Coverage Pointers - Volume I, No. 20

Visit the HOT CASES section of the Federation of Insurance and Corporate Counsel website for cases covering a broad range of legal issues from other jurisdictions: www.thefederation.org.


Special Announcement:

Announcing the 6th Annual FICC Litigation Management College


June 19 - 23, 2000

J.L. Kellogg Graduate School of Management
Northwestern University
Evanston, Illinois

A Program Designed Exclusively for the Claim Professional to Enhance Litigation Management and Negotiation Skills

The Litigation Management College is sponsored by the Federation of Insurance & Corporate Counsel as a service to claim professionals from the insurance industry and self-insured organizations. The target group for the College is claim professionals with three to twelve year’s claims and/or litigation management experience.


The college consists of an intensive five-day series of workshops and participatory, interactive educational experiences. It provides a unique opportunity for claim professionals to meet, study, and discuss issues of common interest with the focus on the increasingly important area of litigation management.


The curriculum is designed to provide a practical approach to litigation management. Everyone who attends should leave with new and enhanced skills to improve the work of litigation management.

For more information, see the FICC website www.thefederation.org or contact Dan D. Kohane, a member of the program faculty.

 

03/29/00: MATTER OF TRANSPORTATION INS. CO. INC. v. PECORARO
New York State Supreme Court, Appellate Division, Fourth Department
Settlement of Personal Injury Claim with Underinsured Motorist without Insurer’s Consent Disqualifies Insured from Underinsured Benefits

Respondent’s settlement of his personal injury action against an underinsured tortfeasor, and tender of a general release without the insurer’s consent, violated the express terms of his policy. Thus, he was disqualified from availing himself of the underinsured benefits of his policy. Respondent’s contention that he was authorized to act without the insurer’s consent because the insurer had taken no action within 30 days of respondent’s letter was rejected. Although the letter advised the insurer of respondent’s intention to make an underinsurance claim, it did not apprise the insurer of the pendency and settlement of the action. Permanent stay of arbitration of the underinsurance claim was granted accordingly.

03/29/00: DUFFIN v. COLONIAL INDEMNITY INS. CO.
New York State Supreme Court, Appellate Division, Fourth Department
Coverage Lost where Insured Fails to Give Notice of Potential Claim

Plaintiff was injured in an altercation at defendant’s restaurant. Defendant and his wife knew that plaintiff was involved in an altercation and that he was on the ground, but did not know he was injured. When plaintiff was at the restaurant several weeks later, they observed plaintiff using crutches, and defendant’s wife learned plaintiff required medical treatment after the incident. Defendant did not advise his carrier until he received a summons three years later. The insurer denied coverage because the defendant failed to notify it of the incident as an occurrence that might result in a claim under the policy. The court held that policy provisions requiring notice of a potential claim as soon as practicable operates as a condition precedent to coverage. While there may be circumstances, such as a reasonable belief in non-liability, that will excuse delay, the insured has the burden of showing the reasonableness of the excuse. Under the circumstances here, the insured could not establish a good-faith belief in non-liability. Therefore, the insurer was not obligated to defend or indemnify defendants in the underlying action.

 

03/28/00: ST. GEORGE v. W.J. BARNEY CORP.
New York State Supreme Court, Appellate Division, First Department
Certificate of Insurance Naming Additional Insured Confers No Rights on Holder – it is not a Contract to Insure

Plaintiff, employed by a subcontractor at a construction site, commenced a personal injury action against the general contractor, who in turn commenced a third-party action against another subcontractor "Kurtz". Kurtz commenced this third-party action seeking defense and indemnification from the named defendants, including its own subcontractor "Crest", who was contractually obligated to include Kurtz as an additional insured in its CGL policy. Kurtz also commenced the action against its insurance broker and CGL carrier. The insurance broker issued an insurance certificate naming Kurtz an additional insured on Crest’s policy, but the certificate stated it was issued for information only, did not confer rights on the certificate holder, did not extend or amend the policy’s coverage, and that insurance afforded by policies listed in the certificate were subject to all terms, exclusions and conditions of those policies. The court dismissed claims against the insurance broker because "the certificate of insurance is not a contract to insure," nor is it conclusive proof that a contract exists. Moreover, while the broker may have breached a duty to its client, it cannot be held liable to the additional insured to whom it owed no duty.

03/27/00: KOSKEY v. PACIFIC INDEMNITY CO.
New York Supreme Court, Appellate Division, Second Department
Party Seeking Reformation of Insurance Policy must Demonstrate Entitlement to the Relief by Clear and Convincing Evidence

Karmgard was issued a fire insurance policy on premises he later conveyed to trust when he learned he was ill. Two fires later destroyed the premises and plaintiffs/trustees filed a claim for the loss. The insurer denied the claim because the trust was not named as "owner" or "loss payee" on the policy and this action was commenced to reform the policies to include the trust as owner and loss payee. At trial, the trustees demonstrated that, on at least four occasions before the fires, they contacted the insurance broker to advise that the property was conveyed to trust and requested that the trust be added as an insured. The trustees received affirmative responses from the broker. In a non-jury trial the Court reformed the policy to include the trustees as owners and loss payees. Although the trial court erroneously applied a preponderance of the evidence standard to plaintiffs' reformation action, (party seeking reformation of a contract is required to demonstrate its entitlement to the relief by clear and convincing evidence), plaintiffs satisfied their burden with the uncontradicted proof.

 

3/27/00: AMERICAN REF-FUEL CO. OF HEMPSTEAD v. EMPLOYERS INS. CO. OF WAUSAU
New York Supreme Court, Appellate Division, Second Department
The Location of the Insured and the Risk Determine Whether Policy was Issued or Delivered in New York under Insurance Law §3420(d)

In this declaratory judgment action, plaintiff/insured sought defense and indemnification under a CGL and umbrella policy issued by defendant for an underlying personal injury action. The court held that the insurer was obligated to defend and indemnify its insureds because it failed to issue timely notice of disclaimer based on pollution exclusions in the policy as required by Insurance Law §3420(d). Insurance Law §3420(d) applies to "all policies issued or delivered in this State." The insurer argued that the statute was not applicable because the policies were actually delivered to plaintiff’s parent corporation in Texas. The court rejected the argument, finding that the policies included as named insureds the plaintiff, a New York Corporation located in and performing work in New York. While the policies also covered other corporations operating in other states and were countersigned and actually delivered in Texas, the location of the insured and the risk to be insured are determinative. Under Insurance Law §3420(d), the insurer was obligated to give written notice as "soon as is reasonably possible" of its disclaimer based on the pollution exclusion. The insurer’s four-month delay was untimely as a matter of law.

03/27/00: SPHERE DRAKE INS. CO. v. BLOCK 7206 CORP.
New York Supreme Court, Appellate Division, Second Department
Insurer has Duty to Timely Disclaim Coverage Based on Policy Exclusions under Insurance Law § 3420(d)

Plaintiff was verbally and physically confronted by an intoxicated patron while on the insured’s premises, and was allegedly shot in the parking lot by the same patron sometime later. He commenced an action against the insured for negligence in maintaining secure premises, hiring and supervising personnel, and for allowing the patron to drink alcohol even after he was visibly intoxicated. The insured sought coverage from its insurer under a general liability policy and a liquor liability policy. The insurer disclaimed coverage under assault and battery exclusions in both policies. The court held the assault and battery exclusions applied because they encompassed claims "arising out of" assault and battery caused either the intentional conduct or negligence of the insured. Moreover, since the occurrence was governed by Insurance Law § 3420(d) and the insurer’s disclaimer rested upon an exclusion in each policy, the insurer had a duty to timely disclaim coverage. The insurer’s disclaimer, made 45 days after receiving notice of claim, satisfied the statute.

03/27/00: STATE FARM v. YOUNGBLOOD
New York Supreme Court, Appellate Division, Second Department
DMV’s Statement that Offending Driver Lacked Insurance at Time of Accident Deemed Sufficient to Establish that Offending Vehicle was Uninsured

The respondent was involved in an automobile accident with an uninsured driver and sought uninsured motorist benefits from her carrier. The carrier moved to stay the arbitration and established a prima facie showing of the existence of insurance coverage for the offending vehicle, including a copy of the police report and a registration record expansion indicating the vehicle was insured by Allstate. In response, the respondent presented Allstate’s disclaimer letter and a letter from the DMV, which stated that the driving privileges of the owner and operator of the offending vehicle had been revoked because the vehicle was uninsured at the time of the accident. The court found that, absent proof to the contrary, such a statement from the DMV was sufficient to establish that the offending vehicle was uninsured at the time of the accident. The application for stay was denied.

03/23/00: COMMERCE AND INDUSTRY INS. CO. v. IMREX CO., INC.
New York State Supreme Court, Appellate Division, First Department
Insurer’s Action to Recoup Proceeds of Inflated Claims Commenced More Than Two Years from Date Insurer on Inquiry Notice Deemed Untimely

This action by the insurer against its insureds and public adjusters to recover insurance proceeds paid out on allegedly inflated claims was properly dismissed as untimely. The court found the insurer was on at least inquiry notice of the allegedly inflated claims as early as 1995, more than two years before the action was commenced. The court rejected the insurer’s argument that the doctrine of equitable estoppel applied. Although it argued that the fraud alleged in the complaint caused it to be unaware of its cause of action until "only recently", when it acquired "limited information"; from "other members of the scheme", it "fundamentally misapplies the doctrine of equitable estoppel, which has no application unless and until a fraudulent misrepresentation or concealment intended to induce forbearance from suit ceases to be operational, at which point the plaintiff must exercise due diligence in bringing suit" Plaintiff’s opposition was deficient in two respects: it was too vague as to how and when plaintiff learned of the fraud alleged in the complaint; and, it did not specify anything that defendants did to induce plaintiff not to bring suit within two years of the 1995 date when it appears to have had knowledge of the fraud.

03/21/00: NEW YORK CITY HOUSING AUTHORITY v. NATIONAL UNION FIRE INS. CO.
New York State Supreme Court, Appellate Division, First Department
Risks Contemplated in Contract to Procure Insurance Determines Additional Insured Status under Comprehensive Liability Policy

Plaintiff, property owner, was an additional insured under its elevator service contractor’s comprehensive liability policy because Endorsement "J" included as an insured any person or organization with whom the elevator contractor had contracted "to provide insurance such as is afforded under this policy . . . with respect to [the contractor’s] work". The insurer’s argument to the contrary, based entirely on the nomenclature of the service contract concerning procurement of insurance rather than on that contract’s description of the risks to be covered, was rejected. Although the insurance was denominated in the contract as "owner’s liability insurance", not the "comprehensive liability insurance" actually procured, the parties’ intent was clear – plaintiff was to be provided with insurance protecting it "against liability claims for bodily injury . . . arising from the operations of the Contractor and his subcontractors."

03/21/00: OMEGA CASTING CORP. v. GRAPHIC ARTS MUTUAL INS. CO.
New York State Supreme Court, Appellate Division, First Department
Jewelry Manufacturers’ Affidavits Raise Triable Question Whether Policy’s Limits for Theft of "Patterns" applied to Theft of "Models" -- Terms may not be Interchangeable from Insured’s Perspective as Jewelry Manufacturer

Jewelry manufacturer’s insurance policy limited the insurer’s liability for loss by theft of the insured’s jewelry "patterns" to $2500. The court held it was not clear, as a matter of law, whether the limitation also applied where the loss was attributable to theft of the insured’s jewelry "models". Affidavits from jewelry manufacturers were sufficient to raise a triable question whether those terms were interchangeable.

03/21/00: UNITED STATES FIRE INS. CO. v. NEW YORK MARINE AND GENERAL INS. CO.
New York State Supreme Court, Appellate Division, First Department
CGL Policy Excludes Claims arising out of Accident with Bridge Authority's Truck, Even Where Claims Against Authority are for Negligent Operation of Bridge rather than Negligent Operation of Truck

This action arises from an accident in which a passenger car struck a Nassau County Bridge Authority (NCBA) pickup truck that was left on the roadway of the bridge. The question presented is whether NCBA’s general liability insurance carrier may deny coverage based upon an automobile exclusion clause in its policy where the underlying complaint asserts, inter alia, negligence in the operation of the bridge, as opposed to the use of the vehicle. Court concludes, following Mount Vernon Fire Ins. Co. v Creative Housing (88 NY2d 347), that coverage was properly denied. No matter what the theory against the insured, the accident still involved a truck.

3/20/00: VACCARINO v. ALLSTATE INSURANCE CO.
New York Supreme Court, Appellate Division, Second Department
An Underlying Judgment is Subject to Collateral Attack in an Action under Insurance Law §3420(d)

Plaintiff commenced this action pursuant to Insurance Law §3420(a)(2) to recover an unsatisfied judgment entered against the defendant’s insureds upon their default in answering her complaint. The insurer alleged that the default judgment in the underlying action was a nullity, as the court did not have personal jurisdiction over the insureds. The court held that a judgment rendered without jurisdiction is a nullity and is subject to collateral attack. The insured demonstrated that the plaintiff failed to comply with the Vehicle and Traffic law, which governed service of nonresident defendants. Since jurisdiction was never obtained over the insured, the judgment entered upon their default was a nullity. This action was dismissed accordingly.

3/20/00: MATTER OF ELRAC v. EDWARDS
New York Supreme Court, Appellate Division, Second Department
Rental Car Agreement’s Waiver of Uninsured Motorist Benefits is Unenforceable

This was an action pursuant to CPLR Article 75 to permanently stay arbitration of an uninsured motorist claim. The respondent was injured in an automobile accident by a hit and run motorist. At the time of the accident, respondent was operating a vehicle he had leased from ELRAC, a self-insured rental company. The respondent’s own vehicle, which was not involved in the accident, was insured by GEICO. The respondent filed a demand to arbitrate his uninsured motorist claim and, in seeking to stay the arbitration, ELRAC claimed respondent signed a rental agreement waiving uninsured motorist benefits from ELRAC or, in the alternative, that GEICO owes primary coverage. The Court held that ELRAC is obligated by law (11 NYCRR 60-1.1(g)) to furnish uninsured motorist benefits to the respondent and held that the waiver in the rental agreement was therefore invalid.

3/20/00: MATTER OF ELRAC v. FAJARDO
New York Supreme Court, Appellate Division, Second Department
Rental Car Agreement’s Waiver of Uninsured Motorist Benefits is Unenforceable

Here, the rental agreement signed by respondent provided that personal injury and uninsured motorist protection were not included and that the renter waived any claims. The court, in keeping with its earlier decision in Matter of Elrac v. Edwards, supra., held that ELRAC is obligated by law to provide primary uninsured motorist benefits and the waiver in the rental agreement was unenforceable.

02/18/00: SAASTOMOINEN v. PAGANO
New York State Supreme Court, County of Nassau (Trial Court)
Allstate Sanctioned for Maintaining Frivolous Tort Defense in Personal Injury Action

The trial judge urged Allstate, through its defense counsel, to settle a matter that was being tried before it. The claim arose out of a Vehicle and Traffic Law dart out violation resulting in what the court believed was "a clear determination of defendant's negligence and only a theoretical possibility of plaintiff 's culpability". Defendant's counsel was warned in pre-trial conferences, on three occasions, that based upon his offer of proof, there was no liability defense. Allstate was the carrier on the risk. Following a plaintiff's verdict, in a case of first impression in New York, the trial judge sanctioned Allstate, even though the NY sanction rules only apply to parties: The Court determines that the issue is less the extent of the conduct exhibited by the carrier than the existence of control. If the insurance company wishes to control the claim against its insured, which it is clearly entitled to do, then the consequences, both beneficial and detrimental, must be accepted. The common law has created fictions that must require examination by succeeding courts and supplanted with social reality when their applications are no longer appropriate. At the beginning of the 21st Century, the reality is that insurance companies are as much a party in interest as the named insured defendant.

ACROSS BORDERS

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

03/27/00: AMERICAN JUSTICE INS. RECIPROCAL v. HUTCHISON
Tennessee Supreme Court
Deputy Sheriffs of One Department Assisting Another Deemed "Volunteers" and Thus Covered Under Second Department's Policies; Late Notice to Carrier Does Not Forfeit Coverage Without Showing of Prejudice

Where Deputy Sheriffs assisted another jurisdiction's sheriff's department in siege, they were "volunteers" -- an undefined term in liability policy and, as such, insureds. Court also concludes that a standard liability policy is not automatically forfeited when the insured fails to comply with a policy’s notice provision. Rather, breach of a notice provision establishes a presumption that the insurer was prejudiced by the failure to provide timely notice. The insured may rebut the presumption with competent evidence that the insurer was not prejudiced by the delay in notice.

03/24/00: WEBB v. NATIONAL UNION FIRE INS. CO.
United States Court of Appeals for the Ninth Circuit (applying Oregon law)
Where Policy was Unambiguous, Extrinsic Evidence Inadmissible to Establish Lack of Coverage
Insurance company could not provide extrinsic evidence to show intent of the parties to a contract of insurance when the policy was not ambiguous. Apt words of the policy would be applied.

 

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REPORTED DECISIONS

VACCARINO v ALLSTATE INSURANCE COMPANY

In an action pursuant to Insurance Law § 3420(a)(2) to recover on an unsatisfied judgment entered against the defendant 's insureds, the defendant appeals, as limited by its brief, from so much of an order of the Supreme Court, Kings County (G. Aronin, J.), dated March 5, 1999, as granted the plaintiff's cross motion for summary judgment on her cause of action for liquidated damages in the principal amount of $28,480.

ORDERED that the order is reversed insofar as appealed from, on the law, with costs, the cross motion is denied, and, upon searching the record, summary judgment is granted dismissing complaint .

The plaintiff commenced this action pursuant to Insurance Law § 3420(a)(2) to recover on an unsatisfied judgment she obtained against the defendant 's insureds, Dwayne Franks and Mary Franks. The judgment was entered upon the Franks' default in the underlying personal injury action. In its answer, the defendant asserted that the judgment in the underlying action should be vacated because the court did not have personal jurisdiction over the Franks.

A judgment rendered without jurisdiction is a nullity and is subject to collateral attack (see, Royal Zenith Corp. v Continental Ins. Co., 63 NY2d 975). The evidence presented by the defendant in opposition to the plaintiff's cross motion for summary judgment established that the plaintiff failed to comply with the provisions of Vehicle and Traffic Law § 253(2) which governed service upon the Franks as nonresident defendants in the underlying action. As no jurisdiction was obtained over the Franks, the judgment entered upon their default in the underlying action was a nullity (see, e.g., Jean-Laurent v Nicholas, 182 AD2d 805; Dickinson v Houston, 97 AD2d 665; McCoon v Schoch, 30 AD2d 768).

The Supreme Court therefore erred in granting the plaintiff's cross motion for summary judgment. Upon searching the record (see, Merritt Hill Vineyards v Windy Hgts. Vineyard, 61 NY2d 106; QDR Consultants & Dev. Corp. v Colonia Ins. Co., 251 AD2d 641), we grant summary judgment to the defendant dismissing the complaint.

MANGANO, P.J., BRACKEN, LUCIANO, and SMITH, JJ., concur.

COMMERCE AND INDUSTRY INS. CO. v. IMREX CO., INC.

Judgment, Supreme Court , New York County (Ira Gammerman, J.), entered March 8, 1999, in an action by an insurer against its insureds and public adjusters seeking to recover insurance proceeds paid out on allegedly inflated insurance claims, dismissing the complaint as against defendants-respondents as barred by the Statute of Limitations , unanimously affirmed, without costs.

The action was properly dismissed as against defendants -respondents upon a finding that plaintiff was on at least inquiry notice of the allegedly inflated claims as early as 1995, more than two years before institution of the instant action in 1998, and, indeed, plaintiff does not appear to argue otherwise. Instead, plaintiff argues that the action is saved by the doctrine of equitable estoppel in that the fraud alleged in the complaint caused it to be unaware of its cause of action until "only recently", when it acquired "limited information" ; from "other members of the scheme". Such argument is clearly inconsistent with the finding that the action was not instituted within two years of the time that plaintiff was on inquiry notice of the fraud alleged in the complaint. The argument also fundamentally misapplies the doctrine of equitable estoppel, which has no application unless and until a fraudulent misrepresentation or concealment intended to induce forbearance from suit ceases to be operational, at which point the plaintiff must exercise due diligence in bringing suit (see, Simcuski v Saeli, 44 NY2d 442, 450). Plaintiff’s opposition was therefore deficient in at least two respects: first, it was too vague as to how and when plaintiff learned of the fraud alleged in the complaint, and, second, it did not specify anything that defendants did to induce plaintiff not to bring suit within two years of the 1995 date when it appears to have had knowledge of the fraud alleged in the complaint (see, Zoe G. v Frederick F.G., 208 AD2d 675; Clarke v Mikail, 238 AD2d 538).

SPHERE DRAKE INS. CO. v. BLOCK 7206 CORP.

RITTER, J.P. The plaintiffs commenced this action, inter alia, for a judgment declaring that the plaintiff Sphere Drake Insurance Company, PLC (hereinafter Sphere Drake) is not obligated to defend or indemnify the defendant Block 7206

Corporation, d/b/a/ Hipps (hereinafter Hipps), in an underlying action commenced by the defendant Jonathan Ilchert. We grant such relief on the ground that Sphere Drake properly and timely disclaimed coverage pursuant to policy exclusions for claims arising out of an alleged assault and battery.

The relevant allegations in the underlying negligence action may be summarized as follows: Jonathan Ilchert, while in a nightclub operated by Hipps, was confronted verbally and physically by a fellow patron who was intoxicated. While in the parking lot of the club a short time later, he heard a noise and realized that he had been shot, allegedly by the same patron . Ilchert commenced an action against Hipps claiming that a proximate cause of his injuries was that Hipps was negligent in failing to maintain a secure premises and in hiring and supervising its personnel , and that Hipps had violated the so-called dram shop act by allowing his assailant to continue to drink alcoholic beverages even after he was visibly intoxicated. Hipps, in turn, sought coverage from its insurer, Sphere Drake, pursuant to a general liability policy and a liquor liability policy. Sphere Drake disclaimed coverage under an assault and battery exclusion in each policy and commenced this declaratory judgment action. In the order appealed from, the Supreme Court, inter alia, denied the plaintiffs' cross motion for summary judgment declaring that Sphere Drake is not obligated to defend or indemnify the defendant Block 7206 Corporation, d/b/a Hipps, in the action entitled Ilchert v Block 7206 Corporation, finding issues of fact. We reverse the order insofar as appealed from.

As a threshold issue, we find that the defendants failed to rebut Sphere Drake's prima facie showing that an assault and battery exclusion was part of each policy (see, Metzgar v Aetna Ins. Co., 227 NY 411; Matter of Sarah K., 66 NY2d 223, cert denied 475 US 1108; Northville Indus. Corp. v Fort Neck Oil Terms., 100 AD2d 865, affd 64 NY2d 930). The exclusions encompassed claims "arising out of" an assault and battery caused by either the intentional conduct or negligence of the insured. They are applicable to the facts giving rise to Ilchert's claims (see, Mount Vernon Fire Ins. Co. v Creative Hous. Ltd., 88 NY2d 347; U.S. Underwriters Ins. Co. v Val-Blue Corp., 85 NY2d 821; Sphere Drake Ins. Co. v Block 7206 Corp., 237 AD2d 427). Thus, Sphere Drake properly disclaimed coverage based on the assault and battery exclusions.

However, Sphere Drake had a duty to disclaim coverage in a timely manner because the occurrence at issue is governed by Insurance Law § 3420(d) (see, American Ref-Fuel Company of Hempstead v Employers Insurance Company of Wausau, AD2d [decided herewith]), and Sphere Drake's disclaimer rests on an exclusion in each policy. Insurance Law § 3420(d) provides: "If under a liability policy delivered or issued for delivery in this state, an insurer shall disclaim liability or deny coverage for death or bodily

injury arising out of a motor vehicle accident or any other type of accident occurring within this state, it shall give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant". Here, the coverage is governed by Insurance Law § 3420(d) (see, Nallan v Union Labor Life Ins. Co., 42 NY2d 884; see also, Park Terrace Arms Corp. v Nationwide Ins . Co., AD2d [1st Dept., Jan. 18, 2000]; Agoado Realty Corp. v United Intl. Ins. Co., AD2d [1st Dept., Nov. 30, 1999]; 2500 Motel Corp. v Investors Ins. Co. of Am., 169 AD2d 604; 70 NY Jur 2d, Insurance § 1439; Annotation , Construction and Application of Provision of Liability Insurance Policy Expressly Excluding Injuries Intended or Expected by Insured, 31 ALR4th 957). In so holding, we emphasize that we are not addressing policy coverage issues concerning the scope of the subject assault and battery exclusions. We note that the Court of Appeals has, in general, given assault and battery exclusions a broad construction. If no cause of action would exist but for the assault, it is immaterial whether the assault was committed by the insured or an employee of the insured on the one hand, or by a third party on the other (see, Mount Vernon Fire Ins. Co. v Creative Hous. Ltd., supra, 353; see also, U.S. Underwriters Ins. Co. v Val-Blue Corp., supra ). However, the legislature has determined that an insurance carrier will be precluded from disclaiming coverage based on such a policy exclusion, even if otherwise applicable, if the occurrence is one within Insurance Law § 3420(d) and the disclaimer is not timely (see, Zappone v Home Ins. Co., 55 NY2d 131). This conclusion flows from two related lines of case law from the Court of Appeals.

In Albert J. Schiff Assocs., Inc. v Flack (51 NY2d 692), a case which, inter alia, did not involve death or bodily injury and, therefore, was not governed by Insurance Law § 3420(d) (former Insurance Law § 167[8]), the Court of Appeals established various general principles as to disclaimers and denials of insurance coverage. The defendant-insurer in Schiff disclaimed coverage on the ground, inter alia, that the policies at issue were written, without reference to any exclusions, so as not to provide coverage for the occurrence at issue. In upholding the disclaimer , the Court of Appeals held that the coverage afforded by an insurance policy was the "sum total, or net balance, however one labels it", of the policy inclusions minus the policy exclusions (see, Albert J. Schiff Assocs., Inc. v Flack, supra, at 697). Further, that coverage, in addition to the coverage provided by the policy, could not be attained by waiver (see, Albert J. Schiff Assocs., Inc. v Flack, supra, at 698).

Rather, the court held, an insurer could only "create" coverage by estoppel (see, Albert J. Schiff Assocs., Inc. v Flack, supra, at 697-698; see also, New York Univ. v Cont. Ins. Co., 87 NY2d 308).

Two years later, in Zappone v Home Ins . Co. (supra), the Court of Appeals considered how the principles concerning disclaimer set forth in Schiff were to be applied in cases governed by Insurance Law § 3420(d) (former Insurance Law § 167[8]). In Zappone, which concerned an automobile accident, the defendant-insurer had disclaimed coverage on the ground that neither the vehicle nor the person involved in the underlying accident was covered by either of the two policies at issue. The plaintiffs -insureds sought a declaration that Home was precluded from denying coverage pursuant to former Insurance Law § 167(8) (now 3420[d]) because it had failed to timely disclaim coverage on such grounds . In holding that the defendant-insurer was not precluded from disclaiming coverage on the ground that there was a lack of coverage, the Zappone court stated:

"The principle, declared in Schiff Assocs. v Flack (51 NY2d 692), that the failure to disclaim coverage does not create coverage which the policy was not written to provide, applies to liability policies as well as professional indemnity insurance, notwithstanding the provisions of [ Insurance Law § 3420(d)]. The words 'deny coverage' in that subdivision refers to denial of liability predicated upon an exclusion set forth in a policy which, without the exclusion, would provide coverage for the liability in question. It does not encompass denial that the policy as written could not have covered the liability in question under any circumstances."

(Zappone v Home Ins. Co., supra, at 134). Thus, the Zappone court held, preclusion pursuant to Insurance Law § 3420(d) occurred when there was an untimely disclaimer and "a policy of insurance that would otherwise cover the particular accident is claimed not to cover it because of an exclusion in the policy" (Zappone v Home Ins. Co., supra, at 138; see also, Handelsman v Sea Ins. Co., Ltd., 85 NY2d 96; cf., Central Gen. Hosp. v Chubb Group of Ins. Co., 90 NY2d 195; Presbyterian Hosp. v Maryland Cas. Co., 90 NY2d 274).

Here, because the occurrence is governed by Insurance Law § 3420(d), and Sphere Drake's disclaimer rests on an exclusion in each of the subject policies, Sphere Drake had a duty to timely disclaim coverage. On the facts presented, we conclude that Sphere Drake's disclaimer of coverage, made approximately 45 days after receiving the notice of claim , satisfied the statute and was timely as matter of law (see, Brooklyn Hosp. Ctr. v Centennial Ins. Co., 258 AD2d 491; Structure Tone, Inc. v Burgess Steel Prods. Corp., 249 AD2d 144).

Our analysis concerning the duty to timely disclaim is not altered by the decision of the Appellate Division, Fourth Department in Crouse West Holding Corp. v Sphere Drake Ins. Co., PLC (248 AD2d 932, affd for reasons stated 92 NY2d 1017). In Crouse, the court, on facts similar to those at bar, held, inter alia, that the defendant-insurer did not have a duty to timely disclaim coverage based on policy exclusions for assault and battery. In support of such a conclusion, the Appellate Division, Fourth Department cited New York Univ. v Cont. Ins. Co. (87 NY2d 308) for the proposition that "coverage is the net total of policy inclusions minus exclusions, and the failure to disclaim based on an exclusion will not give rise to coverage that does not exist" (New York Univ. v Cont. Ins. Co., supra, at 323). However, as discussed, neither the New York University case, nor the case upon which New York University relied - Albert J. Schiff Assocs., Inc. v Flack (51 NY2d 692) - concerned claims governed by Insurance Law § 3420(d), because neither involved a claim for death or bodily injury. In addition , the policies involved in Schiff did not afford coverage for the occurrence at issue, as distinguished from cases, such as here, where coverage would apply but for a policy exclusion. Where Insurance Law § 3420(d) is applicable and a disclaimer is based on a policy exclusion, controlling precedent is set by Zappone v Home Ins. Co. (supra), and a timely disclaimer of coverage is required. Moreover, although the Crouse decision was affirmed by the Court of Appeals, the Fourth Department's analysis concerning the disclaimer issue does not appear to have been reviewed by the Court of Appeals . Rather, the appeal to the Court of Appeals, as limited by the notice of appeal of the appellant (Sphere Drake), concerned only a discrete issue as to whether an ambiguity had been created by a discrepancy between the insurance binder and the insurance policies as issued. Thus, Crouse does not represent controlling precedent on the issue being reviewed on this appeal.

Accordingly, the order is reversed insofar as appealed from, the plaintiffs' cross motion is granted, and the matter is remitted to the Supreme Court, Richmond County, for the entry of a judgment declaring that Sphere Drake is not obligated to defend or indemnify Hipps in the action entitled Ilchert v Block 7206 Corporation.

The parties' remaining contentions are either academic or without merit.

JOY, GOLDSTEIN and McGINITY, JJ., concur.

ORDERED that the order is reversed insofar as appealed from, on the law, with one bill of costs, the plaintiffs' cross motion is granted, and the matter is remitted to the Supreme Court, Richmond County, for the entry of a judgment declaring that the plaintiff Sphere Drake Insurance Company, PLC, is not obligated to defend or indemnify the defendant Block 7206 Corporation , d/b/a Hipps, in the action entitled Ilchert v Block 7206 Corporation.

MATTER OF STATE FARM MUTUAL AUTOMOBILE INS. CO. v. YOUNGBLOOD

In a proceeding to stay arbitration of a claim for uninsured motorist benefits, the petitioner appeals from an order of the Supreme Court , Nassau County (Adams, J.), dated September 30, 1999, which denied the petition.

ORDERED that the order is affirmed, with costs to the respondent Bernice Youngblood.

The respondent Bernice Youngblood was involved in an automobile accident on November 19, 1997, while driving a vehicle insured by the petitioner State Farm Mutual Automobile Insurance Company (hereinafter State Farm). Youngblood subsequently sought uninsured motorist benefits under the State Farm policy. State Farm commenced this proceeding to stay arbitration of her claim on the ground, inter alia, that an evidentiary hearing was required to determine whether the offending vehicle was insured by Allstate Insurance Company (hereinafter Allstate) at the time of the accident.

State Farm established a prima facie case as to the existence of insurance coverage for the offending vehicle by presenting a copy of the police accident report, which contained the identification code for the Assigned Risk Plan for the offending vehicle, and a "registration record expansion" from the Department of Motor Vehicles (hereinafter the DMV) which indicated that the offending vehicle was insured by Allstate (see , e.g., Matter of Liberty Mut. Ins. Co. v Bohl, 262 AD2d 645; Matter of Lumbermens Mut. Cas. Co. v Beliard, 256 AD2d 579; see also, Brogan v New Hampshire Ins. Co., 250 AD2d 562).

In response, Youngblood presented , inter alia, a letter from Allstate, which denied coverage in connection with the accident, and a letter from the DMV dated September 1, 1999, which stated that the driving privileges of the owner and operator of the offending vehicle had been revoked because the vehicle was uninsured when it was involved in the accident on November 19, 1997. Absent proof to the contrary, such a statement from the DMV is sufficient to establish that the offending vehicle was uninsured at the time of the accident (see, e.g., Matter of Commercial Union Ins. Co. [Pouncy], 120 AD2d 382; Matter of Cosmopolitan Mut. Ins. Co. [Hughes], 63 AD2d 874; Zelanka v MVAIC, 32 AD2d 847).

State Farm failed to offer evidence to rebut the statement from the DMV that the offending vehicle was uninsured at the time of the accident. Accordingly , the Supreme Court properly denied State Farm's petition for a stay of arbitration (see, Matter of Cosmopolitan Mut. Ins. Co. [Hughes], supra; see also, Matter of State-Wide Ins. Co. v Valdes, 173 AD2d 624).

O'BRIEN, J.P., SULLIVAN, FRIEDMANN , and FEUERSTEIN, JJ., concur.

AMERICAN REF-FUEL CO. OF HEMPSTEAD v. EMPLOYERS INS. CO. OF WAUSAU

APPEAL by the defendant, in an action for a judgment declaring that the defendant must defend and indemnify the plaintiff, American Ref-Fuel Company of Hempstead, and the Town of Hempstead as an additional insured in an underlying personal injury action entitled Tierney v American Ref-Fuel Company of Hempstead, pending in the Supreme Court, Suffolk County under Index No. 96-18747, from so much of a judgment of the Supreme Court (John S. Lockman, J.), entered December 1, 1998, in Nassau County, as declared that it had a duty to defend the plaintiff and the Town of Hempstead in the underlying action , and CROSS APPEAL by the plaintiff from so much of the same judgment as failed to declare that the defendant had a duty to indemnify the plaintiff and the Town of Hempstead for any loss incurred during the policy period and to reimburse the plaintiff for its pro rata share of litigation expenses.

GOLDSTEIN, J. The primary issue here is the applicability of Insurance Law § 3420(d), requiring a timely notice of disclaimer.

The plaintiff, American Ref-Fuel Company of Hempstead, operated the municipal incinerator for the Town of Hempstead. The defendant , Employers Insurance

Company of Wausau (hereinafter Wausau), with a home office in Wausau, Wisconsin, delivered two insurance policies to the plaintiff's parent corporation in Houston, Texas, for the policy period of January 1, 1995, until January 1, 1996. One policy was a commercial general liability policy, and the other policy a commercial umbrella liability policy. Each policy listed, as a named insured, American Ref-Fuel Company of Hempstead, located in Westbury, New York. The commercial general liability policy covered bodily injury or property damage in the policy period caused by an " occurrence". "Occurrence" was defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions". The umbrella policy covered "those sums that the insured becomes legally obligated to pay as damages in excess of the 'underlying limit'" of the primary policy. Each policy contained a "pollution exclusion".

The underlying action was brought by an employee of the Town of Brookhaven who was required to work in a portion of the Town of Brookhaven landfill that was used as a depository for, among other things, ash produced from the municipal incinerator operated by the plaintiff. The employee alleged that he sustained bodily injury from the plaintiff's allegedly negligent processing of the ash. He claimed that the plaintiff failed to add sufficient moisture to the ash, allowing it to become "airborne in or about the area" where he was required to work. He sued both the plaintiff and the Town of Hempstead.

The Town of Hempstead was an additional insured by virtue of a provision providing coverage for any organization "for which [the plaintiff] agreed by written contract to procure bodily injury or property damage liability insurance, but only for liability arising out of operations performed by you or on your behalf". It is alleged that the Town of Hempstead transported the offending material from its municipal landfill to the Town of Brookhaven incinerator.

The defendant claims, inter alia, that the two insurance policies in issue do not cover the personal injuries sustained by the claimant in the underlying action, based upon the "pollution exclusion " in each policy. The defendant also claims that the policies do not cover the liability of the Town of Hempstead, because any liability incurred by the Town of Hempstead did not arise out of the operations performed by the plaintiff or on the plaintiff's behalf. The plaintiff claims, inter alia, that the defendant failed to timely disclaim coverage pursuant to Insurance Law § 3420(d).

The failure to timely disclaim coverage pursuant to Insurance Law § 3420(d) cannot create insurance which was never in effect (see, Zappone v Home Ins. Co., 55 NY2d 131, 137-138), or which "could not have covered the liability in question under any

circumstances" (Zappone v Home Ins. Co., supra, at 134). For example, an automobile insurance carrier's denial of coverage "premised on the fact or founded belief that the alleged injury" did not arise from an automobile accident is not governed by Insurance Law § 3420(d) (see, Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195, 199).

However, where the insurance policy in question would otherwise cover the particular occurrence, but for an exclusion in the policy, Insurance Law § 3420(d) mandates that, under certain circumstances, the insurance carrier give written notice as soon as reasonably possible of the denial of liability predicated upon the exclusion (see, Zappone v Home Ins. Co., supra; Merchants Mut. Ins. Co. v Allcity Ins. Co., 245 AD2d 590; United Servs. Auto. Assn. v Meier, 89 AD2d 998, 999; Kenyon v Security Ins. Co. of Hartford, 163 Misc 2d 991, 995, affd 206 AD2d 980).

Insurance Law § 3420(d) applies to coverage in a policy delivered or issued for delivery in this State for death or bodily injury arising out of an accident occurring within this State. This provision first appeared in 1958, as an amendment to Insurance Law former § 167(1), which set forth mandatory provisions for policies "issued or delivered in this State" insuring liability for personal injuries or property damages (see, L 1958, ch 759 § 3; L 1939, ch 882). As originally enacted, it applied not only to liability for accidents occurring in this State, but to any liability under a policy "issued or delivered in this State".

In 1959 the provision was repealed, and was replaced with the following provision , applicable to policies "delivered or issued for delivery in this State" but only if a motor vehicle accident occurring in this State was involved (L 1959, ch 649 § 2):

"If under a liability policy delivered or issued for delivery in this state , an insurer shall disclaim liability or deny coverage for death or bodily injury injury arising out of a motor vehicle accident occurring within this state, it shall give written notice as soon as reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant" (emphasis supplied).

In 1975 that provision was amended to cover claims arising from "death or bodily injury arising out of a motor vehicle accident or any other type of accident occurring within this State" (L 1975, ch 77 5 § 1). In a memorandum in support, the Superintendent of Insurance noted that the 1975 amendment would , in essence, restore the statutory requirements of the 1958 enactment, which had been repealed because automobile insurance carriers

claimed it unfairly imposed a "nationwide burden". The Superintendent further noted that, unlike the 1958 provision, the 1975 provision was only applicable to accidents occurring in this State (see, Mem of Superintendent of Ins., Bill Jacket, L 1975, ch 659).

It should be noted that the language in issue here, "delivered or issued for delivery in this State" differs from the language in Laws of 1958, Chapter 759, § 3 and Insurance Law § 3420(a), applicable to policies "issued or delivered in this State" (see, Aperm of Florida v Transcoastal Maintenance Corp., 505 So2d 459 [Fla]; cf., American Continental Props. v National Union Fire Ins. Co. of Pittsburgh, 200 AD2d 443, 446-447).

The defendant acknowledges that "issued for delivery" does not mean the same as actual delivery (see, Fenasci v Travelers Ins. Co., 642 F2d 986, 992, cert denied 454 US 1123). Further, it acknowledges that the policies "included as additional named insureds nine separate divisions of [the parent corporation ], operating in several different states", including New York. The defendant contends that the policies were not delivered or issued for delivery in New York, because the policies were actually delivered to the plaintiff's parent corporation in Texas, all premium invoices were sent to the parent corporation , and the policies were countersigned by the defendant's authorized agent in Texas.

In support of its contention that the policies were not issued for delivery in New York, the defendant relies upon Marino v New York Tel. Co. (944 F2d 109). In that case, the United States Court of Appeals for the Second Circuit held that a policy actually delivered in New Hampshire was not issued for delivery in New York where the named insured was a New Hampshire corporation, and the policy was not "specific" to any work in New York (Marino v New York Tel. Co., supra, at 113).

In First City Acceptance Corp. v Gulf Ins. Co. (245 AD2d 649) the Appellate Division, Third Department , found that Insurance Law § 3420(d) did not apply to a policy issued and delivered in Massachusetts, where the insured was a Massachusetts Company.

In the instant case, on the other hand, the policies listed, as a named insured, the plaintiff, which is a New York corporation located in and performing work in New York. The fact that the policies also covered other corporations operating in other States and the happenstance that the policies were countersigned and actually delivered in another state is not determinative. Rather, the location of the insured and the risk to be insured are determinative (see, Amarnick v Automobile Ins. Co. of Hartford, 643 So2d 1130 [Fla]; East Coast Ins. Co. v Cooper, 415 So2d 1323 [Fla]; Zurich Ins. Co. v Travelers Indem. Co., 184 AD2d 454, 461 [Sullivan, J., dissenting], modified 81 NY2d 938, on dissenting memorandum of Sullivan, J.).

We further note that the claim was for bodily injury resulting from an accident occurring within this State. Injury results from an accident when, from the point of view of the insured, the event was unexpected, unusual, or unforeseen (see, Nallan v Union Labor Life Ins. Co., 42 NY2d 884). An unintended event is considered accidental ( see, Northville Indus. Corp. v National Union Fire Ins. Co. of Pittsburgh, PA, 89 NY2d 621, 623; Petr-All Petroleum Corp. v Firemen's Ins. Co. of Newark, 188 AD2d 139; Matychak v Security Mut. Ins. Co., 181 AD2d 957).

Insurance Law § 3420(d) applies because the disclaimer was for liability for a claim, under policies issued for delivery in this State, for bodily injury arising out of an accident occurring in this State . Pursuant to Insurance Law § 3420(d), Wausau was obligated to "give written notice as soon as is reasonably possible " of its disclaimer based upon the pollution exclusions in the policies. The plaintiff gave notice of the claim on or about August 7, 1996. An agent representing the defendant notified the plaintiff on or about September 27, 1996, that "allegations are being presented which may fall within the exclusions " in the defendant's primary policy, without specifying what those exclusions were. The defendant did not disclaim based upon the pollution exclusion until, at the earliest, December 20, 1996. This delay of over four months rendered the disclaimer untimely as a matter of law (see, Hartford Ins. Co. v County of Nassau, 46 NY2d 1028, 1029-1030; Prudential Prop. & Cas. Ins. v Persaud, 256 AD2d 502).

Accordingly, we need not reach the question of whether the pollution exclusions apply here. The defendant is obliged to defend, and , if necessary, indemnify the plaintiff in the underlying action for liability incurred during the policy period (see, Hanover Ins. Co. v Suffolk Overhead Door Co., 207 AD2d 428, 430).

With respect to the defendant's duty toward the Town of Hempstead, the allegations in the pleadings in the underlying action are sufficient to trigger a duty to defend the Town of Hempstead (see, Incorporated Vil. of Cedarhurst v Hanover Ins. Co., 89 NY2d 293, 298). However, the record does not contain a copy of the contract between the plaintiff and the Town of Hempstead, which defined the plaintiff's obligation to procure insurance for the Town of Hempstead. Nor is it clear from the record who was responsible for the alleged condition which purportedly caused the claimant's injuries. In view of the foregoing, the record does not contain sufficient information to determine, as a matter of law , whether the defendant ever provided coverage for the alleged condition which purportedly caused the claimant's injuries. On this question, no timely disclaimer was required (see, United Servs Auto. Assn. v Meier, 89 AD2d 889, supra). We agree with the Supreme Court that the defendant's obligation to indemnify the Town of Hempstead cannot be determined at this juncture.

The parties' remaining contentions are without merit, or need not be addressed at this juncture , in light of our determination.

Accordingly, the judgment is modified, on the law, by adding thereto a provision declaring that the defendant is obligated to indemnify the plaintiff, if necessary , in the underlying action for liability incurred during the policy period, and to reimburse the plaintiff for its pro rata share of reasonable litigation expenses, to be determined by the Supreme Court, Nassau County; as so modified, the judgment is affirmed, with costs to the plaintiff.

O'BRIEN, J.P., SULLIVAN, and H. MILLER, JJ., concur.

ORDERED that the judgment is modified, on the law, by adding thereto a provision declaring that the defendant is obligated to indemnify the plaintiff, if necessary, in the underlying action for liability incurred during the policy period, and to reimburse the plaintiff for its pro rata share of reasonable litigation expenses, to be determined by the Supreme Court, Nassau County; as so modified, the judgment is affirmed, with costs to the plaintiff.

ST. GEORGE v. W.J. BARNEY CORP.

Order, Supreme Court, New York County (Edward Lehner, J.), entered on or about March 5, 1999, which, insofar as appealed from as limited by the appellant’s brief, denied the cross-motion of third-party defendant The Schaefer Agency, Inc. ("Schaefer") for summary judgment dismissing Kurtz Steel Corp.’s ("Kurtz") claims as against it, unanimously reversed, on the law, with costs, the cross-motion granted, and Kurtz’s claims against Schaefer dismissed. The Clerk is directed to enter judgment in favor of third-party defendant-appellant dismissing the complaint.

The plaintiff in the underlying personal injury action was an employee of one of the subcontractors at a construction site. He commenced that action against, among others, the general contractor at the site , W.J. Barney Corporation ("Barney"). Barney cross claimed, seeking defense and indemnification , and impleaded several other parties including Kurtz, another of the subcontractors. Kurtz commenced this third-party action seeking a declaration that the named defendants were obligated to defend and indemnify it in the underlying action: Crest Steel Co. ("Crest"), a subcontractor hired by Kurtz that was contractually obligated to have Kurtz named as an additional insured on its general liability insurance policy; Schaefer, Crest’s insurance broker; and The Home Indemnity Co. ("Home"), Crest’s general liability insurer to whose policy Kurtz was to be added. Shaefer issued a certificate of insurance naming Kurtz an additional insured on Crest’s policy with Home, but the certificate contained one disclaimer that stated that it was issued for information only, that it did not confer any rights on the certificate holder and that it did not extend or amend the policy’s coverage, and a second disclaimer that stated, among other things, that the insurance afforded by the policies listed on the certificate "is subject to all the terms, exclusions and conditions of such policies".

Under these circumstances, summary judgment should have been granted to Schaefer, the insurance broker. The certificate of insurance...is not a contract to insure...nor is it conclusive proof, standing alone, that such a contract exists [cites omitted]" ( Buccini v 1568 Broadway Assocs., 250 AD2d 466, 469). Moreover, while Schaefer may have arguably breached its duty to its client, Crest, it cannot be held liable to Kurtz, the additional insured, to whom it owed no duty (see, American Ref-Fuel Company of Hempstead v Resource Recycling, 248 AD2d 420, 424).

NEW YORK CITY HOUSING AUTHORITY v. NATIONAL UNION FIRE INS. CO.

Order, Supreme Court, Bronx County (George Friedman, J.), entered March 9, 1998, which, upon the parties’ respective motions for summary judgment , declared that defendant is obligated to indemnify plaintiff for all sums paid to settle an underlying action for personal injuries, unanimously affirmed, with costs.

Since a copy of the subject insurance policy, which was issued to plaintiff’s elevator service contractor as the primary insured, was provided to plaintiff only after it had made its first motion for summary judgment, its second motion for summary judgement was based on what was effectively newly discovered evidence, and, as such, was not an impermissible multiple motion (see, Siegel, Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, CPLR C3212:21, at 328). On the merits, it is clear that the elevator service contractor, before commencing work on plaintiff’s property , had contracted with plaintiff to procure comprehensive liability insurance naming plaintiff as an additional insured. The fact that the insurance was denominated in the contract as owner’s liability insurance rather than comprehensive liability insurance does not bring into question the parties’ clear intent that plaintiff be provided with insurance protecting it "against liability claims for bodily injury ... arising from the operations of the Contractor and his subcontractors". It is therefore evident that plaintiff is an additional insured under Endorsement "J" of the policy, which includes as an insured any person or organization with whom the elevator contractor had contracted "to provide insurance such as is afforded under this policy ... with respect to [the contractor’s] work". Defendant ’s argument to the contrary, based entirely on the nomenclature of the service contract concerning procurement of insurance rather than on that contract’s description of the risks to be covered, is disingenuous.

OMEGA CASTING CORP. v. GRAPHIC ARTS MUTUAL INS. CO.

Order, Supreme Court, New York County (Barbara Kapnick, J.), entered on or about December 18, 1998, inter alia, denying defendant-appellant’s cross motion for summary judgment, unanimously affirmed, without costs.

The subject policy of insurance issued by defendant insurer to plaintiff jewelry manufacturer limits the insurer’s liability thereunder for loss occasioned by the theft of the insured’s "pattern[s]" to $2500. Because it is not clear , as a matter of law, that limitation should apply where the insured’s loss is attributable to theft of its jewelry "model[s]", summary judgment was properly denied. The affidavits of jewelry manufacturers submitted by plaintiff were sufficient to raise a triable question as to whether the terms "model" and "pattern", when understood from the insured’s perspective as a jewelry manufacturer, were, in fact, interchangeable as defendant-appellant contends.

UNITES STATES FIRE INS. CO. v. NEW YORK MARINE AND GENERAL INS. CO.

Plaintiffs appeal from a judgment of the Supreme Court, New York County (Richard Lowe, III, J.), entered May 6, 1998, which denied their motion for summary judgment and granted defendant’s cross-motion for summary judgment dismissing the complaint and declaring that defendant is not obligated to indemnify plaintiffs .

FRIEDMAN, J.

This action arises from an accident in which a passenger car struck a Nassau County Bridge Authority (NCBA) pickup truck that was left on the roadway of the bridge . The question presented is whether NCBA’s general liability insurance carrier may deny coverage based upon an automobile exclusion clause in its policy where the underlying complaint asserts, inter alia, negligence in the operation of the bridge, as opposed to the use of the vehicle. We conclude that coverage was properly denied.

On September 3, 1990, plaintiff NCBA experienced problems with two of its tollgates. In order to curb the flow of traffic to the non-operational tollgates, the bridge operator directed a maintenance man, plaintiff Vincent LaRocco, to use a NCBA pickup truck to block the right and center northbound lanes. LaRocca placed the truck as directed. Thereafter, a car , which was headed north and occupied by a driver and two passengers, drove into the stationary pickup truck.

The collision spawned three separate personal injury actions by the driver and passengers of the vehicle that struck the pickup truck. In sum and substance, these complaints alleged negligence on the part of NCBA and LaRocco in failing to properly operate the pickup truck. The complaints also asserted that NCBA was negligent in its management and operation of the bridge by failing to limit the speed on the bridge and properly warn approaching drivers that there was a dangerous condition on the bridge, namely, a stopped vehicle in the road.

NCBA timely notified both its automobile insurer , plaintiff United States Fire Insurance Company (United), and its general liability carrier, defendant New York Marine and General Insurance Company (Marine), of the various claims. Marine denied coverage based on the automobile exclusion clause of its policy, which provides:

This insurance does not apply ... to bodily injury or property damage arising out of the ownership, maintenance, operation , use, loading or unloading of ... any automobile ... owned or operated by or rented or loaned to any insured ...

Plaintiffs commenced the instant declaratory judgment action alleging that Marine had a concurrent duty (along with United) to indemnify NCBA and LaRocco in each of the three personal injury actions. In this regard, it was argued that there were multiple theories of negligence being asserted in the underlying personal injury actions and since some of them were based upon NCBA’s allegedly negligent operation of the bridge, Marine’s general liability policy was implicated.

Thereafter , prior to trial of any of the underlying negligence actions, United, acting on behalf of NCBA and LaRocco , settled the claims of the two passengers. Marine did not participate in the settlement negotiations , taking the position that the accident was not within the scope of coverage under its policy of insurance . Meanwhile, the negligence action brought by the driver of the vehicle proceeded to trial with the jury rendering a verdict finding that NCBA and LaRocco were not negligent.

After the verdict , United moved for summary judgment in this declaratory judgment action seeking a ruling that Marine was required to indemnify LaRocca and NCBA. Such a ruling would result in Marine being obligated to share the cost of the settlements paid by United.

Marine cross-moved for summary judgment dismissing the complaint, arguing that the automobile exclusion clause of its policy was applicable, so that there was no coverage for accidents involving motor vehicles. Marine also contended that the jury verdict in the driver’s personal injury trial, which found NCBA and LaRocco free of negligence, collaterally estopped plaintiff’s claims in this action. Pointing to this, Marine argued that the jury, by its verdict , necessarily concluded that NCBA and LaRocco were not negligent in the operation of the bridge so that Marine’s general liability policy was not implicated. Supreme Court, agreeing with Marine, granted its cross-motion and dismissed the action. In our view, determination of the declaratory judgment action in favor of Marine was proper since the automobile exclusion clause of its policy applied. It follows that there is no need to reach the issue of collateral estoppel.

Initially, it can hardly be debated that an accident in which one vehicle collides with another vehicle that has been improperly left in the middle of a roadway arises out of the use of the stationary vehicle. In this connection, when used in automobile exclusion clauses, the words "arising out of the use" are deemed to be broad, general, comprehensive terms "ordinarily understood to mean originating from, incident to, or having connection with the use of the vehicle" ( New Hampshire Ins. Co. v Jefferson Ins. Co., 213 AD2d 325, 330 quoting Cone v Nationwide Mut. Fire Ins. Co., 75 NY2d 747, 750). Thus, if the sole claim of negligence in the underlying personal injury actions was premised on the fact that LaRocca left NCBA’s pickup truck in the middle of the roadway , the inescapable conclusion would be that the automobile exclusion clause in the policy issued by Marine would protect it from having to share the cost of United’s settlement. Seeking to avoid such a result , United contends that Marine is nevertheless obligated to provide concurrent coverage since multiple theories of liability were alleged in the underlying action, including a claim that NCBA was negligent in operating the bridge. This contention lacks merit. United mistakenly focuses on possible theories for NCBA’s liability and fails to give proper cognizance to the analytical framework for determining coverage issues as enunciated by this Court in New Hampshire Ins. Co. v Jefferson Ins. Co. (supra) - a framework that was subsequently reinforced in Mount Vernon Fire Ins. Co. v Creative Housing (88 NY2d 347).

In New Hampshire Ins. Co., a camper attending Camp Merrimac, Inc. was injured when he was struck by a vehicle owned by the camp and operated by one of its employees. The camp’s automobile insurer, New Hampshire Insurance Company (New Hampshire), commenced an action seeking a judgment declaring that Jefferson Insurance Company (Jefferson), which issued a general liability policy to the camp, was obligated to defend and indemnify the camp.

New Hampshire, as the camp’s automobile liability carrier, did not contest its duty to defend the camp since the accident arose from the operation of the camp’s vehicle. It argued, however, that there were also claims that the camp was negligent in failing to take reasonable precautions to prevent campers from coming into the path of passing vehicles, in failing to erect barriers between the roadways and the play areas, and in hiring counselors with inadequate training and skill. This, it was asserted, invoked the general liability policy issued by Jefferson. Jefferson countered that, irrespective of the theory of liability stated in the complaint, the accident at issue clearly fell within the exclusion clause of it policy, which omitted coverage for "[b]odily injury ... arising out of the ownership, maintenance, operation [or] use" of any vehicle owned or operated by the camp (id. at 326).

In finding that Jefferson was not obligated to defend and indemnify the camp, this Court observed that "whatever theory of liability the resourceful attorney may fashion from the circumstances of a client struck by an automobile, it remains that the immediate and efficient cause of the injury is, in fact, the automobile" (id. at 327). It was further observed that "[a]bsent the injury resulting from the operation of the camp’s automobile by its employee, [the injured camper] would have no claim against [the camp]" (id. at 329).

What New Hampshire Ins. Co. therefore indicated was that it is the act giving rise to liability that is determinative, not the theories of liability alleged (cf., Matter of Duncan Petroleum Transp. V Aetna Ins. Co. 96 AD2d 942, affd 61 NY2d 665; Ruggerio v Aetna Life & Ca. Co., 107 AD2d 744). To the extent that there was any doubt as to the appropriateness of such an analysis (see, Cone v Nationwide Mut. Fire Ins. Co., 75 NY2d 747; Lalomia v Bankers & Shippers Ins. Co., 35 AD2d 114, affd on opn below, 31 NY2d 830), such doubt was firmly laid to rest with the Court of Appeals’ decision in Mount Vernon (88 NY2d 347, supra).

In Mount Vernon, the underlying negligence action was premised on an assault that took place inside of a building. The victim of the assault commenced an action against the owner of the building alleging negligent supervision, management and control of the premises. Although the owner sought a defense and indemnification from its insurer, coverage was declined on the basis of an exclusionary clause providing that "no coverage shall apply under this policy for any claim, demand or suit based on Assault and Battery ..." (id. at 350). 1

In resolving the coverage issue, the Court stated:

[T]he language of the policy controls ... and while the theory pleaded may be the [owner]’s negligent failure to maintain safe premises, the operative act giving rise to any recovery is the assault. While the [owner]’s negligence may have been a proximate cause of plaintiff’s injuries, that only resolves its liability; it does not resolve the [owner]’s right to coverage based on the language of the contract between him and the insurer . Merely because the insured might be found liable under some theory of negligence does not overcome the policy’s exclusion for injury resulting from assault ( New Hampshire Ins. Co. v Jefferson Ins. Co., 213 AD2d 325; Ruggerio v Aetna Life & Ca. Co., 107 AD2d 744). id. at 352.

The Court, pointing to its prior decision in U.S. Underwriters Ins. Co. v Val-Blue Corp. (85 NY2d 821), also noted that "if no cause of action would exist but for the assault, the claim is based on assault and the exclusion applies" (id. at 350).

What emerges from New Hampshire and Mount Vernon is that, while a jury could determine that NCBA was negligent in failing to properly warn approaching drivers that the pickup truck was positioned across the roadway, the mere fact that NCBA could be found liable on this independent theory of recovery does not alter the operative act giving rise to this accident, namely, the use of a NCBA vehicle. Hence , as in New Hampshire and Mount Vernon, whether or not liability may be predicated on NCBA ’s operation of the bridge, Marine is entitled to rely upon the exclusionary clause of its policy.

In sum, the insurance policy at issue in this declaratory judgment action contained a broad exclusionary clause applicable to any accident arising out of the ownership, maintenance, operation, or use of a NCBA vehicle. Since the accident that occurred clearly arose from the use of a NCBA vehicle, Marine is under no duty to indemnify the plaintiffs.

Accordingly, the judgment of the Supreme Court, New York County (Richard Lowe, III, J.) entered May 6, 1998, denying plaintiffs’ motion for summary judgment , and granting defendant’s cross-motion for summary judgment dismissing the complaint and declaring that defendant is not obligated to indemnify plaintiffs, should be affirmed, with costs.

All concur .

Footnotes

(1) The Court of Appeals noted that there is no significant difference between the words "based on" and "arising from" for purposes of construing exclusionary clauses (Mount Vernon Fire Ins. Co. v Creative Housing, supra, at 352).

KOSKEY v. PACIFIC INDEMNITY COMPANY

In an action, inter alia, to reform a fire insurance policy, the defendant, Pacific Indemnity Company , appeals from (1) a judgment of the Supreme Court, Dutchess County (Bernhard, J.), dated December 9, 1998, which, after a nonjury trial, reformed the subject fire insurance policy to add Richard Koskey and Jean Lossi as Trustees, a/k/a The Karmgard Trust, as owners and loss payees, and (2) an order of the same court (Pagones, J.), dated February 18, 1999, which denied its posttrial motion pursuant to CPLR 4404(b) to set aside the judgment and for judgment in its favor or a new trial.

ORDERED that the judgment and the order are affirmed, with one bill of costs.

Wayne Karmgard owned a parcel of real estate known as "Shagabak". The defendant, Pacific Indemnity Company , issued a so-called "Chubb Masterpiece" fire insurance policy on Shagabak. The policy had been placed through March & McLennan, Inc. (hereinafter M & M), an insurance brokerage firm. Upon learning that he was HIV-positive, Karmgard conveyed his assets to the plaintiffs Richard Koskey and Jean Lossi, who were accountants, as Trustees, for his own benefit for life, with the remainder to his sisters. The trust is called "The Karmgard Trust".

In 1992 Karmgard attempted to file insurance claims with the defendant after two fires destroyed the premises at Shagabak. The defendant denied the claim because, inter alia, The Karmgard Trust was not named as owner and loss payee on the policy. After a nonjury trial, the Supreme Court (Bernhard, J.), found in favor of the plaintiffs, based on the preponderance of the evidence, on their cause of action for reformation and reformed the policy to add Richard Koskey and Jean Lossi as Trustees, a/k/a The Karmgard Trust, "as owners and loss payees". Thereafter, the defendant moved pursuant to CPLR 4404(b) to set aside the judgment, and the Supreme Court (Pagones, J.), denied the motion.

We agree with the defendant's contention that Justice Bernhard erroneously applied a preponderance of the evidence standard to the plaintiffs' reformation cause of action, as it is well settled that a party seeking reformation of a contract is required to demonstrate its entitlement to such relief by clear and convincing evidence (see, Judge v Travelers Insur. Co., 262 AD2d 983; Town of German Flats v Aetna Cas. & Sur. Co., 174 AD2d 1003, 1004; West 90th Owners Corp. v Schlechter, 165 AD2d 46, 50; Lambert v Lambert, 142 AD2d 557, 558).

The defendant's further contention that the plaintiffs failed to meet their burden of proof by clear and convincing evidence, however, is without merit. The plaintiffs' evidence at trial demonstrated, without contradiction, that Karmgard and Lossi contacted M & M on at least four separate occasions before the two fires to inform it that Shagabak had been conveyed to The Karmgard Trust, and to request that The Karmgard Trust be added as an insured, to which they received affirmative responses (see, Matter of Vadney, 83 NY2d 885, 887). Accordingly, the Supreme Court properly denied the defendant 's posttrial motion pursuant to CPLR 4404(b) to set aside the judgment.

S. MILLER, J.P., KRAUSMAN, FLORIO, and H. MILLER , JJ., concur.

MATTER OF ELRAC, INC. v. EDWARDS

In a proceeding pursuant to CPLR article 75 to permanently stay the arbitration of an uninsured motorist claim, the petitioner appeals from an order of the Supreme Court, Suffolk County (Gerard, J.), dated April 9, 1999, which denied the petition.

ORDERED that the order is affirmed, with costs.

The respondent William Edwards was injured in an automobile accident which involved a hit-and-run driver . Edwards was operating a vehicle he had leased from the appellant ELRAC, Inc., d/b/a Enterprise Rent -A-Car (hereinafter ELRAC), a self-insured automobile rental company. Edwards concedes that at the time of the accident he owned a vehicle which was not involved in the accident, which was insured by the proposed additional respondent Government Employees Insurance Company (hereinafter GEICO).

After Edwards demanded that ELRAC proceed to arbitration on his uninsured motorist claim, ELRAC commenced this proceeding for a permanent stay of arbitration on the ground that Edwards had signed a rental agreement which waived uninsured motorist (hereinafter UM) benefits from ELRAC, and absolved ELRAC from providing UM benefits to Edwards. In the alternative, ELRAC sought to join GEICO as an additional respondent, and to direct Edwards "to secure primary [UM] coverage" from GEICO, arguing that the sole issue presented was "which company must provide primary [UM] coverage to * * * Edwards".

The Supreme Court properly denied the petition, as ELRAC is obligated by law to furnish such UM benefits to Edwards (see, Matter of Allstate Ins. Co. v Shaw, 52 NY2d 818; see also, 11 NYCRR 60-1.1[g]; Eddy v Aetna Cas. & Sur. Co., 159 AD2d 1005; Matter of Nordone, 58 AD2d 584). Although ELRAC relies on Matter of Allstate Ins. Co. v Mark (156 Misc 2d 188), Progressive Cas. Ins. Co. v Empire Ins. Co. (162 Misc 2d 91), and Miller v Sullivan (174 Misc 2d 690), to support its argument that the waiver is valid and that GEICO 's policy provides primary UM insurance as a result of the waiver, we find that those cases conflict with the decision of the Appellate Division, Fourth Department in Eddy v Aetna Cas. & Sur. Co. (supra ), and should not be followed. As a result, the Supreme Court properly declined to join GEICO as an additional respondent, as ELRAC is required to provide primary UM benefits to Edwards.

For the first time on appeal, ELRAC also claims that joinder of GEICO was required to enable the Supreme Court to review the GEICO policy and any "other insurance" clause contained therein, and to determine whether the UM benefits provided under the GEICO policy must be treated as equally "primary" with the UM benefits which ELRAC must provide as a matter of law. We decline to address this issue, as it was never presented to the Supreme Court in the first instance, and is therefore improperly raised for the first time on appeal (see, e.g., Matter of American Home Assur. Co. v Cebellos, 224 AD2d 612, 613; Matter of Allstate Ins. Co. v Beider, 212 AD2d 693, 694).

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

MATTER OF ELRAC, INC. v. FAJARDO

In a proceeding pursuant to CPLR article 75 to stay arbitration of an uninsured motorist claim, Allstate Insurance Company appeals from an order of the Supreme Court, Suffolk County (Floyd, J.), dated January 25, 1999, which granted the petition staying arbitration against the petitioner, and directed that arbitration proceed against it.

ORDERED that the order is reversed, on the law, with costs, the petition is denied, and the petitioner is directed to proceed to arbitration with Azalea Fajardo.

Azalea Fajardo was involved in a collision with an unknown driver while operating a car that she rented from the petitioner ELRAC, Inc., d/b/a Enterprise Rent-A-Car (hereinafter ELRAC), a self-insured automobile rental company. The rental agreement signed by Fajardo provided that personal injury and uninsured motorist protection were not included and that the renter waived any claims thereto. At the time of the collision , Fajardo was independently insured by Allstate Insurance Company (hereinafter Allstate).

After Fajardo filed a demand for arbitration of her uninsured motorist claim, ELRAC commenced this proceeding to stay arbitration, alleging that a self-insured automobile rental company has no obligation to provide primary uninsured motorist coverage to a renter who is otherwise insured. After Allstate was joined as an additional respondent, the Supreme Court granted the petition staying arbitration against ELRAC , and directed that arbitration proceed against Allstate. The Supreme Court erred in granting the petition. ELRAC is obligated by law to provide primary uninsured motorist benefits and, consequently , the waiver in the rental agreement is unenforceable (see, Matter of ELRAC, Inc. v Edwards, AD2d [decided herewith]).

In light of our determination, it is unnecessary to address the remaining contention of Allstate.

BRACKEN , J.P., RITTER, ALTMAN, and McGINITY, JJ., concur.

FINNEGAN v. BROTHMAN

Judgment unanimously modified on the law and as modified affirmed without costs and new trial granted on first and second causes of action only in accordance with the following Memorandum: Supreme Court erred in granting that part of defendant’s motion pursuant to CPLR 4401 for a directed verdict on the first and second causes of action alleging medical malpractice and negligence. John F. Finnegan, Jr. (plaintiff) received insurance benefits from New York Central Mutual Insurance Company (NYCM) as a result of a motor vehicle accident on April 11, 1992. Prior to a scheduled surgery on plaintiff’s right shoulder, NYCM directed plaintiff to submit to a medical examination by defendant. Plaintiff testified that the length of the examination was 3 minutes and 22 seconds and that no medical history was taken nor meaningful physical examination performed. Defendant testified that he performed a standard examination over a period of 20 to 25 minutes. Defendant’s report to NYCM’s agent did not include a medical opinion because defendant did not have the results of diagnostic tests that had been conducted previously. However, the report included defendant’s personal opinion that the need for the shoulder surgery was not related to the accident. That report resulted in the denial of benefits for plaintiff’s surgery. Plaintiff incurred costs and attorney’s fees in the ensuing arbitration, which resulted in an award of the benefits that was denied based on defendant’s report.

The court erred in directing a verdict on the first cause of action alleging medical malpractice. Defendant testified that a proper independent medical examination includes taking the patient’s history, conducting a physical examination and reviewing diagnostic studies. Plaintiff’s testimony provided a rational basis for the jury to find that defendant failed to conduct a proper examination and that the denial of benefits was causally related to that failure (see, Lacy v Guthrie Clinic, 184 AD2d 1057).

The court further erred in directing a verdict on the second cause of action alleging negligence because the jury could have rationally found that defendant’s report caused plaintiff to lose insurance benefits and incur damages (see, Lacy v Guthrie Clinic, supra). "Although defendant’s examination was not paid for by plaintiff and was not conducted during the course of treatment or with intention of future treatment, defendant nevertheless owed a duty of reasonable care to plaintiff (see, Roth v Tuckman, 162 AD2d 941, 942, lv denied 76 NY2d 712), although the scope of that duty is limited (see, Murphy v Blum, 160 AD2d 914, 915; LoDico v Caputi, 129 AD2d 361, 364, lv denied 76 NY 804)" (Smith v Pasquarella, 201 AD2d 782).

We thus modify the judgment by denying defendant’s motion in part and reinstating the first and second causes of action and by granting a new trial on those causes of action only. (Appeal from Judgment of Supreme Court, Erie County, Glownia, J. - Negligence.) PRESENT: GREEN, A. P. J., HAYES, PIGOTT, JR., AND SCUDDER, JJ. (Filed Mar. 29, 2000.)

MATTER OF TRANSPORTATION INS. CO. v. PECORARO

Order unanimously reversed on the law without costs and application granted. Memorandum: Supreme Court erred in denying the application seeking a permanent stay of arbitration of respondent’s underinsurance motorist claim. Respondent settled his personal injury action against the tortfeasor and tendered a general release without petitioner’s consent in violation of the express terms of the policy. The "failure of [respondent] to obtain such prior consent from [petitioner] constitutes a breach of a condition of the insurance contract and disqualifies [respondent] from availing himself of the pertinent benefits of the policy" (Matter of State Farm Auto. Ins. Co. v Blanco, 208 AD2d 933, 934, lv denied 85 NY2d 802; see, Matter of State Farm Mut. Auto. Ins. Co. v Hardina, 225 AD2d 486).

Respondent contends that he was authorized to act without petitioner’s consent because petitioner failed to take any action within 30 days of respondent’s letter dated July 8, 1996. We reject respondent’s contention that the letter satisfied the notice of settlement requirement of the policy. Although the letter advised petitioner of respondent’s intention to make an underinsurance claim, it did not "apprise petitioner of the pendency and settlement of the action" (Matter of Nationwide Mut. Ins. Co. [Tarsia], ___ AD2d ___ [decided Oct. 1, 1999], lv denied ___ NY2d ___ [decided Dec. 21, 1999]). We also reject respondent’s contention that subsequent oral communications constituted proper notice under the policy (see, Elkowitz v Farm Family Mut. Ins. Co., 180 AD2d 711; 70A NY Jur 2d, Insurance, § 1872). In addition, petitioner did not waive the written notice requirement by words or conduct indicating that oral notice would suffice (see, Collins v Isaksen, 221 AD2d 403), nor did petitioner repudiate coverage as in Matter of State Farm Mut. Auto. Ins. Co. (Callisto) (255 AD2d 876). (Appeal from Order of Supreme Court, Erie County, Glownia, J. - Arbitration.) PRESENT: PIGOTT, JR., P. J., PINE, WISNER AND SCUDDER, JJ. (Filed Mar. 29, 2000.)

DUFFIN v. COLONIAL INDEMNITY INSURANCE COMPANY

Judgment unanimously reversed on the law without costs and judgment granted in accordance with the following Memorandum: Supreme Court erred in granting judgment in favor of plaintiff declaring that defendant Colonial Indemnity Insurance Company (Colonial) is obligated to defend and indemnify Michael Kerns, d/b/a Balloons Restaurant (defendant), in an action commenced by plaintiff in Federal court against defendant. Plaintiff was injured during an altercation at defendant’s restaurant on July 29, 1990. Defendant and his wife, who were both at the restaurant at the time of the incident, were aware that plaintiff was involved in an altercation and that he was on the ground, but were unaware that he was injured. When plaintiff was at the restaurant several weeks or months later, both defendant and his wife observed that plaintiff used crutches, and defendant’s wife learned from plaintiff that he required medical treatment when he returned to his home in Canada after the incident at defendant’s restaurant. Defendant did not advise Colonial of the incident until he received a summons in October of 1993. Colonial denied coverage because defendant failed to notify Colonial of the incident as an occurrence that might result in a claim under the policy. It is well settled that "[t]he requirement that an insured notify its liability carrier of a potential claim ‘as soon as practicable’ operates as a condition precedent to coverage [citations omitted]. There may be circumstances, such as * * * a reasonable belief in nonliability, that will excuse or explain delay in giving notice, but the insured has the burden of showing the reasonableness of such excuse" (White v City of New York, 81 NY2d 955, 957). Here, defendant failed to establish a "good-faith belief of nonliability * * * [that was] reasonable under all the circumstances" (Security Mut. Ins. Co. of N. Y. v Ackerman Fitzsimons Corp., 31 NY2d 436, 441). Based upon defendant’s observations of plaintiff on the floor after the altercation and later on crutches, and the information that plaintiff had obtained medical treatment for an injury sustained at defendant’s restaurant, together with the fact that defendant had been sued four or five times, it cannot be said that the incident "was not one which would lead a reasonable person to envision any possible liability" (Security Mut. Ins. Co. of N. Y. v Ackerman Fitzsimons, supra, at 442). Thus, defendant’s belief that there was no potential liability is not sufficient to establish a reasonable excuse or explanation for defendant’s delay in notifying Colonial about the incident (see, McCarthy v Nova Cas. Co., 239 AD2d 851, 852, lv denied 90 NY2d 807). We therefore reverse the judgment and grant judgment in favor of Colonial declaring that Colonial is not obligated to defend and indemnify defendant in an action commenced by plaintiff in Federal court against defendant or to pay the reasonable attorney’s fees of defendant incurred in the defense of this action. (Appeal from Judgment of Supreme Court, Erie County, Howe, J. - Declaratory Judgment.) PRESENT: HAYES, J. P., HURLBUTT, SCUDDER AND KEHOE, JJ. (Filed Mar. 29, 2000.)

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