| Tully Constr. Co., Inc. v TIG Ins. Co. |
| 2007 NY Slip Op 06983 [43 AD3d 1150] |
| September 25, 2007 |
| Appellate Division, Second Department |
| Tully Construction Co., Inc., Appellant, v TIG InsuranceCo., Respondent, et al., Defendants. |
—[*1] Landman Corsi Ballaine & Ford P.C., New York, N.Y. (Jeremy S. Simon, pro hac vice, ofcounsel), for respondent.
In an action, inter alia, for a judgment declaring, among other things, that the defendant TIGInsurance Co. is obligated to indemnify the plaintiff in the underlying actions entitledRubenstein v Tully Construction Co., Inc., in the Supreme Court, Kings County, underindex No. 15025/02, and Jones v Tully Construction Co., Inc., in the Supreme Court,Kings County, under index No. 23132/02, in the combined sum of $952,000, the plaintiff appealsfrom an order and judgment (one paper) of the Supreme Court, Queens County (Satterfield, J.),entered August 7, 2006, which, upon a decision of the same court dated May 16, 2006, inter alia,denied the plaintiff's motion for summary judgment and granted the defendant TIG InsuranceCo.'s motion for summary judgment, among other things, declaring that TIG Insurance Co. is notobligated to indemnify the plaintiff in the underlying actions.
Ordered that on the Court's own motion, the notice of appeal from the decision is deemed tobe a premature notice of appeal from the order and judgment (see CPLR 5520 [c]), and itis further,
Ordered that the order and judgment is affirmed; and is it further,
Ordered that one bill of costs is awarded to the respondent.[*2]
On November 27, 2000 a vehicle operated by DavidJones and owned by Debra Rubenstein hit a backhoe owned by the plaintiff Tully ConstructionCo., Inc. (hereinafter Tully), which was parked on the shoulder of the Staten Island Expressway.As a result of the collision, both Jones and Rubenstein, who was a passenger in the vehicle, werekilled. At the time of the accident, Tully was insured by Zurich Insurance Co. (hereinafterZurich) for liability claims up to $1,000,000 and carried an excess liability policy issued by thedefendant TIG Insurance Co. (hereinafter TIG). Tully notified Zurich of the potential claims inDecember 2000. The estates of Jones and Rubenstein commenced wrongful death actions onApril 16, 2002 and June 11, 2002, respectively.
By letter dated June 14, 2004 Tully advised TIG's Claims Department, inter alia, that inFebruary 2001 Tully had notified TIG of a claim arising out of an incident that occurred onNovember 27, 2000. Receiving no reply to its June 14, 2004 letter, Tully again wrote to TIG, byletter dated June 24, 2004, advising that, on November 27, 2000 Jones and Rubenstein crashedinto Tully's parked backhoe and that Tully's broker had notified TIG about the accident on May9, 2001. TIG informed Tully that it had no record of the prior notice alleged by Tully and that theJune 24, 2004, letter constituted TIG's first notice of the claim. By letter to Tully dated August 5,2004, TIG disclaimed coverage under Tully's policy with TIG based on late notice.
Pursuant to Insurance Law § 3420 (d), an insurer must give written notice of adisclaimer "as soon as is reasonably possible" after the insurer learns of the grounds for thedisclaimer of liability (see First Fin. Ins. Co. v Jetco Contr. Corp.,1 NY3d 64, 66 [2003]; Reyes vDiamond State Ins. Co., 35 AD3d 830, 831 [2006]; Lancer Ins. Co. v T.F.D. Bus Co., Inc., 18 AD3d 445, 446 [2005];Mann v Gulf Ins. Co., 3 AD3d 554, 556 [2004]; McGinnis vMandracchia, 291 AD2d 484, 485 [2002]). An insurer's failure to do so precludes effectivedisclaimer or denial, even where the insured has failed to provide the insurer with timely noticeof the claim (see Matter of Allstate Ins.Co. v Cruz, 30 AD3d 511, 512 [2006]; Gregorio v J.M. Dennis Constr. Co. Corp., 21 AD3d 1056 [2005];Wasserheit v New York Cent. Mut. Fire Ins. Co., 271 AD2d 439, 440 [2000]; see also Matter of New York Cent. Mut.Fire Ins. Co. v Aguirre, 7 NY3d 772, 774 [2006]). "[T]imeliness of an insurer'sdisclaimer is measured from the point in time when the insurer first learns of the grounds fordisclaimer of liability or denial of coverage" (First Fin. Ins. Co. v Jetco Contr. Corp., at68-69; see Halloway v State Farm Ins.Cos., 23 AD3d 617, 618 [2005]; Danna Constr. Corp. v Utica First Ins. Co., 17 AD3d 622, 623[2005]).
It is the insurer's responsibility to explain its delay in giving written notice of disclaimer, andan unsatisfactory explanation will render the delay unreasonable as a matter of law (see 1NY3d at 68; Pennsylvania LumbermansMut. Ins. Co. v D & Sons Constr. Corp., 18 AD3d 843, 845 [2005]; 17 AD3d at 623;271 AD2d at 440). An insurer's explanation is insufficient as a matter of law where the basis fordenying coverage was or should have been readily apparent before the onset of the delay (seeFirst Fin. Ins. Co. v Jetco Contr. Corp. at 68; Danna Constr.Corp. v Utica First Ins. Co. at 623). However, an insurer's delay innotifying the insured of a disclaimer may be excused when the insurer conducts an "investigationinto issues affecting [its] decision whether to disclaim coverage" (First Fin. Ins.Co. v Jetco Contr. Corp. at 69; see Schoenig v North Sea Ins. Co., 28 AD3d 462 [2006]). In thatcase, the burden is on the insurer to demonstrate that its delay was reasonably related to itscompletion of a thorough and diligent investigation (see Schulman v Indian Harbor Ins.Co., 40 AD3d 957 [2007]).
Here, even assuming Tully's June 14, 2004 letter was received by TIG, that letter cannotserve as the date of first notice to TIG since it contained insufficient information to providegrounds for a disclaimer of liability or denial of coverage and, in fact, professed that notice toTIG [*3]had been timely given. Thus, TIG's delay in disclaimingmust be measured from Tully's June 24, 2004 letter until TIG's August 5, 2004 letter disclaimingcoverage, a period of 42 days.
Tully contends that grounds for a disclaimer should have been readily apparent to TIG uponits receipt of the June 24, 2004 letter. However, the record reflects otherwise. A letter dated May9, 2001, attached to Tully's June 24, 2004 letter to TIG indicated that Tully and Marsh USA, Inc.(hereinafter Marsh), Tully's broker, had agreed that Marsh would put TIG on notice of the claims.Moreover, according to an affidavit by a claims analyst from TIG, in a telephone conversation hehad on June 30, 2004 with "William Ryan of Tully," Ryan was adamant that Marsh had givenprior notice to TIG. Thus, TIG was presented with circumstances regarding Tully's late noticewhich warranted further investigation (cf. Uptown Whole Foods v Liberty Mut.Fire Ins. Co., 302 AD2d 592, 593 [2003]).
Contrary to Tully's contention, TIG's moving papers demonstrated that it conducted aninvestigation before disclaiming based on late notice. Among other things, TIG contacted Zurichand requested the summonses and complaints and any pretrial reports. TIG also requested a copyof the primary insurance policy issued to Tully by Zurich, which was not received by TIG untilJuly 26, 2004. TIG then waited 10 additional days before issuing its disclaimer in order toascertain whether Ryan had obtained documentation from Marsh of the alleged prior notice toTIG. Under the particular circumstances of this case, TIG met its burden of demonstrating that itsinvestigation was reasonably related to its completion of a thorough and diligent investigationinto whether it had grounds for a disclaimer based on late notice. Therefore, its delay indisclaiming coverage was not unreasonable for purposes of Insurance Law § 3420 (d) (see New York Cent. Mut. Fire Ins. Co. vMajid, 5 AD3d 447, 448 [2004]; DeSantis Bros. v Allstate Ins. Co., 244 AD2d183, 184 [1997]). Accordingly, the Supreme Court properly denied Tully's motion for summaryjudgment and granted TIG's summary judgment motion. Crane, J.P., Goldstein, Dillon and Carni,JJ., concur.