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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 On appeal, the court held that the $7 million limit of the reinsurance policy was not superceded by the “follow the settlements” section of the policy, and, as such, the expenses for which the reinsurers were obligated to reimburse Factory Mutual,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.