American Tr. Ins. Co. v Alaa

[*1] American Tr. Ins. Co. v Alaa 2006 NY Slip Op 51649(U) [13 Misc 3d 1202(A)] Decided on August 17, 2006 Supreme Court, New York County Heitler, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 August 17, 2006
Supreme Court, New York County

American Transit Insurance Company, Plaintiff,

against

Amer M. Alaa, Anba Taxi, Inc., Yevgeniya Blokh and Boris Rozentsvayg, Defendants.



601152/05

Sherry Klein Heitler, J.

In this insurance dispute, plaintiff American Transit Insurance Company (American Transit) seeks a judicial declaration that it does not have a duty to provide a defense or indemnification with respect to an automobile accident which occurred on November 6, 2004, and which became the subject of a negligence action in Supreme Court, Kings County, under index number 39531/04 (the Kings Action). Currently before this court is a motion by the injured claimants in the Kings Action, defendants Yvegeniya Blokh (Blokh) and Boris Rozentsvayg (Rozentsvayg), for an order, pursuant to CPLR 3212 and Insurance Law § 3420 (d), granting summary judgment in their favor and dismissing the complaint. American Transit opposes the motion and cross-moves for an order, pursuant to CPLR 3212, granting summary judgment in its favor on its demand for a declaratory judgment, and for a default judgment against its insureds, defendants Anba Taxi, Inc. and Amer M. Alaa (together, the Taxi defendants) based upon their failure to serve an answer in this action.

The complaint in the Kings Action, which was commenced on December 6, 2004, approximately one month after the automobile accident, alleges that Blokh was seriously injured when the car she and her husband, Rozentzvayg, were driving in was hit by a taxi owned by Anba Taxi, Inc. and driven by Amer M. Alaa. Rozentsvayg's claim is derivative in nature.

It is undisputed that American Transit issued an insurance policy, policy number MPA300953, to Anba Taxi, Inc. for the period from March 1, 2004, to March 1, 2005, and that the accident involved a covered vehicle and occurred during the policy period. According to American Transit, it first learned of the Kings County lawsuit on February 16, 2005 when it received a notice of motion for a default judgment against its insureds, the Taxi defendants. The default motion was, apparently, served upon both the Taxi defendants and their insurance company, American Transit, and was triggered by the failure of the Taxi defendants to timely answer the summons and complaint in the Kings Action.

On March 7, 2005, American Transit contacted the attorney for Blokh and Rozentsvayg, Paul Hayt (Hayt), seeking a stipulated withdrawal of the motion for a default judgment. The proposed stipulation, which was pre-signed by American Transit's general manager and director of claims, Richard Carroll, states, in relevant part: [*2]

On February 9, 2005 American Transit Insurance Company received a motion for Default Judgment against Amer Alaa and Anba Taxi Inc.

There has been no timely notification to American Transit Insurance Company that an action was commenced as required by the policy. The Summons and complaint for this action have never been received by American Transit Insurance Company, neither the Plaintiff nor the insured gave timely notice that an action had been initiated.

Since there was a breach of a policy condition American Transit Insurance Company can disclaim coverage to the insured and injured party for all claims arising out of this accident and would have no obligation to pay any portion of Judgment rendered against its insured or any costs associated with same.

However, prior to disclaiming, in an attempt to amicably resolve this issue American Transit Insurance Company will agree to assign this matter to counsel to appear on behalf of the insured and driver if Attorneys for plaintiff agree to accept the defendant's answer and withdraw the Motion for Default dated January 27, 2005.

The cover letter attached to the proposed stipulation adds: "[i]f I will not hear from you by this date, we will be forced to disclaim our insured and driver from coverage," and having not heard back, American Transit then faxed a second copy of the stipulation to Hayt on March 9, 2005. The second cover letter faxed along with the stipulation states, in relevant part: "[i]f we will not hear from you by March 10, 2005, the insurance company will disclaim coverage to Anba Taxi Inc. due to a breach of policy condition." According to American Transit, it did not hear back from Hayt, and the stipulation was never executed. It is undisputed that on April 13, 2005, American Transit sent a letter of disclaimer, dated March 9, 2005, to Amer Alaa, by certified mail return receipt requested, indicating that American Transit was disclaiming coverage due to the failure of its insured to provide timely notification of the underlying action (Notice of Motion, exhibit H).

On or about April 1, 2005, American Transit commenced the instant action for a declaratory judgment. Issue was joined by the service of Blokh and Rozentsvayg's answer, and discovery ensued. Among the discovery sought by Blokh and Rozentsvayg was a copy of the insurance claim file and the deposition of Carroll, whose name appears as plaintiff's signatory on the proposed stipulation, and on the bottom of letters/notices sent by American Transit to the various defendants on April 13, 19, and 21, 2005.

The central issue before this court is whether American Transit's letter disclaiming coverage, dated March 9, 2005, was timely. Blokh and Rozentsvaig contend that there is no evidence that the disclaimer notice was sent to its intended recipients prior to April 13, 2005, rendering it untimely under both Insurance Law § 3420 (d) and New York case law. Plaintiff disagrees.

In support of their motion, defendants offer documentary evidence consisting of, among other things, a copy of the disclaimer letter and the envelope it was mailed in (Notice of Motion, exhibit H), and a copy of Carroll's signed and notarized deposition transcript (Notice of Motion, exhibit G). As stated above, the disclaimer letter is dated March 9, 2005, and the envelope it came in is postmarked April 13, 2005. Carroll, who is ultimately responsible for the insurance [*3]company's decision to deny a claim if and when a denial is challenged, made a series of admissions. He acknowledged that American Transit was initially informed that Blokh was making a claim under the Anba Taxi, Inc. policy when it received a letter from Hayt, dated December 14, 2005, stating that his firm was representing Blokh and Rozentsvaig for personal injuries [FN1] (Carroll deposition, at 9 - 10). Carroll stated that his company, actually (or, "first") became aware of the Kings Action on February 16, 2005, when it received a copy of the summons and complaint, and a notice for a default motion, from non-party Taxi Club Management Corp., which is date-stamped February 9, 2005 (id. at 12 - 16). Finally, with respect to the letter of disclaimer dated March 9, 2005, Carroll acknowledged that the postmark on the envelope containing the March 9, 2005 letter, read "April 13, 2005," and was unable to explain why the letter is dated March 9, 2005 while the envelope is postmarked April 13, 2005. Despite answering questions concerning routine procedures and records kept in the ordinary course of American Transit's business, Carroll was unable to state, from his examination of the American Transit claim file, whether more than one disclaimer letter, dated March 9, 2005, was sent out, and if it was, when it was sent out.

Insurance Law § 3420 (d) provides: If under a liability policy delivered or issued for delivery in this state, an insurer shall disclaim liability or deny 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.Defendants assert that American Transit's disclaimer was made over 60 days from the date that it acknowledged receipt of the underlying summons and complaint (February 9, 2005), rendering it unreasonably late under the above-cited section of the Insurance Law (section 3420 [d]) and case law (see Hartford Ins. Co. v County of Nassau, 46 NY2d 1028, 1029 [1979]), and mandating a summary dismissal of the action.

In opposition to defendants' motion, and in support of its cross motion, American Transit submits, together with a copy of the March 9, 2005 disclaimer letter, a copy of a letter, dated April 19, 2005, in which American Transit informs the Taxi defendants, as follows, in relevant part:

[t]he Notice of Inquest has been referred to my attention for review. As we previously informed you on March 9, 2005, American Transit Insurance Company disclaimed coverage for Anba Taxi Inc.

However, on March 18, 2005, a default judgment has apparently been entered against you for failure of anyone to interpose an answer to the complaint on your behalf.

American Transit also submits a copy of, what appears to be, a cover letter, dated April 21, 2005, addressed to the Taxi defendants and Taxi Club Management, Inc., informing the recipients that it commenced the instant declaratory judgment action.

Finally, American Transit submits the affidavit of its operations officer, Michael [*4]Castronovo (Castronovo), for the specific purpose of rebutting movant's assertion that the insurer failed to timely disclaim coverage and is estopped from doing so belatedly.

In his affidavit, Castronovo acknowledges that on December 28, 2004, American Transit received Hayt's letter, dated December 14, 2004, stating that his firm had been retained to represent Blokh and Rozentsvayg for all claims stemming from the November 6, 2004 accident with American Transit's insured, Anba Taxi, Inc., and seeking the name of the claims adjuster and file number assigned to the matter, as well as the coverage limits of the insured's liability policy. Castronovo asserts that American Transit was not advised of the Kings Action until it received a copy of the notice of motion for a default judgment on February 9, 2005. He states that, on March 7, 2005, and again on March 9, 2005, American Transit informed Hayt, in writing, that it had not received timely notice of the Kings Action, and attached a stipulation for Hayt to sign on behalf of his clients, withdrawing the motion for a default judgment. Castronovo states that as a result of Hayt's failure to return a signed stipulation, American Transit sent, by regular mail on March 9, 2005, a disclaimer notice to the Taxi defendants, thereby fulfilling its obligation under Insurance Law § 3420 (d). Castronovo states that coverage was denied on the basis that neither the Taxi defendants, nor the allegedly injured parties, provided the requisite, timely notification of the accident and lawsuit, and he confirms that, on April 13, 2005, American Transit sent, by certified mail, an additional copy of the disclaimer letter to the Taxi Defendants, and that on April 19, 2005, and on April 21, 2005, additional notices regarding disclaimer were sent out.

As proof of the timeliness of the disclaimer notices, Castronovo asserts that it is the customary and routine business practice of American Transit to mail to its insured two copies of the disclaimer letter, one by regular mail and one by certified mail, and furthermore, that it is standard practice and procedure for American Transit to mail a disclaimer letter on the same date the letters are dated. From this, Castronovo concludes, and American Transit asks the court to conclude, that the letter dated March 9, 2005, was sent out on March 9, 2005, rendering its disclaimer timely. Other than this brief explanation, plaintiff offers no proof of mailing.

The motion by Blokh and Rozentsvayg for summary judgment is granted, as a review of the evidence reveals that: (1) no later than December 28, 2004, Hoyt provided American Transit with notice, albeit cursory, of the accident, and notice that he had been retained to represent Blokh and Rozentsvayg with respect to claims stemming from the accident involving plaintiff's insured; (2) American Transit had actual knowledge of the Kings Action no later than February 9, 2005; and (3) the March 9, 2005 letter disclaiming coverage was sent, by certified mail return receipt requested, on April 13, 2005, and there is no proof of any prior disclaimer notification. Castronovo's assertion that the disclaimer must have been sent out on the date it was written, is unavailing, as he failed to detail an office practice and procedure geared to ensure the likelihood that a disclaimer notice was sent out on a particular date (Nassau Ins. Co. v Murray, 46 NY2d 828, 829 [1978]), nor did he have any personal knowledge that this particular disclaimer was sent out on February 9, 2005, or at any other time prior to April 13, 2005. More than 60 days elapsed between February 9, 2005 and April 13, 2005, which is well beyond the reasonable period, especially where, as here, the facts relevant to American Transit's decision to disclaim (the late notice of the underlying accident and lawsuit), were apparent to American Transit at the outset.

"[T]imeliness of an insurer's disclaimer is measured from the point in time when the insurer first [*5]learns of the grounds for disclaimer of liability or denial of coverage" [citations omitted]. Moreover, 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

(First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 68 - 69 [2003]).

Moreover, even if American Transit had sent a timely letter of disclaimer, it would not be entitled to summary judgment in its favor, as the probative evidence is insufficient to support a finding that American Transit did not receive timely and adequate notice that a motor vehicle accident had occurred involving its insureds. Among the well-settled principles of insurance law is "the rule that an insurer has the right to demand that it be notified of any loss or accident that is covered under the terms of the insurance policy. The purpose of such a requirement is to afford the insurer an opportunity to protect itself," and the purpose of the rule regarding "timely notice of a claimant's commencement of litigation . . . is to provide the insurer with a fair and reasonable opportunity to appear and defend against a claim or exercise its right to settle the matter" (American Tr. Ins. Co. v Sartor, 3 NY3d 71, 76 [2004][internal quotation marks and citations omitted]).

By plaintiff's own account, it received notice of the accident and possible claims involving its insureds no later than December 28, 2004, and the fact that it was put on notice by the allegedly injured person/claimant, is of no import, as Insurance Law § 3420 (a) (3) requires that with respect to liability policies, "written notice by or on behalf of the injured person or any other claimant . . . shall be deemed notice to the insurer" (id.). Therefore, even if the disclaimer had been timely, American Transit fails to demonstrate entitlement to summary judgment because a question would nevertheless exist as to when American Transit first obtained sufficient notice, by either party, enabling it to expeditiously investigate any possible claim and to "appear and defend against a claim or exercise its right to settle the matter" (id.).

Accordingly, it is

ORDERED that the motion by defendants Yevgeniya Blokh and Boris Rozentsvayg for summary judgment is granted, and the complaint is dismissed with costs and disbursements to defendants Yevgeniya Blokh and Boris Rozentsvayg as taxed by the Clerk of the Court upon the submission of an appropriate bill of costs; and it is further

ORDERED that the cross motion by American Transit Insurance Company is denied; and it is further

ORDERED that upon searching the record on these motions for summary judgement, the complaint is dismissed as against the remaining defendants, Amer M. Alaa and Anba Taxi, Inc., for the reasons stated above; and it is further

ORDERED that the cross motion by American Transit Insurance Company for a default judgment against defendants Amer M. Alaa and Anba Taxi, Inc. is denied as moot; and it is further

ORDERED that the Clerk is directed to enter judgment accordingly.

This shall constitute the decision and order of the court.

DATED: AUGUST 17, 2006

SHERRY KLEIN HEITLER

J.S.C. [*6] Footnotes

Footnote 1:American Transit received the December 14, 2004 letter no later than December 28, 2004 (see Michael Castronovo affidavit, ¶ 7).