Coverage Pointers - Volume I, No. 4
United States Court of Appeals, Second Circuit
A Claim By Any Other Claimant May Not Be A Claim; Simply Because One Claimant’s Notice Was Not Timely Provided To Carrier Does Not Necessarily Mean Notice About Other Claimant is Untimely
A photographer for Time Magazine, who took a picture of Jacqueline Kennedy at her late husband’s funeral, took issue with Andy Warhol using it in one of his works. In 1994, the photographer wrote a letter to Warhol’s Estate advising that he would likely bring a lawsuit against the Estate unless a monetary resolution could be attained and the parties agreed to toll the statute of limitations. The letter indicated that "[w]e have communicated with counsel for Time, who has expressed support for our position in this matter and who has further indicated a willingness to take all reasonable and necessary steps . . . to effect a recovery in this matter." Warhol’s Estate did not give notice of the threatened claim to its liability insurer with which it had a claims-made Association Directors & Officers Liability Insurance policy. Two years later, in 1996, both the photographer and Time Magazine brought a copyright infringement suit against the Estate and the carrier claimed that the policy was breached because of late notice of the claim. The Second Circuit, following New York law, and quoting Henry Wadsworth Longfellow, held that Time’s claim was different than the photographer’s claim. The photographer couldn’t, and didn’t speak for Time Magazine and couldn’t and didn’t assert a claim on behalf of Time when he wrote the 1994 letter. Accordingly, notice of Time’s claims was timely.
8/16/99:BOUTIN v AETNA CASUALTY & SURETY COMPANY
New York State Supreme Court, Appellate Division, Second Department
Insured's Unsubstantiated Denial that he Receive Underlying Pleadings Insufficient to Relieve Him of Responsibility to Notify Liability Carrier of Commencement of Lawsuit; Late Notice Denial Upheld
On January 30, 1994, the underlying plaintiff allegedly slipped and fell on the sidewalk in front of the insureds' property and commenced an action against him in March 1995. Service on the insured was made by substituted service. By letter dated February 16, 1996, following the receipt of a copy of a motion for leave to enter a default judgment in the underlying action, the insured's attorneys informed his homeowner's carrier of the underlying action for the first time. A disclaimer was promptly issued on late notice grounds. The insured's conclusory denials of receipt of the pleadings, without more, were insufficient to rebut this presumption of service. The Appellate Division held that it is well settled that where an insurance policy requires an insured to provide notice 'as soon as practicable' of an occurrence, such notice must be provided within a reasonable time under all the circumstances", and "[t]he burden is on the insured to show that there was a reasonable excuse for the delay". Here, the unexplained delay in providing notice of the underlying action was not reasonable and the carrier was entitled to summary judgment declaring that it does not have a duty to defend and indemnify the in the underlying action.
8/16/99: MATTER OF ALLSTATE INS. CO. v. KRUGER
New York State Supreme Court, Appellate Division, Second Department
Failure of Insured to Send Underinsured Motorist (SUM) Insurer a Copy of The Complaint Against Tortfeasor Breaches Insurance Agreement, Irrespective of Prejudice
In April 1994, Kruger, an Allstate insured, was in an automobile accident with another vehicle. The appellant claims that shortly after the accident she retained her present counsel who, by letter dated October 20, 1994, advised Allstate that she was making a claim under the supplementary uninsured motorists endorsement of her policy. Allstate denies receiving this letter. Kruger sued the other driver in July 1996 and never sent a copy of that summons and complaint to Allstate as required by the policy. Kruger thereafter demanded arbitration of her underinsured motorist claim. Allstate commenced this proceeding to permanently stay arbitration on the grounds that Kruger failed to give Allstate timely written notice of her intention to make a claim and that she failed to forward a copy of the summons and complaint to Allstate, as required by the policy. The Appellate Division agreed that Kruger breached the insurance agreement by commencing an action against a tortfeasor and filing to provide a copy of that pleading to Allstate. An absence of prejudice on the part of Allstate cannot cure her failure and coverage was lost.
8/5/99: ALLCITY INS. CO v. 601 CROWN STREET REALTY
New York State Supreme Court, Appellate Division, First Department
Despite a Blatant Lack of Cooperation by Insured, Failure to Disclaim on That Ground for Over Two Years Renders Disclaimer Invalid
Insured landlord "blatantly" failed to cooperate with counsel and carrier in defense of personal injury and wrongful death action arising out of a 1987 fire. A lawsuit was commenced against the insured in May 1988 alleging negligence. The insurer sent a series of notices to the principal of the corporate owner of the premises, requesting his appearance at the deposition of the landlord. Despite language advising him of his duty to cooperate pursuant to the terms of the insurance policy, Mr. He failed to appear in response to seven such notices sent to him between January 9, 1991 and June 19, 1992. A letter of August 14, 1992, informing him of a "final" deposition date of September 22, 1992, failed to elicit his appearance. In an internal memorandum, carrier noted insured failure to cooperate. A final letter dated November 17, 1992, attempting to obtain his voluntary cooperation, advised that "your continued non-cooperation will result in Breach of Contract and our withdrawal in this matter." Allcity issued its disclaimer based on lack of cooperation in January 1995. Court holds disclaimer untimely as a matter of law. It was unreasonable for the insurer to wait until January 10, 1995, four years after its first notice of deposition was ignored, before issuing a disclaimer. The insurer’s purported need for further time to investigate the lack of cooperation was, under the circumstances, implausible
8/5/99: NEW JERSEY MANUFACTURERS INS. CO. v. ROBERY
New York State Supreme Court, Appellate Division, First Department
New Jersey Compensation Carrier Has No Lien in NY for Payments Made in New Jersey Which Would Have Been In Lieu of Basic Economic Loss Payments
Under New Jersey law, worker’s compensation carrier mistakenly paid New Jersey resident, injured in New York motor vehicle accident, New Jersey Worker’s Comp benefits. When it tried to assert a lien against the injured party’s third-party recovery as permitted by New Jersey law, the New York court disallowed the lien. The New York No-Fault statute does not allow a worker’s compensation carrier to maintain a lien for any payments it makes in lieu of no-fault benefits. This assures that an individual injured in the course of employment in an auto accident is in the same position vis-à-vis benefits as he or she would be if there were no auto accident. Despite New Jersey law permitting such a lien, the Appellate Division holds that no lien may be maintained in New York because of statutory prohibition. Court refused to look at "choice of law" rules – instead, looks at statutory language.
From time to time we will highlight significant cases of interest from other jurisdictions.
[Because of the length of this decision, an internet link/url is provided for access to this decision.]
Ohio Supreme Court Rules Tort Reform Legislation Unconstitutional
In a landmark decision, the Ohio Supreme Court holds that the state's tort reform legislation, Am.Sub.H.B. No. 350, usurps judicial power in violation of the Ohio constitutional doctrine of separation of powers and is therefore unconstitutional. The tort reform measures included: a 15-year statute of repose for product liability claims (including wrongful death); 6-year statute of repose for medical and professional malpractice claims; a certificate-of-merit requirement for actions involving medical, dental, optometric, chiropractic and malpractice claims; a collateral benefits rule; punitive and general damages caps; judicial standards for granting summary judgment in toxic tort cases; and, rules concerning admissibility of evidence of a common insurer of defendant and expert witness in medical malpractice claims to prove bias.
Hurwitz & Fine, P.C. is a full-service law firm
providing legal services throughout the State of New York.
- ANDY WARHOL FOUNDATION FOR THE VISUAL ARTS, INC.; FREDERICK W. HUGHES, as Executor of the Estate of Andy Warhol, v. FEDERAL INSURANCE COMPANY
- WINTER, Chief Judge,
- CARDAMONE, and PARKER, Circuit Judges
- Plaintiffs The Andy Warhol Foundation for the Visual Arts, Inc. and Frederick W. Hughes, as executor of the estate of Andy Warhol, appeal from a judgment entered June 4, 1998 in the United States District Court for the Southern District of New York (Griesa, J.), granting defendant Federal Insurance Company's motion for summary judgment, denying plaintiffs' cross-motion for partial summary judgment, and dismissing the complaint.
- Reversed and remanded.
- HOWARD S. SCHRADER, New York, New York (Paul J. Hanly, Jr., Coblence & Warner, New York, New York, of counsel), for Plaintiffs-Appellants.
- CURTIS C. MECHLING, New York, New York (Michael F. Perlis, Charles E. Torres, Stroock & Stroock & Lavan LLP, New York, New York, of counsel), for Defendant-Appellent.
- CARDAMONE, Circuit Judge:
- In this appeal we discuss the question of when a "claim" is made so as to trigger an insured's obligation to give notice to its insurer. Among other things, one necessary ingredient distilled from a survey of the decisional law is that a party that has a claim must itself assert it: a concept perfectly capsulized in Longfellow's "Why don't you speak for yourself, John?" Henry W. Longfellow, The Courtship of Miles Standish, in The Complete Poetical Works of Henry Wadsworth Longfellow 197 (Houghton, Mifflin & Co., Household ed. 1901).
- More specifically, the appeal deals with whether notice to an insurance carrier of liability claims made against its insureds was given as soon as practicable so as to trigger the company's obligation to provide coverage. The genesis of the litigation began at the 1963 funeral of President John F. Kennedy when a professional photographer named Henri Dauman snapped a picture of the President's widow, Jacqueline Kennedy, that was later published in Life magazine, a Time Inc. publication. The photograph was copyrighted by Time and as a result by Dauman. Subsequently, the famous American pop-artist Andy Warhol allegedly improperly incorporated the copyrighted photo into his artworks. Such use of the photo precipitated a copyright infringement suit by the copyright holders against the Andy Warhol Foundation for the Visual Arts, Inc. (Foundation) and Frederick W. Hughes, as executor of the Estate of Andy Warhol (Estate) (collectively, Warhol entities). Both these Warhol entities are insured by Federal Insurance Company (Federal), the liability carrier in this case.
- When Dauman and Time filed a copyright infringement suit against the Foundation and the Estate in federal district court, the Warhol entities asked Federal to provide coverage. Federal refused on the grounds that it had not been given timely notice of the claims as required by the policy. The Foundation and the Estate thereupon instituted the instant declaratory judgment action in the United States District Court for the Southern District of New York (Griesa, J.) as plaintiffs seeking a judicial ruling that they are covered by the carrier's policy for any liability that might be found against them in Dauman's and Time's copyright infringement suit. The district court granted Federal's motion for summary judgment and dismissed the complaint. From that judgment, plaintiffs appeal.
- Plaintiffs in the declaratory judgment suit are the Foundation, a not-for-profit organization dedicated to supporting the advancement of the visual arts, and the Estate, which held most of the assets of the late Andy Warhol and is administered in New York State by plaintiff Hughes as executor. In December 1995 Federal issued an Association Directors & Officers Liability Insurance Policy (policy) to the Warhol entities, as it had for the two prior years, with a policy term from December 18, 1995 to December 18, 1996. The policy is a "claims made" policy, meaning that coverage is provided only for claims actually made against the Foundation and the Estate during the period when the policy is in effect.
- A. Provisions of the Insurance Policy
- Separate "Insuring Clauses" of the policy spell out the various circumstances in which coverage is triggered. This case concerns only the coverage of Insured Associations -- here the Foundation and the Estate -- a subject addressed in Clauses 1.3 and 1.4 of the policy. Under Clause 1.3, Federal agreed to pay all "Loss" resulting from a claim for a "Wrongful Act" made against any "Insured Association" and reported to Federal during the policy period. A Wrongful Act is defined in 8.1, as amended by Endorsement Number six, as:
- [A]ny error, misstatement or misleading statement, act or omission, or neglect or breach of duty committed, attempted or allegedly committed or attempted by an Insured individually or otherwise, in the discharge of his duties to the association, or any matter claimed against him solely by reason of his serving in such capacity . . . . All such causally connected errors, statements, acts, omissions, neglects or breaches of duty or other such matters committed or attempted by, allegedly committed or attempted by or claimed against one or more of the Insureds shall be deemed interrelated Wrongful Acts.
- Clause 1.4 further obligated Federal to pay on behalf of any Insured Association all "Loss" resulting from a claim for certain specified types of acts enumerated in Clause 1.4, including "infringement of copyright or trademark or unauthorized use of title," made against any Insured Association and reported to Federal during the policy period. Thus, the insuring clauses provide coverage generally for Wrongful Acts in Clause 1.3, and then provide coverage for certain specified types of acts in Clause 1.4.
- The term "claim," used in both Clauses 1.3 and 1.4, is not defined in the policy. Nonetheless, both clauses provide for reporting to Federal of any claim "in accordance with Section 4" of the policy. Section 4.1 states
- A specific Wrongful Act shall be considered to have been first reported to [Federal]:
- (A) at the time that any Insured(s) first give written notice to [Federal] that a claim has been made against the Insured(s) for such Wrongful Act; or
- (B) at the time that the Insured(s) first gives written notice to [Federal] (1) of the material facts or circumstances relating to such Wrongful Act as facts or circumstances having the potential of giving rise to a claim being made against the Insured(s) or (2) of the receipt of written or oral notice from any party that it is the intention of such party to hold the Insured(s) responsible for such Wrongful Act; whichever occurs first.
- Further, under 4.2, "as a condition precedent to their rights under [the] policy" the Foundation and the Estate were required to give Federal "written notice as soon as practicable of any claim" made against them.
- B. Copyright Suit
- With these policy provisions in mind, we examine the copyright suit brought against the Foundation and the Estate. On October 25, 1994 the attorneys for Dauman sent a letter to the Foundation with a copy to the Estate, which set forth in detail acts of alleged copyright infringement committed by the Foundation and/or the Estate. Specifically, the letter asserted that Henri Dauman was the undisputed author of the Jacqueline Kennedy photograph taken at her husband's funeral. According to Dauman's letter, this photograph was first published by Life magazine on December 6, 1963 with Dauman's express permission. The letter states that Life took "all appropriate steps to preserve Mr. Dauman's interests in the Photograph by, among other things, . . . affixing a copyright symbol and Mr. Dauman's name as required by the copyright laws of the United States." This photograph, according to Dauman, was subsequently wrongfully copied and appropriated by the artist Andy Warhol for use in a large number of his artworks. The Foundation and the Estate allegedly compounded that wrong by selling these works and including the photograph in publications. The letter demanded compensation and assurances that there would be no further infringement.
- On October 27, 1994 counsel to the Foundation responded, requesting additional information from Dauman's counsel and indicating a willingness to meet and "discuss your client's claim." Counsel for Dauman replied with a letter dated January 6, 1995, describing, among other things, Time's registered copyright and its number. The letter added that counsel for Dauman "have communicated with counsel for Time, who has expressed support for our position in this matter and who has further indicated a willingness to take all reasonable and necessary steps as may be appropriate to effect a recovery in this matter."
- In an attempt to facilitate a settlement, on May 31, 1995 Dauman and the Foundation entered into a "tolling agreement" (agreement), which recited that Dauman and the Foundation "are aware of claims arising out of the use by Andy Warhol of a photograph of Jackie Kennedy taken by Dauman." It provided for a tolling of the statute of limitations until 30 days after written notice of termination of the agreement, during which time settlement negotiations were to be held.
- These negotiations did not succeed, so Dauman and Time sued for copyright infringement in the Southern District of New York on December 6, 1996. See Dauman v. Andy Warhol Found. for the Visual Arts, Inc., No. 96 Civ. 9219 (S.D.N.Y. filed Dec. 6, 1996). When Dauman and the Warhol entities attempted to negotiate a settlement, counsel for Dauman was not representing Time, and therefore did not purport to assert a claim on its behalf. Shortly before the copyright suit was instituted, Time engaged Dauman's counsel to represent it also.
- C. Procedural History of Present Action
- The same day Dauman and Time filed their complaint -- December 6, 1996 -- the Foundation gave notice of both claims to Federal under the policy covering the period December 18, 1995 to December 18, 1996. On December 31, 1996 Federal wrote the Foundation a letter declining coverage on the grounds that the Foundation's failure "to notify Federal of this claim until over 2 years" after Dauman's October 25, 1994 letter constituted a breach of the policy's timely notification provision.
- That denial of coverage led to the instant declaratory judgment action against Federal instituted on April 15, 1997. In their complaint the Foundation and the Estate alleged breach of contract, bad faith refusal to provide insurance coverage, and also sought a declaration that they were covered by the policy with respect to the copyright infringement claims of Dauman and Time. Federal moved for summary judgment contending the undisputed facts show plaintiffs did not give the required notice. In opposition to this motion plaintiffs maintained that no claim was made by Time against either of the Warhol entities until December 6, 1996. Plaintiffs, in addition, cross-moved for summary judgment on their breach of contract claim asserting that the undisputed facts demonstrate policy coverage and breach of the insurance contract by Federal.
- The district court granted Federal's motion for summary judgment on the grounds of untimely notice, denied plaintiffs' motion for the same relief, and dismissed plaintiffs' complaint. In its opinion, the district court held that "the requirement in Clause 4.2 of notice as soon as practicable" applied to Dauman's October 25, 1994 claim of copyright infringement. It further ruled that Dauman's January 6, 1995 letter "broadened the claim to include Time." The district court therefore concluded that coverage under the policy for any claim in the Dauman action was barred by the failure of plaintiffs to provide Federal with notice of the claims until after the filing of the lawsuit in 1996. See Andy Warhol Found. for the Visual Arts, Inc. v. Federal Ins. Co., No. 97 Civ. 2716, 1998 WL 292326, at *4 (S.D.N.Y. June 2, 1998).
- On appeal plaintiffs do not contest that the notice they gave Federal of the Dauman claims was untimely. Instead, they challenge only that portion of the judgment, entered June 4, 1998, granting summary judgment and dismissing their complaint with respect to insurance coverage for the claims of Time. We reverse.
- I Standard of Review & Choice of Law
- We review de novo the district court's grant of summary judgment. See Ace Auto Body & Towing, Ltd. v. City of New York, 171 F.3d 765, 770 (2d Cir. 1999). In the present suit both parties assert that the undisputed facts support such relief in their favor. Under Fed. R. Civ. P. 56(c), summary judgment is appropriate where the parties' submissions "show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P 56(c); see also Bryant v. Maffucci, 923 F.2d 979, 982 (2d Cir. 1991) (discussing summary judgment standard).
- Subject matter jurisdiction in this case is based upon diversity of citizenship of the parties. See 28 U.S.C. 1332 (1994). Here the insureds reside in New York, the policy was delivered to them in New York, and the claim against them arose in that State. Hence, since New York is the state most intimately concerned with the outcome, New York law governs the disposition of the case. See AXA Marine & Aviation Ins. (UK) Ltd. v. Seajet Indus. Inc., 84 F.3d 622, 624 (2d Cir. 1996). Under New York law, as well as the terms of the policy, compliance with the notice provision is a condition precedent to the insurer's obligations under the policy. See Commercial Union Ins. Co. v. International Flavors & Fragrances, Inc., 822 F.2d 267, 271 (2d Cir. 1987).
- II Timeliness of Notice of Claim
- The policy required that the Foundation and the Estate, as a condition precedent of coverage, give Federal written notice "as soon as practicable of any claim made against any of them for a Wrongful Act." The term "claim," as noted, is not defined in the policy. But Federal contends that the January 6, 1995 letter from counsel for Dauman asserted a claim by Time against plaintiffs, and thus their failure to timely notify it of this letter permits it to disavow coverage for any loss arising from the Time claims. Plaintiffs insist that the January 1995 letter is not a claim by Time because it is not an assertion made by Time itself and it does not adequately indicate a demand by Time for damages. They add that they were not aware of any claim by Time until the Dauman and Time suit was filed on December 6, 1996. Hence, they contend that notice to Federal of Time's claims the same day its suit was filed satisfied the notice requirement for coverage.
- All parties agree that under New York law late notice of a claim vitiates coverage under a "claims made" policy. The dispute regarding coverage requires us to decide whether under that State's law the 1995 letter or the filing of the 1996 suit marked the first assertion of a claim by Time under the policy. After resolving this question, we must also address three alternative grounds Federal posits for affirming the grant of summary judgment.
- A. Insurance Policy Interpretation
- We start our analysis with the premise that an insurance policy, like any contract, must be construed to effectuate the intent of the parties as derived from the plain meaning of the policy's terms. See Dicola v. American S.S. Owners Mut. Protection & Indem. Ass'n, Inc. (In re Prudential Lines Inc.), 158 F.3d 65, 77 (2d Cir. 1998). If the language of the insurance contract is unambiguous, we apply its terms. Where its terms are reasonably susceptible to more than one interpretation, the policy must be regarded as ambiguous. See Haber v. St. Paul Guardian Ins. Co., 137 F.3d 691, 695 (2d Cir. 1998).
- When a court decides, after examination of the contractual language, that an insurance policy is ambiguous, it looks outside the policy to extrinsic evidence, if any, to ascertain the intent of the parties. See id. If, as is often the case, the ambiguities "cannot be resolved by examining the parties' intentions, then the ambiguous language should be construed in accordance with the reasonable expectations of the insured when he entered into the contract." Id. at 697 (applying New York's "reasonable expectations doctrine"). In such situations the ambiguities in the policy ordinarily are construed in favor of coverage and against the insurer, because as the drafter of the policy the insurer is responsible for the ambiguity. See Dicola, 158 F.3d at 77; Westchester Resco Co. v. New England Reins. Corp., 818 F.2d 2, 3 (2d Cir. 1987) (per curiam). Even though a contract may be ambiguous, summary judgment may nonetheless be appropriate where a court is in position to resolve the ambiguities through a legal, rather than factual, construction of its terms. See Dicola, 158 F.3d at 77.
- B. Meaning of "Claim"
- The central dispute in the present litigation concerns the meaning of the word "claim" as set out in the policy. In our view the district court's holding that Time's claims were included in the January 1995 letter written by Dauman's attorney setting forth Dauman's claims misapprehends the meaning of the term claim as it is defined in insurance cases.
- It may appear at first blush that deciding when Time's claim was made is an uncomplicated task. But because the policy contains no definition of the term, and the arguments of both parties appear at least plausible, further examination of the case law interpreting "claims made" under policies and the term "claim" itself is required. Here, for purposes of deciding when Time's claims were first asserted, we think the policy ambiguous, but we also think that the ambiguity may appropriately be resolved by applying the definition gleaned from the case law.
- We have ruled in a similar insurance case under New York law that the "ordinary meaning" of claim is "an assertion by a third party that in the opinion of that party the insured may be liable to it for damages [which are] within the risks covered by the policy." American Ins. Co. v. Fairchild Indus., Inc., 56 F.3d 435, 439 (2d Cir. 1995). Various district court cases have reiterated the American Insurance requirement that to constitute a claim within the meaning of an insurance policy, the demand must be by the third party to whom a right has allegedly accrued. See Garfield Slope Hous. Corp. v. Public Serv. Mut. Ins. Co., 973 F. Supp. 326, 334-35 (E.D.N.Y. 1997) (citing various definitions of claim, including "a demand by one to whom a right has accrued for payment of a loss suffered due to acts of the insured" and "the assertion of a liability to the party making it" (emphasis added)); Home Ins. Co. v. Spectrum Info. Techs., Inc., 930 F. Supp. 825, 846 (E.D.N.Y. 1996) (defining claim as "a demand by a third party against the insured for money damages or other relief" (emphasis added)); National State Bank v. American Home Assurance Co., 492 F. Supp. 393, 396 (S.D.N.Y. 1980) (defining claim as "assertion of a legal right by a third-party against the insured" (emphasis added)). In addition, Black's Law Dictionary defines claim as "[t]o demand as one's own or as one's right." Black's Law Dictionary 247 (6th ed. 1990). As a consequence, for an assertion or notice to the insured to be a claim it must be made by the party whose rights allegedly have been violated.
- C. Application of Definition
- Looking again at the January 1995 letter written by counsel for Dauman, it opens with the statement that: "we represent Henri Dauman in this matter." It goes on to state that in response to the Warhol parties' letter of October 1994, which requested additional information, "we wish to inform you of the following," and sets out three paragraphs of details. Paragraph one lists the publications in which the photograph had appeared with Dauman's name and a copyright symbol. Paragraph two lists the publications in which the photograph had appeared without attribution to Dauman and without Dauman's permission. Paragraph three states that the photograph is registered as part of a compilation, gives the copyright registration number and declares that Time Inc. is the holder of that copyright.
- The letter then continues, "[w]e have communicated with counsel for Time, who has expressed support for our position in this matter and who has further indicated a willingness to take all reasonable and necessary steps . . . to effect a recovery in this matter." Ending the paragraph is more information regarding Dauman's copyright registration of a "Jackie composite image." In an affidavit, Dauman's attorney conceded that at the time when this letter was written he did not represent Time.
- We think the language mentioning Time, particularly when viewed in the context of the entire letter, does not sufficiently state a claim on behalf of Time for purposes of the policy's notice requirements. First, and most important, the letter was not from Time or Time's counsel. To constitute a claim within the meaning of an insurance contract, the assertion must be made by or on behalf of the party making the claim. Second, the language stating Time's alleged "willingness to take all reasonable and necessary steps . . . to effect a recovery in this matter," does not of necessity state a claim. A reasonable reading of this assertion, made by Dauman's attorney, is that Time is willing to take steps to support the resolution of Dauman's claim, since Time had not yet made its own assertion of the insured's liability to it. The letter does not suggest that Time seeks to recover in its own right, and in fact makes no demand for relief on Time's behalf.
- Hence, the letter fails to meet the requirement of a claim because it lacks a request to the insured for damages within the risks covered by the policy by the party whose rights allegedly were violated. See Windham Solid Waste Management Dist. v. National Cas. Co., 146 F.3d 131, 134 (2d Cir. 1998). Or, in other words, Dauman's lawyer could not speak for Time anymore than John Alden could speak for Miles Standish. To assert a claim, Time should have spoken itself.
- III Other Federal Arguments
- Beyond the letter, Federal maintains that we must affirm the district court's grant of summary judgment on three alternative bases. First, it argues that the 1995 tolling agreement is evidence that the Foundation was aware of Time's claims, because, in its opinion, the agreement tolls the statute of limitations for all claims relating to misappropriation of the photograph. The Warhol parties respond that the agreement by its own terms is limited to the claims of Dauman. Second, Federal asserts that Dauman's and Time's claims are identical, emphasizing that both claims stem from Time's copyright, and thus the late notice of Dauman's claims also prevents coverage for Time's claim. The Foundation and the Estate contend that under copyright law, the claims are different because the copyright ownership of Dauman and Time are separate and distinct. Third, Federal declares that even assuming that Dauman's and Time's claims are separate and distinct, coverage of Time's claim is barred because both sets of claims arise out of the same Wrongful Act, as defined in the policy. We discuss each of Federal's propositions in turn.
- 1. Tolling Agreement. The agreement, entered into only by Dauman and the Foundation, states that "[a]ll limitations periods which may be applicable to any Claim of any kind whatsoever by Dauman, or any of his heirs or assigns, against the Foundation, . . . are hereby tolled . . . ." (emphasis added). Obviously the agreement provides no indication that the Foundation was aware of claims by Time. It contains no references to Time or Time's claims. As Time was not a party to the agreement, it was not bound by any agreement entered into by Dauman unless it agreed to be bound. And, nothing suggests that Time consented to be bound.
- Although Federal contends that because the agreement covers Dauman's heirs and assigns, it thereby includes Time's claims, this contention also fails. Time has its own copyright to the photograph, based on its ownership of copyright to a "collective work," the December 6, 1963 issue of Life as a whole, see 17 U.S.C. 101, 201(c) (1994). Since Time possesses an independent copyright, as discussed below, it is not included in the agreement as an heir or assignee of Dauman.
- 2. Bases for Claims Under Copyright Law. Next we address the identical claim assertion. Federal insists that Dauman's and Time's claims are identical. Of course, they are not. Dauman's claim arises from his alleged ownership of the copyright of an individual photograph. He contributed an individual photograph to the December 1963 issue of Life magazine, a "collective work." Under 17 U.S.C. 101, a collective work is defined as "a work, such as a periodical issue . . . in which a number of contributions, constituting separate and independent works in themselves, are assembled into a collective whole." Thus, while Time's copyright is to the collective work, under 17 U.S.C. 201(c), which states that copyright to an individual contribution in a collective work "is distinct from copyright in the collective work as a whole, and vests initially in the author of the contribution," Dauman's copyright clearly remains independent from Time's.
- The distinction between the separate claims of Dauman and Time is reinforced by existence of separate standards that would be applicable to the "fair use" defense available against each claim. An element of that statutory defense is the "amount and substantiality of the portion used in relation to the copyrighted work as a whole." 17 U.S.C. 107(3); see also Consumers Union of United States, Inc. v. General Signal Corp., 724 F.2d 1044, 1050 (2d Cir. 1983). The Kennedy photograph constitutes a very small portion -- allegedly less than one percent -- of the entire December 6, 1963 collective work to which Time holds a copyright. In contrast, because Dauman holds a copyright to the individual photograph, the allegedly infringing Warhol artworks make use of Dauman's entire copyrighted work. Dauman's and Time's copyright claims are therefore clearly not identical. Since as a matter of copyright law, their claims are different, the provision of coverage under Federal's policy must be separately addressed for each.
- 3. Wrongful Act. Federal asserts that the policy's notice provision means that the policy will not provide coverage for any loss on account of a Wrongful Act where the insured has failed to give timely notice of "any" claim for such Wrongful Act. Referring again to this section, the policy states: "the Insured(s) shall, as a condition precedent to their rights under this policy, give to [Federal] written notice as soon as practicable of any claim made against any of them for a Wrongful Act . . . ." The text of this provision does not say any claim for "such Wrongful Act," but rather requires the notice for "any claim . . . for a Wrongful Act." The policy's plain language does not provide that the insured's failure to provide notice for one claim prohibits coverage of another claim simply because they are both related to the same Wrongful Act. Thus, Federal cannot properly deny coverage of Time's claims on the grounds that the Warhol entities failed to provide timely notice of Dauman's related claims.
- For the foregoing reasons, the grant of summary judgment as to the claims of Time is reversed, and the case is remanded to the district court for further proceedings not inconsistent with this opinion.
SUPREME COURT OF THE STATE OF NEW YORK APPELLATE DIVISION : SECOND JUDICIAL DEPARTMENT
May 26, 1999
SONDRA MILLER, J.P.
THOMAS R. SULLIVAN
WILLIAM D. FRIEDMANN
SANDRA J. FEUERSTEIN, JJ.
DECISION & ORDER
Andre Boutin, et al., plaintiffs- respondents, v Aetna Casualty & Surety Company, appellant, Serge Denizard, Sr., et al., defendants-respondents.
Majewski & Poole, LLP, Garden City, N.Y. (Michael Majewski and Nicole Norris Poole of counsel), for appellant.
Lazarowitz & Manganillo, P.C., Brooklyn, N.Y. (Ira F. Seplow of counsel), for plaintiffs-respondents.
Friedman, Levy & Goldfarb, P.C., New York, N.Y. (Ira H. Goldfarb of counsel), for defendants-respondents.
In an action for a judgment declaring that the defendant Aetna Casualty & Surety Company has a duty to defend and indemnify the plaintiffs in an underlying action entitled Denizard v City of New York, pending in the Supreme Court, Kings County, under Index No. 8840/95, Aetna Casualty & Surety Company appeals from an order and judgment (one paper) of the Supreme Court, Kings County (Barasch, J.), dated September 24, 1998, which denied its motion for summary judgment, and upon searching the record, declared that it has a duty to defend and indemnify the plaintiffs in the underlying action.
ORDERED that the order and judgment is reversed, on the law, with one bill of costs, the motion is granted, and the matter is remitted to the Supreme Court, Kings County, for the entry of a judgment declaring that Aetna Casualty & Surety Company does not have a duty to defend and indemnify the plaintiffs in the underlying action.
The defendant Aetna Casualty & Surety Company (hereinafter Aetna) issued a homeowners' liability policy covering certain property owned by the plaintiffs, Andre Boutin and Gladys Boutin, which required, inter alia, that the Boutins give Aetna written notice of an occurrence "as soon as is practical".
On January 30, 1994, the defendant Serge Denizard, Sr., allegedly slipped and fell on the sidewalk in front of the Boutins' property. In or about March 1995 Denizard and his wife commenced an action against, among others, the Boutins. The affidavits of service with respect to that action indicate that the Boutins were served with the summons and complaint on April 4, 1995, by "affix and mail" service pursuant to CPLR 308(4).
By letter dated February 16, 1996, following the receipt of a copy of a motion for leave to enter a default judgment in the underlying action, the Boutins' attorneys informed Aetna of the underlying action for the first time. Aetna disclaimed coverage because of the Boutins' delay in notifying it of the occurrence, concluding that the Boutins received notice of the underlying action in April 1995 (i.e., the date on which they were allegedly served with the summons and complaint in that action).
In response to Aetna's disclaimer, the Boutins brought the instant action for a judgment declaring that Aetna was obligated to defend and indemnify them in the underlying action. Aetna moved for summary judgment and a declaration that it has no obligation to defend or indemnify the Boutins in the underlying action, based upon the Boutins' alleged delay in providing notice of the alleged occurrence. Although the Boutins withdrew a cross motion for summary judgment, the court denied Aetna's motion for summary judgment and searched the record and awarded the Boutins the relief sought in the complaint. We reverse.
In support of its motion for summary judgment, Aetna submitted the affidavits of service in the underlying action, which established a prima facie case that copies of the summons and complaint were mailed to the Boutins at their home address in April 1995. Therefore, "it must be presumed that [they] received it" (Facey v Heward, 244 AD2d 452, 453, citing Engel v Lichterman, 95 AD2d 536, 538, affd 62 NY2d 943; see, Riverhead Sav. Bank v Garone, 183 AD2d 760, 762). The Boutins' conclusory denials of receipt, without more, were insufficient to rebut this presumption (see, Facey v Heward, supra; Matter of Rosa v Board of Examiners, 143 AD2d 351).
"It is well settled that where an insurance policy requires an insured to provide notice 'as soon as practicable' of an occurrence, such notice must be provided within a reasonable time under all the circumstances", and "[t]he burden is on the insured to show that there was a reasonable excuse for the delay" (Lukralle v Durso Supermarkets, 238 AD2d 318, 319 [citations omitted]). Here, the Boutins' unexplained delay in providing Aetna with notice of the underlying action was not reasonable (see, Matter of CNA Ins. Co. v Rauso, 213 AD2d 712; Shaw Temple A.M.E. Zion Church v Mount Vernon Fire Ins. Co., 199 AD2d 374). Therefore, Aetna was entitled to summary judgment declaring that it does not have a duty to defend and indemnify the Boutins in the underlying action.
S. MILLER, J.P., SULLIVAN, FRIEDMANN, and FEUERSTEIN, JJ., concur.
Allcity Insurance Company v. 601 Crown Street Realty Corp.Judgment, Supreme Court, New York County (Ira Gammerman, J.), entered May 21, 1998, which, after a nonjury trial, declared that plaintiff Allcity Insurance Co. is not obligated to represent or indemnify defendant 601 Crown Street Realty or defendant David Fischer, doing business as 601 Crown Street Realty Corp. (collectively, the landlord) in the underlying action for personal injuries and wrongful death based on the landlord's failure to cooperate, as required by the subject policy, unanimously reversed, on the law, with costs, and a declaration issued that plaintiff is obligated to defend and indemnify the landlord.
On December 6, 1987, there was a fire at the premises insured by plaintiff, resulting in the death of Hazel Willis and injury to Josephine Schuler. The underlying action against the landlord was commenced by Patricia Braddy, as Administratrix of the Estate of Hazel Willis, and Josephine Schuler on or about August 10, 1988. (Upon the death of Josephine Schuler, Tamara Braddy was substituted as her administratrix.) Plaintiff sent a series of notices to Elimelech Frydberg, the principal of the corporate owner of the premises, requesting his appearance at the deposition of the landlord, rescheduled from July 6, 1989 when it was first noticed. Despite language advising him of his duty to cooperate pursuant to the terms of the insurance policy, Mr. Frydberg failed to appear in response to seven such notices sent to him between January 9, 1991 and June 19, 1992. A letter of August 14, 1992, informing him of a "final" deposition date of September 22, 1992, failed to elicit his appearance. An Allcity inter-office memorandum of October 20, 1992 states: "Ass'd Mr. Fryberg [sic] refuses to cooperate. He says since we would not renew his policy he doesn't have to appear. EBT pending 11-17". Other memoranda contain identical information, except that the scheduled deposition date is listed as December 23, 1992. A final letter dated November 17, 1992, attempting to obtain his voluntary cooperation, advised Mr. Frydberg that "your continued non-cooperation will result in Breach of Contract and our withdrawal in this matter." Plaintiff finally resorted to a subpoena, which was equally unavailing in securing the witness's appearance for a deposition scheduled for June 14, 1993.
On August 24, 1993, Allcity sent another form letter to Mr. Frydberg, informing him of a September 14, 1993 deposition date and stating the insurer's intention to move the court to discontinue its defense of the landlord in the Braddy action. Six months later, the insurer contacted Samuel Sontag, whom Frydberg had identified as his personal attorney in a December 23, 1987 statement given to an investigator for Empire Insurance Group, Allcity's parent. This statement also identifies the building's superintendent and the landlord's managing agent.
The instant declaratory judgment action, in which the landlord has never appeared, was commenced in December 1994. On January 10, 1995, plaintiff Allcity sent the landlord a disclaimer letter, asserting, "Your [presumably Frydberg’s] blatant refusal to cooperate in this matter is a violation of your insurance contract." Prior to Supreme Court's ruling in this matter, counsel for defendants argued, inter alia, that the carrier had waited an unreasonably long time to issue a disclaimer after becoming aware of the landlord's lack of cooperation.
In view of the failure to contact the managing agent or the superintendent of the building, both of whom had examined the premises after the fire, the insurer's efforts to secure the cooperation of its insured might be regarded as less than diligent (see, Thrasher v United States Liab. Ins. Co., 19 NY2d 159, 168). In any event, its disclaimer is untimely, as "measured from the point in time when the insurer first learns of the grounds for disclaimer of liability or denial of coverage" (Allcity Ins. Co. v Jimenez, 78 NY2d 1054). The internal memorandum of October 20, 1992 clearly reflects the lack of cooperation on the part of the owner of the building and provides the date from which the timeliness of the insurer's disclaimer can be assessed (see, Consolidated Edison Co. v Hartford Ins. Co., 203 AD2d 83 [measuring time to disclaim from date of internal memorandum summarizing facts sufficient for disclaimer and finding four months unreasonable]). Indeed, Allcity alludes to the events described in the October 1992 memorandum in concluding, "It is clear that the attitude of the insured was willful and avowed obstruction."
As a matter of law, it was unreasonable for the insurer to wait until January 10, 1995, four years after its first notice of deposition was ignored, before issuing a disclaimer. The insurer's purported need for further time to investigate the lack of cooperation is, under the circumstances, implausible (see, Allstate Ins. Co. v Macaluso, 217 AD2d 424). Finally, we note that the dissolution of defendant 601 Crown Street Realty Corp. in 1993 renders any judgment that might be obtained against the corporation meaningless (see, Thrasher, supra, at 168 [discussing public policy against penalizing innocent "plaintiff for the action of the insured over whom he has no control"]).
THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: AUGUST 5, 1999
New Jersey Manufacturers Insurance Company v.
Judgment, Supreme Court, New York County (Barbara Kapnick, J.), entered May 14, 1998 which, to the extent appealed from, awarded plaintiff the principal amount of $40,930.96 against the Steckert defendants, and order, same Court and Justice, entered April 7, 1998, which granted plaintiff summary judgment and denied said defendants' cross-motion for summary judgment, unanimously reversed, on the law, without costs, plaintiff's motion denied and the Steckert defendants’ cross-motion for summary judgment dismissing the complaint granted. The Clerk is directed to enter judgment in favor of defendants-appellants Robert Steckert and Susan Steckert dismissing the complaint as against them.
Defendant Robert Steckert, a New Jersey resident, was seriously injured when, during the course of his employment by Longacre Truck Leasing Corp, his vehicle was struck, in Manhattan, by a truck driven by defendant Babulall Ragoo, a New York resident, employed by Broadway Delivery Corp., a New York corporation. The truck was owned by defendant Cohen Express Corp., a New Jersey corporation, for which no-fault coverage was provided by defendant Continental which has offices in New York County. Cohen mistakenly submitted an "Employee Claim Petition" on behalf of Steckert - who was not its employee - to Cohen’s workers' compensation insurance carrier, plaintiff New Jersey Manufacturer's Insurance Company. Plaintiff, mistakenly believing Stecker to be Cohen’s employee, commenced paying Steckert’s medical and wage loss benefits, which it paid until it discovered that Steckert worked for Longacre rather than Cohen. By that time, it had paid $61,396. The Steckerts' New York tort action against Cohen and Ragoo was settled for $850,000 on May 2, 1996. No part of that settlement represented the first $50,000 of necessary medical expenses and loss of earnings. Plaintiff, in the instant action, relying on New Jersey Workers’ Compensation Law § 34:15.40, allowing a statutory lien for two-thirds (minus $200) of benefits paid to an injured employee by a third party, sought a lien against the settlement proceeds. Notwithstanding the prohibition against such a lien under New York Workers’ Compensation Law § 29(1-a), the motion court, finding that New Jersey law governed, granted plaintiff summary judgment in the amount $40,930.96 against the Steckert defendants, and denied those defendants’ cross-motion for summary judgment.
The court approached this as a loss allocation case (cf., Padula v Lilarn Props., 84 NY2d 519). However, the relevant issues involve the applicability of a provision of State insurance law, decided under New York law, applied against a New York judgment, rather than the allocation of liability. Hence, the choice of law analysis employed by the court, which viewed this as a case of economic injury accruing in New Jersey as plaintiff corporation's principal place of business, was erroneous. New York’s Workers’ Compensation Law § 29(1-a) provides that any insurance carrier liable for the payment of workers’ compensation benefits "shall not have a lien on the proceeds of any recovery received pursuant to [Insurance Law § 5104(a)] whether by judgment, settlement or otherwise for compensation, and/or medical benefits paid which were in lieu of first party benefits . . .". Although older case law suggests that the law and the forum where workers' compensation benefits are paid will govern those benefits (see, e.g., Matter of O'Connor, 21 AD2d 333), this is a case of mistaken payments, and not payments made under the law of a particular forum. Furthermore an out-of-State insurer is essentially seeking rights with regard to a New York judgment that would be unavailable to a New York carrier. Moreover, Insurance Law § 5105 limits the remedy of any provider of such compensation benefits seeking to recover benefits paid as first-party benefits to mandatory arbitration (Dietrick v Kemper Ins. Co., 76 NY2d 248). Hence, the relief plaintiff seeks is barred under New York law.
In a proceeding to permanently stay an uninsured motorist arbitration, Karin Kruger appeals from an order of the Supreme Court, Orange County (Owen, J.), dated June 22, 1998, which granted the petition.
ORDERED that the order is affirmed, with costs.
On April 22, 1994, the appellant, while insured by the petitioner Allstate Insurance Company (hereinafter Allstate), was in an automobile accident with another vehicle. The appellant claims that shortly after the accident she retained her present counsel who, by letter dated October 20, 1994, advised Allstate that she was making a claim under the supplementary uninsured motorists endorsement of her policy. Allstate denies receiving this letter.
By summons and complaint dated July 29, 1996, the appellant commenced a personal injury action against the alleged tortfeasor. It is undisputed that a copy of the summons and complaint was never forwarded to Allstate, as required by the policy. Kruger thereafter demanded arbitration of her underinsured motorist claim. Allstate commenced this proceeding to permanently stay arbitration on the grounds that Kruger failed to give Allstate timely written notice of her intention to make a claim and that she failed to forward a copy of the summons and complaint to Allstate, as required by the policy.
The Supreme Court properly granted the petition on the ground that Kruger failed to provide Allstate with a copy of the summons and complaint. It is undisputed that Kruger breached a condition of her policy by instituting a personal injury action against the owner of the other automobile involved in the accident without forwarding to Allstate a copy of the summons and complaint (see, Lumbermens Mut. Cas. Co. v Moyler, 211 AD2d 401; Brown v MVAIC, 33 AD2d 804). Contrary to Kruger's contention, the absence of prejudice on the part of Allstate cannot cure her failure to forward a copy of the summons and complaint to Allstate as required under the policy (see, State Farm Mut. Auto. Ins. Co. v Romero, 109 AD2d 786; cf., New York Mut. Underwriters v Kaufman, AD2d [3d Dept., Jan. 14, 1999]).