Coverage Pointers - Volume III, No. 14

 

02/07/02:            IN RE APPLICATION OF NORTH RIVER INS. CO.

New York State Supreme Court, Appellate Division, First Department

UM/UIM Endorsement that Modifies Truckers Coverage Form Affords Coverage for Accidents Anywhere in the United States; Insurer’s Participation in Arbitration Resulted in Waiver of Claim that there was No Agreement to Arbitrate

Morgan was allegedly injured when the vehicle he was driving was hit in the rear at the Queens-Midtown Tunnel toll plaza.  Morgan was employed by New Deal Delivery Service at the time of the accident, and was operating the vehicle in the course of his employment. New Deal’s principal office was located in New Jersey and the vehicle Morgan was driving was owned by New Deal and registered in New Jersey.  Morgan’s counsel forwarded a letter to North River, which had issued to New Deal a commercial “trucker’s” insurance policy, advising that the vehicle that had struck Morgan had only limited coverage from Eagle Insurance and that Morgan had a potential underinsurance motorist claim.  Thereafter, North River approved Morgan’s acceptance of Eagle’s payment in settlement of Morgan’s action against the owner of the other vehicle, which was the full amount of available insurance under Eagle’s policy.  Morgan then served North River with a demand for arbitration of his claim for SUM benefits.  In the two years that followed, North River participated in pre-hearing proceedings regarding the arbitration, and agreed that New York arbitration rules would be applied; that the third arbitrator would be selected by the American Arbitration Association; designated an arbitrator; received medical reports and records relating to the claim; and agreed to reschedule the arbitration.  North River subsequently commenced this proceeding to stay arbitration, contending that the Out-of-State Coverage Extensions Provision of the Truckers Coverage Form did not afford underinsured motorist coverage outside of New Jersey, since the coverage was optional in New York; and that the 20-day time requirement under CPLR 7503 to serve a petition to stay arbitration was inapplicable, as no agreement to arbitrate existed.

 

The Truckers Coverage Form provided, under the heading “General Conditions,” provided that the “coverage territory” was the “United States of America.”  The “Out-of-State Coverage Extensions Provision” of the Truckers Coverage Form stated that while “a covered ‘auto’ is away from the state where it is licensed we will . . . Provide the minimum amounts and types of other coverages, such as no-fault, required of out-of-state vehicles by the jurisdiction where the covered ‘auto’ is being used.”  The Truckers Coverage Form was modified by an endorsement entitled “New Jersey Uninsured/Underinsured Motorists Coverage”, which stated that North River “will pay all sums the insured is legally entitled to recover as compensatory damages [for bodily injury] from the owner or driver of an ‘uninsured motor vehicle’ or an ‘underinsured motor vehicle.’”

 

The court held that UM/UIM coverage extended to accidents occurring anywhere in the United States.  The Truckers Coverage Form, which was modified by the UM/UIM Endorsement, provided that the “coverage territory” included the entire United States.  The court concluded that nothing in the UM/UIM Endorsement modified that provision, or otherwise addressed the territorial scope of coverage.  The court also concluded that the Truckers Coverage Form's Out-of-State Coverage Extensions Provision had no relevance to the scope of the coverage afforded by the UM/UIM Endorsement – it did not indicate any intent to limit the territorial scope of coverage expressly provided by the Truckers Coverage Form, and such intent could not be inferred merely from the fact that states require minimum amounts of uninsured motorist coverage.  Finally, the court held that North River’s participation in the arbitration proceeding acted as a bar to this proceeding, notwithstanding the existence of a coverage issue because, under CPLR 7503(b), an application to stay arbitration may only be brought by a party “who has not participated in the arbitration. . . .”  North River’s participation in the arbitration by selecting an arbitrator resulted in a waiver of any objection that there was no agreement to arbitrate.

 

02/05/02:         NEW YORK CITY TRANSIT AUTHORITY v. NATIONAL UNION FIRE INS. CO.

New York State Supreme Court, Appellate Division, First Department

Insured’s Failure to Provide Timely Notice of Claim Vitiates Coverage

Court held that insured’s 27-month delay in providing notice of claim was untimely as a matter of law.  Although plaintiff maintained that delay was based on a reasonable belief that it could not be held responsible for the claim, the record disclosed that a timely investigation of the circumstances underlying the claim would have apprised the insured that such a belief was not well founded.  As such, plaintiff’s failure to satisfy this condition precedent vitiated the policy.

 

02/05/02:            EAGLE TRANSFER CORP. v. GREATER NEW YORK MUT. INS. CO.

New York State Supreme Court, Appellate Division, First Department

Insured’s Failure to Provide Timely Notice of Claim to Excess Carrier Vitiates Coverage

Court held that excess insurer was not obligated to indemnify its insured in an underlying action for personal injuries where insured had filed to give notice of the underlying action for three years.  Plaintiff had information from which it could reasonably conclude that its exposure in the underlying action was in excess of $250,000, and that it was therefore required to give defendant immediate notice when partial summary judgment on the issue of liability was granted in favor of the plaintiff in the underlying action, who was demanding $2.5 million to settle and was then deposed by plaintiff regarding the nature and extent of his injuries and resulting lost earnings.  Plaintiff failed to raise an issue of fact whether its insurance broker gave written notice of the underlying action; while evidence of a regular practice or habit is generally admissible to show conformity therewith, the cursory affidavit of the broker’s employee, who did not herself handle the claim, to the effect that it is the broker’s practice to immediately notify both the primary and excess insurer of any claim, is insufficient to counter the absence of any other proof of such notice and defendant’s database log of claim notifications indicating it never received the notice.

 

02/04/02:            MATTER OF ALLSTATE v. MOSHEVEV

New York State Supreme Court, Appellate Division, Second Department

Respondents had no Right to be Present at Each Other’s EUOs

Respondents submitted a claim to their insurance carrier after allegedly coming in contact with a hit-and-run vehicle on the Long Island Expressway.  Their insurance carrier sought to examine each of the respondents under oath, but respondents stated that they would submit to an examination only if they were allowed to be present at each of the respondents’ examinations. The insurance carrier refused, and respondents served the petitioner with a demand for arbitration under the insurance policy provision providing for arbitration in the event of contact with a hit-and-run vehicle.  The insurance carrier then commenced this proceeding for a permanent stay of arbitration or, alternatively, a temporary stay of arbitration pending a hearing on the issue of the respondents’ failure to cooperate and the issue of whether there was actual contact between the respondents’ vehicle and the hit-and-run vehicle. The respondents opposed the petition for stay and cross-moved to compel the carrier to proceed to arbitration.  The court held that respondents had no right to be present at each other’s examinations, since the examinations were requested pursuant to an insurance policy and not as part of a legal action.  The court also held that physical contact was a condition precedent to arbitration based on a hit-and-run accident and that a stay pending a hearing is the appropriate procedure when there is a triable issue of fact with regard to a condition precedent to arbitration.  Finally, respondents’ refusals to separately be examined under oath precluded the carrier from making any meaningful investigation into the facts underlying the respondents’ claim.  The matter was remitted for separate examinations and a hearing on the issue of whether the vehicle came into contact with a hit-and-run vehicle.

 

02/04/02:            IMAGE CLOTHING, INC. v. STATE NATIONAL INS. CO.

New York State Supreme Court, Appellate Division, Second Department

Wear and Tear Exclusion in Property Policy did not apply to Roof of Leased Premises

Court held that exclusionary provisions in insurance policy pertaining to “wear and tear” of plaintiff’s property did not apply to wear and tear of the roof of leased building, but only to property belonging to plaintiff.  Plaintiff, who sustained property damage by water that entered the premises due to worn roof, was entitled to recover under its policy accordingly.

 

02/04/02:            MATTER OF KEMPER INS. CO. v. AZAYEVA

New York State Supreme Court, Appellate Division, Second Department

SUM Coverage Unavailable in Single Vehicle Accident

Respondent and two others were injured when their car collided with a stationary object after the driver lost control. No other car was involved in the accident.  After the insurer of the vehicle paid the bodily injury limits of its policy to all three injured passengers, respondent demanded arbitration to collect supplementary underinsured motorist benefits (SUM) under the policy. The insurer commenced this proceeding to permanently stay arbitration.  The court held that SUM benefits were not available under the policy.  Insurance Law §3420(f)(2) provides for SUM benefits “if the limits of liability under all bodily injury liability . . . insurance policies of another motor vehicle liable for damages are in a lesser amount than the bodily injury liability insurance limits of coverage provided by such policy”. The definition of an underinsured motor vehicle in the petitioner’s insurance policy, which reflects the language of the Insurance Law, provides that the SUM coverage applies only when another, offending vehicle is inadequately insured to cover an injured claimant’s loss. Since there was no other motor vehicle involved in the accident, the respondent could not recover SUM benefits under the petitioner’s policy.  

 

02/01/02:            BUTTENSCHON v. STATE FARM MUT. AUTOMOBILE INS. CO.

New York State Supreme Court, Appellate Division, Fourth Department

Unexcused 79-Day Delay in Disclaiming Coverage Deemed Untimely

In an action seeking a declaration that defendant was required to provide SUM coverage to plaintiff, the court held that the defendant’s disclaimer of SUM coverage was untimely as a matter of law.  Plaintiff established her entitlement to judgment by establishing that the insurer failed to disclaim coverage “as soon as is reasonably possible” and the insurer failed to raise an issue of fact by providing an explanation for the 79-day delay in disclaiming coverage.

 

02/01/02:            FAHRENHOLZ v. SECURITY MUTUAL INS. CO.

New York State Supreme Court, Appellate Division, Fourth Department

Insured May Not Seek Specific Performance of Appraisal Provision in Standard Fire Policy

Court held that plaintiff could not maintain action seeking a declaration that insurer was required to submit to an appraisal pursuant to Insurance Law §3404(g).  Insurance Law §3404, in its present form, does not eliminate the prohibition against seeking specific performance of the appraisal provision in the standard fire insurance policy set forth in CPLR 7601. Further legislative action is required to eliminate that prohibition.

 

02/01/02:            AYYUB v. SMITH

New York State Supreme Court, Appellate Division, Fourth Department

Issue of Fact Whether Insurer Repudiated Claim Sufficient to Excuse Plaintiff’s Compliance with Condition Precedent to Coverage Precludes Summary Judgment

Court held that insurer’s motion for summary judgment dismissing plaintiff’s action for payment of no-fault benefits, which was based on plaintiff’s failure to appear for second medical examination, was properly denied.  Even if second examination was a condition precedent to coverage, the court concluded there was an issue of fact whether, by its actions prior to commencement of the action, the insurer “denied or repudiated the claim sufficient to excuse [plaintiffs]” from compliance with that condition precedent.  Also, the insurer failed to establish that the request for a second medical examination was reasonable under the terms of the policy.

 

01/24/02:            STASACK v. CAPITAL DISTRICT PHYSICIANS' HEALTH PLAN INC. 

New York State Supreme Court, Appellate Division, Third Department

LASIK Eye Surgery Not “Medically Necessary” under Group Health Insurance Contract Where Condition did not Interfere with Ability to Function Normally

After being informed by his treating ophthalmologist that his health insurer would not provide coverage for LASIK eye surgery, plaintiff proceeded to have the surgery without obtaining prior authorization.  Thereafter, plaintiff’s ophthalmologist submitted claim forms for services related to the surgery, which were denied.  Plaintiff commenced this action for a declaratory judgment claiming breach of contract and seeking a declaration that the health insurer was obligated under a group health insurance contract to pay for costs relating to the surgery and damages.  The court held that the procedure was not a covered medical service under the contract.  The policy excluded from coverage those services that are not “medically necessary”, which was defined by the policy as “. . . treatments needed to prevent, diagnose, correct or cure conditions in the person that cause acute suffering, endanger life resulting in illness or infirmity, interfere with such person’s ability for normal activity, or threaten a major handicap.”  On motion for summary judgment, the health insurer submitted plaintiff’s testimony, wherein plaintiff admitted his pre-surgery vision with corrective lenses was 20/20 and that there were no tasks associated with his employment that precluded him from wearing glasses.  Plaintiff also testified that with glasses he was able to see well enough that his safety was not an issue. The court concluded that this evidence was sufficient to establish that plaintiff’s condition did not interfere with his ability to function normally.  Plaintiff’s affidavit in opposition to the motion, which focused primarily on his potential inability to function normally created by the risk of his eyeglasses falling off, was insufficient to raise a question of fact.  The affidavit of his treating ophthalmologist, which contained nothing more than the conclusory assertion that plaintiff’s surgery was medically necessary to correct a functional defect, made no attempt to bring plaintiff’s surgery within the policy’s definition of “medically necessary”, rendering it insufficient to defeat defendant’s motion for summary judgment on the declaratory judgment cause of action.

 

01/22/02:            PUBLIC SERVICE MUT. INS. CO. v. COLOR WEST PHOTO INC.

New York State Supreme Court, Appellate Division, First Department

Tenant and Insurer Obligated to Defend and Indemnify Additional Insured Landlord and Real Estate Manager for Personal Injury and Property Damage Arising Out of Tenant’s Use of Premises

Court held that tenant and its liability insurer were obligated to defend and indemnify landlord and building manager in underlying actions for personal injury and property damage arising out of a fire in the building.  The insurance policy procured by tenant covered bodily injury or property damage resulting from the tenant’s ownership, maintenance or use of the leased premises if caused by “continuous or repeated exposure to substantially similar conditions”, and named as additional insureds plaintiff landlord and any person acting as the landlord’s real estate manager, covered the landlord and managing agent.  Uncontroverted evidence established that the fire started in the ceiling of the leased premises, and that the likely cause was constant heat on the ceiling joists generated by the HVAC unit used and maintained by the tenant and located in a loft that the tenant also used to store supplies.

 

01/17/02:            NEW YORK CENTRAL MUT. FIRE INS. CO. v. DANAHER

New York State Supreme Court, Appellate Division, Third Department

Insurer Not Required to Demonstrate Prejudice to Assert Defense that Claimant Failed to Preserve Subrogation Rights Under SUM Endorsement

Danaher, who was operating a vehicle owned by Jacobs and insured by plaintiff, was severely injured in a collision when a vehicle owned and operated by Dunn struck her.  Thereafter, Danaher served plaintiff with a notice of intention to make a claim under the supplementary uninsured motorist (SUM) coverage of Jacob’s policy.  Danaher’s counsel alleged that he kept “regular and ongoing contact and communication” with the insurer concerning settlement negotiations with Dunn’s liability carrier.  Danaher settled her claim against Dunn for the policy limit of Dunn’s liability coverage, and signed a general release in favor of Dunn that did not preserve plaintiff’s subrogation rights.  When Danaher notified Jacob’s insurer of the settlement, the insurer promptly disclaimed all SUM coverage because its prior written consent to the settlement was not obtained as required by the policy.  The insurer then commenced this action seeking to affirm its disclaimer of coverage.  Danaher argued that the insurer had not shown it was prejudiced by the settlement with Dunn and that plaintiff waived the requirement of consent by its express conduct.  The court disagreed.   The court held that by breaching condition 10 of the SUM endorsement, Danaher could not avail herself of coverage unless she could demonstrate that the insurer had waived the requirement of consent or acquiesced in the settlement.  Danaher’s submissions failed to raise a question of fact in this regard.  That Danaher’s counsel’s repeated requests for a copy of Jacob’s policy, made prior to the settlement, went unanswered, and the insurer’s knowledge that Danaher had asserted a claim for SUM coverage under Jacob’s policy, did not raise a question of fact as to the insurer’s waiver of condition 10.  The court also held that the insurer was not required to demonstrate prejudice to assert a defense of non-compliance and, thus, rejected Danaher’s claim that plaintiff suffered no prejudice as a result of the Dunn settlement because Dunn was judgment proof.  While Dunn’s financial condition may have had an unfavorable impact on any subrogation action, plaintiff’s subrogation rights were completely extinguished when Danaher signed the unrestricted release in the Dunn action.

 

01/17/02:            CHESTER v. MUTUAL LIFE INS. CO. OF NEW YORK

New York State Supreme Court, Appellate Division, First Department

Proceeds of Life Policy Lost for Material Misrepresentations in Policy Application

Court held that insured’s material misrepresentations in application to obtain life insurance warranted the insurer’s decision not to pay on the policy.  Although the insured’s representations that he had not been diagnosed with a tumor, had not had blood tests in the previous five years, had not had recent non-routine medical exams, and had not been advised to have surgery, were true when he completed the application, the answers were not still true on the date his first premium was paid, and he had twice agreed that payment of a premium at a later date was an additional representation that all answers given on the application were true as of the date the premium was paid.

 

01/17/02:         ARTHUR GLICK TRUCK SALES INC. v. SPADACCIA-RYAN-HAAS INC.

New York State Supreme Court, Appellate Division, Third Department

Presumption that Insured has Knowledge of Terms of Policy in its Possession Does Not Bar Claim against Agent

Plaintiffs alleged that for 10 years defendant acted as insurance agent and broker in placing various policies of property insurance, and that over the entire period, their policy limits never changed.  In 1997, however, plaintiffs’ president asked the agent to obtain alternate coverage from another company with less onerous reporting requirements.  The agent complied, obtaining new coverage from Travelers.  Travelers issued a written insurance binder showing that the limits of coverage remained exactly the same as in prior years; however, the policy was ultimately issued with lesser limits.  Plaintiffs’ president acknowledged receiving the policy but alleged he was unaware that it was issued with less coverage.  After plaintiffs’ business was destroyed by fire, this action was commenced to hold the agent liable for the difference between the limits of insurance coverage reflected in the binder and those provided in the policy.  The agent sought summary judgment claiming that plaintiffs’ receipt of the actual policy prior to the fire barred the claim as a matter of law.  The court disagreed, holding that a question of fact whether plaintiffs’ reliance on the agent’s presumed obedience to their instructions regarding the amount of insurance coverage overcame the presumption of knowledge of the terms of a policy admittedly received before the fire.  The court held that, where an agent agrees to obtain coverage, but fails to do so and neglects to give reasonable notice that such insurance has not been obtained, the agent becomes personally liable.  The general rule that an insured is presumed to know the contents of a policy in its possession is not without exception.  The circumstances of this case are sufficient to overcome the otherwise presumptive knowledge of the terms of a policy.

 

01/14/02:            HORACE MANN INS. CO. v. E.T. APPLIANCES, INC.

New York State Supreme Court, Appellate Division, Second Department

Insurer Charged with Responsibility of Preserving Crucial Evidence when on Notice it might be needed for Future Litigation; Insurer’s Subrogation Action Dismissed for Spoliation of Evidence

Plaintiffs’ home suffered extensive damage as a result of a fire, which plaintiffs’ alleged was caused by a defective kitchen stove manufactured by Frigidaire and sold by E.T. Appliances, Inc.  The stove was later examined and photographed by a professional engineer at the behest of the plaintiffs’ homeowners carrier.  In a report to the insurer, the engineer concluded, “the fire appears to be from a manufacturing defect within the electrical components or wiring within the [stove’s] control panel”.  The insurer (as subrogee) and homeowners commenced this lawsuit.  Shortly thereafter, defendants’ counsel sought to have the stove inspected, but was orally informed that it had been inadvertently destroyed.  Despite requests from defendants’ counsel, as well as a court order, plaintiffs’ counsel never confirmed in writing that the stove had been destroyed.  Ultimately, defendants moved to dismiss the complaint based upon spoliation of evidence, which Supreme Court denied.  The Appellate Division reversed, holding that “[w]hen a party alters, loses or destroys key evidence before it can be examined by the other party’s expert, the court should dismiss the pleadings of the party responsible for the spoliation.” Since the plaintiffs’ own expert concluded that the stove appeared to be the cause of the fire, they were on notice that it might be needed for future litigation, and were charged with the responsibility of preserving this crucial piece of evidence.

 

ACROSS BORDERS

 

Visit the HOT CASES section of the Federation of Defense and Corporate Counsel website for cases covering a broad range of legal issues from other jurisdictions:  www.thefederation.org.

 

02/10/02:            HARTFORD FIRE INS. CO. v. ST. PAUL SURPLUS LINES INS. CO.

Seventh Circuit

Vendor’s Endorsement Does Not Apply to Provide Protection to Company that Acquires Assets of Vendor after Product Sale

Where insured acquired the assets of pill manufacturer after pills had been sold to injured consumer, vendor endorsement in insured's liability policy correctly held not to cover pill distributor.

 

02/06/02:            AETNA CASUALTY & SURETY COMPANY v. SIMONE

New Jersey Supreme Court

No Coverage for Go-Cart Accident that Occurs off Homeowner’s Premises notwithstanding Additional Claim of Negligent Supervision on Premises

The trial court found that Aetna was not required to provide a defense to its insured, James Simone, for this incident. Vincent and his father appealed. The Appellate Division affirmed the decision of the trial court, finding the language of the policy clear and unambiguous. The Appellate Division found that there is no coverage for an occurrence or accident causing an injury in an owned go-cart that takes place off the insured location. The court reasoned that the occurrence that triggers the liability coverage is an accident that results in a bodily injury claim, not a particular type of careless conduct by the insured. The court noted that the duty to defend depends on the facts of the case and not the allegations in the complaint. Since there is no coverage in fact, the Appellate Division held that Aetna had no duty to defend James Simone in the tort action. Judgment of the Appellate Division is affirmed substantially for the reasons expressed in the opinion below. Based on the clear and unambiguous language of the homeowners policy, there is no coverage for an accident causing bodily injury in the insured’s go-cart while off the insured’s premises.

 

02/01/02:            JONES v. SECURA INSURANCE

Wisconsin Supreme Court

Wisconsin Broadens Right of Recovery in First-Party Bad Faith Cases

After reviewing the development of the tort of bad faith in Wisconsin, court concludes that the circuit court’s order prohibiting the plaintiffs from attempting to collect any damages otherwise recoverable under a breach of contract claim was an erroneous exercise of discretion.  Although it agrees with the circuit court’s conclusion that the tort of bad faith is a separate cause of action from breach of contract, the absence of a valid breach of contract claim does not prohibit the plaintiffs from pursuing certain damages in a bad faith claim.  When an insurer acts in bad faith by denying benefits, it is liable to the insured in tort for any damages that are the proximate result of that conduct.  Accordingly, it concludes that the plaintiffs are entitled to pursue any damages that are the proximate result of the defendant’s alleged bad faith, including damages that were otherwise recoverable in a breach of an insurance contract claim.

 

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REPORTED DECISIONS

 

NEW YORK CENTRAL MUT. FIRE INS. CO. v. DANAHER

 

Cross appeals from an order of the Supreme Court (Meddaugh, J.), entered December 22, 2000 in Sullivan County, which, inter alia, denied plaintiff's motion for summary judgment.

 

Defendant was severely injured in an August 1998 head-on collision when she was struck by a vehicle owned and operated by Grace Dunn while operating a vehicle owned by Edward Jacobs and insured by plaintiff. In January 1999, defendant served plaintiff with a notice of intention to make a claim under the supplementary uninsured motorist (hereinafter SUM) coverage portion of the liability insurance policy it issued to Jacobs. Defendant's counsel alleges that he thereafter kept "regular and ongoing contact and communication"  with plaintiff concerning the settlement negotiations with Dunn's liability carrier. In June 1999, defendant settled her claim against Dunn for $ 100,000, the policy limit of Dunn's liability coverage. The general release n1 executed in favor of Dunn did not preserve by express limitation plaintiff's subrogation rights.

 

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n1 The general release is not part of the record on appeal, but there is no dispute that the release did not provide for a reservation of plaintiff's subrogation rights.

 

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When defendant notified plaintiff of the settlement, plaintiff promptly disclaimed all SUM coverage because its prior written consent to the settlement was not obtained as required by the policy. n2 Plaintiff then commenced this action by summary judgment in lieu of complaint pursuant to CPLR 3213 n3 seeking to affirm its disclaimer of coverage. Defendant argued that plaintiff has not shown that it was prejudiced by her settlement with Dunn and that plaintiff waived the requirement of consent by its express conduct. Supreme Court rejected defendant's argument that plaintiff must demonstrate that it was prejudiced by defendant's settlement with Dunn in order to assert noncompliance with the policy provision requiring its prior written consent as a condition precedent to underinsured motorist coverage, but found a question of fact "whether the plaintiff, by its conduct, waived the issue of consent", prompting

 appeals from both parties.

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n2 Condition 10 of the SUM endorsement provides, in pertinent part, as follows:

 

An insured shall not otherwise settle with any negligent party without our written consent, such that our rights would be impaired.

 

n3 After the matter was transferred from Westchester County to Sullivan County, Supreme Court determined that the action was inappropriate for treatment under CPLR 3213 and it therefore denied the motion on that basis. Instead of dismissing the action, however, the court proceeded to decide the merits of plaintiff's summary judgment motion since the issues had been fully submitted by the parties.

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By breaching condition 10 of the SUM coverage portion of the subject insurance policy, defendant is disqualified from availing herself of the benefits of the underinsured coverage provided under that policy unless she can demonstrate that plaintiff, by its conduct, waived the requirement of consent or acquiesced in the settlement (see, Matter of Allstate Ins. Co. [Liberati], 280 A.D.2d 922; Matter of New York Cent. Mut. Fire Ins. Co. [Cavanagh], 265 A.D.2d 787, 788, lv denied 94 N.Y.2d 760). Initially, we disagree with Supreme Court that defendant's submissions raised a question of fact whether plaintiff, by its conduct, waived the issue of consent. The fact that defense counsel's repeated telephonic requests for a copy of Jacob's insurance policy, made prior to the Dunn settlement, went unanswered, and plaintiff's knowledge that defendant had asserted a claim under the SUM provision of Jacob's policy do not, in our opinion, raise a question of fact as to plaintiff's waiver of condition 10 of the SUM endorsement (see, Matter of New York Cent. Mut. Fire Ins. Co. [Cavanagh] , supra, at 789). Nor do we agree that Le Corre v Bijesse Belford Dolewski & De Micio (269 A.D.2d 569) relied upon by Supreme Court, is fully on point with the case at bar, since the "policy language of the underinsurance rider" in that case (id., at 571) did not require the insurer's prior written consent n4 to the third-party settlement.

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n4 The automobile liability policy in Le Corre was issued prior to June 17, 1992, the filing date of 11 NYCRR 60-2.3 (f), which requires every SUM endorsement issued in the State to contain, inter alia, the following language:

 

CONDITIONS

 

* * *

 

10. Release or advance:

 

* * *

 

An insured shall not otherwise settle with any negligent party, without our written consent, such that our rights would be impaired.

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As to defendant's cross appeal, we do agree with Supreme Court that plaintiff "is not required to demonstrate prejudice to assert a defense of non-compliance". We also find defendant's claim, that plaintiff suffered no prejudice as a result of the Dunn settlement because Dunn was judgment proof, insufficient to meet her burden of establishing such claim (see, Weinberg v Transamerica Ins. Co., 62 N.Y.2d 379, 382-383, 477 N.Y.S.2d 99, 465 N.E.2d 819; Matter of Allstate Ins. Co. [Brown], ___ A.D.2d ___, 732 N.Y.S.2d 612). While Dunn's financial condition may have had an unfavorable impact on any subrogation action, plaintiff's subrogation rights were completely extinguished when defendant signed the unrestricted release in the Dunn action in June 1999.

 

Cardona, P.J., Peters, Spain and Mugglin, JJ., concur.

 

ORDERED that the order is modified, on the law, without costs, by reversing so much thereof as denied plaintiff's motion for summary judgment; motion granted and defendant is declared to have no rights to supplementary uninsured motorist coverage under plaintiff's liability insurance policy insuring Edward Jacob's vehicle; and, as so modified, affirmed.

 

CHESTER v. MUTUAL LIFE INS. CO. OF NEW YORK

 

Order and judgment (one paper), Supreme Court, New York County (Barry Cozier, J.), entered November 20, 2000, which, insofar as appealed from, granted defendant insurer's motion for summary judgment dismissing the complaint and denied plaintiff's motion for summary judgment against defendant insurer, unanimously affirmed, without costs.

 

Plaintiff's decedent, the insured, an attorney, represented in his application to obtain life insurance from defendant, inter alia, that he had not been diagnosed with a tumor, had not had blood tests in the previous five years, had not had recent non-routine medical exams, and had not been advised to have surgery. Despite his twice agreeing that payment of the premium at a later date would necessarily be a representation that all answers given on his application would be the same on that later date, the insured failed to inform the insurer that none of these representations was still true on the date his first premium was paid. Based on an appropriate affidavit from the insurer's underwriter and excerpts from its underwriting guidelines, the motion court properly found, as a matter of law, that the insured had made material misrepresentations, warranting its decision to decline to pay on the policy (see, Kroski v Long Is. Sav. Bank FSB, 261 A.D.2d 136, 689 N.Y.S.2d 92; see also, Gorra v New York Life Ins. Co., 276 A.D.2d 469, 470, 714 N.Y.S.2d 85). Plaintiff did not raise a triable issue as to waiver, since she offered no evidence of a clear manifestation of intent by the insurer to abandon its right to assert a defense (see, Sulner v G.A. Ins. Co., 224 A.D.2d 205, 206, 637 N.Y.S.2d 144, lv denied, 88 N.Y.2d 805). The motion court properly found that plaintiff's decedent had not prejudicially relied on the insurer's delivery of the policy, justifying rejection of plaintiff's estoppel claim (see, e.g., Fairmont Funding Ltd. v Utica Mut. Ins. Co., 264 A.D.2d 581, 582, 694 N.Y.S.2d 389). Further, there was no evidence of actual conduct by the insurer affirmatively lulling plaintiff or her decedent into inaction (see, Aabco Sheet Metal Co. v Seven W. 34th St. Dev. Corp., 220 A.D.2d 229, 632 N.Y.S.2d 3).

 

ARTHUR GLICK TRUCK SALES INC. v. SPADACCIA-RYAN-HAAS INC.

 

Appeal from an order of the Supreme Court (Ledina, J.), entered April 4, 2001 in Sullivan County, which, inter alia, partially denied a motion by defendant Spadaccia-Ryan-Haas Inc. for summary judgment dismissing the complaint against it.

 

Plaintiffs, owners and operators of a retail automobile and truck dealership, allege that for the better part of 10 years, beginning in 1989 or 1990, defendant Spadaccia-Ryan-Haas Inc. (hereinafter defendant) acted as their insurance agent and broker in placing various policies of property insurance. According to plaintiffs, for "every single year" in that time period their policy limits "never changed". Documentary evidence in the record confirms that for policy periods January 1996 through January 1997 and January 1997 through January 1998, defendant procured insurance policies for plaintiffs containing coverages and limits consistent with defendant's own prior written recommendations (i.e., $ 800,000 on plaintiffs' commercial building, $ 550,000 for their business personal property and $ 450,000 for loss of business income).

 

Midway in this latter policy period, however, plaintiffs' president, dissatisfied with the issuing company's monthly reporting requirements, asked defendant to obtain alternate coverage from another company with less onerous reporting requirements. Defendant complied, obtaining new coverage from defendant Travelers Insurance Company effective June 1, 1997. Notably, on a written insurance binder issued by defendant, the limits of coverage remained exactly the same as in prior years (i.e., $ 800,000 on plaintiffs' building, $ 550,000 for contents and $ 450,000 for business income). Notwithstanding these amounts of coverage as specifically reflected on this binder, the policy was ultimately issued with lesser limits, namely, only $ 700,000 on the building, $500,000 for business personal property and $ 300,000 for loss of business

 income. While plaintiffs' president acknowledges receiving the policy in November or December 1997 (defendant claims that it was mailed in September 1997), he alleges that he was unaware that it was issued with coverages less than defendant's past written proposals, less than plaintiffs' prior years' policies and, most importantly, less than the June 1997 binder. On January 31, 1998, plaintiffs' business was destroyed by fire.

 

In this action grounded generally in theories of breach of contract and negligence, plaintiffs seek to hold defendant liable for the difference between the limits of insurance coverage reflected in the binder and those provided in the policy. Defendant sought summary judgment claiming that plaintiffs' receipt of the actual policy prior to the fire barred such a claim as a matter of law. Supreme Court found a question of fact as to whether plaintiffs' reliance on defendant's presumed obedience to their instructions regarding the amount of insurance coverage overcame the presumption of knowledge of the terms of a policy admittedly received by them prior to the fire. We agree with Supreme Court's analysis and, accordingly, affirm.

 

It is now well settled "that insurance agents have a common-law duty to obtain requested coverage for their clients within a reasonable time or inform the client of the inability to do so" (Murphy v Kuhn, 90 N.Y.2d 266, 270, 660 N.Y.S.2d 371, 682 N.E.2d 972). Where an agent agrees to obtain coverage but "'* * * fails to do so and neglects to give reasonable notice that such insurance has not been obtained, the agent becomes personally liable'" (Humphrey & Vandervoort v C-Kitchens, Inc., 198 A.D.2d 840, 842, 604 N.Y.S.2d 415, quoting Riedman Agency v Meaott Constr. Corp., 90 A.D.2d 963, 964, 456 N.Y.S.2d 553, appeal dismissed 58 N.Y.2d 824). Here, there are sufficient facts to establish an agreement between plaintiffs and defendant that the latter would obtain insurance coverage in specific amounts. Moreover, it is undisputed that defendant knew that a binder had been issued to plaintiffs with specific coverages yet never informed plaintiffs that this binder was itself inaccurate n1 or that the policy was issued with limits different than those recited in the binder.

 

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n1 Defendant claims that the binder was issued "by mistake" in that it was erroneously issued with the insurance limits of the policy it was replacing even though the agent knew that the replacement policy was for lesser limits.

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None of the many cases cited by defendant in support of the general proposition that receipt of an insurance policy constitutes "conclusive, presumptive knowledge" of the terms of the policy (see, e.g., M & E Mfg. Co. v Frank H. Reis, Inc., 258 A.D.2d 9, 692 N.Y.S.2d 191; Madhvani v Sheehan, 234 A.D.2d 652, 650 N.Y.S.2d 490; Lieberthal v Agency Ins. Brokers, 216 A.D.2d 816, 628 N.Y.S.2d 885) are analogous to the facts of this case where plaintiffs may have been misled by defendant's conduct as to the amount of policy limits. Notably, the general rule that an insured is presumed to know the contents of a policy in its possession is not without exception (see, Metzger v Aetna Ins. Co., 227 NY 411, 125 N.E. 814; Brownstein v Travelers Cos., 235 A.D.2d 811, 652 N.Y.S.2d 812). Under the circumstances of this case, we find no basis to distinguish between the affirmative misrepresentation by an insurance agent regarding policy coverages in Kyes v Northbrook Prop. & Cas. Ins. Co. (278 A.D.2d 736, 717 N.Y.S.2d 757) and the failure to correct a clear misimpression created by defendant's issuance of a binder in the case at bar. Either circumstance is sufficient to overcome the otherwise presumptive knowledge of the terms of a policy received by the insured.

 

Mercure, J.P., Crew III, Mugglin and Rose, JJ., concur.

 

ORDERED that the order is affirmed, with costs.

 

HORACE MANN INS. CO. v. E.T. APPLIANCES, INC.

 

In an action, inter alia, to recover damages for breach of contract, the defendants E.T. Appliances, Inc., d/b/a J's Payless Discount Appliance and Frigidaire appeal from an order of the of Supreme Court, Suffolk County (Kitson, J.), dated November 20, 2000, which denied their motion to dismiss the complaint insofar as asserted against them on the ground of spoliation of evidence.

 

ORDERED that the order is reversed, on the law, with costs, the motion is granted, the complaint is dismissed insofar as asserted against the appellants, and the action against the remaining defendants is severed.

 

In March 1994 the home of the plaintiffs John and Linda Knapp suffered extensive damage as a result of a fire. The plaintiffs allege that the fire was caused by a defective kitchen stove which was manufactured by the defendant Frigidaire and sold by the defendant E.T. Appliances, Inc., d/b/a J's Payless Discount Appliance. In December 1994 and January 1995 the stove was examined and photographed by a professional engineer at the behest of the plaintiff Horace Mann Insurance Company, which issued a homeowners policy on the Knapp home covering the premises at the time of the fire. In a report to the insurer, dated January 28, 1995, the engineer concluded that "the fire appears to be from a manufacturing defect within the electrical components or wiring within the [stove's] control panel".

 

In January 1996 Horace Mann Insurance Company, as subrogee of the Knapps, and the Knapps individually, commenced this lawsuit. Shortly thereafter, the appellants' counsel sought to have the stove inspected, but was orally informed that it had been inadvertently destroyed. However, despite requests from the appellants' counsel, as well as a directive in the preliminary conference order, the plaintiffs' counsel never confirmed in writing that the stove had been destroyed. Ultimately, the appellants moved to dismiss the complaint based upon spoliation of evidence. The Supreme Court denied the motion holding, in part, that "it was not persuaded that the destruction [of the stove] would make it extremely difficult or impossible to prepare a defense". We reverse.

 

Although the determination of spoliation sanctions is within the broad discretion of the Supreme Court, under the circumstances of this case, the appellants' motion to dismiss the complaint insofar as asserted against them should be granted. "When a party alters, loses or destroys key evidence before it can be examined by the other party's expert, the court should dismiss the pleadings of the party responsible for the spoliation" (Squitieri v City of New York, 248 A.D.2d 201, 202, 669 N.Y.S.2d 589). Here, in light of the fact that the plaintiffs' own expert concluded that the stove appeared to be the cause of the fire, thus putting them on notice that it might be needed for future litigation, the plaintiffs were charged with the responsibility of preserving this crucial piece of evidence (see, Kirkland v New York City Hous. Auth., 236 A.D.2d 170, 666 N.Y.S.2d 609; see also, Yi Min Ren v Professional Steam Cleaning, 271 A.D.2d 602, 706 N.Y.S.2d 169). Furthermore, contrary to the Supreme Court's conclusion, the loss of the stove is prejudicial to the appellants' ability to present a viable defense (see, Fairclough v Hugo, 207 A.D.2d 707, 616 N.Y.S.2d 944).

 

Accordingly, the appellants are entitled to dismissal of the complaint insofar as asserted against them based upon spoliation of evidence (see, Kirkland v New York City Hous. Auth., supra).

 

SANTUCCI, J.P., O'BRIEN, H. MILLER and COZIER, JJ., concur.

 

FAHRENHOLZ v. SECURITY MUTUAL INS. CO.

 

It is hereby ORDERED that the order so appealed from be and the same hereby is unanimously affirmed without costs.

 

Memorandum: We affirm, for reasons stated in the decision at Supreme Court (Fahey, J.), the order granting that part of the cross motion of defendant Security Mutual Insurance Company (Security Mutual) seeking dismissal of the second cause of action. In that cause of action, plaintiff sought a declaration that Security Mutual is required to submit to an appraisal pursuant to Insurance Law @ 3404(g). We add only that Insurance Law @ 3404, in its present form, does not eliminate the prohibition against seeking specific performance of the appraisal provision in the standard fire insurance policy set forth in CPLR 7601. Further legislative action is required to eliminate that prohibition.

 

AYYUB v. SMITH

 

It is hereby ORDERED that the order so appealed from be and the same hereby is unanimously affirmed with costs.

 

Memorandum: Rukhsana Ayyub (plaintiff) was injured when she was struck by a motor vehicle operated by defendant Julie Ann Smith. After plaintiffs commenced this action seeking payment on their claim for no-fault benefits, CGU Insurance Company (defendant), Smith's insurer, requested a second medical examination of plaintiff. Supreme Court properly denied the cross motion of defendant seeking summary judgment dismissing the complaint against it based upon plaintiff's refusal to submit to that examination. Even assuming, arguendo, that  the second examination is a condition precedent to coverage, we conclude that there is an issue of fact whether, by its actions prior to the commencement of the action, defendant "denied or repudiated the claim sufficient to excuse [plaintiffs]" from compliance with that condition precedent (Raymond v Allstate Ins. Co., 94 A.D.2d 301, 464 N.Y.S.2d 155; see, Lentini Bros. Moving & Stor. Co. v New York Prop. Ins. Underwriting Assn., 53 N.Y.2d 835, 836, 440 N.Y.S.2d 174, 422 N.E.2d 819; Beckley v Otsego County Farmers Coop. Fire Ins. Co., 3 A.D.2d 190, 194, 159 N.Y.S.2d 270, lv dismissed 2 N.Y.2d 990). Furthermore, defendant failed to establish in support of its cross motion that the request for a second medical examination was reasonable under the terms of the policy.

 

BUTTENSCHON v. STATE FARM MUT. AUTOMOBILE INS. CO.

 

Appeal and cross appeal from an order of Supreme Court, Jefferson County (Gilbert, J.), entered November 29, 2000, which, inter alia, denied plaintiff's motion for summary judgment.

 

It is hereby ORDERED that the order so appealed from be and the same hereby is unanimously modified on the law by granting the motion, dismissing the second affirmative defense and granting judgment in favor of plaintiff as follows:

 

It is ADJUDGED and DECLARED that defendant is required to provide supplementary uninsured motorist coverage to plaintiff and as modified the order is affirmed with costs to plaintiff.

 

Memorandum: Plaintiff commenced this declaratory judgment action seeking a declaration that defendant is required to provide supplementary uninsured motorist (SUM) coverage to plaintiff. Plaintiff moved, inter alia, for summary judgment on the grounds that she had provided timely notice of her claim for such coverage and that defendant's disclaimer of SUM coverage was untimely as a matter of law. Defendant cross-moved, inter alia, for summary judgment

 dismissing the complaint on the ground that plaintiff failed to provide timely notice of her claim. Supreme Court denied the motion and cross motion, determining that there was an issue of fact whether plaintiff had a reasonable excuse for her delay in providing notice. We conclude that the court erred in denying plaintiff's motion. Plaintiff established her entitlement to judgment as a matter of law by establishing that defendant failed to disclaim coverage "as soon as is reasonably possible" (Hartford Ins. Co. v County of Nassau, 46 N.Y.2d 1028, 1029, 416 N.Y.S.2d 539, 389 N.E.2d 1061, rearg denied 47 N.Y.2d 951), and defendant failed to raise an issue of fact by providing an explanation for the 79-day delay in disclaiming coverage. Defendant therefore is precluded from disclaiming SUM coverage (see, Hartford Ins. Co. v County of Nassau, supra, at 1029-1030). "A disclaimer without explanation made more than two months after a demand for coverage is untimely as a matter of law" (Nuzzo v Griffin  Technology, 222 A.D.2d 184, 188, 643 N.Y.S.2d 802, lv dismissed 89 N.Y.2d 981, lv denied 91 N.Y.2d 802). Thus, we modify the order by granting plaintiff's motion, dismissing the second affirmative defense and granting judgment in favor of plaintiff declaring that defendant is required to provide SUM coverage to

plaintiff.

 

STASACK v. CAPITAL DISTRICT PHYSICIANS' HEALTH PLAN INC. 

 

Appeal from an order of the Supreme Court (Canfield, J.), entered January 9, 2001 in Rensselaer County, which, inter alia, granted defendant's motion for summary judgment dismissing the complaint.

 

After being informed by his treating ophthalmologist that defendant was unlikely to provide coverage for his LASIK eye surgery, n1 plaintiff, without contacting defendant for prior authorization, paid LCA Vision Laser Associates $4,900 and proceeded to have the surgery performed. As a result of the surgery, plaintiff's distance vision was improved to 20/20 from 20/400, but he continued to require corrective lenses to read. Thereafter, plaintiff's ophthalmologist submitted claim forms for services related to the surgery totaling $ 2,000, and when defendant did not pay the claims, plaintiff commenced this action for a declaratory judgment claiming a breach of contract and seeking a declaration that defendant is obligated under the parties' group health insurance contract to pay for costs relating to plaintiff's surgery and damages in the amount of $ 5,000. n2 Following joinder of issue and certain discovery, each party moved separately for summary judgment. Supreme Court denied plaintiff's motion, granted defendant's motion and dismissed the complaint, finding that plaintiff had failed to demonstrate that the surgery was medically necessary and that he did not obtain the requisite prior approval from defendant before having the surgery performed at a nonparticipating provider. The court also granted defendant $ 100 in costs on each motion. Plaintiff appeals.

 

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   n1 Plaintiff had myopia caused by misshapen corneas. The LASIK surgery

 reshaped the corneas properly to receive light with the intended result of

 improving plaintiff's distance vision.

 

   n2 Plaintiff's ophthalmologist was a participating provider and prior

 authorization for him to perform covered services was not required under the

 terms of the contract. LCA Vision Laser Associates was not a participating

 provider and its services were required to be preapproved. However, the record

 contains no claim for services submitted on behalf of LCA Vision Laser

 Associates.

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The threshold issue on this appeal is whether the surgical procedure that was performed on plaintiff was a covered medical service under the insurance contract. "Generally, the courts bear the responsibility of determining the rights or obligations of parties under insurance contracts based on the specific language of the policies * * *" (State of New York v Home Indem. Co., 66 N.Y.2d 669, 671, 495 N.Y.S.2d 969, 486 N.E.2d 827 [citations omitted]; see, Hartford Acc. & Indem. Co. v Wesolowski, 33 N.Y.2d 169, 172, 350 N.Y.S.2d 895, 305 N.E.2d 907; State Farm Mut. Auto. Ins. Co. v Bentley, 262 A.D.2d 739, 740, 691 N.Y.S.2d 603; Harrigan v Liberty Mut. Fire Ins. Co., 170 A.D.2d 930, 930-931, 566 N.Y.S.2d 755).  On this record, we find the insurance contract provisions are sufficiently clear and unambiguous and the controlling facts are adequately before us to declare that defendant has no contractual obligation to pay for plaintiff's surgery. Section VII (10) of the insurance policy excludes from coverage those services that are not medically necessary. n3 The term "medically necessary" is defined, in relevant part, in section II (31) of the policy as follows:

 

* * * More specifically, this includes treatments needed to prevent, diagnose, correct or cure conditions in the person that cause acute suffering, endanger life resulting in illness or infirmity, interfere with such person's ability for normal activity, or threaten a major handicap.

 

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   n3 Defendant contends that plaintiff's surgery was "cosmetic" in nature and

 therefore excluded under section VII (9) of the insurance policy as cosmetic

 surgery that is not medically necessary. In light of our determination that the

 contract provides coverage only for services that are "medically necessary", we

 need not determine whether the surgery should be deemed cosmetic.

 

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In support of its position that the subject surgery was not a covered service under the contract, defendant submitted plaintiff's deposition testimony, wherein plaintiff acknowledged that his presurgery vision with corrective lenses was 20/20 and that there were no tasks associated with his employment that precluded him from wearing glasses. Plaintiff also testified that, so long as his glasses were not removed, he was able to see well enough that his safety was not an issue. This evidence was sufficient to establish that plaintiff's condition did not interfere with his ability to function normally, notwithstanding his use of corrective lenses, and shifted the burden to plaintiff to demonstrate a material issue of fact with regard to whether his surgery was medically necessary.

 

Plaintiff's affidavit described three incidents in which his glasses were knocked off and his ability to function was briefly impaired. Other than these isolated occurrences, plaintiff's affidavit focused primarily on the potential inability to function normally created by the risk of his eye glasses falling off. This proof is insufficient to raise a question of fact as to whether plaintiff's poor eyesight "caused acute suffering, endangered life resulting in illness or infirmity, interfered with such person's ability for normal activity, or threatened a major handicap". While plaintiff also submitted the affidavit of his treating ophthalmologist, the affidavit contains nothing more than the conclusory assertion that plaintiff's surgery was medically necessary to correct a functional defect and makes no attempt to bring plaintiff's surgery within the policy's definition of "medically necessary", rendering it of insufficient probative value to defeat defendant's motion for summary judgment on the declaratory judgment cause of action (see, Phillips v McClellan St. Assocs., 262 A.D.2d 748, 749, 691 N.Y.S.2d 598). Accordingly, defendant is entitled to a declaration that it was not obligated under the insurance contract to pay for costs related to the surgery performed on plaintiff and consideration of defendant's remaining contentions are academic.

 

Finally, we find no abuse of Supreme Court's discretion in imposing costs of $100 on each of the parties' motions.

 

Mercure, J.P., Peters, Mugglin and Rose, JJ., concur.

 

ORDERED that the order is modified, on the law, with costs to defendant, by reversing so much thereof as dismissed the complaint; it is declared that defendant has no obligation under the insurance contract to pay for costs related to plaintiff's eye surgery; and, as so modified, affirmed.

 

PUBLIC SERVICE MUT. INS. CO. v. COLOR WEST PHOTO INC.

 

Order, Supreme Court, New York County (Louis York, J.), entered March 19, 2001, which, in a declaratory judgment action involving whether defendants commercial tenant and its liability insurer are obligated to defend and indemnify plaintiffs landlord and building manager in underlying actions for personal injury and property damage arising out of a fire in the building, granted plaintiffs' motion for summary judgment declaring that defendants are so obligated, unanimously affirmed, with costs.

 

The insurance policy procured by defendant tenant from defendant insurer covers bodily injury or property damage resulting from defendant tenant's ownership, maintenance or use of the leased premises if caused by, inter alia, "continuous or repeated exposure to substantially similar conditions," and named as additional insureds plaintiff landlord and any person acting as the landlord's real estate manager. Given these provisions, the declaration in favor of the landlord and managing agent was properly made upon uncontroverted evidence, gathered from a Fire Department record and depositions, that the fire started in the ceiling of the leased premises, and that the likely cause was constant heat on the ceiling joists generated by the HVAC unit used and maintained by the tenant and located in a loft that the tenant also used to store supplies. It does not avail defendants tenant and insurer that the underlying actions are for damages or injuries sustained by or in adjacent premises since such damages and injuries resulted from the tenant's use of the insured premises. We have considered defendants' other arguments and find them unavailing.

 

MATTER OF ALLSTATE v. MOSHEVEV

 

In a proceeding pursuant to CPLR article 75 to stay the arbitration of an uninsured motorist claim, the petitioner appeals from an order of the Supreme Court, Suffolk County (Tanenbaum, J.), dated July 25, 2000, which dismissed the proceeding and granted the respondents' cross application to compel the parties to proceed to arbitration.

 

ORDERED that the order is reversed, on the law, with costs, the petition is reinstated, the cross application is denied, the matter is remitted to the Supreme Court, Suffolk County, for separate examinations of the respondents under oath and a hearing on the issue of whether the respondents' vehicle came into contact with a hit-and-run vehicle, and the arbitration is temporarily stayed pending a new determination in accordance herewith.

 

On December 9, 1999, the respondents were travelling on the Long Island Expressway when their vehicle allegedly came into contact with a hit-and-run vehicle. The respondents submitted a claim to their insurance company, the petitioner. The petitioner sought to examine each of the respondents under oath, but the respondents stated that they would submit to an examination only if they were allowed to be present at each of the respondents' examinations. The petitioner refused. Subsequently, the respondents served the petitioner with a demand for arbitration under the insurance policy provision providing for arbitration in the event of contact with a hit-and-run vehicle. The petitioner sought a permanent stay of arbitration or, alternatively, a temporary stay of arbitration pending a hearing on the issue of the respondents' failure to cooperate and the issue of whether there was actual contact between the respondents' vehicle and the hit-and-run vehicle. The respondents opposed the petition for a stay and made a cross application to compel the parties to proceed to arbitration. In support of their cross application, the respondents submitted an affidavit of one of the respondents, who was a passenger in the vehicle, which stated that there was contact with an unidentified vehicle. Relying on this affidavit, the Supreme Court dismissed the proceeding and directed the parties to proceed to arbitration.

 

The respondents have no right to be present at each others' examinations since the examinations were requested pursuant to an insurance policy and not as part of a legal action (see, Dyno-Bite v Travelers Companies, 80 A.D.2d 471, 439 N.Y.S.2d 558; Sabel v Insurance Co. of N. Am., 251 A.D.2d 645, 676 N.Y.S.2d 478).

 

Furthermore, physical contact is a condition precedent to an arbitration that is based on a hit-and-run accident (see, Atlantic Mut. Ins. Co. v Shaw, 222 A.D.2d 581, 635 N.Y.S.2d 297). A stay pending a hearing is the appropriate procedure when there is a triable issue of fact with regard to a condition precedent to arbitration (see, Atlantic Mut. Ins. Co. v Shaw, supra, at 581). In this case, the respondents' refusal to separately be examined under oath precluded the petitioner from making any meaningful investigation into the facts underlying the respondents' insurance claim. Accordingly, the matter is remitted to the Supreme Court for separate examinations of the respondents under oath and a hearing on the issue of whether the respondents' vehicle came into contact with a hit-and-run vehicle.

 

KRAUSMAN, J.P., LUCIANO, ADAMS and TOWNES, JJ., concur.

 

EAGLE TRANSFER CORP. v. GREATER NEW YORK MUT. INS. CO.

 

Order, Supreme Court, New York County (Louise Gruner Gans, J.), entered July 10, 2001, which, inter alia, declared in favor of defendant-respondent excess insurer that it has no obligation to indemnify plaintiff insured in an underlying action for personal injuries, unanimously affirmed, without costs.

 

The IAS court correctly held that, as a matter of law, plaintiff had information from which it could reasonably conclude that its exposure in the underlying action was in excess of $ 250,000, and that it was therefore required to give defendant immediate notice thereof, no later than 1996, when partial summary judgment on the issue of liability was granted in favor of the plaintiff in the underlying action, who was demanding $ 2.5 million to settle and was then deposed by plaintiff regarding the nature and extent of his injuries and resulting lost earnings. As the IAS court noted, there is no real dispute that the ensuing three-year delay in giving defendant notice of the underlying action, until four months prior to the inquest in the underlying action, was unreasonable as a matter of law. Nor does plaintiff raise an issue of fact as to whether its insurance broker gave defendant written notice of the underlying action shortly after its commencement in 1993. While evidence of a regular practice or habit is generally admissible to show conformity therewith (see, Kindelan v Society of NY Hosp., 277 A.D.2d 75, 76, 715 N.Y.S.2d 248), the cursory affidavit of the broker's employee, who did not herself handle the claim, to the effect that it is the broker's practice to immediately notify both the primary and excess insurer of any claim, is insufficient to counter the absence of any other proof of such notice and defendant's database log of claim notifications indicating that it never received such notice until 1999. We have considered plaintiff's other arguments and find them unavailing.

 

NEW YORK CITY TRANSIT AUTHORITY v. NATIONAL UNION FIRE INS. CO.

 

Order, Supreme Court, New York County (Richard Braun, J.), entered January 10, 2001, which, inter alia, granted the cross motions of defendants NAB Construction Corp./Grow Tunneling Corp., J. V. (NAB) and National Union Fire Insurance Company (National Union) for summary judgment declaring that they were not obligated to defend and indemnify the plaintiff New York City Transit Authority in the underlying personal injury action of co-defendant Altagracia Simo, unanimously affirmed, without costs.

 

Inasmuch as the subject insurance policy required plaintiff insured to tender a notice of a claim thereunder to defendant insurer "as soon as practicable" and plaintiff has failed to offer a reasonable excuse for waiting to advise the insurer of the personal injury claim here at issue by Ms. Simo until some 27 months after it received notice of such claim, plaintiff's notice of claim was untimely as [*2]  a matter of law (see, Deso v London & Lancashire Indem. Co. of Am., 3 N.Y.2d 127, 129-130, 164 N.Y.S.2d 689, 143 N.E.2d 889). Although plaintiff maintains that its delay was reasonable since it reasonably believed that there was no prospect that it would be held responsible for Ms. Simo's claim, the record discloses that a timely investigation of the circumstances underlying the claim, such as plaintiff insured was bound to undertake, would have apprised plaintiff that any belief it may have had in its nonliability was not well founded (see, Sec. Mut. Ins. Co. of New York v Acker-Fitzsimons Corp., 31 N.Y.2d 436, 441, 340 N.Y.S.2d 902, 293 N.E.2d 76). Accordingly, plaintiff's failure to satisfy the condition precedent of timely notice vitiated the policy (see, Deso, supra), and relieved NAB and National Union of any further obligations attendant thereto.

 

We have considered plaintiff's remaining arguments and find them to be without merit.

 

IMAGE CLOTHING, INC. v. STATE NATIONAL INS. CO.

 

In an action to recover benefits under an insurance policy, the defendant appeals from an order of the Supreme Court, Kings County (G. Aronin, J.), entered July 16, 2001, which denied its motion for summary judgment dismissing the complaint.

 

ORDERED that the order is modified, on the law, by adding thereto a provision that, upon searching the record, summary judgment is awarded to the plaintiff; as so modified, the order is affirmed, with costs to the plaintiff.

 

The plaintiff, a men's clothing store, leased space in a building and was insured by the defendant for property damage. It is not disputed that on January 31, 2000, clothing merchandise belonging to the plaintiff was damaged in a specific dollar amount by water which entered the premises due to a worn [*2] roof in substantial disrepair.

 

The only issue for the Supreme Court to determine was whether certain provisions in the applicable insurance policy excluded coverage in this case. The defendant claimed that the exclusionary provisions pertaining to "Wear and Tear" of the plaintiff's property included wear and tear of the roof of the building. The Supreme Court, in denying the defendant's motion for summary judgment, correctly determined that the exclusionary provisions in question did not apply to the roof of the building but only applied to the property belonging to the plaintiff.

 

In addition, although the plaintiff did not cross-move for summary judgment, this court is authorized by CPLR 3212(b) to search the record and grant summary judgment to a nonmoving party with respect to an issue that was the subject of the motion before the court (see, Dunham v Hilco Constr. Co., 89 N.Y.2d 425, 429, 654 N.Y.S.2d 335, 676 N.E.2d 1178; QDR Consultants & Dev. Corp. v Colonia Ins. Co., 251 A.D.2d 641, 643, 675 N.Y.S.2d 117). In this case, the issue regarding the exclusionary provisions was the subject of the motion before the Supreme Court.  [*3]  Accordingly, upon searching the record, we find that there are no triable issues of fact and that the plaintiff is entitled to recover under its policy of insurance with the defendant in the amount sought in the complaint.

 

SANTUCCI, J.P., S. MILLER, FRIEDMANN and PRUDENTI, JJ., concur.

 

MATTER OF KEMPER INS. CO. v. AZAYEVA

 

In a proceeding pursuant to CPLR article 75 to permanently stay arbitration of a claim for underinsured motorist benefits, the petitioner appeals from an order of the Supreme Court, Kings County (Clemente, J.), dated September 21, 2001, which denied the petition and dismissed the proceeding.

 

ORDERED that the order is reversed, on the law, with costs, the petition is granted, and the arbitration is permanently stayed.

 

The respondent and two other passengers were injured when their car collided with a stationary object after the driver lost control. No other car was involved in the accident. The petitioner, which insured the car, paid the limits of the bodily injury liability coverage to all three injured passengers. However, the respondent demanded arbitration in an effort to collect supplementary [*2]  underinsured motorist benefits pursuant to a provision of the same policy issued by the petitioner. The petitioner commenced this proceeding to permanently stay arbitration.

 

Insurance Law @ 3420(f)(2) provides for supplementary underinsured motorist benefits "if the limits of liability under all bodily injury liability * * * insurance policies of another motor vehicle liable for damages are in a lesser amount than the bodily injury liability insurance limits of coverage provided by such policy" (see also, 11 NYCRR 60-2.1[a]). The definition of an underinsured motor vehicle in the petitioner's insurance policy, which reflects the language of the Insurance Law, provides that the supplementary underinsured motorist coverage applies only when another, offending vehicle is inadequately insured to cover an injured claimant's loss. Since there was no other motor vehicle involved in the accident, the respondent may not recover supplementary underinsured motorist benefits under the petitioner's policy (see, Matter of Metropolitan Prop. & Liab. Ins. Co. v Falkovitz, 73 N.Y.2d 798, 537 N.Y.S.2d 23, 533 N.E.2d 1052; Haley v State Farm Mut. Auto. Ins. Co., 162 A.D.2d 904, 558 N.Y.S.2d 246). [*3]  Accordingly, the Supreme Court erred in denying the petition.

 

FLORIO, J.P., S. MILLER, FRIEDMANN, ADAMS and PRUDENTI, JJ., concur.

 

IN RE APPLICATION OF THE NORTH RIVER INS. CO.

 

Judgment, Supreme Court, New York County (Jane Solomon, J.), entered March 27, 2001, which, insofar as appealed from by respondent, granted the petition to stay arbitration, and, insofar as cross-appealed from by petitioner, granted respondent $2,555.88 in costs and expenses incurred by respondent in connection with the arbitration proceeding, unanimously reversed, on the law, with costs to respondent payable by petitioner, the petition denied, the proceeding dismissed and the award of costs and expenses vacated.

Respondent Sheldon Morgan was allegedly injured when the vehicle he was driving was hit in the rear at the Queens-Midtown Tunnel toll plaza on June 14, 1995. Morgan, who was employed by New Deal Delivery Service, Inc. ("New Deal") at the time of the accident, was operating the vehicle in the course of his employment. New Deal's principal office is located in New Jersey and the vehicle Morgan was driving was owned by New Deal and registered in New Jersey.

In November 1995, Morgan's counsel forwarded a letter to petitioner The North River Insurance Company ("North River"), which had issued New Deal a commercial "trucker's" insurance policy (the "Policy"), advising that the vehicle which had struck Morgan's vehicle had only limited coverage from Eagle Insurance Company ("Eagle") and that Morgan, therefore, had a "potential underinsurance motorist claim."

The Policy included, inter alia, a "Trucker's Coverage Form," which essentially provides commercial automobile liability coverage to insured vehicles. The Trucker's Coverage Form also provides, under the heading "General Conditions," that the "coverage territory" is the "United States of America." Section II(A)(2)(b)(2) of the Trucker's Coverage Form, the "Out-of-State Coverage Extensions Provision," states that while "a covered 'auto' is away from the state where it is licensed we will . . . Provide the minimum amounts and types of other coverages, such as no-fault, required of out-of-state vehicles by the jurisdiction where the covered 'auto' is being used."

The Trucker's Coverage Form is modified by an endorsement entitled "New Jersey Uninsured/ Underinsured Motorists Coverage" (the "Endorsement"), which states, in relevant part, that North River "will pay all sums the insured is legally entitled to recover as compensatory damages [for bodily injury, inter alia] from the owner or driver of an 'uninsured motor vehicle' or an 'underinsured motor vehicle.'" The Endorsement also sets forth an agreement to arbitrate disputes as to "whether the insured is legally entitled to recover damages from the owner or driver of an [uninsured or underinsured motor vehicle] or . . . as to the amount of damages that are recoverable by that insured," but excludes from arbitration "disputes concerning coverage under this endorsement."

In May 1987, North River approved Morgan's acceptance of Eagle's payment of $10,000 in settlement of Morgan's action against Jose Moscoso, the owner of the other vehicle. The $10,000 sum was the full amount of Moscoso's available insurance. Morgan thereafter served North River with a demand for arbitration, dated January 8, 1998, which identified the claim as one for "Underinsured Motorist" benefits. It is undisputed that North River participated in pre-hearing proceedings regarding the demanded arbitration during the ensuing two years and four months prior to the commencement of this Article 75 proceeding in May 2000. Indeed, North River, at a minimum: agreed with Morgan's counsel that New York arbitration rules would be applied; agreed that the third arbitrator would be selected by the American Arbitration Association (rather than by the two party-selected arbitrators, as provided by the arbitration clause of the Endorsement); designated an arbitrator; received medical reports and records relating to Morgan's claim; and apparently agreed to reschedule the arbitration hearing to the adjourned date of May 10, 2000.

North River subsequently commenced the within proceeding to stay arbitration by order to show cause one week prior to the date on which the arbitration hearing was scheduled to go forward. North River argued, inter alia: that the Out-of-State Coverage Extensions Provision of the Truckers Coverage Form did not afford underinsured motorist coverage outside of New Jersey, since such coverage is optional in New York; that the requirement set forth in CPLR 7503 dictating that a petition to stay arbitration be served within 20 days of the service of the demand for arbitration is inapplicable as no agreement to arbitrate exists; and that it did not participate in the arbitration, a position it has prudently abandoned on appeal.

Morgan, in opposition, maintained that the petition was barred as untimely by North River's participation in the arbitration, as well as the fact that an endorsement to the Policy expressly designates Morgan as an additional insured. Morgan also asserted that the Endorsement does not include any provision limiting coverage to accidents which occur in New Jersey. Additionally, Morgan cross-moved for sanctions against North River, pursuant to 22 NYCRR 130, based primarily on the untimeliness of the petition and North River's failure to inform the court of its substantial participation in the arbitration.

The IAS court accepted North River's interpretation of the Policy, relying on the Trucker's Coverage Form's Out-of-State Coverage Extensions Provision, which it held limited underinsured motorist coverage to accidents occurring in New Jersey. The court also agreed with North River that because there was no coverage for the accident in question, and the arbitration clause of the Endorsement expressly provides that coverage disputes are non-arbitrable, the 20-day limitation period set forth in CPLR 7503 is inapplicable. We disagree and reverse.

In our view, it is clear after a review of the Policy that coverage extends to accidents occurring anywhere in the United States. We note that the Policy's Trucker's Coverage Form, which is modified by the Endorsement, provides in Section V(B)(7) that the "coverage territory" thereunder includes the entire United States. Nothing in the Endorsement modifies the provision in any manner, or otherwise addresses the territorial scope of coverage. The fact that the Endorsement's title refers to New Jersey merely indicates that it conforms to New Jersey legal requirements and is, therefore, appropriate for purchase by insureds owning vehicles in New Jersey.

The Truckers Coverage Form's Out-of-State Coverage Extensions Provision, which is the basis for North River's argument, and the Supreme Court's finding, that underinsured motorist coverage under the Policy is limited to New Jersey accidents, on its face has no relevance to the scope of the coverage afforded by the Endorsement. The Out-of-State Coverage Extensions Provision simply provides that the Truckers Coverage Form affords "the minimum amounts and types of other coverages" required by law while a covered vehicle is "away from the state where it is licensed[.]" It does not indicate any intent to limit the territorial scope of coverage expressly provided by the Truckers Coverage Form or any endorsement thereto. Such intent cannot logically be inferred merely from the fact that States require minimum amounts of uninsured motorist coverage. Accordingly, since there is no coverage dispute, the arbitration provision of the Policy is applicable.

We also find that North River's participation in the arbitration proceeding acts as a bar to the within proceeding, notwithstanding the existence of a coverage issue which under the Policy is not subject to arbitration. CPLR 7503(b) provides that an application to stay arbitration may only be brought by a party "who has not participated in the arbitration. . . ." Consistent with the foregoing statutory language, North River's participation in the arbitration, i.e., by selecting an arbitrator, waives any objection that there was no agreement to arbitrate as a ground for vacating an award (see, CPLR 7511[b][2][ii]; Binghamton Civil Serv. Forum v City of Binghamton, 44 NY2d 23, 29 F.N.; Matter of Sims v Siegelson, 246 AD2d 374, 377; Matter of RRN Assocs. V DAK Elec. Contr. Corp., 224 AD2d 250).

Finally, we find the IAS court's reliance on Matter of Matarasso v Continental Casualty Company (56 NY2d 264) to be misplaced. In Matarasso, the court specifically held that "where the application for a stay is made on the ground that no agreement to arbitrate exists, it may be entertained notwithstanding the fact that the stay was sought after the 20-day period [set forth in CPLR 7503[c]] had elapsed," and further opined that "we cannot impute to the Legislature an intent to bind persons to the arbitral process by their mere inaction for 20 days when no agreement to arbitrate has ever been made" (id. at 267). The court in Matarasso did not discuss the no-participation prohibition of CPLR 7503(b), and there is no indication that the insurance company seeking the stay in Matarasso had participated in the arbitration in any manner prior to seeking a stay approximately six weeks after the 20-day limit had expired. Here, North River actively participated in the arbitration process for a period greater than two years and, on these grounds, we find Matarasso distinguishable.