| State Ins. Fund v American Hardware Mut. Ins. Co. |
| 2009 NY Slip Op 05766 [64 AD3d 581] |
| July 7, 2009 |
| Appellate Division, Second Department |
| State Insurance Fund, Respondent, v American HardwareMutual Insurance Company et al., Appellants. |
—[*1] Montfort, Healy, McGuire & Salley, LLP, Garden City, N.Y. (Donald S. Neumann ofcounsel), for respondent.
In an action for a judgment declaring, in effect, that the defendants are obligated to pay theirproportionate share of the settlement and defense costs incurred in an underlying action entitledWalsh v Stegman, in the Supreme Court, Nassau County, under index No. 8085/91, thedefendants appeal from (1) a judgment of the Supreme Court, Nassau County (Woodard, J.),dated October 19, 2007, which, inter alia, upon an order of the same court dated January 12,2007, granting the plaintiff's motion to resettle a prior order of the same court dated January 17,2006, which granted the plaintiff's motion for leave to reargue that branch of its prior motionwhich was for summary judgment, and upon reargument, granted that branch of the motion,declared, in effect, that they are obligated to pay their proportionate share of the settlement anddefense costs incurred in the underlying action, and is in favor of the plaintiff and against themin the principal sum of $650,000 plus two thirds of the defense costs incurred in the underlyingaction, and (2) an order of the same court dated October 22, 2007, which determined the amountof the two thirds of defense costs in the underlying action to be $13,363.84.
Ordered that on the Court's own motion, the notice of appeal from the order dated October22, 2007 is treated as an application for leave to appeal, and leave to appeal is granted(see CPLR 5701 [c]); and it is further,
Ordered that the judgment is modified, on the law, by reducing the award to the plaintifffrom the principal sum of $650,000 to the principal sum of $300,000; as so modified, thejudgment is affirmed, without costs or disbursements; and it is further,
Ordered that the order dated October 22, 2007 is affirmed, without costs or disbursements.
In an underlying personal injury action, an employee of World of Hitches N Rental, Inc.(hereinafter World of Hitches), sought to recover damages for injuries he sustained when acontainer [*2]exploded while he was filling it with kerosene.Three of the defendants, in turn, brought a third-party action for contribution against World ofHitches. The employee's personal injury action ultimately was settled for the sum of $1,475,000,of which amount the plaintiff State Insurance Fund (hereinafter SIF), as the workers'compensation insurer of World of Hitches, paid $750,000. SIF also agreed to waive its workers'compensation lien in the amount of $225,000.
After the settlement, SIF commenced this action seeking, in effect, a judgment declaring thatthe defendants are obligated to pay their proportionate share of the settlement and defense costsincurred in the underlying action. The defendants had issued World of Hitches two insurancepolicies which were in effect at the time of the accident—a commercial general liabilitypolicy and a garage policy. Although the defendants initially defended World of Hitches, SIFtook over the defense after the defendants disclaimed coverage on the ground that both policiesexcluded coverage for bodily injury to an employee arising out of and in the course ofemployment.
Since the disclaimer was based on policy exclusions, the defendants were required toprovide World of Hitches with timely notice of its disclaimer under Insurance Law § 3420(d) (see Markevics v Liberty Mut. Ins. Co., 97 NY2d 646, 648-649 [2001]; Matter ofWorcester Ins. Co. v Bettenhauser, 95 NY2d 185 [2000]). The Supreme Court properlyfound that the defendants' disclaimer, issued more than four months after receiving notificationof the third-party action, was untimely as a matter of law (see Rael Automatic Sprinkler Co., Inc. v Schaefer Agency, 52 AD3d670 [2008]; American Ref-Fuel Co. of Hempstead v Employers Ins. Co. of Wausau,265 AD2d 49 [2000]). Contrary to the defendants' contention, no showing of prejudice wasrequired under Insurance Law § 3420 (d) (see Allstate Ins. Co. v Gross, 27 NY2d263 [1970]).
Additionally, we reject the defendants' argument that even if the disclaimer was untimely, nocoverage was provided under the garage policy because the employee was not injured whileengaged in garage operations (see Zappone v Home Ins. Co., 55 NY2d 131, 134 [1982]).The record establishes that the employee's actions were taken in furtherance of the garagebusiness (compare Lancer Ins. Co. vWhitfield, 61 AD3d 724 [2009]; Singh v Allcity Ins. Co., 1 AD3d 501 [2003]; Minerva vMerchants Mut. Ins. Co., 117 AD2d 720 [1986]).
Although the defendants were obligated to defend and indemnify World of Hitches in theunderlying action (see Moore vEwing, 9 AD3d 484 [2004]), and thus must pay their proportionate share of thesettlement (see Hawthorne v South Bronx Community Corp., 78 NY2d 433 [1991]) anddefense costs incurred in the underlying action, their contribution may not exceed the limits ofthe policies. Here, both policy limits were $300,000 per accident. Moreover, the garage policyprovided that all of the defendants' policies were mutually exclusive in that if more than onepolicy applied to the same accident, the maximum limit of liability under all the policies wouldnot exceed the highest applicable limit under one policy. Thus, the maximum amount thedefendants were required to contribute to the settlement was $300,000, and the judgment must bemodified accordingly. Mastro, J.P., Florio, Eng and Leventhal, JJ., concur.