemnify. Plaintiffs thereafter commenced the instant action seeking a recovery for defense costs and indemnification for the judgment recovered by Orezzoli in the Federal action.[3] After issue was joined, defendants each filed motions for summary judgment which were granted . This appeal emanates from said order and from the two amended judgments entered thereon.

Recognizing the exceedingly broad nature of the duty to defend as compared to the duty to indemnify (see, Curtis v Nutmeg Ins. Co., 204 AD2d 833, 834, lv dismissed 84 NY2d 1027; see also , Technicon Elecs. Corp. v American Home Assur. Co., 74 NY2d 66; Colon v Aetna Life & Cas. Ins. Co., 66 NY2d 6), the duty to defend will be found "' whenever the allegations in a complaint against the insured fall within the scope of the risks undertaken by the insurer, regardless of how false or groundless those allegations might be * * *'" (Curtis v Nutmeg Ins. Co., supra, at 834, quoting Seaboard Surety Co. v Gillette Co., 64 NY2d 304, 310 [citations omitted]). "A party's characterization of the causes of action alleged * * * are not controlling * * * [;] we * * * determine the nature of the claims based upon the facts alleged 'and not the conclusions which the pleader draws therefrom'" (Curtis v Nutmeg Ins. Co., supra, at 834-835, quoting County of Columbia v Continental Ins. Co., 189 AD2d 391, 394, lv denied 82 NY2d 841).

Within these parameters, we review the terms of the Utica Mutual policy which acknowledges a duty to defend and indemnify its insured in any suit arising out of "bodily injury or property damage" caused by "an occurrence". Since "an occurrence" is defined as " ;an accident * * * which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured", we find, upon our review of the totality of the complaint in the Orezzoli action, that the allegations pertaining to fraudulent misrepresentation regarding concealment of the condition of the building cannot be viewed as unintended or unexpected from plaintiffs ' "standpoint". Finding Orezzoli's damages to be the "direct and natural consequence of [their] intentional act[s]" ( Mary & Alice Ford Nursing Home Co. v Fireman's Ins. Co. of Newark, N.J., 86 AD2d 736, 738, affd 57 NY2d 656) and therefore deemed, as a matter of law, "intentionally caused" ; within the meaning of the policy (see, Allstate Ins. Co. v Mugavero, 79 NY2d 153, 161), we can find no duty to defend or indemnify plaintiffs on any of the claims alleged, including those of constitutional dimensions (see, Sweet Home Cent. School Dist. of Amherst & Tonawanda v Aetna Commercial Ins. Co., AD2d , 695 NYS2d 445; Town of Moreau v Orkin Exterminating Co., 165 AD2d 415; County of Broome v Aetna Cas. & Sur. Co., 146 AD2d 337, lv denied 74 NY2d 614).

Turning to the policy issued by Great American, an "umbrella policy" covering liability in excess of any primary policy covering the same claim, we note that Utica Mutual is named on this policy as plaintiffs' comprehensive general liability carrier with a primary policy limit not exceeded by the award of damages in the Orezzoli action. Despite no coverage under the Utica Mutual policy, the provisions of the Great American policy provide for a defense under these circumstances so long as the "occurrence" constitutes "an event or happening * * * neither expected nor intended from the standpoint of the insured". Like the Utica Mutual policy, however, it further specifies that no coverage will be provided for "any liability for any loss, damage or expense caused intentionally or at the direction of the insured". Following our prior reasoning, we find the allegations of fraud to be intentionally caused, thereby vitiating any obligation of Great American to provide a defense (see, Allstate Ins. Co. v Mugavero, supra; Pistolesi v Nationwide Mut. Fire Ins. Co., 223 AD2d 94, lv denied 88 NY2d 816; Town of Moreau v Orkin Exterminating Co., supra).

Addressing the constitutional violations propounded against Syvertsen, we note that the Great American policy was issued to him in his individual capacity and that it specifies that no coverage will be provided for civil rights claims predicated upon activities taken "under color of state law" ( 42 USC § 1983). Even if these acts were deemed to arise out of his individual conduct, regardless of his municipal function, we would still find no duty to defend since coverage is also excluded for "personal injury claimed by any person directly or indirectly related to the violation of any Civil Rights Act or Constitutional Rights".

Nor can we find error in the determination that by suing plaintiffs in their individual capacities rather than in their corporate identities, Royal did not have a duty to defend or indemnify them based upon its issuance of a commercial general liability policy to Suncrest Transportation Inc. and its corporate officers. As to its second policy to Suncrest, a commercial catastrophic liability policy with "VIP Shield Personal Catastrophic Liability Endorsements" naming plaintiffs as individually insured, its terms provide that coverage will be triggered only after the underlying insurance coverage had been determined to be applicable . As we have already determined that the underlying policy would not be applicable here, no duty to defend or indemnify plaintiffs can be found.

"'"[C]onclud[ing] as a matter of law that there is no possible factual or legal basis on which [these insurers] might eventually be held to be obligated to indemnify [the plaintiff] under any provision of the insurance polic[ies]" ;'" ( Erdman v Eagle Ins. Co., 239 AD2d 847, 849, appeal dismissed, lv denied 90 NY2d 926, quoting Jubin v St. Paul Fire & Mar. Ins. Co., 236 AD2d 712, 714, quoting Servidone Constr. Corp. v Security Ins. Co. of Hartford, 64 NY2d 419, 424), we affirm the order and amended judgments of Supreme Court.

Mikoll, J.P., Mercure, Yesawich Jr. and Graffeo , JJ., concur.

ORDERED that the order and amended judgments are affirmed , with costs.

**FOOTNOTES**

[1]: At all relevant times, Syvertsen was either the chairperson or a member of the City Housing Board of Appeals and the City Zoning Board of Appeals.

[2]: The City, the City Zoning Board of Appeals , the City Housing Board of Appeals and Peter Friedman, the City's Code Enforcement Officer, were also named as defendants.

[3]: In May 199 2, a trial was held which resulted in a jury verdict in favor of Orezzoli on her cause of action against plaintiffs alleging common-law fraud. The judgment was affirmed on appeal to the Second Circuit Court of Appeals. The amount recovered, with interest, is approximately $93,000.

HOBBY v. CNA INSURANCE COMPANY

Order unanimously affirmed without costs. Memorandum: Supreme Court properly granted plaintiff’s motion for summary judgment compelling defendant, CNA Insurance Company (CNA), to pay outstanding medical bills pursuant to the no -fault provisions contained in plaintiff’s motor vehicle insurance policy. CNA sought to discontinue plaintiff’s insurance benefits on the ground that plaintiff had reached "maximum medical improvement" , but there is no authority for that action under Insurance Law § 5102 (a) (1) or that section’s applicable regulations (see, 11 NYCRR 65.12, 65.15 [o]). Indeed, Insurance Law § 5102 (a) (1) provides up to $50,000 for "[a]ll necessary expenses" for medical treatment and "any other professional health services; all without limitation as to time, provided that within one year after the date of the accident causing the injury it is ascertainable that further expenses may be incurred as a result of the injury" ( Insurance Law § 5102 [a] [1] [iv]). CNA’s argument that "maximum medical improvement" has been accepted for several years as a basis for denial of no-fault benefits by arbitrators is not dispositive; courts are not bound by the decisions of arbitrators through the principle of stare decisis (see, McKinney ’s Cons Laws of NY, Book 1, Statutes § 72). We conclude that plaintiff met her initial burden by establishing that the disputed treatment continues to be necessary, and CNA failed to raise a triable issue of fact (see, Zuckerman v City of New York, 49 NY2d 557, 562). (Appeal from Order of Supreme Court, Onondaga County, Major, J. - Summary Judgment.) PRESENT: GREEN, J. P., LAWTON, PIGOTT, JR., HURLBUTT AND CALLAHAN , JJ. (Filed Dec. 30, 1999.)

KLAPAN v. DRYDEN MUTUAL INSURANCE COMPANY

Order unanimously reversed on the law without costs, motion granted in part, complaint dismissed in part and cross motion denied in accordance with the following Memorandum: Following a fire in December 1995, plaintiffs commenced this action to recover under a homeowner’s policy issued by defendant Dryden Mutual Insurance Company (Dryden) to plaintiff George M. Klapan. Dryden disclaimed coverage because George sold the property to plaintiff Marko Klapan before the fire and neither Marko nor his wife, plaintiff Nellie Klapan, were named insureds . The complaint alleges that, after title was transferred, defendant Richard L. Crump Agency, Inc. ( Crump), as the general agent of Dryden, failed to add Marko and Nellie as additional insureds. The complaint contains causes of action for breach of contract and wrongful denial of coverage and states a claim for negligence.

Following a hearing, Supreme Court granted the cross motion of Marko and Nellie to reform the insurance policy to name them as additional insureds. That was error. When the policy was issued to George in 1989, he was the sole owner of the property, and the policy was properly issued to him. When the policy was renewed on September 6, 1994, George was still the sole owner of the property . A written instrument that accurately reflected the intention of the parties when it was executed is not subject to reformation (see, Chimart Assocs. v Paul, 66 NY2d 570, 573-574). Because neither Marko nor Nellie is a named insured , the court erred in denying Dryden’s summary judgment motion with respect to them and in failing to dismiss the complaint with the exception of the negligence claim. The contention of Dryden that it is not responsible for the alleged negligence of Crump is made for the first time on appeal and is not properly before us (see, Walker v Huber, 254 AD2d 734; Curry v County of Erie, 233 AD2d 957). (Appeal from Order of Supreme Court, Onondaga County, Tormey, III, J. - Summary Judgment.) PRESENT: PINE, J. P., WISNER, HURLBUTT AND BALIO, JJ. (Filed Dec. 30, 1999.)

BOYD v. ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK

Judgment unanimously modified on the law and as modified affirmed without costs in accordance with the following Memorandum: Supreme Court properly granted defendant’s motion for summary judgment and declared void and unenforceable a life insurance policy issued to plaintiff’s husband (decedent) in December 1 992. Plaintiff commenced this action to collect the death benefits after decedent died on July 24, 1 993. Defendant counterclaimed for recission pursuant to Insurance Law § 3105 based on material misrepresentations on the insurance application. In support of its motion, defendant presented the requisite "documentation concerning its underwriting practices " establishing that it would have denied the application had it contained accurate information concerning decedent's alcoholism ( Carpinone v Mutual of Omaha Ins. Co., ___ AD2d ___ [decided Oct. 28, 1999]; cf., Campese v National Grange Mut. Ins. Co., 259 AD2d 957; Feldman v Friedman, 241 AD2d 433, 434). In response, plaintiff failed to raise an issue of fact with respect to the application of defendant’s alcoholism guidelines.

Plaintiff contends that decedent was advised by the agent who completed the application not to disclose the condition. By signing the application, however, decedent declared "that all answers written on this Application are full and correct" and acknowledged that defendant "is not presumed to know any information not in this application" and that no agent "may change this Application or waive a right or requirement " (see, Wageman v Metropolitan Life Ins. Co., 24 AD2d 67, 69, affd 18 NY2d 777; see also, Cutrone v American Gen. Life Ins. Co. of N. Y., 199 AD2d 1032, 1033; DiGrazia v United States Life Ins. Co. in City of N. Y., 170 AD2d 246, 247-248; Bloom v Mutual of Omaha Ins. Co., 161 AD2d 1047, 1049).

We reject the contention of plaintiff that an estoppel defense may be premised upon proof that, after decedent’s death, defendant accepted two premium payments automatically deducted from a joint bank account (cf., Scalia v Equitable Life Assur. Socy. of U.S., 251 AD2d 315). The continued deduction of the premium payments following decedent’s death was an error that was promptly corrected by defendant.

The court properly declared the rights of the parties but erred in dismissing the complaint (see , Tumminello v Tumminello, 204 AD2d 1067). We modify the judgment, therefore, by vacating the provision dismissing the complaint. (Appeal from Judgment of Supreme Court, Niagara County, Joslin, J. - Declaratory Judgment.) PRESENT: LAWTON, J. P., HAYES, WISNER, HURLBUTT AND SCUDDER, JJ. (Filed Dec. 30, 1999.)

MULLEN v. INDEPENDENCE SAVINGS BANK

Order, Supreme Court, New York County (Emily Goodman , J.), entered July 7, 1998, which, insofar as appealed from, as limited by the briefs, denied a motion by the insurers for summary judgment, unanimously reversed, on the law, without costs, the motion granted , and the policy declared void ab initio. Appeal from order, same court and Justice, entered May 5, 1999, which denied a second, similar motion by insurers, unanimously dismissed, without costs, as academic in light of the foregoing.

The motion court erred in denying the insurers' summary judgment in this action to collect on a life insurance policy brought by the estate of the insured’s husband. Summary judgment was sought, in separate motions, on the grounds that the insured, in applying for the policy, made material misrepresentations as to her history of substance abuse and as to her use of tobacco, respectively.

The record shows that the insurers established without contradiction that the insured materially misrepresented her history of substance abuse. The hospital records, which reflected her statements to doctors regarding the time periods when her substance abuse problem existed , are admissible pursuant to CPLR 4518(c) as relevant to her diagnosis and treatment ( Eitner v 119 West 71 St. Owners Corp., 253 AD2d 641, 642, citing Williams v Alexander, 309 NY 283, 288). This evidence, combined with the evidence of the insurers ’ underwriting practices regarding applicants’ past use of multiple drugs and of drugs intravenously, sufficiently establishes that, at the least, the insured would have received a much less favorable policy (see, Christiania Gen. Ins. Corp. v Great Am. Ins. Co., 979 F2d 268, 278; Vander Veer v Continental Cas. Co., 34 NY2d 50, 53). Moreover, plaintiff failed in its burden to controvert the above-mentioned evidence (see, Zuckerman v City of New York, 49 NY2d 557, 562). Plaintiff’s argument pursuant to CPLR 4504(c), regarding the non-waivability of the physician-patient privilege here, is without merit since, inter alia, if upheld, the argument would require, pursuant to Insurance Law § 3105(d), that we deem the insured’s failure to disclose her substance abuse history on the insurance application a material misrepresentation, thus entitling the insurers to summary judgment (see, e.g., Leyton v American Mayflower Life Ins. Co. of New York, 184 AD2d 244).

Inasmuch as our grant of summary judgment dismissing the complaint renders the appeal from the May 1999 order academic, that appeal need not be addressed. However, were we to consider it, we would find that the insured also materially misrepresented her history of tobacco use, and that such would provide an additional basis for voiding the policy.

TOPS MARKETS, INC. v. MARYLAND CASUALTY

Judgment unanimously reversed on the law without costs, motion denied, cross motion granted and complaint dismissed. Memorandum: In 1987 plaintiff, Tops Markets, Inc. (Tops), contracted with Broadcast International (BI) to provide background music in plaintiff’s facility. BI was required to obtain liability insurance naming plaintiff as an additional insured. It did so on its policy with defendant, Maryland Casualty (Maryland). Tops also had its own liability insurance with Royal Insurance (Royal). In 1988 an employee of BI was injured at a Tops facility and sued Tops. Royal tendered the defense of the action to Maryland.

In 1992 Maryland asked Royal, as a coinsurer, to contribute equally to a settlement or verdict. Royal and Maryland contributed equally to a postverdict settlement of over $950,000 and, pursuant to the terms of its policy with Tops, Royal charged back to Tops the sum of $250,000. Tops then commenced this action against Maryland, contending that Maryland was obligated to pay the $250,000 as damages for a suit covered by Maryland’s policy.

Supreme Court erred in granting Tops' motion for summary judgment and denying Maryland’s cross motion for summary judgment dismissing the complaint. The court determined that the request by Maryland for contribution from Royal was the equivalent of a disclaimer or denial of coverage under Insurance Law § 3420 (d) and that, because the disclaimer was made more than 2½ years after the commencement of the underlying personal injury action, it was untimely as a matter of law. That was error. An insurer has a right to seek contribution from an obligated coinsurer (see, National Union Fire Ins. Co. of Pittsburgh, Pa. v Hartford Ins. Co. of Midwest, 248 AD2d 78, 85, affd 93 NY2d 983). The purpose of Insurance Law § 3420 (d) is to protect the insured, the injured party "and any other interested party who has a real stake in the outcome" from prejudice resulting from a belated denial of coverage (Excelsior Ins. Co. v Antretter Contr. Corp., ___ AD2d ___ [decided June 15, 1999]). That section is inapplicable to a request for contribution between coinsurers. Maryland never denied or disclaimed coverage to the insured.

Further, we conclude that Royal was obligated to contribute its ratable share of the settlement. "'[W]here insurance policies provide coverage for the same interest and against the same risk, concurrent coverage exists and two or more primary insurers will be held to be coinsurers'" who must contribute a ratable portion of the amount paid (National Union Fire Ins. Co. of Pittsburgh, Pa. v Hartford Ins. Co. of Midwest, supra, at 84, quoting Southgate Owners Corp. v Public Serv. Mut. Ins. Co., 241 AD2d 397, 398; see, Great N. Ins. Co. v Mount Vernon Fire Ins. Co., 92 NY2d 682, 686-687). Royal and Maryland both had "other insurance" clauses in their policies that rendered them primary insurers for the injury to the BI employee. The excess insurance clause in the Maryland policy contained exceptions that are inapplicable to this case (see, Great N. Ins. Co. v Mount Vernon Fire Ins. Co., supra, at 687). The obligation of Royal to contribute to the settlement is an obligation separate and distinct from the contract provisions between Tops and BI (see, National Union Fire Ins. Co. of Pittsburgh, Pa. v Hartford Ins. Co. of Midwest, supra, at 85), and Maryland did not violate any obligation to Tops when it enforced its rights against Royal.

Maryland contends that the $250,000 charged to Tops by Royal constituted a retrospective premium for which Maryland is not liable. Whether that sum is deemed a deductible, as argued by Tops, or a retrospective premium is of no moment. The insurers properly shared equally in paying damages to the injured person, and each was entitled to rely on the provisions of its own policy covering Tops. Maryland had no deductible or retrospective premium adjustment provision, while Royal did. We conclude, therefore, that Tops' motion should have been denied, Maryland's cross motion granted and the complaint dismissed. (Appeal from Judgment of Supreme Court, Erie County, Fahey, J. - Summary Judgment.) PRESENT: PINE, J. P., HAYES, WISNER, PIGOTT, JR., AND SCUDDER, JJ. (Filed Dec. 30, 1999.)

MATTER OF TRANSPORTATION INSURANCE COMPANIES v SELLITTO

In a proceeding pursuant to CPLR article 75 to permanently stay the arbitration of an underinsured motorist claim, the appeal is from an order of the Supreme Court, Suffolk County (Berler, J.), entered December 9, 1998, which granted the petition.

ORDERED that the order is reversed, on the law, with costs, the petition is denied, and the parties are directed to proceed to arbitration.

In granting the petition to permanently stay the arbitration of the appellant's underinsured motorist claim , the Supreme Court relied upon a policy exclusion which, as conceded by the petitioner, was inapplicable pursuant to an amendment to the policy. Nonetheless, the "business pursuits" exclusion is applicable since the appellant, a police officer, was injured by an underinsured motorist while investigating another motor vehicle accident. However, the petitioner failed to timely disclaim coverage under that exclusion .

An insurer is required to give written notice of any disclaimer of liability or denial of coverage "as soon as is reasonably possible" after it first learns of the accident or grounds for disclaimer of liability ( Insurance Law § 3420[d]; see, Hartford Ins. Co. v County of Nassau, 46 NY2d 1028; Prudential Prop. & Cas. Ins. v Persaud, 256 AD2d 502; Matter of Nationwide Ins. Co. v Freehill, 224 AD2d 532). Here, the record shows that the appellant served the petitioner with a notice of intention to make a claim in July 1991, just two weeks after the accident. He provided the petitioner with a copy of the pleadings in the action against the underinsured motorist in 1993. The notice and the pleadings adequately apprised the insurer of the circumstances of the accident, including the fact that the appellant was acting within the scope of his employment as a police officer when he was injured. Nonetheless, the insurer did not disclaim under the "business pursuits" exclusion or any other exclusion until it filed the instant petition in April 1998. This delay in disclaiming is unreasonable as a matter of law, and precludes the petitioner from disclaiming coverage based on that exclusion (see , Jefferson Ins. Co. of N. Y. v Travelers Indem. Co., 92 NY2d 363; Prudential Prop. & Cas. Ins. v Persaud, supra).

Contrary to the petitioner 's contention, it was not relieved of its duty to disclaim. The "business pursuits" provision constitutes an exclusion rather than a limitation of coverage (cf., Matter of Prudential Prop. & Cas. Ins. Co. v Hobson, 67 NY2d 19; Zappone v Home Ins. Co., 55 NY2d 131; Worcester Ins. Co. v Bettenhauser, 260 AD2d 488) and the appellant is not barred from recovering underinsured motorist benefits by the so-called firefighter's rule (see, General Municipal Law § 205-e; General Obligations Law § 11-106; Schiavone v City of New York, 92 NY2d 308; Ruotolo v State of New York, 83 NY2d 248; Santangelo v State of New York, 71 NY2d 393).

The petitioner's remaining contentions are without merit.

SULLIVAN, J.P., JOY, KRAUSMAN, and LUCIANO, JJ., concur.

MATTER OF NATIONWIDE INSURANCE ENTERPRISE v. LEAVY

Graffeo, J.

Appeal from a judgment of the Supreme Court (Canfield, J.), entered August 4, 1999 in Albany County, which, inter alia, granted petitioner 's application pursuant to CPLR 7503 to stay arbitration between the parties.

In February 1997 respondent sustained an ankle injury in a motor vehicle accident. Shortly after the accident, respondent filed a no-fault accident claim with petitioner, her insurance carrier. Although respondent was initially diagnosed with an ankle contusion, during a subsequent visit to her orthopedist on June 11, 1997 a right ankle fracture was detected. Respondent consulted with a second doctor on June 25, 1997 who confirmed that she had sustained a fracture. On August 11, 1997 respondent underwent arthroscopic surgery and, in early September 1997, she retained an attorney.

Counsel for respondent claims that he made several unsuccessful attempts to contact the driver and the owner of the other vehicle involved in the accident. Although he was aware of the identity of the driver from information set forth in the police accident report, the report did not state the owner's identity. Thus, respondent alleges that she was unable to obtain the coverage limits of the applicable insurance policy. Nevertheless, in November 1997 respondent's counsel wrote to petitioner with respect to a potential supplemental uninsured motorist (hereinafter SUM) claim in the event that the owner of the other vehicle was underinsured or uninsured . After the driver of the other automobile involved in the accident finally replied to respondent's inquiries in December 1997, the owner's identity was revealed, along with the limits of the insurance policy. Petitioner denied the claim on December 8, 1997 on the ground that it was untimely.

After respondent made a written request for SUM arbitration in April 1998, petitioner commenced this proceeding seeking a permanent stay of arbitration. Supreme Court denied respondent's motions to dismiss the petition and compel arbitration, and granted petitioner's application to permanently stay arbitration. Respondent now appeals.

Where, as here, an insurance policy requires that notice of a SUM claim must be provided "as soon as practicable", notice must be provided within a reasonable period of time after the insured, in light of all the circumstances (see, Matan v Nationwide Mut. Ins. Co., 243 AD2d 978), "knew or should reasonably have known [] that the tortfeasor was underinsured " ( Matter of Nationwide Ins. Co. [Di Gioacchino], 93 NY2d 487, 495). If an unreasonable delay in the insured's notification to the insurer occurs, it must be established that a reasonable excuse exists or that due diligence was exercised (see, Matter of Allstate Ins. Co. [Dewyea], 245 AD2d 667; Matter of Nationwide Mut. Ins. Co. [Fennimore], 201 AD2d 979, lv denied 83 NY2d 755).

The record reveals that respondent was initially diagnosed with a relatively minor injury which required surgery in August 1997. A few weeks after her surgery, respondent retained an attorney whose efforts to discover the extent of the tortfeasor's insurance coverage were frustrated due to the fact that he was unable to ascertain the vehicle owner's identity. Notably, respondent's counsel notified petitioner in writing of the potential underinsurance claim even before he was able to discover that the tortfeasor was underinsured . Since the extent of respondent's injuries were not apparent until June 1997 and the owner of the other car could not be located until December 1997 despite due diligence, we conclude that respondent has presented a reasonable excuse for her failure to provide notice of her underinsurance claim until nine months after the accident (see, Matter of Nationwide Ins. Co. [Brown-Young], AD2d , 695 NYS2d 823; Matan v Nationwide Mut. Ins. Co., supra, at 979; Matter of Allstate Ins. Co. [White], 231 AD2d 950; cf., Unwin v New York Cent. Mut. Fire Ins. Co., ___ AD2d ___ [decided herewith]). Accordingly, under the particular circumstances of this case, the petition to stay arbitration should have been denied.

Cardona, P .J., Peters, Spain and Carpinello, JJ., concur.

ORDERED that the judgment is reversed, on the law , with costs, petition to permanently stay arbitration dismissed and motion to compel arbitration granted .

UNWIN v. NEW YORK CENTRAL MUTUAL FIRE INSURANCE COMPANY

Crew III, J.

Appeal from a judgment of the Supreme Court (Castellino, J.), entered January 12, 1999 in Chemung County, which, inter alia , granted defendant's motion for summary judgment dismissing the complaint.

In March 1994 plaintiff, while riding as a passenger in a motor vehicle insured by defendant, sustained personal injuries as the result of a collision with a motor vehicle operated by Richard Riker and insured by Nationwide Insurance Company. Plaintiff sought medical care on the day after the accident and continued for a significant period of time to receive treatment for the injuries he sustained, with such treatment including a prolonged regimen of physical therapy. On September 13, 1995, plaintiff was referred to a neurosurgeon who ultimately performed spinal surgery on January 20, 1996. By letter dated February 5, 1996, plaintiff's attorney requested Nationwide to divulge its policy limits. Upon learning that the aforesaid policy limit was $50,000, plaintiff's attorney made a written claim to defendant for supplemental underinsurance motorists coverage. Defendant thereafter disclaimed coverage on the ground that it was not provided notice "as soon as practicable" as called for by its policy of insurance.

As a consequence of defendant's disclaimer, plaintiff commenced this declaratory judgment action seeking, inter alia, a declaration that plaintiff provided timely notice to defendant for underinsurance coverage. Defendant answered and, following discovery, moved for summary judgment dismissing the complaint. Plaintiff cross-moved for summary judgment. Supreme Court, inter alia , granted defendant's motion and this appeal by plaintiff ensued.

It is now well established that "an insured must give his or her insurer notice of an underinsurance claim within the time specified in the insurance policy or within a reasonable time after the occurrence of the incident upon which the claim is based" ( Owen v Allstate Ins. Co., 250 AD2d 1018, 1019), and such notice is a condition precedent to coverage (see, White v City of New York, 81 NY2d 955, 957). Furthermore, where the policy requires that an insured give notice of his or her claim "as soon as practicable", the insured must give notice with "reasonable promptness after the insured knew or should reasonably have known [whichever occurs first] that the tortfeasor was underinsured" ( Matter of Metropolitan Prop. & Cas. Ins. Co. v Mancuso, 93 NY2d 487, 495). Clearly, one of the circumstances to be considered when determining reasonableness is the time within which an insured's injuries manifest themselves ( see, id., at 495).

Inasmuch as we have held that a delay of over one year in serving a written notice of claim for underinsurance coverage is unreasonable as a matter of law (see, Matter of Nationwide Ins. Co. [De Rose], 241 AD2d 607, 608), it is clear that defendant made out a prima facie case for summary judgment upon proof that plaintiff's notice of claim was not given until approximately 23 months following the accident. Consequently, the burden shifted to plaintiff to tender sufficient admissible evidence to raise a question of fact as to the reasonableness of the delay or, put another way, to demonstrate that plaintiff did not know or could not reasonably have known that Riker was underinsured until February 1996 (see, Matter of Metropolitan Prop. & Cas. Ins. Co. v Mancuso, supra, at 495). This plaintiff failed to do.

In opposition to defendant's motion for summary judgment and in support of his own motion, plaintiff offered his own affidavit in which he admits sustaining injuries in the automobile accident in question for which he sought medical treatment the day after. However, in a very conclusory manner, plaintiff asserts that such treatment was rendered "with the understanding that there were no significant problems and that [he] should recover from [his] 'soft tissue' injuries". The record makes plain that such treatment was not ameliorating plaintiff's condition, inasmuch as he was referred to a neurosurgeon in September 1995 and ultimately underwent a spinal fusion on January 20, 1996. Further , plaintiff failed to submit any evidence from which it could be determined that he was not reasonably aware of the severity of his condition until February 1996, at which time he undertook to determine the limits of liability of Riker's insurance policy. Accordingly, plaintiff failed to raise an issue of fact as to whether notice was given "as soon as practicable" based upon the circumstances and factors relevant to that determination and summary judgment was properly granted to defendant.

Mercure, J.P., Spain, Carpinello and Mugglin, JJ., concur.

ORDERED that the judgment is affirmed, with costs.

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