| Fish King Enters. v Countrywide Ins. Co. |
| 2011 NY Slip Op 06997 [88 AD3d 639] |
| October 4, 2011 |
| Appellate Division, Second Department |
| Fish King Enterprises et al., Appellants, v CountrywideInsurance Company, Respondent, et al., Defendants. |
—[*1] Thomas Torto, New York, N.Y., for respondent.
In an action, inter alia, for a judgment declaring that the defendant Countrywide InsuranceCompany is obligated to defend and indemnify the plaintiffs as third-party defendants in anunderlying action entitled Lee v Hino Motors, Ltd., commenced in the Supreme Court,Kings County, under index No. 8263/99, the plaintiffs appeal, as limited by their brief, from somuch of an order of the Supreme Court, Kings County (Ruchelsman, J.), dated August 31, 2009,as denied that branch of their motion which was for summary judgment declaring that thedefendant Countrywide Insurance Company is obligated to defend them as third-party defendantsin the underlying action and granted that branch of the cross motion of the defendantCountrywide Insurance Company which was, in effect, for summary judgment declaring that thedefendant Countrywide Insurance Company is not obligated to defend them as third-partydefendants in the underlying action.
Ordered that the order is reversed insofar as appealed from, on the law, with costs, thatbranch of the plaintiffs' motion which was for summary judgment declaring that the defendantCountrywide Insurance Company is obligated to defend them as third-party defendants in theunderlying action is granted, that branch of the cross motion of the defendant CountrywideInsurance Company which was, in effect, for summary judgment declaring that it is not obligatedto defend the plaintiffs as third-party defendants in the underlying action is denied, and the matteris remitted to the Supreme Court, Kings County, for the entry of a judgment declaring that thedefendant Countrywide Insurance Company is obligated to defend the plaintiffs as third-partydefendants in the underlying action.[*2]
The plaintiff Jian Bin Yang was involved in a trafficaccident while making deliveries for his employer, the plaintiff Fish King Enterprises(hereinafter Fish King). Yang's coworker, who was a passenger in the vehicle, allegedly sufferedinjuries and commenced a personal injury action against, among others, the manufacturers of thevehicle (hereinafter the underlying action). The defendants in the underlying action commenced athird-party action against the plaintiffs here for contribution and indemnification.
Fish King had a business auto insurance policy with the defendant Countrywide InsuranceCompany (hereinafter Countrywide). Through its broker, Fish King timely notified Countrywideof the accident. The broker also forwarded copies of the second third-party complaint, receivedby Countrywide on January 9, 2002, and the police report and summons and complaint in theunderlying action, received by Countrywide on January 17, 2002. On March 6, 2002,Countrywide disclaimed coverage, citing an employee exclusion.
The plaintiffs commenced this action, inter alia, for a judgment declaring that Countrywide isobligated to defend and indemnify them as third-party defendants in the underlying action. Theplaintiffs moved for summary judgment declaring that Countrywide was obligated to defend andindemnify them as third-party defendants in the underlying action, and Countrywidecross-moved, in effect, for summary judgment declaring that it was not obligated to defend andindemnify the plaintiffs as third-party defendants in the underlying action. Prior to the motionsbeing submitted, the underlying action was settled, with Countrywide contributing the policylimits. The issue of indemnification was thereby rendered academic, leaving the remaining issueof Countrywide's liability for legal fees, costs, and disbursements incurred relative to the defenseof the underlying action. The Supreme Court, among other things, denied that branch of theplaintiffs' motion which was for summary judgment declaring that Countrywide is obligated todefend them as third-party defendants in the underlying action and granted that branch ofCountrywide's cross motion which was, in effect, for summary judgment declaring that it was notobligated to defend the plaintiffs as third-party defendants in the underlying action. The plaintiffsappeal, and we reverse the order insofar as appealed from.
Countrywide did not waive its defenses to the issue of defense costs by settling theunderlying action for the policy limits. "Waiver is an intentional relinquishment of a known rightand should not be lightly presumed" (Gilbert Frank Corp. v Federal Ins. Co., 70 NY2d966, 968 [1988]). There was no "clear manifestation of intent" on Countrywide's part to abandonits defenses to the issue of defense costs (id. at 968). Countrywide did, however, waiveits current standing defense by failing to either make a pre-answer motion to dismiss on that basisor assert such as an affirmative defense in its answer (see CPLR 3211 [a] [3]; [e];Matter of Fossella v Dinkins, 66 NY2d 162, 167 [1985]; Country Pointe at Dix Hills Home OwnersAssn., Inc. v Beechwood Org., 80 AD3d 643, 651 [2011]).
The Supreme Court erred in determining that Countrywide's disclaimer of coverage wastimely pursuant to Insurance Law § 3420 (d). "The timeliness of an insurer's disclaimer ismeasured from the point in time when the insurer first learns of the grounds for disclaimer ofliability or denial of coverage" (Matterof New York Cent. Mut. Fire Ins. Co. v Steiert, 68 AD3d 1120, 1121 [2009] [internalquotation marks omitted]; seeContinental Cas. Co. v Stradford, 11 NY3d 443, 449 [2008]; First Fin. Ins. Co. v Jetco Contr. Corp.,1 NY3d 64, 68-69 [2003]). An insurer who delays in giving written notice of disclaimerbears the burden of justifying the delay (see First Fin. Ins. Co. v Jetco Contr. Corp., 1NY3d at 69; Quincy Mut. Fire Ins. Co. vUribe, 45 AD3d 661 [2007]). Here, Countrywide argued that, after its receipt of thesummons and complaint in the underlying action, an investigation was [*3]required to evaluate the full extent of the actions and the identity ofall relevant parties. However, the proffered basis for the disclaimer was that the plaintiff in theunderlying action was an employee of Fish King, a fact which was readily ascertainable from theface of the complaint in the underlying action. Accordingly, the disclaimer, issued 49 days afterCountrywide's receipt of that complaint, was untimely as a matter of law (see First Fin. Ins.Co. v Jetco Contr. Corp., 1 NY3d at 66-69; City of New York v St. Paul Fire & Mar. Ins. Co., 21 AD3d 978[2005]; Uptown Whole Foods v Liberty Mut. Fire Ins. Co., 302 AD2d 592 [2003];City of New York v Northern Ins. Co. of N.Y., 284 AD2d 291 [2001]; cf. Halloway v State Farm Ins. Cos., 23AD3d 617 [2005]).
Contrary to Countrywide's contention, the plaintiffs' request for defense and indemnity didnot constitute a request by a coinsurer for contribution. Therefore, the requirements of InsuranceLaw § 3420 (d) applied (cf. SixtySutton Corp. v Illinois Union Ins. Co., 34 AD3d 386 [2006]). Moreover, the plaintiffsare correct that the relied-upon employee exclusion, which excluded coverage for "[b]odily injuryto any employee of the insured arising out of and in the course of his or her employment by theinsured," did not exclude coverage for third-party claims for contribution and indemnity relatedto such injury (see North Riv. Ins. Co. v United Natl. Ins. Co., 81 NY2d 812 [1993];Graphic Arts Mut. Ins. Co. v Bakers Mut. Ins. Co. of N.Y., 45 NY2d 551 [1978];Doyle v Pawtucket Mut. Ins. Co., 243 AD2d 603 [1997]; cf. Commissioners of StateIns. Fund v Insurance Co. of N. Am., 80 NY2d 992 [1992]). While the plaintiffs failed toraise this contention before the Supreme Court, it may be reached by this Court as it is an issue oflaw that appears on the face of the record which, had it been brought to the attention of theSupreme Court, could not have been avoided (see Romain v Grant, 60 AD3d 838 [2009]; Lischinskaya v Carnival Corp., 56AD3d 116 [2008]; Matter ofBesedina v New York City Tr. Auth., 47 AD3d 924 [2008]).
Since this is a declaratory judgment action, the matter must be remitted to the SupremeCourt, Kings County, for the entry of a judgment declaring that Countrywide is obligated todefend the plaintiffs as third-party defendants in the underlying action (see Lanza vWagner, 11 NY2d 317, 334 [1962], appeal dismissed 371 US 74 [1962], certdenied 371 US 901 [1962]). Dillon, J.P., Eng, Sgroi and Miller, JJ., concur.