Coverage Pointers - Volume I, No. 17

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.

 

02/17/00: QUEENS OFFICE TOWER ASSOCIATES v. GENERAL MILLS RESTAURANT, INC.
New York State Supreme Court, Appellate Division, First Department
Policy Affords Coverage to Property Owner where "Insured Contract" Includes Lease

A pedestrian slipped and fell on a sidewalk adjacent to the insured’s restaurant, and commenced an action for personal injuries. Pursuant to a lease with the property owner, the insured was to maintain general liability coverage, for the benefit of the property owner, covering risk "in, on or about the demised premises." In this action by the property owner for coverage under the insured’s policy, the court concluded the accident occurred "in, on or about the demised premises" because the sidewalk was immediately adjacent to the insured’s dumpster, an area specifically contemplated in the lease. Furthermore, under the insured’s policy, the insurer agreed to defend any claim or suit brought against an "indemnity" under an insured contract, "to the same extent and on the same terms that we would defend if the ‘indemnity’ were the insured under the policy." An insured contract specifically included a lease of premises under the policy. Under these circumstances, the property owner was an "indemnity" under the policy and entitled to defense and indemnification in the underlying action.

02/14/00: FLAHERTY v. CINAR
New York State Supreme Court, Appellate Division, Second Department
Discrepancy in Certificate and Policy concerning Policy’s Effective Date Raises Issue of Fact Whether Vehicle Insured on Date of Accident

In a third-party action for defense and indemnification of a personal injury action arising out of an auto accident, the insurer sought summary dismissal on the ground that its policy was not effective until one day following the accident. The court found issues of fact precluded summary dismissal. While the certificate of insurance issued in conjunction with the policy stated an effective date beginning one day after the accident, the policy itself recited an effective date commencing on the date of the accident. Thus, there was an issue of fact whether the vehicle was insured on the date of the accident.

2/14/00: BONETTI v. INTEGON NATIONAL INS. CO.
New York State Supreme Court, Appellate Division, Second Department
No-Fault Carrier Asserting Lack of Coverage must Offer Evidence to Support that Defense

Plaintiff was injured in an automobile accident and received no-fault benefits from her carrier. The carrier denied coverage for two surgeries, asserting that the surgeries were not for injuries arising from the accident. Plaintiff moved for summary judgment arguing the insurer failed to timely disclaim coverage and is now precluded from denying her claim. Under the no-fault regulations, a no-fault claim, for which no verification is timely sought, must be paid or denied within 30 days. The insurer argued a "lack of coverage" defense, premised on its belief that the injury did not arise out of an insured incident. If properly supported, this is an exception to the preclusion rule. In this case, however, the insurer failed to offer any evidence to support its argument that the surgeries were not related to the accident and plaintiff was granted summary judgment.

02/10/00: RED APPLE COMPANIES, INC. v. SCOTTSDALE INS. CO.
New York State Supreme Court, Appellate Division, First Department
Coverage Lost where Insureds Fail to Provide Prompt Notice of Personal Injury Action

Court held insurer properly disclaimed coverage and had no obligation to defend or indemnify its insureds in an underlying personal injury action where insureds failed to provide prompt notice of the actions.

02/07/00: TOWN OF OYSTER BAY v. EMPLOYERS INSURANCE OF WAUSAU
New York State Supreme Court, Appellate Division, Second Department
Pursuant to a contract to provide snow removal services, the insured agreed to assume the defense of and to indemnify the Town from negligence claims based on the insured’s work under the contract. The insured also agreed to procure insurance naming the Town as an additional insured for bodily injuries arising from the insured’s operations under the contract, and to obtain insurance covering the contractual liability it assumed under the contract. The insured obtained the policies and, thereafter, an action for personal injuries was commenced against the insured and the Town alleging that plaintiff slipped and fell on ice and snow in the Town’s parking lot. The insurer refused to defend and indemnify the Town on the ground that plaintiff’s injuries did not arise out of the insured’s work – the insured was not responsible for snow removal in the parking lot before the accident. The court held that allegations in the underlying action fell within the scope of the policies, and, as such, the insurer was obligated for defense costs previously incurred by the Town in defending the action. However, the insurer was not required to assume the Town’s defense or to indemnify it once it was established in the underlying action that its insured was not responsible for snow removal before the accident. Moreover, the insurer was not precluded from asserting a lack of coverage by its untimely disclaimer because the injuries did not arise from a covered accident.

ACROSS BORDERS

From time to time we highlight significant cases of interest from other jurisdictions. This week we offer decisions from Oregon, Ohio and Florida:

02/17/00: OAK CREST CONSTRUCTION CO. v. AUSTIN MUTUAL INS. CO.
CGL Policy Does Not Cover Contractor for Breach of Contract Claims
Oregon Supreme Court

This is an action for breach of a standard commercial liability insurance contract. Plaintiff, a general contractor, filed the action when its insurer refused to reimburse it for the cost of removing and replacing a subcontractor's painting work that had been applied during the construction of a custom home and had failed to cure properly. The trial court granted the insurer's motion for summary judgment. The Court of Appeals affirmed, holding that plaintiff's claim did not fall within the coverage terms of the policy, because the damage at issue had not been "caused by an occurrence," as the insurance contract required. The Supreme Court affirms -- there was no occurrence here -- all of the damages arise as a result of breach of contract and not an occurrence as defined under the policy.

02/16/00: MOORE v. STATE AUTOMOBILE MUTUAL INS. CO.
Ohio Supreme Court
Policy Limiting Uninsured Motorist Coverage to Those Suffering Bodily Injury, Sickness Ruled Invalid

Policy limited those who can recover under UM policy to those who actually suffered injury, thus precluding survivors of wrongful death from seek uninsured motorist benefits for death. Ohio’s highest court holds that R.C. 3937.18(A)(1), as amended by Am.Sub.S.B. No. 20 does not permit an insurer to limit uninsured motorist coverage in such a way that an insured must suffer bodily injury, sickness, or disease in order to recover damages from the insurer. Therefore, it finds that the limitation in the insurer’s policy requiring that the insured suffer bodily injury in order to recover uninsured motorist benefits is an attempt to provide lesser coverage than that which is mandated by law and, as such, the limitation is invalid and unenforceable.

02/10/00: YOUNG v. PROGRESSIVE SOUTHEASTERN INS. CO.
Florida Supreme Court
Policy Provision Excluding Vehicle Owned or Operated by a Self-Insurer from Definition of "Uninsured Motor Vehicle" for Uninsured/Underinsured Motorist Coverage Deemed Impermissible under Florida Law

Because a self-insurer is not a liability insurer under Florida law, a motorists who possesses a certificate of self-insurance cannot be considered as being underinsured -- since he or she is not insured at all. That motorist is considered uninsured, not underinsured. Uninsured Motorist policy provision which excluded self-insured vehicles from the definition of uninsured motor vehicles is declared void as contrary to the statutory intent to make that coverage available when tortfeasor is uninsured.

AND IN DEFENSE . . .

We periodically include selected cases bearing on the defense of actions. This week we offer a decision from Washington:

02/17/00: ROBERTS v. DUDLEY
Washington Supreme Court
In Employee-at-Will State, Wrongful Discharge Claim can be Maintained, on Public Policy Grounds, for Employee Terminated as a Result of Gender Discrimination

The State of Washington is an employee-at-will state. The high court considered the question of whether an employee who lacks a statutory remedy for wrongful discrimination may nevertheless assert the common law tort of wrongful discharge when terminated because of gender bias. The answer is the employee may, if public policy renders such termination ‘wrongful’ and gender discrimination is, in fact, wrongful.

Editor’s Note: This Court’s recognition of a common law cause of action for wrongful discharge premised upon public policy violations represents a departure from the employment-at-will doctrine (that employment contracts are terminable at will). Exceptions to the doctrine may have significant consequences in the employer practices liability context, since other jurisdictions, including New York, still adhere to it.

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providing legal services throughout the State of New York.


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REPORTED DECISIONS

 

QUEENS OFFICE TOWER ASSOCIATES v. GENERAL MILLS RESTAURANT, INC.

Order, Supreme Court, New York County (Louise Gruner Gans, J.), entered May 18, 1999, granting plaintiffs’ motion for summary judgment , inter alia, declaring that defendant Liberty Mutual Insurance Company is obligated to defend and indemnify plaintiffs in the underlying personal injury action, unanimously affirmed, with costs.

In the underlying action, a pedestrian slipped and fell on the sidewalk immediately adjacent to a restaurant owned by defendant General Mills Restaurant, d/b/a Red Lobster, which leased the premises from plaintiff Queens Office Tower Associates. It is uncontradicted that the pedestrian slipped and fell on a slippery substance that leaked from a dumpster used exclusively by Red Lobster. The lease between Red Lobster and Queens Office provided that Red Lobster was to keep its refuse and rubbish in the demised premises and to that end, the lease designated a specific location in the loading dock area for the placement of the dumpster to be used by Red Lobster. The area where the dumpster was kept was accordingly part of the demised premises. The subject lease further provided that Red Lobster would maintain, for the benefit of Queens Office and Red Lobster, general liability insurance covering risk "in, on or about the demised premises." Since the accident giving rise to the underlying personal injury action occurred on the sidewalk immediately adjacent to the dumpster, a location plainly "in, on or about the demised premises", it follows that the site of the accident falls within the area contemplated by the parties to be covered by insurance (see, J.P. Realty Trust v Pub. Serv. Mut. Ins. Co., 102 AD2d 68, 71, affd 64 NY2d 945).

Under the general liability insurance policy procured by Red Lobster, Liberty Mutual agreed to defend any claim or suit brought against the "indemnity" under an insured contract, "to the same extent and on the same terms that we would defend if the ‘indemnity’ were the insured under the policy". The policy specifically included a lease of premises as an insured contract. Queens Office was thus an "indemnity" under the policy and, as such, entitled to be defended and indemnified by Liberty Mutual to the same extent and on the same terms as would have obtained had Queens Office had been the named insured.

Liberty Mutual’s contentions that the lease agreement provided for indemnification only if Queens Office was not otherwise covered, and that there are issues of fact as to whether there is co-insurance since both Queens Office and Red Lobster performed maintenance to the sidewalk area, are improperly raised for the first time on appeal and, accordingly, are not preserved for our review ( Murray v City of New York, 195 AD2d 379, 381). In any event, the contentions are without merit .

THIS CONSTITUTES THE DECISION AND ORDER

OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

RED APPLE COMPANIES, INC. v. SCOTTSDALE INS. CO.

Order, Supreme Court, New York County (Ira Gammerman, J.), entered August 24, 1999, which, in a declaratory judgment action, granted defendant Scottsdale Insurance Company ’s motion for summary judgment dismissing the complaint upon the grounds that plaintiff insureds failed to give it prompt notice of the underlying personal injury actions pending against them, and granted plaintiffs-respondents’ motion for partial summary judgment on their cross claim for indemnification from the remaining plaintiffs, unanimously modified, on the law, to declare in defendant Scottsdale’s favor that it has no obligation to defend or indemnify plaintiffs in the underlying actions, and otherwise affirmed, without costs.

The motion court properly found that the personal injury cases in the underlying actions against plaintiffs were such that, under the policy, plaintiffs were required to provide defendant with prompt notice, which they failed to do. Accordingly, we find that defendant properly disclaimed and had no obligation to defend and indemnify plaintiffs in the underlying actions . We modify only to the extent of issuing a declaration to that effect (see, Lanza v Wagner, 11 NY2d 317, 334).

Additionally, the court properly determined that plaintiffs-respondents were entitled to indemnification from plaintiffs-appellants, pursuant to the indemnification clause set forth in the lease involved in one of the underlying cases.

THIS CONSTITUTES THE DECISION AND ORDER

OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

BONETTI v. INTEGON NATIONAL INS. CO.

In an action, inter alia, for a judgment declaring that the defendant is required to provide no-fault benefits to the plaintiff in connection with an automobile accident, the defendant appeals from (1) an order of the Supreme Court, Dutchess County (Beisner, J.), dated December 23, 1998, which granted the plaintiff's motion for summary judgment, and (2) a judgment of the same court, entered February 11, 1999, which made the declaration.

ORDERED that the appeal from the order is dismissed; and it is further,

ORDERED that the judgment is affirmed; and it is further,

ORDERED that the plaintiff is awarded one bill of costs.

The appeal from the intermediate order must be dismissed because the right of direct appeal therefrom terminated with the entry of judgment in the action (see , Matter of Aho, 39 NY2d 241, 248). The issues raised on appeal from the order are brought up for review and have been considered on the appeal from the judgment (see, CPLR 5501[a][1]).

The plaintiff was injured in an automobile accident. Initially , she claimed and received certain no-fault insurance benefits from the defendant, her insurance carrier . However, the defendant denied coverage on claims for two surgeries, asserting that those surgeries did not concern injuries arising from the subject accident. The plaintiff then commenced this action . After issue was joined, the plaintiff moved for summary judgment, arguing that the defendant's failure to timely disclaim coverage precluded it from denying her claims. In the order appealed from, the Supreme Court granted such relief. We now affirm the judgment which was entered upon that order.

A no-fault claim for which no additional verification is timely sought must be paid or denied within 30 days or it is "overdue", commencing the accrual of interest and attorney's fees (see, Insurance Law § 5106[a]; 11 NYCRR 65; Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195; Zappone v Home Ins. Co., 55 NY2d 131). Further, with limited exception, an insurance carrier is precluded from denying the claim (see, Central Gen. Hosp. v Chubb Group of Ins. Cos., supra; Presbyterian Hosp. in City of NY v Maryland Cas. Co., 90 NY2d 274; Zappone v Home Ins. Co., 55 NY2d 131). Here, the defendant expressly concedes on appeal that its denial of coverage "was not timely ". Nonetheless, the defendant argues, it is not precluded from denying the plaintiff's claims because of a "lack of coverage defense premised on the fact or founded belief that the alleged injury does not arise out of an insured incident", an exception to the rule of preclusion (see, Central Gen. Hosp. v Chubb Group of Ins. Cos., supra). However, in support of such an argument, the defendant failed to proffer evidence in admissible form (see, Mt Sinai Hospital v Triboro Coach, AD2d [2d Dept., Nov. 29, 1999]). In any event, contrary to the defendant's contention, scrutiny of the record reveals that, in reality, its claim is that the surgeries were medically excessive, a defense subject to preclusion (see, Central Gen. Hosp. v Chubb Group of Ins. Cos., supra). Accordingly, the plaintiff was properly granted summary judgment.

SULLIVAN, J.P., LUCIANO, H. MILLER, and FEUERSTEIN, JJ., concur.

FLAHERTY v. CINAR

In an action to recover damages for personal injuries, the third-party defendant Connecticut Indemnity Co. appeals from an order of the Supreme Court, Westchester County (Colabella , J.), entered December 7, 1998, which denied its motion for summary judgment dismissing the third-party complaint insofar as asserted against it.

ORDERED that the order is affirmed, without costs or disbursements.

The plaintiffs commenced this action to recover damages for injuries allegedly sustained in a vehicular collision which took place on June 30, 1995. The third-party defendant Connecticut Indemnity Co. (hereinafter Connecticut Indemnity) contends, inter alia, that it is not obligated to indemnify or defend the defendants because the policy which it issued to them was not effective until July 1, 1995, i.e., the day following the accident.

The copy of the policy which Connecticut Indemnity submitted in support of its motion for summary judgment , however, recites a policy period commencing June 30, 1995, even though the certificate of insurance issued in conjunction with the policy states an effective date of July 1, 1995. Accordingly, Connecticut Indemnity failed to demonstrate its prima facie entitlement to summary judgment, since there is a question of fact as to whether it insured the defendants' vehicle on the date of the accident (see generally, Freedom Cashier v Federal Ins. Co., AD2d [2d Dept., June 7, 1999]; B.T.R. E. Greenbush v General Acc. Co., 206 AD2d 791; Dryden Cent. School Dist. v Dryden Aquatic Racing Team, 195 AD2d 790; see also, Zuckerman v City of New York, 49 NY2d 557).

Connecticut Indemnity's remaining contention is without merit.

SANTUCCI, J.P., S. MILLER, LUCIANO, and FEUERSTEIN, JJ., concur.

TOWN OF OYSTER BAY v. EMPLOYERS INSURANCE OF WAUSAU

In an action for a judgment declaring, inter alia, that the defendants Employers Insurance of Wausau and Wausau Underwriters Insurance Company are required to defend and indemnify the plaintiff, Town of Oyster Bay, in an action entitled Ambriano v Town of Oyster Bay, pending in the Supreme Court, Nassau County under Index No. 30342/93, the defendants Employers Insurance of Wausau, Wausau Underwriters Insurance Company, and Mill Rental Corp. appeal from (1) a decision of the Supreme Court, Nassau County (McCarty, J.), dated October 5, 1998, and (2) an order and judgment (one paper) of the same court, entered December 31, 1998, which, inter alia, granted the plaintiff's motion for summary judgment, denied the appellants' cross motion for summary judgment, declared that the defendants Employers Insurance of Wausau and Wausau Underwriters Insurance Company are obligated to defend and indemnify the plaintiff in the underlying action, and directed them to reimburse the plaintiff for all of its past, current, and future defense costs in the underlying action.

ORDERED that the appeal from the decision is dismissed, as no appeal lies from a decision (see, Schicchi v Green Constr. Corp., 100 AD2d 509); and it is further,

ORDERED that the order and judgment is modified by (1) deleting the first decretal paragraph thereof and substituting therefor a provision granting that branch of the plaintiff's motion which sought reimbursement from the defendants Employers Insurance of Wausau and Wausau Underwriters Insurance Company for the defense costs incurred in Ambriano v Town of Oyster Bay, and otherwise denying the motion, (2) deleting the second and third decretal paragraphs thereof and substituting therefor a provision granting that branch of the defendants' cross motion which was for a declaration that Employers Insurance of Wausau and Wausau Underwriters Insurance Company are not obligated to assume the defense of and indemnify the Town of Oyster Bay in Ambriano v Town of Oyster Bay, pending in the Supreme Court, Nassau County, under Index No. 30342/93, (3) deleting the words "current and future" in the fourth decretal paragraph, and (4) deleting the fifth and sixth decretal paragraphs; as so modified, the order and judgment is affirmed, without costs or disbursements .

Pursuant to an agreement to provide snow removal services for the Town of Oyster Bay (hereinafter the Town), the defendant Mill Rental Corp. (hereinafter Mill Rental) agreed to assume the defense of the Town and to indemnify it from negligence claims based on its work under the contract . It also agreed to procure liability insurance naming the Town as an additional insured for bodily injury claims arising from its operations under the contract, and to obtain insurance covering the contractual liability it assumed under the contract. Mill Rental obtained the requisite policies from the defendants Employers Insurance of Wausau and Wausau Underwriters Insurance Company (hereinafter the insurers). Thereafter, Nicholas Ambriano was allegedly injured when he slipped and fell on ice and snow in a parking lot owned by the Town. He and his wife subsequently commenced a negligence action against, among others , the Town and Mill Rental. In that action, Ambriano v Town of Oyster Bay, pending in the Supreme Court , Nassau County, under Index No. 30342/93 (hereinafter the underlying action), the insurers refused to defend and indemnify the Town on the ground that Ambriano's injuries did not arise out of Mill Rental 's work.

A duty to defend is broader than the duty to indemnify and arises when the allegations of the complaint against the insured fall within the scope of the risks undertaken by the insurer (see, Frontier Insulation Contrs. v Merchants Mut. Ins. Co., 91 NY2d 169; Seaboard Sur. Co. v Gillette Co., 64 NY2d 304; Lehrer McGovern Bovis v Halsey Constr. Corp., 254 AD2d 335). The complaint in the underlying action contains allegations that fall within the scope of the subject policies. Consequently, the duty to defend was triggered, and the insurers breached that duty when they failed to provide a defense to the Town. They are, therefore, liable for the defense costs previously incurred by the Town in defending the action .

It has now been established in the underlying action, however, that Mill Rental was not responsible for snow removal in the parking lot before Ambriano's accident (see, Ambriano v Town of Oyster Bay, AD2d [2d Dept., Nov. 22, 1999]). Consequently, Ambriano's injuries did not arise out of the operations of Mill Rental. Therefore, the policies issued by the insurers do not provide coverage for Ambriano's accident.

Because it has now been determined that the accident is not covered by the policies, under the circumstances of this case, the insurers are not required to assume the defense in the underlying action. Further, since there is no coverage, the insurers are not obligated to indemnify the Town (see, Servidone Constr. Corp. v Security Ins. Co. of Hartford, 64 NY2d 419; Lehrer McGovern Bovis v Halsey Constr. Corp., supra). Contrary to the Supreme Court's conclusion, the insurers are not precluded by their untimely disclaimer from asserting a lack of coverage where, as here, the injuries did not arise from a covered accident (see, Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195).

The parties' remaining contentions are without merit or unpreserved for appellate review.

MANGANO, P.J., ALTMAN, SCHMIDT, and SMITH, JJ., concur .

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