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.

02/29/00: MIC PROPERTY AND CASUALTY INS. CORP. v. CUSTOM CRAFTSMAN OF BROOKLYN, INC.
New York State Supreme Court, Appellate Division, First Department
No Coverage Afforded to Additional Insured not Named in Rescinded Policy

Plaintiff’s insured sought damages for the partial collapse of its building due to the alleged inadequate shoring of an adjacent lot under construction. The defendant, construction site manager, alleged in a third-party action against a subcontractor’s insurer that it was entitled to indemnification because it was an additional named insured under a policy issued to the subcontractor. The third-party action for indemnification was dismissed. The insurer offered unrebutted proof that the construction site manager was not an additional named insured under the policy in effect at the time of the accident and, in any event, the policy was subsequently rescinded ab initio by reason of a material misrepresentation by the subcontractor. A certificate of insurance naming the construction site manager as an additional named insured under a policy whose expiration predated the accident was insufficient to raise an issue of fact for trial. The court rejected the construction site manager’s contentions that the rescission was void, and that it interfered with its contractual rights under the policy because, absent evidence of a policy insuring the construction site manager, the insurer had no obligation to it under the policy.

02/28/00: LeCORRE v. BIJESSE BELFORD DOLEWSKI & DeMICCO
New York State Supreme Court, Appellate Division, Second Department
Insurer’s Silence Concerning Subrogation on Underinsurance Claim, with Knowledge that Claim Might be Made, May be Viewed as Consenting to Settlement with Tortfeasor

Plaintiff commenced a personal injury action for injuries sustained in an auto accident. Her attorneys settled the action with the tortfeasor for his policy limits of $100,000. After settling with the tortfeasor, plaintiff filed a claim for supplemental underinsured motorist coverage with her insurer; however, she failed to obtain her insurer’s consent before settling with the tortfeasor as required by the policy. Plaintiff retained new counsel and commenced a malpractice action against prior counsel, who in turn commenced a third-party action against the insurer for indemnification and contribution alleging the insurer’s fraudulent and negligent misrepresentations in its handling of the claim caused plaintiff’s loss of coverage. The court found there were issues of fact whether the insurer implicitly consented to the plaintiff’s settlement of the underlying personal injury action based on evidence that the insurer was aware of possible underinsurance exposure, that plaintiff’s injuries were serious, and that the tortfeasor’s policy limits were significantly less than plaintiff’s. Although the insurer was aware that such a claim might be made, it sent only a limited agreement dealing with subrogation regarding the additional PIP provision of the policy. That agreement made no mention of any subrogation issue relating to plaintiff’s potential claim for underinsured benefits. Also, the policy language of the underinsurance rider did not require the insurer’s written consent prior to settling a claim. Thus, the court found there were a questions of fact whether the insurer’s silence on the issue of subrogation regarding the underinsurance claim could have been viewed as consenting to a settlement for the policy limits, as well as whether the insurer was acting in good faith.

2/28/00: KRAMER v. GOVERNMENT EMPLOYEES INS. CO.
New York State Supreme Court, Appellate Division, Second Department
Insured’s Notice of Estate’s Claim is Untimely Notwithstanding Delay in Appointment of Estate Representative Where Insured was Sole Distributee and Fully Aware of Accident

Kramer and her husband were insured under a homeowner’s policy issued by defendant. While the policy was in effect, Kramer’s mother died from carbon monoxide poisoning caused by a defective heating and ventilation system in the home. Almost two years later, Kramer was appointed administrator of her mother’s estate and, at that time, notified her insurer of the accident. The insurer disclaimed coverage based on Kramer's failure to provide notice as soon as practical as required by the policy. Kramer commenced an action for personal injuries and wrongful death on behalf of her mother against several defendants, including herself and her husband. A copy of the complaint was sent to her insurer, who continued to disclaim coverage. The Kramers defaulted and a money judgment was entered solely against the husband. In this action to recover the amount of the judgment from the insurer, Kramer claimed that the timeliness of her notice of the estate’s claim must be measured from the date a legal representative was appointed. The court disagreed, finding that notice was not given as soon as practical or as soon as reasonably possible. Notice of an accident or occurrence may be provided by the insured (Kramer) or by a claimant (the estate). In this case plaintiff was both the insured and, in effect, the claimant. As sole distributee of the estate, she was the only one who benefited from the judgment. She was fully aware of the accident, which occurred in her home, and learned of the cause of death within days of the accident yet failed to provide notice. Under the facts of this case, the lack of a personal representative for the estate did not excuse the delay in providing notice.

02/28/00: JOHN HANCOCK MUTUAL LIFE INS. CO. v. LELONEK
New York State Supreme Court, Appellate Division, Second Department
Rescission of Disability Policy Improper Where Second Policy Issued with Insurer’s Knowledge that the Two Policies Exceeded Income Limits

The insurer brought this action to rescind a disability policy because it exceeded the insurer’s limit for a person of the insured’s annual income. The court declined, finding that the insurer issued the policy when it knew the insured already possessed another policy underwritten by the insurer.

02/28/00: MATTER OF NEW YORK CENTRAL FIRE INS. CO. v. BONILLA
New York State Supreme Court, Appellate Division, Second Department
Residence Requires Some Degree of Permanence and Intention to Remain

The court found claimant was not a resident of the insured’s household within the meaning of the policy. Establishing whether a person is a resident of a household for purposes of insurance requires a showing of something more than a temporary or physical presence and requires at least some degree of permanence and intention to remain. Here, claimant admitted that, within a two-year period, he lived at three addresses including the insured’s address.

02/28/00: EAGLE INS. CO. v. BUTTS
New York State Supreme Court, Appellate Division, Second Department
Auto Policy does not Afford Coverage for Negligence Unrelated to Use or Condition of Covered Vehicle

Claimant was injured when a horse she was leading from a van down an attached ramp jumped and threw her to the ground. In her underlying action for personal injuries, claimant alleged the insured’s negligent training of the horse caused the accident. The insured’s van was covered by an auto policy issued by plaintiff. The insured was also covered under a general liability policy for injuries resulting from use and ownership of the horse. The general liability carrier defended the insured in the underlying action and subsequently requested that the auto carrier assume the insured’s defense. The auto carrier disclaimed coverage on the ground that claimant’s injuries did not result from "ownership, maintenance or use" of a covered vehicle. The court determined the auto carrier was not obligated to defend or indemnify its insured in the underlying action. The determination of whether an accident has resulted from the use or operation of a covered vehicle requires consideration of whether the accident arose out of the inherent nature of the vehicle and whether the vehicle itself produced the injury. While it is not necessary to demonstrate that the vehicle itself produced the injury where the accident occurs during the loading or unloading of property from a covered vehicle, it must be demonstrated that the accident was the result of some act or omission related to use of the vehicle. Here, the alleged acts or omissions involved the insured’s prior training of the horse. There were no allegations that the insured used the van negligently or that the condition of the van contributed to the accident.

02/28/00: GOVERNMENT EMPLOYEES INS. CO. v. KOLODNY
New York State Supreme Court, Appellate Division, Second Department
Defense to Coverage based on Policy Exclusion Lost if Disclaimer is Untimely

Kolodny was the operator of a vehicle owned by Congregation, and was involved in a fatal one-car accident in August 1990. At the time of the accident, GEICO insured a vehicle owned by Kolodny’s father, which provided coverage for "any family member for the . . . use of any auto." It was undisputed that Kolodny was a family member within the meaning of the policy; however, the policy excluded coverage for the ownership, maintenance or use of any vehicle other than "your covered auto" which is furnished or available for the regular use of a family member. GEICO disclaimed coverage under the exclusion in May 1992, over one year after it received notice of the accident. The court held GEICO was required to provide timely disclaimer when asserting the policy exclusion. Its unexplained one-year delay was deemed untimely as a matter of law.

2/22/00: RUIZ v. STATE WIDE INSULATION AND CONSTRUCTION CORP.
New York Supreme Court, Appellate Division, Second Department
Unsigned and Undelivered Declarations Page and Accompanying Endorsements Limiting Coverage Deemed Part of Policy

Plaintiffs allegedly sustained personal injury and property damage when a fire broke out at their premises while the insured was repairing plaintiffs’ roof. The declarations page of the insured’s CGL policy described the insured’s business as "painting" and incorporated by reference an endorsement entitled "Classification Limitation", which limited the operations from which a claim could arise to those described in the schedule of insurance. Since the claim arose while the insured was repairing the roof, the insurer disclaimed coverage on the ground that the claim was beyond the scope of the activity limited by the policy. The court held the disclaimer was proper despite the insured’s contention that provisions limiting coverage were not in effect because they was unsigned and undelivered. The declarations page and accompanying endorsements were made part of the insurance policy and were incorporated by reference regardless of whether the insured received actual delivery of them.

02/22/00: NEW YORK CONVENTION CENTER OPERATING CORP. v. MORRIS CERULLO WORLD EVANGELISM, INC.
New York State Supreme Court, Appellate Division, First Department
Policy Covering Use of Premises and "Operations Necessary and Incidental to those Premises" Includes Entranceways

Defendant entered into a licensing agreement with plaintiff, whereby defendant was granted a license to use "space" at the Javits Center for its conference. The agreement also covered the "right of passage to the space through the entrance and lobby of the Center." Pursuant to the agreement, defendant obtained a commercial general liability policy in favor of plaintiff. In an underlying action for personal injuries, Rodriguez alleged she was injured due to improperly secured rugs or mats at the Javits Center. Rodriguez testified that, at the time of the accident, she was on her way to attend defendant’s conference when she fell. It was undisputed that the entranceway was covered by the "right of passage" provision of the licensing agreement. As such, the policy covered plaintiff for liability for personal injuries suffered at the entranceway by persons who were on the premises to attend the conference. The policy afforded coverage for "bodily injury . . . arising out of . . . use of premises . . . and operations necessary and incidental to those premises . . . ." The language was construed to include not only the premises specifically identified, but also other space whose use was incidental to the use of covered premises. That the insured had no control over or responsibility for the entranceways is irrelevant to the scope of coverage under the policy.

2/22/00: MAXWELL v. TOYS "R" US-NY LTD. PARTNERSHIP
New York Supreme Court, Appellate Division, Second Department
Co-Insurers Obligated to Defend and Indemnify based on Additional Insured Endorsements in Contractor’s and Subcontractor’s Policies

Plaintiff was injured while engaged in renovation work on defendant’s premises and commenced an action against the defendant for personal injuries. At the time of the accident, plaintiff was employed by Island, a subcontractor of Smith. Royal Insurance had issued a policy to Island containing an additional insured endorsement, which provided that any coverage "shall be excess over any other valid and collectible insurance available to the additional insured unless a contract specifically requires that this insurance be primary." Since the contract between Island and Smith specifically required that Island procure primary insurance covering Smith and defendant, Royal’s policy was primary. Smith, on the other hand, was insured under a policy issued by Hanover. The court held that Hanover was a co-insurer with Royal pursuant to a blanket additional insured endorsement in Smith’s policy covering liability arising out of Smith’s work for defendant. Hanover’s disclaimer based on late notice of the occurrence was deemed untimely.

02/22/00: SENECA INS. CO. INC. v. LINCOLNSHIRE MANAGEMENT INC.
New York State Supreme Court, Appellate Division, First Department
New York Deemed Proper Forum in Coverage Dispute Arising from Defamation Action Litigated and Settled in California

The court found New York was the proper forum for this declaratory judgment action to determine the insurer’s defense and indemnification obligation under its policy, even though the underlying defamation and abuse of process action was litigated and settled in California. The insurance transaction had a far greater nexus with New York than California because the parties’ principal place of business are in New York, they reside and litigate here, and the insurance contract at issue incorporates mandatory New York policy language, and was brokered, negotiated, paid for and breached here.

02/22/00: ALLOU HEALTH & BEAUTY CARE, INC. v. AETNA CASUALTY AND SURETY CO.
New York State Supreme Court, Appellate Division, Second Department
Defense Obligation Exists under Personal Injury Coverage where Claim is Misuse of Trademark

The ordinary meaning of the phrase "misappropriation of advertising ideas or style of doing business" can include the alleged misuse of another's trademark. The phrase should be defined "as it would ordinarily be understood by laypersons". "Misappropriation of advertising ideas or style of doing business" encompasses the wrongful taking of the manner by which another advertises its goods or services, including the misuse of another’s trademark. The court rejected the view that this category of advertising injury is narrowly limited to common-law misappropriation actions.

02/22/00: SCHNELL v. LESTER
New York State Supreme Court, Appellate Division, Second Department
Insurer Obligated to Defend Legal Malpractice Claim Alleging Course of Conduct that Encompasses Acts Occurring After Coverage Commenced

Plaintiff placed $160,000 in an escrow account with his law firm to be used for real estate investments. The original investment agreement required members of the firm to authorize all expenditures, but a subsequent amendment to that agreement allowed another to release the funds. Plaintiff commenced an action against the law firm to recover damages for legal malpractice alleging that the funds had been negligently distributed. The law firm sought defense and indemnification for the action pursuant to a comprehensive legal malpractice policy issued by its insurer, who denied coverage on the ground that the operative act of negligence – the amendment of the investment agreement – predated issuance of the policy and was therefore excluded. The insureds argued that the allegation of legal malpractice was a continuous course of conduct and was covered because some acts occurred after coverage commenced. The court agreed, concluding that the insurer was required to defend its insured because allegations in the complaint encompassed acts which occurred after commencement of coverage; however, the insurer would only be required to indemnify its insured for those acts of malpractice proven at trial to have occurred after coverage commenced.

02/22/00: TIG INS. CO. v. WILSHIRE CREDIT CORP.
New York State Supreme Court, Appellate Division, Second Department
Mortgagees Entitled to Policy Proceeds Despite Failure to Obtain Deficiency Judgment in Foreclosure Action – Right to Proceeds Governed by Mortgage Agreement

The mortgagor and two mortgagees of property foreclosed upon each claimed entitlement to the proceeds of a fire insurance policy issued by plaintiff. The court found the mortgagees were contractually entitled to the insurance proceeds notwithstanding their failure to obtain a deficiency judgment in the foreclosure proceeding because the mortgage agreement provided that proceeds from a fire insurance policy will be used first to reduce the mortgage debt and, only if any funds are remaining, would they be paid to the mortgagor. Thus, the mortgagees had a contractual right to the proceeds irrespective of whether they obtained a deficiency judgment in the foreclosure action.

2/22/00: RICHFIELD PROPERTIES LTD. V. GALAXY KNITTING MILLS INC.
New York Supreme Court, Appellate Division, Second Department
Damages for Breach of Agreement to Procure Insurance Limited to Cost of Obtaining Separate Policy Covering the Accident

A lease between Richfield and Galaxy required that Galaxy procure insurance for Richfield, which Galaxy failed to do. Thereafter, an action was commenced against Richfield and resulted in a judgment against it. In this action, Richfield sought a judgment declaring that Galaxy and its insurer were required to indemnify it for the judgment. The court dismissed the complaint against the insurer because Richfield had not been named on the policy. As to Galaxy, the court found that it had breached its lease by failing to procure the insurance for Richfield, but limited Richfield’s damages to the costs of obtaining its own liability policy – a policy that was in effect at the time of the accident and covered the incident.

02/16/00: DAMASK INC. v. CNA INS. CO.
New York State Supreme Court, Appellate Division, Fourth Department
Insurance Agent has no Obligation to Advise Insured to Obtain Different or Additional Coverage

Plaintiff applied for insurance in the amount of $110,000 to $120,000, believing that its building would be adequately insured in that amount. At the suggestion of its insurance agent, however, the plaintiff ultimately obtained additional coverage. In this action for fraud, plaintiff alleged that its insurance agent misrepresented that the insurer required greater coverage than was actually necessary to insure its property, and that the agent should have informed the plaintiff that lesser coverage would have sufficed. The court dismissed the case. The agent’s statements about the amount of coverage required to insure the property referred to the company to which the initial application was made, not the company that eventually issued the policy. The court rejected plaintiff’s contention that the agent should have informed him that lesser coverage would have sufficed since, absent a special relationship, an insurance agent has no obligation to advise or direct an insured to obtain different or additional coverage.

02/16/00: DRYDEN MUTUAL INS. CO. v. GREASER
New York State Supreme Court, Appellate Division, Fourth Department
Coverage Lost Where Insureds Fail to Provide Timely Notice of Occurrence

The insureds were involved in an accident in August 1992 and, shortly thereafter, visited the claimant in the hospital. The claimant solicited the name of the insureds’ carrier and asked the insureds to provide a statement in support of her claim. The insureds did not notify their insurer of the accident until December 1995, when they were served with a summons and complaint. The court determined the insurer was not obligated to defend and indemnify its insureds because the policy required prompt notice be given "if an insured becomes aware of anything that indicates there might be a claim under the policy." The claimant’s statements to the insured at the hospital were sufficient to put the insureds on notice that she might make a claim. Finding the policy provision clear and unambiguous, the court rejected the insureds’ contention that they had a good-faith belief in non-liability that excused the delay. At issue under the policy provision is whether the insureds should have anticipated a claim, not whether the insureds had a good-faith belief in non-liability. The court also rejected the insureds’ contention that the insurer’s disclaimer of coverage was untimely. The disclaimer letter was issued upon completion of its investigation 27 days after the insureds’ untimely notice.

02/16/00: STATE FARM MUTUAL AUTOMOBILE INS. CO. v. DANIELS
New York State Supreme Court, Appellate Division, Fourth Department
Insurer’s Coverage Disclaimer Two Months After Accident Deemed Timely

Donvito was killed when a vehicle in which he was a passenger struck a restaurant during a high-speed police chase. The vehicle’s owner had given Daniels permission to drive the vehicle to his place of business to perform repairs on it, but Daniels instead drove several friends to Sylvan Beach. Daniels was later convicted of second-degree murder and unauthorized use of a motor vehicle. State Farm issued a reservation of rights letter four days after the accident, and two months later disclaimed coverage on the ground that Daniels’ use of the vehicle exceeded the scope of the owner’s consent. In this declaratory judgment action, Donvito argued that State Farm’s disclaimer two months after the accident was untimely as a matter of law. State Farm submitted an affidavit explaining that its insured refused to cooperate and did not give a statement until one month after the accident, and that it disclaimed coverage three weeks later. The court found that State Farm’s three-week delay following completion of its investigation was reasonable. Although timely disclaimer under Insurance Law §3420 (d) is generally an issue of fact, short, explained delays have been held reasonable as a matter of law. Thus, State Farm was not obligated to defend or indemnify Daniels in actions arising from the accident.

Hurwitz & Fine, P.C. is a full-service law firm
providing legal services throughout the State of New York.


Newsletter Editor
Kevin T. Merriman, Esq.
[email protected]

Insurance Coverage Team
Dan D. Kohane, Team Leader
[email protected]
Sheldon Hurwitz
Carolyn M. Henry
Kevin T. Merriman

Fire, First Party & Subrogation Team
James D. Gauthier, Team Leader
[email protected]
Donna L. Burden
Andrea Schillaci
Jody E. Briandi
David F. Powell

© COPYRIGHT 2000 Hurwitz & Fine, P.C., ALL RIGHTS RESERVED.

REPORTED DECISIONS

 

DAMASK INC. v. CNA INSURANCE CO

Appeal insofar as it concerns defendants CNA Insurance Co. and American Casualty Company of Reading, Pa. unanimously dismissed without costs upon stipulation and order affirmed with costs.

Memorandum : Plaintiff appeals from an order that, inter alia, granted the motion of defendant Parsons & amp; Associates, Inc. (Parsons), plaintiff’s insurance agent, for summary judgment dismissing the complaint against it. Supreme Court properly granted that motion. In its fraud cause of action, plaintiff alleges that Parsons misrepresented that the insurer required plaintiff to insure the property for $195,000. The record establishes that Parsons in fact made such a statement, but that the statement referred to CIGNA, the company to which the initial application was made, not defendant CNA Insurance Co., the company that eventually issued the policy. Plaintiff’s contention that Parsons should have informed plaintiff that lesser coverage would have sufficed lacks merit. It is well established that, absent a special relationship, an insurance agent has no obligation to advise or direct an insured to obtain different or additional coverage (see, Murphy v Kuhn, 90 NY2d 266, 270). Moreover, there is no genuine triable issue of fact with respect to the essential element of justifiable reliance. Plaintiff initially applied for insurance in the amount of $110,000 to $120,000 in the belief that the building would be adequately insured in that amount. The fact that plaintiff ultimately acquiesced in Parsons’ suggestion that more coverage be obtained does not support a cause of action for fraud. (Appeal from Order of Supreme Court, Onondaga County, Stone , J. - Summary Judgment.)

PRESENT: PINE, J. P., HAYES, WISNER, SCUDDER AND BALIO, JJ. (Filed Jan. 4, 2000.)

DRYDEN MUTUAL INSURANCE CO. v. GREASER

Judgment unanimously affirmed without costs.

Memorandum: Supreme Court properly granted judgment declaring that plaintiff is not obligated to defend and indemnify Michael Greaser and Beth Greaser (defendants) with respect to a personal injury action brought by defendant Jan Polley arising from an accident on August 10, 1992. When Michael Greaser visited Polley at the hospital shortly after the accident, Polley solicited the name of defendants’ insurer and asked Greaser to provide a statement in support of Polley’s claim. Defendants did not notify plaintiff of the loss until December 13, 199 5, after being served by Polley with a summons and complaint.

The policy at issue requires that prompt notice be given "if an insured becomes aware of anything that indicates there might be a claim under the policy". Polley’s statements to Greaser at the hospital were sufficient to put defendants on notice that Polley might make a claim. Defendants contend that they had a good-faith belief in nonliability and thus that their delay in notifying plaintiff is excusable (see, White v City of New York, 81 NY2d 955, 958). The policy provision, however, is clear and unambiguous and must be given its plain and ordinary meaning (see, Government Empls. Ins. Co. v Kligler, 42 NY2d 863, 864). At issue under the policy provision is not whether defendants have a good-faith belief in nonliability, but whether they should have anticipated a claim (cf., Vradenburg v Prudential Prop. & Cas. Ins. Co., 212 AD2d 913).

We reject defendants ’ contention that plaintiff failed to disclaim coverage "as soon as reasonably possible" ( Insurance Law § 3420 [d]). Plaintiff issued its disclaimer letter upon completion of its investigation , 27 days after receiving defendants’ untimely notice (see, Artis v Aetna Cas. & Sur. Co., 256 AD2d 429; Structure Tone v Burgess Steel Prods. Corp., 249 AD2d 144). (Appeal from Judgment of Supreme Court, Niagara County, Joslin, J. - Declaratory Judgment.)

PRESENT: PINE, J. P., WISNER, HURLBUTT AND BALIO, JJ. (Filed Feb. 16, 2000.)

STATE FARM MUTUAL AUTOMOBILE INS. CO. v. DANIELS

Judgment unanimously affirmed without costs.

Memorandum: Nicholas Donvito, Jr. was killed when the vehicle in which he was a passenger struck a restaurant during a high -speed police chase. Another passenger was also killed. The vehicle was owned by defendant Filomena Madonna and insured by plaintiff, State Farm Mutual Automobile Insurance Company (State Farm). Madonna had given defendant Anthony Daniels permission to drive the vehicle to his place of business to perform some repairs on it but Daniels, who had been drinking through the early morning hours, decided to drive several of his friends to Sylvan Beach. Daniels was convicted of, inter alia, murder in the second degree and unauthorized use of a motor vehicle.

On July 15, 1996, four days after the accident , State Farm issued a reservation of rights letter and, by letter dated September 9, 1996, State Farm disclaimed coverage on the ground that Daniels’ use of the vehicle exceeded the scope of the consent of the insured. State Farm commenced this declaratory judgment action against, inter alia, Madonna , Daniels and defendant Nicholas Donvito, Sr., as administrator of his son’s estate, seeking a declaration that it was not obligated to defend or indemnify Daniels in any action brought against him as a result of the accident. State Farm moved for summary judgment. Donvito opposed the motion, contending that the notice of disclaimer, given almost two months after the accident, was untimely as a matter of law . State Farm submitted an affidavit from the Team Manager of its East Syracuse Claims Office who explained that, immediately after the accident, Madonna refused to cooperate with State Farm and did not give a statement until August 6, 1996. State Farm then submitted the statement to legal counsel to obtain an opinion whether State Farm had a valid legal basis for disclaiming coverage. State Farm obtained the opinion of counsel on August 23, 1996, and disclaimed coverage less than three weeks later. Supreme Court granted the motion, declaring that State Farm was not obligated to defend or indemnify Daniels in actions arising from the underlying motor vehicle accident. We affirm.

Although the issue whether a disclaimer is timely pursuant to Insurance Law § 3420 (d) is generally an issue of fact (see, Mount Vernon Hous. Auth. v Public Serv. Mut. Ins. Co., ___ AD2d ___ [decided Dec. 13, 1999]; Murphy v Hanover Ins. Co., 239 AD2d 323, 324), short, explained delays have been held to be reasonable as a matter of law (see, e.g., Can-Am Roofing v American States Ins. Co., 229 AD2d 973, 975). We conclude that the delay of approximately three weeks following the completion of State Farm’s investigation was reasonable, and thus State Farm’s motion for summary judgment was properly granted (see, Silk v City of New York, 203 AD2d 103, lv denied 84 NY2d 810).

(Appeal from Judgment of Supreme Court, Onondaga County, Mordue, J. - Declaratory Judgment.)

PRESENT: GREEN, A. P. J., WISNER, PIGOTT, JR., HURLBUTT AND SCUDDER, JJ. (Filed Feb. 16, 2000.)

RICHFIELD PROPERTIES, LTD. v GALAXY KNITTING MILLS, INC.

DECISION & ORDER

In an action for a judgment declaring that the defendants are required to indemnify the plaintiffs Richfield Properties, Ltd., and Stuart Goldstein, individually and as partners doing business as Consol Building Associates, for any damages awarded in an underlying negligence action entitled Montenegro v Richfield Properties, which was pending in Supreme Court, Kings County, under Index No. 45683/93, the plaintiffs appeal from so much of an order of the Supreme Court , Kings County (Jones, J.), dated November 9, 1998, as (a) granted the cross motion of CNA Insurance Company for summary judgment dismissing the complaint insofar as asserted against it and declared that the policy issued by it to the defendant Galaxy Knitting Mills, Inc., did not afford coverage to the plaintiffs Richfield Properties, Ltd., and Stuart Goldstein, individually and as partners doing business as Consol Building Associates, and (b) granted that branch of the cross motion of the defendant Galaxy Knitting Mills, Inc., which was for an order declaring that the sole remedy available to the plaintiffs Richfield Properties, Ltd., and Stuart Goldstein, individually and as partners doing business as Consol Building Associates, was recovery of the insurance premiums paid to the plaintiff National Union Fire Insurance Company.

ORDERED that the order is affirmed insofar as appealed from , with one bill of costs.

The plaintiffs failed to rebut the evidence of the defendant CNA Insurance Company (hereinafter CNA) that the plaintiffs Richfield Properties, Ltd., and Stuart Goldstein , individually and as partners doing business as Consol Building Associates (hereinafter Consol), were not added to the liability insurance policy it issued to the defendant Galaxy Knitting Mills, Inc. (hereinafter Galaxy), and the court therefore properly granted summary judgment to CNA dismissing the complaint insofar as asserted against it (see, American Ref-Fuel Co. of Hempstead v Resource Recycling, 248 AD2d 420; Morrison-Knudsen Co. v Continental Cas. Co., 181 AD2d 500).

After finding that Galaxy had breached its lease by failing to procure liability insurance for the benefit of Consol, the court properly limited Consol's damages to the costs of obtaining its own liability policy since such a policy was in effect at the time of the accident from which the underlying tort claim arises (see, Mavashev v Shalosh Realty, 233 AD2d 301; Wallen v Polo Grounds Bar & Grill N.Y., 198 AD2d 19).

SULLIVAN, J.P., S. MILLER, FRIEDMANN, and SCHMIDT, JJ., concur.

SCHNELL v LESTER

In an action, inter alia, to recover damages for fraud and breach of contract, the third-party defendant appeals, as limited by its brief, from so much of an order of the Supreme Court , Suffolk County (Gerard, J.), dated March 24, 1999, as granted the motion of the defendants third-party plaintiffs for summary judgment declaring that it is obligated to defend and indemnify them in a legal malpractice action entitled Schnell v Lester, pending in the Supreme Court, Suffolk County, under Index No. 96-30336.

ORDERED that the order is modified by deleting the provision thereof granting that branch of the motion of the defendants third-party plaintiffs which was for summary judgment declaring that the third-party defendant is obligated to indemnify them in the legal malpractice action entitled Schnell v Lester, pending in the Supreme Court, Suffolk County, under Index No. 96-30336, and substituting therefor a provision granting that branch of the motion only to the extent of declaring that the third-party defendant is obligated to indemnify the defendants third-party plaintiffs in the legal malpractice action only for those acts of malpractice proven at trial to have occurred after the commencement of coverage under the legal malpractice insurance policy issued by the third-party defendant to the defendants third-party plaintiffs; as so modified, the order is affirmed insofar as appealed from , with costs to the defendants third-party plaintiffs.

Roy J. Lester, individually and as a shareholder of Lester and Fontanetta, P.C. (hereinafter Lester), and Lester and Fontanetta, P.C. (hereinafter the firm), provided legal representation to William Schnell (hereinafter Schnell). Schnell placed $160,000 in an escrow account of the firm to be used for real estate investments. The original investment agreement required Lester or members of the firm to authorize all expenditures. A subsequent amendment to the agreement allowed another person to release the funds, and that person distributed the funds pursuant to the amendment. Schnell commenced an action against Lester and the firm to recover damages for legal malpractice alleging that his $160,000 had been negligently distributed . Lester and the firm sought defense and indemnification in the legal malpractice action from the appellant , Chicago Insurance Company, pursuant to a comprehensive legal malpractice insurance policy. Chicago Insurance Company denied coverage asserting that the operative act of negligence, the amendment of the investment agreement, predated the enactment of the insurance contract and was therefore excluded by specific language in the policy. Lester and the firm countered that the allegation of legal malpractice was of a continuous course of conduct and was covered by the insurance contract because some acts occurred after coverage had commenced.

An insurer has a duty to defend its insured where the allegations of the complaint in the underlying action on the known facts give rise to a reasonable possibility of coverage (see, Frontier Insulation Contrs. v Merchants Mut. Ins. Co., 91 NY2d 169; Lehrer McGovern Bovis v Halsey Constr. Corp., 254 AD2d 335). The insurer will be relieved of the duty to defend only when it can prove, as a matter of law, that the injury claimed falls entirely within a policy exclusion (see, Seaboard Sur. Co. v Gillette Co., 64 NY2d 304). Here, the Supreme Court properly concluded that the allegations detailed in the complaint encompassed acts which occurred after the commencement of coverage , and the Chicago Insurance Company was obligated to defend Lester and the firm in the legal malpractice action. However, because the duty to defend is broader than the duty to indemnify, the Chicago Insurance Company will be required to indemnify Lester and the firm only for those acts of malpractice proven at trial to have occurred after the commencement of coverage (see, Seaboard Sur. Co. v Gillette Co., supra ; cf., General Acc. Ins. Co. v 35 Jackson Ave. Corp., 258 AD2d 616).

SANTUCCI, J.P., JOY, S. MILLER , and H. MILLER, JJ., concur.

MAXWELL v TOYS "R" US-NY LTD. PARTNERSHIP

In an action to recover damages for personal injuries in which a third-party action and a second third-party action were commenced, inter alia, for a judgment declaring that Royal Insurance is obligated to defend and indemnify the defendant third-party plaintiff James A. Smith Contracting, Inc., and the defendant second third-party plaintiff Toys "R" US-NY Ltd. Partnership in the main action, the third-party defendant second third-party defendant Royal Insurance appeals, as limited by its brief, from stated portions of an order of the Supreme Court , Suffolk County (Dunn, J.), dated November 16, 1998, which, inter alia, (1) denied its motion for summary judgment dismissing the third-party complaint, the second third-party complaint, and all cross claims insofar as asserted against it, and declaring that the disclaimer and denial of coverage by the third -party plaintiff Hanover Insurance is invalid as a matter of law, and (2) granted that branch of the cross motion of the defendant third-party plaintiff James A. Smith Contracting, Inc., and the third-party plaintiff Hanover Insurance which was for summary judgment declaring that Royal Insurance is obligated to defend and indemnify James A. Smith Contracting, Inc., and Toys "R" US-NY Ltd. Partnership in the main action.

ORDERED that the order is modified, on the law, by deleting the provision thereof denying that branch of the motion which was for summary judgment declaring that the disclaimer and denial of coverage by Hanover Insurance is invalid as a matter of law, and substituting therefor a provision granting that branch of the motion; as so modified, the order is affirmed insofar as appealed from, without costs or disbursements.

At issue here is insurance coverage for personal injuries sustained by the plaintiff, Donald Maxwell, an employee of Island Acoustics of New York, Inc. (hereinafter Island) which was a subcontractor to James A. Smith Contracting, Inc. (hereinafter Smith), during renovations of a store operated by Toys "R" US-NY, Ltd. (hereinafter Toys "R" US). The appellant Royal Insurance (hereinafter Royal) issued a policy to Island, which contained an "additional insureds" endorsement providing that "any coverage provided hereunder shall be excess over any other valid and collectible insurance available to the additional insured * * * unless a contract specifically requires that this insurance be primary". As noted by the Supreme Court, the subcontract between Island and the Smith specifically required Island to procure primary insurance covering Smith and Toys "R" US . Accordingly, Royal's coverage is primary as to Smith and Toys "R" US, and the Supreme Court properly denied that branch of Royal's motion which was to dismiss the third-party and second-third party complaints insofar as asserted against it.

Hanover Insurance (hereinafter Hanover) is a coinsurer with Royal for damages arising out of the accident (see, Merchants & Bus. Men's Mut. Ins. v Savemart, Inc., 213 AD2d 607), pursuant to a blanket additional insured endorsement in Smith's policy, covering liability arising out of Smith's work for Toys "R" US . Hanover's denial of coverage is improper, since the record indicates that the accident arose out of the course of Smith's work for Toys "R" US (see, Consolidated Edison Co. of N.Y. v United States Fid. & Guar. Co., AD2d [1st Dept., Nov. 4, 1999]; Tishman Const. Corp. of N.Y. v CNA Ins. Co., 236 AD2d 211; Lim v Atlas-Gem Erectors, Co., 225 AD2d 304). Hanover's disclaimer, based upon "late notice of occurrence ", was untimely as a matter of law (see, Matter of Firemen's Fund Ins. Co. v Hopkins, 88 NY2d 836; Hartford Ins. Co. v County of Nassau, 46 NY2d 1028, 1029; Murphy v Hanover Ins. Co., 239 AD2d 323).

 

Accordingly, both Royal and Hanover are obligated to defend and indemnify Smith and Toys "R" US in the main action.

BRACKEN, J.P ., THOMPSON, GOLDSTEIN, and McGINITY, JJ., concur.

MIC PROPERTY AND CASUALTY INS. CORP. v. CUSTOM CRAFTSMAN OF BROOKLYN, INC.

Order, Supreme Court, New York County (Leland DeGrasse, J ), entered November 19, 1998, which granted third-party defendant Seneca Insurance Company, Inc. summary judgment dismissing the third-party complaint of defendant Custom Craftsman of Brooklyn, Inc. as against Seneca, unanimously affirmed, without costs.

Plaintiff’s subrogor in the main action sought damages for the partial collapse of its building due to alleged inadequate shoring of an adjacent lot under construction. Defendant Custom, the construction site manager, alleges in its third-party complaint , inter alia, that it is entitled to indemnification from third-party defendant Seneca because Custom was an additional named insured under a liability policy purportedly issued to JCI Ltd ., a contractor at the subject construction site, by Seneca.

The trial court properly exercised its discretion in treating Seneca's motion, brought pursuant to CPLR 3211, as one for summary judgment, since the parties revealed their proof and, in so doing, clearly charted a summary judgment course (cf., Huggins v Whitney, 239 AD2d 174). Seneca, in support of its motion, offered competent, unrebutted proof that Custom was not an additional named insured under the policy issued to JCI Ltd. in effect at the time of the accident (policy number SCC 200-51-62), and that that policy, in any event, was subsequently rescinded ab initio by reason of a material misrepresentation by JCI Ltd. Custom's opposition to the motion, which included a certificate of insurance naming it as an additional insured under a purported Seneca policy whose expiration date predated the accident, as well as an affidavit of its corporate officer that did not indicate personal knowledge of facts asserted, was insufficient to raise a triable issue of fact.

Custom’s argument that the grant of summary judgment was premature is without merit since Custom offers no factual basis for its supposition that there remains undisclosed information probative of its claim within the exclusive possession of Seneca. Custom's further argument that Seneca's rescission ab initio of its SCC Policy with JCI Ltd. was void, either by reason of collusion or as against public policy, and that such rescission interfered with its rights under said policy, is founded on a baseless assumption that Seneca had an obligation to Custom under said policy. As noted, there is no evidence of any Seneca policy insuring Custom during the relevant time period.

NEW YORK CONVENTION CENTER OPERATING CORP. v. MORRIS CERULLO WORLD EVANGELISM, INC.

Order, Supreme Court, New York County (Edward Lehner, J.), entered on or about October 19, 1998, which granted defendants' motion for summary judgment dismissing the action, denied plaintiffs' motion for summary judgment, and declared that defendants are not liable to plaintiffs for the amount of the settlement of the underlying Rodriguez personal injury action, unanimously modified, on the law, defendants' motion denied as to defendant Cigna, plaintiffs' motion as against defendant Cigna granted, and it is declared that defendant Cigna is liable for one-half of the reasonable costs of defending and indemnifying plaintiff New York Convention Center Operating Corporation (NYCCOC ) in the Rodriguez action, and, as so modified, the order is affirmed, without costs, and the matter remanded for further proceedings.

In July 1994, Nelly Rodriguez commenced a personal injury action against NYCCOC based on allegations that, on September 30, 1993, she was injured while at the Javits Center due to a dangerous condition of the "movable rugs/mats" at the entrance of the Javits Center. The bill of particulars elaborated that Ms. Rodriguez had been "caused to fall due to an improperly secured and placed rug/mats at the entranceway/exit way of the [Javits Center]." Ms. Rodriguez testified at her deposition that she had been on her way to attend Cerullo's conference at the Javits Center when she fell. It is undisputed that the entranceway to the Javits Center where Ms. Rodriguez was injured , although not part of the "Space" Cerullo was licensed to use for its conference, was covered by the "right of passage to the Space through the entrance and lobby of the Center" granted to Cerullo by its Licensing Agreement with NYCCOC. Pursuant to such agreement, Cerullo obtained a commercial general liability insurance policy issued by Cigna Insurance Company.

Contrary to the conclusion of the Supreme Court, the Cigna Policy covers NYCCOC for liability for personal injuries suffered at the entranceway to the Javits Center by persons who were on the premises for the purpose of attending Cerullo's conference . That the entranceway was not included in the "Space" Cerullo was licensed to use for the conference is of no moment. It was part of the "right of passage" to such space and coverage under the policy was not limited to injuries incurred in the licensed "Space" itself. Rather, the Cigna Policy afforded coverage for "bodily injury," "personal injury," and "medical expenses" (among other categories of damage) "arising out of . . . [the] use of the premises [referenced in the policy declarations] . . . and operations necessary or incidental to those premises . . . ." This Court has recently construed similar language in another liability insurance policy to include not only the premises specifically identified as covered, but also other space whose use was incidental to the use of the expressly covered premises ( ZKZ Associates v CNA Insurance Co., 224 AD2d 174, affd 89 NY2d 990).

A person coming to attend Cerullo's conference had to go through an entranceway to the Javits Center in order to reach the conference. That Cerullo had no control over, or responsibility for, the entrance ways to the Javits Center, is irrelevant to the scope of coverage under the Cigna Policy, which, by its terms , afforded NYCCOC coverage for the increased risk of liability attendant to Cerullo's use of the Javits Center for its conference.

Plaintiffs concede that the liability policy issued to NYCCOC by co-plaintiff National Union constitutes co-insurance with the policy issued by Cigna, and that, since the policies are both primary and contain identical "Other Insurance" provisions permitting "contribution by equal shares", each insurer should bear one-half the cost of defending and indemnifying NYCCOC in the Rodriguez action. At this point, the Rodriguez action has been settled, but the present record does not afford a basis for determining whether the defense costs incurred, and settlement paid , by National Union in that action were reasonable.

Accordingly, we simply declare that Cigna is liable for one-half of the reasonable costs of NYCCOC's defense and indemnification in the Rodriguez action, and leave the determination of the precise amount of Cigna's liability for determination in future proceedings.

We have considered the parties' alternative points and find them unpersuasive .

SENECA INS. CO., INC. v. LINCOLNSHIRE MANAGEMENT, INC.

Order and judgment (one paper), Supreme Court, New York County (Charles Ramos, J.), entered April 2, 1999, which granted defendants ’ motion pursuant to CPLR 327 and 3211(a)(4) to dismiss the complaint based on forum non conveniens and because there was another action pending between the same parties in the California state courts, unanimously reversed , on the law, with costs, the motion denied and the complaint reinstated.

This action seeks a declaration that plaintiff Seneca is not obligated, by its business owner’s and commercial umbrella liability policies issued to defendants, to defend them in the underlying defamation and abuse of process action. It was allegedly brought in anticipation of an action commenced in California and predates the California action by six days. The motion court erred in dismissing the complaint.

Contrary to the motion court’s finding, the insurance transaction at issue clearly has a far greater nexus with New York than with California. Among other things, the parties’ principal places of business are in New York, they reside and litigate here, and the insurance contract at issue incorporates mandatory New York policy language, and was brokered, negotiated, paid for, and breached here. The only California nexus is that the underlying defamation and abuse of process action arose, was litigated and was settled there. Moreover, defendants failed to meet their burden of showing that a more convenient forum than New York exists ( Wittich v Wittich, 210 AD2d 138). Their argument that they are a "natural plaintiff" ;, which would shift the defendant’s burden to plaintiffs to prove that California is an inconvenient forum, is without merit, since that doctrine is not recognized in New York law and, in any case, plaintiffs can readily establish that California is a less convenient forum, the California court having found New York to be the more convenient forum. The contention that a declaratory judgment action cannot be maintained here because an adequate remedy at law exists is also unsupported. Defendants fail to show the existence of such remedy, and, even if they did, it would not require that Supreme Court decline to render declaratory judgment, since a genuine, justiciable controversy exists (see, CPLR 3001; Morgenthau v Erlbaum, 59 NY2d 143, 148, cert denied 464 US 993).

Plaintiff ’s conduct in commencing this action did not constitute anticipatory litigation because forum-shopping is not at issue because New York "is the logical and proper place...to go forward" ( Fischer & Porter Co. v Moorco Intl., Inc., 869 F Supp 323, 325), where plaintiff did not receive formal notice of the California action or of when and where it would be commenced (Mondo, Inc. v Spitz, 1998 US Dist LEXIS 369 [SDNY 1998]), and where plaintiff is not relying on the first -to-file rule (see, Riviera Trading Corp. v Oakley, Inc., 944 F Supp 1150, 1158 [SDNY 1996]), but on traditional forum non conveniens analysis.

Defendants’ remaining contentions have been considered and found to be without merit.

ALLOU HEALTH & BEAUTY CARE, INC. v. AETNA CASUALTY AND SURETY CO.

In an action for a judgment declaring that the defendants are obligated to defend and indemnify the plaintiffs in an underlying action entitled Nexxus Products Company v Russ Kalvin, Inc., pending in the Superior Court of California for Santa Barbara County, under Index No. 201281, the defendants appeal from (1) an order of the Supreme Court, Nassau County (Joseph , J.), dated November 16, 1998, which granted that branch of the plaintiffs' motion which was for summary judgment declaring that the defendants have a duty to defend the plaintiffs in the underlying action, and denied their cross motion for summary judgment declaring that they have no duty to defend or indemnify the plaintiffs in the underlying action, and (2) a judgment of the same court dated December 2, 1998, 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 respondents are 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 corporations are involved in the marketing and sale of a line of hair care products known as "Russ Kalvin Generic Brand". These products are lower priced versions of hair care products marketed by companies such as Nexxus Products Company (hereinafter Nexxus), which are normally sold in beauty parlors and salons. In September 1996 Nexxus sued the plaintiff corporations in the Superior Court of California for trademark infringement, trademark dilution, false advertising, unfair competition, and counterfeiting. The California action is premised upon allegations that the plaintiffs have imitated Nexxus' trademarks and marketed and advertised their products in a manner intended to deceive the public into believing that the plaintiffs' products are manufactured by or associated with Nexxus.

Shortly after they were served with process in the California action, the plaintiffs demanded that the defendants, who issued a liability policy to the plaintiffs, defend and indemnify them pursuant to the "advertising injury" coverage provided by the policy . Although the policy includes "misappropriation of advertising ideas or style of doing business" as a category of "advertising injury", it does not define the terms "advertising ideas" or "style of doing business". After the defendants disclaimed coverage, the plaintiffs commenced this action seeking a judgment declaring that the defendants are required to defend and indemnify the plaintiffs in the underlying California action. The Supreme Court subsequently granted that branch of the plaintiffs' motion which was for summary judgment declaring that the defendants have a duty to defend them in the California action .

On appeal, the defendants contend that the Supreme Court erred in finding that they have a duty to defend the plaintiffs because trademark infringement and related claims are not covered by the "advertising injury" coverage of the policy. The issue of whether trademark infringement can be considered a form of advertising injury, thereby triggering an insurer's duty to defend, has divided the courts which have addressed it (see, e.g., Callas Enterprises, Inc. v The Travelers Indemnity Co. of America, 193 F3d 952; Advance Watch Co., Ltd. v Kemper National Ins. Co., 99 F3d 795; Letro Products, Inc. v Liberty Mutual Ins. Co., 114 F3d 1194; American Employers' Ins. Co. v DeLorme Publishing Co., 39 F Supp 2d 64). However, courts which have considered this issue applying New York law have found that trademark infringement claims are covered as advertising injury where they relate to the misappropriation of advertising ideas and style of doing business (see, J.A. Brundage Plumbing & Rooter-Rooter, Inc. v Massachusetts Bay Ins. Co., 818 F Supp 553, 559, vacated as a result of settlement , 153 FRD 36; Energex Systems Corp. v Fireman's Fund Ins. Co., US Dist Ct, SD NY, June 25, 1997, Martin J.; Massachusetts Bay Ins. Co. v Pretty Preville, Inc., US Dist Ct, SD NY, July 10, 1996, Patterson, J.; Ben Berger & Son, Inc. v American Motorist Ins. Co., US Dist Ct, SD NY, June 29, 1 995, Chin, J.; B.H. Smith, Inc. v Zurich Ins. Co., 285 Ill App3d 536 [resolving dispute under New York law]).

In New York , insurers have a broad duty to defend an insured whenever a complaint alleges any facts or grounds which bring the action within the scope of the risks undertaken by the insurer (see, Meyers & Sons Corp. v Zurich Am. Ins. Group, 74 NY2d 298, 302; Seaboard Sur. Co. v Gillette Co., 64 NY2d 304, 310). In construing an insurance policy to determine the scope of coverage, courts apply the test of common speech and focus on the reasonable expectations of the average insured (see, Matter of Mostow v State Farm Ins. Cos., 88 NY2d 321; Ace Wire & Cable Co. v Aetna Cas. & Sur. Co., 60 NY2d 390, 398). Moreover, "[w]here there is ambiguity as to the existence of coverage, doubt is to be resolved in favor of the insured and against the insurer " ( Handelsman v Sea Ins. Co., 85 NY2d 96, 101).

Guided by these principles, the courts which have considered this issue under New York law have concluded that the phrase "misappropriation of advertising ideas or style of doing business" should be defined "as it would ordinarily be understood by laypersons" (Energex Systems Corp. v Fireman's Fund Ins. Co., supra; Massachusetts Bay Ins. Co. v Pretty Preville, Inc., supra). Viewed from this perspective, these courts have concluded that "misappropriation of advertising ideas or style of doing business" encompasses the wrongful taking of the manner by which another advertises its goods or services, including the misuse of another's trademark , and have rejected the view that this category of advertising injury is narrowly limited to common-law misappropriation actions (see, J.A. Brundage Plumbing & Rooter-Rooter, Inc. v Massachusetts Bay Ins. Co., supra; Energex Systems Corp . v Fireman's Fund Ins. Co., supra; Massachusetts Bay Ins. Co. v Pretty Preville, Inc., supra; Ben Berger & Son, Inc. v American Motorist Ins. Co., supra; B.H. Smith, Inc. v Zurich Ins. Co., supra). We agree that the ordinary meaning of the phrase "misappropriation of advertising ideas or style of doing business" can include the alleged misuse of another's trademark. Moreover, contrary to the defendants' contention, there is a sufficient causal connection between the injury alleged in the underlying action and the plaintiffs ' advertising activities to afford coverage under the policy (cf., Meyers & Sons Corp. v Zurich Am. Ins. Group, supra). Accordingly , we find that the Supreme Court properly declared that the defendants are obligated to defend the plaintiffs in the underlying California action.

The defendants' remaining arguments are without merit.

BRACKEN, J.P., THOMPSON, SULLIVAN, and KRAUSMAN, JJ., concur.

RUIZ v. STATE WIDE INSULATION AND CONSTRUCTION CORP.

In an action to recover damages for personal injuries and property damage, etc., and a related subrogation action, (1) the third-party defendant Hermitage Insurance Company appeals, as limited by its brief, from so much of an order of the Supreme Court, Nassau County (O'Connell, J.) dated June 3, 1998, as denied its cross motions for summary judgment dismissing the third -party complaint insofar as asserted against it, and for a judgment declaring that it is not obligated to defend and indemnify the third-party defendant Panicos Demetriades in the main action, (2) the third -party plaintiff State Wide Insulation and Construction Corp. cross-appeals, as limited by its brief, from so much of the same order as denied its cross motions for summary judgment on its third-party complaint against the third-party defendants Hermitage Insurance Company and Panicos Demetriades, and (3) the third -party defendant Panicos Demetriades cross-appeals, as limited by his brief, from so much of the same order as denied his motion for summary judgment declaring that Hermitage Insurance Company was obligated to defend and indemnify him in the main action.

ORDERED that the order is modified , on the law, by deleting the provision thereof denying the cross motions of Hermitage Insurance Company , and substituting therefor a provision granting those cross motions; as so modified, the order is affirmed , with one bill of costs to Hermitage Insurance Company payable by State Wide Insulation and Construction Corp. and Panicos Demetriades.

The third-party defendant Hermitage Insurance Company (hereinafter Hermitage) issued a general commercial liability policy to the third-party defendant Panicos Demetriades. The declarations page of the policy described Demetriades' business as "painting" and incorporated by reference an endorsement entitled "Classification Limitation" which limited the operations from which a claim could arise to those described in the schedule of insurance.

The plaintiffs allege that they sustained personal injuries and property damage when a fire broke out at their premises while the third-party defendant Panicos Demetriades was engaged in repairing their roof. Hermitage properly denied Demetriades' claim that it was obligated to defend and indemnify him on the ground that the claim was beyond the scope of the activity covered by his policy, which was limited to "painting". Demetriades asserts that the provision limiting coverage to "painting" operations was not in effect since it was unsigned and he never received it.

The declarations page and the accompanying endorsements were made part of the insurance policy and were incorporated by reference into the policy regardless of whether the insured received actual delivery thereof (see, Hirshfeld v Maryland Cas. Co., 249 AD2d 274). The terms of the policy are clear and unambiguous and their construction may be determined as a matter of law (see, Gelb v Elroy Enters., 170 AD2d 481).

The parties' remaining contentions are without merit (see, Benatovich v Propis Agency, 224 AD2d 998; Galaska v State Farm Mut. Auto Ins. Co., 177 AD2d 947).

O'BRIEN, J.P., FRIEDMANN, FLORIO, and SCHMIDT, JJ., concur.

TIG INSURANCE COMPANY v. WILSHIRE CREDIT CORP.

In an interpleader action to determine entitlement to the proceeds of a fire insurance policy, the defendant Alfreda Thomas appeals, as limited by her brief, from so much of an order of the Supreme Court, Nassau County (Winick, J.), dated August 24, 1998, as granted the motion of the defendants Girard Savings Bank, FSB, and Wilshire Credit Corp. for summary judgment.

ORDERED that the order is affirmed insofar as appealed from, with costs.

In this interpleader action, the appellant, Alfreda Thomas, as the mortgagor of a property which had been foreclosed upon, and the respondents Girard Savings Bank, FSB, and Wilshire Credit Corp. (hereinafter collectively Girard ), as the mortgagee, are each claiming entitlement to the proceeds of a fire insurance policy issued by the plaintiff. Contrary to the appellant's contentions, the Supreme Court correctly determined that Girard was contractually entitled to the proceeds of the policy notwithstanding its failure to obtain a deficiency judgment pursuant to RPAPL 1371(3). The mortgage agreement provides, inter alia, that the proceeds from a fire insurance policy will be used first to reduce the mortgage debt and, only if any funds are remaining, would they be paid to the appellant. Thus, Girard, as a mortgagee, has a contractual right to the insurance proceeds at issue here irrespective of whether or not it obtained a deficiency judgment in the foreclosure action (see, GMS Capital Corp. v Siegmund Spiegel/Baldur Peter, 251 AD2d 542; L.G.H. Enters. v Kadilac Mtge. Bankers, 225 AD2d 735; Melino v National Grange Mut. Ins. Co., 213 AD2d 86). The appellant's claim that the aforementioned mortgage clause did not expressly state that it applied to the instant situation is without merit (cf., L.G.H. Enters. v Kadilac Mtge. Bankers, supra; Melino v National Grange Mut. Ins. Co., supra).

O'BRIEN, J.P., FRIEDMANN, FLORIO, and SCHMIDT, JJ., concur

EAGLE INSURANCE COMPANY v BUTTS

In an action for a judgment declaring , inter alia, that the plaintiff is not required to defend and indemnify the defendant Loretta Vanderveer in an action entitled Butts v Vanderveer, pending in the Supreme Court, Dutchess County, under Index No. 1996/2748, the defendant General Star Indemnity Company appeals from an order and judgment (one paper ) of the Supreme Court, Dutchess County (LaCava, J.), dated February 23, 1999, which granted the plaintiff 's motion for summary judgment, denied its cross motion for summary judgment, and declared that the plaintiff had no obligation to defend or indemnify Loretta Vanderveer in the underlying action.

ORDERED that the order and judgment is affirmed, with costs.

The plaintiff in the underlying personal injury action, Anne B. Butts, was injured as she was leading a horse from a van down an attached ramp. The horse and van were both owned by Loretta Vanderveer. The horse jumped while on the ramp, throwing Butts to the ground. Butts alleged in her complaint that the accident was caused by Vanderveer's negligent training of the horse.

Vanderveer was insured by an automobile policy issued by Eagle Insurance Company (hereinafter Eagle), which covered the subject van . General Star Indemnity Company (hereinafter General Star) issued a general liability insurance policy which provided Vanderveer with coverage for injuries resulting from the use and ownership of her horse . General Star defended Vanderveer in the underlying action and subsequently requested that Eagle assume the defense. Eagle disclaimed coverage on the ground that Butts' claim did not result from the "ownership , maintenance or use" of a covered vehicle. In the instant action, the Supreme Court upheld the disclaimer and declared that Eagle was not required to defend or indemnify Vanderveer. We now affirm.

For purposes of this appeal, Eagle concedes that the term "use" in the policy encompassed the activity of loading and unloading the subject van. Generally, the determination of whether an accident has resulted from the use or operation of a covered vehicle requires consideration of whether, inter alia, the accident arose out of the inherent nature of the vehicle and whether the vehicle itself produced the injury (see , U.S. Oil Ref. & Mktg. Corp. v Aetna Cas. & Sur. Co., 181 AD2d 768), or, in other words, whether the use of the vehicle was a proximate cause of the injury (see, Wausau Underwriters Ins. Co. v St. Barnabas Hosp., 145 AD2d 314; Lumbermen's Mut. Cas. Co. v Logan, 88 AD2d 971).

We agree with General Star that where the accident occurs during the loading or unloading of property from a covered vehicle, the test as to whether coverage is triggered under the subject provision of the policy is more flexible and does not require a showing that the vehicle itself produced the injury (see, e.g., Utica Mut. Ins. Co. v Prudential Prop. & Cas. Ins. Co., 103 AD2d 60, affd 64 NY2d 1049; Matter of Duncan Petroleum Transp. v Aetna Ins. Co., 96 AD2d 942, affd 61 NY2d 665; Aetna Cas. & Sur. Co. v Liberty Mut. Ins. Co., 91 AD2d 317; Cosmopolitan Mut. Ins. Co. v Baltimore & Ohio R.R. Co., 18 AD2d 460; cf., Walton v Lumbermens Mut. Cas. Co., 88 NY2d 211). Nevertheless, it is insufficient to show merely that the accident occurred during the period of loading or unloading. Rather, the accident must be the result of some act or omission related to the use of the vehicle (cf., Argentina v Emery World Wide Delivery Corp., 93 NY2d 554).

In the case at bar, Vanderveer's alleged acts or omissions involved her prior training of the horse, which allegedly made it prone to jump while on the ramp. There were no allegations that Vanderveer used the van negligently or that the condition of the van in any way contributed to the accident. Under the circumstances, we agree with the Supreme Court that Eagle was not required to defend or indemnify Vanderveer in the underlying action.

O'BRIEN, J.P., FRIEDMANN, FLORIO, and SCHMIDT, JJ., concur.

GOVERNMENT EMPLOYEES INSURANCE COMPANY v. KOLODNY

In an action for a judgment declaring that the plaintiff is not obligated to indemnify the defendant Chaim S. Kolodny or to provide coverage for claims arising from an automobile accident, (1) the defendants Abraham Jacobowitz, as Administrator of the Estate of Efraim Jacobowitz, Herbert Basch, and Yehoshua Basch appeal from an order of the Supreme Court, Nassau County (Bucaria, J.), dated May 6, 1998, which granted the plaintiff's motion for summary judgment, and (2) the defendants Abraham Jacobowitz, as Administrator of the Estate of Efraim Jacobowitz, Herbert Basch , and Yehoshua Basch, Abraham Schwartzberg, Zvi Shor, and Meir Shor, and Dvora Zelman, as administratrix of the Estate of Matisyahu Zelman, separately appeal from a judgment of the same court, dated June 12 , 1998, which, inter alia, declared that the plaintiff is not obligated to indemnify the defendant Chaim S. Kolodny and has no duty or obligation to anyone injured as a result of the accident.

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

ORDERED that the judgment is reversed, on the law, the motion is denied, and the order dated May 6, 1998, is modified accordingly; and it is further,

ORDERED that the appellants are 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 defendant Chaim S. Kolodny was the operator of a vehicle owned by the defendant Congregation Khal-Chasidei Skwere which was involved in a fatal one-car accident on August 7, 1990. At the time of the accident, the plaintiff, Government Employees Insurance Company (hereinafter GEICO), insured an automobile owned by Kolodny's father. The GEICO policy provided liability coverage for "any 'family member' for the * * * use of any auto". It is undisputed that Kolodny was a "family member" within the meaning of the GEICO policy. Under the heading entitled "Exclusions", the policy provided, in relevant part, "We do not provide Liability Coverage for the ownership, maintenance or use of * * * any vehicle other than 'your covered auto,' which is * * * furnished or available for the regular use of a 'family member'". In this action, GEICO seeks a declaration that since the vehicle involved in the accident was provided to Kolodny for his regular use, GEICO is not obligated to indemnify him or to provide coverage for the accident.

Contrary to the conclusion of the Supreme Court, GEICO was required to provide a timely disclaimer when asserting its policy's exclusion (see, Handelsman v Sea Ins. Co., 85 NY2d 96; Nigro v General Acc. Ins. Co. of N.Y., 239 AD2d 474). Moreover, GEICO's disclaimer, issued on May 21, 1992, over one year after it received notice of the accident on May 1, 1991, was untimely, and GEICO failed to adequately explain the delay, as a matter of law (see, Insurance Law § 3420; Allstate Ins. Co. v Macaluso, 217 AD2d 424; Safeguard Ins. Co. v Angel Guardian Home, 946 F Supp 221, 229). Accordingly, the Supreme Court should have denied GEICO's motion for summary judgment.

GEICO's argument based on the Workers' Compensation Law is raised for the first time on appeal and is therefore not properly before this court (see, Bragagnolo v EMC Mtge. Corp., 234 AD2d 328).

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY v. LELONEK

In an action to rescind a disability insurance policy , the plaintiff appeals from a judgment of the Supreme Court, Kings County (Douglass, J.), entered December 4, 1998, which dismissed the complaint and is in favor of the defendant and against it in the principal sum of $44,000 on his counterclaim.

ORDERED that the judgment is affirmed, with costs.

The plaintiff insurance company issued the subject disability insurance policy to the defendant when it knew that the defendant already possessed a policy underwritten by the plaintiff. Together the policies exceeded the plaintiff's limit for a person of the defendant's annual income. Under the circumstances of this case, the trial court properly dismissed the complaint and awarded the defendant judgment on his counterclaim (see, Atlas v Metropolitan Life Ins. Co., 181 NYS 363; Lanigan v Prudential Co., 63 Hun 408, Opn in 18 NYS 287; Metropolitan Life Ins. Co. v Goldberger, 3 Misc 2d 878; see also, Violin v Fireman's Fund Ins. Co., 81 Nev. 456, 406 P2d 287, 290).

The plaintiff's remaining contention is unpreserved for appellate review.

SANTUCCI, J.P., ALTMAN, FRIEDMANN, and GOLDSTEIN, JJ., concur .

KRAMER v. GOVERNMENT EMPLOYEES INSURANCE COMPANY

In an action pursuant to Insurance Law § 3420(b) to recover the amount of a judgment obtained against the defendant's insured, the defendant appeals from (1) an order of the Supreme Court, Nassau County (McCarty, J.), dated February 25, 1999, which denied its motion for summary judgment and granted the plaintiff's cross motion for summary judgment, and (2) a judgment of the same court, entered July 30, 1999, which is in favor of the plaintiff and against it in the principal sum of $83,492.13.

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

ORDERED that the judgment is reversed, on the law, the defendant's motion is granted, the plaintiff's cross motion is denied, the order is modified accordingly, and the complaint is dismissed; and it is further,

ORDERED that the appellant 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 defendant issued a homeowners' policy to Tamara Kramer and her husband, Anatoly Kramer, when they purchased their home in February 1992. On March 17, 1992, while visiting the Kramers' home, Mrs. Kramer's mother, Esfir Leitman, died from carbon monoxide poisoning caused by a defective heating and ventilation system. More than 21 months later, Mrs. Kramer, as proposed administrator of her mother's estate, first notified the defendant of the accident by letter. Less than one month later, the defendant disclaimed coverage based on the failure to provide notice of the accident as soon as practical as required by the policy.

On March 9, 1994, limited letters of administration were issued to Mrs. Kramer, her mother's sole distributee. As administrator of Mrs . Leitman's estate, she then commenced an action against multiple defendants, including herself and her husband, to recover damages for personal injuries and wrongful death. A copy of the complaint was forwarded to the defendant, which continued to disclaim coverage. The Kramers defaulted and an assessment of damages was held. Ultimately, a money judgment was entered solely against Mr. Kramer.

Mrs. Kramer, as administrator of her mother's estate, subsequently commenced this action against the defendant pursuant to Insurance Law § 3420(b) to recover the amount of the judgment. The defendant moved for summary judgment, contending that there was no coverage due to the failure to give timely notice of the occurrence . The plaintiff cross-moved for summary judgment. The Supreme Court denied the defendant's motion and granted the plaintiff's cross motion, concluding that the timeliness of notice from the estate of a decedent is measured from the date a legal representative is appointed. Consequently, the Supreme Court found that the notice provided by the plaintiff in this case was timely. We reverse.

Under the particular circumstances of this case, notice was not given as soon as practical or as soon as reasonably possible (see, Insurance Law § 3420[a][4]). Notice of an accident or occurrence may be provided by the insured or by a claimant (see, Insurance Law § 3420[a][3]). In this case, the plaintiff was both the insured and, in effect , the claimant. As the sole distributee of her mother's estate, she is the only one who will benefit from any damages recovered by the estate. She was fully aware of the accident, which occurred in her own home, and she learned the cause of her mother's death within days thereafter, yet failed to provide notice to the defendant for over 21 months. Under the facts of this case, the lack of a personal representative for the estate does not excuse the delay in providing notice (see, Allstate Ins. Co. v Furman, 84 AD2d 29, affd 58 NY2d 613). This is not a case, such as that relied on by the Supreme Court, where the time to give notice is measured from the date a cause of action exists, arises, or is possessed by a legal representative (see, Matter of Johnson [Lumbermen's Mut. Ins. Co.], 88 AD2d 1; see also, Buduson v Curtis, 285 App Div 517, affd 309 NY 879).

The defendant sufficiently specified the grounds for the disclaimer and the disclaimer was sent to the proper parties (see, Losi v Hanover Ins. Co., 139 AD2d 702). Moreover, we conclude that the defendant's delay of less than one month in issuing the disclaimer was reasonable as a matter of law (see, Can-Am Roofing v American States Ins. Co., 229 AD2d 973; Silk v City of New York, 203 AD2d 103).

In light of our determination, we do not reach the defendant's remaining contention which, in any event, is unpreserved for appellate review .

SANTUCCI, J.P., ALTMAN, FRIEDMANN, and GOLDSTEIN, JJ., concur.

LeCORRE v. BIJESSE BELFORD DOLEWSKI & DeMICCO

In an action to recover damages for legal malpractice, (1) the defendant third-party plaintiff second third-party plaintiff appeals, as limited by its brief, from so much of an order of the Supreme Court , Suffolk County (Doyle, J.), entered August 25, 1998, as (a) denied those branches of its cross motion which were for summary judgment dismissing the complaint and for summary judgment in the third-party and second third-party actions on the issues of indemnification and contribution, and (b) granted the motion of the second third-party defendant for summary judgment dismissing the second third-party complaint , and (2) the third-party defendants cross-appeal, as limited by their brief, from so much of the same order as denied their cross motion for summary judgment dismissing the third-party complaint.

ORDERED that the order is modified, on the law, by deleting the provision thereof granting the motion of the second third-party defendant for summary judgment dismissing the second third-party complaint and substituting therefor a provision denying that motion; as so modified, the order is affirmed insofar as appealed and cross-appealed from, without costs or disbursements.

In 1988, the plaintiff, Pamela A. LeCorre, retained the law firm of Bijesse Belford Dolewski & DeMicco (hereinafter Bijesse) to commence an action to recover damages for the injuries she allegedly sustained in an automobile accident. Bijesse settled that action for $100,000, which was the limit of the offending driver's liability insurance policy.

At the time of the accident, the plaintiff was covered by an automobile liability insurance policy issued by Amica Mutual Insurance Company (hereinafter Amica). That policy had a rider providing supplemental underinsured motorist insurance to the plaintiff. When LeCorre filed a claim for underinsured motorist benefits with Amica, Amica questioned whether she breached the terms of the policy by settling the personal injury action without its consent. When Bijesse realized that it may have jeopardized LeCorre's recovery for supplemental underinsured motorist benefits, it advised her to retain new counsel.

LeCorre subsequently retained the law firm of Joachim, Flanzig & Beasley (hereinafter Joachim), which advised LeCorre that a malpractice action against Bijesse was premature since there was no formal disclaimer of coverage. When Joachim filed a notice of intention to arbitrate LeCorre's underinsurance claim, Amica moved to permanently stay arbitration on the ground that its consent had not been obtained prior to settling the personal injury action, thereby possibly jeopardizing its subrogation rights. That motion was granted.

Thereafter, LeCorre commenced this legal malpractice action against Bijesse, and Bijesse commenced a third-party action against Joachim for indemnification and contribution on the ground that Joachim failed to adequately oppose the stay of arbitration. Bijesse subsequently commenced a second third-party action against Amica for indemnification and contribution on the ground that Amica's fraudulent and negligent misrepresentations in connection with its handling of LeCorre's claim for underinsured motorist benefits and its motion to permanently stay arbitration caused LeCorre's loss of her underinsured motorist benefits. In its bill of particulars , Bijesse also claimed that Amica breached its duty to deal with LeCorre in good faith.

Contrary to the determination of the Supreme Court, Bijesse established the existence of triable issues of fact as to whether Amica implicitly consented to LeCorre's settlement of the underlying personal injury action for the policy limits of the offending driver and whether Amica acted in good faith in its dealings with LeCorre. "'When a party is under a duty to speak, or when his failure to speak is inconsistent with honest dealings and misleads another, then his silence may be deemed to be acquiescence'" ( Matter of Aetna Cas. & Sur. Co. v Crown, 181 AD2d 883, 884, quoting More v New York Bowery Fire Ins. Co., 130 NY 537, 545). Furthermore, an insurer has an implied duty to act in good faith in dealing with its insured (see, Jones Lang Wootton USA v LeBoeuf, Lamb, Green & McRae, 243 AD2d 168).

In the matter at bar, at his deposition, Amica's regional vice-president, James M. Lynch, read from a letter he wrote dated January 12, 1989, to one of Amica's claim representatives in which he referred to possible underinsurance coverage exposure pursuant to Amica's policy issued to LeCorre. It also appears from his testimony that in December 1988 and January 1989, at least one of Amica's claims representatives handling the plaintiff's additional Personal Injury Protection claim was aware that there was underinsurance coverage, that LeCorre's injuries were serious, and that the limits of the policy of the other driver were significantly less than Amica's. Thus, in December 1988 and January 1989, Amica was aware that such a claim might be made pursuant to the underinsurance provision of the policy. Yet, one month later , in February 1989, Amica sent only a limited agreement dealing with subrogation regarding the additional "Personal Injury Protection" provision of LeCorre's insurance policy. That agreement, which was signed by LeCorre on February 24, 1989, before the execution of the general release, made no mention of any subrogation issue relating to LeCorre's potential claim for underinsured motorist benefits.

The policy language of the underinsurance rider, as opposed to that of the uninsured motorist protection provision, did not require Amica's written consent prior to settling a claim. Thus, there is a question of fact as to whether Amica's silence on the issue of subrogation regarding the underinsurance claim could have been viewed as consenting to a settlement for the policy limits of the other driver's vehicle , as well as whether Amica was acting in good faith regarding potential claims by LeCorre.

The Supreme Court properly denied those branches of Bijesse's cross motion which were for summary judgment dismissing the complaint and for summary judgment in the second third-party actions on the issues of indemnification and contribution (see generally, Alvarez v Prospect Hosp., 68 NY2d 320). Michael DeMicco, who was the attorney handling the LeCorre matter for Bijesse at the time this matter was settled, admitted that before the delivery of the general release executed by LeCorre, he was aware that Amica had a right of subrogation in this matter. Thus , the fact that the limited subrogation agreement was signed before the execution of the general release raises at least two factual questions concerning whether Bijesse was, or should have been, aware of the subrogation issue as to LeCorre's underinsured motorist claim, and whether it was negligent in failing to obtain a consent from Amica to the settlement of the underlying personal injury action prior to executing the general release.

The parties' remaining contentions are without merit.

O'BRIEN, J.P., RITTER, S. MILLER, and FLORIO, JJ., concur.

MATTER OF NEW YORK CENTRAL MUTUAL FIRE INS. CO. v. BONILLA

In a proceeding, inter alia, pursuant to CPLR article 75 to permanently stay an arbitration, the appeal is from an order of the Supreme Court , Suffolk County (Robbins, J.), dated June 23, 1999, which, after a hearing, granted the petition and permanently stayed the arbitration.

ORDERED that the order is affirmed, with costs .

Establishing whether a person is a resident of a household for insurance purposes generally requires a showing of "something more than temporary or physical presence and requires at least some degree of permanence and intention to remain" ( New York Cent. Mut. Fire Ins. Co. v Kowalski, 195 AD2d 940, 941; accord, Kradjian v American Mfrs. Mut. Ins. Co., 206 AD2d 801, 802; see also, Hollander v Nationwide Mut. Ins. Co., 60 AD2d 380, 383). The appellant admitted that, within a two-year period, he lived at three different addresses, including the premises of the insured of the respondent New York Central Mutual Fire Insurance Company. Thus, the court did not err in granting the petition to permanently stay the arbitration proceeding on the ground that the appellant was not a resident of the insured's household within the meaning of the insurance policy.

MANGANO, P.J., SANTUCCI, KRAUSMAN, and FLORIO, JJ ., concur.