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Coverage Pointers - Volume II, No. 17

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02/08/01:         REPUBLIC FRANKLIN INS. CO. v. L&J REALTY CORP.

New York State, Appellate Division, First Department

Pollution Exclusion Not Applicable to Fumes that Remained in Premises

The Court held that insurer owed duty to defend and indemnify insured building owner under CGL policy in claim for personal injuries caused by exposure to fumes inside building. The court found the policy’s pollution exclusion inapplicable because plaintiff in the underlying action did not allege injury attributable to pollutants that had either emanated from a source outside the building or in some manner escaped from the insureds’ premises, but rather to fumes that remained contained within the premises.

 

02/08/01:         WESTCHESTER FIRE INS. CO. v. METROPOLITAN INS. CO.

New York State, Appellate Division, First Department

Deceptive Sales Practices Not an “Occurrence”

The insured MetLife was sued in nineteen actions involving deceptive sales practices.  Claims in 18 of the actions alleged negligent hiring and supervision in that employees were trained to defraud customers into buying certain life insurance policies.  The court declared that Metlife’s various primary, umbrella and excess carriers were not obligated to defend MetLife in those 18 actions since claims to defraud do not qualify as an “occurrence” within the meaning of the policy.  Additionally, policy exclusions bar coverage for deceptive sales claims and negligent supervision claims arising from deceptive sales.  Carriers were required to defend Metlife in the nineteenth action alleging defamation -- that claim did not fall within one of the professional services exclusions.

 

02/13/01:         AMERICAN MANUFACTURERS MUTUAL INS. CO. v QUALITY KING DISTRIBUTORS, INC. 

New York State, Appellate Division, Second Department

Insurer Obligated to Indemnify Insured under “Advertising Injury” Coverage for Claim that Advertising Activities violated Trademark; Insurer Obligated to Defend Insured for All Causes of Action

Court held that insurer was obligated to defend and indemnify its insured under its CGL policy in an action by Proctor & Gamble for allegedly distributing counterfeit shampoo. The policy provided coverage for “advertising injury.”  Because the complaint alleged that the insured’s advertising activities violated Procter & Gamble's trademark, the allegations brought the claim within the protection purchased.  As the insurer was obligated to indemnify its insured for at least some of the causes of action asserted in the underlying complaint, it was also required to defend insured on all causes of action.

 

02/13/01:         CGU INSURANCE v GUADAGNO

New York State, Appellate Division, Second Department

Timely Disclaimer Provisions of Insurance Law Not Applicable where Policy does not Afford Coverage

Insurer brought action for declaration that it was not obligated to defend or indemnify its insured in an underlying action.  The insured alleged untimely disclaimer.  The court held that the insurer was not obligated to defend or indemnify as the intentional actions of the insured were clearly outside the scope of the insurance policy.  Since no coverage was created in the first instance, the timely disclaimer requirements of the Insurance Law were inapplicable.  The insurer, which issued a reservation of its right to withdraw, was not estopped from asserting the lack of coverage.

 

02/13/01:         SULGRAVE REALTY CORP. v LANDMARK INSURANCE COMPANY

New York State, Appellate Division, Second Department

Notice to Claim Adjustment Service Did Not Satisfy Notice Provisions of Policy

Court held that insurer was not obligated to defend or indemnify its insured in two underlying actions because insured failed to comply with notice provisions in policy.  Although the insured gave notice of the claims to the claims adjustment service, such notice was inadequate since there was no agency relationship between the insurer and the claim adjustment service. 

 

02/08/01:         MATTER OF ROTHERMEL v. FIDELITY and GUARANTEE INS. UNDERWRITERS, INC.

New York States Appellate Division, Third Department

Arbitrator has Discretion to Award Interest – Not the Court

Insurer sustained a fire loss and filed a proof of claim.  The parties could not come to terms as to the amount of insured’s loss and submitted the matter to an arbitrator for determination.  The insured prevailed at arbitration and made application to the court to confirm the award and to seek pre-award interest.  The trial court confirmed the arbitrator’s decision but denied an award of interest.  The Third Department affirmed finding that it was for the arbitrator to determine whether pre-award interest would be allowed.  The court is powerless to award such interest.  Even if the arbitrator committed an error of fact or of law in denying an award of interest, the courts lack authority to correct such an error.

 

02/07/01:         POTAMIANOS v. DRYDEN MUTUAL INS. CO.

New York State Supreme Court, Appellate Division, Fourth Department

Issue of Fact whether Removal of Demolished Property from Damaged Building was Safe Precludes Summary Judgment under “Civil Authority” Exclusion

Court held that summary judgment dismissing claim for damage to business property/contents on the ground that coverage for insureds’ business property was precluded under “civil authority” exclusion of the policy was improper. The insurer failed to establish that its insureds could have safely removed their property from their windstorm-damaged building before the City ordered its demolition. There was an issue of fact whether removal was unsafe or impracticable and thus whether the “proximate, efficient and dominant cause” of insureds’ property loss was the windstorm and not the City's demolition order.

 

02/07/01:         NEVIUS v. PREFERRED MUTUAL INS. CO.

New York State Supreme Court, Appellate Division, Fourth Department

Material Misrepresentation Defense fails Absent Proof that Insurer would have Rejected Application

In this action to recover the proceeds of a homeowner’s policy for fire loss, the court held that summary judgment dismissing the complaint based upon allegations that plaintiff made material misrepresentations on the application for insurance was improper.  Insurers failed to meet their burden of establishing the materiality of the misrepresentations “sufficiently to warrant the court as a matter of law in directing judgment” in their favor.  Insurers also failed to meet their burden of proof at trial, since they failed to demonstrate that knowledge of the facts misrepresented by plaintiff would have led them to reject the application.  Finally, insurers failed to meet their burden of proof at trial that the loss resulted from an act committed by or at the direction of plaintiff. “To prevail on [their] claim that [plaintiff] intentionally caused or procured the setting of the fire, [defendants were] required to demonstrate, by clear and convincing evidence, that [plaintiff] committed the acts in question.”  Insurers failed to present clear and convincing evidence demonstrating either that the fire was intentionally set or that plaintiff had a financial motive to destroy his property for the insurance proceeds.

 

02/07/01:         GALLANT v. THE TRAVELERS INS. CO.

New York State Supreme Court, Appellate Division, Fourth Department

Coverage Lost where neither Insured nor Claimant Provided Timely Notice of Accident

Plaintiffs, Canadian residents, were injured in a motor vehicle accident in Ontario when a truck owned by the insured struck the rear of their vehicle. The truck was registered in New York and insured by defendant under a policy issued by a New York agency.  Plaintiffs obtained a default judgment against the insured in an underlying personal injury action and commenced this declaratory judgment action against the insurer under Insurance Law § 3420 (a)(2).  The insurer claimed that that neither the insured nor plaintiffs provided timely notice of the accident and, thus, it was not obligated to indemnify its insured for the judgment.  The court agreed, holding that compliance with the notice provision of a liability policy is a condition precedent to coverage.  Notice to the insurer almost three years after the accident was untimely.  In determining that New York law applied, the court concluded that neither Insurance Law § 5103 (e) nor the out-of-state extensions of coverage provisions of the New York insurance policy mandate application of Canadian law. Both the statute and the policy provisions concern minimum amounts of coverage and the kinds of accidents that are covered, issues not reached unless there has been compliance with the notice provision of the insurance policy.

 

ACROSS BORDERS

 

We regularly feature cases from other jurisdictions. This week we offer cases from Washington, Massachusetts, and Texas:

 

02/15/01:         DIAZ v. NATIONAL CAR RENTAL SYSTEMS, INC.

Washington Supreme Court

Liability Insurance Purchased in Conjunction with Car Rental Deemed Primary Coverage Requiring Compliance with Washington Underinsured Statute

The Supreme Court reverses finding that the policy did not have to provide coverage in accordance with the Washington underinsured motorist statute, even though it was called Supplemental Liability Insurance. 

 

02/13/01:         116 COMMONWEALTH CONDOMINIUM TRUST v. AETNA CASUALTY & SURETY CO.

Massachusetts Supreme Judicial Court

Claim for Injunctive Relief Not Claim for "Damages" Implicating Directors & Officers Policy

A claim made against insured property owner against the adjoining property owner trust alleged that trustees wrongfully prohibited plaintiff from obtaining access to an adjoining unit and certain common areas in order to connect a gas line to his unit.  The trust forwarded the complaint to its carrier and requested coverage under its D&O policy.  The trust contended that the policy’s coverage for loss incurred by suits for “damages” was ambiguous and therefore should include the equity action.  The court saw no such ambiguity in the word “damages.”  The Commonwealth defines damages as “the word which expresses in dollars and cents the injury sustained by the plaintiff.” Even if the term were ambiguous, any ambiguity in the “Insuring Agreement” section is dispelled by the “Exclusions” section that directly follows: “This insurance does not apply to any claim . . . for anything other than money damages.”  Reading this policy language, the trust could not reasonably expect that the policy would cover an action for injunctive relief that did not seek money damages.

 

02/12/01:         UNITED STATES FIRE INS. CO. v. VILLEGAS

Fifth Circuit (following Texas law)

Plaintiff's Lawyer Liable for Conversion for Failing to Protect Workers Compensation Lien Rights

Plaintiff's lawyer represented to parties that he was protecting lien rights of compensation carrier.  Instead, he accepted a settlement that allocated insufficient funds to the carrier and directed the largest portion of the funds to parties who did not have an obligation to reimburse insurer. Court had no difficulty finding that lawyer was guilty of conversion.

 

AND IN DEFENSE . . .

 

02/13/01:         RIOS v. SMITH

New York Court of Appeals

Parent Liable to Third Party for Negligent Entrustment of a Dangerous Instrumentality to Parent's Son

New York’s highest court holds that a parent can be held liable to a third-party when the parent negligently entrusts a dangerous instrumentality to that parent’s child, and the child injures a third-party.  The court rejected arguments that a parent’s liability can only be to his or her own child.  In this case, the court left to the jury the question of whether an All Terrain Vehicle was a dangerous instrumentality.

 

 

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REPORTED DECISIONS

 

REPUBLIC FRANKLIN INS. CO. v. L&JREALTY CORP.

Order, Supreme Court, Bronx County (Kenneth Thompson, Jr., J.), entered April 18, 2000, which denied plaintiff-insurer’s motion for summary judgment declaring that it is under no obligation to defend or indemnify defendant insureds in the underlying action and to dismiss pursuant to CPLR 3211 defendants' counterclaims for bad faith denial of coverage, unanimously modified, on the law and upon a search of the record, to grant defendant insureds summary judgment declaring that, under the subject policy of insurance, plaintiff insurer must defend and indemnify them in the underlying action and to grant plaintiff insurer’s motion insofar as it seeks dismissal of defendants' counterclaims pursuant to CPLR 3211, and otherwise affirmed, without costs.

Defendant building owners and operators, during the relevant period, were insured under a general business policy issued by plaintiff that contains a pollution exclusion clause. That clause was properly found by the IAS court to be inapplicable to relieve plaintiff insurer of its obligation to defend and indemnify in the underlying personal injury action since the plaintiff in that underlying action did not allege injury attributable to a pollutant that had either emanated from a source outside the building or in some manner escaped from defendant insureds' premises, but rather to fumes that remained contained within the premises (see, Vigilant Ins. Co. v V.I. Technologies, Inc., 253 AD2d 401; see also, Cont. Cas. Co. v Rapid-Am . Corp., 80 NY2d 640, 652-655).

Plaintiff’s motion to dismiss defendants' counterclaims should, however, have been granted. In view, inter alia, of the fact that plaintiff insurer has defended the underlying personal injury action while litigating the issues respecting the scope of its obligation under the subject policy, defendants possess no sustainable claim for a bad faith denial of coverage.

WESTCHESTER FIRE INS. CO. v. METROPOLITAN LIFE INS. CO.

Orders, Supreme Court, New York County (Charles Ramos, J.), entered January 25, 2000 and August 2, 2000, which, inter alia, declared that the various primary, umbrella and excess insurers are not obligated to defendant or indemnify Metropolitan Life Insurance Co. ("MetLife" ;) in 18 underlying actions involving deceptive sales practices claims, and that Westchester Fire Insurance Co. and The North River Insurance Co. (collectively, "Westchester") must defend MetLife in a nineteenth underlying action, titled Dong Li v Metropolitan Life Insurance Co., that includes defamation claims as well as deceptive sales practices claims, unanimously affirmed, with one bill of costs payable by Metropolitan Life Insurance Co. to plaintiffs.

The claims in the 18 underlying actions that MetLife trained its employees to defraud customers into buying certain life insurance policies do not qualify as an "occurrence" within the meaning of the various policies issued to MetLife , and are therefore not covered, notwithstanding that the underlying actions include a theory of negligent hiring and supervision (see, Mount Vernon Fire Ins. Co. v Creative Hous., 88 NY2d 347, 351-352; U.S. Underwriters Ins. v Val-Blue Corp., 85 NY2d 813, 823; Fuller Co. v United States Fid. & Guar. Co., 200 AD2d 255, 259-260, lv denied 84 NY2d 806). In addition, the policies’ exclusionary clauses for professional services and insurance-related services bars coverage of the deceptive sales claims, and therefore, under the above authorities, the negligent supervision claims arising therefrom. However, the circumstances surrounding the sending of the allegedly defamatory letter in the nineteenth underlying action, Dong Li, cannot be determined from the record, and thus Westchester has not established that the defamation claim therein falls within one of its professional services exclusions.

AMERICAN MANUFACTURERS MUTUAL INS. CO. v. QUALITY KING DISTRIBUTORS INC.

In an action for a judgment declaring that the plaintiff is not obligated to defend and indemnify the defendant in an underlying action entitled Procter & Gamble Company v Quality King Distributors, pending in the United States District Court for the Eastern District of New York under Index No. CV95-3113, the defendant appeals from an order and judgment (one paper) of the Supreme Court, Suffolk County (Cohalan , J.), dated March 15, 2000, which granted the plaintiff's motion for summary judgment and declared that the plaintiff is not obligated to defend and indemnify the defendant in the underlying action and denied its cross motion for summary judgment declaring that the plaintiff has a duty to defend and indemnify the defendant in the underlying action.

ORDERED that the order and judgment is reversed, on the law, with costs, the motion is denied, the cross motion is granted, and it is declared that the plaintiff is obligated to defend and indemnify the defendant in the underlying action.

The plaintiff was the underwriter of a commercial general liability insurance policy for the benefit of the defendant, which included coverage for "advertising injury". Procter & Gamble Company (hereinafter Procter & Gamble) sued the defendant in the United States District Court for the Eastern District of New York alleging, inter alia, that the defendant distributed counterfeit "Head & Shoulders" shampoo. The defendant requested that the plaintiff defend and indemnify it under the provision of the insurance policy. The plaintiff refused, and subsequently brought this action for a declaration that it is not obligated to defend or indemnify the defendant.

If the underlying complaint contains any facts or allegations which bring the claim potentially within the protection purchased, the insurer is obligated to defend (see, Technicon Elecs. Corp. v American Home Assur. Co., 74 NY2d 6 6). Additionally, if the insurer may be obligated to indemnify the insured for at least some of the causes of action asserted in the underlying complaint, it must defend the insured on all of the causes of action asserted therein (see, Fitzpatrick v American Honda Motor Co., 78 NY2d 61). In this case, Procter & Gamble alleged that the defendant used its trademark or dress mark in connection with the defendant 's sale or advertising of the counterfeit "Head & Shoulders" shampoo. Because the allegations of the complaint expressly alleged that the defendant's advertising activities violated Procter & Gamble's trademark , the allegations potentially bring the claim within the protection purchased. Therefore, contrary to the determination of the Supreme Court, the plaintiff is obligated to defend and indemnify the defendant in the underlying action (see, Technicon Elecs. Corp. v American Home Assur. Co., supra; Allou Health & Beauty Care, Inc. v Aetna Casualty and Surety Co., 269 AD2d 478).

CGU INSURANCE v. GUADAGNO

In an action for a judgment declaring that the plaintiff is not obligated to defend or indemnify its insured, the defendant Thomas J. Guadagno, Jr., in an action entitled Teger v Guadagno, pending in the Supreme Court, Suffolk County, under Index No. 13626-96, the defendant Brett Teger appeals from (1) an order of the Supreme Court, Suffolk County (Cannavo , J.), dated December 6, 1999, which granted the plaintiff's motion for summary judgment on the complaint , and (2) a judgment of the same court, entered January 27, 2000, which declared that the plaintiff is not obligated to defend or indemnify Thomas J. Guadagno, Jr., in the underlying action. The notice of appeal from the order is deemed also to be a notice of appeal from the judgment (see, CPLR 5501[c]).

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

ORDERED that the judgment is affirmed; and it is further,

ORDERED that the respondent is awarded one bill of costs.

The appeal from the intermediate order must be dismissed because the right of direct appeal therefrom terminated with the entry of judgment in the action (see , Matter of Aho, 39 NY2d 241, 248). The issues raised on the appeal from the order are brought up for review and have been considered on the appeal from the judgment (see, CPLR 5501[a][1]).

The court correctly granted the plaintiff's motion. The intentional actions of the defendant Guadagno were clearly outside the scope of the insurance policy, which defined a coverable "occurrence" as an "accident" (see, Green Chimneys School for Little Folk v Natl. Union Fire Ins. Co. of Pittsburgh, Pa., 244 AD2d 387; Utica Fire Ins. Co. v Shelton, 226 AD2d 705, 706). Since no coverage was created in the first instance, the timely disclaimer provisions of the Insurance Law were inapplicable, and the plaintiff, which issued a reservation of its right to withdraw, was not estopped from asserting the lack of coverage (see, Matter of Worcester Ins. Co. v Bettenhauser, 95 NY2d 185; Utica Fire Ins. Co. v Shelton, supra).

KRAUSMAN , J.P., McGINITY, FEUERSTEIN and SMITH, JJ., concur.

SULGRAVE REALTY CORP. v LANDMARK INSURANCE COMPANY

In an action for a judgment declaring that the defendant Landmark Insurance Company is obligated to defend and indemnify the plaintiffs in two actions pending in the Supreme Court, Rockland County, entitled Luciano v 9-11 Park Parking Corp., Index No. 5241/94, and Luciano v Ardmore, Index No . 8411/92, the plaintiffs appeal from (1) an order of the Supreme Court, Rockland County (Bergerman, J.), dated September 22, 1999, which, inter alia, granted the motion of the defendant Landmark Insurance Company for summary judgment dismissing the complaint insofar as asserted against it, and (2) a judgment of the same court, entered November 15, 1999, which, in effect, dismissed the complaint insofar as asserted against the defendant Landmark Insurance Company and declared that the defendant Landmark Insurance Company was not obligated to defend and indemnify the plaintiffs in the underlying actions. The notice of appeal from the order is also deemed to be a notice of appeal from the judgment (see, CPLR 5501[c]).

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

ORDERED that the judgment is affirmed; and it is further,

ORDERED that the respondent is awarded one bill of costs.

The appeal from the intermediate order must be dismissed because the right of direct appeal therefrom terminated with the entry of judgment in the action (see , Matter of Aho, 39 NY2d 241, 248). The issues raised on the appeal from the order are brought up for review and have been considered on the appeal from the judgment (see, CPLR 5501[a][1]).

The defendant Landmark Insurance Company (hereinafter Landmark) established its entitlement to judgment as a matter of law, and the plaintiffs failed to raise an issue of fact requiring a trial. The insurance policy at issue, read in conjunction with the accompanying endorsements, did not contain conflicting notification provisions (see, County of Columbia v Continental Ins., 83 NY2d 618; Aguirre v City of New York, 214 AD2d 692). In addition , no agency relationship existed between Landmark and the claim adjustment service. Therefore, notice to the claim adjustment service alone did not satisfy the notification provisions of the policy (see, Hallock v State of New York, 64 NY2d 224; Osohowsky v Romaniello, 201 AD2d 473).

The plaintiffs' remaining contention is without merit.

KRAUSMAN, J.P., McGINITY, FEUERSTEIN and SMITH, JJ., concur.

ROTHERMEL v. FIDELITY AND GUARANTEE INSURANCE UNDERWRITERS INC

Appeal from an order of the Supreme Court (Dowd, J.), entered December 21, 1999 in Otsego County, which, inter alia, granted petitioner 's application pursuant to CPLR 7510 to confirm an arbitration award.

Petitioner sustained a fire loss at his law office and filed a proof of loss on April 29, 1994 with respondent, his insurance carrier. The parties could not come to terms as to the amount of petitioner's loss, and petitioner commenced an action to recover $138,400 in lost business income and $5,000 expended in completing an inventory of business personal property, together with interest, costs and disbursements. The parties ultimately agreed to submit the matter to arbitration and on March 3, 1998, the arbitrator awarded petitioner $44,058.88 as his business income loss. In March 1999 petitioner made this application to confirm the arbitration award and, in addition, for preaward interest of $16,061.25. Supreme Court confirmed the arbitrator's award and awarded petitioner interest from the date of the award to the date of payment , but denied his request for an award of preaward interest from June 29, 1994 to March 3, 1998. Petitioner appeals.

We affirm. Although petitioner has set forth various equitable and legal bases for awards of preaward interest, his analysis fails to take into account that the parties agreed that the arbitrator's award was to be given final and binding effect and that the award ultimately rendered was made "in full settlement of all claims submitted to this arbitration". Fundamentally, the question as to whether preaward interest is to be allowed is for the arbitrator to determine and , in the absence of such an allowance, the court is powerless to award such interest (see, Matter of Aetna Cas. & Sur. Co. v Rosen, 233 AD2d 499; Matter of Home Ins. Co. [Hyman], 228 AD2d 389; Matter of Gruberg [Cortell Group], 143 AD2d 39; Matter of Penco Fabrics [Louis Bogopulsky Inc.], 1 AD2d 659). Moreover, even if the arbitrator committed an error of fact or of law in denying petitioner an award of interest, Supreme Court would have lacked authority to correct such an error (see , Matter of Bay Ridge Med. Group v Health Ins. Plan of Greater N.Y., 22 AD2d 807, 807-808).

Cardona, P.J. , Crew III, Peters and Rose, JJ., concur.

POTAMIANOS v. DRYDEN MUTUAL INSURANCE COMPANY

Order insofar as appealed from unanimously reversed on the law with costs, motion denied and claim for damage to business property/contents against defendant Dryden Mutual Insurance Company reinstated. Memorandum: Supreme Court erred in granting that part of the motion of Dryden Mutual Insurance Company (defendant) for summary judgment dismissing the claim for damage to business property/contents on the ground that coverage for plaintiffs' business property was precluded under the "civil authority" exclusion of the policy. Defendant failed to establish that plaintiffs could have safely removed their property from their windstorm-damaged building before the City of Syracuse (City) ordered its demolition. There is an issue of fact whether such removal was unsafe or impracticable and thus whether the "proximate, efficient and dominant cause" of plaintiffs' property loss was the windstorm and not the City's demolition order (Album Realty Corp. v American Home Assur. Co., 80 NY2d 10 08, 1010, rearg denied 81 NY2d 784; see, Throgs Neck Bagels v GA Ins. Co. of N. Y., 241 AD2d 66, 69-70). (Appeal from Order of Supreme Court, Onondaga County, Major, J. - Summary Judgment.) PRESENT: PIGOTT, JR., P. J. , WISNER, HURLBUTT, BURNS AND LAWTON, JJ. (Filed Feb. 7, 2001.)

NEVIUS v.  PREFERRED MUTUAL INSURANCE COMPANY

Judgment unanimously affirmed without costs. Memorandum: Plaintiff commenced this action following defendants’ rejection of the fire loss claim he submitted under his homeowner’s insurance policy. Supreme Court properly denied defendants’ motion for summary judgment dismissing the complaint based upon the third affirmative defense, alleging that plaintiff made material misrepresentations on the application for insurance. Defendants failed to meet their burden of establishing the materiality of the misrepresentations "sufficiently to warrant the court as a matter of law in directing judgment" in their favor (CPLR 3212 [b]; see, Cutrone v American Gen. Life Ins. Co. of N. Y., 199 AD2d 1032, 1033). Defendants also failed to meet their burden of proof at trial with respect to that affirmative defense. Defendants failed to demonstrate that knowledge of the facts misrepresented by plaintiff would have led them to reject the application (see, Insurance Law § 3105 [b]; Campese v National Grange Mut. Ins. Co., 259 AD2d 957, 958). Defendants also failed to meet their burden of proof at trial with respect to the first affirmative defense, alleging that the loss resulted from an act committed by or at the direction of plaintiff. "To prevail on [their] claim that [plaintiff] intentionally caused or procured the setting of the fire, [defendants were] required to demonstrate, by clear and convincing evidence, that [plaintiff] committed the acts in question" (Chenango Mut. Ins. Co. v Charles, 235 AD2d 667, 668). Defendants failed to present clear and convincing evidence demonstrating either that the fire was intentionally set or that plaintiff had a financial motive to destroy his property for the insurance proceeds. Thus , the court properly granted judgment to plaintiff. (Appeal from Judgment of Supreme Court, Lewis County , Parker, J. - Contract.) PRESENT: PIGOTT, JR., P. J., GREEN, HAYES, SCUDDER AND KEHOE, JJ. (Filed Feb. 7, 2001.)

GALLANT v. THE TRAVELERS INSURANCE COMPANY

Judgment unanimously affirmed without costs. Memorandum: Supreme Court properly denied plaintiffs ’ motion for summary judgment and granted defendant’s cross motion for summary judgment, declaring that defendant does not have an obligation to indemnify its insured for the judgment obtained by plaintiffs against defendant’s insured in the underlying personal injury action. Plaintiffs are Canadian residents who were injured in a motor vehicle accident in Ontario when a truck owned by Voss Enclosures, Inc. ( Voss), a New York business, struck the rear of their vehicle. The truck was registered in New York and insured by defendant under a policy issued by a New York agency. Plaintiffs obtained a default judgment against Voss in the underlying personal injury action in New York and thereafter commenced this declaratory judgment action pursuant to Insurance Law § 3420 (a) (2). Defendant’s answer asserted as an affirmative defense that neither Voss nor plaintiffs gave defendant timely notice of the accident and asserted as a counterclaim that it is entitled to judgment declaring that it has no obligation to indemnify Voss.

 The court properly determined that New York law applies to the issue of coverage under the insurance policy (see, Matter of Allstate Ins. Co. [Stolarz], 81 NY2d 219, 226). Under New York law, compliance with the notice provision of a liability insurance policy is a condition precedent to coverage (see , White v City of New York, 81 NY2d 955, 957; see also, Matter of Metropolitan Prop. & Cas . Ins. Co. v Mancuso, 93 NY2d 487, 492), and plaintiffs do not challenge the court’s determination that notice to defendant almost three years after the accident is untimely. Thus, the court properly granted defendant judgment on its counterclaim.

 Even assuming, arguendo, that Canadian law applies, we conclude that plaintiffs ’ reliance on Ontario Motor Vehicle Insurance Act § 258 is misplaced. Although that statute provides for absolute liability of an insurer for a judgment against its insured regardless of any default by the insured, that statute applies only to Canadian judgments. Finally, contrary to plaintiffs’ contention , neither Insurance Law § 5103 (e) nor the out-of-state extensions of coverage provisions of the New York insurance policy mandate that we apply Canadian law. Both the statute and the policy provisions concern minimum amounts of coverage and the kinds of accidents that are covered, issues not reached unless there has been compliance with the notice provision of the insurance policy (cf., Dempsey v Consumers Distrib. Co., 188 AD2d 509, 509-510; Allcity Ins. Co. v Williams, 120 AD2d 1, 5). (Appeal from Judgment of Supreme Court , Erie County, Gorski, J. - Declaratory Judgment.) PRESENT: PINE, J. P., HAYES, WISNER AND LAWTON, JJ. (Filed Feb. 7, 2001.)

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