Coverage Pointers - Volume II, No. 25

New Page 1

 

06/08/01:         BENION v. ALLSTATE INS. CO.

New York State Supreme Court, Appellate Division, Fourth Department

Summary Judgment Improper where Issue of Fact Raised regarding Agent’s Authority to Receive Notice for Carrier; Bad Faith and Punitive Damages Claims Rejected

Plaintiff was injured when the vehicle in which he was a passenger was rear-ended by a vehicle registered to Wilson and operated by Brantley.  Wilson was insured by Allstate and notified his agent of the accident, but his agent erroneously mailed the forms concerning the accident to an insurance company other than Allstate.  Plaintiff commenced a personal injury action against Wilson and Brantley and, after Allstate disclaimed coverage on the ground that it did not receive timely notice of the accident, obtained a default judgment.  Wilson assigned to plaintiff “any and all interest in or rights to any and all claims or causes of action” that Wilson had against Allstate arising from the litigation in the underlying personal injury action.  Plaintiff then commenced this action seeking compensatory and punitive damages.  The court held that summary judgment was properly denied as to plaintiff’s first cause of action.  “[A] broker is normally the agent of the insured and notice to the ordinary insurance broker is not notice to the liability carrier.”  Notice to the broker will constitute such notice, however, if it is established that the broker was acting as the carrier’s agent.  Here, plaintiff submitted evidence that Allstate had informed Wilson that he should “[c]ontact [his] agent, broker, or producer of record if [he had] any questions about [his] insurance coverage”, thereby raising an issue of fact whether Allstate held the agent out as its own agent.  The second and third causes of action against Allstate were properly dismissed.  The second cause of action alleged that Allstate acted in bad faith when it disclaimed coverage.  “[I]n order to establish a prima facie case of bad faith, the plaintiff must establish that the insurer’s conduct constituted a ‘gross disregard’ of the insured’s interests . . . .  In other words, a bad-faith plaintiff must establish that the defendant insurer engaged in a pattern of behavior evincing a conscious or knowing indifference” to the interests of the insured.  Allstate met its initial burden by establishing that it had an arguable basis on which to disclaim coverage, and plaintiff failed to raise an issue of fact whether Allstate had the requisite gross disregard of Wilson’s interests.  Similarly, plaintiff’s demand for punitive damages was properly dismissed.  The court held that punitive damages may not be recovered where the defendant’s conduct does not “demonstrate such wanton dishonesty as to imply a criminal indifference to civil obligations,” which could not be demonstrated here.

 

06/08/01:         MARK MC NICHOL ENTERPRISES, INC. v. FIRST FINANCIAL INS. CO.

New York State Supreme Court, Appellate Division, Fourth Department

Assault and Battery Exclusion Bars Coverage for Barroom Brawl

Court held that tavern owner’s CGL carrier had no obligation to defend or indemnify him in an underlying action brought by a patron who was injured when she was struck in the face by a beer bottle that had been thrown during a fight.  The carrier disclaimed coverage based upon exclusions in the policy for claims “[a]rising out of assault or battery, or out of any act or omission in connection with the prevention or suppression of an assault or battery.”  The claims of negligence in the underlying action, including those for negligent supervision, were all claims “[a]rising out of assault or battery, or out of any act or omission in connection with the prevention or suppression of an assault or battery”, and thus fell within the exclusions.

 

06/08/01:         UNIVERSITY GARDEN APARTMENTS, L.P. v. NATIONWIDE MUT. INS. CO.

New York State Supreme Court, Appellate Division, Fourth Department

Direct Action against Insurer Improper in the Absence of Unsatisfied Judgment

Plaintiffs commenced this action seeking judgment declaring that defendant insurer was obligated to defend and indemnify its insured in a personal injury action brought against plaintiffs and the insured.  Based upon an order in the underlying action granting plaintiffs’ summary judgment on their indemnification claim against the insured, plaintiffs sought a declaration that the insurer was obligated to indemnify plaintiffs and to reimburse them for attorney’s fees and expenses incurred in defense of the underlying action.  The court held that the case was properly dismissed.  Plaintiffs were strangers to the insurance policy and could not maintain a direct action against the insurer to enforce the insurer’s obligation under that policy unless a judgment against its insured is rendered and remains unsatisfied.

 

06/08/01:         MATTER OF ARBITRATION BETWEEN ALLSTATE INS. CO. AND EARL

New York State Supreme Court, Appellate Division, Fourth Department

Issues of Fact concerning Timely Notice of SUM Claim and Subsequent Disclaimer preclude Summary Judgment on Application for Permanent Stay

Respondent was injured when the vehicle he was driving collided with a vehicle owned by another.  Allstate insured respondent, with supplemental uninsured motorist (SUM) coverage of $50,000 per person and $100,000 per accident.  The vehicle owner was insured by State Farm, with SUM coverage of $100,000 per person and $300,000 per accident.  Both policies required that notice and proof of a SUM claim be provided “[a]s soon as practicable”.  It was undisputed that State Farm, as the insurance carrier covering a motor vehicle occupied by the injured person at the time of the accident, was the primary SUM insurer for respondent’s claim.  It was also undisputed that, because State Farm’s SUM coverage was greater than Allstate’s, respondent was precluded from collecting under the Allstate policy if he collected under the State Farm policy. 

 

On August 14, 1997, respondent sent a letter to the tortfeasor’s insurance carrier (also Allstate) requesting the tortfeasor’s bodily injury liability limits, and placing Allsate on notice of a possible SUM claim, dependent upon the amount of the tortfeasor’s limits.  On November 9, 1998, respondent gave written notice of a SUM claim to State Farm.  By letter dated December 17, 1998, State Farm disclaimed coverage on the ground that respondent did not provide it with timely notice of the SUM claim.  When respondent made a demand for arbitration with Allstate, Allstate commenced this proceeding to permanently stay arbitration and for a determination that there was no SUM coverage available under its policy.  Respondent sought an order determining the “rights and obligations” of both insurers to provide him with SUM coverage.  Allstate and respondent contended that respondent’s notice to Allstate of the SUM claim on August 14, 1997 constituted notice to State Farm as well.  The court disagreed.  Although a copy of respondent’s letter was sent to State Farm, an insurer’s actual notice of the accident does not vitiate the requirement that the insured provide timely notice of claim for SUM benefits.  The provision that notice be given “[a]s soon as practicable” was a condition precedent to State Farm’s liability, and, in the underinsurance context, required that the “insured must give notice with reasonable promptness after the insured knew or should reasonably have known that the tortfeasor was underinsured.”  Here, the court concluded that there was an issue of fact whether respondent acted with due diligence in ascertaining the liability limits of the tortfeasor.   There was also an issue of fact whether State Farm’s notice of disclaimer of liability, made approximately five weeks after it received notice of respondent’s SUM claim, was timely.  The matter was therefore remitted for a hearing to determine whether the delay of respondent in providing State Farm with notice of his SUM claim was reasonable and, if not, whether State Farm’s notice of disclaimer of liability based on the late notice of claim was timely.

 

06/05/01:         SIMPLEXDIAM, INC. v. BROCKBANK

New York State Supreme Court, Appellate Division, First Department

Insured need not Establish Cause of Loss to Recover under All Risks Policy

Plaintiff, a wholesale jeweler, was insured under a policy providing an initial $500,000 layer of primary coverage, subject to a $25,000 deductible “each and every loss,” and a further $3.5 million layer of coverage, “excess of $500,000 each and every loss” for losses occurring during the policy term.  The policy provided coverage against “all risks of loss or damage to [the insured] property arising [from] any cause whatsoever.”  The policy had been issued with an endorsement that excepted from coverage “[u]nexplained loss, mysterious disappearance or loss or damage or shortage disclosed on taking inventory,” but that condition was deleted and replaced by an endorsement that provided, “No claim shall attach for goods missing at stock-taking in respect of which no claim has been previously notified unless the loss be proved by the Assured to be due to a peril covered by the policy.”  The insured filed a claim under the policy after it learned of an inventory shortage; however, the insured did not know how the alleged shortage occurred, if the shortage of all units occurred in the same manner, whether any single person or multiple individuals were responsible for the loss, the number of occurrences, where the units disappeared, and how many units disappeared at any one time. 

 

In this action to recover the proceeds of the policy, the excess insurers argued that the insured’s claim consisted of an unknown number of multiple “losses” or of an unknown number of multiple “occurrences,” the extent and details of which the insured would be unable to prove. Thus, the excess insurers argued that the insured would be unable to show that the $500,000 threshold had been reached for each and every one of its multiple losses. In response, the insured argued that it had submitted a single claim for the “unexplained loss” or “mysterious disappearance or loss” of the missing inventory.  The court held that the insured’s inability to prove the cause of the loss was no defense to the claim. The loss, notwithstanding that it was “unexplained” and “mysterious,” was the very risk that the insurers agreed to cover when the original endorsement was deleted and replaced.  The new endorsement covered “goods missing at stock-taking”.  To argue otherwise would re-write the policy by reinstating the policy’s exception for “unexplained loss, mysterious disappearance or loss or damage or shortage disclosed on taking inventory.”  Moreover, under an all risks policy, an insured “need not prove the cause of the loss” and “is not bound to go further and prove the exact nature of the accident or casualty which, in fact, occasioned [the] loss,” since the “very purpose of an all risks policy is to protect the insured where it is difficult to explain the disappearance of the property.”  The court rejected the insurer’s argument that, in cases of unexplained loss or mysterious disappearance, the burden is on the insured to identify the number of occurrences and the amount of loss per occurrence.  It would render coverage for such risks as unexplained loss, mysterious disappearance or inventory shortage illusory. Thus, the court held that for purposes of determining the $500,000 threshold, the insured sustained one loss as a result of the inventory shortages.

 

06/04/01:         CITY OF NEW YORK v. NORTHERN INS. CO. OF NEW YORK

New York State Supreme Court, Appellate Division, Second Department

Late Notice Defense Lost where Insurer’s Disclaimer is Untimely

The court held that an additional insured under a policy issued by defendant was entitled to a defense and indemnification in an underlying action, notwithstanding the insured’s unexplained 16-month delay in providing notice of the occurrence.  The insurer’s two-month delay in disclaiming coverage was unreasonable as a matter of law, and its attempt to justify the delay on the ground that it had to investigate whether the City was an additional insured was insufficient excuse.  The investigation was unrelated to the reason for the disclaimer and could have been asserted at any time.

 

05/29/01:         COMMISSIONERS OF THE STATE INS. FUND v. AETNA CASUALTY & SURETY

New York State Supreme Court, Appellate Division, First Department

Umbrella Policy Not Triggered Where Underlying Policy Affords Unlimited Coverage

The court held that an umbrella policy was not triggered where an underlying policy provided unlimited coverage.  In this case, the employers’ liability coverage, provided by an underlying policy issued by the State Insurance Fund, was unlimited.  The umbrella policy stated that it provided coverage for a loss of the insured in excess of the “applicable underlying limit,” defined as “the amount of insurance stated in the policies of ‘underlying insurance’ in the declarations or any other available insurance less the amount by which any aggregate limit so stated has been reduced solely due to payment of claims.”  Although the State Insurance Fund was not listed in the umbrella policy’s schedule of underlying insurance, it came within the policy’s definition of ‘underlying insurance,’ because the term is defined in the policy to encompass both the policies listed in the schedule of underlying insurance and “[a]ny other insurance available to the insured.”

 

05/29/01:         85-10 34TH AVENUE APARTMENT CORP. v. NATIONWIDE MUT. INS. CO.

New York State Supreme Court, Appellate Division, Second Department

No Coverage Afforded under Directors and Officers Errors or Omissions Liability Endorsement where Directors and Officers not named in Suit

Co-op purchased a policy of insurance containing a “Directors and Officers Errors or Omissions Liability Endorsement” from the defendant, which provided for defense and indemnification for any loss arising from a claim made against an officer or director of the Co-op.  The Co-op was sued in an action which sought a judgment that one was the holder of “unsold shares” in an apartment she leased from the Co-op, and alleged that the Co-op's Board of Directors refused to allow her to sublease the apartment.  The court held that the Co-op was not entitled to defense and indemnification under the endorsement. The “Directors and Officers Errors or Omissions Liability Endorsement” expressly limited recovery to those instances where an officer or director is entitled to indemnification from the corporation, or where an officer or director is obligated to pay an amount based upon his legal liability for an actual or asserted wrongful act. Here, no such showing could be made, since no directors or officers were named as defendants in the underlying action.

 

05/29/01:         HAND v. BONURA

New York State Supreme Court, Appellate Division, Second Department

Serious Injury Threshold: Plaintiff’s Case Dismissed where Physician’s Affirmation based on Exam conducted Three Years Earlier

The court held that plaintiff failed to raise an issue of fact whether he sustained a serious injury within the meaning of Insurance Law §5102(d).  The affirmation of the plaintiff’s physician submitted in opposition to the defendants’ motions for summary judgment was based on an examination of the plaintiff conducted over three years before the motions were made. The projections of permanent limitations contained in the affirmation had no probative value in the absence of a recent exam.  The affirmation also failed to state what, if any, objective tests were performed to determine the range of motion of the plaintiff's spine.  Finally, plaintiff’s statement that he was unable to return to work for four months following the accident was not supported by any competent medical evidence.

 

ACROSS BORDERS

 

06/07/01:         ST. PAUL REINSURANCE CO., INC. v. IRONS

Arkansas Supreme Court

Double Your Pleasure, Double Your Fun -- Arkansas Sanctions Double Recovery for Property Loss

Buy two policies, get two payouts -- an insurer is required to pay the full face value of an insurance policy, as provided under Arkansas's valued-policy statute, codified at Ark. Code Ann. § 23-88-101 where the insured obtained two separate insurance policies for one insurable interest. It would be against public policy to enforce "other insurance clause" which provides for pro-ration of coverage.  Section 23-88-101(a) provides:

 

In case of a total loss by fire or natural disaster of the [real] property insured, a property insurance policy other than for flood and earthquake insurance shall be held and considered to be a liquidated demand against the company taking the risk for the full amount stated in the policy or the full amount upon which the company charges, collects, or receives a premium.

 

06/07/01:         DOUGLAS v. ADAMS TRUCKING CO., INC.

Arkansas Supreme Court

But Arkansas Draws the Line Where Liability Carrier Made Advance Payments to Injured Plaintiff

Liability insurer made advance payments to injured party for wages and benefits. After verdict, plaintiff argued that he never agreed that these payments were to offset recovery he may have in lawsuit. Court holds that the trial judge did not err in allowing credit for the advance payments. Keating accepted advances from the corporate Defendant's insurer, endorsed the drafts of payment, and received credit for his medical expenses with full knowledge of both the source and purpose of these advances. These payments were made during the two and one-half year lapse between the date of injury and date of verdict, thereby undoubtedly sparing Plaintiff the economic pressure which otherwise may have caused him to settle out of court to his disadvantage. Even if Plaintiff had received no judgment for his claim, he would have benefited to the extent of the payments received in advance.

 

AND IN DEFENSE

 

06/07/01:         532 MADISON AVENUE GOURMET FOODS, INC. v. FINLANDIA CENTER, INC.

New York Court of Appeals

Economic Loss Claims for Building Collapse cannot be maintained in Absence of Bodily or Property Damage

After building collapse, NYC streets were closed causing economic losses to businesses in affected areas.  Claims by businesses on those streets against landowner cannot be pursued, holds the New York high court. A landowner who engages in activities that may cause injury to persons on adjoining premises surely owes those persons a duty to take reasonable precautions to avoid injuring them. However, a landowner does not owe a duty to protect an entire urban neighborhood against purely economic losses. Similarly, property owners who suffered same economic losses as others in the neighborhood cannot sue for public nuisance.

 

06/07/01:         DARBY v. COMPAGNIE NATIONAL AIR FRANCE

New York Court of Appeals

Surf's Up? So What? Innkeeper has No Obligation to Warn Guests About Riptides and Dangerous Conditions at Nearby Beaches Over Which Hotel has No Control

Even providing towel and transportation services does not make the hotel the insurer of its guests’ safety at a locale over which it has no control.  Moreover, that the hotel chose to warn its guests of the risks of sun exposure and crime does not create any duty to warn against hazards of the sea.

 

 

Hurwitz & Fine, P.C. is a full-service law firm
providing legal services throughout the State of New York.


Newsletter Editor

Kevin T. Merriman
[email protected]

 

Insurance Coverage Team
Dan D. Kohane, Team Leader
[email protected]
Sheldon Hurwitz
Carolyn M. Henry
Kevin T. Merriman

 

Fire, First Party & Subrogation Team

James D. Gauthier, Team Leader
[email protected]
Donna L. Burden
Andrea Schillaci
Jody E. Briandi


 

© COPYRIGHT 2001 Hurwitz & Fine, P.C., ALL RIGHTS RESERVED.

 

REPORTED DECISIONS

 

SIMPLEXDIAM, INC. v. BROCKBANK

SULLIVAN, P.J.

This is an appeal by an excess insurer affording $3.5 million of additional coverage, "excess of $500,000 each and every loss," under a conventional all risks jewelers block insurance policy, from the denial of its motion for summary judgment dismissing the complaint for failure to show a loss in excess of the $500,000 threshold necessary to trigger its obligation to pay. The alleged insurable loss, calculated at $1,687,779, is based on an inventory loss that took place over a nine-month period.

Plaintiff Simplexdiam, Inc. (Simplex), a Manhattan based wholesale jeweler specializing in diamond rings, pendants, bracelets and chains, was insured under a Lloyd's policy providing an initial $500,000 layer of primary coverage, subject to a $25,000 deductible "each and every loss," underwritten by twelve syndicates, and a further $3.5 million layer of coverage, "excess of $500,000 each and every loss" for losses occurring during the policy term, underwritten by 12 syndicates, many of which also participated in the primary layer. The policy provided coverage against "all risks of loss or damage to [the insured] property arising [from] any cause whatsoever," subject to certain exceptions not relevant here.

Although a policy condition (Clause 5 [Condition M]) excepts from coverage "[u]nexplained loss, mysterious disappearance or loss or damage or shortage disclosed on taking inventory," that condition was deleted and replaced, at Simplex's request, by an endorsement entitled "Clause 5 (Conditions) M," which provided a much narrower exception. It read, "No claim shall attach for goods missing at stock-taking in respect of which no claim has been previously notified unless the loss be proved by the Assured to be due to a peril covered by the policy."

The facts underlying this lawsuit are as follows. Simplex conducted its last fully reconciled inventory before the loss in question in September l995. In December l995 and January l996, it began to notice that certain items were missing. A "rough inventory" conducted in late January 1996 but never completed was necessarily inconclusive. Toward the end of February l996, Simplex's president, although believing that the problem was a logistical one, involving perhaps a breakdown in the company's internal inventory procedures and one not likely to lead to an insurance claim, informed Simplex's long-time insurance broker of his concerns. When it became apparent in mid-March that the missing inventory still could not be explained, Simplex's broker, on March 15 and again on April 3, 1996, notified a representative of the insurers of the problem and the potential for a claim. The insurers thereafter arranged for the appointment of an adjuster to investigate the matter.

In April 1996, Simplex attempted a further inventory, which proved unsatisfactory. With the assistance of forensic accountants retained by the insurers, Simplex conducted two further inventories, one in May and the other in June l996. The latter, the more comprehensive of the two, was the basis of the detailed itemized claim submitted to the insurers on September l8, l996. That inventory conducted on June 28, l996 showed a shortage of 12,814 pieces with an inventory value of $1,892,412. According to the methodology utilized by Simplex, not an issue on this appeal, these items mysteriously disappeared in the nine-month period between the September l995 and the June 28, l996 physical inventories. Simplex does not deny that it does not know how the shortage occurred or precisely when the jewelry disappeared.

After receiving Simplex's itemized claim, the insurers' forensic accountants embarked on an extensive 16-month review of Simplex's inventory records. On December 22, 1997, partly as a result of the assessment of the claim by the insurers' accountants, Simplex submitted a revised claim for 12,469 pieces valued at $1,712,779, reflecting its net loss. The insurers have refused to pay any part of the claim, prompting the commencement of this lawsuit. In its complaint, Simplex asserts two causes of action, one for breach of contract and the other for breach of an implied covenant of good faith and fair dealing based, in part, on the insurers' refusal, without a showing that the loss was not covered by the policy, to pay the claim.

In their answer, the insurers pleaded four affirmative defenses including that the loss claimed is due to "sabotage, theft, conversion or other act or omission of a dishonest character" on the part of Simplex or its employees, an exclusion under the policy. Although lack of timely notice of claim under another policy provision is asserted as an affirmative defense, the limited coverage exception for inventory loss contained in the substituted Clause 5 based on prior notification is not pleaded as a defense to the claim. Nor was it the basis of the summary judgment motion. As noted, Simplex did give prior notice of the possibility of a stock shortage before its inventory loss was determined. Thus, the "unexplained loss" or "mysterious disappearance or loss" of Simplex's inventory is not an occurrence excepted from coverage.

The insurers moved for summary judgment on three grounds, only one of which, Simplex's alleged inability to establish that it has sustained a loss that exceeds the $25,000 deductible requirement of the primary policy or the $500,000 threshold of the excess policy, was raised on this appeal. Simply stated, the insurers argued that Simplex's claim consists of an unknown number of multiple "losses" or of an unknown number of multiple "occurrences," the extent and details of which Simplex would be unable to prove. Thus, Simplex could not prove in the case of each and every loss that the $25,000 deductible was exhausted so as to qualify for coverage under the primary layer of insurance. Similarly, the excess insurers argued that Simplex would be unable to show that the $500,000 threshold had been reached for each and every one of its multiple losses. In response, Simplex argued that it had submitted a single claim for the "unexplained loss" or "mysterious disappearance or loss" of the missing inventory.

Finding that there were issues of fact with respect to the timeliness of Simplex's notification of claim and as to its lack of cooperation in the insurers' investigation, the other two issues raised by the insurers' summary judgment motion, the IAS court denied the motion. The court also held, without elaboration, that "[t]he remainder of [the insurers'] contentions regarding the deductibility threshold have been considered, and are found to be insufficient grounds for summary judgment." The insurers limited their notice of appeal to "the issue of the ... threshold." Subsequent to the filing of the insurers' brief, Simplex settled its claim against the primary insurers for $477,500, rendering academic the issue as to the application of the $25,000 deductible for each and every loss under the primary layer of coverage. The issue as to the application of the $500,000 threshold for each and every loss as it applies to the excess layer of coverage remains an open issue on appeal, the excess insurers taking the position that Simplex cannot meet its burden of showing that any of the losses for which it seeks indemnification reaches the excess policy's $500,000 threshold for "each and every loss."

It is axiomatic that the insured has the burden to show that the loss for which it seeks indemnification is covered. (Lavine v Indemnity Ins. Co. of N.A., 260 NY 399, 410; Throgs Neck Bagels, Inc. v GA Ins. Co. of New York, 241 AD2d 66, 70-71.) In order to recover under an all-risk policy, the insured must show a "fortuitous" loss of the covered property. (Vasile v Hartford Acc. & Ind. Co., 213 AD2d 541; In re Balfour MacLaine Int'l Ltd., 85 F3d 68, 77 [2nd Cir].) To justify an award of damages, the insured must prove the nature, extent and amount of its loss under the policy to a reasonable degree of certainty. (Harbor House Condominium Assoc., et al v Massachusetts Bay Ins. Co., 915 F2d 316 [7th Cir].)

The excess insurers' argument is grounded in the assertion that Simplex does not know how the alleged shortage occurred, if the shortage of all units occurred in the same manner, whether any single person or multiple individuals were responsible for the loss, the number of occurrences, where the units disappeared, and how many units disappeared at one time. This is undisputed. Despite an extensive investigation over the course of several years, the details as to how and when the jewelry found missing at the taking of inventory came to be lost is still unknown. That circumstance, however, is no defense to Simplex's claim. The loss, notwithstanding that it is "unexplained" and "mysterious," is the very risk that the insurers agreed to cover when the original condition (M), which excepted such loss from coverage, was deleted and replaced by the endorsement known as "Clause 5 (Conditions) M." The latter covers "goods missing at stock-taking" as long as notice of the claim has been previously given. As already indicated, notice of the possibility of an inventory loss was given here and the excess insurers do not claim otherwise. As a matter of fact, the insurers acted on such notice and engaged an adjuster to investigate the matter.

By arguing that each item of missing jewelry constitutes a separate and discrete loss and that because Simplex cannot explain the circumstances of each occurrence it cannot prove a claim above the excess threshold, the excess insurers totally ignore "Clause 5 (Conditions) M" and would, in effect, re-write the policy by reinstating the policy condition's exception for "unexplained loss, mysterious disappearance or loss or damage or shortage disclosed on taking inventory." This they cannot do. An insurance contract should not be read so that its provisions are rendered meaningless. (County of Columbia v Continental Ins. Co., 83 NY2d 618, 628). "[W]henever an insurer wishes to exclude certain coverage from its policy obligations, it must do so 'in clear and unmistakable' language." (Seaboard Surety Co. v Gillette Co., 64 NY2d 304, 311, quoting Kratzenstein v Western Assur. Co., 116 NY 54, 59.) The policy at issue contains no exceptions excluding unexplained loss or mysterious disappearance from coverage.

Moreover, in pressing their multiple loss argument, the excess insurers ignore well-settled law. Under an all risks policy an insured "need not prove the cause of the loss" (In re Balfour MacLaine Int'l Ltd., supra, 85 F3d at 77) and "is not bound to go further and prove the exact nature of the accident or casualty which, in fact, occasioned [the] loss" (id. at 77-78 [citation omitted]). "The very purpose of an all risks policy is to protect the insured where it is difficult to explain the disappearance of the property; thus, the insured need not establish the cause of the loss as part of its case." (Great Northern Ins. Co. v Dayco Corp., 637 F Supp 765, 777, citing Atlantic Lines Ltd. v American Motorists Ins. Co., 547 F2d 11, 13 [2nd Cir].)

The excess insurers' argument that, in cases of unexplained loss or mysterious disappearance, the burden is on the insured to identify the number of occurrences and the amount of loss per occurrence finds no support in the precedents. Were such an argument accepted, it would render coverage for such risks as unexplained loss, mysterious disappearance or inventory shortage for the most part illusory. Thus, we hold that for purposes of determining the $500,000 threshold, Simplex sustained one loss as a result of the inventory shortages for which it has submitted a $1,712,779 claim.

Accordingly, the order of the Supreme Court, New York County (Barry Cozier, J.), entered September 6, 2000, which denied defendant Robin Calquhour Duncan Todd's motion for summary judgment dismissing the complaint, should be affirmed, with costs and disbursements.

All concur.

COMMISSIONERS OF THE STATE INS. FUND v. AETNA CASUALTY & SURETY

Order and judgment (one paper), Supreme Court, New York County (Barbara Kapnick, J.), entered on or about December 8, 1999, which granted plaintiff's motion for reargument of a prior order (same Court and Justice) dated March 6, 1998, and upon reargument, granted plaintiff's motion for summary judgment declaring defendant's obligation to indemnify in the underlying action, unanimously reversed, on the law, without costs, plaintiff's motion for summary judgment denied, defendant's cross motion for summary judgment granted, and judgment entered in favor of defendant declaring that the subject policy of insurance does not provide coverage in the underlying action.

Defendant's umbrella policy states that it provides coverage for a loss of the insured in excess of the "applicable underlying limit," defined as, inter alia, "the amount of insurance stated in the policies of 'underlying insurance' in the Declarations or any other available insurance less the amount by which any aggregate limit so stated has been reduced solely due to payment of claims." Although the State Insurance Fund is not listed in the umbrella policy's schedule of underlying insurance, it comes within the policy's definition of "underlying insurance," because this term is defined in the policy to encompass both the policies listed in the schedule of underlying insurance and "[a]ny other insurance available to the insured." Because the State Insurance Fund's coverage is unlimited, the Aetna umbrella policy has not been triggered in this case.

Contrary to the IAS court's finding, the language of the Aetna policy distinguishes this case from State Ins. Fund v International Ins. Co., (251 AD2d 86, lv denied 92 NY2d 816) ("International"). In International, the policy at issue erroneously listed the State Insurance Fund in its schedule of underlying insurance as having a limit of $100,000, and we found that "it [did] not avail defendant that plaintiff's employers' liability policy ... may in fact have provided coverage that was unlimited" (id. at 87). Here, by contrast, the State Insurance Fund is not listed in the policy's schedule of underlying insurance. Thus, the unambiguous terms of this contract require that the State Insurance Fund be exhausted before the Aetna umbrella policy is triggered (see, United States Fid. & Guar. Co. v Annunziata, 67 NY2d 229). Because it is undisputed that the State Insurance Fund provides unlimited coverage, the Aetna umbrella policy was not implicated here.

Finally, neither Insurance Law § 3420(d), the statutory provision requiring a timely disclaimer of coverage, nor principles of waiver or estoppel preclude Aetna from denying coverage. No notice of disclaimer is required where, as here, the policy at issue does not provide coverage for the loss (Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195; Schiff Assocs. v Flack, 51 NY2d 692, 698; Tantillo v United States Fidelity & Guarantee Co., 155 AD2d 970; Empire Mut. Ins. Co. v Fleischman, 106 AD2d 295).

 

CITY OF NEW YORK v. NORTHERN INS. CO. OF NEW YORK

In an action, inter alia, for a judgment declaring that the defendant is obligated to defend and indemnify the plaintiff in an underlying personal injury action entitled Caldas v City of New York pending in the Supreme Court, New York County, under Index No. 127092/94, the plaintiff appeals, as limited by its brief, from so much of an order of the Supreme Court, Kings County (Bruno, J.), dated March 27, 2000, as denied its motion for summary judgment, and the defendant cross-appeals, as limited by its brief, from so much of the same order as denied its cross motion for summary judgment.

ORDERED that the order is reversed insofar as appealed from, on the law, the motion is granted, and the matter is remitted to the Supreme Court, Kings County, for the entry of a judgment declaring that the defendant is obligated to defend and, if necessary, indemnify the plaintiff and reimburse the plaintiff for all past defense costs in the underlying personal injury action; and it is further,

ORDERED that the order is affirmed insofar as cross-appealed from; and it is further,

ORDERED that the plaintiff is awarded by one bill of costs.

The plaintiff, the City of New York (hereinafter the City), as an additional insured of the defendant, Northern Insurance Company of New York (hereinafter Northern), made a claim under the insurance policy at issue. The City's notice showed that it was aware of the occurrence for over 16 months before notifying Northern, and the City offered no excuse for the failure to notify Northern earlier. As a result, Northern disclaimed coverage.

However, Northern's two-month delay in disclaiming coverage was unreasonable as a matter of law, as the ground for the disclaimer was obvious on the face of the City's notice of claim. Northern's attempt to justify its delay in disclaiming coverage on the ground that it had to investigate whether the City was an additional insured is, in this instance, an insufficient excuse as a matter of law, as such an investigation was unrelated to the reason for the disclaimer and could have been asserted at any time. Thus, the City should have been granted summary judgment (see, Mount Vernon Fire Ins. Co. v Gatesington Equities, 204 AD2d 419; cf., 2540 Assocs. v Assicurazioni Generali, 271 AD2d 282; see also, Zappone v Home Ins. Co., 55 NY2d 131).

Since this is an action for a declaratory judgment, the matter is remitted for the entry of a judgment declaring that Northern is obligated to defend and, if necessary, indemnify the City and to reimburse it for all past defense costs in the underlying personal injury action (see, Lanza v Wagner, 11 NY2d 317, 334, appeal dismissed 371 US 74, cert denied 371 US 901).

The parties' remaining contentions are either without merit or need not be reached in light of this determination.

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

85-10 34TH AVENUE APARTMENT CORP. v. NATIONWIDE MUT. INS. CO.

In an action for a judgment declaring that the defendant is obligated to defend and indemnify the plaintiff in an underlying action entitled Maliner-Colvin v 85-10 34th Ave. Apt. Corp., pending in the Supreme Court, Queens County, under Index No. 10381/96, the plaintiff appeals (1) from an order of the Supreme Court, Queens County (Dye, J.), dated February 10, 2000, which denied its motion for summary judgment and granted the defendant's cross motion for summary judgment declaring that it is not obligated to defend or indemnify the plaintiff in the underlying action, and (2), as limited by its brief, from so much of an order of the same court entered August 2, 2000, as, upon reargument, adhered to the original determination.

ORDERED that the appeal from the order dated February 10, 2000, is dismissed, as that order was superseded by the order entered August 2, 2000, made upon reargument; and it is further,

ORDERED that the order entered August 2, 2000, is affirmed insofar as appealed from; and it is further,

ORDERED that the defendant is awarded one bill of costs.

The plaintiff, 85-10 34th Avenue Apartment Corporation (hereinafter the Co-op), purchased a policy of insurance containing a "Directors and Officers Errors or Omissions Liability Endorsement" from the defendant, Nationwide Mutual Insurance Company (hereinafter Nationwide), which provided for defense and indemnification for any loss arising from a claim made against an officer or director of the Co-op.

Subsequently, the Co-op was sued in an action entitled Maliner-Colvin v 85-10 34th Ave. Apt. Corp., which sought, inter alia, a judgment that Susan R. Maliner-Colvin was the holder of "unsold shares" in an apartment she leased from the Co-op. Ms. Maliner-Colvin alleged that the Co-op's Board of Directors refused to allow her to sublease the apartment. However, no directors or officers were named as defendants in the action. The Co-op submitted the claim to Nationwide, which disclaimed coverage. Thereafter, the Co-op instituted the instant declaratory judgment action. The Supreme Court concluded that the Co-op is not entitled to defense and indemnification. We agree.

The "Directors and Officers Errors or Omissions Liability Endorsement" expressly limits recovery to those instances where an officer or director is entitled to indemnification from the corporation, or where an officer or director is obligated to pay an amount based upon his legal liability for an actual or asserted wrongful act. Here, no such showing can be made, since no directors or officers were named as defendants in the underlying action. Therefore, the Co-op is not entitled to defense and indemnification under the endorsement (see, Buckingham Apts. v Liberty Mut. Ins. Co., 124 AD2d 774).

The Co-op's argument advanced in its motion, inter alia, to reargue, that it is entitled to coverage under the commercial liability endorsement, was not properly before the Supreme Court as it was not raised in the original motion papers (see, CPLR 2221[d]; Pistolesi v North Country Ins. Co., 210 AD2d 961).

KRAUSMAN, J.P., S. MILLER, McGINITY and SCHMIDT, JJ., concur. 

HAND v. BONURA

 

In related actions to recover damages for personal injuries, the plaintiff in Action No. 2 appeals from an order of the Supreme Court, Nassau County (Warshawsky, J.), dated October 13, 2000, which granted the separate motions of the defendants in Action No. 2 for summary judgment dismissing the complaint in that action insofar as asserted against them.

ORDERED that the order is affirmed, with costs to the respondent Michael Hand.

The respondents established, prima facie, their entitlement to judgment as a matter of law. In opposition, the appellant failed to raise an issue of fact as to whether he sustained a serious injury within the meaning of Insurance Law - 5102(d) (see, Gaddy v Eyler, 79 NY2d 955). The affirmation of the plaintiff's physician submitted in opposition to the defendants' motions was based on an examination of the plaintiff conducted over three years before those motions were made. The projections of permanent limitations contained therein have no probative value in the absence of a recent examination (see, Bidetto v Williams, 276 AD2d 516; Mohamed v Dhanasar, 273 AD2d 451; Kauderer v Penta, 261 AD2d 365; Evans v Mohammad, 243 AD2d 604). Furthermore, the affirmation failed to state what, if any, objective tests were performed to determine the range of motion of the plaintiff's spine (see, Monaco v Davenport, 277 AD2d 209; Grossman v Wright, 268 AD2d 79, 85; Smith v Askew, 264 AD2d 834; Kauderer v Penta, supra; Lobo v Singh, 259 AD2d 523). Moreover, the plaintiff's statement that he was unable to return to work for four months following the accident was not supported by any competent medical evidence that he was unable to perform substantially all of his daily activities for not less than 90 of the first 180 days as a result of the accident (see, Sainte-Aime v Ho, 274 AD2d 569; Jackson v New York City Tr. Auth., 273 AD2d 200; Greene v Miranda, 272 AD2d 441; Arshad v Gomer, 268 AD2d 450; Bennett v Reed, 263 AD2d 800; DiNunzio v County of Suffolk, 256 AD2d 498, 499).

BRACKEN, P.J., FRIEDMANN, FLORIO and H. MILLER, JJ., concur.

BENNION  v.  ALLSTATE INSURANCE COMPANY

Order unanimously modified on the law and as modified affirmed without costs in accordance with the following Memorandum:  Plaintiff was injured when the vehicle in which he was a passenger was rear-ended by a vehicle registered to Michael B. Wilson and operated by Anthony D. Brantley.  Wilson was insured by defendant, Allstate Insurance Company (Allstate), through the Rybicki Insurance Agency (Rybicki) pursuant to the New York State Assigned Risk Plan.  Wilson notified Rybicki of the accident, but Rybicki erroneously mailed the forms concerning the accident to an insurance company other than Allstate.  Plaintiff commenced a personal injury action against Wilson and Brantley and, after Allstate disclaimed coverage on the ground that it did not receive timely notice of the accident, obtained a default judgment in the amount of $900,415.  Wilson assigned to plaintiff "any and all interest in or rights to any and all claims or causes of action" that Wilson had against Allstate arising from the litigation in the underlying personal injury action.  Plaintiff then commenced this action seeking compensatory and punitive damages.

 

Contrary to the contention of Allstate, Supreme Court properly denied that part of its motion seeking summary judgment dismissing the first cause of action.  "[A] broker is normally the agent of the insured and notice to the ordinary insurance broker is not notice to the liability carrier" (Security Mut. Ins. Co. v Acker-Fitzsimons Corp., 31 NY2d 436, 442, n 3).  Notice to the broker will constitute such notice, however, if it is established that the broker was acting as the carrier’s agent (see, U.S. Delivery Sys. v National Union Fire Ins. Co. of Pittsburgh, Pa, 265 AD2d 402, 402-403; Serravillo v Sterling Ins. Co., 261 AD2d 384, 385, lv denied 95 NY2d 758).  To establish that the broker was acting as the insurer’s agent, "'[t]here must be evidence of some action on the insurer’s part, or facts from which a general authority to represent the insurer may be inferred’" (Camber, Inc. v St. Paul Surplus Lines Ins. Co., 152 AD2d 62, 66, quoting Matco Prods. v Boston Old Colony Ins. Co., 104 AD2d 793, 796; see, U.S. Delivery Sys. v National Union Fire Ins. Co. of Pittsburgh, Pa, supra, at 402-403).  Although Allstate met its initial burden of establishing its entitlement to judgment as a matter of law on the first cause of action, plaintiff submitted evidence that Allstate had informed Wilson that he should "[c]ontact [his] agent, broker, or producer of record if [he had] any questions about [his] insurance coverage", thereby raising an issue of fact whether Allstate held Rybicki out as its agent (see, U.S. Delivery Sys. v National Union Fire Ins. Co. of Pittsburgh, Pa, supra, at 402-403; see also, Incorporated Vil. of Pleasantville v Calvert Ins. Co., 204 AD2d 689).

           

The court erred, however, in denying that part of Allstate’s motion seeking to reduce the amount of damages sought in the first cause of action to the amount of the policy limit.  That cause of action is based on Insurance Law § 3420 (a) (2), which provides that, if a judgment against an insured remains unsatisfied for a period exceeding 30 days, an action may be maintained against the insurer "for the amount of such judgment not exceeding the amount of the applicable limit of coverage under such policy" (see also, Burgos v Allcity Ins. Co., 272 AD2d 195).  Thus, the damages sought in the first cause of action may not exceed the $25,000 policy limit (see, Atlas Feather Corp. v Pine Top Ins. Co., 128 AD2d 578, 579; see also, Valentin v City of New York, 187 AD2d 343, 345, affd 82 NY2d 281).

           

Contrary to the contention of plaintiff on his cross appeal, the court properly granted that part of Allstate’s motion seeking summary judgment dismissing the second and third causes of action.  The second cause of action alleged that Allstate acted in bad faith when it disclaimed coverage.  "[I]n order to establish a prima facie case of bad faith, the plaintiff must establish that the insurer’s conduct constituted a ‘gross disregard’ of the insured’s interests * * *.  In other words, a bad-faith plaintiff must establish that the defendant insurer engaged in a pattern of behavior evincing a conscious or knowing indifference" to the interests of the insured (Pavia v State Farm Mut. Auto. Ins. Co., 82 NY2d 445, 453, rearg denied 83 NY2d 779; see, Daus v Lumbermen’s Mut. Cas. Co., 241 AD2d 665, lv denied 90 NY2d 812).  Allstate met its initial burden by establishing that it had an arguable basis on which to disclaim coverage, and plaintiff failed to raise an issue of fact whether Allstate had the requisite gross disregard of Wilson’s interests.  Based on our resolution of this issue, we need not address Allstate’s alternative basis for dismissal of the second cause of action.

           

Plaintiff’s demand for punitive damages, incorrectly pleaded as the third cause of action (see, Rocanova v Equitable Life Assur. Socy., 83 NY2d 603, 616-617; Farrell v K.J.D.E. Corp., 244 AD2d 905), was properly dismissed.  Punitive damages may not be recovered where the defendant’s conduct does not “demonstrate[] such wanton dishonesty as to imply a criminal indifference to civil obligations" (Walker v Sheldon, 10 NY2d 401, 405).  The evidence in this case "disclose[s] a serious triable issue interposed in good faith by the defendant insurance company.  Under these circumstances, punitive damages are not recoverable as a matter of law" (Botway v American Intl. Assur. Co. of N. Y., 151 AD2d 288, 290).

           

We therefore modify the order by granting that part of Allstate’s motion seeking to reduce the amount of damages sought in the first cause of action to the amount of the $25,000 policy limit.  (Appeals from Order of Supreme Court, Niagara County, Koshian, J. ‑ Summary Judgment.)  PRESENT:  PINE, J. P., HAYES, HURLBUTT, SCUDDER AND LAWTON, JJ.  (Filed June 8, 2001.)

 

MARK MC NICHOL ENTERPRISES, INC. v.  FIRST FINANCIAL INS. CO.

 

Order unanimously reversed on the law without costs, motion granted and judgment granted in accordance with the following Memorandum:  Plaintiff owns and operates a tavern in the City of Batavia.  A patron in the tavern was injured when she was struck in the face by a beer bottle that had been thrown during a fight involving several other patrons.  The patron brought an action to recover damages for her personal injuries.  Plaintiff forwarded the papers to defendant, which had issued a commercial general liability insurance policy to plaintiff, and requested that defendant defend and indemnify it in the underlying action.  Defendant refused to do so based upon exclusions in the policy for claims “[a]rising out of assault or battery, or out of any act or omission in connection with the prevention or suppression of an assault or battery.”  Supreme Court erred in denying the motion of defendant seeking summary judgment declaring that it has no duty to defend or indemnify plaintiff in the underlying personal injury action.  “[I]f no cause of action would exist but for the assault, the claim is based on assault and the exclusion applies” (Mount Vernon Fire Ins. Co. v Creative Hous., 88 NY2d 347, 350; see, U.S. Underwriters Ins. Co. v Val-Blue Corp., 85 NY2d 821, 823).  The claims of negligence in the underlying action, including those for negligent supervision, are all claims “[a]rising out of assault or battery, or out of any act or omission in connection with the prevention or suppression of an assault or battery”, and thus fall within the exclusions of the commercial general liability policy (see, Crouse W. Holding Corp. v Sphere Drake Ins. Co., 248 AD2d 932, 933, affd 92 NY2d 1017; Mount Vernon Fire Ins. Co. v Creative Hous., supra, at 351-353; U.S. Underwriters Ins. Co. v Val-Blue Corp., supra, at 823; Sphere Drake Ins. Co. v Block 7206 Corp., 265 AD2d 78, 80; Dudley’s Rest. v United Natl. Ins. Co., 247 AD2d 425, 426; Tower Ins. Co. of N. Y. v Old N. Blvd. Rest. Corp., 245 AD2d 241, 242).  Therefore, we reverse the order, grant defendant’s motion, and grant judgment in favor of defendant declaring that it has no duty to defend or indemnify plaintiff in the underlying personal injury action.  (Appeal from Order of Supreme Court, Genesee County, Notaro, J. ‑ Summary Judgment.)  PRESENT:  PIGOTT, JR., P. J., PINE, WISNER, KEHOE AND BURNS, JJ.  (Filed June 8, 2001.)

 

UNIVERSITY GARDEN APARTMENTS, L.P. v. NATIONWIDE MUTUAL INS. CO.

 

Order unanimously modified on the law and as modified affirmed without costs in accordance with the following Memorandum:  Plaintiffs commenced this action seeking judgment declaring that defendant Nationwide Insurance Company (Nationwide) is obligated to defend and indemnify Dickerson Construction, Inc. (Dickerson) in a personal injury action brought against plaintiffs and Dickerson by defendant Carey A. Michalak.  Based upon an order in the underlying action granting them summary judgment on their indemnification claim against Dickerson, which was affirmed by this Court (Michalak v University Garden Apts., 277 AD2d 1064), plaintiffs now seek judgment declaring that Nationwide is obligated to indemnify them in the underlying action and to reimburse them for attorney’s fees and expenses incurred in defense of the underlying action.

           

Supreme Court properly granted the cross motion of Nationwide for summary judgment dismissing the amended complaint against it.  Plaintiffs are strangers to the insurance policy issued to Dickerson, and they may not maintain a direct action against Nationwide to enforce Nationwide’s obligation under that policy unless a judgment against Dickerson is rendered and remains unsatisfied (see, Insurance Law § 3420 [a] [2]; [b] [2]; Abdalla v Yehia, 246 AD2d 373, 374; Hershberger v Schwartz, 198 AD2d 859, 860).  We modify the order, however, by deleting the third ordering paragraph.  (Appeal from Order of Supreme Court, Niagara County, Fricano, J. ‑ Summary Judgment.)  PRESENT:  GREEN, J. P., HAYES, HURLBUTT, SCUDDER AND LAWTON, JJ.  (Filed June 8, 2001.)

 

MATTER OF THE ARBITRATION BETWEEN ALLSTATE INSURANCE COMPANY AND EARL

 

Order and judgment unanimously reversed on the law without costs and matter remitted to Supreme Court for further proceedings in accordance with the following Memorandum:  Respondent was injured on November 29, 1995 when the vehicle he was driving, which was owned by Cynthia M. Voit, collided with a vehicle owned by Madenna Brown (tortfeasor).  At that time, respondent was insured by petitioner, Allstate Insurance Company (Allstate), with supplemental uninsured motorist (SUM) coverage of $50,000 per person and $100,000 per accident.  Voit was insured by third-party respondent, State Farm Insurance Company (State Farm), with SUM coverage of $100,000 per person and $300,000 per accident.  Both policies required that notice and proof of a SUM claim be provided “[a]s soon as practicable”.  It is undisputed that State Farm, as the insurance carrier covering a motor vehicle occupied by the injured person at the time of the accident, is the primary SUM insurer for respondent’s claim (see, 11 NYCRR 60-2.3 [f], Condition 8 [a]).  It is further undisputed that, because State Farm’s SUM coverage is greater than that provided by Allstate, respondent is precluded from collecting under the Allstate policy if he collects under the State Farm policy (see, 11 NYCRR 60-2.3 [f], Conditions 7, 8). 

           

On August 14, 1997, respondent sent a letter to the tortfeasor’s insurance carrier, which was also Allstate, requesting the tortfeasor’s bodily injury liability limits.  In that letter, respondent placed Allstate on notice of a possible SUM claim, dependent upon the amount of the tortfeasor’s liability limits.  On November 9, 1998, respondent gave written notice of a SUM claim to State Farm.  By letter dated December 17, 1998, State Farm disclaimed coverage on the ground that respondent did not provide State Farm with timely notice of the SUM claim.  Respondent made a demand for arbitration with Allstate.  Allstate then commenced this proceeding pursuant to CPLR article 75 seeking a permanent stay of arbitration and a determination that there is no SUM coverage available under its policy.  Respondent filed a response to the petition and a third-party petition against State Farm.  With respect to both Allstate and State Farm, respondent sought an order determining the “rights and obligations” of those insurers to provide him with SUM coverage.  Supreme Court denied Allstate’s petition and implicitly granted the third-party petition by determining that State Farm’s denial of benefits was valid and that respondent was not entitled to recover any SUM benefits from State Farm.  The court directed Allstate to proceed to arbitration on respondent’s SUM claim to the extent of Allstate’s remaining SUM coverage of $40,000.  We conclude that there are issues of fact whether the delay of respondent in providing State Farm with notice of his SUM claim was reasonable, and whether State Farm’s notice of disclaimer of liability was timely, and we therefore conclude that the order and judgment must be reversed and the matter remitted to Supreme Court for a hearing on those issues.

           

Allstate and respondent contend that respondent’s notice to Allstate of the SUM claim on August 14, 1997 constituted notice to State Farm as well.  We disagree.  Although a copy of respondent’s letter was sent to State Farm, the no-fault carrier, an insurer’s actual notice of the accident does not vitiate the requirement that the insured provide timely notice of his or her claim for SUM benefits (see, Matter of Nationwide Mut. Ins. Co. v Wexler, 276 AD2d 490, 491; Ciaramella v State Farm Ins. Co., 273 AD2d 831, 832; Dixon v New York Cent. Mut. Fire Ins. Co., 265 AD2d 914, 915).  In that letter, respondent requested the amount of the tortfeasor’s bodily injury coverage “in order that I might evaluate whether it may be necessary to place any other insurance carrier on notice of a possible underinsurance claim” (emphasis added).  That letter did not provide the requisite notice to State Farm.

           

The provision that notice be given “[a]s soon as practicable” was a condition precedent to State Farm’s liability (see, Matter of Metropolitan Prop. & Cas. Ins. Co. v Mancuso, 93 NY2d 487, 492).  The phrase “as soon as practicable” in the underinsurance context requires that the “insured must give notice with reasonable promptness after the insured knew or should reasonably have known that the tortfeasor was underinsured” (Matter of Metropolitan Prop. & Cas. Ins. Co. v Mancuso, supra, at 495).  Factors to consider include the seriousness and nature of the insured’s injuries and the extent of the tortfeasor’s coverage (Matter of Metropolitan Prop. & Cas. Ins. Co. v Mancuso, supra, at 493).  “The burden of establishing a reasonable excuse for the delay is upon the insured” and, “[w]here there is a credible basis to support the reason for the delay, the issue of reasonableness becomes one of fact” (Matter of Travelers Ins. Co. [DeLosh], 249 AD2d 924, 925).

           

Respondent contends that the delay from the date of the accident until July 1997 was excusable because it was not until July 1997 that he realized the seriousness of his injury.  Although respondent was seen in the emergency room on the day of the accident, he did not seek further treatment until July 1997.  At that time, an MRI revealed a tear of the glenoid labrum, requiring surgery.  We agree with respondent that it was not until July 1997 that respondent realized that he had sustained a serious injury within the meaning of the Insurance Law (see, Matter of Nationwide Ins. Co. [Brown-Young], 265 AD2d 918, 918-919; Matter of Travelers Ins. Co. [DeLosh], supra, at 925). 

           

Respondent, however, did not provide State Farm with notice of the SUM claim until 16 months later.  Respondent contends that the delay was excusable because he could not ascertain the liability limits of the tortfeasor.  Respondent bears the burden of establishing that he acted with due diligence in ascertaining the insurance status of the other vehicle (see, Matter of Nationwide Mut. Ins. Co. v Wexler, supra, at 491).  Here, although respondent requested the liability limits of the tortfeasor’s insurance coverage through Allstate in August 1997, respondent did not obtain that information until he spoke with the tortfeasor’s attorney in early November 1998.  We conclude that there is an issue of fact whether respondent acted with due diligence in ascertaining the liability limits of the tortfeasor (see, Matter of State Farm Mut. Auto. Ins. Co. [Hernandez], 275 AD2d 989; Matter of Travelers Ins. Co. [DeLosh], supra, at 926).

           

Allstate further contends that State Farm’s notice of  disclaimer of liability based on late notice was untimely.  An insurer must give written notice of a disclaimer of liability “‘as soon as is reasonably possible after it first learns of the accident or of grounds for disclaimer of liability’” (Matter of Firemen’s Fund Ins. Co. v Hopkins, 88 NY2d 836, 837, rearg denied 88 NY2d 963, quoting Hartford Ins. Co. v County of Nassau, 46 NY2d 1028, 1029, rearg denied 47 NY2d 951; see, Insurance Law § 3420 [d]).  We conclude that there is an issue of fact whether State Farm’s notice of disclaimer of liability, made approximately five weeks after it received notice of respondent’s SUM claim, was timely (see, Utica Fire Ins. Co. v Spagnolo, 221 AD2d 921, 922).

 

We therefore reverse the order and judgment and remit the matter to Supreme Court for a hearing to determine whether the delay of respondent in providing State Farm with notice of his SUM claim was reasonable and, if not, whether State Farm’s notice of disclaimer of liability based on the late notice of claim was timely.  (Appeal from Order and Judgment of Supreme Court, Erie County, Whelan, J. ‑ Arbitration.)  PRESENT:  GREEN, J. P., HAYES, WISNER, KEHOE AND LAWTON, JJ.  (Filed June 8, 2001.)

 

Newsletter Sign-up

Fill in the form to register to receive any of our free electronic newsletters: