Logan Bus Co., Inc. v Discover Prop. & Cas. Ins. Co.
Annotate this CaseDecided on September 28, 2012
Supreme Court, Queens County
Logan Bus Company, Inc., Plaintiff,
against
Discover Property & Casualty Insurance Company, Lutheran Social Services of Metropolitan New York, Inc. D/b/a New Life School, New Life School Inc. Elizabeth Serrano a/k/a Brianna Blalock an infant by her mother and guardian Betty Serrano and Betty Serrano, individually, Dominique Brown an infant by his mother and guardian Ethel Brown, the City of New York and The New York City Department of Education, Defendant.
24525/09
Kevin Kerrigan, J.
The following papers numbered 1 to 11 read on this motion by plaintiff for summary judgment.
Papers
Numbered
Notice of Motion-Affirmation-Exhibits.............. 1-4
Memorandum of Law.................................. 5
Affirmation in Opposition.......................... 6-7
Memorandum of Law in Opposition.................... 8-9
Reply Memorandum of Law............................ 10-11
Upon the foregoing papers it is orderedthat the motion is decided as follows:
Motion by Logan for summary judgment in this declaratory judgment action declaring that defendant Discover Property & Casualty Insurance Company is obligated to defend and indemnify it in the case of Serrano, et ano. v Lutheran Social Services of Metropolitan New York, Inc, et al. (Supreme Court, Kings County, Index No. 169/2009) and ordering Discover to reimburse it for all [*2]defense costs, attorneys' fees and disbursements expended in defending the underlying action "and all monies they may be obligated to pay in the settlement or judgment of the underlying Serrano Action" is denied.
The infant plaintiff in the Serrano case, a student at New Life School in Kings County, allegedly was sexually assaulted by another student, defendant Dominique Brown, on a school bus en route to the school on July 28 and 29, 2008 and that the assaults were committed in full view of the bus matron. It is undisputed that the school bus was owned and operated by Logan and that the bus matron was Logan's employee. Serrano alleges in her Kings County complaint, inter alia, that Logan, through its employees, was negligent in its supervision of Dominique Brown and Serrano, negligent in the screening, hiring, training and supervision of its employees and negligent in failing to promulgate rules and procedures governing the supervision of children in its care and control.
It is undisputed that a business automobile insurance policy was issued by Discover to the New York City Department of Education (DOE) including Logan as an additional named insured. The policy contains an "Abuse and Molestation Liability" endorsement which provides, in relevant portion:
1. Coverage
a. We will pay those sums that the "insured" becomes legally obligated to pay as damages because of "bodily injury" to any person arising out of "abuse or molestation" to which this insurance applies, caused by an "accident" resulting from the ownership, maintenance or use of a covered "auto". The "abuse or molestation" must be caused by one of your "employees" or volunteer workers or arise out of your failure to properly supervise.
We have the right and duty to defend any "insured" against a "suit" asking for such damages. However, we have no duty to defend any "insured" against a "suit" seeking damages for "bodily injury" to any person arising out of "abuse or molestation" to which this insurance does not apply. ...
. . . .
2. The definition of "accident" is replaced by the following:
"Accident" means an act or threatened act of "abuse or molestation"...
[*3]
. . . .
4. The following definition is added:
"Abuse or molestation" means:
a. The actual or threatened abuse or molestation by one of your "employees" or "volunteer workers" of any person while in the care, custody or control of any "insured", or
b. The negligent employment, investigation, supervision, reporting to the proper authorities or failure to so report or retention of a person for whom any "insured" is or ever was legally responsible and whose conduct would be covered under paragraph 4. a. above.
On May 22, 2009, the DOE made a claim with Discover under the policy regarding the Serrano action. By letter dated May 29, 2009, Discover disclaimed coverage under the policy upon the ground that the loss is not a covered loss because it did not result from the ownership, maintenance or use of a covered auto. Discover also apprised the DOE that it reserved its rights to deny coverage on other grounds and and that it was not otherwise waiving its rights. Logan thereafter commenced the underlying declaratory judgment action.
Logan's counsel contends that Logan is entitled to summary judgment because Discover can point to no exclusion in the subject insurance policy to avoid coverage. He argues that the "abuse or molestation liability" provision covers sexual assaults committed by third parties because it does not affirmatively disclaim such coverage and, in fact, provides coverage for sexual abuse or molestation caused by the insured's "failure to properly supervise."
Logan's counsel's arguments are without merit. Paragraph 4 of the "abuse or molestation liability" endorsement explicitly provides coverage only with respect to sexual misconduct committed by the insured's employees or volunteer workers. The interpretation advanced by plaintiff's counsel that paragraph 4(b) applies to the sexual misconduct of a person for whom the insured was legally responsible and, therefore, applies to provide coverage for sexual assaults committed by both an employee of plaintiff or a student on the bus is not supported by any fair reading of the policy provision. There is no basis for defining the "supervision" of a person for whom the insured was "legally responsible" in paragraph 4(b) as including a student. On the contrary, the language of paragraph 4(b) is clear that the covered sexual misconduct is only that of an employee or worker of the insured. This is apparent from [*4]the inclusion of coverage for negligence on the part of Logan not only in the supervision, but in the employment, investigation and retention of such person for whom Logan was legally responsible, thus precluding any interpretation that such person includes an infant student being transported on the bus. The language of the policy is therefore clear that the offender for whom Logan was "legally responsible" refers only to its employee or worker. Moreover, paragraph 4(b)goes on to state that coverage is provided for Logan's negligence in the employment, investigation, supervision, retention or reporting of such individual for whom plaintiff was legally responsible "and whose conduct would be covered under paragraph 4. a. above" (emphasis added), further emphasizing that coverage is only provided for abuse or molestation committed by an employee or worker.
Logan's counsel argues that paragraph 4(b) cannot be interpreted to refer only to employees or workers, as does paragraph 4(a), because it would be redundant and would contradict the word "or" which implies that a different class of persons from that of paragraph 4(a) was intended in paragraph 4(b). However, it is the opinion of this Court that mere redundancy of language alone, if it does not create any internal conflict or contradiction so as to render an absurd result, is no basis for imposing an interpretation that is not clear from but, indeed, is contrary, the plain language of the document. Here, the plain language of both paragraphs 4(a) and 4(b) is that coverage applies only with respect to abuse or molestation committed by Logan's employees or workers for whom Logan is legally responsible. Moreover, the Court does not feel compelled to adopt Logan's counsel's expansive interpretation of paragraph 4(b) to include coverage for the conduct of third-party infant bus passengers as abusers or molesters based upon the use of a single conjunction. Indeed, the Court does not see any redundancy or conflict at all between paragraphs 4(a) and 4(b), since they clearly reflect the intention of Discover to provide liability insurance and defense covering lawsuits where liability against plaintiff is premised upon either or both respondeat superior or negligence.
Finally, plaintiff contends that since the letter of May 29, 2009 by Discover rejecting the DOE's claim did not constitute a valid disclaimer, Discover has waived its right to disclaim coverage. As heretofore stated, Discover disclaimed coverage under the policy upon the ground that the loss did not result from the ownership, maintenance or use of a covered auto. Counsel argues that Discover's failure to disclaim under the Abuse and Molestation Liability endorsement rendered the disclaimer invalid and, therefore, Discover waived its ability to deny coverage under the Abuse and Molestation clause. Counsel's argument is without merit. [*5]
Counsel's argument presupposes that the Abuse and Molestation Liability endorsement covers sexual assaults committed by third-party bus passengers as well as by employees of Logan. However, as heretofore discussed, said endorsement covers only abuse and molestation committed by Logan's employees and workers. Since the Abuse and Molestation Liability endorsement does not provide coverage for the insured in the event of any lawsuit commenced against it for abuse or molestation committed by third parties, there is no issue of waiver.
As explained by the Court of Appeals, "Waiver evolved because of the courts' disfavor of forfeitures of the insured's coverage which would otherwise result where an insured breached a policy condition, as, for instance, failure to give timely notice of a loss or failure to co-operate with the insured...To defeat the forfeiture, courts find waiver where there is direct or circumstantial proof that the insurer intended to abandon the defense ... This, however, does not create coverage, for the underlying coverage must be subsisting if the forfeiture is to serve any purpose. So, where the issue is the existence or nonexistence of coverage (e.g., the insuring clause and exclusions), the doctrine of waiver is simply inapplicable" Albert J. Schiff Assoc. v Flack, 51 NY2d 692, 698 [1980] [citations omitted]). In other words, waiver applies only where the insurance company seeks to invoke an exclusion under the policy to reject a claim that was otherwise covered under the terms of the policy, because of some breach or nonperformance of a condition to coverage. However, where coverage does not exist in the first place, none can be imposed, and the defense that coverage does not exist thus cannot be "waived". Here, Discover disclaimed coverage because the "accident" for which Logan is being sued is simply not the type that is included in the policy of insurance, not because Discover is attempting to invoke an exclusion to disqualify Logan from coverage for the type of "accident" that is otherwise provided for in the policy. "[B]ecause the noncoverage arose from a lack of inclusion, not a policy of exclusion, a timely disclaimer of coverage was not required" (Continental Casualty Company v Luhrs, 299 AD2d 357, 358 [2nd Dept 2002]; see also 474431 Associates v AXA Global Risks U.S. Insurance Company, 18 AD3d 604 [2nd Dept 2005]).
"The duty to defend is triggered whenever the allegations of a complaint, liberally construed, suggest a reasonable possibility of coverage, or the insurer has actual knowledge of facts establishing a reasonable possibility of coverage...an insurance carrier can be relieved of its duty to defend if it establishes, as a matter of law, that there is no possible factual or legal basis on which it might eventually be obligated to indemnify its insured under any policy provision" (Burgund v ESP Café, Inc., 84 AD3d 849, [*6]850 [2nd Dept 2011] [internal quotations and citations omitted]). Here, the only basis for Logan's allegation that Discover is contractually obligated to defend it in the Serrano action and, should plaintiff be cast in damages, to indemnify it, is its erroneous interpretation of the Abuse and Molestation Liability endorsement. But as heretofore noted, this provision only provides coverage for claims of abuse or molestation committed by Logan's employees or workers. Thus, the allegations contained in the Serrano complaint, assuming their truth for purposes of the instant motion, that Logan should be held liable in damages for the sexual assault of the infant plaintiff in that case by a fellow student, do not suggest any possibility of coverage, and it is clear from the very policy provision relied upon by Logan that there is no possibility that Discover may be obligated to defend or indemnify it under the facts and causes of action alleged in that complaint.
Accordingly, the motion is denied.
Dated: September 28, 2012
KEVIN J. KERRIGAN, J.S.C.
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