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04/22/03:         SERIO v PUBLIC SERVICE MUTUAL INS.

New York State Supreme Court, Appellate Division, Second Department

Court Employs “Time on the Risk” Analysis in Determining Apportionment of Liability between Successive Insurers for Lead Paint Claims

In an underlying personal injury action, infant plaintiff was exposed to peeling lead paint in an apartment owned by the insured.  One insurer provided liability coverage for two consecutive one-year terms, while a second insurer provided identical coverage for a third one-year term. Here, the court considered the apportionment of liability between the successive insurers for losses caused by exposure to lead paint. The court held that where the exposure occurred over a period of three years, and where the two insurers covered that loss during consecutive periods of two and one years, respectively, each insurer must bear a share of liability directly proportionate to each insurer’s time on the risk for the purpose of funding their negotiated settlement with the injured parties. In reaching its conclusion, the court followed the Court of Appeals decision in Consolidated Edison Co. of N.Y. v Allstate Ins. Co., 98 NY2d 208 (2002), a case involving soil and ground water contamination over a period of 60 years. In both cases, the losses arose from exposure to harmful substances over extended periods of time during which successive insurers issued policies covering the losses. In the absence of any policy provisions to the contrary, and with no ability to pinpoint exactly when the insured event occurred, the court held that the most equitable means of apportioning the liability for the losses is in direct proportion to each insurer’s time on the risk. Since each insurer undertook to insure against the hazard during a particular policy period, each should be responsible for paying its share of the loss that arose during their respective policy periods.

 

04/22/03:         MINICHELLO v NORTHERN ASSURANCE CO. OF AMERICA

New York State Supreme Court, Appellate Division, Second Department

Policy’s Two-Year Limitations Period Enforced, Action Dismissed

Plaintiffs sustained damage to their residence, which was covered by a policy of insurance issued by defendants. In this action to recover the proceeds of the policy, the court held that the action should have been dismissed as untimely. The defendants met their initial burden of establishing that the policy’s two-year limitations period expired before the action was commenced, and plaintiffs failed to offer evidence that the defendants committed any act or engaged in a course of conduct that lulled them into inactivity in the belief that their claim would ultimately be processed, or that they were induced by fraud, misrepresentation or deception to refrain from commencing a timely action. The record disclosed that delay in denial of the claim was attributable to the investigation of the claim and plaintiffs’ failure to cooperate. Such delay does not excuse the plaintiff from timely commencing an action, since he or she is bound by the terms of the contract to either commence an action prior to the expiration of the limitations period or obtain a waiver or extension of such provision. The court also held that defendants should not be estopped or found to have waived the protection of the limitations period provided for in the contract, where plaintiffs refused to execute transcripts of their examinations under oath and otherwise failed to provide documents and information to which the defendants were entitled in their investigation of the claim.

 

04/22/03:         LEE v AMERICAN TRANSIT INS. CO.

New York State Supreme Court, Appellate Division, Second Department

Issues Concerning Insurer’s Repudiation of Liability Before Demanding Compliance with Proof of Loss Provisions Precludes Summary Judgment

Court held that insurer’s motion for summary judgment based on the insured’s failure to submit to an examination under oath was properly denied where there are issues of fact whether the insurance company repudiated liability under its policy by issuing a series of claim denial forms prior to any alleged failure by the plaintiff to submit to an examination under oath. “An insurance carrier may not, after repudiating liability, create grounds for its refusal to pay by demanding compliance with proof of loss provisions of the policy.” 

 

04/22/03:         CARRACIA v ALLSTATE INS. CO.

New York State Supreme Court, Appellate Division, Second Department

Motion for Judgment as a Matter of Law Improper Where Evidence was Sufficient for Jury to Conclude that Plaintiff did not Sustain Loss

In an action to recover insurance proceeds for the theft of a vehicle, court held that judgment granted in plaintiff’s favor at the close of the proof was improper. It was undisputed that the vehicle was involved in an accident while owned by its prior owner. As a result of that accident, the vehicle was deemed a “total loss” with an estimated salvage value of $5,949. Nevertheless, by invoice dated May 25, 1997, admitted in evidence at the trial, the plaintiff purportedly purchased the vehicle for $14,000 plus tax. It also appeared that the vehicle sold to plaintiff and the vehicle produced for inspection when Allstate issued the policy may not have been the same car, since their odometer readings, rear lights, and rims were different. Further, in her sworn proof of loss, the plaintiff falsely denied that the car was rebuilt. At the trial, she claimed that misrepresentation was an honest mistake, since her father purchased the car for her and rebuilt it without her knowledge. This claim, which was contradicted by the invoice stating that she purchased the car, presented an issue of fact for the jury. In view of this, plaintiff was not entitled to judgment as a matter of law, and Allstate was granted a new trial.

 

04/15/03:         NATIONAL CASUALTY CO. v PAXSON COMMUNICATIONS CORP.

New York State Supreme Court, Appellate Division, First Department

Independent Contractor Exclusion Deemed Inapplicable to Loss; Insured’s Notice Obligation Not Satisfied by Insurer’s Actual Knowledge of Underlying Action

Insurer issued identical policies to PAX and CSE, which provided coverage for claims arising out of trademark and copyright infringement, misappropriation of ideas, and unfair competition. The policies excluded claims made by any independent contractor supplying matter, material or services to the insured, and claims arising from any breach of contract other than liability assumed under contract. IHC brought suit against PAX and CSE arising out of PAX’s alleged misappropriation of IHC’s idea for a cable television program. The first, second and third causes of action sought damages for misappropriation, copyright infringement and unfair competition. The fifth cause of action sought a declaratory judgment and an accounting under federal law. The sixth and seventh causes of action sought damages for breach of an implied agreement assenting to compensate IHC for its services and unjust enrichment. The insurer denied coverage for the entire claim under the “independent contractor” exclusion based on an unexecuted draft agreement describing their relationship as “independent contractors,” and the complaint’s allegation that IHC had supplied matter, materials and service to PAX, within the meaning of the exclusion. The insurer also denied coverage for the fifth and eighth causes of action on the ground that declaratory relief and accounting were not “claims” for “money damages” under the policy. The sixth and seventh causes of action were denied on the ground that contract breaches were also excluded. The insurer denied coverage to CSE for the same reasons it denied coverage to PAX, but also denied coverage on the ground that CSE failed to give timely notice of the claim. Applying Florida law, the court held that the insurer was obligated to defend and indemnify PAX. The allegations did not assert an existing independent contractor arrangement, but merely an incipient and unconsummated relationship as evidenced by the unexecuted draft agreement between the parties, and the materials and services provided by IHC were only in contemplation of some future arrangement. Moreover, while the insurer denied coverage on the fifth, sixth, seventh and eighth causes of action for other reasons, its denial of coverage on the first, second and third causes of action was based solely upon the “independent contractor” exclusion. Since the insurer was obligated to defend as to some of the causes of action in the underlying complaint, it was obligated to defend PAX as to all of them, except that portion seeking declaratory relief. No coverage was available to CSE, however, because of its non-compliance with the policy’s notice provision.  The court held that neither the insurer’s actual knowledge of the underlying action, nor notice from PAX satisfied CSE’s contractual obligation to provide timely notice.

 

04/15/03:         ERNST & YOUNG LLP v NATIONAL UNION FIRE INS. CO. OF PITTSBURG

New York State Supreme Court, Appellate Division, First Department

Fees, Costs and Lost Interest Not Covered by Fidelity Bond

Court held that insurer’s disclaimer of plaintiff’s claim for fees, costs and lost interest occasioned by plaintiff’s employee’s theft of client funds was proper under a fidelity bond. Endorsement to policy unambiguously limited the coverage afforded to indemnification for loss of client property, sustained as a “direct result” of employee dishonesty. Plaintiff's interpretation of the endorsement would impermissibly transform the indemnity policies into liability policies.

 

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.

 

04/23/03:         FARINAS v FLORIDA FARM BUREAU GENERAL INS. CO.

Florida Court of Appeal

Florida Court Defines Bad Faith Standard In Multiple Competing Claims Scenarios

The insured lost control of his car and crossed a median, hitting an oncoming car, resulting in the unfortunate deaths of five teenagers and severe injuries to another seven. Farm Bureau settled for its policy limits with the driver of the other car and two estates for death claims. After exhausting the limits, Farm Bureau filed a declaratory action against the insured whether it had any further duty to defend after paying the limits. The remaining claimants intervened and filed a bad faith action against Farm Bureau. The court found that Farm Bureau was subject to the general standard of conduct applicable to all bad faith cases and a more specific standard applicable to multiple competing claims scenarios. Thus, Farm Bureau was required to fully investigate all the claims at hand to determine how to best limit the insured’s liability; and it also should have sought to settle as many claims as possible within the policy limits. In addition, it had the duty to avoid indiscriminately settling selected claims and leaving the insured at risk for excess judgments which could have been minimized by wiser settlement practice.

Submitted by Bruce D. Celebrezze and Joseph E. Pelochino of Celebrezze & Wesley in San Francisco

 

04/22/03:         MOONEY v NATIONWIDE MUTUAL INS. CO.

New Hampshire Supreme Court

Court “Returns to Sender” Postman’s Fraudulent Auto Policy

When the insured applied for his automobile insurance policy, he informed Nationwide that he worked for the United States Postal Service in a management position. Although he was actually a rural mail deliverer, at no time did he notify Nationwide that he used his vehicles to deliver mail. The insured was using his Jeep to deliver mail on his rural mail route when a hit and run driver in a stolen vehicle struck the Jeep, damaging it and injuring the insured. The insured sought uninsured motorist coverage, which Nationwide denied. In the insured’s declaratory action for coverage, Nationwide cross-petitioned for rescission. The court found that rescission was equitable under the circumstances because: (1) Nationwide would suffer damages were the insurance policy not rescinded with respect to the Jeep; (2) the insured would not suffer undue hardship from rescission; and (3) rescission, coupled with the Nationwide’s restitution to the insured of the premiums he paid to insure the Jeep, would restore the parties to the status quo. Public policy considerations which protect innocent third party claimants in fraud situations are not present when the claimant is the person who procured the insurance through fraud.

Prepared by Bruce D. Celebrezze and Joseph E. Pelochino of Celebrezze & Wesley in San Francisco

 

04/22/03:         SCHILBERG INTEGRATED METALS CORP. v CONTINENTAL CAS. CO.

Connecticut Supreme Court

Insured Has Burden of Proving Exception to Exclusion to Compel Duty to Defend

The insured appealed a grant of summary judgment for the insurer in a dispute over a duty to defend the insured in an administrative lawsuit for soil contamination beneath an unauthorized scrap metal reclamation and waste disposal facility. The Connecticut Supreme Court held that, once an insurer has satisfied its burden of establishing that the underlying complaint alleges damages attributable to the discharge or release of a pollutant into the environment, thereby satisfying the basic requirement for application of the pollution coverage exclusion provision, the burden shifts to the insured to demonstrate a reasonable interpretation of the underlying complaint which potentially brings the claims within the sudden and accidental discharge exception to exclusion of pollution coverage, or to show that extrinsic evidence exists that the discharge was in fact sudden and accidental. The court thereby rejected the insured’s argument that, under Connecticut law, the insurer bears the burden of establishing that the underlying allegations eliminate every reasonably possibility that the discharge of pollutants was sudden and accidental.

Prepared by Bruce D. Celebrezze and Joseph E. Pelochino of Celebrezze & Wesley in San Francisco

 

04/21/03:         CARY v UNITED OF OMAHA LIFE INSURANCE COMPANY

Colorado Supreme Court

Third-Party Insurance Administrator Must Act in Good Faith During Investigation

The Colorado Supreme Court overturned the court of appeals, and held that a third-party insurance administrator hired by a city to run its health insurance program owed a duty of good faith and fair dealing to a claimant in the investigation and processing of the claim. The court held that there is still a special relationship among the administrators and the claimants sufficient to establish a duty of good faith. The claimant here was a city employee who had access to a self-funded health insurance program. Even though the claimant did not have privity of contract with the administrators hired by the city, there is still a duty of good faith and fair dealing to be upheld during an investigation of a claim under an insurance policy.

Prepared by George McCall of Kern and Wooley LLP in Irving, Texas

 

04/21/03:         NMS SERVICES INC. v THE HARTFORD

Fourth Circuit Court of Appeals

Software Development Company Hacked by Own Employee Seeks Coverage For Lost Property

NMS Services is a software development company, and had taken out insurance coverage under a Special Property Coverage Form, which provided additional, optional computer coverage. A hacker gained access to the network and caused considerable damage to the insured’s computer systems. It turns out the hacker was a former employee who had installed hacking software before he left the company. Due to a “dishonesty” clause, the insurer denied the claim, and the District Court for the Eastern District of Virginia held that there was no coverage and granted summary judgment to the insurers. The Fourth Circuit held that while there may not have been coverage under a particular endorsement, there was coverage under this Special Property Form, and subsequently reversed the trial court’s decision and remanded the case for further proceedings.

Prepared by George McCall of Kern and Wooley LLP in Irving, Texas

 

04/18/03:         O'DONOGHUE v FARM BUREAU MUTUAL INSURANCE

Supreme Court of Kansas

Where Tortfeasor's BI Limits Are Reduced by Multiple Claims, Injured Party's UIM Coverage Applies to Difference Between UIM Limit and Amount Actually Recovered from Tortfeasor

In calculating the amount of underinsured motorist benefits where the damages recovered from the tortfeasor are less than the total amount of actual damages because of multiple claims against the tortfeasor's liability insurance limits, the underinsured motorist provider is responsible for paying the difference between the insured's actual recovery from the tortfeasor and the insured's total amount of damages up to the insured's underinsured motorist limits.

Prepared by Jim Horstman of Iwan Cray Huber Horstman & VanAusdal LLC in Chicago

 

04/17/03:         INTERSTATE CLEANING v COMMERCIAL UNDERWRITERS INSURANCE

Eighth Circuit Court of Appeals

Notice of Suit Given by Insured to Insurer After Verdict Was Too Late

Insured with $50,000 SIR was sued for sexual harassment, but decided not to notify insurer, believing that it was a nuisance suit. Case was tried to verdict against insured, but insured appealed. While the case was on appeal, insured settled and thereafter asked insurer to pay. Noting that notice was given almost two years after claim was made, one and one-half years after suit was filed, and one month after verdict was returned, the Circuit Court affirmed the District Court's entry of summary judgment in favor of the insurer based on late notice.

Prepared by Jim Horstman of Iwan Cray Huber Horstman & VanAusdal LLC in

Chicago

 

04/17/03:         PECK v PUBLIC SERVICE MUTUAL

Second Circuit Court of Appeals (applying Connecticut law)

Question of Fact Exists Regarding Coverage Even Where Insured Failed to Give Notice of Suit Until After Entry of Default

Where insured failed to notify insurer of suit until after entry of default and $250,000 judgment, District Court held as a matter of law that insurer was prejudiced and absolved of coverage obligations. On appeal, Circuit Court reversed, finding that earlier notice given to insurer by another created a question of fact as to prejudice, and reversed.

Prepared by Jim Horstman of Iwan Cray Huber Horstman & VanAusdal LLC in Chicago

 

04/14/03:         SCHILBERG INTEGRATED METALS v CONTINENTAL CASUALTY

Connecticut Supreme Court

Insured Has Burden of Proving Applicability of Sudden and Accidental Discharge Exception to Pollution Exclusion

Defendant insurer won summary judgment on duty to defend issue concerning applicability of pollution exclusion. On appeal, insured argued that trial court erred in imposing burden on insured to prove applicability of sudden and accidental exception to the exclusion. Court disagreed with insured and affirmed judgment for insurer, holding that burden of proving applicability of sudden and accidental exception to the exclusion rests with insured.

Prepared by Jim Horstman of Iwan Cray Huber Horstman & VanAusdal LLC in Chicago

 

04/15/03:         LIGHTNER v SOLIS

New Jersey Appellate Division

Whether Owner Was "Operating" Uninsured Vehicle Depends Upon Her Intent

Defendant who rear-ended parked car containing plaintiff appealed the denial of his motion to bar plaintiff from recovery under state statute which bars recovery by the owner "as the result of an accident while operating an uninsured auto." The evidence showed that plaintiff was in the car to put on her makeup, and she denied an intent to drive the vehicle. However, the evidence also showed that on occasion, she would move the uninsured car from one side of the street to the other, to avoid parking tickets. On review, the court held that a question of fact precluded judgment in favor of defendant, because whether plaintiff was operating vehicle (and thus whether the statute applied) depended upon what she intended to do when she entered the parked car.

Prepared by Jim Horstman of Iwan Cray Huber Horstman & VanAusdal LLC in Chicago

 

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NATIONAL CASUALTY CO. v PAXSON COMMUNICATIONS CORP.

 

Order, Supreme Court, New York County (Charles Ramos, J.), entered on or about February 7, 2002, which, inter alia, denied defendants' motion for summary judgment and granted plaintiff's cross motion for summary judgment declaring that it had no duty to defend and indemnify defendants, unanimously modified, on the law, 1) to grant summary judgment with respect to Paxson Communications Corporation and Paxson Productions, Inc. (collectively PAX); 2) to deny National's cross motion with respect to PAX; 3) to declare that National was obligated to defend it in the underlying action brought by Interactive Holdings Corp. (IHC); 4) to declare that PAX is entitled to the costs of defending the underlying action as well as the instant coverage action; 5) to declare that National is responsible to indemnify PAX in the underlying action in all respects; and otherwise affirmed, with costs in favor of PAX. The Clerk is directed to enter judgment accordingly.

 

In 1998 and 1999, plaintiff National Casualty Company (National) respectively issued identical insurance policies to PAX, both Florida-based corporations, and Channel Space Entertainment, Inc. (CSE), a Virginia-based corporation. Each policy provided coverage for a) "damages" as a result of claims "arising out of," inter alia, trademark and copyright infringement, "misappropriation of ideas under implied contract" and unfair competition; and b) all claim expenses incurred in the defense and settlement of covered claims. Specifically excluded from coverage were any claims: a) made by any present, former or prospective employee, partner, joint venturer, co-venturer, officer or director of the insured or any independent contractor supplying matter, material or services to the insured; and b) arising from any breach of contract other than liability assumed under contract. The term "claim" was defined as a demand or suit for money. "Damages" was defined as all forms of monetary damages and legal expenses or other costs included as part of a judgment or settlement.

 

In 1999, IHC brought suit against PAX and CSE arising out of PAX's alleged misappropriation of IHC's idea for a cable television shopping program. The first, second and third causes of action sought damages for PAX's misappropriation, copyright infringement and unfair competition. The fifth cause of action sought a declaratory judgment and an accounting under federal law. The sixth and seventh causes of action sought damages for breach of an implied agreement assenting to compensate IHC for its services and unjust enrichment.

 

Noting several meetings between PAX and IHC, an unexecuted draft agreement describing their relationship as "independent contractors" and the complaint's allegation that IHC had supplied matter, materials and service to PAX, National relied on the policy exclusion as to "independent contractors" to deny coverage to PAX for the entire action. National further denied coverage for the fifth and eighth causes of action on the ground that declaratory relief and accounting were not "claims" for "money damages" under the policy. The sixth and seventh causes of action were denied on the ground that contract breaches were excluded. Although National denied coverage to CSE for the same reasons it denied coverage to PAX, it also denied coverage on the ground that CSE failed to give timely notice of the claim.

 

Subsequently, the underlying action brought by IHC against PAX and CSE was settled by and between the parties. PAX, which arranged to indemnify CSE for its damages and expenses pursuant to a joint defense agreement, incurred over $200,000 in attorneys' fees and expenses in the underlying action.

 

National then commenced the instant action seeking a declaration that it was not obligated to defend or indemnify its insureds for their costs and expenses. PAX and CSE counter-claimed for breach of contract for National's failure to defend and indemnify with respect to the underlying action.

 

PAX and CSE then moved, inter alia, for summary judgment on their counterclaims and National cross-moved for summary judgment declaring that it had no obligation to defend or indemnify in connection with the underlying action. After determining that Florida law applied to PAX's policy and Virginia law to CSE's policy, the motion court found, inter alia, that National had no duty to defend or indemnify either PAX or CSE in light of the policy exclusions. We modify and find that National had a contractual duty to defend and indemnify PAX in the underlying action brought by IHC.

 

Since National disclaimed coverage on the sole ground that PAX was an "independent contractor," the narrow question before us is whether the exclusion of claims by actual "independent contractors" applies to the instant matter. It is well settled under Florida law that exclusionary clauses are to be strictly construed in favor of the insured and coverage (Psychiatric Associates v St. Paul Fire & Mar. Ins. Co., 647 So 2d 134, 138). The motion court erred in construing the exclusion in favor of the insurer and non-coverage.

 

Under Florida law, the duty to defend extends when the complaint alleges facts which create an inference of potential coverage (McCreary v Florida Residential Prop. & Cas. Joint Underwriting Assn., 758 So 2d 692, 695). Contrary to National's contentions that IHC was an actual "independent contractor," the IHC complaint provides no basis for the exclusion disclaimer. The allegations contained in the IHC complaint do not assert an existing independent contractor arrangement, but merely an incipient and unconsummated relationship as evidenced by the unexecuted draft agreement between the parties. The materials and services provided by IHC to PAX were only in contemplation of some future arrangement. Likewise, we find no effective exclusion for PAX's payments of the other insured's expenses pursuant to the indemnification clause in their joint defense agreement.

 

While National denied coverage on the fifth, sixth, seventh and eighth causes of action for other reasons, its denial of coverage on the first, second and third causes of action was based solely upon the "independent contractor" exclusion. Since National was obligated to defend as to some of the causes of action in the underlying complaint, it was obligated to defend PAX as to all of them under Florida law (see Tire Kingdom, Inc. v First Southern Ins. Co., 573 So 2d 885, 887, review denied 589 So 2d 290), except that portion of the fifth cause of action seeking declaratory relief. Thus, PAX is entitled to summary judgment on its motion and to recover from National the costs of litigation representing the damages incurred in settling the action (see Nationwide Mutual Fire Ins. Co. v Beville, 825 So 2d 999, 1001), as well as the costs of defending the other insured under the joint defense indemnification clause.

 

With regard to CSE's non-compliance with its policy's notice provision, we agree with the motion court that neither National's actual knowledge of the underlying action nor notice from PAX satisfies CSE's contractual obligation to provide timely notice (see American Manufacturers Mutual Ins. Co. v CMA Enterprises, Ltd., 246 AD2d 373).

 

THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

 

ENTERED: APRIL 15, 2003

 

ERNST & YOUNG LLP v NATIONAL UNION FIRE INS. CO. OF PITTSBURG

 

Order, Supreme Court, New York County (Charles Ramos, J.), entered February 11, 2002, which, in this action seeking declaratory relief, inter alia, granted defendant's cross motion for summary judgment dismissing the complaint, unanimously modified, on the law, to the extent of declaring in defendant's favor that it is not liable under the subject policies and fidelity bond for fees, costs, and lost interest attributable to the theft of funds by plaintiff's employee, and otherwise affirmed, with costs to defendant.

 

The motion court properly determined that defendant's disclaimer of plaintiff's claim for fees, costs and lost interest occasioned by plaintiff's employee's theft of client funds, was appropriate under the subject fidelity bond. Endorsement 9 to the governing policies unambiguously limits the coverage afforded to indemnification for loss of client property, as defined by the endorsement, sustained as a "direct result" of employee dishonesty. Plaintiff's suggested interpretation of the endorsement would, as the motion court found, impermissibly transform indemnity policies into liability policies (see Aetna Cas. & Sur., Co. v Kidder, Peabody & Co., 246 AD2d 202, 212-213, lv denied 93 NY2d 805).

 

We modify only to declare in defendant's favor (see Lanza v Wagner, 11 NY2d 317, 334, appeal dismissed 371 US 74, cert denied 371 US 901).

 

THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

 

ENTERED: APRIL 15, 2003

 

SERIO v PUBLIC SERVICE MUTUAL INS.

 

S. MILLER, J. On this appeal we address a matter of great importance concerning the apportionment of liability between successive insurers for losses caused by a child's exposure to lead paint. Where the exposure occurred over a period of three years, and where the two insurers covered that loss, respectively, during consecutive periods of two and one years, we hold that each insurer shall bear a share of liability for the purpose of funding their negotiated settlement with the injured parties, directly proportionate to each insurer's time on the risk.

 

I

 

The genesis of this appeal was a loss that occurred in a 100-unit residential apartment building located at 1925 Adam Clayton Powell Boulevard in Manhattan. As alleged in the personal injury complaint in the underlying action, commencing September 23, 1993, the infant plaintiff was exposed to peeling lead paint in apartment 5H of the subject building.

 

The subject building was one of many owned by Graham Court Owners Corp., covered by the relevant insurance policies. Coinciding with the period of lead-paint exposure, the defendant, Public Service Mutual Insurance Company (hereinafter Public Service Mutual), provided $1 million in liability coverage for two consecutive one-year terms from June 1, 1993, through June 1, 1995. First Central Insurance Company (hereinafter First Central), provided identical coverage for the period June 29, 1995, to June 29, 1996. First Central was liquidated by order dated April 24, 1998, and its interests are now being administered by the plaintiff State Insurance Superintendent Gregory Serio (hereinafter the Superintendent).

 

On or about March 19, 2001, the parties to the underlying personal injury action reached a stipulation of settlement pursuant to which the infant plaintiff and her mother would receive the principal sum of $390,000. However, the two insurers further agreed to reserve their rights to seek a judicial determination as to their proportionate contribution obligations.

 

II

 

By summons and verified complaint, the Superintendent, on behalf of First Central, commenced this action in Supreme Court, Nassau County, for a judgment declaring the parties' respective payment obligations. The complaint pleaded the facts underlying the consecutive policies issued by the parties, and noted that they contained identical provisions concerning "other insurance" and "methods of sharing." The complaint set forth the facts that Public Service Mutual's policies insured against, inter alia, lead-paint exposure liability for two of the three relevant years, whereas First Central's policy covered only one relevant year. Finally, the complaint pleaded the parties' irreconcilable assertions as to each insurer's liability; i.e., that Public Service Mutual claimed to be liable for only one-half of the settlement while First Central was liable for the other half, whereas First Central claimed it should bear only one-third liability with Public Service Mutual bearing two-thirds responsibility. The complaint prayed for a declaration apportioning liability one-third as against First Central, and two-thirds as against Public Service Mutual.

 

Public Service Mutual interposed a verified answer which, in essence, confirmed the nature of the dispute, but asked that the Supreme Court declare an equal apportionment of liability.

 

III

 

By notice of motion dated December 5, 2001, First Central moved for summary judgment declaring that it was only liable for one-third of the settlement. In support of its motion, First Central argued, inter alia, that equal apportionment of liability under the circumstances at bar would be contrary to the then-recent decision of the United States Court of Appeals, Second Circuit, in Olin Corp. v Insurance Co of N. Am. (221 F3d 307), which allocated the liability of successor insurers for long-term asbestos exposure in a manner directly proportionate to the number of years each insurer's policy was in effect (see also Stonewall Ins. Co. v Asbestos Claim Mgt. Corp., 73 F3d 1178 [2d Cir., 1995], mod on denial of rehg 85 F3d 49 [2d Cir., 1996]). First Central noted that the Second Circuit had taken its lead from the seminal New Jersey Supreme Court case of Owens-Illinois v United Ins. Co. (138 NJ 437, 650 A2d 974), which established the rule that a fair method of allocation is the one "'related both to time on the risk and the degree of risk assumed'" (Olin Corp. v Insurance Co. of N. Am., supra at 325, quoting Stonewall Ins. Co. v Asbestos Claim Mgt. Corp., supra at 1203, quoting Owens-Illinois, United Ins. Co., supra at 479). Here, First Central asserted, given that Public Service Mutual had twice the "time on the risk," it should bear twice the liability.

 

First Central predicted that Public Service Mutual would argue to the contrary on the strength of the decision of the Appellate Division, First Department, in American Empire Ins. Co. v PSM Ins. Cos. (259 AD2d 341), wherein three insurers were embroiled in a controversy over liability for a settlement of a lead paint exposure case. In that case, the insurers agreed to equally fund a $500,000 settlement and then litigate the issue of proportionate reimbursement. The First Department held equal apportionment to be appropriate in accordance with the "other insurance" provisions of the policies. First Central pointed out, however, that the American Empire decision focused on issues of what event "triggered" coverage, rather than on the issue of time on the risk. First Central thus suggested that American Empire was not on point, and that the subsequent Second Circuit decisions in Olin and Stonewall, neither of which cited American Empire, provided the appropriate analytical approach. Thus, First Central prayed that the Supreme Court would grant its motion and declare it responsible for only one-third of the settlement, to Public Service Mutual's two-thirds responsibility.

 

In response, Public Service Mutual cross-moved, inter alia, for summary judgment declaring the parties to be each liable to pay one-half of the settlement. Public Service Mutual acknowledged that the medical evidence established that the infant plaintiff was exposed to lead paint during the period of both the Public Service Mutual and the First Central policies. Public Service Mutual argued that this sequence of events was identical to that presented by the American Empire case, in which the First Department held equal apportionment to be appropriate. Public Service Mutual argued that the American Empire decision, which was the only state court decision on point, was dispositive of the instant matter, and that Olin and Stonewall were asbestos cases that were inapposite. Significantly, Public Service Mutual asserted that no lead-paint case had ever applied a "time on the risk" analysis, and while such analysis might be warranted in asbestos cases like Olin and Owens-Illinois, it had no bearing on the instant lead-paint exposure case. Accordingly, Public Service Mutual argued that pursuant to the rule of American Empire, Public Service Mutual's cross-motion for summary judgment should be granted, First Central's motion should be denied, and the Supreme Court should declare that Public Service Mutual was obligated to pay only one-half of the $390,000 settlement.

 

IV

 

The Supreme Court denied First Central's motion, and granted that branch of Public Service Mutual's cross motion which was for summary judgment declaring that it was only obligated to pay one half of the settlement. The Supreme Court determined that in the absence of contrary precedent from the Appellate Division, Second Department, it was bound by the First Department's American Empire decision apportioning liability equally.

 

First Central now appeals from so much of the order as denied its motion for a declaration of pro rata apportionment, and which apportioned liability equally. We reverse insofar as appealed from by First Central.

 

V

 

On appeal, First Central argues that the Supreme Court erred in rejecting the time on the risk analysis embraced by the Second Circuit, while Public Service Mutual maintains that the First Department's American Empire equal-apportionment rule was correctly employed.

 

The allocation issue was much more difficult when the Supreme Court dealt with it than it is today. The order on appeal, relying upon the American Empire decision, was rendered March 6, 2002. However, on May 2, 2002, the Court of Appeals rendered a decision that implicitly overruled American Empire insofar as relevant to the instant matter.

 

In Consolidated Edison Co. of N.Y. v Allstate Ins. Co. (98 NY2d 208), the Court of Appeals adopted a "time on the risk" analysis in a case involving the clean-up of toxic substances that had leaked into the soil and ground water over a period of 60 years at a former Consolidated Edison plant in Tarrytown. A succession of 24 insurers had provided coverage over the years, and it was impossible to pinpoint the exact times of the contamination vis-à-vis the terms of the various insurers' policies.

 

The Court of Appeals observed that: "Where, as here, an alleged continuous harm spans many years and thus implicates several successive insurance policies, courts have split as to whether each policy is liable for the entire loss, or whether each policy is responsible only for a portion of the loss. This is a matter of first impression for this Court, though federal courts have predicted New York's answer" (Consolidated Edison Co. of N.Y. v Allstate, supra at 221, citing, inter alia, Olin Corp. v Insurance Co. of N. Am. supra).

 

The Court of Appeals explained that Consolidated Edison sought "joint and several allocation" pursuant to which it was free to collect all its damages from any one of the liable insurers, leaving the insurers to fight out issues of indemnification and contribution. The Court of Appeals rejected this argument and adopted a "pro rata allocation" based upon the language of the policies providing that each was to pay for losses arising "during the policy period" (Consolidated Edison Co. of N.Y. v Allstate Ins. Co., supra at 224, citing Olin Corp. v Insurance Co. of N. Am., supra). The Court of Appeals expressly approved the Supreme Court's use of the "time on the risk" rule employed by the Second Circuit in Olin.

 

Public Service Mutual argues that the Consolidated Edison decision is distinguishable since that case dealt with soil and ground water contamination, and not lead-paint exposure. While these are factual distinctions, they are distinctions without a difference. In both cases, the losses arose as a result of exposure to harmful substances over extended periods of time during which successive insurers issued policies covering the losses. Clearly, in the absence of any policy provisions to the contrary, and with no ability to pinpoint exactly when the insured event occurred, the most equitable means of apportioning the liability for the losses is in direct proportion to each insurer's time on the risk.

 

Because we are of the opinion that Consolidated Edison implicitly overruled American Empire insofar as is relevant to this case, we need not discuss that case in detail. We note, however, that the apportionment issue in American Empire was decided upon an analysis of when each policy was triggered, and in recognition of the equal apportionment required by the "other insurance" clauses of the policies. Unlike American Empire, the instant case presents no "triggering" issue. The instant case presents a single, narrow issue; how shall two insurers apportion liability as between themselves, for a continuing loss that occurred during both of their consecutive policy periods. American Empire did not decide this apportionment issue, and thus American Empire does not compel equal apportionment under the facts at bar.

 

Consolidated Edison also is factually distinguishable from the instant matter insofar as it posed the issue of whether pro-rated apportionment or joint and several apportionment was appropriate, whereas the instant case pits pro-rated apportionment against equal apportionment. Nevertheless, the reasoning of the Consolidated Edison decision is clearly applicable. The loss herein occurred over three years and Public Service Mutual was "on the risk" for two of the three. Therefore, Public Service Mutual rightly bears two-thirds of the liability for the settlement.

 

The instant case is the first lead-paint case in New York to employ a time on the risk analysis. However, one Federal court employed a time on the risk analysis in a closely analogous matter involving successive insurers covering lead-paint injuries (see Scottsdale Ins. Co. v American Empire Surplus Lines Ins. Co., 811 F Supp 210 [D Minn]). There, the infant plaintiff moved from one lead-paint contaminated apartment to another over a period of approximately three and one-half years. The apartments were insured by successive insurers who conceded joint liability via a settlement, and then litigated the issue of apportionment. The United States District Court for the District of Minnesota determined that each insurer's coverage had been triggered by exposure plus injury, and apportioned liability as between the insurers, based upon their respective times on the risk. Additionally, in NL Indus v Commercial Union Ins. Co. (926 F Supp 446 [D N.J.]), in advance of any determination of liability, the United States District Court for the District of New Jersey ruled that two insurers would bear defense costs against lead-poisoning claims in direct proportion to their respective times on the risk.

 

There is a paucity of case law employing a time on the risk analysis to injuries caused by exposure to lead paint. Of greater significance, however, is the fact that we have not found a single lead paint case that has ever expressly rejected the use of a time on the risk analysis. Time on the risk is apparently a comparatively new method of apportioning liability between successive insurers, one that is gaining acceptance among State and Federal courts in other analogous situations.

 

In Matter of Silicone Implant Ins. Coverage Litigation (652 NW2d 46 [Minn]), the Minnesota Court of Appeals adopted a time on the risk analysis to apportion liability as between numerous concurrent excess and consecutive insurers answerable for personal injury claims against 3M, arising from the seven-year period during which 3M sold silicone breast implants. In Mayor and City Council of Baltimore v Utica Mut. Ins. Co. (145 Md App 256, 802 A2d 1070), the Maryland Court of Appeals employed a time on the risk analysis to apportion liability between concurrent and consecutive insurers of a contractor responsible for the installation of asbestos insulation in city-owned buildings through the mid 1970s (see also Matter of Wallace & Gale Co., 284 BR 557).

 

New Jersey's courts have long applied a time on the risk analysis to cases involving successive liability for environmental harm (see Quincy Mut. Fire Ins. Co. v Borough of Bellmawr, 172 NJ 409, 799 A2d 499 [toxic leachate from municipal landfill]; Owens-Illinois v United Ins. Co., 138 NJ 437, supra [asbestos]; Champion Dyeing & Finishing Co. v Centennial Ins. Co., 355 NJ Super 262, 810 A2d 68 [leakage of fuel oil]). Indeed, the time on the risk method of allocating liability between insurers is regarded as the least arbitrary, most equitable method, fostering forseeability in underwriting and providing for uniformity of results (see Reliance Nat. Indem. Co. v Lexington Ins. Co.,  F Supp 2d  [2003 WL 13960], n3 at 6 [ND Ill, Oct. 23, 2002]).

 

In this case, Public Service Mutual has not advanced a single, genuinely persuasive argument not to apportion its liability with First Central in direct proportion to each insurer's time on the risk. Clearly, this is the most equitable measure of each insurer's liability. Each insurer undertook to insure against, inter alia, lead-paint injuries during a particular policy period. Each insurer should thus be responsible for paying its share of the loss that arose during their respective policy periods. This is a simple and just solution to this straight-forward controversy. Accordingly, we hold that each insurer shall bear pro-rata responsibility for funding the settlement, in direct proportion to each insurer's time on the risk.

 

Since this is a declaratory judgment action, the matter must be remitted to the Supreme Court, Nassau County, for the entry of a judgment declaring that the plaintiff is obligated to pay one-third of the underlying settlement, and the defendant is obligated to pay two-thirds of the underlying settlement (see Lanza v Wagner, 11 NY2d 317, 334, appeal dismissed 371 US 74, cert denied 371 US 901).

 

Accordingly, the order is reversed insofar as appealed from, on the law, the motion is granted, the branch of the cross motion which was for summary judgment declaring that the parties are obligated to pay equal shares of the underlying settlement is denied, and the matter is remitted to the Supreme Court, Nassau County, for the entry of a judgment declaring that the plaintiff is obligated to pay one-third of the underlying settlement, and the defendant is obligated to pay two-thirds of the underlying settlement.

 

FLORIO, J.P., CRANE and MASTRO, JJ., concur.

 

ORDERED that the order is reversed insofar as appealed from, on the law, with costs, the motion is granted, the branch of the cross motion which was for summary judgment declaring that the parties are obligated to pay equal shares of the underlying settlement is denied, and the matter is remitted to the Supreme Court, Nassau County, for the entry of a judgment declaring that the plaintiff is obligated to pay one-third of the underlying settlement, and the defendant is obligated to pay two-thirds of the underlying settlement.

 

MINICHELLO v NORTHERN ASSURANCE CO. OF AMERICA

 

In an action to recover damages for breach of an insurance contract, the defendants appeal (1) from an order of the Supreme Court, Queens County (Polizzi, J.), dated March 22, 2002, which denied their motion to dismiss the complaint pursuant to CPLR 3211(a)(5) as time-barred, and (2), as limited by their brief, from so much of an order of the same court, dated August 21, 2002, as, in effect, upon granting that branch of their motion which was for leave to renew, adhered to the prior determination and denied that branch of their motion which was for the imposition of a sanction upon the plaintiffs.

 

ORDERED that the appeal from the order dated March 22, 2002, is dismissed, as that order was superseded by the order dated August 21, 2002, made upon renewal; and it is further,

 

ORDERED that the order dated August 21, 2002, is modified, on the law, by deleting the provision thereof that, in effect, upon granting renewal, adhered to the prior determination and substituting therefor a provision granting the defendants' motion to dismiss the complaint; as so modified, the order dated August 21, 2002, is affirmed insofar as appealed from and the order dated March 22, 2002, is vacated; and it is further,

 

ORDERED that one bill of costs are awarded to the defendants.

 

On April 1, 1999, a residence owned by the plaintiffs was damaged by fire. The property was covered by a policy of insurance issued to the plaintiffs by the defendant, Northern Assurance Company of America, through the defendant, Suydam Agency, Inc.

 

Upon, in effect, granting that branch of the defendants' motion which was for leave to renew, the Supreme Court erred in adhering to its original determination denying the defendants' motion pursuant to CPLR 3211(a)(5) to dismiss the complaint on the ground that the claim is barred by the contractual period of limitations. The defendants met their initial burden of establishing, prima facie, that the two-year limitations period found in the insurance policy expired prior to the commencement of the action (see Savarese v Shatz, 273 AD2d 219, 220; Siegel v Wank, 183 AD2d 158, 159), whereupon the burden shifted to the plaintiffs "to aver evidentiary facts establishing that the case at hand falls within [an exception to the limitations period]" (Hoosac Val. Farmers Exch. v AG Assets, 168 AD2d 822, 823). The plaintiffs failed to offer evidence that the defendants committed any act, much less that they engaged in a course of conduct which lulled them into inactivity in the belief that their claim would ultimately be processed (see 71 NY Jur 2d, Insurance, ' 2351 p. 521-4; see also Carat Diamond Corp. v Underwriters At Lloyd's, London, 123 AD2d 544, 546), or that they were "induced by fraud, misrepresentation or deception to refrain from commencing a timely action" (Kiernan v Long Is. R.R., 209 AD2d 588, 589; see Phillips v Dweck, 300 AD2d 969; cf. Simcuski v Saeli, 44 NY2d 442, 448-449).

 

The record discloses that the delay in denial of the claim by the insurance company was attributable to the investigation of the claim and the plaintiffs' failure to cooperate in the investigation. "Delay by the insurance carrier in completing its investigation of the claim does not excuse the plaintiff from timely commencing an action, since he or she is bound by the terms of the contract to either commence an action prior to the expiration of the limitations period or obtain a waiver or extension of such provision" (Brown v Royal Ins. Co. of Am., 210 AD2d 279; see Blitman Constr. Corp. v Insurance Co. of N. Am., 66 NY2d 820; Phillips v Dweck, supra; Raniolo v Travelers Indem. Co., 279 AD2d 514, 515; Compis Servs. v Hartford Steam Boiler Inspection and Ins. Co., 272 AD2d 886, 887). Moreover, the defendants should not be estopped or found to have waived the protection of the limitations period provided for in the contract, where, as here, the plaintiffs refused to execute transcripts of their examinations under oath and otherwise failed to provide documents and information to which the defendants were entitled in their investigation of the claim (see Brown v Royal Ins. Co. of Am., supra; Myers, Smith & Granady v New York Prop. Ins. Underwriting Assn., 201 AD2d 312, 313, affd 85 NY2d 832; Carat Diamond Corp. v Underwriters At Lloyd's, London, supra at 546-547).

 

The appellants' remaining contention is without merit.

 

KRAUSMAN, J.P., TOWNES, CRANE and MASTRO, JJ., concur.

 

LEE v AMERICAN TRANSIT INS. CO.

 

In an action, inter alia, to recover unpaid no-fault benefits, the defendant appeals, as limited by its brief, from stated portions of an order of the Supreme Court, Queens County (Schmidt, J.), dated September 15, 2002, which, among other things, denied its motion for summary judgment dismissing the complaint.

 

ORDERED that the order is affirmed, with costs.

 

"An insurance carrier may not, after repudiating liability, create grounds for its refusal to pay by demanding compliance with proof of loss provisions of the policy" (State Farm Ins. Co. v Domotor, 266 AD2d 219; see Igbara Realty Corp. v New York Prop. Ins. Underwriting Assn., 63 NY2d 201; Lentini Bros. Moving & Stor. Co. v New York Prop. Ins. Underwriting Assn., 53 NY2d 835; Sherri v Natl' Sur. Co., 243 NY 266; see also King v State Farm Mut. Auto Ins. Co., 218 AD2d 863, 865; Beckley v Otsego County Farmers Coop. Fire Ins. Co., 3 AD2d 190).

 

In the present case, there are issues of fact as to whether the defendant insurance company repudiated liability under its policy, within the meaning of the rule stated above, by issuing a series of claim denial forms prior to any alleged failure by the plaintiff to submit to an examination under oath. Under these circumstances, the Supreme Court properly denied the defendant's motion for summary judgment dismissing the complaint in its entirety, based on the plaintiff's failure to submit to an examination under oath as requested on June 12, 1998 (see e.g. Ayyub v Smith, 291 AD2d 864; Rajchandra Corp. v Title Guar. Co., 163 AD2d 765; Treptow v Exchange Mut. Ins. Co., 106 AD2d 767; Ocean-Clear v Continental Cas. Co., 94 AD2d 717).

 

The defendant's remaining contentions are without merit.

 

PRUDENTI, P.J., KRAUSMAN, GOLDSTEIN and SCHMIDT, JJ., concur.

 

CARRACIA v ALLSTATE INS. CO.

 

In an action, inter alia, to recover insurance proceeds for the theft of an automobile, the defendant appeals from a judgment of the Supreme Court, Suffolk County (Oliver, J.), entered November 21, 2001, which, upon granting the plaintiff's motion pursuant to CPLR 4401 for judgment in her favor as a matter of law at the close of the evidence at a jury trial, is in favor of the plaintiff and against it.

 

ORDERED that the judgment is reversed, on the law, the motion is denied, and a new trial is granted, with costs to abide the event.

 

Viewing the evidence in the light most favorable to the defendant Allstate Insurance Company (hereinafter Allstate) (see Szczerbiak v Pilat, 90 NY2d 553, 556), it cannot be said that there is no valid line of reasoning and permissible inferences which could possibly lead rational persons to conclude that the plaintiff did not sustain the loss that she claimed (see Cohen v Hallmark Cards, 45 NY2d 493, 499).

 

It is undisputed that the subject vehicle was involved in an accident while owned by its prior owner. As a result of that accident, the vehicle was deemed a "total loss" with an estimated salvage value of $5,949. Nevertheless, by invoice dated May 25, 1997, admitted in evidence at the trial, the plaintiff purportedly purchased the vehicle for $14,000 plus tax.

 

It appears that the vehicle sold to the plaintiff and the vehicle produced for inspection when Allstate issued the policy may not have been the same car, since their odometer readings, rear lights, and rims were different. Further, in her sworn proof of loss, the plaintiff falsely denied that the car was rebuilt. At the trial, she claimed that misrepresentation was an honest mistake, since her father purchased the car for her and rebuilt it without her knowledge. This claim, which was contradicted by the invoice stating that she purchased the car, presented an issue of fact for the jury.

 

In view of the foregoing, the plaintiff was not entitled to judgment as a matter of law, and Allstate is granted a new trial.

 

S. MILLER, J.P., GOLDSTEIN, McGINITY and MASTRO, JJ., concur.