Opinion
2624/10.
Decided July 14, 2011.
Plaintiffs were represented by Sean O. Edwards, Esq. of Roach Bernard, PLLC.
Defendants were represented by Jennifer Kotlyarsky, Esq. and Joseph S. Wiener, Esq. of the Law Office of Max W. Gershweir.
Recitation in accordance with CPLR 2219(a) of the papers submitted on Defendants' motion for an order, pursuant to CPLR 3212, "dismissing plaintiffs' complaint and granting [them] summary judgment on [their] counterclaim":
-Amended Notice of Motion
Affirmation
Exhibits A-E
Krumenaker Aff.
Exhibits 1-4
Aptman Affidavit
Exhibits 1-4
-Memorandum of Law
-Affirmation in Opposition
Memorandum of Law
Exhibits A-E
-Reply Affirmation
-Reply Memorandum of Law
Plaintiffs were represented by Sean O. Edwards, Esq. of Roach Bernard, PLLC. Defendants were represented by Jennifer Kotlyarsky, Esq. and Joseph S. Wiener, Esq. of the Law Office of Max W. Gershweir.
In this insurance coverage action, defendants Tower Insurance Company of New York and Tower Group Inc. a/k/a Tower Group Companies (collectively, "Tower") move for an order, pursuant to CPLR 3212, dismissing the Verified Complaint of plaintiffs BSDC NRP I Limited Partnership, Bridge Street Development Corporation (collectively, "Bridge Street") and Precise Management, Inc., and granting Tower summary judgment on the counterclaim asserted against Plaintiffs and "Additional Party to Counterclaim Kenneth L. Johnson." Plaintiffs oppose, but Kenneth L. Johnson has not appeared on the motion.
Plaintiffs' Verified Complaint seeks a declaration that Tower is obligated to provide insurance defense and indemnity to them with respect to an action commenced by Kenneth L. Johnson on August 12, 2009, which is pending in this court under index number 20409/09. Kenneth L. Johnson is seeking damages for personal injuries allegedly sustained on November 12, 2007 when he fell on a stairway at 444-448 Lexington Avenue, Brooklyn, a building owned or managed by Plaintiffs, where he was a tenant.
Tower served a Verified Answer with Counterclaim on Plaintiffs, asserting a counterclaim for a declaration that Tower is not obligated to provide a defense or indemnity with respect to Mr. Johnson's action against Plaintiffs. Tower also modified the caption by adding Kenneth L. Johnson as "Additional Party to Counterclaim." Tower's Verified Answer with Counterclaim asserts its counterclaim for declaratory relief against Mr. Johnson as well as Plaintiffs. Through counsel, Mr. Johnson thereafter served his Verified Answer to Counterclaim.
Plaintiffs, however, apparently have not answered Tower's counterclaim, although required to do so ( see CPLR 3011.) To the extent, therefore, that Tower's motion seeks summary judgment on the counterclaim against Plaintiffs, it is technically premature because issue has not been joined on the counterclaim. ( See CPLR 3212 [a].) It is clear, however, that the parties have treated the motion as if issue has been joined, and the motion need not be denied for lack of joinder of issue. ( See Rhodes v Liberty Mut. Ins. Co. , 67 AD3d 881 , 882 [2d Dept 2009].) Indeed, Tower's counterclaim is, in substance, the mirror-image of Plaintiffs' claim.
As to Kenneth L. Johnson, Tower purports to make him a defendant on its counterclaim presumably pursuant to CPLR 3019 (a), which allows a counterclaim to be asserted "against one or more plaintiffs, a person whom a plaintiff represents or a plaintiff and other persons alleged to be liable." As to a non-party, this procedure requires that a summons and an answer containing the counterclaim be filed, with the appropriate fee paid, and be served upon the putative additional defendant in accordance with CPLR 308 through 312-a, as appropriate. ( See CPLR 3019 [d]; State of New York v International Asset Recovery Corp. , 56 AD3d 849 , 854 [3d Dept 2008]; Baker, Sanders, Barshay, Grossman, Fass, Muhlstock Neuworth, LLC v Comprehensive Mental Assessment Med. Care., P.C., ___ Misc 3d ___, 2011 NY Slip Op 31385 [U], * 6 [Sup Ct, Nassau County 2011]; Wyler v Wyler, 5 Misc 3d 1031[A], 2004 NY Slip Op 51653 [U], * 2 [Sup Ct, Nassau County 2004]; Linzer v Ball, 184 Misc 2d 132, 136-37 [Civ Ct, NY County 2000].)
Tower filed a Summons and a Verified Answer with Counterclaim, apparently after payment of the appropriate fee, on May 3, 2010. Although the Summons is directed to Kenneth L. Johnson at his home address, the moving papers do not contain an affidavit of service to show that it was served upon him in accordance with CPLR 308. An Affidavit of Service for the Verified Answer with Counterclaim, however, shows that service was purportedly made by mail to counsel representing Mr. Johnson in his action against Plaintiffs, which is clearly inappropriate. But Mr. Johnson served a Verified Answer to Counterclaim, asserting no defense based upon improper service, and did not move to dismiss on that ground pre-answer ( see CPLR 3211 [a] [8].) Any such objection, therefore, appears to have been waived. ( See CPLR 3211 [e]; Feola v Moore McCormack Lines, Inc., 173 AD2d 256, 256 [1st Dept 1991].)
Not so easily addressed is the question whether the counterclaim procedure was properly utilized in the first instance. Specifically, can it fairly be said that Tower's counterclaim is asserted against "a plaintiff and other person[] alleged to be liable" within the meaning of CPLR 3019 (a)? ( See Linzer v Ball, 184 Misc 2d at 135-36; see also Ruzicka v Rager, 305 NY 191, 196-99 [1953] [former CPA §§ 266, 271].) Strictly speaking, of course, Kenneth L. Johnson is not "alleged to be liable" to Tower, or Plaintiffs, or anyone else.
It does seem fair to say that CPLR 3019 was probably not drafted with the declaratory judgment action in mind. But the underlying policy of CPLR 3019 (a), as its predecessors, i.e., "to rid our procedure of the restrictive niceties, grounded in early common-law pleading, which needlessly caused a multiplicity of suits between the same litigants" ( see Ruzicka v Rager, 305 NY at 198), is certainly compatible with the declaratory judgment action generally, and its use in insurance coverage disputes specifically. Indeed, the only specific claim identified in the declaratory judgment statute is that of a personal injury or wrongful death claimant against the insurer of the party alleged to be liable. ( See CPLR 3001; see also Watson v Aetna Cas. Sur. Co., 246 AD2d 57, 62-65 [2d Dept 1998]; Abate v All-City Ins. Co., 214 AD2d 627, 628-29 [2d Dept 1995].)
None of the parties address the question whether the counterclaim procedure was properly utilized by Tower against Kenneth L. Johnson, or whether any defect can and has been waived, or the consequences if these questions are answered unfavorably to Tower. Indeed, Mr. Johnson, perhaps the party most likely to complain, has not appeared on Tower's motion (although it is not clear that Mr. Johnson's counsel was notified as to the adjourned return dates.) It would appear, however, that, at worst, the counterclaim against Mr. Johnson would be dismissed, and any ruling on Tower's motion would not have any preclusive effect on him. Although such a result would undermine somewhat the purpose of these proceedings, there seems to be no warrant to withhold determination on Tower's motion until the open questions are answered. On the contrary, it would appear to benefit all parties for there to be an early determination as to insurance coverage for Mr. Johnson's action against Plaintiffs, if that would be provided by a determination on this motion.
On June 20, 2007, Tower issued to or for the benefit of Plaintiffs a Commercial Lines Policy with a Commercial General Liability Coverage Part for the policy period June 20, 2007 to June 20, 2008. The policy provides that an insured "must see to it that [Tower is] notified as soon as practicable of an occurrence' or an offense which may result in a claim." The term "occurrence" is defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." The term "claim" is not defined, but it is other than a "suit," which is defined as "a civil proceeding in which damages because of bodily injury,' property damage' or personal and advertising injury' to which this insurance applies are alleged." Other provisions of this coverage part make clear that a "claim" is made against an insured, and not by an insured against Tower.
As noted above, Kenneth L. Johnson alleges that, on November 12, 2007, he sustained personal injuries as a result of a fall on a stairway at Plaintiffs' premises, where he was a tenant. There is no dispute that Mr. Johnson's alleged fall was an "accident" and "occurrence," nor that the policy required that Tower be notified "as soon as practicable" if Mr. Johnson's fall "may result in a claim." According to the Affidavit of Lowell Aptman, Tower's vice president of liability claims, Tower was first notified of Mr. Johnson's accident on August 14, 2008 through documents received from its producer and Plaintiffs' broker. The documents included a copy of a letter dated July 1, 2008 from Mr. Johnson's attorneys to plaintiff Precise Management, advising that counsel had been retained by Mr. Johnson "to pursue a claim for severe personal injuries sustained as a result of an accident which occurred on [November 12, 2007] through [Precise Management's] negligence."
Tower also submitted the Affidavit of an investigator, Jason D. Krumenaker, who took signed statements from two employees of Precise Management: Curtis Daly, the superintendent at 444-448 Lexington Avenue, and Angela Hall, who described herself of the "property manager." Plaintiffs do not object to consideration of the signed but unsworn statements of Mr. Daly and Ms. Hall. ( See Tower Inc. Co. of NY v Classon Heights LLC , 82 AD3d 632 , 633 [1st Dept 2011]; Holyoke Mut. Ins. Co. v B.T.B. Realty 83 AD2d 603, 606 [2d Dept 1981].)
Mr. Daly stated that, shortly before Mr. Johnson's alleged fall, Mr. Daly saw him with "a shopping cart of laundry"; that when he later saw Mr. Johnson sitting on the landing between the second and third floors, Mr. Johnson stated "he was pulling the clothes up the stairs and fell," and that "he hurt his foot"; and that Mr. Johnson "was taken to the hospital by ambulance." Mr. Daly stated further that he called Angela Hall that same day and "told her what happened"; that Ms. Hall told him to bring an "incident report" to the management office, which he did on November 15; that he saw Mr. Johnson on November 13 "with a white cast on his foot that extended to his ankle and he was using one crutch"; and that he saw Mr. Johnson "a couple of days after the accident around the building so he probably missed work."
Although Mr. Daly spoke to Mr. Johnson "several times after the accident," Mr. Johnson "never mentioned a lawsuit" until February or March 2008 when Mr. Daly saw Mr. Johnson with his attorney, and Mr. Daly "observed Mr. Johnson telling his attorney that he fell between the 4th and 3rd floors because there was no wood covering on the iron handrail." Mr. Daly "did not contact the management office about Mr. Johnson's attorney because [he] reported the accident on November 12, 2007."
For her part, Angela Hall recalled that Mr. Daly "mentioned an incident occurring with Mr. Johnson to [her] by telephone on or around December of 2007"; that she did "not have an incident report on file," and "[b]ecause she did not have an incident report and was not certain of the validity of the claim [she] did not notify the Insurance Broker or carrier"; that the letter from Mr. Johnson's attorney was received on July 10, 2008, and that she sent it "to the wrong insurance company by mistake" before sending it to the broker "around 8/14/08."
Tower also submits a copy of a Property Management Agreement, dated December 29, 2006 between Bridge Street and Precise Management, but the signatures are not acknowledged, and the document is not authenticated or otherwise rendered admissible as evidence. ( See Prince, Richardson on Evidence § 9-101 et seq [Farrell 11th Ed]; Clark v Mortg. Servs. Unlimited , 78 AD3d 1104 , 1104 [2d Dept 2010]; John Deere Ins. Co. v GBE/Alasia Corp. , 57 AD3d 620, 621-22 [2d Dept 2008]; NYCTL 1998-2 Trust v Santiago , 30 AD3d 572 , 573 [2d Dept 2006].)
"It is well settled that when a policy of liability insurance requires that notice of an occurrence be given as soon as practicable,' such notice must be provided within a reasonable period of time; failure to give such notice relieves the insurer of its obligations under the contract, regardless of whether the insurer was prejudiced by the delay." ( Sobora Constr. Corp. v AIU Ins. Co. , 11 NY3d 805, 806; see also Ponok Realty Corp. v United Nat'l Specialty Ins. Co. , 69 AD3d 596 , 596-97 [2d Dept 2010].) "While this rule produces harsh results in some cases, it also, by encouraging prompt notice, enables insurers to investigate claims promptly and thus to deter or detect claims that are ill-founded or fraudulent." ( Briggs Ave., LLC v Ins. Corp. of Hannover , 11 NY3d 377 , 381-82.) In 2008, the Legislature, "weighing the competing interests at stake," struck "a different balance" ( see id. at 382), but the "prejudice" rule found in Insurance Law § 3420 (c) (2) (A) only became effective with respect to policies issued after January 17, 2009 ( see Ponok Realty Corp. v United Nat'l Specialty Ins. Co., 69 AD3d at 596-97.)
Here, Tower did not receive notice of the November 12, 2007 occurrence until nine months later when, on August 14, 2008, it received documents containing Mr. Johnson's counsel's letter dated July 1, 2008 to Precise Management — also, nine months after the superintendent Curtis Daly learned about Mr. Johnson's alleged fall and told Angela Hall, the property manager; and five months after Mr. Daly learned that Mr. Johnson was consulting an attorney and alleging a defect in the stairway as the cause of his fall. Mr. Daly also learned within days of the accident that Mr. Johnson claimed injury as a result of his fall, that he was taken away in an ambulance, that he was fitted with a cast and used a cane for some period, and that he lost time from work.
"The insured's building superintendent's knowledge of the accident and injuries is imputable to the . . . building owners." ( Tower Ins. of NY v Amsterdam Apts., LLC , 82 AD3d 465 , 466 [1st Dept 2011]; see also White v City of New York, 81 NY2d 955, 957-58; Woolverton v Fidelity Cas. Co., 190 NY 41, 48-50 [1907]; Tower Ins. Co. of NY v Classon Hgts., LLC , 82 AD3d 632 , 635 [1st Dept 2011]; Public Serv. Mut. Ins. Co. v Harlem Hous. Assocs. , 7 AD3d 421, 422 [1st Dept 2004]; Smalls v Reliable Auto Serv., 205 AD2d 523, 524 [2d Dept 1994]; Hoyoke Mut. Ins. Co. v B.T.B. Realty Corp., 83 AD2d at 605.) Here, the statements of Curtis Daly and Angela Hall make clear their respective roles in the reporting of injury-producing accidents at the building and notification to the liability insurance carrier, such that their knowledge of the occurrence is imputed to Plaintiffs. ( See Paramount Ins. Co. v Rosedale Gardens, Inc., 293 AD2d 235, 237-40 [1st Dept 2002]; see also Tower Ins. Co. v Christopher Ct. Hous. Co. , 71 AD3d 500 , 500-501 [1st Dept 2010]; Ferreira v Mereda Realty Corp. , 61 AD3d 463 , 463 [1st Dept 2009]; Clifton Park Food Corp. v Travelers Indem. Co., 2010 US Dist LEXIS 88655, * 9- * 12 [NDNY 2010].)
Tower has carried its burden on this motion, establishing prima facie that it is not obligated to defend and indemnify Plaintiffs with respect to the claim of Kennedy L. Johnson. At the latest, Plaintiffs should have notified Tower when Mr. Daly learned that Mr. Johnson had consulted an attorney and was alleging that a defect in the stairway caused his fall, but notification was not given until five months later when Mr. Johnson's lawyer's letter was forwarded. An unexcused five-month delay in notification is "untimely as a matter of law." ( See Tower Ins. Co. of NY v Classon Hgts., LLC, 82 AD3d at 634; see also Lobosco v Best Buy, Inc. , 80 AD3d 728 , 731-32 [2d Dept 2011] [four months]; McGovern-Barbash Assoc., LLC v Everest Natl. Ins. Co. , 79 AD3d 981 , 983 [2d Dept 2010] [four months]; Steinberg v Hermitage Ins. Co. , 26 AD3d 426 , 427 [2d Dept 2006] [57 days].) Under New York law, "absent mitigating circumstances," delays of four and five months are routinely held unreasonable, "especially when the insured has immediate knowledge of the accident." ( See Clifton Park Food Corp. v Travelers Indem. Co., 2010 US Dist LEXIS 88655, at * 7- * 8.)
"Consequentially, the burden shifted to [Plaintiffs] to raise a triable issue of fact as to whether there existed a reasonable excuse for [their] delay in notifying the defendant." ( See Bigman Bros., Inc. v QBE Ins. Corp. , 73 AD3d 1110 , 1112 [2d Dept 2010]; see also Felix v Pinewood Bldrs., Inc. , 30 AD3d 459, 461 [2d Dept 2006].) "[T]here may be circumstances that excuse a failure to give timely notice, such as where the insured has a good-faith belief of non-liability,' provided that belief is reasonable." ( Great Canal Realty Corp. v Seneca Ins. Co., Inc. , 5 NY3d 742, 743 [quoting Security Mut. Ins. Co. NY v Acker-Fitzsimmons Corp., 31 NY2d 436, 441 (1972)].) "But . . . the insured's belief must be reasonable under all the circumstances, and it may be relevant on the issue of reasonableness, whether and to what extent, the insured has inquired into the circumstances of the accident or occurrence'." ( Id. at 743-44 [quoting Security Mut. Ins. Co., 31 NY2d at 441].) "Additionally, the insured bears the burden of establishing the reasonableness of the proferred excuse." ( Id.)
"While the reasonableness of an insured's good faith belief in nonliability is a matter ordinarily left for a trial . . ., it may be determined as a matter of law where the evidence, construing all inferences in favor of the insured, establishes that the belief was unreasonable or in bad faith." ( McGovern-Barbash Assoc., LLC v Everest Natl. Ins. Co., 79 AD3d at 983; see also Bigman Bros., Inc. v QBE Ins. Corp., 73 AD3d at 1111-12 ["good faith belief that the injured party would not seek to hold the insured liable"].) Where the insured "should have realized that there was a reasonable possibility of the subject policy's involvement", "the proferred excuse was unreasonable as a matter of law." ( See McGovern-Barbash Assoc., LLC v Everest Natl. Ins. Co., 79 AD3d at 984.)
In opposition, Plaintiffs assert that, for several reasons, they "had no reason to believe that the allegedly injured Johnson would hold them liable for anything surrounding his fall." ( See affirmation in opposition ¶¶ 10-15.) In support of their assertion, Plaintiffs submit affidavits of Angela Hall, the property manager, and Curtis Daly, the superintendent. Neither affidavit purports to retract anything the affiant stated to Tower's investigator, as reflected in their respective signed statements, and, therefore, the affidavits do not directly undermine Tower's prima facie showing on this motion.
The respective affidavits of Angela Hall and Curtis Daly, together with the absence of an affidavit from Bridge Street or any other representative of Precise Management, confirm that Ms. Hall and Mr. Daly were responsible for obtaining information about possible claims that should be passed on to Plaintiffs' insurer. Plaintiffs do not contend that Mr. Daly's knowledge should not be imputed to them. Indeed, as will appear, Plaintiffs rely on Mr. Daly's knowledge in support of their excuse in not notifying Tower earlier about Mr. Johnson's alleged fall.
Perhaps the most significant statement in Angela Hall's Affidavit is that, "[h]ad Mr. Johnson or his attorneys made [her] aware of their intentions for such claims [ i.e., "a claim of liability on the part of the building or plaintiffs"]. . ., [she] would have alerted [Tower] as soon as was practicable." ( See affidavit [Angela Hall] in support of plaintiff's [ sic] affirmation in opposition ¶¶ 12, 13.) Although she acknowledges that Mr. Daly told her in November or December 2007 that "Mr. Johnson had an incident at the premises" ( see id. ¶ 5), contrary to Mr. Daly's statement to the investigator and Affidavit she asserts that Mr. Daly "did not have any details surrounding the incident" ( see id. ¶ 6.) Sheasserts that her office "never had an incident report for Mr. Johnson's alleged incident" ( see id. ¶ 7), and that she was "not . . . aware that there was an ambulance that responded to the scene of the accident" ( see id. ¶ 12.)
Ms. Hall asserts further that she "was not aware nor made aware that the incident Mr. Johnson was involved in had anything to do with a condition in the building" ( see id. ¶ 8), and "was not aware or made aware that the incident . . . had anything to do with a claim or potential claim for liability surrounding ownership, management or controllers [ sic] of 444-448 Lexington Avenue" ( see id. ¶ 9.) Thereis nothing in Angela Hall's Affidavit suggesting that, at any time from November or December 2007 when she learned of Mr. Johnson's "incident" until July 2008 when she received his lawyer's letter, she made any inquiry of anyone, including Mr. Daly, about the circumstances of Mr. Johnson's alleged fall and the possibility of a claim.
The Affidavit of Curtis Hall is notable for the absence of any reference to the incident in February or March 2008, described in his statement to Tower's investigator, when he "observed Mr. Johnson telling his attorney that he fell between the 4th and 3rd floors because there was no wood covering on the iron handrail." Nor does his Affidavit make any reference to the incident report that he stated he "brought . . . to the office on November 15, 2007." Rather, in his Affidavit, Mr. Daly recounts several circumstances that would explain why he "had no reason to believe that the allegedly injured Johnson would hold the plaintiff's [ sic] liable for anything surrounding his alleged fall" ( see affidavit [Curtis Daly] in support of plaintiff's [ sic] affirmation in opposition ¶ 9.)
"I knew Mr. Johnson to have a leg that was stricken because of a debilitating disease or injury, and accordingly, he walked with a severe limp, a compromised gait, and had obvious problems staying balanced when walking and in the days leading up to Mr. Johnson's alleged incident I had observed him tripping over himself and falling unobstructed.
I knew Mr. Johnson to have a history of self-inflicted falls at, in, or around the building in question, stemming from Johnson's compromised gait solely, and once he fell he would be taken by ambulance to the nearest hospital without complaining of any negligence at, in, or about the property.
. . .
I observed Mr. Johnson coming from the Laundromat down the block from the building in question with a shopping cart full of laundry just minutes before the alleged incident. Minutes later when I found Mr. Johnson, he did not explain that he fell for any other reason than he was pulling a shopping cart full of laundry, up three flights of stairs (in sets of eight stairs each flight and one landing in between floors), when the weight of the cart became overwhelming and rather than letting the cart of laundry go and fall, Mr. Johnson held on to the heavy cart and allowed the cart to pull him to a fall.
I inspected the scene where Mr. Johnson allegedly fell in Mr. Johnson's presence, and in front of Mr. Johnson's son, minutes after the fall, and did not observe nor did Mr. Johnson or his son identify any slip, trip or dangerous condition that would give rise to Mr. Johnson's fall." ( Id. ¶¶ 4, 5, 7, 8.)
Mr. Daly's assertions, and Plaintiffs' opposition, might fairly be characterized as putting forth two separate, but related contentions, i.e., that Mr. Johnson was solely responsible for his fall, and that he would not claim that Plaintiffs were responsible. As will appear, neither contention can be accepted as an excuse for Plaintiffs' failure to notify Tower earlier about Mr. Johnson's alleged fall.
In Security Mut. Ins. Co. NY v Acker-Fitzsimmons Corp. ( 31 NY2d 436), the Court of Appeals articulated "a good-faith belief of nonliability," "reasonable under all of the circumstances," as the basis for excuse or explanation for an insured's failure to give timely notice ( see id. at 441), but such a gloss on the notice requirement had been recognized for decades. In Haas Tobacco Corp. v America Fidelity Co. ( 226 NY 343), the court recognized that while an insured might be "absolved from making the report required by its policy" in the case of a "trivial occurrence . . . [i]f no apparent harm came from the mishap" ( see id. at 344-45), where "a boy is knocked down in the street [by an automobile], and at least slightly injured, the insured may not, without any investigation whatever, rely solely upon his own opinion or upon the opinion of his driver that because he went away the injury was too trivial to require attention" ( see id. at 347.) These essentials have not changed over the past century.
Like other principles that join the subjective standard of "good faith" with the objective standard of "reasonableness" ( see Kim Hung Tsang v Romano, 31 Misc 3d 1202[A], 2011 NY Slip Op 50468 [U], * 5- * 6 [Sup Ct, Kings County 2011]), the "nonliability" limitation on the insured's duty to notify is often, if not usually, discussed in the cases without clear delineation as to whether "good faith" or "reasonableness" is being addressed. Similarly, the cases discussing "nonliability" do not always distinguish between an insured's belief that a claim will not be asserted and a belief that there is no legal basis for liability if a claim is asserted.
Caselaw suggests that "a good-faith belief of nonliability" would include a belief that there is no legal basis for the insured's liability. ( See White v City of New York, 81 NY2d 955; Security Mut. Ins. Co. v Acker-Fitzsimmons Corp., 31 NY2d at 442; National Union Fire Ins. Co. of Pittsburgh, P.A. v Great Am. E S Ins. Co., ___ AD3d ___, 2011 NY Slip Op 5859, * 2 [1st Dept 2011]; Tower Ins. Co. of NY v Red Rose Rest., Inc. , 77 AD3d 453, 454 [1st Dept 2010]; Tower Ins. Co. of NY v Miles , 74 AD3d 410 [1st Dept 2010]; Romeo v Malta , 55 AD3d 330 [1st Dept 2008]; Tower Ins. Co. of NY v Lin Hsin Long Co. , 50 AD3d 305 , 308 [1st Dept 2008]; Marco Enters. v QBE Ins. Co., 43 AD3d 728 [1st Dept 2007]; Steinberg v Hermitage Ins. Co., 26 AD3d at 427; Zadrima v PSM Ins. Co., 208 AD2d 529, 530 [2d Dept 1994].)
In none of the cited cases, however, did the insured succeed in excusing its failure to timely notify the insurer, and Plaintiffs have not cited the Court to any case in which the court has found excuse solely because of the insured's good-faith belief that there was no legal basis for the insured's liability. Where courts have rejected the insured's proffered excuse and offered a reason, it has been the lack of appropriate inquiry or investigation. ( See White v City of New York, 81 NY2d at 958 ["where a reasonable person could envision liability, that person has a duty to make some inquiry"]; Security Mut. Ins. Co. v Acker-Fitzsimmons, 31 NY2d at 442-43 ["insureds failed to exercise reasonable care and diligence in ascertaining the facts about the alleged accident and in evaluating their potential liability"]; National Union Fire Ins. Co. of Pittsburgh, P.A. v Great Am. E S Ins. Co., 2011 NY Slip Op 5859, at * 2 [insured "never sought clarification of the coverage at issue, either from its counsel or insurance carrier"]; Tower Ins. Co. of NY v Red Rose Rest., Inc., 77 AD3d at 454; Tower Ins. Co. of NY v Miles, 74 AD3d at 410; Steinberg v Hermitage Ins. Co., 29 AD3d at 427-28.)
More of the caselaw appears to address the insured's "good-faith belief in nonliability" in the sense of a belief that "the injured party would not seek to hold [the insured] liable" ( see Argentina v Ostego Mut. Fire Ins. Co., 86 NY2d 748, 750.) The standard has come to be stated as whether "a prudent insured should have realized that there was a reasonable possibility of the subject policy's involvement'." ( See 120 Whitehall Realty Assoc., LLC v Hermitage Ins. Co., 40 AD3d 719, 721 [2d Dept 2007] [quoting C.C.R. Realty of Dutchess v New York Cent. Mut Fire Ins. Co., 1 AD3d 304, 305 (2d Dept 2003)]; Paramount Ins. Co. v Rosedale Gardens, 293 AD2d 235, 239-41 [1st Dept 2002].) "[T]he requirement of prompt notice of any occurrence that may result in a claim' should not be interpreted in a way that the insurer is compelled to relinquish its right to prompt notice and all the benefits that accrue therefrom . . . by placing undue emphasis on the liability assessment of one not trained or even knowledgeable in such matters." ( Id. at 240.)
Again, the insured's failure to make reasonable inquiry or investigation may deprive the insured of this excuse. ( See Tower Ins. Co. of NY v Classon Hgts., LLC, 82 AD3d at 635 ["the building manager's knowledge triggered a duty to further investigate the accident since [the apparently injured person] was a tenant in their own building"]; Tower Ins. Co. of NY v R R Dental Modeling, Inc. , 82 AD3d 607 , 608 [1st Dept 2011]; Tower Is. Co. of NY v Amsterdam Apts., LLC, 82 AD3d at 467; Lobosco v Best Buy, Inc., 80 AD3d at 732; Felix v Pinewood Bldrs., 30 AD3d at 461 [2d Dept 2006].)
Insureds have had some success with this excuse in the "peculiar circumstances" where "the close familial relationship between the insureds and the accident was of such a nature as to support a finding that the insureds reasonably believed that they would have been apprised if the injured party had been contemplating a lawsuit." ( See Argentina v Ostego Mut. Fire. Ins. Co., 86 NY2d at 751; see also AMRO Carting Corp. v Allcity Ins. Co., 170 AD2d 394 [1st Dept 1991]; compare Balbert v 302 96th St. Owners Corp. , 77 AD3d 779 , 780 [2d Dept 2010] [Board member].) And where a woman fell in a diner parking lot, "[t]he husband's statement to the manager that he should not worry' and that his wife had tripped over her shoelaces, and the wife's statement that she was clumsy,' followed by the couple's departure without giving the manager an opportunity to obtain further information, led the manager to reasonably believe that the couple would not seek to hold the diner's owner liable for the mishap." ( See Kambousi Rest., Inc. v Burlington Ins. Co. , 58 AD3d 513 , 515 [1st Dept 2009]; see also 426-28 W. 46th St. Owners, Inc. v Greater NY Mut. Ins. Co. , 23 AD3d 207 , 207-08 [1st Dept 2005]; compare Clifton Park Food Corp. v Travelers Indem. Co., 2010 US Dist LEXIS 88655, at * 13- * 17.)
Considering, first, Plaintiffs' contention that they had a "good-faith belief of nonliability" in light of Curtis Daly's assertions as to Mr. Johnson's "history of self-inflicted falls at, in, or around the building in question, stemming from Johnson's compromised gait solely"; that on the day of his alleged fall, Mr. Johnson "did not explain that he fell for any other reason" than his attempt to pull a shopping cart full of laundry up three flights of stairs; that Mr. Daly "inspected the scene where Mr. Johnson allegedly fell in Mr. Johnson's presence, and in front of Mr. Johnson's son minutes after the fall, and did not observe nor did Mr. Johnson or his son identify any slip, trip or dangerous condition that would give rise to Mr. Johnson's fall"; a fact-finder might conclude that Mr. Daly, and, therefore, Plaintiffs had a good-faith and reasonable belief that there was no legal basis for ascribing liability to Plaintiffs for Mr. Johnson's alleged fall. ( See 875 Forest Ave. Corp. v Aetna Cas. Sur. Co., 37 AD2d 11 [1st Dept 1971], aff'd 30 NY2d 726.)
Had this remained the status of Mr. Daly's and Plaintiffs' knowledge until Plaintiffs received Mr. Johnson's counsel's letter in July 2008, this Court might well conclude that Plaintiffs have raised an issue of fact sufficient to require denial of Tower's motion. But that is not what happened according to the signed statement Mr. Daly gave to Tower's investigator. There, he states that "around February or March 2008" he "observed Mr. Johnson telling his attorney that he fell between the 4th and 3rd floors because there was no wood covering on the iron handrail." Indeed, the statement might be understood as saying that Mr. Daly was told a lawsuit was planned ("Mr. Johnson never mentioned a lawsuit until I saw him . . . with his attorney"). As stated above, Mr. Daly in his Affidavit does not retract this account; rather, it is simply ignored. There is no suggestion in either the statement or Affidavit that any further inquiry or investigation was made.
Having become aware in February or March 2008 of an alleged defect in the handrail on the stairway where Mr. Johnson said he fell, Plaintiffs should have inquired or investigated further in order to maintain any good-faith and reasonable belief that they could not be liable for Mr. Johnson's alleged fall. In any event, and perhaps more importantly, as of that point, without at least further inquiry or investigation, Plaintiffs could not have had a good-faith and reasonable belief that Mr. Johnson would not assert a claim against them.
Even assuming that, in light of the other facts and circumstances cited by Mr. Daly in his Affidavit, Plaintiffs' good-faith and reasonable belief that they could not be liable would not have been materially affected by any inquiry or investigation into the alleged defect in the handrail, a duty to notify Tower arose within a reasonable time after Mr. Daly's encounter with Mr. Johnson in February or March 2008. ( See Travelers Indem. Co. of Am. v Southern Gastronom Corp., 2010 US Dist LEXIS 32333, * 19- * 23 [EDNY 2010].) Opinions state that "the notice requirement does not exempt occurrences, which, in the insured's estimation, do not portend probable liability on its part" ( see Paramount Ins. Co. v Rosedale Garden, 293 AD2d at 241), and that "[a]t issue is not whether the insured believes he will ultimately be found liable for the injury, but whether he has a reasonable basis for a belief that no claim will be asserted against him" ( see SSBSS Realty Corp. v Public Serv. Mut. Ins. Co., 253 AD2d 583, 584 [1st Dept 1998]; see also Philadelphia Indem. Ins. Co. v Genessee Val. Improvement Corp., 41 AD3d 44, 46 [4th Dept 2007]; Clifton Park Food Corp. v Travelers Indem. Co., 2010 US Dist LEXIS 88655, at * 12.)
This Court is not aware of any opinion that expressly addresses the interplay between a belief as to the legal basis for liability and a belief as to the possibility that a claim will be asserted, although they are clearly related; and, despite the rather categorical language just quoted, caselaw discussed above makes clear that legitimate excuse may be provided by a belief as to the lack of any legal basis for liability. Where, as, here, however, there is such a clear indication that a claim will be made, the insurer's interests in early investigation and the preservation of evidence are sufficiently strong that the insured should at least make further inquiry or investigation; and, if it does not, awaiting the commencement of suit is at the insured's risk. The Court is not aware that the benefits of early investigation and the preservation of evidence are limited to situations where there is a legal basis for holding the insured liable, and it may well be that the benefits are greater when there is not.
Finding no triable issue as to a good-faith and reasonable excuse for Plaintiffs' late notice, Defendants' motion must be granted.
Plaintiffs' Verified Complaint is dismissed, and Defendants may enter judgment accordingly. Defendants are also entitled to a declaration on their counterclaim that they are not obligated to provide Plaintiffs with a defense or indemnity with respect to the claim of Kenneth L. Johnson, and may enter judgment accordingly.