Admiral Indem. Co. v Pancas Rest., Inc.

[*1] Admiral Indem. Co. v Pancas Rest., Inc. 2005 NY Slip Op 51721(U) [9 Misc 3d 1121(A)] Decided on October 3, 2005 Supreme Court, New York County Ramos, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on October 3, 2005
Supreme Court, New York County

Admiral Indemnity Company, Plaintiff,

against

Pancas Restaurant, Inc., 47 WEST 55TH STREET RESTAURANT, INC., d/b/a GIOVANNI RISTORANTE, PUBLIC SERVICE MUTUAL INSURANCE COMPANY, OSWALDO BENDENZU AND YULI LOPEZ, Defendants.



602950/04

Charles Edward Ramos, J.

In motion sequence 001, plaintiff Admiral Indemnity Company ("Admiral") moves, pursuant to CPLR 3212, for summary judgement on its complaint in an underlying personal injury action. Defendants, Pancas Restaurant, Inc., ("Pancas") and Public Service Mutual Insurance Company ("PSM") cross move for summary judgement dismissing the complaint, also pursuant to 3212.

Defendant, Giovanni Ristaurante ("Giovanni") operates a restaurant located in a building at 47-49 West 55th Street in New York, New York. Giovanni leases the restaurant premises from the owner of the building, defendant Pancas.

Plaintiff Admiral issued a General Liability policy[FN1] to Giovanni. Pursuant to an "Additional Insured Endorsement", the policy, as required by the terms of Giovanni's lease with building owner Pancas, names Pancas as an additional insured. The Admiral policy contains in its pertinent parts a "Conditions" section which requires that the insured notify "as soon as practicable of an occurrence which may result in a claim."[FN2] The Conditions section further provides that when "[Admiral] insurance is excess, [they] will have no duty under Coverage [...] to defend the insured against any 'suit' if any other [*2]insurer has a duty to defend the insured against that 'suit'."[FN3]

Pancas also procured its own separate liability policy from the defendant PSM.[FN4] Pancas's PSM policy provides primary coverage to Pancas for, among other things, lawsuits arising out of bodily injury occurring within the subject premises.

On October 20, 2002, while both the Admiral and PSM liability policies were in effect, the defendant and underlying plaintiff, Oswalso Bendenzu, slipped and fell on a staircase within the above-described premises during the course of his employment as a dishwasher for Giovanni. He sustained injuries as a consequence of this accident.

In a December 2, 2002, letter from an attorney retained by Bendenzu, Bendenzu advised that he would be asserting a claim against Pancas to recover for injuries he had sustained in the course of his employment. This letter instructed Pancas to notify its liability insurer for the claim. Plaintiff claims that Pancas did not notify Admiral of Bendenzu's claim in December 2002.

On January 2, 2003, Bendenzu commenced an action against Pancas in the Supreme Court of Bronx County for which the Summons and Complaint were served on Pancas on January 23, 3003.[FN5] Bendenzu alleged in his complaint that his injuries are the result of defective conditions of the premises due to Pancas's negligent maintenance and ownership of the premises. In February, 2003, Pancas tendered the action exclusively to its own liability insurer, defendant PSM. PSM thereafter assigned counsel to represent Pancas in the Bendenzu lawsuit without reservation of rights.

In July, 2003, Admiral claims they were placed on notice of the Bendenzu lawsuit. Admiral acknowledged the action in a letter dated August 11, 2003. Admiral states that it commenced its investigation thereafter into the matter.

On September 15, 2003 the Bendenzu Summons and Complaint were furnished to Admiral. Admiral disclaimed coverage in a letter to Pancas dated November 4, 2003, on the basis of its violation of the Admiral policy's Notice Conditions. In a letter dated May 17, 2004, Admiral rescinded its disclaimer and retained defense counsel to share in and partly assume control of Pancas's defense with PSM in the Bendenzu suit. [*3]

Admiral argues that it is not obligated to defend or indemnify Pancas in the underlying personal injury action. Admiral claims that PSM, as Pancas's own general liability insurer, breached the Notice Conditions of the Admiral policy by unconditionally and without any reservation of rights assuming Pancas's defense exclusively at the outset of the underlying litigation. Admiral claims that PSM failed to notify Admiral of the injury or/and suit in a timely manner and controlled Pancas's defense as a primary insurer thereby forfeiting its rights to challenge the nature of the coverage or to disclaim coverage thereunder.

Pancas and PSM oppose plaintiff's motion for summary judgement. Defendants claim that Pancas's delay in providing notice to Admiral creates an issue of fact as to the viability of Admiral's late notice defense.

Additionally, Pancas and PSM file a cross motion for summary judgment on the ground that Admiral is precluded from disclaiming coverage to Pancas because Admiral allegedly unreasonably delayed disclaiming coverage based on a late notice. Defendants also argue that Admiral ultimately rescinded its disclaimer of coverage and has resumed Pancas's defense in the underlying action without reservation.

"[I]n order to obtain summary judgment, movant must establish its defense or cause of action sufficiently to warrant a court's directing judgment in its favor as a matter of law." Gilbert Frank Corp. v Federal Ins. Co., 70 NY2d 966, 967 (1988). In order to defeat the motion, the defending party must establish the existence of a factual issue requiring trial, through production of admissible evidence. Id, at 967.

Pancas's contract, as an additional insured under the Admiral policy, requires it to notify Admiral "as soon as practicable" of an occurrence, claim, or suit pursuant to the policy's coverage section (Condition; section I-coverage; 2 a; 2b). While the issue of whether the insured has given timely notice of occurrence is generally a question of fact:

New York courts have held that it may be determined as a matter of law when (1) the facts bearing on the delay in providing notice are not in dispute and (2) the insured has not offered valid excuse for the delay.

Village of Endicott, NY v Insurance Co. of North America, 908 F

Supp 115, 122 (NDNY 1995).[FN6] [*4]

The undisputed evidence establishes that on October 20, 2002 while both the Admiral and PSM liability policies were in effect, the defendant and underlying plaintiff, Bendenzu, sustained an injury during the course of his employment for Giovanni. While Pancas, became aware of the incident in December 2002, it was not until 9 months later , on July 30, 2003 that Admiral was placed on notice for the first time of the 2002 occurrence and lawsuit. Therefore, the facts regarding the delay are not in dispute. Rather, the issue is whether the delay is reasonable.

In Holmes v Morgan Guar. and Trust Co. of New York, the court held that a ten months delay by owner and general contractor of premises, additional insured under a subcontractor's liability policy, in providing notice to subcontractor's insurer of accident and subsequent suit was not reasonable. Holmes v Morgan Guar. and Trust Co. of New York, 223 AD2d 441, (1st Dep't 1996). The court stated that the delay violated the policy condition that notice be given "as soon as practicable" and eliminated any duty of insurer to defend them against the lawsuit. Id.

Pancas has not offered a valid reason for the delay. New York recognizes the insured's reasonable belief in its non-liability as a valid excuse for a policyholder's untimely notice. White v City of New York, 81 NY2d 955, 957 (1993). Nevertheless, when no credible evidence supports a proffered excuse, a notice will be held untimely as matter of law. Hartford Fire Ins. Co. v Masternak, 55 AD2d 472, 474 (4th Dep't. 1977).

Defendant Pancas argues that given the allegation that Bendenzu's injury occurred as a result of a defective stairway, which Giovanni was contractually obligated to maintain and repair, Pancas had a good-faith belief that it would not be held liable. However, Pancas, as the owner of the building within which the injury occurred should have been aware of his liability with regards to the occurrence which is specifically alleged in the Bendenzu Summons and Complaint. Additionally, Pancas, as an additional insured, agreed to all of Admiral policy's terms, conditions, limitations and exceptions that existed with respect to the original insured. Therefore, Pancas has an independent contractual obligation for which Pancas should have been put on notice by virtue of being an additional insured on the Admiral policy liability.

Under New York law, an insured's satisfaction of the notice of conditions in a policy insurance, absent valid reason for [*5]delay, is a mandatory condition precedent to the insured's right of coverage under the policy. New York v Luslow's Sanitary Landfill, Inc., 50 F Supp 2d 135, 138 (NDNY 1999). Where an insured breaches the policy notice conditions, it is deemed as a matter of law, to have forfeited its rights under the policy, thus absolving the insurer of any coverage obligations, whether it be the primary or excess insurer, which would otherwise have existed. Aetna Cas. & Sur. Co. v Lanza, 70 Ad2d 508,(1st Dep't. 1979). Pancas failed to notify Admiral of the subject occurrence, claim and suit in a timely manner and as a result, breached the conditions stipulated in the Admiral policy. Pancas's breach of insurance contract forfeits its rights of coverage under the Admiral policy.Admiral is not estopped from disclaiming liability. In light of the circumstances, investigation, and delay of notice of occurrence and lawsuit, Admiral's disclaimer was provided as soon as reasonably possible. Pursuant to §3420(d): If under a liability policy delivered or issued for delivery in this state, an insurer shall disclaim liability or deny coverage for [...] any other type of accident occurring within this state, it shall give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant.

It is well established that where an insurance policy would otherwise cover a particular occurrence, but for an exclusion in the policy, an insurance carrier will be precluded from disclaiming coverage when it has unreasonably delayed in issuing its disclaimer. American Ref-Fuel Co. of Hempstead v Employers Ins. Co. Of Wasau, 265 AD2d 49, (2nd Dep't. 2000).

Under New York law, an insurer's statutory obligation to give written notice of disclaimer of coverage "as soon as reasonably possible" pursuant to §3420(d) varies a great deal according to the specific circumstances surrounding the disclaimer. Nevertheless, timeliness is generally measured from the time that the insurer has sufficient information to disclaim liability in good faith. AJ McNulty & Co., Inc. v Lloyds of London, 306 AD2d 211, 212 (1st Dep't. 2003). Admiral was obligated pursuant to New York Insurance Law to notify Pancas and PSM as soon as reasonably possible of its disclaimer upon the predicated exclusion. However, Admiral was not put on notice of the 2002 occurrence until July 2003 and did not receive the Bendenzu pleadings until September 2003.

In the case of Public Service Mutual Insurance Company v Harlen Housing Associates, the court held that a "disclaimer is based on concrete evidence" in order to avoid "piecemeal disclaimer". Public Serv. Mut. Ins. Co. v Harlen Hous Assocs., [*6]7 AD3d 421, 440 (1st Dep't. 2004). While Admiral cited Pancas's breach of policy conditions as grounds for its liability disclaimer, namely late notification of the occurrence, claim, and lawsuit, Admiral could not come to this determination without an investigation of the Bendenzu accident, the legal events following thereafter and all potential grounds for disclaimers. Under these circumstances, the Court finds Admiral's delay in issuing the disclaimer from September to July reasonable.

Pancas and PSM argue in their cross motion for summary judgement that Admiral is equitably estopped from disclaiming a primary coverage obligation to Pancas because Admiral rescinded its disclaimer and provided defense and indemnity to Pancas. However, estoppel applies only "where [an insurer] undertakes the defense of the case without reserving its rights, 'in reliance on which the insured suffers the detriment of losing the right to control its own defense'". Brooklyn Hosp. Ctr. v Centennial Ins Co., 258 AD2d 491 (2d Dep't 1999).

Admiral's rescission letter states in pertinent parts: "We hereby rescind our November 4, 2003 coverage disclaimer. We will share in the defense of this claim on its merits with Magna Carta Insurance Company [PSM]." Admiral did not reserve its rights. While primary coverage by Admiral is not dependent upon the condition that PSM share in the obligation to defend Pancas, as argued by Admiral, the rescission following Pancas's defense does not prejudice Pancas. PSM did not lose complete control of the defense. As the aforementioned letter provides, PSM was able to share in Pancas's defense and Admiral only assumed part of the defense of the claim in conjunction with PSM. Therefore, the estoppel doctrine does not apply to Admiral; Admiral can disclaim their primary coverage obligation after having rescinded their original disclaimer.

Accordingly, it is

ORDERED that Admiral's motion for summary judgment (mot. Seq. 001) is granted and that Admiral is not obligated to defend or indemnify Pancas in the underlying personal injury action; and it is further

ORDERED that defendants', PSN and Pancas, cross motion for summary judgment is denied; Admiral effectively disclaimed coverage of Pancas in the underlying personal injury action; and it is further

ORDERED that the Clerk is directed to enter judgment accordingly.

Dated: October 3, 2005

ENTER:

J.S.C.

Counsel are hereby directed to obtain an accurate copy of this Court's opinion from the record room and not to rely on decisions from the internet which have been altered in the scanning process. Footnotes

Footnote 1:Policy #21-3-1366-31-02

Footnote 2: Admiral policy, Section I-Coverages, §7 Conditions.

Footnote 3:Id.

Footnote 4:Policy # 00-74-304783.

Footnote 5:Bendenzu did not sue his employer, Giovanni, since any such action would be barred by the exclusive provisions of the Workers Compensation Law.

Footnote 6: This decision was vacated in part on reconsideration, 914 F Supp 36 (NDNY 1996). The court held that it erred in declaring that Insurance of America, the defendant in the subject motion for summary judgment, has a duty to defend plaintiff, the Village in that it failed to meet a condition precedent to coverage. Therefore, the court should not have been granted partial summary judgement on that issue.