Old Republic Constr. Ins. Agency of N.Y., Inc. v Fairmont Ins. Brokers, Ltd.

Old Republic Constr. Ins. Agency of N.Y., Inc. v Fairmont Ins. Brokers, Ltd. 2013 NY Slip Op 07832 Decided on November 26, 2013 Appellate Division, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports.

Decided on November 26, 2013
Freedman, J.P., Richter, Feinman, Gische, JJ.
10562 601168/10

[*1]Old Republic Construction Insurance Agency of New York, Inc., Plaintiff-Respondent,

v

Fairmont Insurance Brokers, Ltd., Defendant-Appellant.




Babchik & Young LLP, White Plains (Jack Babchik of
counsel), for appellant.
Cornell Grace, P.C., New York (Keith D. Grace of counsel), for
respondent.

Appeal from order, Supreme Court, New York County (Cynthia S. Kern, J.), entered August 6, 2012, which granted plaintiff's motion for summary judgment on the issue of liability, and denied defendant's cross motion for summary judgment, deemed appeal from judgment, same court and Justice, entered February 7, 2013, awarding plaintiff damages, (see CPLR 5501[c]), and, so considered, said judgment unanimously reversed, on the law, without costs, the judgment vacated, and the matter remanded for further proceedings consistent herewith.

Under the parties' Producer Agreement, pursuant to which defendant procured insurance for its clients through plaintiff, defendant is obligated to pay all insurance premiums, including those that plaintiff retroactively increased upon audit. Section 5.3 of the agreement states that "[defendant] guarantees to pay [plaintiff] all premium [sic] ... on any insurance placed or arranged for [defendant] by [plaintiff], irrespective of whether [defendant] has collected such premiums . . . from any customer or client of [defendant]" (emphasis added). Contrary to defendant's contention, the term "all premium" does not refer to the "initial premium" only. Accordingly, the court properly granted plaintiff summary judgment as to defendant's liability for the retroactive increases.

But it was incorrect for the court to proceed as though the invoices were correct and hold that defendant lacked standing to challenge plaintiff's calculation of the premium amounts due. Given that the Producer Agreement did not provide that defendant waived any defenses and that the guarantee was unconditional, defendant was entitled to raise the insureds' defense that the audits were inaccurate and the increases were excessive under the policies (see Restatement [Third] of Suretyship & Guaranty § 34; see also Sterling Natl. Bank v Biaggi, 47 AD3d 436, 436-[*2]437 [1st Dept 2008]). Thus under CPLR 3212(f), defendant was entitled to disclosure about the audits that plaintiffs used to calculate the premium increases before damages were determined.

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

ENTERED: NOVEMBER 26, 2013

CLERK