Coverage Pointers - Volume II, No. 16
New York State Supreme Court, Appellate Division, First Department
Insurance Broker Owes No Duty of Care to Insurers
Court dismissed counterclaims for negligent misrepresentation asserted by insurers against broker finding insurance broker did not owe a duty of care to the insurers. Furthermore, the brokers did not possess knowledge superior to that of the insurers, and the brokers’ assertion that the new account would be profitable and would double the brokers’ account with the insurers was nonactionable opinion or mere puffery. The insurers’ failure to conduct their own thorough investigation into the financial stability of the proposed insured further precluded their claim of detrimental reliance on the purportedly inadequate investigation by the brokers.
New York State, Appellate Division, First Department
Physical Contact is a Condition Precedent to Arbitration for Uninsured Motorist Benefits
Claimant was injured in a one-car accident claiming that his vehicle was “cut-off” by another vehicle causing him to loss control. He made a claim for uninsured motorist benefits under his auto policy and the insurer moved to permanently stay the arbitration. The court found that the uninsured motorist endorsement to claimant’s policy required physical contact between the insured or his vehicle and the other vehicle. Physical contact is a condition precedent to an arbitration based on a "hit and run" accident and the burden of proof to demonstrate physical contact is upon the insured. In the absence of any proof of physical contact between either claimant or his vehicle and the motor vehicle which claimant claims cut him off, arbitration was properly stayed.
01/25/01: PARKER v. I.E.S.I.N.Y. CORP.
New York State Supreme Court, Appellate Division, First Department
Insurer’s Oversight deemed Sufficient Cause to Vacate Default
Plaintiff’s motion for a default judgment against defendant for failure to timely answer the complaint was properly denied where delay was caused by some oversight of the insurer and the defendant established a meritorious defense and lack of prejudice from the delay. The court held that the insurer’s negligence is akin to law office failure, which constitutes basis to vacate default and restore action.
New York State Supreme Court, Appellate Division, First Department
Exclusion in Jeweler’s Policy bars Coverage Absent Proof that Insured was “In or Upon” Vehicle at time of Theft
In an action to recover on a jeweler’s block policy, the court held that the insurer was entitled to summary judgment dismissing the complaint. The policy contained the standard exclusion for “[l]oss or damage to property while in or upon any automobile ... unless, at the time the loss or damage occurs, there is actually in or upon such vehicle, the Insured, or a person whose sole duty is to attend the vehicle.” The record disclosed no factual basis to conclude that, at the time of the theft, plaintiff’s salesman was actually “in or upon” the vehicle from which its jewelry was stolen. The exclusion, which “has consistently been given a literal construction rejecting various theories of constructive possession of the vehicle ... applies to bar recovery”.
01/18/01: KOKONIS v. HANOVER INS. CO.
New York State Supreme Court, Appellate Division, Third Department
Insurer Waives Right to Disclaim under Policy Exclusion when not asserted in Earlier Disclaimer Letter
This declaratory judgment action arises out of an auto accident in which the defendant was driving a car owned by her brother, both of whom lived with their parents at the time of the accident. Plaintiff sought a declaration that any damages in excess of the policy limits under the owner’s policy are recoverable under an umbrella policy issued to their father. The insurer had first disclaimed coverage on the ground that neither the owner nor the driver was an “insured” under the umbrella policy. Three months later, however, the insurer issued another disclaimer asserting policy exclusion as an additional basis for disclaimer. The court held that the insurer had waived its right to disclaim under the policy’s exclusion because it failed to include it as a basis for disclaimer in its earlier letter. The court declined to consider whether the owner and driver were “insureds” under the policy, as the notice of appeal was limited solely to that part of the lower court’s order denying summary judgment on the basis of the policy exclusion.
We regularly feature cases from other jurisdictions. This week we offer cases from California, New Jersey and Washington:
California Supreme Court
Carrier Has No Obligation to Pay for Damages Awarded by Environmental Agency under Environmental Statute
Despite fears that its recent ruling in Vandenberg implied an expansive interpretation of coverage for damages, the Supreme Court ruled earlier today that liability policies that insure "sums that the insured is legally obligated to pay as damages" only extend to monies that an insured is ordered to pay by a court. Further, the court ruled that an insurer has no duty to indemnify a policyholder for sums that it is ordered to pay by an environmental agency by an environmental statute. Justices Kennard and Werdeger dissented, contending that this limited construction of coverage would only delay the process of cleaning up the environment.
Prepared by Michael Aylward of the Boston, Massachusetts firm Morrison, Mahoney & Miller.
01/30/01: CALFARM INS. CO. v. WOLF
California Court of Appeal
Only in California -- Court concludes that the Same "Type" of Insurance is Not "Similar" Insurance
Insurance Code section 11580.2 (section 11580.2), in part, governs insurance companies in providing uninsured motorist coverage (UMC). Subdivision (c)(2) of section 11580.2 authorizes an insurer to exclude UMC for bodily injury of its insured if the insured is in, upon, entering into, or alighting from, a motor vehicle that is not described in the insured’s auto policy and the owner of that vehicle “has insurance similar to that provided in this section.” The court concludes that where the insured has $100,000 in UMC and the owner of the non-described vehicle has $30,000 in UMC, the owner does not have “insurance similar to that provided in this section.” Consequently, the exclusion authorized by subdivision (c)(2) of section 11580.2 does not apply, and affirms the judgment.
01/29/01: PROGRESSIVE CASUALTY INS. CO. v. HURLEY
New Jersey Supreme Court
Court held the meaning of the phrase “[y]ou or any family member” in the UM endorsement of Progressive's business automobile policy is readily susceptible of several interpretations. Because some of those interpretations are favorable to the insured and others to the insurer, the interpretations favoring coverage should be applied. Moreover, Progressive's policy is interpreted “to accord with the objectively reasonable expectations of the insured.” An average policyholder reasonably could have concluded that the designated drivers were personally entitled to UM benefits. UM endorsements containing family member language should not be appended to business automobile insurance policies because policyholders are left to speculate about their meaning and purpose.
01/25/01: GODFREY v. HARTFORD CASUALTY INS. CO.
Washington State Supreme Court
John and Gertrude Godfrey obtained a $165,000 arbitration award against their insurer, Hartford Casualty Insurance Company (Hartford) from a three-member arbitration panel in an uninsured/underinsured motorist (UIM) claim. Pursuant to the Hartford policy, the arbitration panel decision on liability was final, but either party could seek a trial de novo in court on damages if dissatisfied with the panel's decision. Where the parties submit all issues of liability and damages to an arbitration panel, Washington's Arbitration Act (Act), chapter 7.04 RCW, our code of arbitration, makes the trial de novo provision in Hartford's policy unenforceable as against public policy.
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Order, Supreme Court, New York County (Elliott Wilk, J.), entered on or about December 27, 1999, which, to the extent appealed from, as limited by the brief, granted counterclaim-defendants’ motion for summary judgment dismissing the third through sixth counterclaims, and denied counterclaim plaintiffs’ motion to amend the answer to assert a seventh counterclaim, for negligent misrepresentation, unanimously affirmed, with costs.
Counterclaim-defendants, as the insurance broker for the proposed insured, owed the insured , not counterclaim-plaintiff insurers, a duty of care (see, Am. Motorists Ins. v Salvatore, 102 AD2d 342, 345). In any event, the brokers did not possess knowledge superior to that of the insurers, and the brokers’ assertion that the new account would be profitable and would double the brokers’ account with the insurers was nonactionable opinion or mere puffery (see, Jacobs v Lewis, 261 AD2d 127). The insurers ’ failure to conduct their own thorough investigation into the financial stability of the proposed insured further precludes their claim of detrimental reliance on the purportedly inadequate investigation by the brokers (see, id.).
Order, Supreme Court , Bronx County (Anne Targum, J.), entered on or about March 27, 2000, which denied plaintiff’s motion for a default judgment against defendant Schlegel and granted defendant’s cross motion, permitting him to serve an answer to the complaint, unanimously affirmed, without costs.
While defendant Schlegel , apparently through some oversight of his insurer, failed to timely answer the complaint, he had adequately established a meritorious defense. Further, plaintiff has failed to demonstrate that he suffered prejudice as the result of the delay. Since we have held that "[u]pon a showing of a lack of prejudice and a meritorious defense, a default judgment may be vacated and the action restored despite the existence of egregious law office failure . . ." (Leary v Pou Poune, Inc., 273 AD2d 8), and since the negligence of the insurer
is akin to law office failure (see, Barajas v Toll Bros., Inc., 247 AD2d 242; Murphy v D.V. Waste Control Corp., 124 AD2d 573; Ganvey Merch. Corp . v Knudsen Elev. Corp., 169 AD2d 518), we now find that plaintiff’s motion for a default judgment against Schlegel was properly denied.
The Decision and Order of this Court entered herein on October 31, 2000, is hereby recalled and vacated. See M-7231 decided simultaneously herewith.
Order, Supreme Court, New York County (Barbara Kapnick , J.), entered on or about December 22, 1999, which, in an action to recover on a jeweler’s block policy , granted defendant insurer’s motion for summary judgment dismissing the complaint, unanimously affirmed , without costs.
Summary judgment was properly granted to defendant insurer since the subject policy contained the standard exclusion for "[l]oss or damage to property while in or upon any automobile ... unless, at the time the loss or damage occurs, there is actually in or upon such vehicle, the Insured , or a person whose sole duty is to attend the vehicle", and the record discloses no factual basis to conclude that, at the time of the theft, plaintiff’s salesman was actually "in or upon" the vehicle from which its jewelry was stolen. The subject exclusion, which "has consistently been given a literal construction rejecting various theories of constructive possession of the vehicle ... applies to bar recovery" in this case (Cardova, Inc. v Lloyd’s Underwriters, 228 AD2d 179, lv denied 89 NY2d 802; Royce Furs v Home Ins. Co., 30 AD2d 238; Wideband Jewelry Corp. v Sun Ins. Co., 210 AD2d 220).
Appeal from that part of an order of the Supreme Court (Cobb, J.), entered October 15, 1999 in Columbia County, which denied a motion by defendant Hanover Insurance Company for summary judgment seeking to disclaim coverage for defendants Kara K. Keeler and Brennan Keeler under a certain exclusion in an insurance policy.
The origin of this declaratory judgment action is a March 1998 automobile accident. On that day, defendant Kara K. Keeler was driving a car owned by her brother, defendant Brennan Keeler, when she collided with plaintiff's motorcycle seriously injuring him. Both Kara Keeler and Brennan Keeler lived with their parents at the time of the accident . Plaintiff now seeks a declaration that any damages in excess of the policy limits under Brennan Keeler 's automobile insurance policy are recoverable under an umbrella policy issued to their father, defendant Paul J. Keeler Jr., by defendant Hanover Insurance Company.
The sole issue before this Court, as expressly limited by the notice of appeal filed by Hanover (see, CPLR 5515  ; see also, City of Mount Vernon v Mount Vernon Hous. Auth., 235 AD2d 516, 516-517), is the propriety of Supreme Court's order denying it summary judgment based on its finding that a particular disclaimer of coverage was untimely. No matter how meritorious Hanover's claim, now pressed on appeal , that neither Brennan Keeler nor Kara Keeler was an "insured" as defined under the policy , this Court is powerless to address such claim since Hanover expressly limited its notice of appeal to another issue. Hanover's notice of appeal was limited solely to that part of Supreme Court's order denying summary judgment "on the basis that the disclaimer of coverage found in exclusion nineteen (19) of the policy was untimely" (see, Clifford R. Gray Inc. v City School Dist. of Albany, ___ AD2d ___, 716 NYS2d 795; Robertson v Little Rapids Corp., ___ AD2d ___, 715 NYS2d 482; Millard v City of Ogdensburg, 274 AD2d 953; Hemmings v St. Marks Hous. Assoc., Phase II, 272 AD2d 442; Battipaglia v Barlow, 107 AD2d 1001, 1003).
Turning to the narrow issue thus presented, we find that Supreme Court properly determined that Hanover waived its right to disclaim under this particular exclusion because it failed to include it as a basis for disclaimer in an earlier disclaimer letter sent on January 6, 1999. This earlier letter stated that the disclaimer of coverage was based on its determination that neither Brennan Keeler nor Kara Keeler was an "insured" as that term is defined under the umbrella policy. Specifically, Hanover claimed that the testimony of Brennan Keeler and Kara Keeler at a December 23, 1998 examination under oath confirmed that the vehicle which Kara Keeler was driving on the day of the accident was owned by Brennan Keeler and was furnished for her regular use. As such, Hanover explained that under those circumstances , neither was an insured under their father's policy. By letter dated April 26, 1999, Hanover reaffirmed its disclaimer of coverage by reasserting that neither Brennan Keeler nor Kara Keeler was an " insured" under the policy. However, for the first time, it asserted "further support" for its disclaimer, namely, that a particular policy exclusion also precluded coverage. By failing to include this exclusion as a ground for disclaimer in the original disclaimer letter, Hanover waived any defense based on the exclusion (see, Agoado Realty Corp. v United Intl. Ins. Co., 260 AD2d 112, 118, mod 95 NY2d 141; Haslauer v North Country Adirondack Coop. Ins. Co., 237 AD2d 673, 674-675; Cain v Allstate Ins. Co., 234 AD2d 775, 776; Allstate Ins. Co. v Moon, 89 AD2d 804, 806; see also, General Acc. Ins. Group v Cirucci, 46 NY2d 862, 864).
Even if we were to find no waiver on the part of Hanover, we would nevertheless find that its disclaimer based on this exclusion was in any event untimely as a matter of law. Hanover failed to advance any justification or explanation for the delay in disclaiming on this ground (see, Hartford Ins. Co. v County of Nassau, 46 NY2d 1028; Mohawk Minden Ins. Co. v Ferry, 251 AD2d 846; Dependible Janitorial Servs. v Transcontinental Ins. Co., 212 AD2d 946, lv denied 85 NY2d 811). Since the second disclaimer letter was issued four months after Hanover deposed Brennan Keeler and Kara Keeler when it was informed of all the facts necessary to invoke the exclusion, its disclaimer on this basis was untimely (see, Hartford Ins. Co. v County of Nassua, supra; Gill v Gouchie, 210 AD2d 954, lv denied 86 NY2d 701; National Cas. Co. v Levittown Events, 191 AD2d 543; Cassara v Nationwide Mut. Ins. Co., 144 AD2d 974).
Cardona, P.J., Mercure, Peters and Spain, JJ., concur.
Order, Supreme Court, New York County (Alfred Toker, J.H.O.), entered February 4, 2000, which, after a hearing, granted respondent’s motion to lift a temporary stay and denied the petition for a permanent stay of arbitration, unanimously reversed, on the law, without costs, respondent ’s motion denied, the petition granted and a permanent stay of arbitration issued. Appeal from order , same court (Stanley Parness, J.), entered January 8, 1999, unanimously dismissed, without costs, as academic in view of the foregoing.
Respondent allegedly sustained personal injuries as a result of a motor vehicle accident in September 1997 and petitioner sought to stay arbitration of respondent ’s claim for uninsured motorist benefits in May 1998 on the ground that only respondent’s vehicle was involved. In August 1998, the IAS court granted a permanent stay on respondent’s default. Thereafter , respondent moved to vacate his default on the basis of his affidavit in which he stated that the accident was caused when his vehicle was "cut off" by another vehicle as a result of which he lost control and his vehicle left the road, striking a building. At a subsequent hearing, the investigating officer testified that there was no second vehicle involved in the accident. The uninsured motorist endorsement to respondent’s insurance policy provides for coverage for accidents caused by uninsured motor vehicles and requires physical contact between such other vehicle and either the insured or his vehicle. This endorsement mirrors the language of Insurance Law § 5217. Physical contact is a condition precedent to an arbitration based on a "hit and run" accident and the burden of proof to demonstrate physical contact is upon the insured (Atlantic Mutual Insurance Co. v Shaw, 222 AD2d 581; Allstate v Killakey, 78 NY2d 325, 329). In the absence of any proof of physical contact between either respondent or his vehicle and the motor vehicle which respondent claims cut him off, arbitration was properly stayed.