Coverage Pointers - Volume V, No. 18
04/15/04 NESHER LLC v REALM NATL. INS. CO.
Court held that phrase “do your best” in policy was unambiguous, and had a clear and unmistakable meaning. Plaintiff failed to “do its best” where undisputed evidence established that plaintiff failed to purchase oil for a heating tank or to contract with an oil supplier for the premises during the 18 months from its acquisition of the premises until the water damage resulting from the frozen pipes. In addition, plaintiff’s caretaker was not instructed on how to maintain the heat, and was never even told that the premises were heated with oil, how to check for oil in the tank, or where the oil tank was located.
The carriers issued policies to Chase Manhattan Auto Finance Corp. to insure against liability incurred as a result of the negligent acts of its lessees in the operation of its vehicles. In 2002, Chase stipulated to pay $3.49 million to settle an underlying action to recover for injuries sustained in a collision involving one of its leased vehicles. It was undisputed that Gulf’s policy provided that its $2 million limit was offset by the amount of insurance the lessee was required to obtain under the leasing agreement — $300,000; however, Gulf contended that its liability was further reduced by the proceeds of an umbrella policy obtained by the lessee. The court properly refused to credit Gulf with the proceeds of the umbrella policy. Endorsement #4 to the Gulf policy expressly provided only for an offset for the amount of insurance required to be obtained pursuant to the lease agreement naming Chase as an additional insured. Endorsement #3, relied upon by Gulf, only applied where the requisite insurance “is not collectable,” in which case the Gulf policy replaced the required coverage. Because the lessee’s primary insurer paid the $300,000 limit of its policy, endorsement #3 was inapplicable under the facts.
A fire in the insured hotel’s building severely damaged a tenant’s ground-floor café. As a result, the café was required to suspend its operations for more than four months. The café commenced an underlying action against the hotel seeking to recover damages for the cost of repairs to the leased premises and for business interruption losses. The café's first cause of action alleged that the hotel breached its duty under the lease to repair the premises after the fire, and sought reimbursement for the cost of repairs. The second cause of action alleged loss of business interruption insurance due to the hotel's unreasonable delay in approving architectural and mechanical plans. GAIC had issued a CGL policy, naming the hotel as an additional insured. GAIC disclaimed coverage, contending that the policy did cover claims for breach of contract, and the complaint alleged that the hotel failed to restore the premises back to its pre-accident state in a timely manner based on the lease. The disclaimer also stated that there was no “bodily injury” or “property damage.” GAIC did not cite any exclusions in its disclaimer letter. In this declaratory judgment action, the hotel argued that GAIC had a duty to defend it because the policy expressly covered losses from “property damage,” irrespective of whether the source of the hotel’s legal obligation to pay was based in contract or tort. The hotel also argued that having breached its duty to defend, GAIC was liable for the full amount of the settlement, not merely a portion of the settlement amount relating to covered losses. GAIC denied coverage based on its contention that a CGL policy does not provide coverage for losses caused by the insured’s failure to perform its contractual obligations. According to GAIC, the policy covered only “property damage” resulting from the negligence of the hotel, i.e., tort liability. The court disagreed, concluding that the allegations in the underlying complaint against the hotel fell within the policy’s embrace. “The café’s first cause of action alleged that the hotel breached its duty under the lease to promptly restore the leased premises, and therefore it was legally obligated to reimburse the restaurant for the cost of restoration. Next, the first two causes of action make it clear that recovery was sought ‘because of’ property damage resulting from the fire. Finally, there is no serious dispute that this policy applies to the property damage suffered here, since the loss at issue fell within the policy period and territory, and resulted from an ‘occurrence.’ Thus, insofar as the coverage provisions of the policy are concerned, the claim in the first cause of action should have triggered the duty to defend.” The court reasoned further that nowhere in the policy’s coverage provisions were there any restrictions on the source or theory of the insured’s legal liability, i.e., contract or tort. The court rejected the hotel’s argument that as a consequence of GAIC’s breach of its duty to defend, GAIC was required to indemnify the hotel for the entire amount of the settlement in the underlying action, without regard to whether that entire sum relates to covered losses. “An insurer’s breach of [its] duty to defend does not create coverage and that, even in cases of negotiated settlements, there can be no duty to indemnify unless there is first a covered loss.” Although it will be the insurer’s burden to prove that “the loss compromised by the insured was not within policy coverage”, until that determination is made, it is impermissible for a court to “enlarge the bargained-for coverage as a penalty for breach of the duty to defend.” The case was remanded for a determination on the issues of coverage and indemnification.
Defendant issued a homeowners’ insurance policy, which covered damage to the plaintiffs’ residence, but contained an exclusion for “water damage.” Plaintiffs’ residence allegedly sustained damage due to rain, and plaintiffs filed a claim with Tower under the policy. Tower investigated the claim and disclaimed coverage due to the water damage exclusion more than 60 days after the claim was filed. Plaintiffs then commenced this action to recover damages for breach of contract. Plaintiffs asserted that Tower was precluded from disclaiming coverage because of its alleged violation of 11 NYCRR 216.6(c), which requires an insurer, “[w]ithin 15 business days after receipt by the insurer of a properly executed proof of loss and/or receipt of all items, statements and forms which the insurer requested from the claimant, to advise a claimant, or a claimant’s representative, in writing, (1) of its acceptance or rejection of a claim, or (2) that it needs more time to determine whether the claim should be accepted or rejected.” Tower argued that its alleged failure to comply with 11 NYCRR 216.6(c) did not preclude it from disclaiming coverage based upon the policy exclusion. Rather, the common-law rule applied, providing for preclusion only if the delay in disclaiming coverage was unreasonable and resulted in prejudice to the insured. Court held that no private cause of action exists for a violation of part 216 of the Insurance Regulations. Moreover, cases have held that an insurer’s failure to comply with a different requirement of 11 NYCRR 216.6(c) was insufficient to estop the insurer from relying upon the plaintiff’s failure to commence an action within the limitations period provided in the policy. Applying those cases to the facts of this case, court held that Tower’s failure to comply with 11 NYCRR 216.6(c) did not preclude it from relying on a policy exclusion to disclaim coverage. The court further held, however, that Supreme Court properly denied Tower’s motion for summary judgment dismissing the complaint. “Water Damage” was defined as: “(1) Flood, surface water, waves, tidal water, overflow of a body of water, or spray from any of these, whether or not driven by wind; (2) Water which backs up through sewers or drains or which overflows from a sump; or (3) Water below the surface of the ground, including water which exerts pressure on or seeps or leaks through a building, sidewalk, driveway, foundation, swimming pool or other structure.” Based on plaintiffs’ description of how the damage occurred (i.e., high winds causing damage to the premises and rain damage to the interior), and the description in Tower’s disclaimer letter as to how the damage occurred (as “a result of water seeping through the rear wall of [the premises’ family room]” and “water entering from the side door and traveling under the granite tiles),” Tower failed to establish a prima facie case that the policy did not cover the loss claimed.
Jones and Fraser were allegedly injured when a vehicle owned by Jones was involved in an accident with a vehicle owned by MSC. MSC’s vehicle was insured by St. Paul, and Jones’ vehicle was insured by GEICO. St. Paul disclaimed coverage based on the failure of its insured to provide timely notice of the accident, and the injured parties sought arbitration of their claim for uninsured motorist benefits under the policy issued by GEICO. GEICO commenced this proceeding to permanently stay arbitration, and a hearing was held on the issue of whether the disclaimer issued by St. Paul was valid.
Court held that the Judicial Hearing Officer erred in determining that the notice of disclaimer issued by St. Paul was valid against the injured parties. The evidence established that the injured parties provided notification of the accident to St. Paul pursuant to Insurance Law § 3420(a) (3). The letter St. Paul sent to its insured disclaimed coverage based solely upon the insured's failure to timely notify it of the accident. “[I]n order for a disclaimer letter to be valid against an injured party, the notice of disclaimer must specifically advise the claimant that his or her notice of claim was untimely.”
Singh claimed injuries as a result of an accident in August 2001, caused by an allegedly uninsured vehicle that stopped short and then drove off following the accident. On March 8, 2002, Singh’s attorney sent to his insurer, Nationwide, a letter enclosing an application for no-fault insurance benefits and a notice “with respect to uninsured and/or underinsured motorist benefits.” This notice was captioned “Notice of Intention to Make Claim and Arbitrate.” It contained a statement pursuant to CPLR 7503(c) that Singh “intends to demand arbitration” and that Nationwide would be precluded from raising the objection that a valid agreement had not been made or complied with unless Nationwide applied to stay arbitration within 20 days after receipt of the notice. The letter was sent to Nationwide at its Syracuse office, and its receipt was undisputed. In March 2002, Nationwide’s Woodbury Claims Department sent a disclaimer because the insured had failed to notify Nationwide of his claim as soon as practicable. Singh notified Nationwide in June 2002, that he was demanding arbitration and that “unless the time to apply for a stay of arbitration has already expired,” he repeated the preclusion warning authorized by CPLR 7503(c) would apply. This document was served on Nationwide at its Woodbury office. Within 20 days of its receipt of this Demand for Arbitration, Nationwide commenced this proceeding to stay arbitration on the ground that Singh’s notification of his claim was untimely. Singh cross-moved to dismiss on the ground that the proceeding itself was not timely commenced, relying on his March 2002 Notice of Intention to Arbitrate. Nationwide argued that the Notice of Intention to Arbitrate was not a formal Demand to Arbitrate against which a proceeding to stay would be required, and that the notice had been served in Syracuse, while the Demand for Arbitration was served in the Woodbury Claims Department, where the UM claim was being handled. Court held that the Nationwide’s application to stay arbitration was untimely. The 20-day preclusion of CPLR 7503(c) does not apply only to a Demand to Arbitrate, but also to a notice of intention to arbitrate. Although service intended to conceal a Notice of Intention to Arbitrate and to precipitate an insurer’s default will not be given preclusive effect when the notice is buried among unrelated documents or is served on a remote office of the insurer, the issue must be raised by the petitioners who sought to stay arbitration, and had to be supported by someone with knowledge of the facts on the basis of which they contended that they had been misled. Nationwide never claimed to have been misled, and no affidavit by a claims employee was submitted to support the conclusion that Nationwide was misled. The notice was not buried among a sheaf of other documents; it was sent with an application for no-fault benefits. Furthermore, it was sent to Nationwide’s Syracuse office because that is the location of its no-fault division, and this location had no adverse effect on Nationwide’s ability to respond.
Plaintiffs instituted this action seeking a judgment declaring that a general liability policy issued by defendant provided coverage to plaintiff Arbor Handling Services, Inc. as a named insured. Arbor, one of plaintiff's vendors, entered into a contract to sell to J.T. Ryerson & Sons two new sideloaders intended to be installed and operated in Ryerson’s warehouse. The contract also obligated Arbor to obtain two rental sideloaders for Ryerson until the new sideloaders could be delivered. Arbor located one rental sideloader and later agreed to “support,” as if it were its own, any sideloader rented by Ryerson. Ryerson rented a sideloader from another company, and Arbor sent two service technicians to install it. They did not properly modify the guide rollers, which caused the unit to become unsteady when operated. As a result, Ryerson’s employee suffered serious head and brain injuries when knocked out of the operator compartment. Raymond and Arbor settled the employee’s action by contributing $6 million, leaving the coverage issues to be resolved in this declaratory judgment action. First, the court considered whether the policy provided coverage to Raymond for injuries to a third party resulting from the malfeasance of Arbor, an additional insured under the policy. The vendor endorsement provided: “’Who is An Insured’ is amended to include as an Insured any person or organization … shown in the schedule, but only with respect to ‘Bodily Injury’ or ‘Property Damage’ arising out of ‘Your Products’ shown in the schedule which are distributed, sold, repaired, serviced, demonstrated, installed or rented to others in the regular course of the vendors business, subject to the following additional provisions….” The court held that in determining the scope of coverage afforded by the vendors endorsement, the language “arising out of” must be construed broadly to encompass not only claims resulting from defects in the vendor’s product (i.e., product liability claims), but also those claims resulting from the vendor’s negligent installation or services. The court also addressed whether an exclusion removed Arbor’s negligent acts from coverage under the policy, concluding it did not apply.
Visit the Hot Cases section of the Federation of Defense and Corporate Counsel website, recently ranked among the top five legal research websites in an article published in the January 2004 issue of Litigation News, a publication of the Litigation Section of the American Bar Association. Dan Kohane serves as the FDCC’s Website Editor.
Advertising Injury Coverage Only
Afforded for Patent Infringement Claims Where Patent Pertains To Specific
The Washington Appellate Court, on interlocutory appeal, reversed the trial court and ruled in favor of Zurich. The trial court had granted Autosox’ MSJ and held that Zurich owed a duty to defend a patent infringement claim as potential “advertising injury”. Zurich filed a petition for interlocutory appeal, which was granted, but was forced by the trial judge to assume the defense of the costly patent litigation while the appeal was pending. Autosox (the insured) is in the business of manufacturing and selling rooftop advertising signs, like those on pizza delivery vehicles. William Elmer holds a patent that pertains to the manner in which a rooftop signed is attached to the vehicle - not the sign itself, but the specific method of attachment. Elmer sued the insured for patent infringement, and the insured tendered the defense to Zurich, and Zurich denied coverage. The insured filed a bad faith suit and both sides filed MSJ. The trial court ruled in favor of the insured. Ostensibly, the trial court held that since the patent was related to advertising activities (albeit not the insured’s, but the insured’s customers), then there was at least the potential for an “advertising injury” in the form of misappropriation of an advertising idea (the advertising “idea” presumably being the advertising sign sold by the insured. In a unanimous decision, the Appellate Court reversed the trial judge in every respect. It is worth noting that the Appellate Court adopted all of Zurich’s arguments on virtually every point, including the recent WA case of Amazon.com, which held that patent infringement was covered where the claim pertained to misappropriation of an actual advertising idea. In Amazon.com, the insured was accused of stealing the plaintiff’s patented technique for sampling music - Amazon used the technique in the manner in which it advertised for sale and otherwise marketed its music products on its website. Zurich distinguished Amazon on the basis that the infringing conduct was an integral part of the insured’s advertising activities and was specifically incorporated into the manner by which it advertised its products, i.e. advertising idea (potential customers could sample the music before they decided whether to buy it). The Appellate Court adopted Zurich’s argument and distinguished Amazon, holding that Autosox was never accused of infringing a patented advertising idea or technique: “The patented product itself relates to a product used to advertise. It is not, however, an ‘advertising idea’ that relates to ideas about soliciting customers... Auto Sox did not take Mr. Elmer’s ideas about how to solicit customers with his patented design for a rooftop sign. Auto Sox took his idea for the manner in which a rooftop sign is attached to a vehicle. In other words, Auto Sox [sic] alleged infringement occurred not in advertising but in the manufacture and sale of an infringing product.”
Plaintiff construction company instituted this action for declaratory judgment to determine whether the defendant insurer was required to cover costs incurred with replacing overflow coping stones around a swimming pool that the plaintiff was responsible for building. Plaintiff entered into a purchase agreement with a third-party vendor requiring it to “furnish and pay for all supervision, labor, materials, tools, equipment, services, and all other items necessary or required to fully prepar[e], design, fabricat[e], treat, stor[e], and deliver … overflow coping stones.” When the swimming pool opened for use, patrons were injured as a result of the cracking of a large number of the coping stones. Plaintiff demanded that the third-party vendor replace the stones but was rebuffed, and was forced to replace them at a cost of $164,162.24. Plaintiff submitted a claim under its general liability policy with the defendant and was denied. Defendant contended that the insurance did not cover the cost of remedying defects in workmanship because the exclusion for damage to “your work” in the CGL insurance policy precluded coverage. The court disagreed and held the third-party vendor performed work as a subcontractor on behalf of plaintiff and thus fulfilled the “subcontractor exception” to the “your work” exclusion.
Plaintiffs bought a whole life insurance policy; the agent provided an illustration that indicated that after seven years plaintiffs could use the accumulated dividends to pay the policy premiums if the dividend payments continued at that rate and were reinvested. Plaintiffs made premium payments for seven years and reinvested the dividends. Plaintiffs filed suit ten years later alleging breach of contract by failing to "vanish" their premium payments after seven years. The Court applied the holding of an analogous Eighth circuit case in holding that the policy unambiguously stated that the insured was responsible for paying the premiums. The Court was not persuaded by the confusion caused by the agent's illustration and found that the wording of the policy was clear such that ambiguity could not be found. Louisiana law bars the courts from examining extrinsic evidence in the absence of ambiguity on the face of the contract.
Inland's argument that its failure to inquire into the vacancy of the Wellesley property cannot support a claim for breach of contract attempts to confine the parties' contract to the matters specifically discussed between the parties, to the exclusion of Inland's more general implied contractual obligation to comport with professional standards in the performance of its services on the plaintiffs' behalf. However, though the parties did not specifically discuss the procurement of coverage on vacant properties, that is the source of the plaintiffs' complaint, rather than a defense against it. As the trial judge found, Inland was aware that the policy issued by Commerce excluded vacant properties from coverage (unless specifically modified to provide coverage), yet failed to investigate the occupancy of the Wellesley property in executing the plaintiffs' request to obtain a renewal of coverage. The trial judge also found (based in part on the admission of Inland's president that it had an obligation when renewing the policy to inquire about the occupancy of each property scheduled under the policy) that Inland's failure to ascertain the occupancy of the Wellesley property fell below the standard of care Inland owed to the plaintiffs. Finally, the trial judge found that the plaintiffs could easily have obtained coverage of the Wellesley property despite its vacancy had Inland raised the issue. Inland's failure to investigate conditions it knew would invalidate coverage of the Wellesley property properly stands as a basis for its liability in contract.
Trial court judge found that defendant had no duty to defend the insured. Plaintiff in a separate but related action received a default judgment against the insured and then commenced an action seeking satisfaction of the judgment against the insurer/defendant. The Court found that a determination that an insurer has no duty to defend an insured acted as collateral estoppel in an action to recover from the insurer a subsequent award against an insured. The Court reiterated that the duty to defend is triggered when a complaint alleges facts that potentially could fall within the scope of coverage, whereas the duty to indemnify arises only if the evidence adduced at trial establishes that the conduct actually was covered by the policy. As the trial court judge had determined that defendant had no duty to defend the insured, defendant also had no duty to indemnify the insured in that action. Under the principles of collateral estoppel, this determination is binding on the plaintiff seeking satisfaction of the judgment against the insurer because he was a party to the previous action which found that the insurer had no duty to defend.
When considered in light of all of the reprehensibility factors, Court concludes that a 9-to-1 ratio between compensatory and punitive damages, yielding a $9,018,780.75 punitive damages award, serves Utah's legitimate goals of deterrence and retribution within the limits of due process.
We must interpret the term "happening" consistent with its natural and ordinary meaning. The natural and ordinary meaning of "happening" is something that occurs unexpectedly and without design. See Webster’s Third New International Dictionary 1031, 1561 (unabridged ed. 2002) (defining "happening" as an occurrence; and "occurrence" as something that happens unexpectedly and without design). This definition is akin to our interpretation of the term "accident" and similarly does not incorporate a temporal component. Accordingly, the occurrence-based policy at issue is triggered by a "happening or series of happenings" within the policy period, which is not limited to a single, discrete event. We therefore conclude that, under New Hampshire law, the language of the policy clearly embodies an exposure trigger, and where the alleged migration of toxic wastes is continuing, multiple exposures triggering coverage are also continuing.
Rule that prevents insurers from denying coverage based on alleged misrepresentations in an application for life insurance unless that application was attached to the policy when issued does not apply to applications for reinstatement after lapse.
A no-fault motorist was injured in a car accident with an uninsured motorist (tortfeasor). She recovered both personal injury protection (PIP) benefits and uninsured motorist (UIM) benefits from the same insurance carrier. After arbitration of the UIM claim was complete, the insurance carrier took an offset, in an amount equal to the PIP benefits it previously paid, against the amount it owed in its capacity as UIM carrier. Court extends earlier decisions in Mahler v Szucs, 135 Wn.2d 398, 957 P.2d 632, 966 P.2d 305 (1998), and Winters v State Farm Mutual Automobile Insurance Co., 144 Wn.2d 869, 31 P.3d 1164, 63 P.3d 764 (2001), and holds that in order to take a PIP reimbursement offset, the insurance carrier must pay a pro rata share of the legal expenses incurred by the insured to arbitrate the UIM claim.
Plaintiff was injured in a single-car accident, in which the other driver was at fault. Plaintiff was employed by Hosea Concrete, which had in effect a commercial insurance policy with UM/UIM coverage Plaintiff was not acting in the course and scope of her employment when injured. Plaintiff filed suit seeking a declaration that she was an insured under the policy and the trial court granted judgment in her favor. The insurer appealed and the court found that, based on a recent Ohio Supreme Court decision, plaintiff was required to be an employee acting within the course and scope of her employment in order to have coverage under the contract. Plaintiff admitted that she was not acting within the course of her employment. Accordingly, the appellate court reversed the trial court’s ruling against the insurer on this count.
An Injured Person Who Is an “Insured” under Multiple Auto Policies Cannot Seek Uninsured Motorist Benefits Pursuant to those Policies if Vehicle Involved in Accident Is a Covered Vehicle under the Liability Portion of the Policies but there Is No Liability Coverage for the Accident Due to Exclusions
This diversity case concerns the restraints on remand of an action removed from state court. Plaintiff sued Defendant in state court seeking damages for breach of fiduciary duty, negligence and negligent misrepresentation and alleging that defendant had induced plaintiff to either make bad investments or have failed to protect plaintiff’s interests. Defendants filed a motion to dismiss alleging lack of personal jurisdiction then defendant filed a notice of removal on the basis of diversity. The district court sua sponte remanded this suit to the state court holding that by filing motions to dismiss in state court Defendant had attempted to litigate this case in the state forum and therefore had waived his right to remove. Defendant appealed. The district court found that a motion to remand the case on the basis of any defect other than lack of subject matter jurisdiction must be made within 30 days after the filing of the notice of removal. The district court may not sua sponte decide to remand the case for any procedural defect other than lack of subject matter jurisdiction. Florida requires a state court defendant to file responsive pleadings within 20 days after receipt of the complaint. Concurrently a state court Defendant has 30 days to seek removal of a state court Defendant in a quandary of either removing the action.
ATV accident occurred on beach near, but not adjoining insured's premises. Court finds that accident did not occur on "insured location". It is not reasonable that the meaning of the language "used in connection with [the residence]," and hence the ambit of the "insured location," should vary depending on the fortuity of an insured's regular use of a field, trail, or recreational area, public or private, in the neighborhood of his residence. Such a construction would require knowledge by an insurer of not only the insured's property but also of neighboring property and the insured's hobbies and interests. Rather, the term "insured location" is intended and appropriately understood to be limited to the residence and premises integral to its use as a residence. The beach is not integral to the use of the insured premises as a residence.
The court of appeals found that neither collision nor liability insurance existed on the insureds’ car under their automobile insurance policy at the time of the insured’s accident because prior to the accident, a premium was only charged for comprehensive coverage, and under the policy, coverage was applicable only if a premium was indicated. In addition, there was competent and credible evidence that the accident occurred prior to the time the insured called the insurance agent to obtain full coverage of the vehicle and when the insurer was informed of the changes. The court thus found that the insurer had no duty to defend or indemnify the insureds or compensate them for the loss of their automobile.
Claimant filed claims for compensation after receiving work-related back injuries; however, claimant twice refused to appear for an Insurer Medical Exam (IME) and walked out of a deposition before opposing counsel’s examination had finished. As a result, the insurer denied the claim relying on an Oregon statute allowing for denial if the claimant’s non-cooperation continues for 30 days after notice. In deciding in Insurer’s favor, the Court rejected Claimant’s ambiguity argument founded upon maxims of statutory construction. Ultimately, the Court’s interpretation of the applicable statutes found “other formal or informal information gathering techniques” to encompass IMEs.
Weigel and Knutson were involved in a car accident. Weigel was insured by Farmers, and Knutsen by Allstate. Farmer paid Weigel’s medical expenses, and Weigel sued Knutson for his injuries, seeking policy limits. Knutson’s counsel offered policy limits; Farmer’s would not allow Weigel to sign a release. At trial, Weigel was only awarded $5,000, and sued Farmers. Farmer’s motion to disqualify Weigel’s counsel from representing him, citing that he would be a necessary witness at trial, was granted. Weigel appealed. The Supreme Court affirmed the disqualification, in that Farmer’s had proven the evidence was material, unobtainable from other sources, and may be prejudicial to his client. The exception, for substantial hardship, was not applicable in that Farmer’s need of the testimony outweighed the hardship.
Under Florida law, an injured party under multiple insurance policies cannot seek uninsured motorist coverage under those policies even if the vehicle involved in the accident is covered under the liability portions of those policies if exceptions to the policy preclude liability coverage. Gares was a visitor to his brother’s auto shop and was injured by a vehicle in that shop for service being driven by his brother. Gares made a demand upon the owner of the vehicle and its insurer, Allstate, who denied coverage. Gares then made demands to Allstate under policies issued to his brother, the auto repair shop owner, for other vehicles. Allstate again denied coverage. The specific policy language precluded uninsured coverage for an auto driven by a “resident relative.”
York insurance declined to renew two homeowners policies because the policy holders operated day care facilities at the home, even though both policy holders had obtained separate commercial policies from another carrier for the day care business The lower court overturned an administrative finding that the York had not met its burden to show that the reasons for non-renewal were rationally related to the insurability of the property as required under Maine law. On appeal the court agreed with the reversals, finding that the increased traffic to the home, and a heightened duty to defend, did affect the insurability and the non-renewals were appropriately justified.
The court found that the exclusionary provision of the insurer’s policy excluding “expected or intended injuries” applied to injuries resulting from the insured’s actions in which (1) the insured intentionally carried a gun; (2) the insured admitted to shooting the victim; and (3) the insured asserted at trial that he did not intend to harm the victim either because he accidentally discharged the gun or because he was not aiming at the victim. Although the insured was defending his property, the court found that the insured’s argument of self-defense failed because the evidence in the record supported a finding that the insured voluntarily became the aggressor when he attempted to take the law into his own hands before notifying the police. As such, the insurer was not obligated to defend or indemnify the insured for the injuries caused to the victim.
For an action against the county alleging the taking of the plaintiff’s property without just compensation, causing stigma on the plaintiff’s ability to sell previously approved lots located near the thirteen certified survey maps; and the intentional violation of the plaintiff’s civil rights, the court found that the county’s insurer had no duty to defend or indemnify the county from the plaintiff’s claim. The court found that the insurance policy’s exclusionary provision excluding liability arising out of or connected with the principles of eminent domain, condemnation proceedings or inverse condemnation. Because the county exercised its authority to require the plaintiff to designate land for parks and in so doing, restricted the plaintiff’s use of land, the court found these actions to arise out of the principles of eminent domain and inverse condemnation. Thus, the court concluded that the exclusion applied.
Auto policy language provided for maximum liability limit of $100,000 “per person per accident” regardless of the number of vehicles involved in an accident, or the number of vehicles insured under the policy. The District Court had entered summary judgment in favor of the parties seeking to “stack” the policy limits with the effect of raising the insurer’s liability to $200,000. The appellate courts in Illinois were divided on the issue of “stacking” policy limits, but the Seventh Circuit came down on the side of “no stacking” because even if the declarations page could be considered ambiguous and thus be interpreted in favor of the insured, it still would not justify “stacking” policy limits as the policy contained unambiguous “anti-stacking” language elsewhere.
Order, Supreme Court, New York County (Barbara R. Kapnick, J.), entered October 8, 2003, which denied plaintiff's motion for summary judgment, and granted defendant's cross motion for summary judgment dismissing the complaint, unanimously affirmed, with costs.
The phrase in the policy to "do your best" is unambiguous, and has a clear and unmistakable meaning (see Goldman & Sons v Hanover Ins. Co., 80 NY2d 986). The undisputed evidence establishes that plaintiff failed to purchase oil for the heating tank or to contract with an oil supplier for the premises during the 18 months from its acquisition of the premises until the water damage resulting from the frozen pipes. In addition, plaintiff's caretaker was not instructed on how to maintain the heat, and was never even told that the premises were heated with oil, how to check for oil in the tank, or where the oil tank was located. Under any reasonable interpretation, plaintiff failed to "do its best" to maintain heat in the building.
Order and judgment (one paper), Supreme Court, New York County (Helen E. Freedman, J.), entered February 13, 2003, which granted plaintiff AIU Insurance Company's motion for summary judgment and denied defendant Gulf Insurance Company's motion for summary judgment and awarded AIU the total amount of $1,234,225.96, unanimously affirmed, with costs.
The parties issued policies to Chase Manhattan Auto Finance Corp. to insure against liability incurred as a result of the negligent acts of its lessees in the operation of its vehicles. In 2002, Chase stipulated to pay $3.49 million to settle an action to recover for injuries sustained in a collision involving one of its leased vehicles. It is undisputed that Gulf's insurance policy provides that its $2 million liability limit is offset by the amount of liability insurance that the lessee is required to obtain under the leasing agreement — $300,000 for this occurrence. However, Gulf paid only $700,000 under its policy, contending that its liability was further reduced by the proceeds of a $1 million umbrella policy obtained by the lessee from Prudential Property & Casualty Insurance. Plaintiff paid the disputed $1 million in connection with the settlement, reserving its right to seek reimbursement from Gulf, and this action ensued.
Supreme Court properly refused to credit defendant with the proceeds of the Prudential policy. Endorsement #4 to the Gulf insurance contract expressly provides only for an offset for the amount of insurance required to be obtained pursuant to the lease agreement — $100,000 per person, $300,000 per occurrence — naming Chase as an additional insured. Endorsement #3, relied upon by Gulf, only applies where the requisite insurance "is not collectable," in which case the Gulf policy replaces the required coverage up to $300,000. Because the lessee's primary insurer paid the $300,000 limit of its policy, endorsement #3 is inapplicable under the facts. In any event, the term "collectable" must be read to refer to the insured, not a third party. Thus, coverage is afforded where Chase is unable to collect upon coverage required to be obtained by the lessee for its benefit. Furthermore, in view of the $300,000 limit, the endorsement's provision that its coverage "is excess over any other collectable insurance, whether primary, excess, or contingent" clearly does not encompass the $1 million payable on behalf of the lessee under the Prudential insurance policy.
Finally, we agree that the Gulf policy's requirement that Chase contribute 50% of total "damages, loss and loss expense payments * * * incurred in connection with all accidents or losses" during the policy period is inapposite. The right of Gulf to obtain contribution from its insured does not limit the right of AIU to obtain reimbursement for monies paid on Gulf's behalf. As Supreme Court observed, defendant's remedy is to seek contribution from its insured.
Plaintiff appeals from an order of the Supreme Court, New York County (Barbara R. Kapnick, J.), entered April 17, 2002, which, to the extent appealed from, declared that it was not entitled to recover the full amount of any reasonable settlement it entered into with respect to the underlying action and that defendant was not under a duty to defend it with respect to every cause of action in the underlying complaint; and from an order, same court and Justice, entered January 6, 2003, which granted defendant's cross motion for reargument of the earlier order, and upon reargument, declared that the defendant had no duty to defend or indemnify plaintiff with respect to any of the causes of action in the underlying complaint, and dismissed the instant complaint.
The primary issue on this appeal is whether an insurer has a duty to defend its insured against claims in an underlying action that fall within the embrace of a commercial general liability (CGL) policy issued by the insurer, notwithstanding the fact that the insured's legal liability arises in contract, not tort. In addition, we must decide whether an insured is entitled to recover the entire amount paid in settlement as a consequence of the insurer's alleged breach of its duty to defend, and whether the insurer in this case waived its late-notice defense due to its failure to timely raise it.
We find that the insurer breached its duty to defend in this instance, but that the insured may only recover that portion of the settlement amount relating to covered losses. We also hold that the insurer waived its late-notice defense by failing to raise it within a reasonable time. Accordingly, we reverse and remand for further proceedings.
On December 23, 1997, a fire erupted at 1 West 67th Street in Manhattan in a building owned by plaintiff Hotel des Artistes, Inc. The fire severely damaged the ground-floor restaurant known as Café des Artistes, a tenant in the building. The leased premises were rendered wholly unusable due to the fire and ensuing water damage, which required the restaurant to suspend its operations for a period of more than four months. After several conversations with the hotel over the scope of the repairs, the restaurant eventually obtained the hotel's approval to do the repair work. The work was completed by May 1, 1998 and the restaurant reopened on that day.
In January 1999, the restaurant commenced a lawsuit against the hotel (underlying action) seeking to recover damages for the cost of repairs to the leased premises and for business interruption losses. Specifically, the restaurant's first cause of action alleged that the hotel breached its duty under the lease to repair the leased premises after the fire, and sought reimbursement of $628,810 for the cost of repairs. The second cause of action alleged a $600,000 loss of business interruption insurance due to the hotel's unreasonable delay in approving the restaurant's architectural and mechanical plans. In this regard, the restaurant's business interruption insurer denied coverage for business interruption losses for the period between February 15, 1998 through April 30, 1998 on the ground that the repairs should have been completed by February 15, 1998.
The third cause of action sought recovery of $32,000 representing the cost paid by the restaurant for repairs to certain structural and building systems that allegedly were the responsibility of the hotel under the lease. The fourth cause of action sought recovery of attorneys' fees pursuant to the lease provision authorizing such recovery by the tenant where it is successful in enforcing its rights under the lease.
Prior to the fire, defendant General Accident Insurance Company of America (GAIC) had issued a CGL policy (the policy) to nonparty Douglas Elliman Purchasing Group, with the hotel named as an additional insured. The policy covered the period between December 17, 1997 and December 19, 1998, which encompasses the date of the fire and all subsequent acts and [*3]omissions relevant to the underlying action.
We will have the right and duty to defend the insured against any "suit" seeking those damages even if the allegations of the "suit" are groundless, false or fraudulent. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply . . .
Part A further states that "[t]his insurance applies to 'bodily injury' and 'property damage' only if: (1) [t]he 'bodily injury' or 'property damage' is caused by an 'occurrence' that takes place in the 'coverage territory'; and (2) [t]he 'bodily injury' or 'property damage' occurs during the policy period." The policy defines "property damage" as "[p]hysical injury to tangible property, including all resulting loss of use of that property." The policy further states that an "occurrence" means "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."
The policy also includes a contractual liability exclusion, which provided that "[t]his insurance does not apply to '[b]odily injury' or 'property damage' for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement." However, the exclusion was inapplicable to liability for damages (1) that the insured would have in the absence of the contract or agreement, or (2) assumed in a contract or agreement that is an "insured contract" . . . . The policy definition of "insured contract" includes "a contract for a lease of premises."
In a January 25, 1999 letter, the hotel asked its insurance broker to notify its fire and liability carriers of the restaurant's lawsuit. On January 29, 1999, the broker forwarded a copy of the summons and complaint in the underlying action to defendant GAIC. By letter dated February 2, 1999, GAIC disclaimed coverage as follows:
Upon review of your policy and the allegations in the complaint, we must advise you that there is no coverage for this lawsuit. Your policy does not cover a claim for "Breach of Contract." We do not cover the liability for failure to perform or comply with the terms contained in a contract. It is alleged that the Hotel failed to restore the structure of the premises back to its pre-accident state in a timely manner based on the [parties] lease. There is no damage alleged that would qualify under the definition of "bodily injury," "property damage" . . . which are the only damages your policy covers.
Based on GAIC's disclaimer, the hotel hired its own counsel to defend it against the restaurant's lawsuit. By letter dated October 17, 2000, the hotel notified GAIC that it had negotiated a potential settlement of the restaurant's lawsuit, and further requested that GAIC review the terms of the proposed settlement and advise whether it would reconsider its disclaimer. GAIC did not respond, and the hotel settled the matter with the restaurant for approximately $150,000.
In January 1999, the hotel commenced the instant action for a declaratory judgment and breach of the insurance policy. In July 2001, the hotel moved for summary judgment declaring that GAIC breached its duty to defend under the policy and, therefore, it was liable for the costs incurred in defending the restaurant's suit as well as the sum paid in settlement of the action. The hotel argued that the restaurant's claims in the underlying action fell potentially within the scope of coverage since the claims arose from the fire and sought damages that fell within the policy's definition of "property damage." The hotel further asserted that under the policy, it was irrelevant that the hotel's legal obligation to pay arose from a contract, as opposed to a tort duty.
GAIC cross-moved for summary judgment, arguing that the claims in the underlying action were clearly outside the policy's coverage since the policy did not provide coverage "to companies or individuals when they are sued because they failed to live up to their claimed contractual obligations." According to GAIC, since the restaurant's complaint did not allege any tortious conduct by the hotel in causing the fire, the policy clearly did not cover these contract-based losses and no duty to defend existed. Alternatively, GAIC argued that any coverage was vitiated by the hotel's failure to comply with policy provision requiring notice of occurrence that might result in a claim "as soon as practicable."
In its April 17, 2002 order, Supreme Court granted the hotel's motion to the extent of declaring that GAIC had a duty to defend the hotel in the underlying action. Although the court found no duty to defend on the second cause of action since "the gravamen is not that the Hotel is liable to the [restaurant] for the damage done by the fire, but, rather, that the Hotel breached a contractual duty owed to its tenant," it held that the duty to defend was triggered by the restaurant's first cause of action which sought recovery for "property damage initially caused by the fire independent of the Hotel's contractual obligations."[FN1] On the issue of indemnification, the court denied the hotel's motion for summary judgment, finding a question of fact as to what portion of the settlement amount, if any, was attributable to the claim raised in the first cause of action.
Both parties moved for reargument, and in its January 6, 2003 order, the court granted GAIC's cross motion for reargument, and upon reargument, declared that GAIC had no duty to defend or indemnify the hotel with respect to any of the causes of action in the underlying [*5]complaint, and dismissed the hotel's complaint. The court found that upon reconsideration, the first cause of action merely alleged that the hotel breached its contractual duty under the lease, and did not contain any allegation that the hotel negligently caused the restaurant's property damage. Accordingly, the court ruled that no duty to defend existed because the underlying complaint failed to allege any facts or grounds that arguably fall within the terms of the policy.
On appeal, the hotel argues that GAIC had a duty to defend it in the underlying action because the policy expressly covered losses from "property damage," irrespective of whether the source of the hotel's legal obligation to pay was based in contract or tort. In addition, the hotel contends that having breached its duty to defend, GAIC is liable for the full amount of the settlement, not merely a portion of the settlement amount relating to covered losses.
"Where an insurance policy includes the insurer's promise to defend the insured against specified claims as well as to indemnify for actual liability, the insurer's duty to furnish a defense is broader than its obligation to indemnify" (Seaboard Surety Co. v Gillette Co., 64 NY2d 304, 310). An insurer's duty to defend must be determined from the allegations of the complaint and the terms of the policy (Incorporated Village of Cedarhurst v Hanover Ins. Co., 89 NY2d 293, 298; Technicon Electronics Corp. v American Home Assurance Co., 74 NY2d 66, 73), "If the complaint contains any facts or allegations which bring the claim even potentially within the protection purchased, the insurer is obligated to defend" (Technicon Electronics Corp. v American Home Assurance Co., 74 NY2d at 73, citing Ruder & Finn v Seaboard Sur. Co., 52 NY2d 663, 669-670).
As the Court of Appeals has stated, "[t]he insured's right to representation and the insurer's correlative duty to defend suits, however groundless, false or fraudulent, are in a sense 'litigation insurance' expressly provided by the insurance contract" (Servidone Constr. Corp. v Security Ins. Co., 64 NY2d 419, 423-424, quoting Intl. Paper Co. v Continental Cas. Co., 35 NY2d 322, 325-326). "If the claims asserted, though frivolous, are within policy coverage, the insurer must defend irrespective of ultimate liability" (Servidone Constr. Corp. v Security Ins. Co., 64 NY2d at 424). Thus, an insurer may escape its duty to defend under the policy "only if it could be concluded as a matter of law that there is no possible factual or legal basis on which [the insurer] might eventually be held to be obligated to indemnify [the insured] under any provision of the insurance policy" (Servidone Constr. Corp. v Security Ins. Co., 64 NY2d at 424, quoting Spoor-Lasher Co. v Aetna Cas. & Sur. Co., 39 NY2d 875, 876).
In its February 2, 1999 disclaimer letter, GAIC based its refusal to defend the hotel on its contention that its CGL policy does not provide coverage for losses caused by the insured's failure to perform its contractual obligations. According to GAIC, the policy covers only "property damage" resulting from the negligence of the Hotel, i.e., tort liability. Without relying on any specific policy exclusion, GAIC argues that the underlying claims fall outside the policy's coverage since it was not the intent of the policy to cover claims against the hotel for the breach of its lease obligations. We disagree.
The obvious flaw in GAIC's argument is that its interpretation of the policy conflicts with the plain meaning of the actual policy terms (see Teichman v Community Hospital, 87 NY2d 514, 520). As noted above, the policy's insuring agreement stated that GAIC "will pay those [*6]sums that [the Hotel] becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies." Thus, in order for coverage to exist, three things must be shown: (1) the hotel is legally obligated to pay damages; (2) the hotel's legal obligation to pay is "because of" property damage; and (3) the property damage must be of a type to which this insurance applies.
In our view, the allegations in the underlying complaint against the hotel clearly fall within the embrace of the policy. The restaurant's first cause of action alleged that the hotel breached its duty under the lease to promptly restore the leased premises, and therefore it was legally obligated to reimburse the restaurant for the cost of restoration [FN2]. Next, the first two causes of action make it clear that recovery was sought "because of" property damage resulting from the fire. Finally, there is no serious dispute that this policy applies to the property damage suffered here, since the loss at issue fell within the policy period and territory, and resulted from an "occurrence." Thus, insofar as the coverage provisions of the policy are concerned, the claim in the first cause of action should have triggered the duty to defend.
Significantly, nowhere in the policy's coverage provisions are there any restrictions on the source or theory of the insured's legal liability. For instance, nowhere is it said that the insured's "legal obligation to pay damages because of property damage" is limited to the insured's liability in tort. Nor is there any other language in the coverage provisions that could be interpreted to exclude liability that is derived from a contractual obligation. In short, nothing in the coverage terms of the policy even implies a distinction between liability acquired by contract or in tort (see Touchette Corp. v Merchants Mutual Ins. Co., 76 AD2d 7, 10-11; Tenney v Ins. Co., 409 F Supp 746, 748 [SDNY 1975]).
Despite the absence of such a distinction, the motion court improperly engrafted onto the policy an exclusion for claims "sounding in contract." This was error. To negate coverage by virtue of an exclusion, an insurer must establish that the exclusion is stated in clear and unmistakable language, is subject to no other reasonable interpretation, and applies in the particular case (Continental Cas. Co. v Rapid-American Corp., 80 NY2d 640, 652; Throgs Neck Bagels, Inc. v GA Ins. Co., 241 AD2d 66, 71). Further, "[p]olicy exclusions 'are not to be extended by interpretation or implication, but are to be accorded a strict and narrow construction'" (Incorporated Village of Cedarhurst v Hanover Ins. Co., 89 NY2d at 298, quoting Seaboard Sur. Co. v Gillette Co., 64 NY2d at 311).
GAIC has failed to meet its burden of demonstrating the applicability of a policy [*7]exclusion. In fact, while the policy does contain an exclusion for "contractual liability," GAIC did not cite this exclusion in its disclaimer and did not rely on it before the motion court or on this appeal. Thus, we can only conclude that GAIC concedes that no policy exclusion applies in this particular case. In light of this concession, GAIC's argument boils down to the following: even though the underlying claims against the hotel do not fall within the contractual liability exclusion, these claims are otherwise excluded, presumably by implication, because the policy was not intended to cover losses resulting from the breach of a contractual obligation. Given the above-stated principles governing the applicability of insurance policy exclusions, as well as the oft-cited principle that ambiguities in an insurance policy must be construed against the insurer-drafter (Ace Wire & Cable Co. v Aetna Cas. & Sur. Co., 60 NY2d 390, 398; Roofers' Joint Training, Apprentice and Educ. Comm. v General Accident Ins. Co., 275 AD2d 90, 91), the weakness of this position should be manifest.
Although some prior appellate holdings have suggested that contractual liability is not covered under the type of CGL policy at issue here, a closer examination of those cases shows that they are distinguishable on the grounds that either the contractual liability at issue in those cases was expressly excluded from coverage, or the policy did not cover the loss due to the absence of an "occurrence."
For instance, in George A. Fuller Co. v United States Fid. & Guar. Co. (200 AD2d 255, 257-259, lv denied 84 NY2d 806), the underlying action involved a property owner's lawsuit against the insured-contractor for negligent performance of a construction contract. The defendant insurer's CGL policy insured the insured-contractor for "property damage" caused by an "occurrence," but excluded "property damage" to the insured's work product, i.e., the building being constructed.
After USF&G disclaimed coverage, and the motion court ruled that a duty to defend the contractor existed, this Court reversed and declared that no coverage existed because the complaint against the contractor in the underlying action did not allege an "occurrence" resulting in "property damage" as contemplated by the CGL policy (id. at 259). We also held that since all the damages related to the defectively constructed building, coverage was excluded under the work product exclusion (id. at 260-261).
The present case is distinguishable from Fuller because here, there was in fact "property damage" resulting from an "occurrence" as required under the policy, and further, there was no work product exclusion at play in this case. Nevertheless, GAIC and the motion court rely on statements in Fuller to extract the erroneous principle that CGL policies never cover contractual liability.
For example, GAIC cites the Fuller Court's statement (200 AD2d at 260) that USF&G's liability policy "was never intended to insure Fuller's work product or Fuller's compliance, as a general contractor or construction manager, with its contractual obligations." However, that statement must be read in the context of the facts of Fuller, where the insured's contractual obligation involved the proper construction of a building, and the policy at issue expressly excluded from coverage a breach of that same obligation. Thus, the policy in Fuller did not exclude contractual liability because such liability fell outside the policy's coverage in all [*8]circumstances, as GAIC argues — rather, there was no coverage because the contractual liability being sued upon was expressly excluded elsewhere in the policy, and because there was no "occurrence" as required by the policy.
Hartford Accident & Indemnity Co. v A.P. Reale & Sons, Inc. (228 AD2d 935) is distinguishable for similar reasons. In Hartford, the insured contractor was sued for faulty work under the construction contract and sought a defense and indemnity from its CGL insurer, who disclaimed. The Third Department held that based upon the work product exclusion in the subject policy, no duty to defend existed (id. at 936).
However, in dicta, the Hartford court (228 AD2d at 936) also stated that "the purpose of a [CGL] policy . . . is to provide coverage for tort liability for physical damage to others and not for contractual liability of the insured for economic loss because the product or completed work is not what the damaged person bargained for" (see also Pavarini Constr. Co., Inc. v Continental Ins. Co., 304 AD2d 501, 501-502). This dicta has no bearing on this case because there is no work product exclusion in this case and the hotel is not being sued for economic loss resulting from its own defective work product.
Further, in Willets Point Contr. Corp. v Hartford Ins. Group (75 AD2d 254, affd 53 NY2d 879), the insured-contractor was sued by a landowner for failing to meet its contractual obligations to the county to avoid obstructing adjacent properties during a construction project. Although the Second Department stated (75 AD2d at 259) that no duty to defend existed because "[t]he complaint in the underlying action sounds in breach of contract only and thus clearly seeks to recover for damages caused in a manner outside the [policy's] coverage . . . ," the specific policy at issue in that case contained an exclusion for "damages arising from the breach of [contractual] representations or warranties made by the named insured as to the level of performance of its work." Thus, since the contractual liability at issue in Willets was specifically excluded under the policy, Willets cannot be read to exclude from coverage all contract-based liability.
In contrast to these authorities, we believe that the Fourth Department's holding in Touchette Corp. v Merchants Mutual Ins. Co. (76 AD2d 7), is factually similar and provides the correct analysis on this issue. In Touchette (76 AD2d at 8-9), the insured was a data processing company that was sued by one of its clients for negligent performance of its data processing services contract. While the original complaint included causes of action for both breach of contract and negligence, the negligence claim was subsequently dismissed, after which the insurer withdrew its defense. The policy issued by the insurer required it to indemnify the insured for all sums the insured becomes "legally obligated to pay as damages on account of any claim against the Insured and caused by any negligent act, error or omission of the Insured . . . ."
In the insured's declaratory judgment action, the motion court granted the insured's motion for a declaration that the insurer must defend and indemnify it (id. at 9). On appeal, the insurer argued that the policy did not cover breach of contract claims against the insured, and since the negligence cause of action had been dismissed, there was no longer a duty to defend. The Fourth Department, rejecting the insurer's argument that the duty to defend exists only where the insured is sued in negligence, stated (id. at 10): [*9]
"It is not the form of the pleading which determines coverage . . . it is the nature of the insured's conduct and nothing in the language of the policy suggests that claims are to be covered only if sued in negligence . . . [I]f [the insured's] conduct comes within th[e] defined risk, it is no less 'legally obligated' to pay an award in a contract action than in a tort action."
In this case, the duty to defend is even clearer than in Touchette since there is no "negligent act, error or omission" limitation in the instant policy. Rather, in this policy GAIC agreed to defend and indemnify the hotel for all sums the hotel becomes "legally obligated to pay as damages because of . . . 'property damage,'" without any limitation or restriction as to the source of legal obligation. There is no requirement that the hotel engage in negligent conduct, commit any other tort or even be at fault for the property damage, so long as it is "legally obligated to pay" for it. Without such requirements, one cannot read into the policy an exclusion for contract-based liability that is not stated in the policy (see Tenney v Ins. Co., 409 F Supp at 748 [no language in liability policy exempting from coverage a legal obligation for liability for personal injury because the obligation arises from a contractual relationship with a nominee rather than a direct action against the insured]; Vandenberg v The Superior Court, 21 Cal 4th 815, 840 [Sup Ct Cal 1999] [reasonable layperson would understand "legally obligated to pay" to refer to any obligation which is being enforced under law, whether pursuant to contract or tort liability]).
Accordingly, we hold that GAIC had a duty to defend the hotel in the underlying action because the claims in that action were potentially within the policy's coverage, and the policy did not otherwise exclude liability in contract in clear and unmistakable terms. In light of our finding that the policy did not exclude all contractual liability, it is unnecessary for us to consider the hotel's alternative argument that not all of the underlying claims were based on the lease.
On the issue of late notice, GAIC argues that even if its policy provided coverage under these circumstances, the policy was vitiated by the hotel's failure to comply with the policy provision requiring notice of an occurrence which may result in a claim "as soon as practicable." This argument is rejected. GAIC did not disclaim on the basis of late notice, nor did it raise the late-notice issue as a defense in its answer. Instead, GAIC first raised the issue in its cross motion for summary judgment, some 2½ years after it first received notice of the claim.
"An insurer must give written notice of disclaimer on the ground of late notice 'as soon as is reasonably possible after it first learns of the accident or of grounds for disclaimer of liability,' and failure to do so 'precludes effective disclaimer'" (Matter of Firemen's Fund Ins. Co. v Hopkins, 88 NY2d 836, 837, quoting Hartford Ins. Co. v County of Nassau, 46 NY2d 1028, 1029). GAIC's failure to disclaim upon the ground of late notice, and failure to raise the late-notice issue in its answer (see CPLR 3211[e]), constitute a waiver of this defense.
Finally, we reject the hotel's argument that as a consequence of GAIC's wrongful breach of its duty to defend, GAIC is required to indemnify the hotel for the entire amount of the settlement in the underlying action, without regard to whether that entire sum relates to covered losses. In Servidone Constr. Corp. v Security Ins. Co. (64 NY2d 419, 423-424), the Court of [*10]Appeals held that "an insurer's breach of [its] duty to defend does not create coverage and that, even in cases of negotiated settlements, there can be no duty to indemnify unless there is first a covered loss." Although it will be the insurer's burden to prove that "the loss compromised by the insured was not within policy coverage" (id. at 425), until that determination is made, it is impermissible for a court to "enlarge the bargained-for coverage as a penalty for breach of the duty to defend" (id. at 424). Accordingly, we remand the matter to Supreme Court for a determination on the issues of coverage and indemnification.
Accordingly, the order of the Supreme Court, New York County (Barbara R. Kapnick, J.), entered January 6, 2003, which granted defendant's cross motion for reargument of an earlier April 17, 2002 order, and upon reargument, declared that the defendant had no duty to defend or indemnify plaintiff with respect to any of the causes of action in the underlying complaint, and dismissed the instant complaint, should be reversed, on the law, with costs, defendant's cross motion for reargument denied, the complaint reinstated, and plaintiff's motion for summary judgment granted to the extent of declaring that defendant breached its duty to defend plaintiff in the underlying action and remanding the matter to Supreme Court for further proceedings, including a determination on the issues of coverage and indemnification. The appeal from the order, same court and Justice, entered April 17, 2002, which granted plaintiff's motion for summary judgment to the extent of declaring that defendant insurer had a duty to defend plaintiff with respect to the first cause of action of the underlying complaint and denied defendant's cross motion for summary judgment, should be dismissed, without costs, as academic.
Footnote 1:The court also held that no duty to defend existed on the third and fourth causes of action for repairs apparently unrelated to the fire and for attorneys' fees, respectively.
Footnote 2:Although GAIC argues that the hotel was not obligated to restore the premises under the lease, the evidence is equivocal on this point. In any event, this argument would not defeat the duty to defend since GAIC was obligated to defend its insured against any claims that fall potentially within the policy's coverage, even if those claims are "groundless, false or fraudulent" (Servidone Constr. Corp. v Security Ins. Co., 64 NY2d at 423-424).
In an action to recover damages for breach of an insurance contract, the defendant appeals from (1) an order of the Supreme Court, Queens County (Jackson, J.), dated March 19, 2003, which granted the plaintiffs' motion for summary judgment, in effect, on the second cause of action and denied its cross motion for summary judgment dismissing the complaint, and (2) a judgment of the same court entered April 4, 2003, which, upon the order, is in favor of the plaintiffs and against it in the principal sum of $39,527.70
The appeal from the intermediate order must be dismissed because the right of direct appeal therefrom terminated with the entry of judgment in the action (see Matter of Aho, 39 NY2d 241, 248). The issues raised on the appeal from the order are brought up for review and have been considered on appeal from the judgment (see CPLR 5501[a]).
The defendant, Tower Insurance Company of New York (hereinafter Tower), issued the plaintiffs a homeowners' insurance policy which, at all relevant times, covered, among other items, damage to the plaintiffs' residence. The policy also contained certain exclusions to coverage, including an exclusion for "Water Damage," as that term was defined in the policy.
In March 2001 the plaintiffs' residence allegedly sustained damage due to rain, and on March 15, 2001, the plaintiffs filed a claim with Tower under their homeowners' policy. Tower investigated the claim and, by letter dated May 22, 2001, more than 60 days after the claim was filed, it disclaimed coverage due to the policy exclusion for water damage.
Thereafter, the plaintiffs commenced this action against Tower to recover damages for breach of contract arising out of Tower's disclaimer of coverage. In the second cause of action in their amended complaint, they asserted that Tower was precluded from disclaiming coverage based upon a policy exclusion because of its alleged violation of 11 NYCRR 216.6(c). Eventually, they moved for summary judgment, in effect, on their second cause of action. In response, Tower cross-moved for summary judgment dismissing the complaint, asserting that its alleged failure to comply with 11 NYCRR 216.6(c) did not preclude it from disclaiming coverage based upon the policy exclusion. Rather, it argued that the common-law rule applied, providing for preclusion only if the delay in disclaiming coverage was unreasonable and resulted in prejudice to the insured.
By order dated March 19, 2003, the Supreme Court granted the plaintiff's motion and denied Tower's cross motion, and on April 4, 2002, a judgment was entered in favor of the plaintiffs and against Tower in the principal sum of $39,527.70. On appeal by Tower, we conclude that the Supreme Court improperly granted the plaintiffs' motion, but properly denied Tower's cross motion.
Pursuant to Insurance Law § 2601, which prohibits insurers from engaging in unfair claim settlement practices, the Superintendent of Insurance has issued part 216 of the Insurance Regulations (11 NYCRR 216.0). Part 216.0, which the parties do not dispute is applicable to the instant case, "contains claim practice rules which insurers must apply to the processing of all first- and third-party claims arising under policies subject to this Part" (11 NYCRR 216.0[a]). Insofar as is relevant to the instant appeals, 11 NYCRR 216.6(c) requires an insurer, "[w]ithin 15 business days after receipt by the insurer of a properly executed proof of loss and/or receipt of all items, statements and forms which the insurer requested from the claimant," to advise a claimant, or a claimant's representative, in writing, (1) of its acceptance or rejection of a claim, or (2) that it needs more time to determine whether the claim should be accepted or rejected.
It is well settled that no private cause of action exists for a violation of Insurance Law § 2601 or for an alleged violation of part 216 of the Insurance Regulations (see Rocanova v Equitable Life Assur. Socy. of U.S., 83 NY2d 603, 614; Bettan v Geico Gen. Ins. Co., 296 AD2d 469, 470; Klinger v Allstate Ins. Co., 268 AD2d 562; Newsom v Republic Fin. Servs., 130 Misc 2d 780). Moreover, cases have held that, in rejecting a plaintiff's claim, an insurer's failure to comply with a different requirement of 11 NYCRR 216.6(c) than at issue in this case was insufficient to estop the insurer from relying upon the plaintiff's failure to commence his or her action within the limitations [*3]period provided in the policy (see Schunk v New York Cent. Mut. Fire Ins. Co., 237 AD2d 913, 915; May v Aetna Life & Cas. Co., 204 AD2d 1007; see also Sirignano v Chicago Ins. Co., 192 F Supp 2d 199). Applying those cases to the facts of this case, Tower's failure to comply with 11 NYCRR 216.6(c) does not preclude it from relying on a policy exclusion to disclaim coverage. To the extent that this decision and order conflicts with Eveleno v Colonial Penn Ins. Co. (188 Misc 2d 454), the primary case upon which the Supreme Court relied in granting the plaintiffs' motion for summary judgment in the instant case, we decline to follow that case.
The Supreme Court, however, properly denied Tower's cross motion for summary judgment dismissing the complaint. As noted, the policy issued to the plaintiffs excluded from coverage "Water Damage" to their residence. It defined "Water Damage" as follows:
Based on the plaintiffs'
description of how the damage occurred (i.e., high winds causing damage to the
premises and rain damage to the interior), and the description in Tower's
disclaimer letter as to how the damage occurred (as "a result of water seeping
through the rear wall of [the premises' family room]" and "water entering from
the side door and traveling under the granite tiles)," Tower failed to establish
a prima facie case that the policy did not cover the loss claimed, and therefore
it was not entitled to summary judgment dismissing the complaint (see
generally Winegrad v New York Univ. Med. Ctr.,
64 NY2d 851, 853).
In a proceeding pursuant to CPLR article 75 to permanently stay arbitration of a claim for uninsured motorist benefits, the appeal is from an order of the Supreme Court, Kings County (Silverman, J.H.O.), dated May 28, 2003, which, upon a finding, in effect, that St. Paul Fire & Marine Ins. Co. properly disclaimed coverage under its policy of insurance issued to MSC National, Inc., in effect, denied the petition.
Lisa Jones and Leslie Fraser (hereinafter the injured parties) allegedly were injured when the vehicle owned by Jones was involved in an accident with a vehicle owned by MSC National, Inc. (hereinafter MSC). MSC's vehicle was insured by St. Paul Fire & Marine Ins. Co. [*2](hereinafter St. Paul), and Jones' vehicle was insured by Government Employees Insurance Company (hereinafter GEICO). St. Paul disclaimed coverage based on the failure of its insured to provide timely notice of the accident, and the injured parties sought arbitration of their claim for uninsured motorist benefits under the policy issued by GEICO. GEICO commenced this proceeding to permanently stay arbitration, and a hearing was held on the issue of whether the disclaimer issued by St. Paul was valid.
The Judicial Hearing Officer erred in determining that the notice of disclaimer issued by St. Paul was valid against the injured parties. The evidence elicited at the hearing established that the injured parties provided notification of the accident to St. Paul pursuant to Insurance Law § 3420(a)(3). The letter St. Paul sent to its insured disclaimed coverage based solely upon the insured's failure to timely notify it of the accident. "[I]n order for a disclaimer letter to be valid against an injured party, the notice of disclaimer must specifically advise the claimant that his or her notice of claim was untimely" (Matter of State Farm Mut. Auto. Ins. Co. v Cooper, 303 AD2d 414; see also General Acc. Ins. Group v Cirucci, 46 NY2d 862; Matter of State Farm Mut. Auto. Ins. Co. v Joseph, 287 AD2d 724; Hazen v Otsego Mut. Fire Ins. Co., 286 AD2d 708; cf. Matter of First Central Ins. Co., 3 AD3d 494; Travelers Indem. Co. v Worthy, 281 AD2d 411). Accordingly, GEICO's petition to permanently stay arbitration should have been granted on the ground that MSC's vehicle was insured at the time of the accident.
In a proceeding pursuant to CPLR article 75 to permanently stay arbitration of an uninsured motorist claim, Rajeev Singh appeals from an order of the Supreme Court, Nassau County (McCarty, J.), dated September 17, 2002, which denied his cross motion to dismiss the petition, granted the petition, and permanently stayed the arbitration.
The appellant, Rajeev Singh, claimed injuries as a result of an accident on August 4, 2001, caused by an allegedly uninsured vehicle that stopped short and then drove off following the accident. On March 8, 2002, Singh's attorney sent to his insurer, the petitioner, Nationwide Insurance Company (hereinafter Nationwide), by certified mail, return receipt requested, a letter enclosing an application for no-fault insurance benefits and a notice "with respect to uninsured [*2]and/or underinsured motorist benefits." This notice to which the letter referred was captioned "Notice of Intention to Make Claim and Arbitrate." It contained a statement pursuant to CPLR 7503(c) that Singh "intends to demand arbitration" and that Nationwide would be precluded from raising the objection, inter alia, that a valid agreement had not been made or complied with unless Nationwide applied to stay arbitration within 20 days after receipt of the notice.
The letter was sent to Nationwide at its North Syracuse office, and its receipt is undisputed. On March 18, 2002, Robert Marino from Nationwide's Woodbury Claims Department sent a letter of disclaimer, inter alia, because the insured had failed to notify Nationwide of his claim as soon as practicable.
By a document dated June 12, 2002, Singh notified Nationwide that he was demanding arbitration before the American Arbitration Association (hereinafter the AAA) and that "unless the time to apply for a stay of arbitration has already expired" he repeated the preclusion warning authorized by CPLR 7503(c) would apply. This document was served on Nationwide at its Woodbury office by certified mail, return receipt requested. Within 20 days of its receipt of this Demand for Arbitration, Nationwide commenced this proceeding to stay arbitration on the ground, inter alia, that Singh's notification of his claim was untimely.
Singh cross-moved to dismiss on the ground that the proceeding itself was not timely commenced. He relied on his Notice of Intention to Arbitrate transmitted by his attorney's letter dated March 8, 2002, by certified mail, return receipt requested. In opposition, Nationwide's counsel argued in an affirmation that the Notice of Intention to Arbitrate was not a formal Demand to Arbitrate against which a proceeding to stay would be required. Counsel further made passing mention that the Notice of Intention to Arbitrate had been served on Nationwide in North Syracuse and that the Demand for Arbitration was served on Robert Marino in the Woodbury Claims Department, who was handling the uninsured motorist benefit claim.
The Supreme Court granted the petition to stay arbitration, holding that the proceeding was timely. It held that the Notice of Intention to Arbitrate in its timing and circumstances was intended to mislead. Thus, the 20-day preclusion was measured from the later Demand for Arbitration. This was error.
The basis on which Nationwide sought to justify the timeliness of its application was that a Notice of Intention to Arbitrate is not a Demand for Arbitration and that the 20-day preclusion of CPLR 7503(c) applies only to the Demand. However, CPLR 7503(c) provides:
Thus, the preclusion applies identically to a Demand for Arbitration and a Notice of Intention to Arbitrate (see Alexander, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C7503:6). Indeed, the Notice of Intention has been characterized, as Singh's lawyer did in his March 8, 2002, letter, as simply a "Notice" by Professor David D. Siegel in New York Practice (Siegel, NY Prac § 593, at 1002 [3d ed.). Also, the seminal case on the preclusive effect of CPLR 7503(c), Matter of Jonathan Logan, Inc. (Stillwater Worsted Mills, Inc.) (31 AD2d 208, affd 24 NY2d 898), arose not from a Demand for Arbitration but from a Notice of Intention to Arbitrate. [*3]
It is true, as Nationwide contends, that service intended to conceal a Notice of Intention to Arbitrate and to precipitate an insurer's default will not be given preclusive effect when the notice is buried among unrelated documents or is served on a remote office of the insurer (see Crawford v Merrill, Lynch, Pierce, Fenner & Smith, 35 NY2d 291, 296 [notice for arbitration before AAA not served on attorneys representing the defendant in action in which the defendant had moved to compel arbitration before NYSE, but was served on an office different from the one on which the summons commencing the action had been served; notice contained misleading statements suggesting that the plaintiff was joining in the defendants' motion to compel arbitration before the NYSE]; Matter of Insinga v Liberty Mut. Ins. Co., 265 AD2d 411, 412 [notice, served on respondent, not its attorneys, was hidden among voluminous other documents to prevent respondent from contesting arbitrability]; Matter of Balboa Ins. Co. v Barnes, 123 AD2d 691 [demand for arbitration enclosed in the middle of a packet of 11 documents mailed to the insurer's home office in California despite a prior request that future correspondence be sent to the New York office]; Rider Ins. Co. v Marino, 84 AD2d 832 [demand mailed to insurer at address unrelated to the business at hand and placed amidst a packet of documents submitted in support of the claim with a covering letter adumbrating reference to the demand]). Yet, these cases were not decided in a vacuum. The issue of misleading tactics had to be raised by the petitioners who tardily sought to stay arbitration, and had to be supported by someone with knowledge of the facts on the basis of which they contended that they had been misled.
In the case at hand, Nationwide never claimed to have been misled; this came only from the Supreme Court. Furthermore, no affidavit by a Nationwide claims employee was submitted that would support the conclusion that Nationwide was misled. This court confronted just such a situation in Matter of State-Wide Ins. Co. v Rowe (228 AD2d 606). There, the tardy motion to stay arbitration (sought by way of a Notice of Intention to Arbitrate) was rejected by the court on the one ground originally asserted in the petition (see Matter of Steck, 88 NY2d 827). It was not until State-Wide Insurance Company moved for renewal that it raised the claim of a defective and misleading Notice of Intention to Arbitrate. In Rowe, at least the contention was supported with an affidavit of the claims department manager. This court affirmed the rejection of this new ground articulated in the renewal motion since the argument and facts were known at the time of the original petition.
The Rowe case compels us to reverse the grant of a stay of arbitration of Singh's uninsured motorist claim. Nationwide never made the claim, interposed in the Rowe case only on renewal, that its time to move to stay arbitration was defeated by trickery. Nor does it seem that it could support such a claim. Singh's attorney did not bury the Notice of Intention to Arbitrate among a sheaf of other documents. He only transmitted one other document with it, namely an application for no-fault benefits. Furthermore, this was transmitted, quite understandably, to Nationwide's North Syracuse office because that is the location of its no-fault division. The record demonstrates that this location had no adverse effect on Nationwide's ability to respond with alacrity and to move to stay arbitration within 20 days because Nationwide, in fact, sent a disclaimer letter dated a mere 10 days later from its Woodbury office.
Accordingly, the Supreme
Court erred in denying Singh's cross motion to dismiss and in granting
Nationwide's untimely petition to stay arbitration since the evidence does not
support the conclusion that Nationwide was misled into filing an untimely
petition, and Nationwide itself never raised this issue.
Plaintiffs instituted this action seeking a declaratory judgment that a general liability insurance policy issued to plaintiff Raymond Corporation by defendant provided coverage to plaintiff Arbor Handling Services, Inc. as a named insured. In its answer, defendant asserted a counterclaim seeking a declaration that Arbor was not an additional insured. At the completion of discovery, plaintiffs and defendant moved for summary judgment. Supreme Court denied plaintiffs' motion and granted defendant's motion, holding that Raymond's policy of insurance did not cover Arbor as an additional insured under the circumstances. Plaintiffs appeal.
The following facts are undisputed. Arbor, one of Raymond's vendors, entered into a contract to sell to J.T. Ryerson & Sons two new Raymond sideloaders [FN1] intended to be installed and operated in Ryerson's new warehouse facility. Since the facility would be completed prior to [*2]the availability of the sideloaders, the contract additionally obligated Arbor to obtain two rental sideloaders for Ryerson until the new sideloaders could be delivered. Arbor located one rental sideloader and later agreed to "support," as if it were its own, any Raymond sideloader rented by Ryerson. Ryerson subsequently rented a Raymond sideloader from a company in Chicago, Illinois, and Arbor sent two service technicians to install it. Although they assembled it, they did not properly modify the guide rollers, which caused the unit to become unsteady when operated. As a result, during the first use of the sideloader, Ryerson's employee suffered serious head and brain injuries when knocked out of the operator compartment. Raymond and Arbor settled the employee's personal injury action by contributing $6 million. To satisfy its $3 million share of the settlement, Raymond looked to the general liability insurance policy issued by defendant claiming coverage for Arbor as an additional insured pursuant to the terms of endorsement 5 of the policy. Despite defendant's dispute of Raymond's claim in this regard, it agreed to jointly fund Raymond's $3 million share of the settlement, leaving the coverage issues to be resolved in this declaratory judgment action.
The first issue on this appeal is whether the policy of insurance issued by defendant provides coverage to Raymond for injuries to a third party resulting from the malfeasance of Arbor, an additional insured under the policy. The vendor endorsement (number 5) contained in the policy of insurance provides:
"'Who is An Insured' is amended to include as an Insured any person or organization (referred to below as 'vendor') shown in the schedule, but only with respect to 'Bodily Injury' or 'Property Damage' arising out of 'Your Products' shown in the schedule which are distributed, sold, repaired, serviced, demonstrated, installed or rented to others in the regular course of the vendors (sic) business, subject to the following additional provisions: * * *."
What causative factor triggers the endorsement's coverage depends on the meaning of the key language "arising out of." Plaintiffs argue that the phrase should be construed broadly so as to include bodily injuries that a vendor's negligent installation or service causes. Defendant, on the other hand, posits that the endorsement contemplates coverage for only those injuries that result from a defect in the product itself.
"Generally, the courts bear the responsibility of determining the rights or obligations of parties under insurance contracts based on the specific language of the policies" (State of New York v Home Indem. Co., 66 NY2d 669, 671  [citations omitted]; see Stasack v Capital Dist. Physicians' Health Plan, 290 AD2d 866, 866 ). "[I]n interpreting an insurance policy, its unambiguous provisions must be given their plain and ordinary meanings" (Demopoulous v New York Cent. Mut. Fire Ins. Co., 280 AD2d 855, 856 ). When interpreting automobile exclusion clauses, courts in New York have deemed the words "arising out of" to be "broad, general, comprehensive terms ordinarily understood to mean originating from, incident to, or having connection with" the subject of the exclusion (United States Fire Ins. Co. v New York Mar. & Gen. Ins. Co., 268 AD2d 19, 21-22  [internal quotation marks omitted]; see Hertz Corp. v Government Empls. Ins. Co., 250 AD2d 181, 186 , lv denied 93 NY2d 1040 ; New Hampshire Ins. Co. v Jefferson Ins. Co. of N.Y., 213 AD2d 325, 330 ; Nycal Corp. v Inoco PLC, 166 F3d 1201, 1201 ).
Courts in other jurisdictions have interpreted the phrase "arising out of" when dealing with similar vendor endorsements to determine the scope of coverage. In Pep Boys v Cigna [*3]Indem. Ins. Co. of N. Am. (300 NJ Super 245, 255, 692 A2d 546, 552 ), the court held that the vendor endorsement at issue covered the vendor for its independent negligence in selling the manufacturer's product to a minor who ultimately died from his misuse of the product (see also Sportmart, Inc. v Daisy Mfg., 268 Ill App 3d 974, 645 NE2d 360 ). Guided by this precedent, we conclude that Supreme Court's interpretation, that the policy provides coverage only for products liability and not negligence, is overly narrow and fails to recognize the intention of the parties with respect to this vendor's endorsement and the overall scheme of the policy of insurance. In this regard, we note that there is neither an express provision in the policy which purports to limit coverage to only products liability nor an express provision which purports to exclude coverage for negligence of others. Giving the phrase "arising out of" its intended broad meaning, although the product itself did not cause the injury, there is no dispute that the employee suffered "bodily injury" while he was operating the sideloader and that he was injured because the sideloader was not "repaired," "serviced" or "installed" properly by Arbor, thus making his injuries "incident to" and "connected with" the product by way of Arbor's repair, service and installation of it. Thus, we conclude that coverage is provided for the independent negligence of Arbor under this vendor's endorsement.
1.D. "Any failure to make such inspections, adjustment, tests or servicing as the Vendor has agreed to make or normally undertakes to make in the usual course of business, in connection with distribution or sale of the products."
Under the particular facts of this case, exclusion 1.D. must be read in conjunction with exclusion 1.E. which provides that coverage afforded to Arbor does not apply to "demonstration, installation, servicing or repair operations except such operations performed by the vendor."
We first note that since coverage has been found to exist, it is defendant's burden to demonstrate that an exclusion in the policy defeats the claim (see Throgs Neck Bagels v GA Ins. Co. of N.Y., 241 AD2d 66, 70-71 ). The insurer's burden is to establish that the exclusion is clear, unmistakable, unambiguous and applies to the fact scenario under consideration (see Continental Cas. Co. v Rapid-Am. Corp., 80 NY2d 640, 652 ). A comparison of these exclusions reveals that exclusion 1.E. contemplates an affirmative act, i.e., demonstration, installation, servicing or repair, while exclusion 1.D. contemplates a failure to provide services. Moreover, exclusion 1.E. does not apply to the vendor. Since Arbor is the vendor and its employees admittedly negligently installed the product, exclusion 1.D. has no application as it does not apply to the installation of the product. Moreover, as the improper adjustment of the rollers is an affirmative act of negligence in the installation process, and as it applies to parties other than a vendor, coverage is not excluded.
ORDERED that the order is reversed, on the law, with costs, defendant's motion denied, plaintiffs' motion granted, summary judgment awarded to plaintiffs and it declared that plaintiff Arbor Handling Services, Inc. is an additional insured under an insurance policy issued by defendant. [*4]