Evanston Ins. Co. v P.S. Bruckel, Inc.Annotate this Case
Decided on April 19, 2019
Supreme Court, Suffolk County
Evanston Insurance Company, Plaintiff(s),
P.S. Bruckel, Inc., State of New York, Henrique Staveski and Izabel Camargo, Defendant(s).
ONE PENN PLAZA, SUITE 4701
NEW YORK, NY 10119
TREVETT CRISTO SALZER PC
TWO STATE STREET, SUITE 1000
ROCHESTER, NY 14614
NEW YORK STATE DEPT OF LAW
300 MOTOR PARKWAY
HAUPPAUGE, NY 11788
SACKS & SACKS ESQS
NEW YORK, NY 10038
Sanford Neil Berland, J.
Upon the reading and filing of the following papers in this matter: (1) Notice of Motion, [*2]by defendant New York State, dated September 5, 2018, and supporting papers; (2) Notice of Cross-Motion, by defendant PS Bruckel, dated November 8, 2018, and supporting papers; (3) Affirmation in Opposition, by plaintiff, dated November 16, 2018, and supporting papers; and oral argument having been heard on February 14, 2019, it is
ORDERED that motions sequenced 007 and 009 are hereby denied without prejudice to renewal upon a more complete record; and it is further
ORDERED that all attorneys of record in this action are directed to appear before this Court in Part 6 for a compliance conference on April 24, 2019 at 10:00am at the Supreme Court located at One Court Street, Riverhead, New York; and it is further
The parties are reminded that pursuant to the Rules of the Chief Judge (22 NYCRR 202.27) the Court may without further notice grant judgment by default or order an inquest against any defendant who fails to appear or the Court may dismiss the action against any Plaintiff who fails to appear; or make such orders as may be just.
This declaratory judgment action arises from a worksite accident that occurred on July 8, 2008, when Henrique Staveski, an employee of P.S. Bruckel, Inc. ("Bruckel"), fell from scaffolding while performing sandblasting work on the Route 135 overpass at Route 24 in Nassau County. Bruckel had been contracted by the State of New York to repaint highway bridges along Route 135, including the bridge where Staveski fell, and Staveski and his wife, Izabel Camargo, brought a personal injury action against the State in the Court of Claims, alleging that the State had, among other things, been negligent and reckless in maintaining the worksite where he fell and had violated §§ 200, 240 and 241 of the Labor Law (Staveski and Camargo v. State of New York (Department of Transportation), Claim No. 115633) (the "Staveski action"). When Evanston Insurance Company ("Evanston") denied the State's claim for coverage for the claims asserted against it in the Staveski action (the "Staveski claims") under a certificate of insurance and various insurance policies that Bruckel had procured from Evanston for itself or for the State, the State commenced a third-party action against Evanston, seeking a declaratory judgment that Evanston was required to defend it against and indemnify it for the Staveski claims. Eventually, Evanston agreed to provide coverage for the Staveski claims against the State under one of the policies referenced in the certificate of insurance [FN1] and to waive that policy's $10,000 deductible, and the State, by stipulation dated May 19, 2009, discontinued its third-party action against Evanston with prejudice. Evanston balked, however, at the State's request that the law firm retained to defend the State in the Staveski action assert a third-party claim on behalf of the State against Bruckel in the Court of Claims litigation. On March 9, 2012, [*3]the State commenced a separate indemnification, contribution and breach of contract action against Bruckel in this court, State of New York v. P.S. Bruckel, Inc., Index no. 7744-2012 (Sup Ct, Suffolk County) ("State v. Bruckel" or the Bruckel action").
Pursuant to a January 3, 2014 Stipulation of Settlement and Discontinuance, the Staveski claims against the State were settled for a total of $2,725,000 and the Staveski action was discontinued with prejudice, with Evanston paying $1,000,000 and the State the balance of the settlement. The State v. Bruckel action, however, remained pending. Although it appears to be undisputed that Bruckel's President, Peter S. Bruckel, was personally served with the summons and complaint in that action on March 12, 2012, Bruckel did not forward the pleadings or any other paper with which Mr. Bruckel had been served to Evanston nor did it notify Evanston of the commencement of the action or take any steps to tender the defense of the claims asserted against it to Evanston [FN2] . The State, however, asserts that although it did not provide Evanston with copies of the summons and complaint in the State v. Bruckel action until March 2013, nearly a year after it commenced the action, it had alerted Evanston of its intention to commence that action before it did so, informed it within a month after it filed the summons and complaint that it had commenced the action, and then, after Bruckel failed to appear in the action, informed Evanston of Bruckel's default and of the State's intention to seek a default judgment. Emails, adjuster notes and one or more "trial reports" to Evanston prepared by the attorney retained by Evanston to defend the State in the Staveski action corroborate the State's account but also corroborate Evanston's contention that despite several requests it made to the State to be provided with copies of its summons and complaint in the State v. Bruckel action, the State did not do so until March 1, 2013. Two weeks later, by letter dated March 15, 2013, addressed to Bruckel, with copies both to the State and to the attorneys for the Staveskis and for Camargo, the law firm of Goldberg Segalla LLP, as attorneys for Evanston's claim service manager and on behalf of Evanston, issued a "Disclaimer of Coverage," dated March 15, 2013, for the claims asserted by the State against Bruckel. Among other things, the letter asserted that Bruckel, the State, Staveski and Camargo had all violated the policies' "prompt and/or immediate notice of any occurrence, claim or suit" requirements, and that Bruckel had breached policy provisions requiring "Bruckel and any other involved insured to immediately send Evanston copies of any demands, notices, summons, or legal papers received in connection with any claim or 'suit'." Citing several provisions of the polices, the letter further asserted that "multiple policy exclusions and limitations to coverage contained in the Evanston policies apply to the claims and causes of action asserted by the State of New York in the [Bruckel] lawsuit."
The Current Action - Procedural History
The summons and complaint in this declaratory judgment action by Evanston was filed on March 18, 2013, just a few days following the utterance of the Goldberg Segalla disclaimer letter. After Bruckel's motion to the Supreme Court in Livingston County, to change the venue of this action to that county — where Bruckel maintains its principal place of business — was [*4]denied on the dual grounds that Bruckel had waited too long to file its motion based upon improper venue (see CPLR 510 and 511[b]) and that, in any event, a motion seeking, in whole or in part, a change of venue for the convenience of witnesses (CPLR 510) must be made in the court where the action has been brought (see Evanston insurance Company v. P.S. Bruckel, Inc., et al., Index No. 0393-2013, Decision & Order dated July 15, 2013 [Sup Ct, Livingston County, Wiggins, J.]), Bruckel filed a motion for change of venue pursuant to CPLR 510 in this court. The State then moved for leave to amend its answer to assert a counterclaim against Evanston for a declaratory judgment that Evanston's "denial and disclaimer of coverage to indemnify the State in the [Staveski action] was not timely, proper, and valid" (emphasis in original). Evanston opposed both motions and cross-moved for summary judgment in its favor declaring that because of breaches of the notice provisions of its insurance policies, it had no duty to defend or indemnify Bruckel — "or any other person or entity" — for the claims in the State's underlying action against Bruckel for indemnification and contribution or, alternatively, that the employer's-liability and breach-of-contract exclusions of the Evanston policies excluded coverage for the State's claims against Bruckel. Both Bruckel and the State opposed Evanston's cross-motion, and Bruckel cross-moved for summary judgment in its favor, inter alia, declaring that Evanston is required under the CGL and Excess liability policies to defend and indemnify it in the State's action against it.
In a Decision and Order dated December 30, 2014 (the "December 30, 2014 Decision and Order"), Justice Asher denied Bruckel's motion to change the venue of the action to Livingston County for Bruckel's failure adequately to demonstrate that the convenience of material witnesses would be served and the ends of justice promoted by transferring the action to Livingston County; denied the State's motion to amend its answer to assert a counterclaim for a declaration of coverage under the CGL and excess liability polices as foreclosed by the May 19, 2009 stipulation that discontinued the State's third-party claims against Evanston in the Staveski action with prejudice; denied Bruckel's cross-motion for summary judgment granting a declaratory judgment in its favor as improper, as Bruckel had failed to interpose a counterclaim for a declaratory judgment [FN3] ; and held that although Evanston had carried its burden of establishing, prima facie, an entitlement to summary judgment for Bruckel's failure to satisfy the policies' notice requirements, including the fact that the March 2012 summons and complaint in the State's action against Bruckel had not been delivered to Evanston until March 2013, issues of fact concerning the timeliness of Evanston's disclaimer of coverage and as to whether Evanston had been provided with "sufficient notice" of the Bruckel action by others — specifically, John L. Belford, IV, the Assistant Attorney General who was assigned to represent the State's interests in the Staveski action and who commenced the State's action against Bruckel, and Lawrence Buchman, the attorney retained by Evanston to represent the State in the Staveski action — required that Evanston's cross-motion be denied. With respect to this last holding, Justice Asher explained that:[D]efendants raise triable issues of fact as to whether Evanston had notice of the [State v. Bruckel] lawsuit and whether it failed to issue a timely disclaimer. The failure of an [*5]insured to timely notify the insurer of a claim does not excuse the insurer's failure to timely disclaim coverage (Schulman v Indian Harbor Ins. Co., 40 AD3d 957 [2d Dept 2007]). Indeed, an insurer waives its affirmative defenses of late notice if it fails to disclaim coverage "as soon as is reasonably possible" (Hermitage Ins. Co. v Arm-ing, Inc., 46 AD3d 620, 621, 847 NYS2d 628 [2d Dept 2007]). Insurance Law § 3420(d)(2) requires written notice of disclaimer to be given "as soon as is reasonably possible" after the insurer learns of the grounds for disclaiming liability (Sirius Am. Ins. Co. v Vigo Const. Corp., 48 AD3d 450, 451, 852 NYS2d 176 [2d Dept 2008]; see First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 65, 769 NYS2d 459 ). The reasonableness of the delay is measured from the time when the insurer "has sufficient knowledge of facts entitling it to disclaim, or knows that it will disclaim coverage" (Allstate Ins. Co. v Gross, 27 NY2d 263, 264, 317 NYS2d 309 . Sirius Am. Ins. Co. v Vigo Const. Corp., supra). It is the insurer's responsibility to explain its delay in giving written notice of disclaimer, and an unsatisfactory explanation will render the delay unreasonable as a matter of law (Tully Const. Co., Inc. v TIG Ins. Co., 43 AD3d 1150, 1151, 842 NYS2d 528 [2d Dept 2007]; see Sirius Am. Ins. Co. v Vigo Const. Corp., supra).
(Decision and Order, December 30, 2014, at 4-5, emphasis supplied). "At issue," Justice Asher held, "is whether P.S. Bruckel failed to provide timely notice of the lawsuit commenced by the State of New York against it," further explaining that While P.S. Bruckel did not satisfy its obligation to provide prompt notice by forwarding the summons and complaint to Evanston Insurance in a timely [manner], it is unclear whether Evanston Insurance was put on notice of the existence of the lawsuit and the potential implications it held for its policy. Pursuant to the Insurance Law, an injured person or any other claimant may provide sufficient notice to an insurer (Ins. Law 3420[a]; Rose v. State, 265 AD2d 473, 696 NYS2d 473 [2d Dept 1999]).
(Id. at 5). Given Assistant Attorney General John Belford's assertion that he had "informed Pat Dunstan, senior claims examiner for Markel Services Incorporated [FN4] , of the [Bruckel] lawsuit when it was commenced" and attorney Buchman's April 2012 trial report to Dunstan, "indicating that the State of New York had commenced an action against P.S. Bruckel," Justice Asher concluded that "triable issues of fact remain as to whether Evanston Insurance had notice of the lawsuit," thereby requiring the denial of Evanston's cross-motion for summary judgment validating its disclaimer of coverage and relieving it of any obligation to defend or indemnify Bruckel against the State's claims.
Evanston appealed the denial of its cross-motion for summary judgment. In a decision dated May 3, 2017, the Appellate Division affirmed Justice Asher's decision and order to the extent it had been appealed by Evanston (Evanston Ins. Co. v P.S. Bruckel, Inc., 150 AD3d 693 [2d Dept 2017]). Citing its earlier decision in Nationwide Ins. Co. v Shedlick, 274 AD2d 519 [2d Dept 2000] — which upheld an order permanently staying arbitration of a claim for underinsured motorist benefits where the claimant gave the insurer prompt notice of his claim for coverage under his automobile insurance policy's supplemental uninsured motorists endorsement but failed for 2-1/2 years to comply with the endorsement's requirement that he "immediately" forward [*6]copies of the summons and complaint to the insurer if he commenced a lawsuit against the underinsured tortfeasor — and the Court of Appeals' decision in American Tr. Ins. Co. v Sartor, 3 NY3d 71, 75-76  — which held that the proviso in Vehicle & Traffic Law § 370(4), that failure to comply with that statute's requirement that the operator of a vehicle for hire give notice to the insurer or surety for the vehicle within five days of an accident (violation of which is a misdemeanor) "shall not affect the liability of the surety or insurer," does not obviate the right of the insurer to condition coverage upon its being provided with timely notice of the initiation of litigation against the insured and to disclaim coverage where timely notice is not received from the insured or other persons who are entitled to provide notice pursuant to Insurance Law § 3420(a)(3) — the Appellate Division noted that Evanston had "established, prima facie, that Bruckel failed to comply with the condition in the subject policy that required it to 'immediately' forward to [Evanston] copies of any legal papers received in connection with a lawsuit" (Evanston Ins. Co. v P.S. Bruckel, Inc., 150 AD3d at 694), as the State had commenced the action against Bruckel and served it with the summons and complaint in March 2012 but copies of those papers were not received by Evanston until March 2013. The Appellate Division also noted that because the "subject policy" was issued before Insurance Law § 3420 was amended, it was not necessary for Evanston to show that it had been prejudiced by the failure to give it timely notice. Nonetheless, it agreed that because "'[t]he failure of an insured to timely notify the insurer of a claim does not excuse the insurer's failure to timely disclaim coverage' (Delphi Restoration Corp. v. Sunshine Restoration Corp., 43 AD3d 851, 852, 841 N.Y.S.2d 684; see Atlantic Cas. Ins. Co. v. RJNJ Servs., Inc., 89 AD3d 649, 651, 932 N.Y.S.2d 109)," and "'[t]he timeliness of an insurer's disclaimer is measured from the point in time when the insurer first learns of the grounds for disclaimer of liability or denial of coverage' (Matter of Allcity Ins. Co. [Jimenez], 78 NY2d 1054, 1056, 576 N.Y.S.2d 87, 581 N.E.2d 1342 ; see First Fin. Ins. Co. v. Jetco Contr. Corp., 1 NY3d 64, 68—69, 769 N.Y.S.2d 459, 801 N.E.2d 835 )," there were "triable issues of fact as to whether [Evanston] acquired knowledge of the commencement of the [State v. Bruckel] action in April 2012, or, at the latest, October 2012, and thus, whether it timely disclaimed coverage in March 2013, on the basis of, inter alia, late receipt of a copy of the summons and complaint" (Evanston Ins. Co. v P.S. Bruckel, Inc., 150 AD3d at 694)[FN5] .
The Current Motion and Cross-Motion.
Some [FN6] discovery having been conducted following the Appellate Division's decision, the [*7]State now moves for summary judgment in its favor dismissing Evanston's complaint and requiring Evanston to defend and indemnify Bruckel in the State's action against Bruckel on the ground that Evanston's disclaimer of coverage for Bruckel was untimely and, therefore, ineffective. Bruckel, having been granted leave to amend its answer to assert a counterclaim for the relief sought in its prior cross-motion for summary judgment (see Order dated December 23, 2015 (Asher, J.)), cross-moves [FN7] again for summary judgment in its favor, both dismissing Evanston's complaint and declaring that Evanston is required to defend and indemnify it in the State's action against it, on the same ground as the State's motion. Neither moving party disputes that if the timeliness of Evanston's disclaimer of coverage were measured from the date Evanston was provided with a copy of the summons and complaint, Evanston's disclaimer would have been sufficiently prompt. Both argue, however, that Evanston knew even before the Bruckel action was commenced that the State intended to bring such an action against Bruckel, that Evanston knew by April 2, 2012, when Buchman, the attorney it had retained to represent the State in the Staveski action, informed it, in a pretrial report to Patricia Dunstan, the adjuster handling the claim for Evanston, that he had been told by Belford, the Assistant Attorney General assigned to the matter, that the State had "instituted an action against P.S. Bruckel in State Court for indemnification"; that any doubt about the commencement of the Bruckel action — and Bruckel's failure to notify Evanston of that fact and to provide it with copies of the pleadings that had been served upon it — would have been dispelled in May 2012, when Buchman, by his own account, would have reported to Dunstan conversations he had with Belford regarding Bruckel's default in the State's action against it and Belford's request for samples of CPLR 3215 default notices; a conversation Belford had with Dunstan on October 26, 2012, in which Belford told Dunstan that he had a suit pending against Bruckel and was in the process of filing a default against Bruckel, and also in which Dunstan requested "a copy of the suit"; and a November 29, 2012 "Claims Note" made by Dunstan concerning following up with Belford "related to getting suit against P.S. Bruckel" and a telephone conversation she then had with Belford that day in which he again told her that Bruckel had been served and that he would be filing a default judgment against them, and in which Dunstan again requested a copy of the State's complaint against Bruckel [FN8] . Bruckel also makes the further argument that because Evanston had been [*8]"promptly put on notice" of both the underlying occurrence and of the commencement, shortly thereafter, of the Staveski action, and therefore had early and ample opportunity to, among other things, investigate the underlying claim and to assess the State's entitlement to indemnification from Bruckel and to coverage under Bruckel's insurance policies; because Evanston did in fact so investigate and "noted that the Staveski claim could far exceed policy limits"[FN9] ; and because Evanston was aware of the State's action against Bruckel months before it was provided with copies of the pleadings in that action, not only was Evanston's disclaimer of coverage fatally belated, but Evanston cannot show any prejudice from Bruckel's failure promptly to forward to it the pleadings with which it had been served.
Evanston opposes both motions, arguing, among other things, that Insurance Law § 3420(d)(2), which requires that written notice of a disclaimer of liability or denial of coverage "for death or bodily injury arising out of . . . [an] accident occurring within this state" shall be given "as soon as is reasonably possible . . . to the insured and the injured person or any other claimant," does not apply because the State v. Bruckel action seeks indemnification and contribution and is not a claim "for death or bodily injury"; that even if Insurance Law § 3420(d)(2) does apply, Evanston's disclaimer was timely, as Evanston acted diligently in conducting and completing its investigation — which included determining that Bruckel had been served with the summons and complaint a year earlier — and in issuing its disclaimer on March 15, 2013, eleven days after it first "received"[FN10] the complaint in the Bruckel action; and, alternatively, that in the event the court does not conclude that Evanston's disclaimer was timely on the undisputed facts, that there are, then, issues of fact concerning whether Evanston's waiting until shortly after it had been sent copies of the State's summons and complaint against Bruckel, confirming that the action had in fact been brought and revealing its actual allegations, rendered its disclaimer untimely.
Summary judgment helps "expedite all civil cases by eliminating . . . claims which can properly be resolved as a matter of law" (Andre v Pomeroy, 35 NY2d 361, 364, 362 NYS2d 131 [*9]). A party seeking summary judgment has the burden both of "tendering sufficient evidence to demonstrate the absence of any material issues of fact" (Alvarez v Prospect Hosp., 68NY2d 320, 324, 508 NYS2d 923, 925 ; see Granados v Cox, 43 AD3d 391, 392, 840 NYS2d 427, 428 [2d Dept 2007]), and of "demonstrating its entitlement to judgment as a matter of law" (Blackwell v Mikevin Mgt. III, LLC, 88 AD3d 836, 837 [2d Dept 2011]). The motion must be "supported by affidavit, by a copy of the pleadings and by other available proof, such as depositions and written admissions" (CPLR 3212 [b]). However, a "movant fails to satisfy its prima facie burden by merely pointing out gaps in the plaintiff's case" (Blackwell v Mikevin Mgt. III, LLC, supra, 88 AD3d at 837, citing Englington Med., P.C. v Motor Veh. Acc. Indem. Corp., 81 AD3d 223 ; Shafi v Motta, 73 AD3d 729, 730 ; Doe v Orange-Ulster Bd. of Coop. Educ. Servs., 4 AD3d 387, 388 ). Moreover, failing to make a prima facie showing will result in the motion's denial, "regardless of the sufficiency of the opposing papers" (Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 852, 487 NYS2d 316 ). If the movant establishes a prima facie case of entitlement to summary judgment, the burden shifts to the party opposing the motion to produce "evidentiary proof in admissible form sufficient to require a trial of material questions of fact" (Zuckerman v City of New York, 49 NY2d 557, 562, 427 NYS2d 595, 597 ).
As the Appellate Division, quoting from the Court of Appeals decision in Matter of Allcity Ins. Co. [Jimenez], 78 NY2d 1054, 1056 , ruled in addressing Evanston's appeal from the denial of its earlier cross-motion for summary judgment, "'[t]he timeliness of an insurer's disclaimer is measured from the point in time when the insurer first learns of the grounds for disclaimer of liability or denial of coverage.'" see First Fin. Ins. Co. v. Jetco Contr. Corp., 1 NY3d 64, 68—69, 769 N.Y.S.2d 459, 801 N.E.2d 835)." Although Insurance Law § 3420(d)(2) requires that an insurer "give written notice as soon as is reasonably possible" when it disclaims or denies coverage "for death or bodily injury," that statute does not apply to claims for "common-law indemnification/contribution, contractual indemnification and breach of contract for failure to procure the promised liability insurance" (Preserver Ins. Co. v Ryba, 10 NY3d 635, 638-39, 642 ) (holding, in action brought by New York worksite owner against New Jersey contractor who employed a worker who was gravely injured when he fell from scaffolding while performing work on plaintiff's premises, that "even if the policy were 'issued for delivery' in New York, Preserver still would not be barred from denying coverage for Almeida's breach of contract claim since Insurance Law § 3420 (d) requires timely disclaimer only for denials of coverage 'for death or bodily injury'")). Rather, the test is whether the insurer is foreclosed by common law waiver or estoppel principles from asserting policy exclusions and conditions or otherwise denying coverage (see KeySpan Gas E. Corp. v Munich Reins. Am., Inc., 23 NY3d 583, 590-91 ).
In KeySpan Gas E. Corp., supra, the Long Island Lighting Company ("LILCO") and its assignee, Keyspan, sought coverage from the defendant insurers for claims for environmental damage at, or attributable to, manufactured gas plants sites previously owned or operated by LILCO. The Appellate Division held that although LILCO had failed to provide timely notice of the environmental occurrences to the defendants, there were triable issues of fact as to whether the defendant insurers, which had sent LILCO letters reserving their rights and defenses, including the defense of late notice, had "issued written notice of disclaimer on the ground of late [*10]notice as soon as is reasonably possible after first learning of the accident or of grounds for disclaimer of liability" (Long Is. Light. Co. v Allianz Underwriters Ins. Co.,104 AD3d 581, 582 [1st Dept 2013]). On the insurers' appeal on certified question [FN11] , the Court of Appeals held that the Appellate Division had applied an incorrect standard to the issue of whether the defendant insurers had waived the right to disclaim coverage for LILCO's late notice to them:"Where, as here, the underlying claim does not arise out of an accident involving bodily injury or death, the notice of disclaimer provisions set forth in Insurance Law § 3420(d) are inapplicable" (Vecchiarelli v. Continental Ins. Co., 277 AD2d 992, 993, 716 N.Y.S.2d 524 [4th Dept.2000]; see e.g. Ryba, 10 NY3d at 642, 862 N.Y.S.2d 820, 893 N.E.2d 97 [insurer "not required by Insurance Law § 3420(d) to make timely disclaimer of coverage" for breach of contract claim][FN12]; Travelers Indem. Co. v. Orange & Rockland Utils., Inc., 73 AD3d 576, 577, 905 N.Y.S.2d 11 [1st Dept.2010], lv. dismissed, 15 NY3d 834, 909 N.Y.S.2d 8, 935 N.E.2d 799 ; Topliffe v. U.S. Art Co., Inc., 40 AD3d 967, 969, 838 N.Y.S.2d 571 [2d Dept.2007]; Fairmont Funding v. -Utica Mut. Ins. Co., 264 AD2d 581, 581, 694 N.Y.S.2d 389 [1st Dept.1999]. In such cases, the insurer will not be barred from disclaiming coverage "simply as a result of the passage of time," and its delay in giving notice of disclaimer should be considered under common-law waiver and/or estoppel principles (Travelers, 73 AD3d at 577, 905 N.Y.S.2d 11; see Allstate, 27 NY2d at 269, 317 N.Y.S.2d 309, 265 N.E.2d 736).
(KeySpan Gas E. Corp. v Munich Reins. Am., Inc., 23 NY3d at 590-91 (footnote omitted.) Accordingly, the Court of Appeals remitted the matter to the Appellate Division to determine "whether the evidence supporting this defense" of common-law waiver — by the defendant insurers of their right to disclaim coverage for the insured's failure to give timely notice — "is sufficient to defeat defendants' motion for summary judgment based on LILCO['s] failure, as a matter of law, to give timely notice under the policies" (id., 23 NY3d at 591). The requisite inquiry, the Court emphasized, is a precise one: Specifically, the Appellate Division must consider if, under common-law principles, triable issues of fact exist whether defendants clearly manifested an intent to abandon their late-notice defense (see e.g. Fundamental Portfolio Advisors, Inc. v. Tocqueville Asset Mgt., L.P., 7 NY3d 96, 104, 817 N.Y.S.2d 606, 850 N.E.2d 653 ; Gilbert Frank Corp. v. Federal Ins. Co., 70 NY2d 966, 968, 525 N.Y.S.2d 793, 520 N.E.2d 512 ; Albert J. Schiff Assoc. v. Flack, 51 NY2d 692, 698, 435 N.Y.S.2d 972, 417 N.E.2d 84 ; Allstate, 27 NY2d at 269, 317 N.Y.S.2d 309, 265 N.E.2d 736).
(Id., 23 NY3d at 591 (emphasis supplied)).
It is beyond dispute now, as it was when Evanston moved for summary judgment in its favor in 2014, that "Bruckel failed to comply with the condition in the subject policy that required it to 'immediately' forward to [Evanston] copies of any legal papers received in connection with [the Sate's] lawsuit" against it and that although that lawsuit was commenced in March 2012, Evanston "did not receive a copy of the summons and complaint until March 2013" (Evanston Ins. Co. v P.S. Bruckel, Inc., supra, 150 AD3d at 694), when Assistant Attorney General Belford, who, again, had commenced the State's action against Bruckel, emailed those pleadings to Buchman, the Evanston-retained attorney representing the State in the Staveski action, who, in turn, promptly forwarded the email with the attached pleadings to Dunstan, the Markel claims examiner who was handling the Staveski action for Evanston. Likewise, it is beyond dispute now, as it was in 2014, that Evanston had been told a number of times, beginning as early as April 2, 2012 and again in May, October and November of 2012, that the State was in the process of instituting, or had instituted, an indemnification action against Bruckel in "state court in New York," that Bruckel had defaulted in that action, and that the State was filing — "based on Buchman's . . . recommendation" — a notice of default against Bruckel (see, e.g., December 30, 2014 Decision and Order at 5; Evanston Ins. Co. v P.S. Bruckel, Inc., supra, 150 AD3d at 694; "Pre-Trial Report Outline Defense Litigation," dated April 2, 2012, from Pillinger Miller Tarallo, LLP by Lawrence J. Buchman to Patricia Dunstan, RN, JD, c" target="_blank">with KeySpan Gas E. Corp. v Munich Reins. Am., Inc., supra, 23 NY3d 583 , and Preserver Ins. Co. v Ryba, supra, 10 NY3d 635 ). As framed in the prior decisions in this case, these are disputed factual issues that the additional discovery conducted following the Second Department's has not eliminated and which, at least as the record now stands, can only be resolved by the jury.
Even before the Insurance Law was amended in 2008 to add paragraph (5) to § 3420(a), the Court of Appeals had recognized exceptions to strict application of New York's "no-prejudice rule" (see, e.g.,Sec. Mut. Ins. Co. of New York v Acker-Fitzsimons Corp., 31 NY2d 436, 439 ) where the insurer had received timely notice of the insurance-triggering occurrence and, thus, had a full and prompt opportunity to investigate and to protect its interests, but the insured subsequently failed to comply with a further notice requirement of the insurance policy. Thus, in Matter of Brandon (Nationwide Mut. Ins. Co.), 97 NY2d 491 , the Court of Appeals held that where the insurer had received timely notice of the underlying accident, it could not deny its insured supplementary uninsured/underinsured motorists ("SUM") benefits for failing to provide it with prompt notice that she had commenced an action against the other driver without showing that it had been prejudiced by the delay:[U]nlike most notices of claim—which must be submitted promptly after the accident, while an insurer's investigation has the greatest potential to curb fraud—notices of legal action become due at a moment that cannot be fixed relative to any other key event, such as the injury, the discovery of the tortfeasor's insurance limits or the resolution of the underlying tort claim.
(97 NY2d at 498). Three years later, in Rekemeyer v State Farm Mut. Auto. Ins. Co., 4 NY3d 468, 472 , the Court of Appeals applied the rationale of Brandon where the SUM claim itself had not been filed "as soon as practicable," as required by the insured's policy. In that case, the insured had given her automobile insurer prompt notice of the accident in which she was injured and of her claim for no-fault benefits, but she did not notify the insurer that she was suing the other driver until nearly three months after filing the action and did not inform the insurer that she was making a claim against her own policy for SUM benefits until six months after she learned that the other driver's coverage was inadequate. The Court acknowledged that the facts of the case before it differed from those in Brandon but held that they nonetheless "also warrant a showing of prejudice by the carrier": Here, plaintiff gave timely notice of the accident and made a claim for no-fault benefits soon thereafter. That notice was sufficient to promote the valid policy objective of curbing fraud or collusion. Moreover, the record indicates that State Farm undertook an investigation of the accident. It also required plaintiff to undergo medical exams in December 1998 and February 2000. Under these circumstances, application of a rule that [*15]contravenes general contract principles is not justified. Absent a showing of prejudice, State Farm should not be entitled to a windfall (Brandon, 97 NY2d at 496 n. 3 [743 N.Y.S.2d 53, 769 N.E.2d 810], citing Clementi v. Nationwide Mut. Fire Ins. Co., 16 P.3d 223, 230 [Colo. 2001] ). Additionally, State Farm should bear the burden of establishing prejudice 'because it has the relevant information about its own claims-handling procedures and because the alternative approach would saddle the policyholder with the task of proving a negative' (id. at 498 [743 N.Y.S.2d 53, 769 N.E.2d 810]; see also Unigard, 79 NY2d at 584 [584 N.Y.S.2d 290, 594 N.E.2d 571] [placing the burden of showing prejudice on the reinsurer] ). Thus, we hold that where an insured previously gives timely notice of the accident, the carrier must establish that it is prejudiced by a late notice of SUM claim before it may properly disclaim coverage.
(Id., 4 NY3d at 475-76.) Accord In re Liberty Mut. Ins. Co. (Frenkel), 58 AD3d 1089, 1090-91 [3d Dept 2009]; New York Cent. Mut. Fire Ins. Co. v Ward, 38 AD3d 898, 901 [2d Dept 2007]; State Farm Mut. Auto. Ins. Co. v Rinaldi, 27 AD3d 476, 476 [2d Dept 2006]; New York Mut. Underwriters v Kaufman, 257 AD2d 850, 851 [3d Dept 1999].
The Third Department's decision in New York Mut. Underwriters v Kaufman, supra, is particularly apt. In that case, the insured homeowner, sued in 1996 for an injury that allegedly occurred on his premises in 1994, did not forward the pleadings to his insurer until 2-1/2 months after he was served. The insurer brought a declaratory judgment action against both the homeowner and the personal injury plaintiff and then moved for summary judgment, contending that the insured homeowner's two-year delay in notifying it of the occurrence and failure promptly to forward to it the pleadings in the personal injury action relieved it of any obligation to defend or indemnify the homeowner. In opposition to the insurer's motion, both the homeowner and the personal injury plaintiff averred that the homeowner had timely notified the insurer's agent of the accident and of the eventual tort plaintiff's injuries more than two years earlier, approximately two weeks after the accident occurred. The trial court denied the motion, and the Appellate Division affirmed, holding that the homeowner's contention that he had given the insurer timely notice of the occurrence raised a credibility issue to be decided by the trier of fact and that the insurer had failed to show that it was prejudiced by the delay in the forwarding of the pleadings to it:Plaintiff further urges that Supreme Court erred in denying summary judgment inasmuch as Kaufman failed to promptly forward the summons and complaint as required by plaintiff's policy of insurance. Plaintiff contends that such failure vitiates the contract without regard to whether plaintiff was prejudiced as a result of the late notice. We disagree. This court previously has held that the principles governing the failure of an insured to give timely notice of an accident are entirely different from those governing the requirement of notice of suit. In the latter case, late notice will be excused where no prejudice has inured to the insurer (see, Aetna Ins. Co. of Hartford, Conn. v. Millard, 25 AD2d 341, 269 N.Y.S.2d 588); see also, Romano v. St. Paul Fire & Mar. Ins. Co., 65 AD2d 941, 410 N.Y.S.2d 942. Inasmuch as O'Neill did not take a default judgment against Kaufman in the underlying personal injury action, no prejudice to plaintiff has been demonstrated (see, id.).
(New York Mut. Underwriters v Kaufman, 257 AD2d 850, 851 [3d Dept 1999]. See also Mark A. [*16]Varrichio and Assoc., Mark A. Varichio v Chicago Ins. Co., 312 F3d 544, 549 [2d Cir 2002], certified question accepted sub nom. Mark A. Varrichio and Assoc. v Chicago Ins. Co., 99 NY2d 545 , and certified question withdrawn sub nom. Mark A. Varrichio and Assoc. v Chicago Ins. Co., 328 F3d 50 [2d Cir 2003], and Mark A. Varrichio and Assoc. v Chicago Ins. Co., 100 NY2d 527 ).
Even if the delay in the forwarding of the pleadings to Evanston is viewed from the perspective of a claimed lack of required cooperation by Bruckel, there are factual issues that cannot be resolved on the current record. As the Appellate Division recently restated in Robinson v Glob. Liberty Ins. Co. of New York, 164 AD3d 1385, 1386 [2d Dept 2018], quoting from its earlier decisions in , respectively, Allstate Ins. Co. v United Intl. Ins. Co., 16 AD3d 605, 606 , and Matter of Government Empls. Ins. Co. v Fletcher, 147 AD3d 940, 941 :"To effectively deny coverage based upon lack of cooperation, an insurance carrier must demonstrate (1) that it acted diligently in seeking to bring about the insured's cooperation, (2) that the efforts employed by the insurer were reasonably calculated to obtain the insured's cooperation, and (3) that the attitude of the insured, after his or her cooperation was sought, was one of willful and avowed obstruction" (Allstate Ins. Co. v United Intl. Ins. Co., 16 AD3d 605, 606 ; see Thrasher v United States Liab. Ins. Co., 19 NY2d 159, 168-169 ; DeLuca v RLI Ins. Co., 153 AD3d 662 ). " '[M]ere efforts by the insurer and mere inaction on the part of the insured, without more, are insufficient to establish non-cooperation' " (Matter of Government Empls. Ins. Co. v Fletcher, 147 AD3d 940, 941 , quoting Matter of Country-Wide Ins. Co. v Henderson, 50 AD3d 789, 791 ).
Here, although Buchman testified that he had reached out to Bruckel to inquire whether they had "received the papers, what do they plan to do with the papers, have they informed Evanston or whoever it was, Evanston or Markel or Investors Mutual, whatever they went by, whoever they referred to them by" (Buchman Dep. At 151), he further testified that he was doing so not as an emissary for Evanston, but "to stir the pot," that is "because I'm trying to get my client, the state, more coverage" (id., at 141, 149; see footnotes 14 and 16, supra). Moreover, although Buchman was confident that he had informed Dunstan of his contact with Bruckel, it appears that neither his files nor Dunstan's contains any record of his having done so, nor has any party submitted anything on the current motion indicating that Dunstan's efforts to obtain copies of the pleadings in the State's action against Bruckel included seeking to obtain them from Bruckel. On the other hand, Bruckel has yet to be deposed in this action, and it is evident that discovery from it is incomplete. Thus, on the current record, issues of fact and the incomplete state of discovery preclude any summary determination that Bruckel's failure timely to provide copies of the pleadings to Evanston viewed from a lack of cooperation perspective constituted a basis for disclaiming coverage that Evanston relinquished either through waiver or by waiting too long to invoke after learning of the grounds therefor.
For all of the foregoing reasons, the motion of defendant the State of New York, for summary judgment in its favor dismissing the complaint, and the motion of defendant P.S. Bruckel, Inc., incorrectly denominated a cross-motion, for summary judgment in its favor dismissing the complaint and granting its first counterclaim, are denied without prejudice to renewal upon a more complete record if the parties are so advised.
This constitutes the decision and order of the court.
Dated: April 19, 2019
Riverhead, New York
HON. SANFORD NEIL BERLAND, A.J.S.C. Footnotes
Footnote 1: The certificate of insurance referenced three policies — a commercial general liability policy (the "CGL policy"), an Excess Liability Policy (the "Excess policy") and a so-called "Owners and Contractors Protective Liability" policy (the "OCP policy"). Initially, Evanston had "determined" that the State was not an "additional insured" under Bruckel's CGL policy and was not entitled to coverage for the Staveskis' claims under any of the policies. After the State commenced the third-party action against it, however, Evanston conducted a "further investigation" and agreed that the State was entitled to coverage under the OCP policy "as the named insured," but not under the CGL or Excess policies.
Footnote 2: Indeed, except to the extent that Bruckel's prior and current cross-motions for summary judgment in this action, dated May 22, 2014 and November 8, 2018, respectively, and Bruckel's opposition to Evanston's earlier cross-motion for summary judgment may be so construed, it does not appear that Bruckel has ever done so.
Footnote 3: Subsequently, by order dated December 23, 2015, the court (Asher, J.) granted Bruckel's motion to amend its answer to assert a counterclaim for declaratory relief against Evanston.
Footnote 4: Markel was Evanston's Claims Service Manager for the Staveski claim (see footnote 8, infra).
Footnote 5: With respect to Evanston's contention that the claims asserted in the State's action against Bruckel were subject to exclusions in the Evanston policies and that its cross-motion should have been granted based upon those exclusions, the Appellate Division held that because the court below had not addressed that contention, it "remains pending and undecided." None of the parties, however, have addressed those exclusions in connection with the current motion and cross-motion.
Footnote 6: Both Buchman — the attorney retained by Evanston to represent the State in the Staveski action — and — Belford — the Assistant Attorney General who represented the State's interests in that matter and who filed both the earlier impleader action against Evanston and the Bruckel action — have been deposed, but there has been no deposition of Bruckel nor of Evanston, although claim notes and other documents made or maintained by Pat Dunstan, the Markel claims examiner who handled the Staveski claim for Evanston (and whose current medical condition has precludes the parties from taking of her deposition (see fn. 8, infra)), have been produced, albeit in some instances with redactions.
Footnote 7:Because Bruckel is seeking relief against a non-moving party, its cross-motion should more properly have been denominated a "motion." (See CPLR 2215.) There being no substantial prejudice to the right of any party, the error in denomination will be disregarded for purposes of this decision and the Bruckel's cross-motion will be treated as if noticed as a motion. (See CPLR 2001.)
Footnote 8: Dunstan, an employee of Markel Services Incorporated and a registered nurse who also holds a law degree, has been diagnosed with Parkinson's disease. During the relevant time period, Dunstan held the title of Senior Claims Examiner for Markel Services, Inc., the Claims Service Manager for Evanston. As a result of her medical condition, Dunstan has not been deposed in this action. She did, however, execute affidavits on April 2 and June 30, 2014, which are part of the current record.
Footnote 9: Among other things, Bruckel cites the amended "Reservation of Rights Letter," dated January 7, 2009, that Dunstan, writing for Markel Underwriting Managers, Inc. on behalf of Evanston, addressed to the State of New York, Office of the Attorney General (Exhibit E to the April 2, 2014 Dunstan Affidavit).
Footnote 10: Evanston concedes, and the moving parties do not dispute, that the summons and complaint were first emailed to Evanston on March 1, 2013, when Buchman, the attorney retained by Evanston to defend the State in the Staveski action, forwarded an email that Belford, the Assistant Attorney General who commenced the Bruckel action, had sent to him 21 minutes earlier. Because both emails were sent after business hours on a Friday, Evanston measures begins its day count from the immediately following business day, Monday, March 4, 2013.
Footnote 11: See Long Is. Light. Co. v Allianz Underwriters Ins. Co. - KeySpan Corp. - Am. Re-Ins. Co., 2013 NY Slip Op 80446(U) [1st Dept July 23, 2013].
Footnote 12: The Court of Appeals' citation to its earlier decision in Preserver Ins. Co. v Ryba, 10 NY3d 635, 642 , is particularly instructive here because it eliminates any doubt that the "underlying claim," the characterization of which determines the applicability, vel non, of Insurance Law Section § 3420(d)(2), is the claim that has been asserted against, or the alleged liability of, the named insured party for which that insured party is seeking insurance coverage — e.g., breach of contract or common law, statutory or contractual indemnification or contribution — and not any antecedent personal injury or other claim or liability that has been asserted against the party who is seeking judgment against the insured party. (Accord Johnson v Atl. Cas. Ins. Co., 13-CV-1002S, 2015 WL 5021953, at 5 [WDNY Aug. 24, 2015]; New Hampshire Ins. Co. v JVA Indus. Inc., 57 Misc 3d 1209(A), at 3 [Sup Ct, New York Co. 2017]). Indeed, this is consistent with Evanston's allegations in its complaint in this action, which label the State's action against Bruckel — but not Staveski's and Camargo's action against the State — as "the underlying action" (Complaint, ¶ 5).
Footnote 13: In his April 2, 2012 pre-trial report to Dunstan, with copy to Belford, Buchman recited that he had been "informed by John Belford of the Attorney General's Office of the State of New York that they have instituted an action against P.S. Bruckel in State Court for indemnification. The Attorney General's Office plans to expedite the matter against P.S. Bruckel." In his April 4, 2012 supplemental pre-trial report, however, he was less categorical about the status of the State's claim against Bruckel, advising, in pertinent part, as follows: As discussed, according to conversations with John Belford of the Attorney General's Office, The State of New York is commencing an action against P.S. Bruckel in State Supreme Court for contractual indemnification. We have contacted Mr. Belford and are awaiting confirmation of the commencement of the State Court action as well as a copy of the summons and complaint. (April 4, 2012 supplemental pre-trial report at 1.) As noted above, it is undisputed that it was not until March 1, 2013, that Belford emailed a copy of the summons and complaint to Buchman, who then forwarded Belford's email to Dunstan. Further, it should be noted that although Buchman's April 4, 2012 supplemental pre-trial report indicates that, "according to conversations with John Belford of the Attorney General's Office," the action that the State "is commencing . . . against P.S. Bruckel" is for "contractual indemnification," the copy of the complaint that the moving and opposing parties do not appear to dispute was ultimately provided to Buchman by Belford on March 1, 2013 and that Buchman then forwarded to Dunstan also alleges causes of action for non-contractual indemnification and contribution and for "breach of contract in failing to purchase insurance for the protection of the State of New York . . ." (see Exhibit A to Evanston's complaint in the current action). In any event, the State has offered no explanation for the failure earlier to respond to Buchman's and Dunstan's requests for copies of the pleadings in the State's action against Bruckel — even after Dunstan informed Belford that "she was unable to find them herself" — which evidently was not commenced through the courts' electronic filing system and had not advanced to the stage at which a "non-e-filed" action or proceeding can be identified through a search of the New York State Unified Court System's "E-Courts" online case information service, asserting, as discussed infra (see footnote 14 and accompanying text), privilege when Belford was asked why he did not earlier provide copies of the pleadings to Dunstan. Nor, for that matter, has Evanston offered any explanation for its not having reached out to Bruckel, prior to its receipt of the State's pleadings from Belford via Buchman, to determine if Bruckel had in fact been served and, if so, to obtain copies of the pleadings from it, particularly after it was made aware of the State's contention that the action had been commenced and that Bruckel had defaulted in appearing in the State's action against it.
Footnote 14: When asked at his deposition "if there was any reason" or "different reasons or the same reason" for not providing a copy of the State's complaint in the Bruckel action to Dunstan earlier despite her having asked him for it "on multiple occasions" and his having "told her that [he] would," Belford was instructed not to answer "on the basis of privilege." (See transcript citations in accompanying text). The parties have not addressed the propriety, vel non, of that assertion and the court draws no inference from it in connection with the current motion.
Footnote 15: Buchman testified that he reached out to Bruckel, inquiring whether they had given the carrier notice and if not, "about giving the notice about what's going on or why aren't you moving on it" (Buchman Dep., tr. at 151). Their response, as recounted by Buchman in his deposition, was as follows [T]here was some reference to business not going well, business closing down, something like that, and "they can own my trucks if I have a problem," something like that because it's just a corporation and they're insulated. (Buchman Dep., tr. at 151; see also id., at 149-50.) As Buchman explained, he believed that the $1 million limit of the OCP policy would be inadequate to settle the Staveski action (id. at 139; April 2, 2012 Pre-Trial Report at 5), and he was "trying to get my client, the state, more coverage" (Buchman Dep., tr. at 149): That's why I'm trying to stir the pot. "We got a suit. What are you guys doing about it? Hey, we got this coverage. What's going on here?" (Id. at 141).
Footnote 16: On the current motion and cross-motion, the parties have directed essentially all of their attention to the temporal effectiveness, vel non, of Evanston's disclaimer of coverage; none has addressed in more than passing the coverage exclusions that were invoked in the March 15, 2013 disclaimer letter.
Footnote 17: Again, Buchman testified that he reached out to Bruckel on one or more occasions, in his capacity as defense counsel for the State in the Staveski action and with the goal of increasing the resources — specifically, insurance coverage - available to settle that action (see fn. 15, supra). Although apparently not reflected in any of the writings that are part of the current record, Buchman testified that he was "sure" that he had talked with Dunstan about his contacting Bruckel, that she was aware that he was doing so and that he informed her of the conversation in which he referenced "coverage" (Buchman Dep. at 140, 142; see fn. 15, supra).