Admiral Ins. Co. v State Farm Fire & Cas. Co.
Decided on April 24, 2009
Supreme Court, Bronx County
Admiral Insurance Company and P & K Contracting, Inc., Plaintiff,
State Farm Fire and Casualty Company (pertaining to an underlying action entitled Lakhwinder Singh City of New York and New York City Health & Hospital Corporation and P & K Contracting Inc.), Defendants.
Attorney for Plaintiffs: Leonard Porcelli, Esq.
Attorney for Defendant: Allen L. Sheridan, Esq.
Alexander W. Hunter Jr., J.
The motion by plaintiff pursuant to C.P.L.R. §3212 for an order determining that defendant must defend and indemnify the plaintiff P & K Contracting, Inc., (hereinafter "P & K") in the underlying personal injury lawsuit titled Lakhwinder Singh v. City of New York and New York City Health & Hospital Corp. and P & K Contracting, Inc., filed in Bronx County under index number 6385/03, is denied. The cross-motion by defendant for summary judgment dismissing plaintiffs' complaint against it, is denied.
The underlying action was a labor law cause of action wherein Lakhwinder Singh sued for personal injuries he sustained on October 19, 2002 while performing construction work at 34-24 Kosseth Avenue in Bronx County.
Plaintiffs initiated the instant declaratory judgment action against the defendant and assert that P & K was insured under a general liability policy issued by co-plaintiff Admiral Insurance Company (hereinafter "Admiral"). P & K had entered into a written contract with Shahid Enterprises, Inc., (hereinafter "Shahid") to perform construction work at said location. The contract required Shahid to procure additional insured coverage for the benefit of P & K. Shahid obtained a general liability insurance policy from defendant State Farm which contained an additional insured endorsement. Plaintiffs contend that said endorsement expressly scheduled P [*2]& K to the policy as an additional insured. Plaintiffs contend that a letter was sent to State Farm on December 17, 2003, tendering P & K's defense and indemnification and State Farm did not disclaim to P & K for late notice until April 13, 2004, 113 days after receipt of its first notice of loss.
Plaintiffs argue that the delay in disclaiming was unreasonable as a matter of law and that plaintiff failed to comply with the requirements of Insurance Law §3420(d), that a notice of disclaimer be given as soon as is reasonably possible. Plaintiffs cite to case law which states that the timeliness of an insurer's disclaimer is measured from the moment the insurer first receives information that would disqualify the claim. Plaintiffs argue that if State Farm was in doubt as to whether it received timely notice of the claim, it should have immediately disclaimed coverage and filed a declaratory judgment action but it chose not to. Therefore, late notice constitutes a waiver of any late notice defense.
Plaintiff contends that pursuant to the terms of the Admiral and State Farm policies, the State Farm policy provided primary coverage to P & K while the Admiral policy issued to P & K provides excess coverage. Therefore, P & K is entitled to look to the State Farm policy for defense and indemnification of the loss alleged in the underlying lawsuit and summary judgment should be granted in plaintiffs' favor.
State Farm opposes plaintiffs' motion and submits a cross-motion for summary judgment dismissing plaintiffs' complaint against it. State Farm first contends that Insurance Law §3420(d) is not applicable herein where a claim is being made by a co-insurer for indemnification or contribution for the benefit of mutual insured. The underlying cause of action settled for $975,000 on November 17, 2008. State Farm contends that since Admiral is seeking contribution or indemnification from another co-insurer, Insurance Law §3420(d) does not apply. State Farm cites to case law which holds that Insurance Law §3420(d) is not triggered where the request is for contribution by a co-insurer. State Farm argues that late notice was provided by Admiral and no notice was ever provided by P & K and even if State Farm's denial of coverage had been untimely, Admiral does not have standing to raise that issue. Moreover, Admiral has fully defended P & K's interest in the underlying action and that matter settled within the liability limits of the Admiral policy. Therefore, Admiral is the sole party with any real interest in the outcome of the instant action.
State Farm further contends that P & K's defense and indemnification were fully funded by Admiral and P & K has no independent claim beyond the scope of Admiral's claim. Therefore, Insurance Law §3420(d) does not apply to Admiral's claim against State Farm. State Farm argues that if this court finds that Insurance Law §3420(d) applies, State Farm acted in accordance with that statute because the letter from Admiral's agent, United Claims Service, Inc., (hereinafter "United") that was sent on December 17, 2003 with respect to the underlying occurrence, was not received by State Farm until January 22, 2004 because it had been sent to the wrong State Farm office. Thereafter, State Farm's agents attempted to obtain the details concerning the underlying occurrence through Admiral or P & K. State Farm argues that it made [*3]good faith and reasonable efforts to contact the named insured, additional insured, the additional insured's insurer, Admiral and the claim representative for Admiral, United, to obtain the necessary information. However, since the information was not forthcoming and Admiral and United were not cooperative with State Farm, State Farm could not have disclaimed coverage in good faith upon receipt of United's December 17, 2003 letter in the absence of any investigation.
State Farm contends that the issuance of its denial of coverage within 21 days after learning of the grounds for issuing its disclaimer was reasonable as a matter of law and was therefore, in line with the requirements of Insurance Law §3420(d). Moreover, since Admiral and United refused to provide State Farm with the information it requested, they should be collaterally estoppel from attempting to use Insurance Law §3420 as a sword against State Farm.
State Farm also argues that even if its denial of coverage was precluded by Insurance Law §3420(d), then State Farm and Admiral would be co-primary insurers of P & K. State Farm refers to the policies of both State Farm and Admiral and argues that both policies provide primary insurance on their faces and both contain excess insurance clauses that cancel one another out under New York Law. Therefore, both State Farm and Admiral are required to apportion their contributions to the defense and indemnification of P & K on a pro rata basis.
Admiral and P & K oppose the cross-motion by State Farm and argue that State Farm did not offer a reasonable explanation for the 113 day delay in disclaiming coverage. Admiral denies that there was a lack of cooperation by it and United and if State Farm believed there was no cooperation, it should have expressly disclaimed in a prompt manner on those grounds. In addition, Admiral argues that Insurance Law §3420(d) does apply to its disclaimer because P & K is a co-plaintiff in this declaratory judgment action. Admiral contends that P & K had an interest in the coverage dispute at the inception of the lawsuit and still has an ongoing interest in this coverage dispute because its loss history will be adversely impacted by any pay out from its own carrier, Admiral. P & K negotiated with Shahid for additional insured coverage and the State Farm policy was expressly endorsed to provide P & K with additional insured coverage. Therefore, State Farm should have fully defended and indemnified P & K and P & K should have no negative loss history. Moreover, by virtue of the settlement in the underlying lawsuit, Admiral is subrogated to the rights of P & K and still has a right to pursue indemnification for the payments made to the plaintiff in the underlying action.
State Farm submits reply papers in support of its cross-motion and also agues that Admiral is the real party in interest in this matter because P & K has not incurred any independent liability due to the fact that the action settled within Admiral's policy limits. Moreover, State Farm contends that the arguments by Admiral and P & K that P & K's loss history will be adversely affected, is not supported by any admissible evidence. State Farm argues that the settlement in the underlying action will remain a part of P & K's loss history irrespective of the name of the insurance company who ultimately pays for the loss. Therefore, the cross-motion for summary judgment should be granted. [*4]
It is well established that summary judgment is a drastic remedy and should not be granted where there is any doubt as to the existence of a triable issue. Rotuba Extruders v. Ceppos, 46 NY2d 223 (1978). "To obtain summary judgment it is necessary that the movant establish his cause of action or defense sufficiently to warrant the court as a matter of law in directing judgment' in his favor...and he must do so by tender of evidentiary proof in admissible form." Friends of Animals, Inc. v. Associated Fur Manuf., Inc., 46 NY2d 1065 (1979). Once the movant has made this showing, the burden shifts to the party opposing the motion "to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action." Alvarez v. Prospect Hospital, 68 NY2d 320 (1986).
Insurance Law §3420(d)(2), states "If under a liability policy issued or delivered in this state, an insurer shall disclaim liability or coverage for death or bodily injury arising out of a motor vehicle accident or 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."
In AIU Ins. Co. v. Investors Ins. Co., 17 AD3d 259 (1st Dept. 2005), the court ruled that, "...the duty to disclaim as soon as is reasonably possible...is not triggered where, as here, the request is for contribution by a coinsurer....The purpose of Insurance Law §3420(d) is to protect the insured, the injured party, and any other interested party who has a real stake in the outcome' from prejudice resulting from a belated denial of coverage'..." (citations omitted). Id. at 260. Although State Farm contends that Insurance Law §3420(d) does not apply, this action was commenced long before the settlement in the underlying action took place and the insured, P & K, is a co-plaintiff herein and a party with a real stake in the outcome.
In First Financial Ins. Co. v. Jetco Contracting Corp., 1 NY3d 64 (2003), the Court of Appeals stated, "On the one hand, we appreciate the desire for a fixed yardstick against which to measure the reasonableness, or unreasonableness, of an insurer's delay...On the other hand, the difficulty with imposing a fixed time period - -which the Legislature scrupulously avoided - - is that most often the question whether a notice of disclaimer has been sent "as soon as is reasonably possible' 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..." (citations omitted). Id. at 70. In the case at bar, this court finds that there is a question of fact as to whether or not State Farm disclaimed coverage as soon as it was reasonably possible.
Accordingly, the motion and cross-motion for summary judgment are denied.
This constitutes the decision and order of this court.
Dated:April 24, 2009