Ryan v Continental Cas. Co. - CNA
Annotate this CaseDecided on July 3, 2006
Supreme Court, Suffolk County
Matthew Ryan, Plaintiff(s),
against
Continental Casualty Company - CNA, Defendant(s).
14590-05
CHARLES VON SCHMIDT, ESQ
Attorney for Plaintiff
336 Concord Street
Dix Hills, New York 11746
SCOTT LOCKWOOD, ESQ.
Attorney for Plaintiff
1600 Deer Park Avenue
Deer Park, New York 11729
GOLDBERG SEGALLA, LLP
Attorneys for Defendant
By: Kevin T. Merriman, Esq.
665 Main Street, Suite 400
Buffalo, New York 14203
Mary M. Werner, J.
Upon the following papers read on this motion: Notice of Motion and Supporting Papers 1-15 and Exhibits A-D; Notice of Cross-Motion and Supporting Papers 16-25 and Exhibits A-E; Replying Affidavit and Supporting Papers 26-31; Replying Affidavit and Supporting Papers 32-40; it is [*2]
ORDERED that the motion (seq. No.001) of the plaintiff Matthew Ryan for an order pursuant to CPLR § 3212 granting summary judgment on the first cause of action of the complaint seeking a judgment declaring that plaintiff was a covered person under an insurance policy issued by the defendant Continental Casualty Company-CNA, that the defendant was obliged to provide a defense to plaintiff in the Eastern District of New York commenced by Clarence and Aischa Mitchell against the owners of certain property, Century 21 Rustic Realty, and plaintiff Matthew Ryan (Docket No. 02-9425), and that plaintiff is entitled to recover from defendant his costs and expenses in defending said federal action is granted; and it is
ORDERED that the cross-motion (seq. #
002) of defendant Continental Casualty Company-CNA, for an order granting summary judgment in its favor and dismissing the complaint of the plaintiff is denied; and it is
ORDERED AND ADJUDGED that plaintiff was a covered person under an insurance policy issued by the defendant Continental Casualty Company-CNA; and it is
ORDERED AND ADJUDGED that the defendant was obliged to provide a defense to plaintiff in the Eastern District of New York commenced by Clarence and Aischa Mitchell against the owners of certain property, Century 21 Rustic Realty and plaintiff Matthew Ryan (Docket No. 02-9425); and it is
ORDERED AND ADJUDGED that plaintiff is entitled to recover from defendant his costs and expenses in defending said federal action.
In this declaratory judgment action, plaintiff seeks a judgment declaring that plaintiff was a covered person under an insurance policy issued by the defendant Continental Casualty Company-CNA (hereinafter "CNA"), that the defendant was obliged to provide a defense to plaintiff in the action commenced in the Eastern District of New York by Clarence and Aischa Mitchell against the owners of certain property, Century 21 Rustic Realty, and plaintiff Matthew Ryan (hereinafter "Ryan") (Docket No. 02-9425) (hereinafter "the Mitchell action"), and that plaintiff is entitled to recover from defendant his costs and expenses in defending said federal action.
Clarence and Aischa Mitchell, an African-American couple, alleged in federal court, that they were denied, in violation of the Fair Housing Act, 42 U.S.C. § 3601 et seq., 42 U.S.C. §§ 1981 and 1982, and New York Executive Law § 296(5)(a)(1), the right to purchase certain property owned by Sheila and Harvey Shane, and listed with Century 21 Rustic Realty (hereinafter"Century 21"). Plaintiff in this action was the Century 21 broker who handled the transactions in connection with the sale of the Shanes' property and was a named defendant in the federal action. The facts underlying the Mitchell action are set forth at length in the Second Circuit decision (Mitchell v. Shane, 350 F.3d 39 [2d Cir. 2003]). The Mitchell case was dismissed as to the Shanes (Id. ), ultimately settled with Century 21 for $25,453.78, and was [*3]discontinued as against Ryan.
Defendant CNA refused to provide a defense to Ryan in the Mitchell action. Under the policy issued to Century 21, CNA maintained it was only obligated pursuant to the terms of a claims-made Real Estate Agents Errors and Omissions policy of insurance to provide a defense to Century 21. CNA relied upon the Discrimination Coverage Notice contained within the policy which provided coverage for "vicarious liability and disparate impact discrimination". CNA maintained that the underlying complaint did not allege that broker Ryan engaged in disparate impact discrimination and/or was vicariously liable for disparate treatment discrimination and therefore disclaimed coverage for Ryan.
In reversing the district court's grant of summary judgment to Ryan, the Second Circuit found that "There is no dispute that Ryan...was well aware of the Mitchells' race, having been present at their second inspection of the Property in December 2001. There is...a genuine issue of material fact as to (1) whether there was a custom in eastern Long Island dictating that a real estate broker must disclose the existence of a competing offer to bidders involved in negotiations with the seller; and (2) if so, whether Ryan violated that custom and treated the Mitchells differently from white prospective purchasers (footnote omitted). The plaintiffs presented evidence suggesting that the prevailing custom in Suffolk County was for brokers to give competitive bidders the opportunity to make a counter-offer when a superior offer is made by another prospective buyer.... We do not doubt that a reasonable factfinder could conclude that Ryan violated no custom in his dealings with the plaintiffs, or that even if he did depart from normal procedures, the totality of the circumstances including his alleged solicitude for the plaintiffs in earlier stages of negotiation obviates any inference of discrimination. Still, given that multiple interpretations of the evidence are possible, there are questions that must appropriately be put to a jury, and so we vacate the district court's grant of summary judgment to Ryan." Mitchell v. Shane, supra at 49-50.
It is well settled that an insurer's general duty to defend has been "liberally construed" and is "broader than its duty to indemnify." GMAC v. Nationwide Ins. Co., 4 NY3d 451; 828 NE2d 959; 796 NYS2d 2 (2005). "Indeed, the duty to defend is exceedingly broad' and an insurer will be called upon to provide a defense whenever the allegations of the complaint suggest . . . a reasonable possibility of coverage'.Automobile Ins. Co. of Hartford v. Cook, __ NY3d __, 2006 NY LEXIS 1400; 2006 NY Slip Op 4456 (2006) citing Continental Cas. Co. v. Rapid-American Corp., 80 NY2d 640, 648, 609 NE2d 506, 593 NYS2d 966 (1993). "If, liberally construed, the claim is within the embrace of the policy, the insurer must come forward to defend its insured no matter how groundless, false or baseless the suit may be". Automobile Ins. Co. of Hartford v. Cook, supra [internal quotation omitted]. Thus, "[t]he duty remains even though facts outside the four corners of [the] pleadings indicate that the claim may be meritless or not covered'" Id. citing Fitzpatrick v. Am. Honda Motor Co., Inc., 78 NY2d 61, 63, 575 NE2d 90, 571 NYS2d 672 (1991). "When a policy represents that it will provide the insured with a defense... it actually constitutes litigation insurance' in [*4]addition to liability coverage (see, Seaboard Sur. Co. v. Gillette Co., 64 NY2d 304, 310, 476 NE2d 272, 486 NYS2d 873 [1984] citing Intl. Paper Co. v. Cont. Cas. Co., 35 NY2d 322, 326, 320 NE2d 619, 361 NYS2d 873 [1974])." Id. "Thus, an insurer may be required to defend under the contract even though it may not be required to pay once the litigation has run its course." Id. "When an insurer seeks to disclaim coverage on the further basis of an exclusion, as it does here, the insurer will be required to provide a defense unless it can demonstrate that the allegations of the complaint cast that pleading solely and entirely within the policy exclusions, and, further, that the allegations, in toto, are subject to no other interpretation'. Id. citing Allstate Ins. Co. v. Mugavero, 79 NY2d 153, 159, 589 NE2d 365, 581 NYS2d 142 (1992) [internal citation omitted]. Moreover, "exclusions are subject to strict construction and must be read narrowly". Id. Finally, the Court must look not only to the nature of the specific causes of action alleged in the complaint but must determine whether the factual allegations could have supported the amendment of the complaint to include a cause of action for which coverage would not be excluded. See, McGroarty v. Great American Ins. Co., 36 NY2d 358, 329 NE2d 172, 368 NYS2d 485( 1975)[wherein the Court found that the review of the allegations of the original complaint "should have signaled" the insurer that a covered event might be proved on a different theory.]
Here, defendant maintains that a reading of the complaint demonstrates that plaintiff was alleged only to have engaged in actual discrimination or disparate treatment and that the allegations do not make out a claim of disparate impact or vicarious liability which would have been covered under the policy. The Court disagrees. While disparate impact analysis focuses on the impact of a facially neutral policy on a particular group and disparate treatment involves "differential treatment of similarly situated persons or groups", "the line is not always a bright one". Hubel v. Madison Mut. Ins. Co., 2003 NY Slip Op 51026U, 1 (Sup. Ct.,Onondaga Co., 2003). The complaint against Ryan alleged that by failing to follow a Suffolk realtor policy of providing an opportunity to the Mitchells to match the offer of a subsequent bidder, he engaged in an act which discriminated against the Mitchells and that such failure was for discriminatory reasons, and that the policy requiring an "80% mortgage contingency" was used to enforce discriminatory policies. The allegations of the complaint thus could be construed as claiming that a "facially neutral" policy of requiring an "80% mortgage contingency", in its application, had a discriminatory impact on the African American Mitchells. In view of the broad duty to defend, the Court finds that CNA was contractually required to provide a defense to plaintiff Ryan in the Mitchell action. See, McGroarty v. Great American Ins. Co., supra .
Submit judgment declaring the rights and obligations of the parties.
[*5]
MARY M. WERNER, J.S.C.
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