Morath v New York Cent. Mut. Fire Ins. Co.
Annotate this CaseDecided on November 28, 2006
Supreme Court, Ontario County
Michael J. Morath and Elizabeth G. Morath, Plaintiffs,
against
New York Central Mutual Fire Insurance Company, Defendant.
97651
Craig J. Doran, J.
This action arises from an insurance contract between the plaintiffs and defendant. The plaintiff settled her action to recover damages for personal injuries against the tortfeasor for $25,000.00, the limit of the tortfeasor's automobile liability policy, and subsequently commenced this action against her own insurer, New York Central Mutual Fire Insurance Company to recover damages under the supplementary under-insured endorsement of her policy.
The plaintiff, Elizabeth Morath, was injured in an automobile accident that occurred on June 12, 2005. The plaintiff and her husband thereafter commenced an action against the primary tortfeasor. The plaintiffs notified their insurer, the defendant herein, that there was a potential claim against the under-insured endorsement of her policy.
The plaintiffs eventually settled the underlying action with the tortfeasor for the limit of the tortfeasor's automobile liability policy. Contrary to the plaintiff's insurance policy with New York Central, as well as the insurance regulations, the plaintiffs failed to provide New York Central with written notice that the tortfeasor's insurance company had tendered their policy limits. Also in violation of the policy, the plaintiffs failed to obtain New York Central's consent prior to settling the lawsuit. Thereafter, plaintiffs informed New York Central of the settlement by letter dated February 15, 2006 and asked the carrier for its coverage. On March 23, 2006, New York Central disclaimed coverage.
The plaintiffs thereafter commenced this instant action seeking a declaration as to whether or not the defendant's disclaimer should be set aside and whether or not the defendant should be obligated to provide plaintiffs SUM coverage under their automobile policy.
The defendant has now moved for summary judgment seeking an order dismissing the plaintiff's complaint and enjoining the plaintiffs from recovering under the SUM endorsement of the insurance contract. The plaintiff has cross-moved for summary judgment declaring that the defendant must provide SUM coverage for the accident in question.
In support of the defendant's motion, New York Central cites the well settled law that "where an automobile insurance policy expressly requires the insurer's prior consent to any settlement by the insured with a tortfeasor, failure of the insured to obtain such prior consent from the insurer constitutes a breach of a condition of the insurance contract and disqualifies the insured from availing himself of the pertinent benefits of the policy... unless the insured can [*2]demonstrate that the insurer, either by its conduct, silence, or unreasonable delay, waived the requirement of consent or acquiesced in the settlement" (see, State Farm Auto. Ins. Co. V. Blanco, 208 AD2d 933; Matter of Transportation Insurance Company v. Pecoraro, 270 AD2d 851; Matter of Allstate Insurance Company v. Liberati, 280 AD2d 922).
In light of the foregoing case law, the defendant asserts that the failure of the plaintiff herein to obtain New York Central's prior consent to the settlement of the underlying personal injury action constitutes a breach of a condition of the insurance contract and disqualifies the plaintiff from availing herself of the pertinent benefits of the policy, specifically, obtaining any compensation under the SUM endorsement.
The plaintiff acknowledges that she was required to obtain the consent of New York Central prior to settling the underlying claim with the tortfeasor. However, the plaintiff asserts that New York Central, either by its conduct, silence, or unreasonable delay, waived the requirement of consent or acquiesced in the settlement (see, State Farm Auto. Ins. Co. v. Blanco, supra; State Farm Mut. Ins. Co. v. Delpizzo, 185 AD2d 352). It is undisputed that plaintiff's counsel advised New York Central by letter dated February 15, 2006, that they had settled with the underlying action with the tortfeasor. On February 24, 2006, plaintiff's counsel again wrote to New York Central notifying them of the settlement and asking for their SUM coverage. It was not until March 23, 2006 that New York Central advised the plaintiff by letter that it was disclaiming coverage. This 36-day delay in notification of the disclaim in coverage was untimely as a matter of law.
This Court notes that Insurance Law §3420(d) requires that written notice of disclaimer is to be given as soon as is reasonably possible after the insurer learns of the grounds for disclaimer of liability or denial of coverage. New York Central was aware upon receipt of plaintiff's February 15, 2006 letter of the grounds for disclaimer of liability. However, New York Central delayed disclaiming for a period of 36 days and further failed to provide an excuse for its delay. Timeliness of an insurer's disclaimer is measured from the point in time when the insurer first learns of the grounds for disclaimer of liability or denial of coverage. It is the responsibility of the insurer to explain its delay, and an unsatisfactory explanation will render the delay unreasonable as a matter of law. An insurer's explanation is insufficient as a matter of law where the basis for denying coverage was or should have been readily apparent before the onset of the delay (see, Danna Construction Corp. v. Utica First Insurance Company, 17 AD3d 622).
In the instant case, the record demonstrates that New York Central disclaimed coverage 36 days after receiving notice of the facts upon which its disclaimer was based. Based upon the delay in disclaiming coverage and upon the insurer's failure to provide an excuse for its delay, this Court finds that New York Central's delay is unreasonable as a matter of law (see, Danna Construction Corp. v. Utica First Insurance Company, supra; Bernstein v. Allstate Ins. Co., 199 AD2d 358).
Finally, this Court would note that when the plaintiff first learned that New York Central was disclaiming coverage, the plaintiff attempted to nullify the release that it had issued as a result of the settlement in the underlying action. On March 29, 2006, plaintiff's counsel indicated to New York Central that the insurance carrier for the underlying tortfeasor was willing to nullify the release if the plaintiffs returned the settlement. New York Central thereafter declined to have the plaintiffs pursue nullification of the release.[*3]Based upon the foregoing, this Court denies the defendant's motion for summary judgment and hereby grants the plaintiff's cross-motion for summary judgment.
This constitutes the Decision of the Court. Counsel is directed to submit an order in accordance herewith.
________________________________________
Craig J. Doran
Acting Supreme Court Justice
Dated at Canandaigua, New York,
thisday of November, 2006.
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