Brend Contr. Corp. v United Natl. Ins. Co.

[*1] Brend Contr. Corp. v United Natl. Ins. Co. 2006 NY Slip Op 51898(U) [13 Misc 3d 1218(A)] Decided on June 23, 2006 Supreme Court, Kings County Jacobson, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 June 23, 2006
Supreme Court, Kings County

Brend Contracting Corporation, Plaintiff,

against

United National Insurance Company, and LEVITT-FUIRST ASSOCIATES, LTD., Defendants.



44174/2003

Laura Lee Jacobson, J.

Defendant United National Insurance Company (hereinafter "United") moves for an order pursuant to CPLR section 3212 for summary judgment declaring that United is not obligated to defend or indemnify Brend Contracting Corporation (hereinafter "Brend"). Defendant Levitt-Fuirst Associates, LTD. (hereinafter "Levitt-Fuirst") moves for an order and judgment shortening the time after which an unsigned transcript is considered admitted under CPLR 3016 to coincide with the time in which responding parties must respond to this motion; and/or waiving the requirement of execution; for a framed issue hearing to confirm the transcript or other appropriate relief; and further, pursuant to CPLR section 3212 and Insurance Law Section 3420 (d) granting partial summary judgment declaring that the disclaimer letter of defendant United dated October 1, 2003 is untimely as a matter of law and that said defendant has thus waived any exclusions or substantive policy defenses, and that defendant therefore must provide coverage to plaintiff for the underlying claims at issue herein, subject to the policy amounts and agreements; [*2]and further declaring that the policy of United covers the disputed claims notwithstanding the "residential projects" exclusion and other exclusions. Plaintiff Brend cross moves for an order pursuant to CPLR section 3212, granting summary judgment in favor of plaintiff against defendant United, or, in the alternative, against defendant Levitt-Fuirst. At the outset, that portion of defendant Levitt-Fuirst's motion which seeks waiving execution of the transcript for purposes of opposing the instant motion is granted without opposition.

The Underlying Action

The underlying action in this matter, Zbigniew Rakowski v. 203 East 72 Street Corp., and Insignia Residential Group, Index No. 600013/03 was commenced in New York County by the filing of a summons and complaint on January 3, 2003. Thereafter, a third party action was commenced against Brend. In the underlying personal injury action, plaintiff Rakowski alleges that on August 23, 2002, he was injured while performing repair and/or construction work at the defendant's premises. At the time of the accident, plaintiff was employed by Brend. In his complaint plaintiff Rakowski alleges negligence and Labor Law violations. Plaintiff Brend contends that subsequent to service and filing of its cross-motion in the declaratory judgment action, the underlying personal injury action brought against the building owner and management company was dismissed based upon their lack of supervision or control of work performed by Brend and based upon the inapplicability of Labor Law provisions. As a result, the third-party action against Brend was rendered moot as well as Brend's cross-motion for summary judgment against the owner and manager. However, plaintiff Brend contends that the declaratory action is still necessary in the event of a successful appeal by plaintiff Rakowski; for its precedential effect and because Brend seeks a declaration that it is entitled to reimbursement of its defense costs and reimbursement.

Facts and Procedural Background

The undisputed facts in the instant declaratory judgment action are that Brend obtained an insurance policy with United. The policy was placed by Levitt-Fuirst through two intermediaries, a wholesale broker, Swett & Crawford (hereinafter "Swett"), which in turn communicated with a general agent of United called Lambin Insurance Services, Inc. (hereinafter "Lambin"). On May 14, 2002, Lambin offered a quote for the insurance which was contingent upon receiving a Contractor's Supplemental Warranty. Levitt-Fuirst provided the warranty and coverage was provided by United effective May 28, 2002 to May 23, 2003. The supplemental warranty provided in pertinent part that "I warrant that the applicant and anyone performing work on the applicant's behalf do [sic] not perform any residential work, and I understand all residential work is excluded from coverage". The warranty dated May 28, 2002, purportedly contained the signature of the president of Brend, Mr. Withold Brend.[FN1] [*3]

The policy was delivered to Levitt-Fuirst on August 12, 2002. Brend testified that it received the policy in October 2002. On August 23, 2002, Mr. Rakowski sustained injuries while performing work for Brend at a cooperative located at 203 East 72nd Street in New York, New York. The accident was reported verbally by Brend to Levitt-Fuirst. Brend completed a C-2 workers compensation claim form on the same day of the incident and forwarded it to Levitt-Fuirst directing that Levitt file a workers compensation claim. Levitt-Fuirst reported the claim to Brend's workers compensation carrier. On November 21, 2002, Mr. Rakowski instituted the underlying action against the owner and the manager of the cooperative. On or about June 16, 2003, the insurer for 203 East 72nd Street, Gulf Insurance, through a manager Barkly Coverage Corp. (hereinafter "Barkly") sent a letter to Levitt-Fuirst requesting indemnification for the Rakowski claims. The letter was conveyed by Levitt-Fuirst to Swett and by further letter dated July 24, 2003, the tender was conveyed by Swett to Lambin, United's general agent. On or about September 4, 2003, East 72nd Street Corp. and Insignia Residential Group initiated a third-party action against Brend for contractual and common law indemnity and contribution in the Rakowski action. On October 1, 2003, United disclaimed coverage to Brend due to alleged late notice and three policy exclusions. In the disclaimer letter, United acknowledged that it received a correspondence dated September 12, 2003, that was sent by Levitt Fuirst Associates, Ltd., which enclosed a third-party action commenced against Brend. On November 12, 2003, Brend instituted the instant action. Brend contends that in the Rakowski action, it should be covered for the third party claims against it sounding in indemnity and contribution. Brend further contends that United should also cover the claims of the owner and manager against it for failure to procure insurance. In the alternative, Brend alleges that the broker Levitt-Fuirst failed to provide notice of claim on behalf of Brend and failed to procure adequate coverage, respectively.

The Insurance Agreement



The policy states that the insured's duties regarding notification are as follows: 2. Duties in the Event of Occurrence, Offense, Claim or Suit.A. You or an involved insured must see to it that we are notified as soon as possible of any "occurrence" or an offense which may result in a claim but notification to the Company must be made within (30) days from your, or any involved insured's first notice of an "occurrence" or offense. To the extent possible notice should include:1) How, when and where the "occurrence" or offense took place;2) The names and location of any injury or damage arising our of the "occurrence" [*4]or offense; and3) The nature and location of any injury or damage arising out of the "occurrence" or offense.B. If a claim is received by any insured you or that insured must, as a condition precedent to coverage or to recover under this policy:1) Immediately record the specifics of the claim or "suit" and the date received and2) Notify us as practicable but not more than thirty (30) days following initial receipt of the claim.You must see to it that we receive written notice of the claim or "suit" as soon as practicable but no greater then thirty (30) days following initial notice of an "occurrence" or offense.C. You and any other involved insured must:1) Immediately send us copies of any demands notices summonses or legal papers received in connection with the claim or "suit";2) Authorize us to obtain records and other information;3) Cooperate with us in the investigation, settlement or defense of the claim or "suit"; and4) Assist us upon our request in the enforcement of any right against any person or organization which may be liable to the insured

The Insurance policy's Residential Projects Exclusion states in pertinent part that: This insurance does not apply to injury or damage directly or indirectly arising out of, caused by or resulting from "your products" or "your work" in connection with any single custom house or a house which is part of multiple tract housing or condominium or other multi-unit residential projects.Projects which are mixed-use, any part residential or any part commercial, are considered to be a residential project subject to this endorsement.

The Parties Contentions [*5]

Although defendant United originally disclaimed upon several basis, the only remaining reasons for disclaimer are late notice and the residential projects exclusion. Defendant United alleges that Brend did not notify it of the accident until September 12, 2003. United contends that it disclaimed coverage by letter dated October 1, 2003. Defendant United argues that as such, Brend failed to serve timely notice of claim. It is United's position that the policy excluded residential projects and that at the time of the loss alleged in the underlying action, Brend was working on a residential project. Defendant United offered an affidavit from an employee, senior claims examiner Duane Parker. Mr. Parker stated that although plaintiff Brend filed a C-2 Employer's Report of Work-Related Accident Report on August 23, 2002, the same day as the accident, the first notice that United received was on September 12, 2003. Mr. Parker contends that it is United's position that plaintiff Brend breached the terms and conditions of the subject policy in failing to report the occurrence to United on the day of the accident when the C-2 was filled out by Mr. Withold Brend.

Defendant Levitt-Fuirst contends that the notice of the occurrence to United was not late. Defendant Levitt-Fuirst alleges that because of the complicated nature of Labor Law 241 litigation, the laypersons involved in this claim reasonably concluded that only the workers compensation policy was implicated in this claim. As a result, they failed to notify United based upon their reasonable belief of non-liability. Defendant Levitt-Fuirst argues that United received notice on July 24, 2003, when Levitt-Fuirst forwarded the owner's claim letter to Swett. Defendant Levitt-Fuirst contends that United received notice of claim at the latest on July 29, 2003. Defendant Levitt-Fuirst refers to a "New Claim Set Up" form that United provided on discovery, which on a section entitled "internal tracking" which has the notation "To Mgr. 7-29-03". The document in the papers is neither sworn nor certified. However, Duane Parker, a United Claims examiner was questioned about the date that United received notification at his deposition. Initially, Mr. Parker testified that United first received notice of the claim on September 4, 2003. However, when Mr. Parker was questioned about a correspondence in the claim file from Swett & Crawford to Lambin dated July 24, 2003, he acknowledged that " There is a date stamp of July 28th of 2003 on it". He was also questioned about a stamp on the document that said "7/28/03 to United National". When he was asked if anyone from United National received a copy of this transmittal on or about July 28th of 2003, he replied "I can't recall offhand". Defendant Levitt-Fuirst alleges that even if notice was late, defendant United failed to timely disclaim. Defendant Levitt-Fuirst asserts that defendant United first received notice of the claim on July 24, 2003 and that the approximate 69 day delay in disclaiming coverage was untimely as a matter of law. As such, defendant United's disclaimer based upon late notice and the "residential projects exclusion" must be considered waived. Defendant Levitt-Fuirst further contends that the "residential projects exclusion" is ambiguous and does not apply to the loss at hand. Defendant Levitt-Fuirst refers to the testimony of Violla Clements, United's vice-president of underwriting who acknowledged that the exclusionary provision was changed in August, 2002 to add language to the effect that apartments were not excluded by the residential projects exclusion. However, Mr. Parker testified regarding the "residential projects" exclusion that it was his understanding that the exclusion applied to residential coop buildings. [*6]

Plaintiff Brend contends that on September 5, 2002, it gave timely notice of the accident to defendant Levitt-Fuirst who notified Brend's workers' compensation carrier. Plaintiff Brend alleges that Alan Fuirst testified at his deposition that he did not notify United "because we had no reason to believe that there was a liability claim involved, but it was a simple Workers' Comp. Claim. Sometime later we were notified that there is a liability matter and we notified United National". Plaintiff Brend alleges that as such, late notice may not serve to deny coverage, or that at the very least, there is a question of fact as to the reasonableness of plaintiff's agent's excuse for late notice. Plaintiff Brend further asserts that the residential projects exclusion pertains to construction projects and not repair jobs. Plaintiff Brend contends that the purpose of the residential Projects Exclusion is to limit the insurer's long term exposure for construction defects in residential projects, not short term exposure in the course of residential repair. Plaintiff Brend alleges that to interpret the exclusion otherwise would render its policy meaningless since 100% of its work is done upon apartment buildings in Manhattan. Plaintiff Brend asserts that further evidence that United knew that Brend performed work on residential properties is the fact that the certificate of insurance dated July 15, 2002 named 203 East 72nd Street Corp. c/o Insignia Residential Group as the certificate holder. Plaintiff Brend contends that United was placed on notice that it did work on residential apartment buildings in Manhattan, if not by the address alone, then by the "Residential" in Insignia's name. Plaintiff Brend alleges that the warranty stating that Brend performed no residential work, was signed by Levitt-Fuirst's employee Giselle, without plaintiff Brend's authorization or knowledge. Plaintiff Brend further argues that if United is entitled to judgment by virtue of the late notice or the residential projects exclusion, or if there is a question of fact with regard to either, which will require a trial to resolve, then Brend is entitled to summary judgment against Levitt-Fuirst based upon its failure to notify United and its failure to obtain coverage for its customer plaintiff Brend, if the residential projects exclusion leaves plaintiff Brend without coverage.

Discussion

Providing an insurer with timely notice of a potential claim is a condition precedent, and thus absent a valid excuse, a failure to satisfy the notice requirement vitiates the policy (Paul Developers, LLC v. Maryland Casualty, _AD3d_, WL 861618 2006 [2nd Dept.]). Here, plaintiff Brend did not provide defendant United with notice until at the earliest July 29, 2003, which was 11 months after the occurrence. Plaintiff Brend has not offered a reasonable excuse for failing to provide timely notice to United. The fact that plaintiff provided timely notice to their own broker is of no moment since such notice does not constitute timely notice to the carrier (see Paul Developers, LLC v. Maryland Casualty, supra). Moreover, Levitt-Fuirst's argument that the insured lacked sophistication regarding insurance matters is an insufficient excuse for the delay (see Allstate v. Marcone, 815 NYS2d. 235 [2nd Dept. 2006]). Although failure to give notice may be excused when an insured has a reasonable belief of non-liability, the burden is on the insured to show the reasonableness of its belief, and whether the belief is reasonable is ordinarily a question for the trier of fact ( C.C.R. Realty of Dutchess, Inc, 1 AD3d 304 [2nd Dept. 2003]). The duty to give notice arises "when from the information available relative to the accident, an insured could glean a reasonable possibility of the policy's involvement" (Paramount Ins. Co. v. [*7]Rosedale Gardens, 293 AD2d 235, 239-240 [3nd Dept. 2002]). Here, even though the underlying action was eventually dismissed, plaintiff Brend and defendant Levitt-Fuirst have not established that a reasonable and prudent insured would have concluded in this instance that there was no possibility of liability. However, pursuant to Insurance Law section 3420[d], an insurance carrier must give timely notice of the disclaimer as soon as is reasonably possible after it first learns of the accident or grounds for disclaimer of liability or denial of coverage (see New York Mutual Fire Insurance v. Majid, 5 AD3d 447 [2004]). Furthermore, this rule applies even if the insured or the injured party has in the first instance...failed to provide the insurance carrier with timely notice of the accident (Prudential Property & Casualty Insurance v. Persaud, 256 AD2d 502, 504 [1998]). In most cases the timeliness of an insurer's disclaimer will be a question of fact, dependent on all of the circumstances of a case that make it reasonable, or unreasonable, for an insurer to investigate coverage (First Fin. Ins. Co. V. Jetco Contr. Corp., 1 NY3d 64, 70 [2003]). Where the ground for disclaiming coverage should have been readily apparent to the carrier when it first received notice of the claim, the requirement for timely notice is particularly applicable (see Gregorio v. J.M. Dennis Construction Company Corp., 21 AD3d 1056 [2nd Dept.2005]). Although defendant United alleges that it did not receive notice until September 12, 2003, there is some evidence that it received notice on July 29, 2003, which would mean that United took more than two months to notify plaintiff that it was disclaiming coverage. Here, questions of fact exist as to when United received notice of the occurrence and as to whether it disclaimed coverage in a timely fashion which precludes granting summary judgment to any party in this action. Furthermore, questions of fact exist as to whether the exclusionary provision of the insurance agreement applies in this instance. To be relieved of its duty to defend on the basis of a policy exclusion, the insurer bears the heavy burden of demonstrating that the allegations of the complaint cast the pleadings wholly within that exclusion, that the exclusion is subject to no other reasonable interpretation, and that there is no possible factual or legal basis upon which the insurer may eventually be held obligated to indemnify the insured under any policy provision (Frontier Insulation Constr., Inc. v. Merchants Mut. Ins. Co., 91 NY2d 169, 175 [1997]). Here, where the exclusion provision fails to specifically include cooperatives in the types of buildings that constitute residential projects, questions of fact exist as to whether the exclusion is applicable in this case (see Bovis Lend Lease LMB, Inc. v. Royal Surplus Lines Insurance Company, 27 AD3d 84 [1st Dept. 2005]).

Accordingly, defendant United's motion for summary judgment and defendant Levitt-Fuirst s motion and plaintiff's cross-motion for summary judgment are all denied, based on the issues of fact noted above.

This constitutes the decision and order of the court.

ENTER:

LAURA L. JACOBSON, JSC

Footnotes

Footnote 1: However, a fact in dispute is whether Mr. Brend authorized or had knowledge of the warranty. At his deposition, Mr. Brend denied signing the document. Indeed, Mr. Fuirst testified that he was informed by an employee, Giselle Petersen, that she signed the client's name. Mr. Brend also denied authorizing Levitt-Fuirst to sign the warranty in his behalf.