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12/04/03
EXCESS INS. CO., LTD. v FACTORY MUT. INS. CO.
New York State Supreme Court, Appellate Division, First
Department
“Follow the Settlements”
Provision of Reinsurance Agreement Subject to Agreement’s “Limits” Provision
Factory Mutual insured a warehouse and obtained reinsurance
from plaintiffs for the risk. The reinsurance agreement contained a provision
limiting the reinsurance coverage to $7 million for any one occurrence. The
agreement also included a condition that “Reinsurers agree to follow the
settlements of the Reinsured in all respects and to bear their proportion of any
expenses incurred, whether legal or otherwise, in the investigation and defense
of any claim hereunder.” The warehouse burned down and Factory Mutual commenced
an unsuccessful litigation against the insured. After spending $35 million in
litigation expenses, it abandoned the litigation and settled with the insured
for $100 million. The lower court concluded that the $7 million limit of the
reinsurance coverage did not apply to the litigation expenses referred to in the
“follow the settlements” clause contained in the agreement’s “Conditions.” On
appeal, the court held that the $7 million limit of the reinsurance policy was
not superceded by the “follow the settlements” section of the policy, and, as
such, the expenses for which the reinsurers were obligated to reimburse Factory
Mutual, including those pursuant to the “follow the settlements” section, could
not exceed the overall $7 million limit of the policy. In doing so, the court
rejected an expert affidavit submitted by Factory Mutual regarding industry
custom—extrinsic evidence could not be considered in interpreting clear and
unambiguous contract language.
12/02/03
GAIDON v THE GUARDIAN LIFE INS. CO. OF AMERICA
New York State Supreme Court, Appellate Division, First
Department
Class Certification Denied in
Action Alleging Deceptive Practices in Violation of General Business Law § 349
Court denied class certification to policyholders in action
alleging deceptive sales techniques. Plaintiffs failed to demonstrate questions
of fact common to the class that predominated over questions affecting only
individual members. Court held that deceptive acts or practices implies more
than simply an invented scheme or marketing strategy, but an actual
misrepresentation or omission to the consumer. “Any oral communications that may
have induced members of the putative class to purchase the policies, as well as
the varied use of illustrations concerning the ‘vanishing premium’ concept and
the extent to which a purchaser might have been influenced by such
illustrations, would require individualized proof in the case of each class
member, which would in turn raise questions that would overwhelm any issues
common to the class.”
11/25/03
FRANCHINI v PALMIERI
New York
Court of Appeals
Failure of
Plaintiff’s Doctor to Discuss Preexisting Condition Leads to Summary Judgment on
“Serious Injury” Threshold
Defendant had a right to rely on
plaintiff’s medical records and reports to support motion for summary judgment
on grounds of lack of “serious injury,” as defined in No-Fault law. Plaintiff’s
submissions were insufficient to defeat summary judgment because her experts
failed to adequately address plaintiff’s preexisting back condition and other
medical problems, and did not provide any foundation or objective medical basis
supporting the conclusions they reached.
11/25/03
EMPIRE BLUE CROSS AND BLUE SHIELD v VARIOUS UNDERWRITERS AT LLOYD’S
New York State Supreme Court, Appellate Division, First
Department
Insurer Not Estopped from
Invoking Policy’s Limitations Period as Defense in Absence of Evidence that
Insured was Lulled into Inactivity
Plaintiff filed suit against Lloyd’s after its claim for
losses arising from employee theft was denied for failure to file a timely
notice of claim, as well as proof of loss, and failure to cooperate. The lower
court dismissed the case because it was not filed within two years from the date
of discovery of the loss, as required by the policy. Plaintiff argued that it
was lulled into not filing suit by Lloyd’s conduct in refraining from sending
out a disclaimer until after the time for suit had run. The court observed that
there was evidence of bad faith, since two of the grounds for disclaimer--lack
of timely claim and lack of timely proof of loss--were known to Lloyd’s long
before the disclaimer letter was issued. The court held, however, that plaintiff
failed to demonstrate the existence of any conduct by Lloyd’s that could
reasonably be construed as having duped plaintiff into refraining from
initiating a lawsuit. Plaintiff waited seven months after disclaimer was sent
before it commenced the lawsuit. More important, plaintiff, also an insurance
company, failed to show that there were any communications that would have
suggested that upon the conclusion of the investigation the claim would be paid,
or even that Lloyd’s had requested plaintiff to refrain from commencing a
lawsuit pending an investigation. Thus, there is no showing of detrimental
reliance, a necessary element of estoppel.
11/24/03
ACE FIRE UNDERWRITERS INS. CO. v ORANGE-ULSTER BD.
OF COOP. EDUC. SERVS.
New York, Appellate Division,
Second Department
E&O Carrier, Not CGL Carrier,
Responsible for Defending Claim that School District Negligently Hired Employee
Who Sexually Assaulted Plaintiff
The court held that a CGL
did not cover claims sounding in negligent hiring and supervision, where the
claims were premised on intentional sexual assaults. The general liability
policy defined “occurrence” as an “accident, including continuous or repeated
exposure to substantially the same general harmful conditions.” Thus, the court
concluded that allegations sounding in negligent hiring and supervision were
intentional acts and did not constitute an “occurrence” within the meaning of
the policy. The inclusion of causes of action sounding in negligent hiring and
supervision did not alter the fact that the operative acts giving rise to any
recovery are the alleged intentional sexual assaults. Because there was no legal
basis on which plaintiff could be held liable for coverage, there was no
obligation to provide a defense. The insurer was not estopped from
asserting that its policy did not cover the underlying claim. Although the
plaintiff initially provided a defense to the defendants in the underlying
action, it reserved its rights to disclaim coverage and the defendants failed to
demonstrate prejudice. An errors and omissions policy issued to the defendant
did afford coverage for the claims. The court held that such policies are
intended to insure a member of a designated calling against liability arising
out of the mistakes inherent in the practice of that particular profession or
business. While the underlying action is grounded in allegations of intentional
sexual abuse for which the insurer would owe no duty of defense or
indemnification, to the extent that the defendants may be held liable in the
underlying action for negligent hiring and supervision, this risk falls squarely
within the errors and omissions policy.
11/24/03 RONDALE BUILDING
CORP. v NATIONWIDE PROPERTY AND CAS. INS. CO.
New York State Supreme
Court, Appellate Division, Second Department
Insured Loses Coverage for
Failing to Provide Carrier with Notice of Accident
In August 1997, a dog
kept on plaintiff’s premises attacked a NYNEX employee who allegedly was on the
property unlawfully. The victim was removed from the scene by ambulance and
hospitalized for three days. Although the plaintiff was aware of the incident,
it did not notify its insurer. In February 2000, the victim commenced an
underlying personal injury action against the plaintiff. The insurer was then
notified of the incident, and disclaimed coverage due to late notice. Plaintiff
commenced this action seeking a declaration that the defendant was required to
defend and indemnify it in the underlying action. The policy required the
plaintiff to notify the defendant “as soon as practicable of an ‘occurrence’ …
which may result in a claim.” Court held that compliance with the notice
provision is a condition precedent to coverage. Absent valid excuse, the failure
to comply vitiates coverage. A reasonable belief in non-liability will excuse
the delay in giving notice, but the insured has the burden of showing the
reasonableness of such excuse. Based on the evidence available to the plaintiff
in 1997, a reasonable and prudent insured would have concluded that there
existed a strong possibility that a liability claim would be made due to the
fact that the victim was removed from the scene by ambulance and hospitalized
for three days. Accordingly, the plaintiff’s delay in giving notice was not
excusable.
11/24/03
SHANNA GOLDEN, LTD. v TOWER INS. CO. OF
NEW YORK
New York State Supreme
Court, Appellate Division, Second Department
Assault and Battery Exclusion in
General Liability Policy Applies to Liquor Liability Endorsement
A customer at the
plaintiff's restaurant was shot by a fellow patron, who allegedly was
intoxicated. Plaintiff commenced an action against plaintiff alleging a Dram
Shop Act cause of action. Plaintiff was insured under a general liability
policy, which contained a liquor liability endorsement. The general liability
section of the policy excluded coverage for assault and battery “whether caused
by or at the instigation of, or at the direction of the insured, his/her
employees, customers, patrons, guests or any cause whatsoever, including, but
not limited to claims of negligent or improper … supervision of … patrons or
guests and negligence in failing to protect customers, patrons or guests.” The
liquor liability endorsement provided coverage for damages “sustained by any
person if such liability is imposed upon the insured by reason of the selling,
serving or giving of any alcoholic beverage at or from the insured premises.”
The endorsement listed three exclusions, none relevant here, which “are added
to the EXCLUSIONS section of the General Liability Coverage”. The liquor
liability endorsement did not specifically include an assault and battery
exclusion, but the endorsement was expressly made “subject to the terms
contained in the General Liability Coverage.” The word “terms,” was defined to
mean "provisions, limitations, exclusions, definitions and conditions.”
Defendant disclaimed coverage based on the assault and battery exclusion, and
plaintiff commenced this action seeking a judgment declaring that the defendant
was obligated to defend and indemnify it in the underlying action. The lower
court denied the defendant’s motion for summary judgment and granted the
plaintiff's cross motion for summary judgment, concluding that the defendant was
obligated to defend and indemnify the plaintiff. The appellate court reversed,
concluding that the assault and battery exclusion was applicable to the liquor
liability coverage as well as to the general liability coverage. “[I]n
construing an endorsement to an insurance policy, the endorsement and the policy
must be read together, and the words of the policy remain in full force and
effect except as altered by the words of the endorsement.” The liquor liability
endorsement expressly provided that it was subject to all the terms of the
policy, which, by definition, included the policy exclusions. The endorsement
further provided that the exclusions listed therein are added to the general
liability coverage exclusions; they do not replace the general exclusions. Thus,
pursuant to the clear and unambiguous terms of the policy and endorsement, the
assault and battery exclusion applied to the liquor liability endorsement.
11/21/03
GRAPHIC ARTS MUT. INS. CO. v ABRAMS
New York State Supreme
Court, Appellate Division, Fourth Department
Insurer has Duty to Defend When
it has Knowledge of Facts Potentially within Coverage though Not Alleged in
Complaint
In this case, the court
was called upon to determine whether the insurer was obligated to defend its
insured in an underlying action arising out of a motor vehicle accident, where
the injured claimant has alleged that the insured intentionally drove his motor
vehicle at him, a claim not covered by the policy. Court held that although no
covered occurrence was evident from the four corners of the complaint, the
insurer was nevertheless obligated to defend its insured. An insurer must
provide a defense where it has knowledge of facts that would “potentially bring
the claim within the policy’s indemnity coverage.” An insurer cannot ignore
facts made known to it by its insured and rely on the complaint alone to assess
its duty to defend. If any of the claims against defendant in the underlying
action arguably arise from a covered occurrence, plaintiff is required to defend
the entire action. Here, the insured contended that he drove off the road toward
plaintiff, who was waving a flashlight and yelling, to see if he was in trouble
or needed assistance. Thus, the insurer was required to defend until the
disputed factual allegations are resolved at trial.
11/21/03
MATTER OF STATE FARM MUT. AUTO. INS. CO.
v CYBULSKI
New York State Supreme
Court, Appellate Division, Fourth Department
SUM Coverage Properly Denied for
Insured’s Two-Year Delay in Proving Notice of SUM Claim
Respondent was injured in
an auto accident, but did not give petitioner notice of his supplemental
uninsured motorist (SUM) claim until two years later. The insurance policy
issued by petitioner required notice of a SUM claim “[a]s soon as practicable,”
i.e., “with reasonable promptness after [he] knew or should reasonably have
known that the tortfeasor was underinsured.” Petitioner sought a permanent stay
of arbitration of respondent’s SUM claim, and respondent cross-moved to dismiss
the petition. Court held that petition should have been granted. Respondent
failed to meet his burden of establishing a reasonable excuse for the more than
two-year delay in giving notice. “The nature and extent of respondent's injury
did not change from the time of the accident until the time when respondent
provided petitioner with notice of the SUM claim,” nor did respondent
demonstrate that he acted with due diligence in attempting to determine the
insurance coverage of the tortfeasor. Moreover, respondent retained his attorney
one month after the accident, but the record “does not reflect the efforts of
that attorney, if any, to obtain the information necessary for respondent to
make a claim for SUM benefits.”
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12/04/03
LEE v JOHN DEERE INS. CO.
Illinois Supreme Court
Failure to Strictly Comply with
Insurance Code Imposes Coverage Up to Bodily Injury Liability Limits
The Illinois Supreme Court
held that failure of an insurance company to comply strictly with requirement in
Illinois Insurance Code that insurance company provide a space in its motor
vehicle coverage application form for the applicant to sign or initial
indicating a decision to reject uninsured-motorist coverage, operates to impose
underinsured-motorist coverage in an amount equal to the bodily injury liability
limits.
Gary Crapster, Strasburger &
Price
12/02/03
CAPROOD v
ATLANTA CAS. CO.
Connecticut Appellate Court
Insured Need Only Provide
Circumstantial Evidence of Causation of Accident to Satisfy Jury Finding that
Insurer is Liable for Damages.
Plaintiff Caprood filed a
complaint against her insurer, Atlanta Cas. Co., seeking damages under an
automobile policy providing coverage for hit-and-run accidents. Atlanta denied
that plaintiff was injured as a result of the negligent conduct of the
hit-and-run driver. Jury awarded plaintiff damages and the trial court set the
verdict aside because, in its view, plaintiff had presented no evidence as to
what had caused the other driver to collide with plaintiff’s vehicle. The
appeals court reversed, finding that the plaintiff, while not presenting direct
evidence as to the cause of the collision, provided sufficient circumstantial
evidence from which the jury reasonably could have inferred that the hit-and-run
driver negligently caused the collision. The court found that the jury could
have inferred that the hit-and-run driver failed to keep a proper lookout, as
the intersection at which the collision occurred was well lit and unobstructed.
Further, the court found the jury could have inferred that the driver failed to
keep proper control of the vehicle, after considering the extensive damage to
the plaintiff’s car.
Bruce D. Celebrezze and
Vanessa O'Brien, Sedgwick, Detert, Moran & Arnold LLP
12/01/03
THOMAS v
UNITED STATES FIDELITY AND GUARANTEE INS. CO.
Ohio Court of Appeals, Twelfth
Appellate District
Insured Not Entitled to UM/UIM
Coverage because She Failed to Notify Insurer of Settlement of Claims Against
Two Other Insurers.
United States Fidelity and
Guarantee Ins. Co. (USF&G) argued that it had no duty to provide
uninsured/underinsured motorist (UM/UIM) coverage to appellant because she
failed to notify the insurer of settlement of her claims against two other
insurers, which prejudiced USF&G. The trial court agreed, and the insured
appealed. The appellate court first noted that a subrogation clause is an
enforceable precondition to an insurer’s duty to provide UM/UIM coverage. The
insured failed to protect USF&G’s subrogation rights, as she was required to do
under the terms of the insurance policy. Appellant argued that the parties could
not have intended the notice and subrogation provisions of the policy to apply
to UM/UIM coverage. The court rejected this contention, citing an earlier
decision that holds that the notice provision is a general condition imposed
upon a policy with respect to any liability coverage it provides, and the
insured’s failure to comply with those requirements terminated the UM/UIM
liability coverage involved.
Bruce D. Celebrezze & Vanessa
O'Brien, Sedgwick, Detert, Moran & Arnold, LLP
11/26/03
LANDMARK CHEVROLET
CORP v UNIVERSAL UNDERWRITERS INS. CO.
Texas Court of Appeals
Extrinsic Evidence Not Permitted
in Determining Whether Insurer Had Duty to Defend for Violations of Federal and
State Truth-in-Lending Laws.
Automobile dealerships were
sued by former consumers who alleged that they were charged a “Consumer Services
Fee” in return for a worthless coupon book. The petitions alleged violation of
the Texas Deceptive Trade Practices Act and fraud, but did not allege any
violations of state or federal truth-in-lending laws. Insurer issued a policy to
the dealerships that provided Status and Title E&O coverage and required insurer
to defend against any claims of truth-in-lending violations. Insurer declined
defense on grounds that the petitions made no legal allegations of
truth-in-lending violations, and because the factual allegations did not
indicate that plaintiffs claimed violations of truth-in-lending laws. Trial
court granted summary judgment in the insurer’s favor. The insured argued (1)
that the pleadings, when considered in the underlying cases, were sufficient to
bring the cases within the insurer’s duty to defend and (2) the court should
consider extrinsic evidence so as to trigger the duty to defend. The court found
that the Federal Truth-In-Lending Act required creditors to make certain
material disclosures, and the petitions did not allege that the dealerships were
creditors or that the automobiles were purchased on credit. Thus, the insurer
was not required to defend the dealerships against the claims. In addition, the
court did not recognize an exception to the “eight-corners rule” requiring the
court to consider the pleadings and the insurance policy only in determining
whether the insurer had a duty to defend. The court had specifically rejected an
exception to allow extrinsic evidence to be introduced in determining a duty to
defend.
Bruce D. Celebrezze & Vanessa
O'Brien, Sedgwick, Detert, Moran & Arnold, LLP
11/26/03
CHENARD v
COMMERCE INSURANCE COMPANY
Massachusetts Supreme Judicial
Court
Stacking of Uninsured Motorists
Coverage Disallowed by Massachusetts High Court
Insured not entitled to
additional Uninsured Motorist limits from carrier for household car which was
not involved in accident under policy and state law.
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EMPIRE BLUE CROSS AND
BLUE SHIELD v VARIOUS UNDERWRITERS AT LLOYD’S
Plaintiff filed suit
against various underwriters (Lloyd's), after its claim for losses arising from
employee theft was denied for, inter alia, failure to file a timely notice of
claim as well as proof of loss, and failure to cooperate. The IAS court
dismissed the lawsuit because it was not filed within the time period recited in
the insurance policy for commencement (i.e., two years from the date of
discovery of the loss). Plaintiff argued that it was lulled into not filing suit
earlier by Lloyd's conduct in refraining from sending out a disclaimer until
after the time for suit had run.
At the outset, we note that there is evidence of bad faith by Lloyd's, since two
of the grounds for disclaimer lack of timely claim and lack of timely proof of
loss were known to it long before the disclaimer letter was issued. However,
plaintiff has not demonstrated the existence of any conduct, passive or active,
by Lloyd's that could reasonably be construed as having duped plaintiff into
refraining from initiating a lawsuit. In this regard, we note that plaintiff
waited seven months after the disclaimer was sent before it commenced this
lawsuit. More important, plaintiff, also an insurance company, has failed to
show that there were any communications that would have suggested that upon the
conclusion of the investigation the claim would be paid, or even that Lloyd's
had requested plaintiff to refrain from commencing a lawsuit pending an
investigation. Thus, there is no showing of detrimental reliance, a necessary
element of estoppel (see Blitman
Constr. Corp. v Insurance Co. of N. Am., 66 NY2d
820, 823).
RONDALE BUILDING CORP.
v NATIONWIDE PROPERTY AND CASUALTY INS. CO.
In an action for a
judgment declaring that the defendant is obligated to defend and indemnify the
plaintiff in an underlying action entitled Ahmad v Marku,
commenced in the Supreme Court, Kings County, under Index No. 5809/00, the
defendant appeals from an order of the Supreme Court, Nassau County (McCarty,
J.), entered December 12, 2002, which denied its motion for summary judgment.
ORDERED that the order is reversed, on the law, with costs, the motion is
granted, and the matter is remitted to the Supreme Court, Kings County, for the
entry of a judgment declaring that the defendant is not obligated to defend or
indemnify the plaintiff in the underlying action.
The defendant provided insurance coverage for property owned by the plaintiff.
The policy required the plaintiff to notify the defendant "as soon as
practicable of an 'occurrence' * * * which may result in a claim." The
definition of "occurrence" included "an accident." In August 1997, a dog kept on
the plaintiff's premises attacked a NYNEX employee who allegedly was on the
property unlawfully. The victim was removed from the scene by ambulance and
hospitalized for three days. Although the plaintiff was aware of the incident,
it did not notify the defendant of it.
In February 2000 the victim commenced the underlying personal injury action,
among others, against the plaintiff. The defendant was then notified of the
incident. The defendant disclaimed coverage due to late notice and the plaintiff
commenced this action seeking a declaration that the defendant is required to
defend and indemnify it in the underlying action.
Compliance with the notice provision of an insurance policy is a condition
precedent to coverage (see
New York Cent.
Mut.
Fire Ins. Co. v Riley, 234
AD2d 279).
Therefore, absent a valid excuse, the failure to comply with the notice
requirements vitiates coverage (see American Home Assur.
Co. v International Ins. Co.,
90 NY2d 433). A reasonable
belief in nonliability will excuse the delay in
giving notice, but the insured has the burden of showing the reasonableness of
such excuse (see White v City of
New York,
81 NY2d 955). Based on
the evidence available to the plaintiff in 1997, a reasonable and prudent
insured would have concluded that there existed a strong possibility that a
liability claim would be made due to the fact that the victim was removed from
the scene by ambulance and hospitalized for three days (see Greater N.Y.
Mut. Ins. Co. v
Farrauto, 158 AD2d
514). Accordingly, the plaintiff's delay in giving notice was
not excusable.
SHANNA GOLDEN, LTD. v
TOWER INS. CO. OF NEW YORK
In an action, inter alia,
for a judgment declaring that the defendant is obligated to defend and indemnify
the plaintiff in an action entitled Lehmann
v Shanna Golden, Ltd., pending in the Supreme
Court, Queens County, under Index No. 31376/01, the defendant appeals, as
limited by its brief, from so much of an order of the Supreme Court, Queens
County (O'Donoghue, J.), dated July 29, 2002, as
denied its motion for summary judgment and granted the plaintiff's cross motion
for summary judgment.
ORDERED that the order is reversed insofar as appealed from, on the law, with
costs, the motion is granted, the cross motion is denied, and the matter is
remitted to the Supreme Court, Queens County, for the entry of a judgment
declaring that the defendant is not obligated to defend and indemnify the
plaintiff in the action entitled Lehmann v
Shanna Golden, Ltd., pending in the Supreme
Court, Queens County, under Index No. 31376/01.
The defendant issued a general liability insurance policy with a liquor
liability endorsement to the plaintiff, a restaurant owner. The general
liability portion of the policy excludes coverage, among other things, for
assault and battery "whether caused by or at the instigation of, or at the
direction of the insured, his/her employees, customers, patrons, guests or any
cause whatsoever, including, but not limited to claims of negligent or improper
* * * supervision of * * * patrons or guests and negligence in failing to
protect customers, patrons or guests." The liquor liability endorsement provides
coverage for damages "sustained by any person if such liability is imposed upon
the insured by reason of the selling, serving or giving of any alcoholic
beverage at or from the insured premises." The endorsement lists three
exclusions, none relevant here, which "are added to the EXCLUSIONS
section of the General Liability Coverage" [emphasis supplied]. The liquor
liability endorsement does not specifically include an
assault and battery exclusion, but the endorsement is expressly made
"subject to the terms contained in the General Liability Coverage." The
word "terms," as used in the policy, "means provisions, limitations,
exclusions, definitions and conditions" [emphasis supplied].
Michael Lehmann, a customer at the plaintiff's
restaurant, was shot by Daniel Vergez, a fellow
patron, who allegedly was intoxicated. Lehmann
subsequently commenced an action against Vergez and
the plaintiff alleging, among other things, a Dram Shop Act cause of action
against the plaintiff (see General Obligations Law § 11-101). After the
defendant disclaimed coverage based on the assault and battery exclusion, the
plaintiff commenced this action seeking, among other things, a judgment
declaring that the defendant is obligated to defend and indemnify it in the
underlying action. The Supreme Court denied the defendant's motion for summary
judgment and granted the plaintiff's cross motion for summary judgment,
concluding that the defendant is obligated to defend and indemnify the
plaintiff. We reverse.
Contrary to the plaintiff's contention, the assault and battery exclusion is
applicable to the liquor liability coverage as well as to the general liability
coverage. "[I]n construing an endorsement to an insurance policy, the
endorsement and the policy must be read together, and the words of the policy
remain in full force and effect except as altered by the words of the
endorsement" (County of Columbia v Continental Ins. Co., 83 NY2d 618,
628). The liquor liability endorsement expressly provides that it is subject to
all the terms of the policy, which, by definition, includes the policy
exclusions. The endorsement further provides that the exclusions listed therein
are added to the general liability coverage exclusions; they do not replace the
general exclusions. Pursuant to the clear and unambiguous terms of the policy
and endorsement, the assault and battery exclusion applies to the liquor
liability endorsement. Consequently, the defendant has no duty to defend or
indemnify the plaintiff (see County of Columbia v Continental Ins. Co.,
supra; Sphere Drake Ins. Co. v Block 7206 Corp., 265 AD2d 78, 79-80).
ALTMAN, J.P., McGINITY, LUCIANO and H. MILLER,
JJ., concur.
BARSALONE v NEW YORK CITY
TRANSIT AUTHORITY
In an action to recover
damages for personal injuries, the defendant New York City Transit Authority
appeals from an order of the Supreme Court, Kings County (Hutcherson,
J.), dated September 16, 2002, which denied its motion for summary judgment
dismissing the complaint insofar as asserted against it on the ground that the
plaintiff did not sustain a serious injury within the meaning of Insurance Law §
5102(d).
ORDERED that the order is reversed, on the law, with costs, the motion is
granted, and the complaint is dismissed insofar as asserted against the
appellant; and it is further,
ORDERED that upon searching the record, summary judgment is granted to the
defendant John Doe, and the complaint is dismissed insofar as asserted against
that defendant.
The appellant made out a prima facie case that the plaintiff's injuries were not
serious within the meaning of Insurance Law § 5102(d) through the affirmed
medical report of an orthopedist who examined the plaintiff and concluded that
she had not sustained any disability (see Gaddy v
Eyler, 79 NY2d 955).
The affirmation prepared by the plaintiff's treating physician
which was submitted in opposition to the motion
failed to raise a triable issue of fact. The plaintiff's physician failed to set
forth the objective tests he performed in arriving at his conclusions concerning
the alleged restrictions of motion in the plaintiff's arm and shoulder (see
Grossman v Wright, 268 AD2d 79). Furthermore, the physician failed to
address the impact of the pre-existing arthritic condition in the plaintiff's
shoulder on the alleged restrictions of motion (see
Dimenshteyn v Caruso, 262 AD2d 348).
EXCESS INS. CO., LTD. v FACTORY MUT.
INS. CO.
Order, Supreme Court, New
York County (Karla Moskowitz, J.), entered September
25, 2002, which denied plaintiffs' motion for partial summary judgment and
granted defendant's cross motion for partial summary judgment, unanimously
reversed, on the law, with costs, defendant's cross motion denied and
plaintiffs' motion granted so as to declare that the portion of the reinsurance
agreement between the parties requiring plaintiffs to bear their proportionate
share of expenses incurred in the investigation and defense of any claim under
the underlying policy, is subject to the $7 million limit stated in the
agreement.
Defendant Factory Mutual
(formerly known as Allendale Mutual Ins. Co.) insured a warehouse in
Seclin,
France. Defendant then obtained reinsurance from plaintiffs for a large portion
of the risk. The reinsurance agreement contained a "Limit" provision limiting
the reinsurance coverage to $7 million (U.S.) for any one occurrence.
Immediately following this "Limit" provision were listed "Conditions," including
the condition that "Reinsurers agree to follow the settlements of the Reinsured
in all respects and to bear their proportion of any expenses incurred, whether
legal or otherwise, in the investigation and defence
of any claim hereunder."
The warehouse burned
down, and defendant commenced an unsuccessful litigation against the insured.
After spending approximately $35 million in litigation expenses, defendant
abandoned the litigation and settled with the insured for nearly $100 million.
The motion court
concluded that the $7 million limit of the reinsurance coverage did not apply to
the litigation expenses referred to in the "follow the settlements" clause
contained in the agreement's "Conditions." We disagree, holding that the $7
[*2]million
limit of the reinsurance policy is not superceded or overruled by the "follow
the settlements" section of the policy, and so the expenses for which
plaintiffs-reinsurers are obligated to reimburse defendant-reinsured, including
those pursuant to the "follow the settlements" section, cannot exceed the
overall $7 million limit of the policy.
Initially, we conclude
that New York law should be applied. In a conflicts
of law analysis, the first consideration is whether there is any actual conflict
between the laws of the competing jurisdictions. If no conflict exists, then the
court should apply the law of the forum state in which the action is being heard
(see Matter of Allstate Ins. Co. [Stolarz],
81 NY2d 219, 223;
Taylor v American Bankers
Ins. Group,
267 AD2d 178). Here, defendant's sole claimed difference in the laws of the two
states is that it claims Rhode Island allows a court, when interpreting a
contract, to consider extrinsic evidence. We disagree, and conclude that no such
conflict exists.
Under Rhode Island law,
as under New York law, "the clear and unambiguous language set out in a written
instrument is controlling as to the intent of the parties thereto and governs
the legal consequences of the contract provisions" (Theroux v Bay Associates,
Inc., 339 A2d 266, 268 [RI]; see Chapman v Domestic
Vendresca, 426 A2d 262 [RI]; Supreme
Woodworking Co. v Zuckerberg, 107 A2d 287, 290
[RI]). We do not read Westinghouse Broadcasting Co. v Dial Media, Inc.
(410 A2d 986 [RI]) as altering this well-established rule. Therefore, the expert
affidavit submitted by defendant regarding industry custom is extrinsic evidence
which should not be considered in interpreting this clear and unambiguous
document.
Even if a conflict in the
two states' law existed, under the complex circumstances here, the mere fact
that defendant is a Rhode Island company which paid the underlying policy
premiums from Rhode Island would not justify the application of Rhode Island
law. We also note that throughout the four years of the parties' litigation in
the Federal District Court, defendant took the position that New York law
applied.
As we read the
reinsurance agreement, while plaintiffs-reinsurers are required by the policy to
"follow the settlements of the Reinsured in all respects and to bear their
proportion of any expenses incurred, whether legal or otherwise, in the
investigation and defense of any claim hereunder," this provision does not
supercede or supplant the "limit" of the overall
[*3]contract
(see Bellefonte Reins.
Co. v Aetna
Cas. & Sur.
Co., 903 F2d 910;
Unigard Sec. Ins. Co. v North River Ins. Co.,
4 F3d 1049).
While the reinsurance contracts considered in Bellefonte and
Unigard, unlike that in the present case,
contained language which specified that the reinsurance was "subject to" the
terms and conditions of the reinsurance contract, that distinction does not
warrant the application of different reasoning in this case, since it seems
evident that all contracts are subject to their terms and conditions; the real
question is how those terms and conditions affect each other. The overriding
determination in Bellefonte and Unigard
was that the "follow the fortunes" clauses of the reinsurance contracts
considered there coexisted with, and did not supplant, the contract limitations.
Indeed, this point appears to have been accepted by the Court of Appeals in
Travelers Casualty and Surety Company v Certain Underwriters at Lloyds of London
(96 NY2d 583).
As the Federal Southern
District Court noted in the litigation before it between these parties on this
point, had the reinsured desired to have the expenses not subject to the limits
of the contract, it could easily have inserted, directly prior to the "follow
the settlements" clause, language such as "notwithstanding any provision in this
contract to the contrary" or something similar (Allendale
Mut. Ins. Co. v Excess Ins. Co.,
Ltd., 970 F Supp 265, 269).
Accordingly, the $7
million "Limit" contained in the reinsurance agreement between plaintiffs, as
reinsurers, and defendant, as reinsured, applied to the reinsurers'
proportionate share of expenses incurred in the investigation and defense of any
claim under the underlying policy.
GAIDON v THE GUARDIAN
LIFE INS. CO. OF AMERICA
Order, Supreme Court, New
York County (Charles Ramos, J.), entered April 25, 2003, which, inter alia,
denied class certification to plaintiff policyholders in this action alleging
deceptive sales techniques, unanimously affirmed, without costs.
Plaintiffs failed to
demonstrate questions of fact common to the class which predominate over
questions affecting only individual members (CPLR 901[a][2];
Canavan v Chase Manhattan Bank, 234
AD2d 493, 494). "Deceptive acts or practices" (General Business Law § 349)
implies more than simply an invented scheme or marketing strategy, but an actual
misrepresentation or omission to the consumer (Goshen
v Mutual Life Ins. Co. of N.Y.,
98 NY2d 314, 325). Any oral communications that may have induced members of the
putative class to purchase the policies, as well as the varied use of
illustrations concerning the "vanishing premium" concept and the extent to which
a purchaser might have been influenced by such illustrations, would require
individualized proof in the case of each class member, which would in turn raise
questions that would overwhelm any issues common to the class (Carnegie v H&R
Block, 269 AD2d 145, 147, lv
[*2]dismissed
95 NY2d 844; see also Russo v Massachusetts
Mut. Life Ins. Co.,
192 Misc 2d 349, in which the court denied class
certification in a "vanishing premium" case).
GRAPHIC ARTS MUT.
INS. CO. v ABRAMS
It is hereby ORDERED that
the judgment so appealed from be and the same hereby is unanimously modified on
the law by granting judgment in favor of defendant as follows: It is ADJUDGED
and DECLARED that plaintiff must defend defendant in the underlying action until
the disputed factual allegations are resolved at trial and as modified
the judgment is affirmed without costs.
Memorandum: Supreme Court
properly denied plaintiff's motion for summary judgment in this declaratory
judgment action. Although no covered occurrence is evident from the four corners
of the complaint in the underlying action, that is not the "sole criteria
for measuring the scope of" the duty to defend (Fitzpatrick v American Honda
Motor Co., 78 NY2d 61, 66). An insurer must provide a defense where it has
knowledge of facts that would "potentially bring the claim within the policy's
indemnity coverage" (id.). Here, the plaintiff in the underlying action,
Alan Cook, contends that defendant intentionally drove his motor vehicle at him,
while defendant contends that he drove
[*2]off
the road toward Cook, who was waving a flashlight and yelling, to see if he was
in trouble or needed assistance. If the truck's mirror hit Cook under the latter
circumstances, defendant's conduct may have constituted a negligent act
involving the use of a motor vehicle falling within the policy's coverage.
The court, however, erred
in denying the motion without declaring the rights of the parties. "[R]ather
than mechanically applying only the 'four corners of the complaint' rule ***,
the sounder approach is to require the insurer to provide a defense when it has
actual knowledge of facts establishing a reasonable possibility of coverage" (id.
at 67; see also A. Meyers & Sons Corp. v Zurich Am. Ins. Group, 74 NY2d
298, 302). An insurer cannot ignore facts made known to it by its insured and
rely on the complaint alone to assess its duty to defend (see Fitzpatrick,
78 NY2d at 70). If any of the claims against defendant in the underlying action
arguably arise from a covered occurrence, plaintiff is required to defend the
entire action (see Frontier Insulation Contr. v Merchants
Mut. Ins. Co.,
91 NY2d 169, 175). We therefore modify the judgment by
granting judgment in favor of defendant declaring that plaintiff must defend
defendant in the underlying action until the disputed factual allegations are
resolved at trial.
MATTER OF STATE FARM MUT.
AUTO. INS. CO. v CYBULSKI
It is hereby ORDERED that
the order so appealed from be and the same hereby is unanimously reversed on the
law without costs, the cross motion is denied and the petition is granted.
Memorandum: Respondent
was injured in an automobile accident on May 24, 1998, but did not give
petitioner notice of his supplemental uninsured motorist (SUM) claim until June
28, 2000. The insurance policy issued by petitioner to respondent required him
to give notice of a SUM claim "[a]s soon as practicable," i.e., "with reasonable
promptness after [he] knew or should reasonably have known that the tortfeasor
was underinsured" (Matter of Metropolitan Prop. & Cas.
Ins. Co. v Mancuso, 93 NY2d
487, 495). Petitioner sought a permanent stay of arbitration
of respondent's SUM claim, and respondent cross-moved to dismiss the petition.
We conclude that Supreme Court should have granted the petition. Respondent
failed to meet his burden of establishing a reasonable excuse for the more than
two-year delay in giving notice (see Matter of State Farm
Mut. Auto. Ins. Cos. [Proper], 300 AD2d 1095,
1095-1096; Matter of Nationwide Ins. Co. v Montopoli,
262 AD2d 647). "The nature and extent of respondent's injury did not
[*2]change
from the time of the accident until the time when respondent provided petitioner
with notice of the SUM claim" (Matter of
New York Cent.
Mut.
Fire Ins. Co. [Moore],
280 AD2d 923, 924; see Proper, 300 AD2d at 1096; cf. Matter of
Travelers Ins. Co. [DeLosh], 249 AD2d 924, 925).
Nor did respondent demonstrate that he acted with due diligence in attempting to
determine the insurance coverage of the tortfeasor (see Proper, 300 AD2d
at 1096; Moore, 280 AD2d at 924). Respondent retained his attorney one
month after the accident, but the record "does not reflect the efforts of that
attorney, if any, to obtain the information necessary for respondent to make a
claim for SUM benefits" at any time before May or June 2000 (Matter of
Hartford
Cas. Ins. Co. [Brody],
278 AD2d 830, 830-831; cf. Matter of State Farm Mut.
Auto. Ins. Co. [Hernandez],
275 AD2d 989, 990), despite the fact that "[r]espondent
was aware of the identity of the tortfeasor on the day of the accident" (Moore,
280 AD2d at 924). We therefore reverse the order, deny
respondent's cross motion, and grant the petition seeking a permanent stay of
arbitration. In view of our determination, there is no need to address
petitioner's remaining contentions.
ACE FIRE UNDERWRITERS
INS. CO. v ORANGE-ULSTER BOARD OF COOPERATIVE EDUCATIONAL SERVICES
In an action for a
judgment declaring that the plaintiff has no obligation to defend and indemnify
the defendant Orange-Ulster Board of Cooperative Education Services in an
underlying action entitled Doe v Orange-Ulster BOCES, pending in the
Supreme Court, Orange County, under Index No. 8148/99, (1) the plaintiff
appeals, as limited by its brief, from stated portions of a judgment of the
Supreme Court, Orange County (Peter C. Patsalos,
J.), entered July 24, 2002, which, inter alia, upon so much of an order of the
same court dated April 10, 2002, as denied that branch of its motion which was
for summary judgment on the complaint and as granted those branches of the
defendants' cross motion which were for summary judgment declaring that it is
obligated to defend and indemnify them in the underlying action and for legal
fees and expenses, declared that it is obligated to provide primary insurance
coverage to the defendants in the underlying action and awarded legal fees and
expenses to the defendants, (2) the third-party defendant National Union Fire
Insurance Company of Pittsburgh, PA, cross-appeals from so much of the same
judgment as, upon so much of the order dated April 10, 2002, as denied that
branch of its cross motion which was for summary judgment declaring that it is
not obligated to defend or indemnify the defendants in the underlying action,
declared that it is obligated to provide excess insurance coverage to the
defendants in the underlying action, and (3) the third-party defendant,
Coregis Insurance Company, cross-appeals from so
much of the same judgment as declared that it is obligated to provide excess
insurance coverage to the defendants in the underlying action.
ORDERED that the judgment
is modified by (1) deleting the provision thereof declaring that the plaintiff
is obligated to provide primary insurance coverage to the defendants in the
underlying action and substituting therefor a
provision declaring that the plaintiff is not obligated to defend or indemnify
the defendants in the underlying action, (2) deleting the provision thereof
awarding legal fees and expenses to the defendants and substituting
therefor a provision declaring that the defendants
are not entitled to legal fees and expenses; as so modified, the judgment is
affirmed insofar as appealed and cross-appealed from, with one bill of costs
payable to the plaintiff, and the order dated April 10, 2002, is modified
accordingly.
The general liability
policy issued by the plaintiff defines "occurrence" as an "accident, including
continuous or repeated exposure to substantially the same general harmful
conditions." Thus, the acts alleged in the underlying action sounding in, inter
alia, negligent hiring
[*3]and
supervision, are intentional acts and do not constitute an "occurrence" within
the meaning of the policy (see RJC Realty Holding Corp. v Republic Franklin
Ins. Co., 303 AD2d 573; cf. Agoado Realty
Corp. v United Intl. Ins. Co., 95 NY2d 141). Further, the inclusion in the
underlying complaint of causes of action sounding in negligent hiring and
supervision does not alter the fact that the operative acts giving rise to any
recovery are the alleged intentional sexual assaults (see Green Chimneys
School for Little Folk v National Union Fire Ins. Co. of Pittsburgh, PA.,
244 AD2d 387; United Community Ins. Co. v Greater N.Y.
Mut. Ins. Co., 266
AD2d 453; General Acc. Ins. Co. v 35
Jackson Ave. Corp.,
258 AD2d 616; Sweet
Home Cent.
School Dist. of Amherst v Aetna Commercial Ins. Co.,
263 AD2d 949; Board of
Educ. of E. Syracuse-Minoa Cent.
School Dist. v Continental Ins. Co.,
198 AD2d 816).
Because there is no legal basis on which the plaintiff can be held liable for
coverage, there is no obligation to provide a defense and the Supreme Court
erred in declaring that the plaintiff is obligated to provide primary insurance
coverage to the defendants in the underlying action (see RJC Realty Holding
Corp., supra).
Moreover, the plaintiff
is not estopped from asserting that its policy at issue does not cover the
underlying claim (see Albert J. Schiff Assoc. v Flack, 51 NY2d 692).
Although the plaintiff initially provided a defense to the defendants in the
underlying action, it reserved its rights to disclaim coverage and the
defendants have failed to demonstrate prejudice (see General Acc. Ins. Co.,
supra).
However, the errors and
omissions policies issued by the third-party defendants, National Union Fire
Insurance Company of Pittsburgh, PA (hereinafter National) and
Coregis Insurance Company (hereinafter
Coregis), are not standard general liability
policies, but rather are intended to insure a member of a designated calling
against liability arising out of the mistakes inherent in the practice of that
particular profession or business (see Watkins Glen Cent.
School Dist. v National Union Fire Ins. Co. of
Pittsburgh, PA.,
286 AD2d 48).
The errors and omissions policies issued by National and
Coregis provide coverage for negligent acts but not for intentional acts.
While the underlying action is grounded in allegations of intentional sexual
abuse for which National and Coregis owe no duty of
defense or indemnification, to the extent that the defendants may be held liable
in the underlying action for negligent hiring and supervision, this risk falls
squarely within the errors and omissions policies issued by National and
Coregis (see Watkins Glen Cent.
School Dist., supra).
Thus, the Supreme Court properly declared that National and
Coregis are obligated to provide excess insurance coverage to the
defendants (see Watkins Glen Cent. School Dist., supra).
Moreover, the Supreme
Court properly apportioned the costs to National and
Coregis of defending and indemnifying the insured on a pro rata basis (see
Great N. Ins. Co. v Mount Vernon Fire Ins. Co., 92 NY2d 682).
[*4]
The parties' remaining
contentions are without merit.
SANTUCCI, J.P., LUCIANO,
SCHMIDT and COZIER, JJ., concur.
