Coverage Pointers - Volume V, No. 19
New York State Court of Appeals
Taxicabs Can Lose Coverage if Notice of Lawsuit Isn’t Provided to Carrier
The issue in this case is whether Vehicle and Traffic Law ' 370 obligates the insurer of a taxicab to satisfy a default judgment entered against its insureds where the insurer was never notified, as required by the terms of its commercial liability policy, that legal proceedings had been commenced by the injured party. New York high Court concludes that the statute does not obviate the insurer's right to such notice and, therefore, the insurer is entitled to disclaim coverage under these circumstances.
New York State Supreme Court, Appellate Division, First Department
Payment of Investigator by Insured did not Waive Arbitration as to Excess Carrier
It was not a condition precedent to arbitration that the insured and primary insurer share the cost of the Investigative Specialist selected by the insured from the list of Investigative Specialists contained in the endorsement attached to the primary policy. Insured’s payment of 100% of the investigator’s fee did not waive arbitration.
New York State Supreme Court, Appellate Division, First Department
Partial Recitation of Exclusionary Language did not Render Disclaimer Untimely
Defendant's disclaimer was not untimely nor did defendant otherwise waive reliance upon the applicable exclusionary language. The disclaimer was not rendered ineffective by defendant's quotation of only part of the relevant exclusion, especially since the claim of ineffectiveness was being raised not by the insured but by a coinsurer seeking contribution.
New York State Supreme Court, Appellate Division, Second Department
No Fault Insurer Liable Only to Pay Benefits if Within Limits and Proof has Been Provided
A No Fault insurer is not required to pay a claim where the policy limits have been exhausted nor is it obligated to pay or deny a claim until it has received verification of all relevant information.
New York State Supreme
Court, Appellate Division, Second Department
Internally Complete and Distinct Parts of the Policy Cannot be Qualified by Conditions of the Liability Portions of the Policy
In an action to recover first-party no-fault benefits, sufficient proof was submitted through executed statutory claim forms; and insurer’s failure to pay or reject the claim within 30 days of receipt precluded interposing most defenses. Repeated requests of the assignor for an examination under oath (EUO) did not toll the claim determination period because the insurance regulations then in effect did not provide for EUOs as a form of verification.
New York State Supreme Court, Appellate Division, Third Department
Employer’s ‘Gararge Coverage” Excess to Employee’s
Personal Auto Policy
Employer’s "garage coverage” under policy issued by a Traveler’s subsidiary was excess coverage to the employee’s personal auto insurance policy issued by Nationwide. The Nationwide policy's "Other Insurance" provision made no provision for insurance coverage solely in excess over any other collectible insurance. Therefore, the Travelers policy was secondary to the Nationwide policy and since the intent of the Nationwide policy was only to require pro rata contribution by other primary insurance there was no conflict between the provisions.
New York State Supreme Court, Appellate Division,
Late Notice of Claim as Matter of Law, but Disclaimer Delay of 38 days Still Question of Fact
Insurer is not estopped from disclaiming coverage, even though the disclaimer letter did not cite plaintiff's failure to give timely notice as a basis for the disclaimer. As a matter of law, a delay of three years after the accident was not as soon as practical under the policy. But, it was an issue of fact whether notice of disclaimer sent 38 days after receipt of notice of claim was reasonable on the part of the insurer.
Visit the Hot Cases section of the Federation of Defense & Corporate Counsel website, www.thefederation.org 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.
GTE CORPORATION V. ALLENDALE MUTUAL INS. CO., AFFILIATED FM INS. CO., ALLIANZ
INS. CO., FEDERAL INS. CO., AND INDUSTRIAL RISK INSURERS
United States Third Circuit Court of Appeals
Y2K Expenses Not Covered -
Design Defect And Inherent Vice Exclusions
GTE Corp. was seeking coverage for costs and expenses incurred in remediating its computer systems to avoid Year 2000 related date recognition problems. The District Court found that GTE's Y2K remediation fell under the design defect and inherent vice exclusions of the policies. The problem was not that a program or system malfunctioned, or that some external threat caused damage to the systems. Rather, the system performed in exactly the manner it was designed to operate, but the system as designed did not permit recognition of dates in the 21st century. The court also found that the exceptions to these exclusions were inapplicable.
Submitted by: James A. Lochridge, Jr and Elizabeth M. LeBlanc [Voorhies & Labbé]
6/25/04 JUSTOFIN V. METROPOLITAN LIFE INS. CO.
United States Third Circuit Court of Appeals
Insurer Has Burden Of Showing
Misrepresentations Made In Bad Faith In Order To Void Policy
Beneficiaries on the life insurance policy of their deceased mother sued the insurer for denying a portion of the death benefit proceeds. The insurer argued the policy amendment increasing the benefits was void because the insured failed to disclose fully her medical history. In order for a policy to be declared void as a matter of law, an insurer must show that the insured made a false representation in bad faith and the representation was material to the risk being insured. Although the insured disclosed in her initial application that her son, a doctor, treated her for arthritis, she failed to do so in her application for increased coverage. She also failed to disclose that she used Prednisone, a drug typically prescribed for more serious forms of arthritis. The court held that, although there were clearly misrepresentations, the insurer had not met the burden of showing that they were made in bad faith. Bad faith was not the only reasonable explanation for the omissions, and all permissible inferences are to be drawn in favor of the insured. Thus, the policy endorsement was not void.
Submitted by: Bruce D. Celebrezze and Erin Adrian (Sedgwick, Detert, Moran & Arnold LLP)
6/25/04 STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY V. COLON
Florida Second District Court of Appeal
Intent to Return Home
Determines Residency for Uninsured Motorist Coverage Purposes
A plaintiff and her fiancé were living with the plaintiff’s grandfather while waiting for repairs on plaintiff’s water-damaged housed to be completed. The plaintiff was involved in a motor vehicle accident while staying with her grandfather. The grandfather’s uninsured motorist coverage applied to individuals residing with the grandfather. The plaintiff was not covered by the policy, because she intended to return to her former address, as evidenced by the fact that she continued to pay the mortgage, utilities and phone of her own residence, and also did not have her mail forwarded to her grandfather’s residence.
Submitted by: J. Richard Caldwell, Jr. and Michael L. Forte [Rumberger, Kirk & Caldwell]
6/28/04 GENERAL AGENTS INSURANCE COMPANY OF AMERICA, INC. V. MIDWEST SPORTING GOODS CO.
Illinois Appellate Court
Insurer Can Recover Defense
Costs From Insured After Defending Under a Reservation of Rights
The insured tendered defense of a public nuisance lawsuit to its insurer. The insurer denied coverage and filed a DJ action claiming that it did not have a duty to defend or indemnify the insured. During the pendency of the DJ action, the insurer nevertheless agreed to defend the insured under a reservation of rights. The insurer also specifically reserved the right to recoup defense costs it paid on behalf of the insured, if it was later found that no duty to defend existed. The majority of the Illinois Court of Appeals, relying on the California Buss decision and a 1903 decision by the Illinois Supreme Court, held that the insurer may recover payments made for non-covered claims because the insured knew when it accepted the payments that the insurer intended to seek recovery of defense costs if the claims were not covered.
Submitted by: Thomas K. Hanekamp (Tressler, Soderstrom)
6/29/04 TWIN CITY FIRE INSURANCE COMPANY V. PORTER
United States Eleventh Circuit Court of Appeals
Withdrawal of Settlement Offer Does Not Constitute Bad Faith
An insurance company did not commit bad faith in offering to contribute $75,000 toward a settlement with its insured and then withdrawing the offer before the conclusion of the settlement negotiations. The withdrawal of the offer caused no proven damage to the insured, and the terms of the applicable insurance policy did not require the insurance company to contribute to the settlement.
Submitted by: J. Richard Caldwell, Jr. and Michael L. Forte [Rumberger, Kirk & Caldwell]
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providing legal services throughout the State of New York.
Scott C. Billman
Insurance Coverage Team
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Fire, First-Party and Subrogation Team
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American Transit Insurance Company, v. Sartor,
The issue in this case is whether Vehicle and Traffic Law ' 370 obligates the insurer of a taxicab to satisfy a default judgment entered against its insureds where the insurer was never notified, as required by the terms of its commercial liability policy, that legal proceedings had been commenced by the injured party. We conclude that the statute does not obviate the insurer's right to such notice and, therefore, the insurer is entitled to disclaim coverage under these circumstances.
Defendant Anthony Sartor was injured in March 2000 when a vehicle he was driving was involved in an accident with a taxicab being driven by defendant Julian Mesamours. The taxicab, which was owned by defendant Utica Taxi Center Inc., was insured by plaintiff American Transit Insurance Company in the name of the registered owner, defendant Pierre Toussaint. Although a taxi operator is required to provide written notice to its insurer within five days of an accident or face a misdemeanor criminal charge (see Vehicle and Traffic Law ' 370 ), neither Mesamours, Toussaint nor Utica Taxi informed American Transit about the collision involving Sartor. Approximately seven months later, Sartor's attorney notified American Transit of the accident, and requested information regarding the name of American Transit's claim adjuster and the extent of the policy's liability limits. American Transit apparently never responded to this inquiry.
Sartor, an Ohio resident, subsequently initiated a personal injury action against Mesamours, Toussaint and Utica Taxi in Federal District Court. None of the defendants answered Sartor's complaint or informed American Transit that a lawsuit had been filed, as required by the terms of the policy. Nor did Sartor, whose attorney had contacted American Transit three months earlier, send the insurer notice that he had filed a lawsuit. After obtaining a default judgment and submitting proof of his injuries at an inquest, Sartor was awarded $100,000 in damages against the three defendants. Sartor served a copy of the judgment on American Transit and the defendants one week later. American Transit disclaimed coverage solely on the basis that it had not been timely notified by any party of the commencement of the litigation or the application for a default judgment, and it asserted that Utica Taxi was not its insured as defined by the policy.
American Transit then commenced this action, seeking a declaration that it was not obligated to satisfy Sartor's default judgment. The insurer moved for summary judgment and Sartor cross-moved for summary judgment declaring that the disclaimer was improper. Supreme Court granted American Transit's motion, concluding that the lack of notice to the insurer of the initiation of the federal lawsuit constituted a breach of an express condition precedent to coverage under the terms of the commercial insurance policy and Sartor's notice of the accident was insufficient.
The Appellate Division reversed and granted Sartor's cross motion for summary judgment. Despite the undisputed fact that American Transit was never informed about the initiation of litigation, the court determined that American Transit was liable for the default judgment because the terms of the policy and relevant provisions of the Vehicle and Traffic Law provide that an insured's failure to supply requisite notice does not prejudice the rights of an injured party to recover under the policy. We granted leave to appeal and now reverse.
Our analysis of the issue presented in this case is guided by well-settled principles of insurance law. Among these is the rule that an insurer has the right to demand that it be notified of any loss or accident that is covered under the terms of the insurance policy (see Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 NY2d 436, 440 ; Hicks v British Am. Assur. Co., 162 NY 284, 292 ). The purpose of such a requirement is to "afford the insurer an opportunity to protect itself" (Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 NY2d at 440) by, for example, "investigating claims soon after the underlying events" (Matter of Brandon [Nationwide Mut. Ins. Co.], 97 NY2d 491, 496 ). Here, the commercial liability policy, having been approved by the Superintendent of Insurance for use in compliance with section 370 of the Vehicle and Traffic Law, expressly conditions American Transit's obligation to provide coverage upon its receipt of "immediate written notice of any accident causing loss."
Distinct from notice of an accident, an insurer may also demand that it receive timely notice of a claimant's commencement of litigation. The purpose of such notice is to provide the insurer with a fair and reasonable opportunity to appear and defend against a claim or exercise its right to settle the matter. The policy issued by American Transit conditions its coverage obligation upon receipt of "immediate written notice of any . . . notice of claims for damages on account of such accidents." The policy further states that "[i]f any suit is brought against the Insured to recover such damages the Insured shall immediately forward to the Company every summons or other process served upon him."
The insurer's receipt of such notice is therefore a condition precedent to its liability under the policy (see Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 NY2d at 440). The failure to satisfy this requirement may allow an insurer to disclaim its duty to provide coverage (see id.; see also Matter of Brandon [Nationwide Mut. Ins. Co.], 97 NY2d at 496-497; Unigard Sec. Ins. Co. v North Riv. Ins. Co., 79 NY2d 576, 581 ). Significantly, although it is the insured that is charged with the primary duty to issue notice to the insurer, the Legislature has given an injured party the statutory right to fulfill this policy obligation by allowing any necessary notification to be issued by the claimant (see Lauritano v American Fid. Fire Ins. Co., 3 AD2d 564, 568 [1st Dept 1957], affd 4 NY2d 1028, 1030 ; see generally General Acc. Ins. Group v Cirucci, 46 NY2d 862, 863-864 ). Section 3420 (a) (3) of the Insurance Law mandates that all liability policies include a provision that "written notice by or on behalf on the injured person or any other claimant . . . shall be deemed notice to the insurer."
In this case, Sartor argues that the general notice rules have been modified by section 370 (4) of the Vehicle and Traffic Law, which specifically addresses taxicabs and other vehicles that transport passengers for hire. He claims that the insureds' failure to comply with the notice requirements cannot prejudice his rights as an injured party and, therefore, American Transit cannot disclaim coverage by relying on his failure to provide notice of the federal litigation. We disagree with this contention.
The starting point in any case of statutory interpretation must, of course, always be the language itself, giving effect to its plain meaning. A court cannot amend a statute by adding words that are not there (see Matter of Chemical Specialties Mfrs. Assn. v Jorling, 85 NY2d 382, 394 . Applying these established principles of statutory interpretation, we find nothing in the text of Vehicle and Traffic Law ' 370 (4) to indicate that the Legislature intended to alter the long-standing insurance industry practice with regard to notice or the right that Insurance Law ' 3420 (a) (3) grants to injured claimants. With respect to vehicles that transport passengers for hire, section 370 (4) of the Vehicle and Traffic Law provides that:
"[e]very person operating a motor vehicle . . . as to which a bond or policy of insurance is required by this section, which is in any manner involved in an accident, shall within five days give written notice of the time and place of the accident to the surety or insurer. Failure to give notice of the accident as herein provided shall constitute a misdemeanor, but shall not affect the liability of the surety or insurer."
It is readily apparent that the purpose of this provision is to establish an incentive to the operator of a vehicle for hire to supply its insurer with immediate notice that an accident has occurred in order to avoid criminal liability for noncompliance. But the statute also clearly indicates that the operator's failure to furnish such notice has no effect on the insurer's obligations under the terms of the insurance policy. Thus, a violation of section 370 (4) does not create an exclusive basis for a disclaimer of coverage by the insurer. Nothing in the language of the statute therefore relieves a claimant from complying with Insurance Law ' 3420 (a) (3) -- the provision allowing an injured party to issue the notice otherwise required of an insured -- in order to preserve a right to recovery.
Nor does subdivision (1) of section 370 undermine American Transit's right to receive notice of litigation. This portion of the statute states, in relevant part, that "[e]very person, firm, association or corporation engaged in the business of carrying or transporting passengers for hire in any motor vehicle . . . shall file with the commissioner of motor vehicles . . . a policy of insurance . . . conditioned for the payment of a minimum sum . . . on a judgment or judgments for damages" (Vehicle and Traffic Law ' 370 ). The policy issued by American Transit complies with this statutory command. Although Sartor asserts that imposing a notice of commencement of a lawsuit transforms the policy into a noncompliant, illusory agreement to pay a damages judgment, we find this contention unpersuasive, given that it is permissible for an insurer to require compliance with various notice and cooperation provisions as conditions precedent to its coverage obligations.
In addition, requiring a claimant to give proper and timely notice of the initiation of litigation does not contravene the general "'public policy that victims of automobile accidents should have recourse to a financially responsible defendant'" (Planet Ins. Co. v Bright Bay Classic Vehs., 75 NY2d 394, 401 , quoting Motor Veh. Acc. Indem. Corp. v Continental Natl. Am. Group Co., 35 NY2d 260, 265 ). Nor does it subvert the public policy underlying Vehicle and Traffic Law ' 370 and its predecessor statutes, which were enacted "from the viewpoint of the protection of the passengers using the common carrier and not primarily for the protection of the owner" of the vehicle for hire (Green Bus Lines v Ocean Acc. & Guar. Corp., 287 NY 309, 313 ). Permitting an insurer to demand notice of litigation neither undermines the insurer's financial responsibility nor shifts the protections of common carrier policies away from the injured party. To the contrary, a claimant, acting in a responsible manner by providing notice to the insurer under Insurance Law ' 3420 (a) (3), can singlehandedly protect his or her recovery in the event a judgment eventually is entered against an insured.
Our decision that Vehicle and Traffic Law ' 370 does not negate the notice condition precedent required by the policy at issue in this case effectuates the intent of the Legislature, as reflected in the language of the statute and Insurance Law ' 3420, and also preserves the fair and reasonable balance of rights and responsibilities among injured claimants, insured parties and their insurers. Rather than being left to the mercy of an insured's acts of compliance or noncompliance with the terms of the insurance policy, a claimant injured by a vehicle for hire can safeguard the ability to seek enforcement of a judgment against the insurer by exercising the independent notice right provided by the Legislature in Insurance Law ' 3420 (a) (3). Concomitantly, the insurer will have an opportunity to challenge or settle claims against its insured. We therefore conclude that American Transit properly disclaimed coverage of the default judgment on the ground that it did not receive notice of the federal litigation.
Finally, in light of our determination, it is unnecessary to address Sartor's remaining argument regarding the effect of the Utica Taxi disclaimer.
Accordingly, the order of the Appellate Division should be reversed, with costs, and the order of Supreme Court reinstated.
* * * * * * * * * * * * * * * * *
Order reversed, with costs, and order of Supreme Court, New York County, reinstated. Opinion by Judge Graffeo. Chief Judge Kaye and Judges Smith, Ciparick, Rosenblatt, Read and Smith concur.
for Joint Diseases, etc., et al., appellants,
State Farm Mutual Automobile Insurance Company, respondent. (Index No. 10851/03)
Joseph Henig, Bellmore, N.Y., for appellants.
Martin, Fallon & Mullé, Huntington, N.Y. (Maryellen David
of counsel), for respondent.
In an action to recover no-fault medical payments under five insurance contracts, the plaintiffs appeal from so much of an order of the Supreme Court, Nassau County (Galasso, J.), dated October 23, 2003, as denied those branches of their motion which were for summary judgment on the first and fifth causes of action and granted that branch of the defendant's cross motion which was for summary judgment dismissing the first cause of action and upon, in effect, searching the record, dismissed the fifth cause of action.
ORDERED that the order is affirmed insofar as appealed from, with costs.
The Supreme Court properly denied that branch of the plaintiffs' motion which was for summary judgment on the first cause of action to recover payments for medical services provided by the plaintiff Hospital for Joint Diseases and correctly granted that branch of the defendant's cross motion which was for summary judgment dismissing that cause of action. An insurer is not required to pay a claim where the policy limits have been exhausted (see New York & Presbyterian Hosp. v Progressive Cas. Ins. Co., 5 AD3d 568). "[W]here, as here, an insurer has paid the full monetary limits set forth in the policy, its duties under the contract of insurance cease" (Presbyterian Hosp. in City of N.Y. v Liberty Mut. Ins. Co., 216 AD2d 448; see Presbyterian Hosp. in City of N.Y. v General Acc. Ins. Co. of Am., 229 AD2d 479, 480). The evidence submitted by the defendant was [*2]sufficient to establish that the subject policy limits for personal injury protection benefits had been exhausted by prior claims. No triable issue of fact was raised by the plaintiffs in opposition to the defendant's motion.
Moreover, the Supreme Court properly denied that branch of the plaintiffs' motion which was for summary judgment on the fifth cause of action to recover payments for medical services provided by the New York Hospital Medical Center of Queens (hereinafter the NYHMCQ) and, in effect, upon searching the record, dismissed that cause of action. An insurer is not obligated to pay or deny a claim until it has received verification of all relevant information requested (see 11 NYCRR 65.15[g][I], [iii]; St. Vincent's Hosp. of Richmond v American Tr. Ins. Co., 299 AD2d 338, 340). It is undisputed that the NYHMCQ failed to respond to the defendant's verification requests for medical records. Accordingly, the period within which the defendant was required to respond to this claim did not begin to run, and any claim for payment was premature (see New York & Presbyterian Hosp. v Progressive Cas. Ins. Co., supra; St. Vincent's Hosp. of Richmond v American Tr. Ins. Co., supra).
There is no merit to the
argument of the NYHMCQ that the defendant's verification requests were
ineffective to toll the defendant's time to pay or deny the claims because
they were made by letter rather than by prescribed form (see St. Vincent's
Hosp. of Richmond v American Tr. Ins. Co., supra at 339; Nyack Hosp. v
Progressive Cas. Ins. Co., 296 AD2d 482, 483;
New York Hosp.
Med. Ctr. of Queens v State Farm Mut. Auto. Ins.
Co., 293 AD2d
RITTER, J.P., GOLDSTEIN, CRANE and SPOLZINO, JJ., concur.
James Edward Pelzer
Clerk of the Court
Group of Companies, Inc., Plaintiff-Respondent,
National Union Fire Insurance Company of Pittsburgh, PA, Defendant, Great American Insurance Company, Defendant-Appellant.
Winget, Spadafora & Schwartzberg, LLP, New York (William
G. Winget of counsel), for appellant.
Proskauer Rose LLP, New York (Hal S. Shaftel of counsel), for
Order, Supreme Court, New York County (Herman Cahn, J.), entered on or about May 28, 2003, which, insofar as appealed from, granted plaintiff insured's motion to compel defendant-appellant excess insurer to arbitrate plaintiff's claims under its policy and an underlying fidelity insurance policy issued by defendant primary insurer, and bringing up for review, pursuant to CPLR 5517(b), an order, same court and Justice, entered October 29, 2003, which denied the excess insurer's motion to renew, unanimously affirmed, with costs.
We reject the excess insurer's argument that it was a condition precedent to arbitration that the insured and primary insurer share the cost of the Investigative Specialist selected by the insured from the list of Investigative Specialists contained in the endorsement attached to the primary policy. The insured did exactly what the primary policy required by choosing from the list an Investigative Specialist who did not present a clear conflict of interest. Absent clear language in the policy making cost-sharing, or independence, conditions precedent to arbitration, we decline to hold that the insured waived its right to arbitration by paying 100% of the Investigative Specialist's fee (see Matter of United Nations Dev. Corp. v Norkin Plumbing Co., 45 NY2d 358, 362, 364, 365). The motion to renew was properly denied for failure to reasonably explain why the new evidence was not presented on the prior motion (CPLR [*2]2221[e]). We have considered the excess insurer's other arguments and find them unavailing.
THIS CONSTITUTES THE
DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: JUNE 22, 2004
Querrey & Harrow, Ltd., New York (Crystal Monahan of
counsel), for appellant.
Israelson & Gold, Plainview (Jeffrey B. Gold of counsel), for
Order, Supreme Court, New York County (Sherry Klein Heitler, J.), entered on or about October 15, 2003, which, in this action seeking declaratory relief, inter alia, granted defendant's motion to dismiss the complaint, unanimously modified, on the law, to declare in defendant's favor that it is not obligated to defend, indemnify, or otherwise reimburse plaintiff in connection with the underlying personal injury action, and otherwise affirmed, with costs in favor of defendant, payable by plaintiff.
Plaintiff workers' compensation carrier sues to compel defendant general liability carrier to contribute to the defense and indemnification of the parties' insured in an underlying third-party action, in which common-law and contractual indemnification is sought from the insured for liability incurred to the insured's employee by reason of personal injuries sustained by the employee in the course of his employment. The subject general liability policy issued by defendant, however, specifically excludes both coverage for bodily injury to an employee of the insured arising out of or in the course of employment, and coverage for "any obligation [of the insured] to share damages with or repay someone else who must pay damages because of the [employee's] injury" (see Monteleone v Crow Constr. Co., 242 AD2d 135, lv denied 92 NY2d 818; N. Star Reins. Corp. v Contl. Ins. Co., 185 AD2d 187, affd 82 NY2d 281). Contrary to plaintiff's argument, defendant's disclaimer was not untimely pursuant to Insurance Law § 3420(d), nor did defendant otherwise waive reliance upon the applicable exclusionary language. The original disclaimer letter, which clearly cited the relied upon exclusion, promptly apprised the claimant with a high degree of specificity of the grounds upon which the disclaimer was predicated (cf. Matter of Aetna Cas. & Sur. Co. v Rodriguez, 115 AD2d 418). The disclaimer was not rendered ineffective by defendant's quotation of only part of the relevant exclusion, especially since the claim of ineffectiveness is being raised not by the insured but by a coinsurer seeking contribution (see Tops Mkts., Inc. v Maryland Cas., 267 AD2d 999, 1000). [*2]
We modify only to declare in defendant's favor (see Lanza v Wagner, 11 NY2d 317, 334, cert denied 371 US 901).
THIS CONSTITUTES THE
DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: JUNE 15, 2004
MEMORANDUM AND ORDER
Calendar Date: April 21,
Before: Peters, J.P., Spain, Mugglin, Rose and Lahtinen, JJ.
Kris T. Jackstadt Law Offices, Albany (Murry S.
Brower of counsel), for appellants.
Ryan & Smallacombe P.L.L.C., Albany (Melissa
Smallacombe of counsel), for respondent.
Appeal from an order of the Supreme Court (Keegan, J.), entered January 24, 2003 in Albany County, which, inter alia, granted plaintiff's motion for summary judgment.
This action revolves around the respective responsibilities of the parties, automobile liability insurance providers, in regard to an action arising out of a personal injury accident. In 1997, Raymond Baker, in the course of his employment with Goldstein Enterprises, Inc., was involved in an automobile accident where a pedestrian was injured. Baker was driving his own automobile at the time of the accident and had a personal auto insurance policy issued by plaintiff that provided $50,000 maximum liability coverage (hereinafter the Nationwide policy). Goldstein had "garage coverage," issued by defendant Phoenix Insurance Company, a subsidiary of defendant Travelers Insurance Company, that provided $1,000,000 maximum liability coverage (hereinafter the Phoenix policy).
The pedestrian commenced an action against, among others, Baker and Goldstein, which was eventually settled for $450,000. Initially, plaintiff refused to undertake the defense and indemnification of Goldstein in that action. Goldstein commenced a declaratory judgment action which ultimately was removed to the United States District Court for the Northern District of New York and resulted in an order establishing that the Nationwide policy covered the [*2]accident and requiring plaintiff to provide indemnification and a defense. District Court noted in a subsequent order, however, that the relative financial obligations of plaintiff and defendants were not at issue in that action. As a result, plaintiff commenced this declaratory judgment action to determine those obligations. Following plaintiff's motion and defendants' cross motion for summary judgment, Supreme Court granted plaintiff's motion, determining that the Phoenix policy did cover Baker at the time of the accident. Supreme Court further determined that plaintiff and defendants were both primary insurers, and that, as "both policies contain[ed] essentially the same 'other insurance' clause," the carriers were responsible for their pro rata shares of the settlement amount 95%, or $427,500, for defendants and 5%, or $22,500, for plaintiff and their own legal costs. Defendants now appeal.
We turn first to defendants' argument that the Phoenix policy provides only insurance in excess of that provided by the Nationwide policy, and are persuaded. Generally, where the terms regarding payment obligations in two or more policies conflict, "insurers must contribute in the proportion their policies bear to the limit of coverage at that level" (Jefferson Ins. Co. of N.Y. v Travelers Indem. Co., 92 NY2d 363, 372 ; see Lumbermens Mut. Cas. Co. v Allstate Ins. Co., 51 NY2d 651, 655 ; Castricone v Riggi, 259 AD2d 815, 816 ). Here, we find no such conflict in the provisions of the Phoenix and Nationwide policies dealing with payment in the event of other insurance coverage. The Phoenix policy's Garage Coverage Form has an "Other Insurance" provision which states that, "[f]or any covered 'auto' [Goldstein does not] own, the Insurance provided by this Coverage Form is excess over any other collectible insurance." No dispute exists that Baker was driving his own car at the time of the accident. In addition, the Phoenix policy's New York Business Auto Coverage Extension Form states, in a "Limit of Insurance" provision, that "[t]he insurance provided by this endorsement is excess over any other collectible insurance available." In contrast, the Nationwide policy's "Other Insurance" provision states that plaintiff "will be liable for only [its] proportional share of any loss if there is other collectible liability insurance," but makes no provision for insurance coverage solely in excess over any other collectible insurance except under facts unlike those here. As such, the Phoenix policy is secondary to the Nationwide policy and, as the intent of the Nationwide "policy was 'only to require prorata contribution by other primary insurance,'" we perceive no conflict between the provisions (State Farm Fire & Cas. Co. v Li Mauro, 65 NY2d 369, 373 , quoting General Acc. Fire & Life Assur. Corp. v Piazza, 4 NY2d 659, 669 ; see Matter of Government Empls. Ins. Co. v Shlomy, 305 AD2d 504, 507-508 ).
As the Phoenix policy provides only excess coverage under these circumstances, regardless of whether Baker was covered under the Garage Coverage Form or New York Business Auto Coverage Extension Form, and defendants have conceded that Baker was an insured under the New York Business Auto Coverage Extension Form, we need not address defendants' argument that Baker was not an insured under the Garage Coverage Form. Accordingly, that part of defendants' cross motion seeking a declaration that the Phoenix policy provided only excess coverage and requiring plaintiff to pay the full $50,000 liability limit on the Nationwide policy should have been granted.
Lastly, on the record before us, we discern no abuse of discretion in Supreme Court's decision to decline to award legal fees to defendants (see Sanabria v American Home Assur. Co., 113 AD2d 193, 197 , revd on other grounds 68 NY2d 866 ).
Peters, J.P., Mugglin, Rose and Lahtinen, JJ., concur.
ORDERED the order is modified, without costs, by reversing so much thereof as denied that part of defendants' cross motion for summary judgment seeking a declaration that the insurance policy issued by defendant Phoenix Insurance Company provided coverage in excess of that provided by plaintiff's insurance policy and reimbursement up to the full policy limits of plaintiff's policy; cross motion granted to that extent; and, as so modified, affirmed.
Appeal from a judgment (denominated order and judgment) of the Supreme Court, Onondaga County (John V. Centra, J.), entered April 22, 2003. The judgment denied plaintiff's motion for summary judgment, granted summary judgment to defendant North Country Insurance Company, dismissed the complaint and declared that defendant North Country Insurance Company is not required to defend or indemnify defendant John S. Janicki, individually and doing business as JJ Construction, in an underlying personal injury action.
PETRONE & PETRONE, P.C., BUFFALO (ELIZABETH CLARKE OF COUNSEL), FOR PLAINTIFF-APPELLANT.
HANCOCK & ESTABROOK, LLP, SYRACUSE (JANET D. CALLAHAN OF COUNSEL), FOR DEFENDANT-RESPONDENT.
It is hereby ORDERED that the judgment so appealed from be and the same hereby is unanimously modified on the law by vacating the last three decretal paragraphs and reinstating the complaint and as modified the judgment is affirmed without costs.
Memorandum: Plaintiff allegedly sustained serious injuries on May 10, 1995, during the course of his employment with defendant John J. Janicki, individually and doing business as JJ Construction. Plaintiff commenced a personal injury action against, inter alia, Janicki, and, during the course of discovery proceedings, Janicki initially denied that he had insurance that would cover the accident. On May 18, 1998, however, plaintiff's attorney learned that Janicki actually had been insured. On that same date, the insurance agent faxed a notice of the accident to Janicki's insurer, defendant North Country Insurance Company (North Country). North Country disclaimed coverage by a letter dated June 25, 1998. Plaintiff thereafter commenced this declaratory judgment action against North Country, among other defendants. Plaintiff sought, inter alia, a declaration that North Country is obligated to defend and indemnify Janicki in the personal injury action.
We conclude that Supreme Court properly denied plaintiff's motion for summary judgment but erred in sua sponte granting summary judgment to North Country. Plaintiff failed to submit proof in admissible form entitling him to judgment as a matter of law (see generally Zuckerman v City of New York, 49 NY2d 557, 562). The admissible proof submitted by plaintiff established that the injury occurred on May 10, 1995; that notice thereof was not given to North Country until more than three years after the accident; and that the insurance policy required that [*2]notice be given as soon as practicable. A delay of three years is unreasonable as a matter of law (see e.g. Matter of State Farm Mut. Auto. Ins. Co. [Hernandez], 275 AD2d 989; Matter of State Farm Mut. Auto. Ins. Co. [Tremaine], 270 AD2d 962, 963; Matter of Travelers Ins. Co. [DeLosh], 249 AD2d 924, 925). Although plaintiff, as the injured party, had an independent right to provide notice to North Country (see generally Lauritano v American Fid. Fire Ins. Co., 3 AD2d 564, 568, affd 4 NY2d 1028), here there is no evidence that he ever did so (see Matter of First Cent. Ins. Co. [Malave], 3 AD3d 494, 495). Thus, contrary to plaintiff's contention, North Country is not estopped from disclaiming coverage, even though the disclaimer letter did not cite plaintiff's failure to give timely notice as a basis for the disclaimer (see id.).
Although the court had the
authority to search the record and grant summary judgment to a nonmoving party
under CPLR 3212 (b), the record in this case does not support an award of
summary judgment to North Country. In his complaint, plaintiff contends that
North Country's disclaimer was untimely and that North Country therefore is
precluded from disclaiming coverage. The record establishes that the
disclaimer letter was sent 38 days after receipt of notice, and we conclude
that there is an issue of fact whether that delay in disclaiming coverage was
reasonable (see Insurance Law § 3420 [d]; see e.g. First Fin. Ins.
Co. v Jetco Contr. Corp., 1 NY3d 64, 70;
West 16th St. Tenants Corp. v Public Serv.
Mut. Ins. Co., 290 AD2d 278, 279,
lv denied 98 NY2d 605). We therefore
modify the judgment by vacating the last three decretal
paragraphs and reinstating the complaint.
Entered: June 14, 2004
JoAnn M. Wahl
Clerk of the Court
MELBOURNE MEDICAL, P.C. Assignee of JOSE
UTICA MUTUAL INSURANCE CO., Appellant.
Appeal by defendant from
two orders of the Civil Court, Queens County (J. Golia,
J.), the first, entered December 20, 2002, denying defendant's motion for
summary judgment and the second, entered April 2, 2003, granting plaintiff's
cross motion for summary judgment.
Orders unanimously affirmed without costs.
In this action to recover
$765 in first-party no-fault benefits for medical treatment provided its
assignor, plaintiff established it prima facie case for summary judgment by
proof it submitted properly executed statutory claim forms (Dermatossian
v New York
City Tr. Auth., 67 NY2d 219, 224 ; Amaze Med. Supply Inc. v Eagle Ins. Co., NYLJ, Dec. 29, 2003 [App Term, 2d & 11th Jud Dists]). Defendant's conceded failure to pay or reject the claim within 30 days of receipt precluded defendant from interposing most defenses (Insurance law § 5106 [a]; 11 NYCRR 65.15 [g] ; Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274 ). We cannot agree that defendant's repeated requests of the assignor for an examination under oath (EUO) tolled the claim determination period because the insurance regulations then in effect
did not provide for EUOs as a form of verification (Ocean Diagnostic Imaging P.C. v Nationwide Mut. Ins. Co., NYLJ, Mar. 26, 2004 [App Term, 2d & 11th Jud Dists]; Triboro Chiropractic v Kemper Auto & Home Ins. Co., NYLJ, Mar. 26, 2004 [App Term, 2d &
11th Jud Dists]). A new regulation, effective April 5, 2002, which explicitly provides for such [*2]verification, is inapplicable to the instant claim (see 11 NYCRR 65-3.5 [e]; Kings Med. Supply Inc. v Geico Ins. Co., NYLJ, Mar. 23, 2004 [App Term, 2d & 11th Jud Dists]). We have also rejected the argument that the absence of an EUO provision
in the former verification scheme may be remedied by reference to policy provisions requiring that an insured cooperate with the insurer's investigation of a claim, even if a clause therein explicitly provides for cooperation in that form (e.g. King's Med. Supply
Inc. v Kemper Auto & Home Ins. Co., NYLJ, Mar. 18, 2004 [App Term, 2d & 11th Jud Dists]). Such provisions may not be invoked to alter the terms of the mandatory no-fault
endorsement because the "internally complete and distinct part of the insurance policy . . . cannot be qualified by . . . conditions . . . of the liability portions of the policy" (Utica Mut. Ins. Co. v Timms, 293 AD2d 669, 670 ; A.B. Med. Servs. v State Farm Mut. Auto. Ins. Co., NYLJ, Feb. 20, 2004 [App Term, 2d & 11th Jud Dists]). Finally, an
insurer may not rely on a letter, even if denominated a verification request, that merely informs a claimant that a decision on the claim is delayed pending an investigation, and without specifying a particular form of verification and the person or entity from whom
the verification is sought, to toll the 30-day claim determination period (Ocean Diagnostic Imaging P.C. v Nationwide Mut. Ins. Co., supra; see also 11 NYCRR 65.15 [e] ;
Sehgal v Royal Ins. Co. of Am., NYLJ, Apr. 15, 1999 [App Term, 9th & 10th Jud Dists] [letter informing claimant that a peer review was to be conducted is not a proper verification request]).
With regard to the fraud
allegation, raised for the first time in defendant's motion for summary
judgment, defendant did not specify whether the fraudulent conduct was a
staged automobile incident or the provider's unilateral scheme to obtain no-fault benefits for unnecessary or excessive medical treatment. If the latter is the case, the purported defense is precluded by defendant's untimely claim denial (Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195, 199 ; Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d at 285). If the former is the case, the defense survives
preclusion (Matter of Metro Med. Diagnostics, P.C. v Eagle Ins. Co., 293 AD2d 751, 752 ) and would, if substantiated, constitute a complete defense to the action (Matter
of Government Empls. Ins. Co. v Shaulskaya, 302 AD2d 522 ). However, defendant failed to adduce proof in admissible form sufficient to create a triable issue of fraud, having submitted no affidavit by anyone with personal knowledge of the investigation. The herein allegations of fact, by an attorney who does not allege such knowledge, amount to mere unsubstantiated hearsay (e.g. Amstel Chiropractic P.C. v Omni Indemnity Co., NYLJ, Feb. 13, 2004 [App Term, 2d & 11th Jud Dists] ["(An) attorney's affidavit, consisting of unsubstantiated hypotheses and suppositions, is legally insufficient to support defendant's fraud allegation"]).
Decision Date: June 07, 2004
 Concurrently with the initiation of this action, American Transit (on behalf of Toussaint and Mesamours) applied in federal court to vacate the default judgment on the ground that process was not properly served by Sartor. After a traverse hearing, the District Court denied the motion, but the Court of Appeals for the Second Circuit vacated that decision and remanded to provide the District Court an opportunity to consider whether Sartor's process server exercised due diligence prior to using affix-and-mail service on Mesamours and whether Toussaint was properly served at Utica Taxi's place of business (see Sartor v Toussaint, 70 Fed Appx 11, 14 [2d Cir 2002]). On remand, the District Court adhered to its original decision and refused to vacate the default judgment (see Sartor v Utica Taxi Ctr., 260 F Supp 2d 670, 672 [SDNY 2003]).
 Sartor's reliance on certain language in the insurance policy issued by American Transit is unavailing for a similar reason. The policy provides that the insured's failure to comply with the notice conditions "shall not prejudice the right of any person other than the insured to recover hereunder." Thus, the insured's dilatory conduct, standing alone, does not constitute an adequate basis for a disclaimer against the injured party precisely because the claimant personally may issue the required notice pursuant to section 3420 of the Insurance Law (see General Acc. Ins. Group v Cirucci, 46 NY2d at 863-864). It is only in the event of noncompliance by both the insured and the injured claimant that the insurer may validly disclaim against the injured party.
 Paragraph 1 of the policy provides that American Transit "agrees to pay any sums which the insured may become obligated to pay by reason of the liability imposed by law upon the Insured for damages . . . resulting from the ownership, operation, maintenance, use or defective construction of the motor vehicle described in the Declaration." This agreement, of course, is premised on American Transit being notified about the occurrence of an accident and the commencement of any litigation, as well as other conditions.
 Sartor's reliance on our decision in Pierre v Providence Washington Ins. Co. (99 NY2d 222 ) is misplaced. The issue in that case was whether the driver of a tractor-trailer or the company for whom he worked qualified as an "insured" under a federally-mandated endorsement known as the MCS-90. And, unlike the facts of this case, the parties in Pierre "agree[d] that the endorsement modifie[d] the terms of the [insurance] policy by excusing any conditions or limitations, including the notice of accident condition on which Providence disclaimed" (id. at 230).
 The requirement that taxicab owners file proof of insurance or other security derives from section 282-b of the former Highway Law (L 1922, ch 612), which was recodified as section 17 of the Vehicle and Traffic Law (L 1940, ch 646) before being placed into its current location in article 8 of the Vehicle and Traffic Law (L 1955, ch 775).