Coverage Pointers - Volume II, No. 1
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.
CASUALTY CO. v. W.R. GRACE AND CO.
Second Circuit (applying New York law)
Settling Asbestos Insurers Not Entitled to Contributions From Insurers That Did Not Contribute
Disposing of long-standing asbestos coverage litigation against W.R. Grace, Second Circuit agrees with lower court that insurers that paid defense and indemnity costs were not entitled to contribution from carriers that refused to defend as those carriers were not unjustly enriched.
MUTUAL FIRE INS. CO., v. ORSAEO
New York State Supreme Court, Appellate Division, Fourth Department
Issue of Fact Whether Insured Had Reasonable Belief in Nonliability to Excuse Seven-Month Delay in Notifying Insurer
Insurer sought declaration that it was not obligated to defend insured based on late notice. The insured learned of the accident seven months before he put the insured on notice. The insured was notified of the accident by a letter from the injured party’s attorney. This was seven months before he put the insurer on notice. The insured argued that the letter did not notify him that a lawsuit would be commenced and as an absentee landlord he did not believe he could be held liable for the accident. The Court found an issue of fact whether the insured had a reasonable belief in nonliability to support his seven-month delay in notifying the insurer.
07/03/00: APPIAN ESTATES,
INC. v. MASTRODDI
New York State Supreme Court, Appellate Division, Second Department
Fraud Cause of Action Against Agents Cannot be Independently Sustained as It is Inextricably Related to Breach of Contract and Negligent Causes of Action.
Plaintiffs commenced this action against their insurance agent to recover damages based on a denial of coverage on a claim of negligent construction. The plaintiffs contend that the agent assured them that they had "total and complete liability insurance coverage" and the failure to secure such coverage was the result of negligence and fraud and was a breach of contract. The court dismissed the claims for breach of contract and negligence on the grounds that the Statute of Limitations had expired on those claims. Even though the underlying action against the plaintiffs was not commenced until 1996, the plaintiffs were aware of the construction defect in 1991 at which time they retained counsel. The plaintiffs could not invoke the doctrine of equitable estoppel as there was no showing that the agents induced the plaintiffs by fraud, misrepresentations or deception to postpone the action. The Court also dismissed the fraud cause of action as that action cannot be independently sustained since it is inextricably related to the breach of contract and negligence causes of action. The Statute of Limitations for a fraud cause of action may not be separately invoked.
06/29/00: In Re CITRON v.
New York State Supreme Court, Appellate Division, First Department
Broker’s License Revoked for Fee Arrangement Which was Not in Accordance With the Insurance Law
The court affirmed revocation of an insurance broker’s license for violations of the insurance law and for fraudulent and dishonest practices. The insurance law requires that there be a document specifying a broker’s compensation either explicitly or by reference to another identified document setting forth the terms of the compensation. Here the broker had a service fee arrangement that stated only the minimum premium charge and did not define the amount or extent of compensation. Such an agreement was in violation of the insurance law.
06/29/00: D.J. ROSSETTI,
INC. v. JOSEPH FRANCESE INC.
New York State Supreme Court, Appellate Division, Third Department
Bond’s One-Year Limitations Period Enforced Absent Evidence Warranting Waiver/Estoppel
The court dismissed this action to recover the proceeds of a payment bond because the action was commenced after the bond’s limitations period expired. The bond required that an action on the bond be commenced within one year of notice of the claim. The plaintiff gave notice of the claim in August 1996 but did not commence this action until April 1998. The court rejected plaintiff’s argument that it would be inequitable to enforce the limitations period. Plaintiff offered no proof that it was induced by the defendant not to bring its lawsuit in a timely manner.
06/29/00:INGARRA v. GENERAL ACCIDENT/PG INS. CO. OF NEW YORK
New York State Supreme Court, Appellate Division, Third Department
Public Adjuster’s Affidavit Attesting to Timely Service of Sworn Proof of Loss Defeats Summary Dismissal – Raises Issue of Credibility for Trier of Fact
Plaintiff sustained water damage to his townhouse and notified the defendant, his insurance carrier. On February 3, 1997, the insurer’s adjuster advised plaintiff of his duties after loss, requested documentation, and requested a signed, sworn proof of loss. On February 24, 1997 the adjuster received an inventory from plaintiff with his claim and estimate for structural damage and contents damage dated February 13, 1997, but did not receive plaintiff’s sworn proof of loss form until April 15, 1997. The sworn proof of loss was sent via facsimile transmission by plaintiff's public adjuster. The defendant then issued a written denial of the claim. In this action to recover the proceeds of the policy, the court held issues of fact precluded summary dismissal. It is well settled that an insured's failure to submit a sworn proof of loss within 60 days after receiving a demand to do so by its insurer, accompanied by blank proof of loss forms, provides a complete defense to an action for payment on an insurance policy. But here the plaintiff submitted an affidavit prepared by his public adjuster stating that the completed proof of loss forms had been mailed to the defendant on March 7, 1997, the same date in which plaintiff's notarized signature appeared on the form. This was a credibility issue regarding the timeliness of the proof of loss to be resolved by the trier of fact.
06/27/00:TOWER INS. CO. OF NEW YORK v. SKATE KEY, INC.
New York State Supreme Court, Appellate Division, First Department
Injured Party Did Not Have Standing To Intervene Where There Is No Judgment Against Insured.
In a declaratory judgment action against an insurance carrier for coverage the injured party sought leave to intervene as a party defendant. Under Insurance Law §3420(b)(1) an injured party has the right to bring a direct action against an insurer once they have a judgment against the insured. In this case, the injured party did not have a judgment and thus was a stranger to the subject policy and had no right to enforce the insurer’s obligation to its insured. The court denied her leave to intervene.
06/26/00: HOME INS. CO. v. NORTH AMERICAN SPECIALTY INS. CO.
New York State Supreme Court, Appellate Division, Second Department
Failure To Properly Cancel Policy Did Not Effect Disclaimer Where No Specific Endorsement for Project was Issued.
The plaintiff settled a property damage claim that arose out of a construction project and then commenced this action against the negligent parties’ CGL carrier to collect under that policy. The Court held that defendant insurer had not effectively cancelled the policy because its notice of cancellation did not comply with Insurance Law §3426(c), but dismissed the action anyway because the insureds failed to obtain an endorsement providing coverage for the project as required by the policy.
06/26/00:BMW FINAMCIAL SERVICES NA, INC. v. HASSAN
New York State Supreme Court, Appellate Division, Second Department
Additional Insured Entitled to Recover Proceeds Despite Principal Insureds’ Misrepresentation of Their Interest in Vehicle.
BMW leased a vehicle to Hassan on the condition that BMW be listed as an additional insured on Hassan’s auto policy. Hassan induced his parents to insure the vehicle under the parents’ policy. The parents represented to their insurer that they had leased the vehicle and Hassan was an additional driver. The policy listed BMW as an additional insured. The vehicle was stolen and a claim was filed. After an investigation the insurer disclaimed liability as to both Hassan and BMW claiming that the parents had no insurable interest in the vehicle and thus, the policy was void ab initio. The court held that the insurer improperly disclaimed liability as to BMW. An insurer has a separate and distinct obligation to the various insured parties, whether named as the principal insured or as an additional insured. As the owner of the vehicle BMW had an insurable interest for which the insurer provided coverage. BMW was entitled to recover for its loss under the policy. It is irrelevant to the consideration of BMW’s claim that the principal insureds had misrepresented their own interest in the insured vehicle.
06/26/00:METROPOLITAN PROPERTY & CASUALTY INS. CO. v. PULIDO
New York State Supreme Court, Appellate Division, Second Department
Premises Not Insured Premises Where Insured Did Not Reside at the Property.
Insurer issued homeowners policy to insureds that covered premises listed in the declarations and which is used by insureds as a residence. The premises listed on the policy was located on Joselson Avenue, however, the insureds did not reside at that address. Ms. Pulido was injured at the Joselson Avenue premises and sued the insureds. The insurer disclaimed coverage on the ground of an intentional misrepresentation of a material fact. The insurer then commenced this action for a declaration that it was not obligated to defend or indemnify the insureds in the underlying action. Ms. Pulido moved for summary judgment seeking to dismiss the complaint on the basis of late disclaimer. The court found in favor of the insurer finding that the loss was not covered under the policy as the policy was intended to cover only the insured’s residence. The policy cannot be read to provide coverage to a location the insureds did not reside even if they owned the premises. Since the insureds did not reside at the Joselson Avenue address there was no coverage for that property under the policy. The court rejected the insureds argument on late disclaimer as a delay or failure to disclaim cannot create coverage for which the policy never intended to provide.
06/26/00:FANGER v. MANHATTAN LIFE INS. CO. OF NEW YORK
New York State Supreme Court, Appellate Division, Second Department
Answers To Ambiguous Questions on Life Insurance Application Can Not Be a Basis For a Claim of Misrepresentation.
Insurer issued a life insurance policy to plaintiff’s husband. Husband died and the insurer disclaimed coverage claiming a misrepresentation on his policy application by decedent’s failure to disclose psychiatric treatment for mild obsessive-compulsive disorder. The insurer claimed that the misrepresentation was material. The court denied the insurer’s motion for summary judgment and granted summary judgment to plaintiff. The court found that the questions on the application were ambiguous and were not "so plain and intelligible that any applicant can readily comprehend" that they sought disclosure of the condition involved in this case and the treatment. An answer to an ambiguous question on an application cannot be the basis for a claim of misrepresentation where, as here, a reasonable person in the insured’s position could rationally interpreted the questions as he did.
From time to time we highlight significant cases of interest from other jurisdictions. This week we offer a decision from Washington:
07/03/00: HAMM v.
STATE FARM INS. CO.
Washington State Supreme Court
UIM Insured Bears Own Attorneys Fees for UIM Arbitration – Cannot Recover Those Fees From Insurer
After incurring legal expenses in arbitration over her underinsured motorist (UIM) claim against auto carrier, the trial court awarded the insured a rata portion of those legal expenses. Insurer appeals the award of legal fees. Court finds that a claimant- insured bears his or her own attorney fees for a UIM arbitration when a UIM insurer stands in the shoes of the uninsured tortfeasor.I looked -- really don't have any good Across Borders cases this issue
Hurwitz & Fine, P.C. is a full-service law firm
providing legal services throughout the State of New York.
Kevin T. Merriman
Insurance Coverage Team
Carolyn M. Henry
Kevin T. Merriman
Fire, First Party & Subrogation Team
James D. Gauthier, Team Leader
Donna L. Burden
Jody E. Briandi
© COPYRIGHT 2000 Hurwitz & Fine, P.C., ALL RIGHTS RESERVED.
PER CURIAM. In this case we are asked to determine whether an insurer is obligated to defend and indemnify an insured under a homeowner's policy where the insured is not a resident of the insured premises. Under the facts of this case, we conclude that the policy at issue did not provide such coverage.
In February 1996, the plaintiff, Metropolitan Property & Casualty Insurance Company (hereinafter Met) issued a homeowners liability policy to the defendants John B. Perdue and Estelle Perdue insuring premises located at 1082 Joselson Avenue in Bayshore, New York (hereinafter the premises).
Under the General Definitions section of the policy, it is stated:
"INSURED PREMISES means:
1. the residence premises described in the Declarations /i.e., 1082 Joselson Avenue in Bayshore, New York/.
2. any other premises specifically named in the Declarations and used by you as a residence.
3. any premises acquired by you during the term of this policy and used by you as a residence.
4. any premises not owned by you but where you may be temporarily residing".
(emphasis in original).
The term "residence premises" is defined in the policy as "a one-family dwelling used as a private residence by you and named in the declarations and includes private structures and private approaches".
On May 21, 1996, the defendant Clara Pulido allegedly was bitten by a dog at the premises. The Perdues provided timely notice of the incident to Met. However, the Perdues did not reside at the premises at the time the policy was issued or at the time the dog bite incident took place. Instead, the Perdues resided at 29 Adams Street, Deer Park, New York, and the defendants, Donna Quiles and Pedro Quiles, the Perdues' daughter and son-in-law, resided at the premises.
On January 17, 1997, the plaintiff commenced the underlying action as a result of the dog bite she allegedly sustained while upon the premises. Met retained counsel to represent the Perdues and the Quiles, and an answer was interposed on their behalf on February 4, 1997. On June 17, 1997, Met advised the Perdues that it was disclaiming coverage in the underlying action commenced by Pulido. The letter advised the Perdues that Met had discovered that they did not in fact reside at the covered premises, but rather in Deer Park, and thus Estelle Perdue's "representation" to a Met investigator that she lived at the covered premises constituted an intentional misrepresentation of a material fact.
Shortly thereafter Met commenced this action against Pulido, the Perdues, and the Quiles, seeking a declaration that it was not obligated to defend or indemnify the defendants in the underlying action commenced by Pulido. Met alleged, inter alia, that 1082 Joselson Avenue did not qualify as an insured premises since it "was no longer used as a private residence by John and Estelle Perdue who maintained a residence elsewhere at the time of the alleged occurrence".
In December 1998 Pulido moved for summary judgment dismissing the complaint in the declaratory judgment action. Pulido argued that Met failed to timely disclaim. Pulido also argued that the disclaimer lacked merit because the policy provided coverage for injuries sustained at the insured premises which the policy simply defined as the "residence premises described in the Declarations" (i.e., 1082 Joselson Avenue). Thus, the fact that the Perdues did not reside at this address did not void the policy and, consequently, any alleged representation by them as to where they resided was not material to the policy. The codefendants, the Perdues and the Quiles, also moved for summary judgment dismissing Met's complaint. Met opposed the motion and cross-moved for summary judgment declaring that it was not obligated to defend or indemnify the defendants in the underlying action.
The Supreme Court granted Met's cross motion for summary judgment and denied the defendants' respective motions for summary judgment. The court reasoned that "the loss was not covered under the contract [of insurance] which was clearly intended to cover only the insured's residence. * * * [Thus], if the policy is void ab initio, the insured who is a claimant cannot create coverage by relying upon the failure to provide a timely notice of disclaimer". We agree.
Insurance Law § 3420(d) provides that if an insurer shall disclaim liability under a liability policy issued in this State, it "shall give written notice as soon as is reasonably possible of such disclaimer or denial of coverage to the insured". Furthermore, it has been held that a delay of only two months in failing to disclaim is unreasonable (i.e., untimely) as a matter of law (see, Hartford Ins. Co. v County of Nassau, 46 NY2d 1028).
However, the issue of a timely disclaimer is irrelevant if, in the first instance, the policy never provided coverage for the particular claim at issue. In Zappone v Home Ins. Co. (55 NY2d 131, 134), the Court of Appeals stated:
"The principle * * * that the failure to disclaim coverage does not create coverage which the policy was not intended to provide, applies to liability policies as well as professional indemnity insurance, notwithstanding the provisions of [§ 3420(d)] of the Insurance Law. 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" (emphasis added).
In other words, if the policy never provided coverage for the underlying claim, "a prompt notice of disclaimer is not required" (Government Empls. Ins. Co. v Pagano, 251 AD2d 452; see also, Central General Hospital v Chubb Group of Ins. Companies, 90 NY2d 195; cf., Matter of Worcester Insurance Co. v Bettenhauser, NY2d [June 20, 2000]).
Here the Met policy only provided coverage to the appellants if the insured premises was used as a residence by the Perdues, and since it was not so used, there was no coverage under this policy for the dog bite incident.
The appellants argue that since the policy covers the address described in the declarations, there is coverage for the incident which occurred at this address and thus Met was obligated to timely disclaim. However, this would be in direct contravention of the clear statement in the policy that the insured premises (i.e., 1082 Joselson Avenue) means "residence premises". Furthermore, even ignoring that the ordinary meaning of the word "residence" as a place where one resides or lives, the policy itself defines "Residence Premises" as "a one family dwelling used as private residence by you and named in the Declarations" (emphasis added) (see generally, Teichman v Community Hosp. of Western Suffolk, 87 NY2d 514 [unambiguous terms in a policy of insurance must be given their plain and ordinary meaning and courts may not make or vary the contract of insurance to accomplish their notion of abstract justice or moral obligation]; Breed v Insurance Co., 46 NY2d 351, 355).
It is significant that all of the definitions of "insured premises" in the policy have a common element. In order for a location to be an insured premises under the policy it must be a residence of the insured. This fact further emphasizes that the policy is only intended to afford coverage for places where the insured live.
Under these circumstances, it is reasonable to conclude that the policy at issue was intended (and indeed was unambiguously written) so as to only provide liability coverage to the insured at their residence - which was either the premises described or any other place where they actually lived (see, County of Columbia v Continental Ins. Co., 83 NY2d 618 [intent of insurance policy is determined by examining the policy as a whole, and by giving effect and meaning to all of the terms in the policy]). The policy cannot be read to provide coverage to a location where the insured did not reside, even if they owned such premises. Accordingly, if the insured did not live at the Joselson Avenue address, then their homeowners' liability policy coverage never applied to this location, and thus there was no requirement that Met timely disclaim.
The fact that Met's June 1997 disclaimer letter did not specifically raise the issue that Joselson Avenue was not an insured premises, but instead cited the fraud and concealment portion of the policy as grounds for disclaimer, does not mandate a different result. Since the policy did not provide coverage for the Joselson Avenue address if the insured did not live there, the issue of timely disclaimer or whether all of the grounds for such disclaimer were initially asserted is irrelevant (see, Empire Group Allcity Ins. Co. v Cicciaro, 240 AD2d 362 [where the policy does not provide coverage, the delay or failure to disclaim does not give rise to estoppel]; cf., General Accident Ins. Co. v Cirucci, 46 NY2d 862 [when there is a requirement to disclaim, all grounds for disclaimer must be initially asserted in the letter of disclaimer]).
In view of the above conclusions and the fact that the appellants did not raise any material issue of fact regarding where they actually resided, Met was entitled to summary judgment declaring that it had no obligation to defend or indemnify them in the underlying action (see generally, Gilbert Frank v Federal Ins. Co., 70 NY2d 966; Alvarez v Prospect Hosp., 68 NY2d 320).
The appeal from the intermediate order must be dismissed because the right of direct appeal therefrom terminated with the entry of judgment in the action (see, Matter of Aho, 39 NY2d 241, 248). The issues raised on the appeal from the order are brought up for review and have been considered on the appeal from the judgment (see, CPLR 5501[a]).
RITTER, J.P., SANTUCCI, THOMPSON and McGINITY, JJ., concur.
Determination of respondent Superintendent of Insurance dated May 14, 1993, finding that petitioner insurance broker violated Insurance Law §§ 2119, 2314, 2122(b) and 2102, and engaged in fraudulent and dishonest practices and demonstrated untrustworthiness within the meaning of Insurance Law § 2110(a)(3) and (4), and revoking all licenses issued by the Insurance Department to petitioner, unanimously confirmed, the petition denied and the proceeding brought pursuant to CPLR article 78 (transferred to this Court by order of the Supreme Court , New York County [Karla Moskowitz, J.], entered March 19, 1999), dismissed, without costs.
Respondent’s determination is supported by, among other substantial evidence, the service fee agreement that petitioner presented to prospective insureds who sought to purchase worker’s compensation insurance through him. That agreement stated only the minimum premium charge, without specifying or clearly defining the amount or extent of the compensation to be received by petitioner, as required by Insurance Law § 2119(c)(1).
The Insurance Law requires that there be one document specifying the broker’s compensation either explicitly or by reference to another identified document setting forth the terms of the compensation (cf., Fox Co. v Kaufman Org., 74 NY2d 136, 142 [applying substantially identical language of Insurance Law § 2119(a)(1)]), a standard not satisfied by the service fee agreement here. In any event, it is undisputed that the documents providing additional information from which an insured purportedly could have derived the amount of petitioner’s compensation were not provided to an insured until after such insured had signed the service fee agreement and made payment. Petitioner ’s argument that he was not acting as an insurance broker in these transactions because he purportedly did not deal directly with insureds is without merit because direct dealing with insureds is not an element of the applicable definition of "insurance broker" (Insurance Law § 2101[c]). We note that the verified petition and petitioner’s brief in this Court fail to address the other violations of the Insurance Law which petitioner was found to have committed, and such findings are in any event supported by substantial evidence.
Respondent’s service and filing of his answer five years after entry of an order transferring venue of the proceeding to New York County Supreme Court, during which period petitioner neither noticed a return date in the new venue nor took any other steps to move the proceeding toward judgment, did not entitle petitioner to a default judgment (see, CPLR 7804[c],[e]; Matter of Murray v Matusiak, 247 AD2d 303, 304). Indeed, if respondent were in default, petitioner’s failure to move for judgment within one year thereafter would have required dismissal of the petition (CPLR 3 215[c]). Finally, we note that, consistent with Insurance Law § 2127(a), respondent’s determination did not impose any monetary penalty in addition to revoking petitioner’s licenses.
Order, Supreme Court, New York County (Diane Lebedeff, J.), entered October 20, 199 9, which, in a declaratory judgment action, to the extent appealable, denied non-party appellant Barbara Van Putten’s motion for leave to intervene as a party defendant, unanimously affirmed, without costs. Appeal from order, same court and Justice, entered on or about November 1, 1999, which held plaintiff insurer’s motion for a default judgment against defendant insured in abeyance pending an inquest on the issue of whether defendant’s failure to reimburse deductibles constituted a breach of the insurance policy , unanimously dismissed, without costs.
The motion court correctly denied the motion to intervene because the proposed intervenor was a stranger to the subject insurance agreement and therefore had no right to enforce the insurer’s obligation, until a judgment against the insured was rendered and remained unsatisfied (see, Insurance Law § 3420(b)(1); Abdalla v El Emeri Yehia, 246 AD2d 373; Clarendon Place Corp. v Landmark Ins. Co., 182 AD2d 6, 9, appeal dismissed and lv denied 80 NY2d 918).
Since appellant is without standing to intervene in this action, it follows that she may not claim to be aggrieved, within the meaning of CPLR 5511, by determinations made in the action other than the denial of her motion for intervention, and, accordingly, that she has no standing to appeal from such other determinations.
In an action, inter alia, to recover on an automobile insurance policy, the plaintiff, BMW Financial Services NA, Inc., appeals from an order of the Supreme Court, Queens County (Lonschein, J.), dated February 1 9, 1999, which (1) denied its motion for partial summary judgment on its cause of action to recover from the defendant New York Central Mutual as the additional insured under the insurance policy issued by New York Central Mutual, and (2) granted the cross motion of New York Central Mutual for summary judgment dismissing the complaint insofar as asserted against it.
ORDERED that the order is reversed, on the law, with costs, the motion is granted, and the cross motion is denied.
The plaintiff, BMW Financial Services NA, Inc. (hereinafter BMW), leased a vehicle to the defendants Khaldoon Hassan and Khaled Hassan, on condition that they obtain an automobile insurance policy naming BMW as an additional insured. Instead of complying with that provision of the lease, the Hassans induced Khaldoon's parents to insure the vehicle under the parents' automobile insurance policy, issued by the defendant New York Central Mutual (hereinafter NYCM). The parents represented to NYCM, inter alia, that they had leased the vehicle and that Khaldoon was an additional driver residing with them. The policy listed BMW as the owner/lessor of the vehicle and named it as an additional insured. After the vehicle was reported stolen, and after an investigation, NYCM disclaimed liability as to both the Hassans and BMW, claiming that the parents had no insurable interest in the vehicle and thus, the policy was void ab initio.
Contrary to the Supreme Court's conclusion, NYCM improperly disclaimed liability as to BMW. An insurer undertakes a separate and distinct obligation to the various insured parties, whether named as the principal insured or as an additional insured (see, Morgan v Greater N. Y. Taxpayers Mut. Ins. Ass'n, 305 NY 243, 249; Greaves v Public Serv. Mut. Ins. Co., 5 NY2d 120, 123 [the obligations of the insurer to the named insured on the one hand, and to the additional insured on the other, must be considered separately]; see generally, State Farm Mutual Automobile Ins. Co. v Grund, 243 AD2d 557; Meade v North County Coop. Ins. Co., 120 AD2d 834 [mortgagor named in policy as additional insured was entitled to recover under the policy despite purported misrepresentations of mortgagee who had obtained the policy]). As the owner of the vehicle, BMW had an insurable interest for which NYCM provided coverage (see, Insurance Law § 3401; Scarola v Ins. Co. of North America, 31 NY2d 411, 413). Under the circumstances, it is irrelevant to the consideration of the BMW claim that the principal insureds had misrepresented their own interest in the insured vehicle, and BMW was entitled to recover for its loss under the terms of the policy.
MANGANO, P.J., BRACKEN, McGINITY, and LUCIANO, JJ., concur.
In an action to collect the proceeds of a life insurance policy, the defendant appeals, as limited by its brief, from so much of an order of Supreme Court, Nassau County (Phelan, J.), entered March 3, 1999, as denied its motion for summary judgment dismissing the complaint, and the plaintiff cross-appeals, as limited by her brief, from so much of the same order as denied her cross motion for summary judgment.
ORDERED that the order is modified, on the law, by deleting the provision denying the plaintiff's cross motion and substituting a provision therefor granting the plaintiff's cross motion; as so modified, the order is affirmed, with costs to the plaintiff.
The defendant insurer issued a life insurance policy to the plaintiff 's husband, who subsequently died. The insurer disclaimed benefits on the ground that the decedent policyholder had made a material misrepresentation on his policy application when he failed to disclose to the insurer 's examining doctor that he had been in psychiatric treatment for mild obsessive-compulsive disorder. According to the insurer, the decedent should have disclosed this fact in response to a questionnaire administered by the insurer's examining physician, which asked whether the applicant had ever been treated for "Any other disorder, injury or impairment". The question was designated 7(k) on the application, and it followed subparts (a) through (j), all of which dealt with physical disorders. The insurer also claims that the decedent should have disclosed his psychiatric treatment for his obsessive-compulsive disorder in response to question 6, which asked, "Have you had any health examinations or check-ups in the past five years?".
The insurer contends that the decedent's misrepresentations were material, first because his "disorder" interfered with his quality of life, and also because a medication he had taken in the past for the disorder was contraindicated for a person suffering from a heart condition , as he was.
The court should have granted the plaintiff's cross motion for summary judgment. Questions 6 and 7(k), in the context of the entire application and the other subparts of question 7, were not "so plain and intelligible that any applicant can readily comprehend" that they sought disclosure of the condition involved in this case and the treatment therefor (see, Nadel v Manhattan Life Ins. Co., 211 AD2d 900). Ambiguities in an insurance policy must be construed against the insurer (see, Lipton, Inc. v Liberty Mut. Ins. Co., 34 NY2d 356, 361). An insurer is held to a strict standard when it is endeavoring to avoid payment on its insurance contract because of answers to inquiries or declarations which it has framed (see, Garcia v American Gen. Life Ins. Co. of N.Y., 264 AD2d 809; Dineen v General Accident Insurance Co., 126 App Div 167; see also, Japour v Ryan & Sons Agency, 215 AD2d 81 7, 818-819). An answer to an ambiguous question on an application for insurance cannot be the basis of a claim of misrepresentation by the insurer against its insured where, as here, a reasonable person in the insured's position could rationally have interpreted the question as he did (see, e.g., Nadel v Manhattan Life Ins. Co., supra; see also, Berger v Manhattan Life Ins. Co., 805 F Supp. 1097, 1104).
Whether or not a contract provision is ambiguous is a question of law to be resolved by a court (see, e.g., Van Wagner Adv. Corp. v S & M Enters ., 67 NY2d 186, 191; Sutton v East River Savings Bank, 55 NY2d 550, 554; Kailasanathan v Mysorekar, 2 34 AD2d 425). Accordingly, it was error for the court to have denied the plaintiff's cross motion for summary judgment finding that there was a question of fact as to whether the application question at issue was ambiguous. Because there was no factual issue for a jury to determine, the plaintiff's cross motion for summary judgment should have been granted.
JOY, J.P., SULLIVAN, FRIEDMANN and H. MILLER , JJ., concur.
In a subrogation action to recover benefits paid under a policy of insurance, the plaintiffs appeal from an order of the Supreme Court, Nassau County (Cozzens, J.), dated August 19, 1999, which granted the defendant's motion to dismiss the complaint and denied their cross motion for summary judgment.
ORDERED that the order is affirmed, with costs.
The plaintiffs , after settling a claim for property damage arising during a construction project, commenced this action against the defendant, the insurer of the negligent parties, to collect benefits under a general liability policy of insurance issued to the negligent parties. After issue was joined, the defendant moved to dismiss the complaint, arguing that the subject policy had been cancelled prior to the occurrence at issue and that, in any event, the policy did not provide coverage for the subject construction project because the insureds had not obtained an endorsement providing coverage for the project as required by the terms of the policy. The plaintiffs cross-moved for summary judgment, arguing that the policy cancellation was ineffective and that the defendant either waived its right to deny coverage or should be estopped from denying coverage. In the order appealed from, the Supreme Court, inter alia, dismissed the complaint . We affirm.
Although it appears that the defendant's notice of cancellation failed to comply with Insurance Law § 3426(c) and was, therefore, ineffective, it is not disputed that no specific endorsement for the subject construction project was issued. Thus, the policy did not provide coverage for the project. On the facts presented, the doctrine of waiver is not applicable, and there is no basis to conclude that the defendant should be estopped from denying coverage (see, Albert J. Schiff Assoc. v Flack, 51 NY2d 692; Indemnity Ins. Co. of N. Am. v Charter Oak Ins. Co., 235 AD2d 521; National Indem. Co. v Ryder Truck Rental, 230 AD2d 720; Hartford Ins. Group v Mello, 81 AD2d 577). Accordingly, the complaint was properly dismissed.
Plaintiff commenced this breach of contract action to recover the balance allegedly due for its work pursuant to a subcontract for the installation of precast structural concrete and the performance of masonry work in the construction of a new elementary school for defendant Enlarged City School District of Troy (hereinafter the District ) in Rensselaer County. The complaint includes a cause of action against defendant Seaboard Surety Company (hereinafter defendant) on the payment bond it issued to the District on behalf of the general contractor. Following joinder of issue, the District moved for summary judgment dismissing the complaint and all cross claims against it and defendant moved for summary judgment dismissing the complaint against it. Supreme Court granted the District's motion and denied defendant's motion. Defendant appeals from the denial of its motion.
The payment bond contains a limitations provision which includes a requirement that an action on the bond be commenced within one year of the notice of claim required by the bond. Plaintiff gave the required notice of claim in August 1996 and commenced this action in April 1998. The bond also contains a provision which requires that, within 45 days of receipt of a notice of claim, defendant shall send an answer stating the amounts that are undisputed and the basis for challenging any amounts that are disputed. Defendant promptly answered plaintiff's notice of claim with a letter stating that the claim had been referred to the general contractor for confirmation and that "[u]pon receipt of advice from our contractor, we shall notify you of our position in this matter". The letter concluded by noting that defendant reserved whatever rights and defenses were available under the bond. There was no further communication between plaintiff and defendant prior to the commencement of this action.
Conceding that it failed to commence this action within one year of the notice of claim, plaintiff opposed defendant's motion for summary judgment by claiming that it would be inequitable to enforce the contractual limitations period. In support of its argument, plaintiff relied on case law which holds that an insurer's failure to comply with a statutory notice of disclaimer requirement precludes the insurer from disclaiming regardless of whether the insured 's notice of claim was timely (see, e.g., State Farm Mut. Auto. Ins. Co. v Clift, 249 AD2d 800, 801). Assuming that defendant's failure to reject the claim within the 45-day period specified in the bond precluded it from rejecting the claim, the question of whether it would be inequitable to enforce the contractual limitations period for the commencement of an action on the bond is a separate and distinct issue. Significantly, the contractual limitations period runs from the date of the notice of claim and not from the date of the rejection of the claim.
"Evidence of communications or settlement negotiations between an insured and its insurer either before or after expiration of a limitations period contained in a policy is not, without more, sufficient to prove a waiver or estoppel * * *" ( Gilbert Frank Corp. v Federal Ins. Co., 70 NY2d 966, 968 [citations omitted]). Thus, defendant's advice to plaintiff that it would consult with the general contractor before resolving plaintiff's claim is, in and of itself, insufficient to preclude defendant from pleading the limitations defense (see, A.J. McNulty & Co. v P.J. Carlin Constr. Co., 247 AD2d 254, lv denied 92 NY2d 801); nor does defendant's delay in accepting or rejecting plaintiff's claim result in a waiver or estoppel with regard to the limitations defense (see, Carat Diamond Corp. v Underwriters at Lloyd's, London, 123 AD2d 544, 546 ). There is no evidence that defendant committed any act of fraud, deception or misrepresentation or made a request or promise upon which plaintiff relied (see, Cranesville Block Co. v Niagara Mohawk Power Corp., 175 AD2d 444, 445).
Accordingly, we conclude that plaintiff failed to meet its burden to demonstrate that it was induced by defendant not to bring its lawsuit in a timely manner (see, Cortland Paving Co. v Capitol Dist. Contrs., 111 AD2d 955), particularly in view of the nearly 20-month delay between plaintiff's last communication with defendant and the commencement of this action (see, Atkins & Dubrow v Home Indem. Co., 84 AD2d 637, affd 5 5 NY2d 859). Defendant was, therefore, entitled to summary judgment dismissing the complaint. Having so concluded, we need not reach any of the other issues raised by defendant on appeal.
Mercure, J.P., Crew III, Peters and Mugglin, JJ., concur.
ORDERED that the order is modified, on the law, with costs to defendant Seaboard Surety Company, by reversing so much thereof as denied the motion of defendant Seaboard Surety Company for summary judgment; motion granted, summary judgment awarded to said defendant and complaint dismissed against it; and, as so modified, affirmed.
In January 1997 plaintiff had homeowners' insurance coverage for his townhouse residence with defendant. Plaintiff left for Atlantic City, New Jersey, on Friday, January 17, 1997 and, upon his return to his residence five days later, observed water pouring from the first floor ceiling into the first floor and basement of his townhouse, seven or eight inches deep in some places. Plaintiff and a friend who had accompanied him to the residence immediately shut off the water and attempted to remove the water. The next morning plaintiff reported the incident to his insurance agent. Defendant 's adjuster, Scott Demarest, went to the property on Monday, January 26, 1997 with a contractor and met with Paul Buda, a public adjuster representing plaintiff. On February 3, 1997 Demarest sent a letter to Buda (copied to plaintiff) which, inter alia, advised plaintiff of his duties after a loss as set forth in his policy, requested certain documentation and requested a signed, sworn proof of loss . On February 24, 1997 Demarest received an inventory from plaintiff with his claim and estimate for structural damage and contents damage dated February 13, 1997. On March 6, 1997 Demarest and an investigator employed by defendant again inspected plaintiff's residence and took pictures. On April 15, 1997 defendant received plaintiff's proof of loss form, which was signed and sworn to on March 7, 1997, via facsimile transmission from plaintiff's public adjuster. By letter dated April 16, 1997 defendant demanded an examination under oath under the policy and "neither accept[ed] nor reject[ed] the [p]roofs of loss". On June 4, 1997 plaintiff was examined by defendant's counsel who, in a letter dated June 27, 1997, requested additional documents. Plaintiff's counsel responded by letter with enclosures on July 11, 1997. On September 24, 1997 defendant issued a written denial of plaintiff's claim.
Plaintiff commenced this action in October 1997 seeking payment of his claim and additional damages based on defendant's refusal to pay. After discovery defendant moved for summary judgment seeking dismissal of the complaint based on plaintiff's allegedly untimely proof of loss, failure to comply with policy conditions and fraud or concealment regarding his claim. In a decision addressing each of defendant's claims, Supreme Court denied defendant's motion. Defendant now appeals.
We affirm. It is well settled that an insured's failure to submit a sworn proof of loss within 60 days after receiving a demand to do so by its insurer, accompanied by blank proof of loss forms, provides a complete defense to an action for payment on an insurance policy (see, Insurance Law § ; 3407; Marino Constr. Corp. v INA Underwriters Ins. Co., 69 NY2d 798, 800; Igbara Realty Corp. v New York Prop. Ins. Underwriting Assn., 63 NY2d 201, 216). Defendant acknowledged receiving plaintiff's proof of loss by facsimile transmission on April 16, 1997, some 12 days beyond the 60-day period established by defendant's February 3, 1997 demand . In opposition to defendant's motion, however, plaintiff provided the affidavit of one of his public adjusters who averred that he had mailed (see, Ball v Allstate Ins. Co., 81 NY2d 22) the completed proof of loss forms to defendant on or about March 7, 1997, the same date in which plaintiff's notarized signature appears thereon. This creates credibility issues regarding the timeliness of the proof of loss to be resolved by the trier of fact (see, General Elec. Capital Corp. v Royal Ins. Co. of Am., 205 AD2d 396; Kravitz v Pioneer Ins. Co., 176 AD2d 430). We also note that defendant did not conclusively establish that it had supplied blank proof of loss forms with its February 3, 1997 demand letter as required by Insurance Law § 3407. This has been held to preclude an insurer from denying recovery based on a failure to timely provide a proof of loss ( see, Bailey v Nationwide Mut. Fire Ins. Co., 133 AD2d 915).
Defendant next claims that plaintiff willfully violated the cooperation clause of the insurance policy, thereby precluding recovery. An insured's willful failure to provide material and relevant documents or to submit to an examination under oath may amount to a material breach of contract which would bar recovery under an insurance policy (see , Weissberg v Royal Ins. Co., 240 AD2d 733, 734; Levy v Chubb Ins., 240 AD2d 336, 337). The insurer's burden of proving willfulness has been termed "a heavy one" (Levy v Chubb Ins., supra, at 337; see, Ausch v St. Paul Fire & Mar. Ins. Co., 125 AD2d 43, 45-4 6, lv denied 70 NY2d 610) and requires a showing that the insured's attitude "'* * * was one of willful and avowed obstruction'" (Baghaloo-White v Allstate Ins. Co., ___ AD2d ___, ___, 704 NYS2d 131, 131, quoting Physicians' Reciprocal Insurers v Keller, 243 AD2d 547, 547) involving a "pattern of noncooperation for which no reasonable excuse [is] offered" (Argento v Aetna Cas. & Sur. Co., 184 AD2d 487, 488). Supreme Court correctly determined that defendant did not meet this heavy burden as a matter of law and that questions of fact existed pertaining to the reasonableness of plaintiff's cooperation . The record reveals that plaintiff submitted to an examination under oath, supplied documents and records, proffered what he believed were reasonable substitutes for discarded documents destroyed in the January 1997 incident and attempted to explain his position regarding those items he could not, or would not, produce.
Finally, defendant argues that plaintiff committed fraud or concealed facts in his claims which violated plaintiff's obligation of good faith and fair dealing. The submission of a fraudulent or false claim by an insured seeking recovery under an insurance policy may vitiate the terms of the policy (see, Saks & Co. v Continental Ins. Co., 23 NY2d 161, 165). Defendant points out that plaintiff's proof of loss and estimate included claims for damages to the second floor of his townhouse, which plaintiff thereafter admitted was not damaged in this incident. Defendant also argues that some of the damages now claimed resulted from prior water damage incurred in 1993. Plaintiff explained that he had no records from the 1993 loss, which may have been among those destroyed and discarded as a result of the current damage, and that he did not go over the proof of loss as carefully as he should have. Supreme Court found this created a credibility issue which generally cannot be determined on a summary judgment motion (see, Ferrante v American Lung Assn., 90 NY2d 623, 631; Paynter v Moorehouse, ___ AD2d ___, 704 NYS2d 718). While aware that we have held that credibility may be determined as a matter of law when evaluating fraud or misrepresentations by a claimant under an insurance policy (see, Rickert v Travelers Ins. Co., 159 AD2d 758, 760, lv denied 76 NY2d 701), we find the general rule regarding credibility determinations more appropriate on the facts of this case and, accordingly , decline to disturb Supreme Court's order.
Cardona, P.J., Mercure, Graffeo and Rose , JJ., concur.
In an action to recover damages for breach of contract, fraud, and negligence, the plaintiffs appeal, as limited by their brief, from so much of an order of the Supreme Court, Westchester County (Fredman, J.), entered March 30, 1999, as granted those branches of the defendants' motion which were to dismiss the complaint pursuant to CPLR 3211(a)(5) and (a)(7).
ORDERED that the order is affirmed insofar as appealed from, with costs.
The plaintiffs, home builders, commenced this action against the defendants, insurance agents, to recover damages based on a denial of coverage on a claim of negligent construction asserted against the plaintiffs in a separate action commenced by the defendant Paris Mastroddi . The plaintiffs contend that the defendants assured them of "total and complete liability insurance coverage", and the failure to secure such coverage was the result of negligence and fraud, and constituted a breach of contract. The Supreme Court granted those branches of the defendants' motion which were to dismiss the complaint on the grounds that the Statute of Limitations had expired on the breach of contract and negligence causes of action, and the fraud cause of action was "inextricably related to the breach of contract claim".
The Supreme Court properly rejected the plaintiffs ' attempt to invoke the doctrine of equitable estoppel against the defendants to bar the interposition of the Statute of Limitations defense. It cannot be said that the defendants induced the plaintiffs "by fraud, misrepresentations or deception" to postpone bringing the action (Simcuski v Saeli, 44 NY2d 442; see, Davis v Smith Corp., 262 AD2d 752). While the defendant Paris Mastroddi did not commence an action against the plaintiffs until 1996, the plaintiffs became aware of the construction defect claimed by the defendants in August 1991, at which time they retained counsel, nearly 6 1/2 years prior to their commencement of this action (see, Marino v Buck, 231 AD2d 931).
The court also properly determined that the fraud cause of action cannot be independently sustained since it is inextricably related to the breach of contract and negligence causes of action (see, Clarke-Fitzpatrick, Inc. v Long Is. R. R. Co., 70 NY2d 382, 389; White of Lake George v Bell, 251 AD2d 777; Cleffi v Crescent Beach Club , 222 AD2d 642). The Statute of Limitations for a fraud cause of action may not be separately invoked (see, New York Seven-Up Bottling Co. v Dow Chem. Co., 96 AD2d 1051, affd 61 NY2d 828).
In light of our determination, we do not address the plaintiffs' remaining contentions.
JOY, J.P., FRIEDMANN, KRAUSMAN and H. MILLER, JJ., concur.
Judgment unanimously reversed on the law without costs and motion and cross motion denied. Memorandum: Supreme Court erred in granting judgment declaring that plaintiff has a duty to defend and indemnify Gerald P. Orsaeo (defendant) in the underlying personal injury action. The record establishes that defendant did not inform plaintiff of the accident that occurred on his premises until approximately seven months after he received a letter from the attorney for the plaintiff in the underlying action advising him of the occurrence. Defendant contends that the letter did not notify him that a lawsuit would be commenced against him and that, as an absentee landlord, he did not believe that he could be held liable for the accident. Because there is an issue of fact whether defendant had a reasonable belief in nonliability to support his seven-month delay in notifying plaintiff, the court erred in granting defendant’s cross motion for summary judgment (see, Matter of Travelers Ins. Co. [DeLosh], 249 AD2d 924, 924-925; Zugnoni v Travelers Ins. Cos., 179 AD2d 1033, 1033-1034; see also, Home Mut. Ins. Co. of Binghamton v Preston, 155 AD2d 932, 933, lv dismissed 75 NY2d 947). Plaintiff is not entitled to summary judgment because there is a further issue of fact whether plaintiff disclaimed liability "as soon as is reasonably possible" (Insurance Law § 3420 [d ]; see, Osterreicher v Home Mut. Ins. Co., ___ AD2d ___ [decided May 10, 2000]). (Appeal from Judgment of Supreme Court, Oneida County, Grow, J. - Declaratory Judgment.) PRESENT: PIGOTT, JR., P. J., PINE, WISNER, SCUDDER AND LAWTON , JJ.