Tower Ins. Co. of N.Y. v Diaz

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Tower Ins. Co. of N.Y. v Diaz 2008 NY Slip Op 31999(U) July 11, 2008 Supreme Court, New York County Docket Number: 0113448/2006 Judge: Doris Ling-Cohan Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. UED ON 711512008 [* 1 ] ' SUPREME COURT OF THE STATE OF NEW YOR,#'- / NEW YORK COUNTY ~. Index Number : I I344812006 TOWER INSURANCE INDEX NO. MOTIONDATE . vs DIAZ, SEGUNDO, JR. MOTION SEQ. NO. Sequence Number : 001 MOTION CAL. NO. SUMMARY JUDGEMENT his motion tolfor PAPERS NUMBERED Notice of Motion/ Order t o Show Cause Answering Affidavits - - Affidavits - Exhibits ... f; t -3 Exhibits leplying Affidavits Check one: - ' FINAL DISPOSITION dNON-FINAL DISPOSITION L.-I [* 2 ] SUPREME COURT OF THE STATE OF NEW YORK I Segundo Diaz, Jr., Christina Diaz, if Rafael Pacheco and Francis Gayle, Defei -_r-_--_--r---__-_r-_r__r__________r____ Doris Ling-Cohan, J.: 9 In this declaratory policy, plaintiff Tower Insurance Company of New Yo-wer) under the terms of the insurance mows for an order, pursuant to CPLR 3212, granting it summary judgment, Co-defendants Segundo Diaz. Jr. (Segundo) and Christina Diaz (Christina) (the Diazes) request in their opposition papers that, pursuant to CP1,R 3212 (b), they be granted summary judgment dismissing Tower's complaiiit in its entirety. I On March I O , 2006, co-defendants Rafael Pacheco (Pacheco) and Francis Gayle (Gayle) I I were injured when they fell from an elevated height while performing construction work on a building undisputably owned by the Diazes, and located at 2604 East 651h Street, Brooklyn, New York (the premises). Purportedly, the premises was purchased by the Diazes, in or about Nove,mber 2005, and was to be used as their marital residence. Pacheco and Gayle allege that they were injured due to the. failure of the owners to maintain the construction site premises in a safe condition. Pacheco and Gayle were employees of a subcontractor engaged by a general contractor to perform work OII the premises. Some of the construction work included the addition of a second floor to the premises (see Notice of Motion, Williams Affidavit, Exhibit 1). On March 2 1,2006, an action was brought in Kings County Supreme Court. under Index L' No. 9589/06, by Paclieco and Gayle, as plaintiffs, against Segundo, as the sole defendant. Tower [* 3 ] was notified of the incident 011 May 5 , 2006. On May 12,2006, Brian K. Williams (Williams), an investigator employed by Tower, interviewed Segundo. As a result of that interview, in a June 2,2006 letter, Tower notified the Diazes that it disclaimed any duty to defend or indemnify them in the Kings County action, and that it was commencing a declaratory judgment action seeking such relief. It informed the Diazes that it would defend them in the Kings County action until such time as the declaratory judgment action was resolved. Tower s cornplaint alleges two causes of action. The first cause of action seeks a declaratory judgment that there is no duty to defend and indemnifjl the Diazes based on language in an exclusionary clause in the Definitions portion of Tower insurance form HO 00 03 04 9 1, subsection (4) (0. The second cause of action seeks a declaratory judgment that the insurance policy is void because the Dimes allegedly made a false material representation on the homeowners insurance policy application, in violation of Tower insurance policy form HO 01 3 1 08 00 Section I and I1 - Conditions, subsection (2). In paragraph 1 1 of their answer, the Diazes admit so much of the allegations contained in paragraph 13 [of the complaint] as it asserts that the [Diazes] intended to occupy the premises following its renovation. The Pertinent Policv Languwe It is alleged that the material misrepresentation occurred when the Diazes submitted a homeowners insurance application, dated November 1,2005, which listed 2604 East 65 Street as their mailing address while listing 2325 East 69 hStreet, Brooklyn, New York as their previous address (if less than 3 years) (see Affidavit in Opposition, Exhibit EE; Notice of Motion, Aptman Affidavit, Exhibit 2). The addresses were on a computerized or typed homeowners insurance application, which was allegedly prepared by Obinach Arroyo (Arroyo), an insurance salesman employed with Northeast Agencies, lnc. (Northeast). The application was 2 [* 4 ] signed by the Diazes, and was then signed by Brenda Stitt, an agent with Northeast, and was then forwarded to Tower. The record shows that Tower, thereafter, issued an insurance policy for the premises for the period of November 7,2005 through November 7,2006. That policy number was HOS2561682. The premises was subsequently inspected by Tower on November 1 1 2005. Tower form HTOO1, the Declarations page of the insurance policy, lists the Diazes as the Insured with an address of 2604 E. 65IhSt., Brooklyn, New York. Under the box marked Occupancy, Owner is typed in. Tower form H TO01 also lists Northeast as the Agent W o Brenda Stitt. Tower form HO 00 03 04 9 1, entitled L Hoineowners3 Special Form, includes a Definitions section, a Section - 1 Liability section, and a Section I1 1 Exclusions section. The Definitions portion of form HO 00 03 04 91, section (4), entitled Jnsured location mcans, provides, in pertinent part, that the Insured location includes: a. The residence nremises ; b. The part of other prcmises, other structures and grounds used by you as a residence and: 1. which is shown in the Declarations; or 2. which is acquired by you during the policy period for your use as a residence; c. Any premises used by you in connection with a premises in 4.a. and 4.b. above; d. Any part of a premises: (1) not owned by an insured ; and (2) where an insured is temporarily residing; e. Vacant land, other than farm land, owned by or rented to an insured ; - Land owned hv or rented to an insured on which a one or !NO familv f. dwelling is being built as a residence for nn insured ... [emphasis added]. Section 8, entitled Residence premises means, provides, in pertinent part, that Residence premises includes: a. The one family dwelling, other structures, and grounds; or b. That part of any other building; 3 [* 5 ] where you reside and which is shown as the residence premises in the Declarations. [emphasis added]. Residence premises also means a two family dwelling where you reside in at least one of the family units and which is shown as the residence premises in the Declarations. - The Section I1 Exclusions portion of form NO 00 03 04 9 I under Section I1 -Liability Coverages, the Coverage E - Personality Liability portion of that section, which deals with when a claim is brought against an insured, delineates in subsection (1) that the insurer will pay up to the limit of liability for the insured, and in subsection (2) that the insurer will provide a defense. The (Coverage- Medical Payment to Others portion delineates in subsection (1) that necessary medical expenses will be paid to a person injured on the insured location with the permission of the insured. - The Section I1 Exclusions portion of form HO 00 03 04 91, under section (1) of Section I1 - Exclusions, which states that Coverage E - Personal Liability and Coverage FMedical Payments to Others do not apply to bodily injury or property damage , section (1) provides in, pertinent part, that such coverage is not provided: e. Arising out of a premises: (1) owned by an insured ; ... that is not an insured location. [emphasis added] (see Notice of Motion, Aptman Affidavit, Exhibit 1 [Policy form HO 00 03 04 91, Section 11 - Exclusions, (1) (e) (l), at 13 of 18 for Insurance Policy HOS561682). In Tower policy form HO 01 3 1 OS 00, the Section 1 and I1 - Conditions portion addresses the matter of making a false representation on the insurance policy application. The pertinent language provides: 2. Concealment or Fraud. The entire p o h y will be void if, whether before or after a loss, an insured has: 4 [* 6 ] a. Intentionally concealed or misrepresented any material fact or circumstance; b. Engaged in fraudulent conduct; or c. Made false statements; relating to this insurance (see Notice of Motion, Aptman Affidavit, Exhibit 1, Policy form HO 01 3 1 08 00, Section 1 and I1 - Conditions subsections (2) (a), (b) and (c), at 17 of 18), The Insurer s, Insurance Apent s, and Insured s Business Relationship Historv Christine argues that she did not misrepresent a material fact on the application. She represents in her affidavit that for a number of years she and her family have obtained coverage for vehicles and apartments through Arroyo. Though those policies had previously been with Allstate Insurance, at some point, Arroyo switched their policies to Tower Insurance. Christine, who apparently handles the f,unily insurance matters, was directed by Arroyo to contact Brenda Stitt, another Northeast agent. Ms. Stitt used Northeast stationary and identified herself as a Northeast agent in her correspondence with Christine (see Djaz Affidavit in Opposition, Exhibits DD, EE and FF). In paragraphs 9, 14, 19 and 20 of Christine s affidavit, she alleges that at all times, Arroyo and Northeast were aware of the purpose for which the insurance policy on the premises had been procured, that being that it was purchased as their residence and that it was undergoing renovations prior to their intended occupancy of the premises (ibidparagraph 6) Christine states that Tower inspected the premises four (4) days after the its policy was issued. The inspection report noted the premises vacancy as a concern. First Cause of Action Tower s position is that it is not obligated to defend and indemnify the Diazes pursuant to exclusion clause subsection (1) (e) (1) because 2604 East 65 hStreet was neither a residence premises nor an insured location under the terms of the insurance policy. Their reliance on 5 - [* 7 ] that exclusion clause is based upon the fact that the Diazes were not actually residing at 2604 East 6Sh Street on the date of the incident. The allegation of non-residence is based upon a transcript statement signed on May 12, 2006 by Segundo and given to Williams. Williams states in his affidavit that at the end of a conversation between himself and Segundo, he accurately transcribed Diaz s statement, then he reviewed it with Segundo, who then reviewed those transcribed statements and signed the transcription (seeNotice of Motion, Williams affidavit). The court record reflects that only a redacted copy of Segundo s alleged statement, referred to in Notice of Motion, Williams Williams s affidavit, is attached to the Notice of Motion (s Affidavit, Exhibit 1). That redacted copy provides the followitlg: File #406-0877 Mr. Segundo D i u , Jr. My name is Segundo Diaz Jr. [redaction] I purchased a vacant two (2) family private home at 2604 E. 65 hStreet, Brooklyn, N.Y. in December 2005 or January 2006. I purchased 2604 East 65 h Street with my wife Christina Diaz. We have resided at 22 76 E. 3S h Street since the purchase of 2604 East 6SfhStreet in December 2005/January 2006, as we are having another floor added and are converting the property from a two (2) family to a one (1) family dwelling. We have never resided at 2604 East 65th Street, however we should be able to move in after construction is complete (in a few weeks). [redaction]. I have read the above statements and find them to be true and accurate to the best of my knowledge. [signed] Segundo Diaz Jr. Segundo was not provided with an unredacted copy of the transcript (seeDiaz Memorandum of Law, at 8, footnote 4;Tower Memorandum of Law, at 3, footnote 10). In his October 29,2007 affidavit, Lowell Aptman, the vice president handling liability claims for Tower, in reliance on the Williams Affidavit and attached exhibit, states, in paragraph 7, that, on the date of the accident, the Diazes resided at 2176 E. 73th [sic]St., Brooklyn, New York and awaited the completion of construction on the subject premises located at 6ShStreet b [* 8 ] before moving in. He states that the application submitted by the Diazes through their insurance broker represented that they occupied the premises as their primary residence. He further states that the policy excludes coverage for an injury sustained at a location which the insureds own but in which they do not reside. In paragraphs 14, 19 and 2 1 of her affidavit, Mrs. Dim, in reliance on policy form HO 00 03 04 91, section (4)(f), interprets the language found in policy form HO 00 03 04 91, Section 11 - Exclusions, (1) (e) (1) differently from Mr. Altman. She points out, in paragraph 14 in particular, that, in its Notice of Motion, Tower limits the definition of Insured location to that of the phrase the residence premises found in subsection (4)(a), and makes no mention of subsection (4) (0, upon which the Diazes rely. Her position is that the land, referred to in section (4) (0, being land owned by or rented to an insured on which a one- or two-family that dwelling is being built as a residence for an insured, includes land, such as the subject premises, upon which construction in an existing building is taking place. Thus, she argues that 2604 East 65 hStreet is an insured location pursuant to subsection (4)(f), and falls within an exception to the subsection (1) (e) (1) exclusion language. Tower s position is that the activity on the existing structure at 2604 East 65Ih Street is renovation and is not encompassed within term #& & I the plain meaning of the subsection (4) (0 or phrase beinn built as n residence [emphasis added]. As with any contract, unambiguous provisions of an insurance contract must be given their plain and ordinary meaning, and the interpretation of such [unambiguous] provisions is a question of law [to be determined by] the court (White v Cclntinentul Casualty Compauly, 9 NY3d 264, 267 120071) (citation omitted). If an ambiguity is determined to exist in an insurance policy, it must be construed against the preparer of the policy, the insurer, and in favor of the 7 [* 9 ] Here, section (4) (e), which specifically refers to vacant land, when compared with section (4) (0,which more broadly refers to [l]and owned by .,. an insured on which a one or two family dwelliiiy is being built as a residence for an insured, seems to distinyuish vacant land from land with somethiny on it. Both subsections fall within exceptions to the exclusionary language in the policy. Additionally, the policy language in subsection (0, not spec@ that does the structure being built on the land must be only a completely new structure versus a structure that is being constructed, reconditioned, renovated, added onto, or rebuilt. The facts show that there was construction being done on a pre-cxisting building on the lalid identified as the premises. It is significant that the buildins work being done was done to convert the properly lo a one (1) faiiiily residence fbr the defendant homeowners. In the redacted Williams transcript, Segiiiido states t h a t a second tloor was being added I O the premises, a construction done to convert the two family dwelling to a one family residence so that he and his wife could move in ai tcr construction was completed. In paragraph (7) of lis aflidavjt, hptnian refers to the building activity as being construction on the subject premises. The fact that a second floor is being added to a building is identical to as a second floor being built, or, using MI-. Aptman s own words, a second floor being constructed. Tower s assertion that land as used in subsection (4) (f) would only enconlpass land on wliich an entirely new stnicture is being built is not supported by the plain nieaniny ofthe lanyuage in that subsection. To apply Tower s interpretation of subsection (4) (9 would theoretically requii-e an insured to tear down an existiny structure and rcbuild it from scratch in ordei- h r subsection (4) (f) of insurance policy I-iOS2561682 to apply. This court finds that, based on Seyundo s statements in the Williams transcript, the statement in paragi-aph 7 of the Aptman afTidavit, and the plain meaning of the term build as 8 [* 10 ] used in the languaye of subsection (4) (f), the premises located on 2604 East 65 Street is an insured location. The addition of a second floor to tlie structure on the premises makes it land on wliich a one family dwellilly is being built. As an insured location, there is a duty to defend and indcmnify as lotiy as the insurance policy is not voided due to a material misrepresentation on tlie application. Upon searching the recoi-d, the court may grant summary judginent to tlie nonmoving party where appi-cspriate (% CPLR 32 I 2 [b]; 7i*ip/ei Xoofi rlg (To(f). I F ~ V I I I ; H ~ ~ ~ C h. [Jtiioii F i ~ S diool Lji,r./i.ic/, AD3d 323, 325 [2d Dept 20061). Here, suiiiinary judgment u 26 sliould be granted to the non-nioving co-defendants 011 the first came of action, for the above reasons. The Second Cause of Action The couit recognizes that the exclusionary language in a lioi~ieowner s insurance policy is specifically based on the assumption that the 1-esidenceofthe insured is their home, or in this case, will bc their home (E 9A, Couch on Insurance 3D 5 128:1, e l S L C ~ . ) The second cause of action implics that, based on the statements in the May 12, 2006 Williams transcript discussed above, the mailing addi-ess on the application forni was fraudulently filled out. Lowell Aptman states in paragraph 8 of his October 19, 2007 afxdavit that [t]he application sirbinitted by the Diazes through their insurance broker, dated November 1, ZOOS, represented that they occupied the premises as their primary dwelling, and did not own, occc~py or I-entany other residence The court notes that the application form, identified as an ACORD HOMEOWNER APPLICATION prepared on an Acord Corporation 198 1 forrn identified as ACORD 80(2002/11I ), was allegedly prepai-ed by the Agent Northeast Aycncies, Tiic The application, which has spaces for a mailing address and a previous address, lists 2604 East 65 Street as the Diazes mailiny address and lists 2325 East 69 Street, Brooklyn New Yo]-k 9 [* 11 ] as the previous address. The court reiterates that the Tower policy s Declarations page was prepared on Tower s form HT001 , Under the name of the insured, it listed 2604 East 65 Street as the Diazes address. Neither of the ternis mailing addrcss or address are defined anywhere on either the ACORD application or in the Tower insurance policy. Nor do any of the palties addi-ess whether or not the Diazes actually i-eceived inail at the pr-ernises addi-ess. Tower refers t o the Sections I and I1 - Conditions portion of Special Provisions - New Yoi-li section (2), which provides, in subsection (2) (a), that it will not provide coverage f or the insured who, \hjJictlier bef ore or after the loss, has inlentionally concealed or iiiisi-eprescnted any material fact or circumstance. In reliance on subsection (2) (a), the fourth last paragraph ofthe June 2, 2006 disclaimer letter from Aptman indicated that Tower would not provide insurance coveraye for an insured who, either before or after a loss, misrepresented any inaterial fact or circumstance, nor would it have issued a homeowner s policy, had it known that the disputed premises was not owner-occupied (.sw Notice of Motion, Aptman hffidavit, Exhibit 4). The Insurance Law defines a representation as a statement regarding past or present fact made to the insurer- by, or by the authoi-ity of, the applicant for insurance or the prospective insured, at or before the making of the jnsurance contract as an inducement to the making thereof (Insiu-ance Law $ 3 105 [a]). [A] material misrepresentation the insurancc policy ab initio (7.jTm i. ibi?iinrf [I, if proven, would void i.rtron Fire ~ t ~ s l i l ~ m l c~?o n l p r36 ,AD3d 609, ~t y 61 0 [2d Dept 2007][citation omitted]). [Tlo establish [a] right to rescind an insurance policy, 1 an insurer must demonstrate that the insured nia.de a inaterial misrepresentation (S chi~wer P o i k r r r , 4 I AD3d CiS8, 690 [2d Dcpt 2007][citation omitted]). To establish materiality as a matter of law, an insurer mist present [docuinentaiy evidence] concerning its uiidcrwritiny manuals, bulletins, or rules peitainiiig to similar risks, that show practices, such as ~indei-wi-itin~ 10 [* 12 ] that it would not have issued the same policy if the [allegedly] correct information had been disclosed in the application (at 690-691). Conclusory statements by insurance company employees, [such as Mi-. Aptman] [which are] unsupported by documentary evidence, are irisuficicnt to cstablish materiality as a matter of law (at 691 ). Here, other than the Aptiiian affidavit, the record is devoid of any Tower documentation coucerning its underwriting practices to show that it would not have issued the same policy if the allegedly correct inforniation Iiad been disclosed in the application. Even assuming that therc was a niatcrial misrepresentation made, the evidence proff ered is insuflicient to establish materiality as Hci*/?/iluge Itisiirutm (701iym7y, 2 1 hD3d 538, 54 1 [2ndDept 2005)). a matter of law ( P ( I I ~ L .11Y I . The issue of materiality is generally a question of fact for the jury ( S C / ~ ~ / WvUPerlkerf, 4 I AU3d at 6~10) At this jirnctiire, there is no basis to grant Tower sumniary judgment 0 1 its 1 second cause of action. Moreover, the Diazes are not entitled to summary judyment oil the second cause of action. J T ~stating that they did not niisrepresent any facts on either their homeowners applicatioii or in tlicir explanation to the insurance ayeiit prior to obtaining the disputed homeowners insurance policy, they indicated that, as a subsec,tioii (4) (f) exception to the exclusion, they would be movinz in after the construction work on the premises was completed. Segundo iiidicated in the May 12, 2006 transcript that such a move would be occurriiiy within a few weeks. No such proof that they actually moved into tlic premises has been provided. Thus, there is triable question of. Fact as to whether the Diazes f 3 1 within the subsection (4) (f) exception under the insurance po I icy t e m s , Accordingly, based on the 1-ecordbefore this couit, it is ORDERED that that portion of thc iiiotion seeking sumniary judgment on the first C 11 a w [* 13 ] of action is denied as to thc movant but is granted as to the non-nioving parties and the court finds that there is a duly to defend and indemnify the Diazes subject to plaintif fs s defenses stated in the second cause of action, and it is further ORDERED that that portion of the motion seeking summary judgment on the second cause of action premised upon material tiiisrepresentation is denied as to all parties, and it is fur t ti e r OLXDERED that within 30 days of entry ofthis order, the Diazes shall scrve a copy upon all patties with notice of entry Dated: July IL / , 2008 I-Zoii. Doris Ling-Cohan, J. S.C 12

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