Nova Cas. Co. v Interstate Indem. Co.

[*1] Nova Cas. Co. v Interstate Indem. Co. 2014 NY Slip Op 50250(U) Decided on February 21, 2014 Supreme Court, Kings County Lewis, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 February 21, 2014
Supreme Court, Kings County

Nova Casualty Company, Plaintiff,

against

Interstate Indemnity Company, New Hampshire Insurance Company and Athena Insurance Company, Defendant.



13504/11



Plaintiff Attorney:

Robert Lewis

Keidel, Weldon & Cunningham

Defense Attorney:

David Guadagnoli, Esq

Rivkin Radler LLP

Yvonne Lewis, J.

In this insurance coverage dispute, defendant, New Hampshire Insurance Company (New Hampshire) moves for an order: (1) granting it summary judgment, pursuant to CPLR 3212, dismissing the complaint of plaintiff Nova Casualty Company (Nova); (2) declaring that it has no obligation to defend or indemnify Nova under the commercial umbrella insurance policy No. 4085095 that New Hampshire issued to Nelson Air Device Corp. (Nelson) for the period February 17, 2005 to May 1, 2006 (Umbrella Policy); and (3) granting New Hampshire a protective order, pursuant to CPLR 3103, "denying the deposition sought by Nova . . ."

Background And Procedural History

The Construction Project

AWL Industries, Inc. (AWL) was the general contractor of a renovation project at Kings County Hospital Building E at 451 Clarkson Ave. in Brooklyn (Construction Project). AWL subcontracted with Cole Mechanical Corp. (Cole) on December 11, 2003 to furnish and install all mechanical/HVAC piping for the [*2]Construction Project (HVAC Subcontract). Nova then issued a performance bond to Cole in connection with the HVAC Subcontract. Cole allegedly defaulted under the HVAC Subcontract in August 2004 and assigned its rights thereunder to Nova, its surety under the performance bond. Nova contracted with Nelson in September 2004 to complete the work under the HVAC Subcontract (Completion Contract).

The 2007 Personal Injury Action (Index No. 2839/07)

Peter Caravousanos (Caravousanos) was seriously injured on November 29, 2005 when he fell down a stairwell at the construction site while he was working as a consultant at the Construction Project (2005 Accident). Caravousanos commenced a personal injury action against Kings County Hospital, AWL and others in January 2007 regarding the 2005 Accident (2007 Personal Injury Action) (See Caravousanos v Kings County Hosp., Sup Ct, Kings County, Index No. 2839/07).

The complaint in the 2007 Personal Injury Action specifically alleges that Caravousanos "was caused to trip and /or slip and fall and he violently and precipitously propelled downward a considerable distance down a stairwell and thereby sustain serious and permanent personal injuries . . ."Regarding damages and the extent of his personal injuries, the complaint in the 2007 Personal Injury Action alleges that: "[p]laintiff sustained serious, severe and permanent personal injuries, still suffers and will continue to suffer great physical and mental pain and serious bodily injury, became sick, sore, lame and disabled and so remains, has been unable to attend his usual vocation and activities and he has been obliged to expend and will expend in the future, sums of money for medical aid and attention; and Plaintiff was otherwise damaged. That by reason of the foregoing, Plaintiff has been damaged in a sum which exceeds the jurisdictional limits of all lower Courts which would otherwise have jurisdiction over this action."

2008 Third Party Action (Index No. 75432/08)

AWL commenced a third party action against Nova and Nelson on May 8, 2008, asserting claims for breach of the Completion Contract, contribution and indemnification for the personal injury claims in the 2007 Personal Injury Action (2008 Third Party Action). AWL's affidavit of service shows that Nova was served with the third party complaint in the 2008 Third Party Action on May 20, 2008, which Nova admittedly received on June 5, 2008. AWL's third party complaint against Nova generally describes the allegations in the 2007 Personal Injury Action, states that it "incorporates said allegations by reference herein" and annexes a copy of Caravousanos' complaint in the 2007 Personal Injury Action. Thus, Nova arguably had notice of the nature of Caravousanos' personal injuries at issue in the 2007 Personal Injury Action since it received those pleadings in June 2008.

Caravousanos subsequently served October 13, 2008 verified bill of particulars in the 2007 Personal Injury Action, in which he alleges that he sustained severe spinal injury, herniated and bulging discs, numbness in certain extremities, acceleration of arthritis and nerve damage requiring future hospitalizations, spinal surgeries, medical care and therapy. Although the bill of particulars states that Caravousanos incurred $30,000.00 in medical expenses as of October 2008, it expressly alleges that "[a]t the time of trial, plaintiff also intends to prove future medical expenses in excess of One Million Dollars . . ." Caravousanos' October 2008 bill of particulars reflects that it was addressed to Nelson.

Caravousanos subsequently served a January 14, 2009 supplemental bill [*3]of particulars in the 2007 Personal Injury Action and the 2008 Third Party Action, indicating that: (1) he underwent lumbar fusion and decompression surgery and would require future spinal surgeries; (2) he requires multiple series of epidural steroid injections; and (3) he suffers from herniated discs, disc bulges, lumbar and cervical strain with radiculopathy, lumbar and cervical stenosis, left shoulder and knee contusions, persistent pain, inflamation and diminished use of his knees and diminished use and persistent numbness in his left hand, groin and left leg and foot. Caravousanos' affidavit of service of his January 2009 supplemental bill of particulars reflects that the supplemental bill of particulars was served on all parties to the 2007 Personal Injury Action and the 2008 Third Party Action on January 22, 2009, including Nova's former counsel of record, Neil B. Connelly, Esq.

Caravousanos' deposition in the 2007 Personal Injury Action and the 2008 Third Party Action proceeded on April 20, 2009, during which Caravousanos described his serious personal injuries, including his spinal fusion surgery. The deposition transcript in the record reflects that Nova and its counsel were not present for Caravousanos' deposition.

Nova's Second Third Party Action (Index No. 75761/09)

Nova waited until September 23, 2009 before commencing a second third party action against Interstate Indemnity Company (Interstate), Nelson's general liability insurer, and New Hampshire seeking primary and excess liability coverage for its exposure in the 2007 Personal Injury Action as an additional insured under the Interstate and Umbrella Policies. Nova does not dispute that its September 23, 2009 third party complaint in the Second Third Party Action was the first time that Nova notified New Hampshire of potential liability under the Umbrella Policy arising out of the 2005 Accident and the 2007 Personal Injury Action.

New Hampshire timely answered Nova's third party complaint in the Second Third Party Action on October 8, 2009, denying the material allegations and asserting eight affirmative defenses, including that Nova breached the terms of the Umbrella Policy. Specifically, New Hampshire alleges that Nova breached the terms of the Umbrella Policy "thereby vitiating coverage, if any" because: (1) "it did not notify New Hampshire as soon as practicable' of the subject occurrence or accident"; (2) "it did not notify New Hampshire of the Casavousanos action as soon as practicable'"; and (3) "it did not immediately forward a copy of the Caravousanos suit papers to New Hampshire . . ."

This 2011 Action (Index No. 13504/11)

Nova's Second Third Party Action was subsequently "severed for all purposes" from the 2007 Personal Injury Action and the 2008 Third Party Action by a June 18, 2010 order issued in the 2007 Personal Injury Action (under index number 2839/07). The Second Third Party Action proceeds as an independent action under index number 13504/11 (2011 Action).

New Hampshire's Summary Judgment Motion

New Hampshire now seeks summary judgment dismissing Nova's complaint in the 2011 Action and a declaration that it has no obligation to indemnify or defend Nova under the Umbrella Policy. According to New Hampshire, "[t]here is no dispute that [Nova's] pleading was the first notice that New Hampshire received regarding the [2005 Accident] or Nova's demand for defense and indemnification." New Hampshire relies on Nova's affidavit of service of the third party complaint in the Second Third Party Action, which reflects that Nova served New Hampshire on September 28, 2009.

New Hampshire contends that Nova is not entitled to coverage under the Umbrella Policy because "it is undisputed that Nova failed to comply with the [*4]conditions" regarding notice of occurrences and claims that are "reasonably likely to involve this policy." Specifically, New Hampshire argues that "Nova provided late notice of an occurrence and suit that was reasonably likely to involve the [Umbrella Policy], and failed to immediately forward the AWL suit papers to New Hampshire." New Hampshire contends that it timely disclaimed coverage on these grounds in its third party answer to the third party complaint in the Second Third Party Action.

New Hampshire's motion papers include Caravousanos' October 13, 2008 verified bill of particulars, which claim special damages for future medical expenses in excess of Interstate's $1 million general liability policy limit. New Hampshire also relies on Nova's August 24, 2012 interrogatory responses, in which Nova confirms that it had actual notice of the 2005 Accident and the 2007 Personal Injury Action "on or before June 5, 2008." New Hampshire argues that there is no dispute that Nova failed to notify New Hampshire of a potential claim under the Umbrella Policy until "[a] year after the revelation of plaintiff's claimed damages and sixteen months after its receipt of the [2008 Third Party Action]."

New Hampshire contends that "a reasonable insured, in the exercise of due diligence, should have concluded in October 2008 . . . that there was a reasonable possibility that the potential $1 million primary coverage could be exhausted, triggering [Nova's] duty to place [it] on notice . . ." New Hampshire claims that [a] review of comparable jury verdicts demonstrates the reasonable possibility of a jury verdict in excess of $1 million" and cites to several personal injury decisions involving comparable spinal injuries in which trial courts sustained jury verdicts in excess of $1 million. New Hampshire also seeks a protective order precluding Nova from taking the deposition of its claims adjuster in the 2001 Action because it would be "an expensive, duplicative and unreasonably burdensome fishing expedition, without promise of revealing any material and necessary information relevant to the [coverage] issue before the Court." New Hampshireargues that "[s]ince there are no issues of fact regarding Nova's late notice to New Hampshire, a deposition of New Hampshire would not be material or necessary to this action . . ."

Nova opposes New Hampshire's summary judgment motion by contending that "New Hampshire's motion for summary judgment is premature, because discovery in this action is not yet complete and additional discovery, including the noticed deposition of New Hampshire's representative may provide evidence that undermines New Hampshire's claimed entitlement to summary judgment." Nova's counsel anticipates that such testimony would provide "evidence" relevant to the coverage issue, including: "testimony by New Hampshire's representative that it received notice and suit papers from some other source, such as its insured, that satisfied Nova's obligation to provide the same, testimony that the timing of Nova's notice to New Hampshire was reasonable based upon New Hampshire's usual practices, and/or testimony that shows that New Hampshire unreasonably delayed in denying coverage to Nova."

Nova also opposes New Hampshire's motion for a protective order on the grounds that New Hampshire's claims representative "may have information that would assist Nova in showing that it did not breach any of the [Umbrella] Policy conditions and/or that New Hampshire failed to timely deny coverage . . ." Nova argues that summary judgment is precluded by material issues of fact "regarding when Nova knew that the [Umbrella] Policy may be implicated . . . [and] when Nova had an obligation to notify New Hampshire of this occurrence and suit and/or forward suit papers to New Hampshire." Nova implies that it did not receive Caravousanos' October 2008 bill of particulars substantiating his personal [*5]injuries and damages, claiming that "New Hampshire provides no evidence of when, if ever, this document was served on Nova." Nova, however, does not deny that it received Caravousanos' personal injury complaint in 2008 (as an exhibit to the complaint in the 2008 Third Party Action) and Caravousanos' January 2009 supplemental bill of particulars.

Discussion

(1)

Summary judgment is a drastic remedy that deprives a litigant of his or her day in court and should, thus, only be employed when there is no doubt as to the absence of triable issues of material fact (Kolivas v Kirchoff, 14 AD3d 493 [2005]; see also Andre v Pomeroy, 35 NY2d 361, 364 [1974]). "The proponent of a motion for summary judgment must make a prima facie showing of entitlement to judgment, as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact" (Manicone v City of New York, 75 AD3d 535, 537 [2010], quoting Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]; see also Zuckerman v City of New York, 49 NY2d 557, 562 [1980]; Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]). If it is determined that a party has made a prima facie showing of entitlement to summary judgment, "the burden shifts to the opposing party to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action" (Garnham & Han Real Estate Brokers v Oppenheimer, 148 AD2d 493, 494 [1989]; see also Zuckerman, 49 NY2d at 562). Consideration of a summary judgment motion requires that the evidence be viewed in the light most favorable to the motion opponent (Vega v Restani Constr. Corp, 18 NY3d 499, 503 [2012] [internal quotations and citations omitted]).

Nevertheless, the court must evaluate whether the issues of fact alleged by the opposing party are genuine or unsubstantiated (Gervasio v Di Napoli, 134 AD2d 235, 236 [1987]; Assing v United Rubber Supply Co., 126 AD2d 590 [1987]; Columbus Trust Co. v Campolo, 110 AD2d 616 [1985], affd 66 NY2d 701 [1985]). Mere conclusory statements, expressions of hope, or unsubstantiated allegations are insufficient to defeat a motion for summary judgment (Gilbert Frank Corp. v Federal Ins. Co., 70 NY2d 966, 967 [1988]); Spodek v Park Prop. Dev. Assoc., 263 AD2d 478 [1999]). "[A]verments merely stating conclusions, of fact or of law, are insufficient to defeat summary judgment" (Banco Popular N. Am. v Victory Taxi Mgt., 1 NY3d 381, 383-384 [2004], quoting Mallad Constr. Corp. v County Fed. Sav. & Loan Assn., 32 NY2d 285, 290 [1973]). If there is no genuine issue of fact, the case should be summarily determined (Andre, 35 NY2d at 364). "The court's function on a motion for summary judgment is to determine whether material factual issues exist, not to resolve such issues" (Ruiz v Griffin, 71 AD3d 1112, 1115 [2010] [internal citations omitted]).

(2)

New Hampshire's summary judgment motion hinges on the timeliness of Nova's September 28, 2009 notice to New Hampshire regarding the possibility that coverage in excess of Interstate's $1 million policy will be triggered in the 2007 Personal Injury Action. According to New Hampshire, Nova failed to provide it with timely notice of an occurrence, claim or suit potentially covered under the Umbrella Policy "as soon as practicable," as required under the express "Conditions" set forth therein: "VI .Conditions F. Duties In The Event Of An Occurrence, Claim Or Suit 1. You must see to it that we are notified as soon as Practicable of an Occurrence which may result in a claim under this policy . . . 2. If a claim is made or suit is brought against any insured that is reasonably likely to involve this policy, you must notify us in writing as soon as practicable. [*6]

3. You and other involved insured(s) must: ...immediately send us copies of any demands, notices, summonses or legal papers received in connection with the claim or suit . . ." New Hampshire argues that "Nova was required to immediately report any potential exposure of over $1 Million dollars as soon as that potential became apparent" and that "Nova failed to do so, violating the conditions of the [Umbrella] Policy and vitiating coverage."

The Appellate Division, Second Department has held that "[c]ontractual obligations of an insured to provide notice of a claim to its liability insurer as soon as practicable and to promptly forward legal papers to the carrier serve as conditions precedent to coverage" (Morris Park Contr. Corp. v National Union Fire Ins. Co. Of Pittsburgh, Pa., 33 AD3d 763, 764 [2006]). In determining whether an excess liability insurer received timely notice of claim, the Second Department stated that: "the focus is on when the insured reasonably should have known that the claim against it would likely exhaust its primary insurance coverage and trigger its excess coverage, and whether any delay between acquiring that knowledge and giving notice to the excess carrier was reasonable under the circumstances" (id. at 765 [emphasis added]). Thus, the standard contemplates a case-by-case factual inquiry as to whether the timeliness of the notice was reasonable under the circumstances. The Court of Appeals, applying this standard, has held that a four-month delay in providing a notice of claim to an excess insurer is unreasonable (see, e.g., Great Canal Realty Corp. v Seneca Ins. Co., Inc., 5 NY3d 742 [2005] [granting excess insurer summary judgment, declaring that it had no duty to defend and indemnify property owner and holding that four-month delay in providing notice of claim to excess insurer was not founded upon good faith belief that there was no liability]).

In Morris Park, the Second Department upheld the denial of the excess insurer's summary judgment motion, under the facts presented there, because the insured plaintiff raised triable issues of fact regarding the timeliness of its notice of claim (see 33 AD3d 763). The personal injury complaint at issue in Morris Park explicitly sought $10 million in damages when there was only $1 million in primary insurance coverage. Although plaintiff received the personal injury complaint in July 2002, the appellate court held that the mere demand for $10 million in the ad damnum clause therein was not determinative of the timeliness of the insured's January 2003 notice of claim. The insured's notice of claim was promptly sent within days after the serious nature of the personal injuries in the underlying action were substantiated in a bill of particulars. The court held that the combination of the ad damnum clause and "evidence of the seriousness of the injuries" triggers the insured's obligation to notify its excess insurer: "[i]n view of the commonplace practice of exaggerating damages requests in personal injury actions, the ad damnum clause alone was not sufficient to require the giving of notice . . . [r]ather, it is the combination of the ad damnum figure and the evidence regarding the seriousness of the injuries which triggers that obligation" (33 AD3d at 765 [emphasis added]). Importantly, in that case, the court noted that the underlying personal injury complaint "contained only vague and generalized allegations of injury without any particularity or substantiation," while the bill of particulars evidenced the serious nature of the injuries.

Here, Caravousanos' complaint in the underlying 2007 Personal Injury Action generally demands judgment "in an amount which exceeds the jurisdictional limits of all lower [c]ourts and which will fairly and adequately compensate him." However, unlike the vague allegations in the Morris Park complaint, Caravousanos specifically alleges that he "was caused to trip and/or slip and fall and he violently and precipitously propelled downward a considerable [*7]distance down a stairwell and thereby sustain serious and permanent personal injuries . . ." Caravousanos' allegations regarding the 2005 Accident and his injuries — while more specific than those at issue in Morris Park — do not evidence the serious nature and extent of Caravousanos' personal injuries or the likelihood that the personal injury claim may exceed Interstate's $1 million primary policy limit.

The serious nature of Caravousanos' personal injuries and the fact that the 2007 Personal Injury Action seeks damages exceeding $1 million was first evidenced in Caravousanos' October 13, 2008 bill of particulars in the 2007 Personal Injury Action. Caravousanos' bill of particulars alleges that he sustained serious personal injuries, including lumbar and cervical strain with radiculopathy, herniated discs, bulging discs and numbness in his left hand, groin and left leg and foot. Caravousanos' October 2008 bill of particulars specifically alleges the "NECESSITY OF FUTURE SPINAL SURGERY" as a result of the 2005 Accident. Caravousanos' October 2008 bill of particulars also alleges that "[a]t the time of trial, [he] intends to prove future medical expenses in excess of One Million Dollars . . ." While Caravousanos alleges that he has only incurred $30,000.00 as of October 2008, he specifies that "other items of special damages exist presently which the [p]laintiff does not have complete knowledge to furnish particulars, and additional special damages will or may arise in the future."

Caravousanos' January 14, 2009 supplemental bill of particulars, which was served on all parties to the 2007 Personal Injury Action and the 2008 Third Party Action, leaves no doubt regarding the severity and extent of Caravousanos' personal injuries. Caravousanos apparently supplemented his October 2008 bill of particulars in January 2009 after he had lumbar fusion and decompression surgery. In addition to a 2-page listing of personal injuries beginning with "LUMBAR FUSION SURGERY" and LUMBAR DECOMPRESSION SURGERY," Caravousanos' January 2009 supplemental bill of particulars also alleges the "NECESSITY OF FUTURE SPINAL SURGERY."

Nova implies that it never received Caravousanos' October 2008 bill of particulars, although it was a third party defendant to the 2008 Third Party Action since May 20, 2008. While it inconceivable that Nova was not privy to the October 2008 bill of particulars in the fourteen months before providing New Hampshire with notice of claim in September 2009, there is no evidence in this record that Nova actually received Caravousanos' 2008 discovery. Nova, however, admits that it was served with Caravousanos' January 2009 supplemental bill of particulars, which put Nova on actual notice that: (1) Caravousanos' personal injuries were sufficiently serious to require multiple spinal surgeries and (2) Caravousanos had previously served a bill of particulars in the 2007 Personal Injury Action. The affidavit of service in the record reflects that Caravousanos served his January 2009 supplemental bill of particulars upon Nova's former counsel, Neil B. Connolly, Esq., on January 22, 2009. New Hampshire contends that "[t]he nine month gap from Nova's admitted receipt of Caravousanos' Supplemental Bill of Particulars listing his surgery until Nova brought suit against New Hampshire is necessarily late notice as a matter of law."Under the facts presented on this record, Nova's obligation to notify New Hampshire of a potential insurance claim regarding the 2005 Accident and the 2007 Personal Injury Action was triggered, at the latest, in January 2009 when Nova received Caravousanos' supplemental bill of particulars detailing the severity of Caravousanos' personal injuries. The January 2009 supplemental bill of particulars, which Nova admittedly received, sufficiently substantiated the seriousness of Caravousanos' personal injuries, and consequently, the potential for a jury verdict exceeding [*8]Interstate's $1 million coverage limit. Despite Nova's admitted receipt of the January 2009 supplemental bill of particulars, Nova inexplicably waited until September 2009 before it provided notice to New Hampshire. Nova's nine-month delay in providing its notice of claim to New Hampshire was unreasonable under the circumstances. Consequently, New Hampshire has no duty to defend or indemnify Nova under the Umbrella Policy regarding the 2007 Personal Injury Action because Nova failed to provide New Hampshire with timely notice in accordance with the conditions of coverage in the Umbrella Policy. Given the determination that Nova's notice of claim under the Umbrella Policy was untimely, New Hampshire's motion for a protective order regarding Nova's notice to depose New Hampshire's claim representative regarding notice of claim and coverage issues resolved herein has been rendered moot. Accordingly, it is

ORDERED that the branch of New Hampshire's motion for summary judgment dismissing the Nova's complaint against New Hampshire is granted and Nova's complaint is hereby dismissed with prejudice; and it is further

ORDERED that the branch of New Hampshire's motion for an order declaring that New Hampshire has no obligation to defend or indemnify Nova under the Umbrella Policy is granted; and it is further

ORDERED that the branch of New Hampshire's motion for a protective order "denying the deposition sought by Nova of New Hampshire" is denied as moot.

The foregoing constitutes the decision, judgment and order of this court.E N T E R,

_____________________________

yvonne lewis, J.S.C.