Opinion
600469/07.
Decided February 5, 2008.
This declaratory action by plaintiff, The Insurance Company of New York ("Inscorp") arises out of a dispute over insurance coverage in connection with three personal injury suits commenced against defendant BFC Construction Corp. ("BFC"), entitled Dagati v BFC Construction, et al. (the "Dagati Action"), Torres v BFC Construction, et al. (the "Torres Action"), and Regolodo v BFC Construction et al. (the "Regolodo Action") (collectively, the "underlying actions"). The plaintiffs in the underlying actions allege that they were injured at a construction site where defendant BFC was performing work. Background
Regolodo's Action was initially commenced only against Neighborhood Partnership Housing Development Fund Company, Inc., the sponsor of the construction project, but was later amended to add Pacific Village, the owner, and BFC as defendants.
Inscorp issued a Commercial General Liability policy to defendant BFC for the period of January 1, 2001 to January 1, 2002, with coverage limits of $1,000,000 for each occurrence subject to a $2,000,000 General Aggregate Limit (the "Inscorp Policy"). Defendant United States Fire Insurance Company ("US Fire") provided excess liability coverage to BFC under a policy which covers the period of January 1, 2001 through January 1, 2002 (the "US Fire Policy"). The US Fire Policy provides coverage with limits of $5,000,000 for each occurrence and $5,000,000 in the aggregate, in excess of coverage provided by Inscorp.
By letter dated March 8, 2006, Inscorp's claim's representative, Nova ProRisk Solutions LP f/k/a Ward North America LP ("Ward"), advised BFC that the general aggregate limit in the Inscorp Policy was "likely to be used up in the payment or judgments or settlements" in the Torres Action.
By email dated March 9, 2006, Ward advised US Fire's claim representative, Crum and Foster ("C F") that the trial in the Dagati Action had commenced, and of the Torres and Regolodo claims. Ward's email also informed C F that "To date" $1,200,000 of the $2,000,000 general aggregate had been paid "as indemnity, leaving $800,000 as the remainder of the aggregate."
Thereafter, by email dated March 14, 2006 US Fire advised Ward that US Fire intended to attend the trial and asked for the date and location for any upcoming pre-trial settlement discussions.
On March 16, 2006, Ward faxed to C F the summons and complaint in the Regolodo Action, and correspondence, again advising that the general aggregate limit in the Inscorp Policy was "likely to be used up in the payment or judgments or settlements" in the Torres Action.
On April 20, 2006, after a $600,000 settlement in the Dagati Action, Ward sent two letters to C F advising that only $200,000 of the $2,000,000 general aggregate limit remained for the Torres and Regolodo Actions, which would be "insufficient to settle the two claims which are open and in suit under this policy." Ward also advised that it was tendering to C F $100,000 of the $200,000 remaining in the general aggregate, and that if C F agreed to accept such tender, C F would "become responsible for all defense costs and legal fees incurred in connection with this suit."
In response, on April 28, 2006, C F notified BFC that it was disclaiming coverage for the Torres and Regolodo claims based on late notice. C F also referred to a "Schedule of Underlying Insurance attached to the policy," raising a "question as to the application of these underlying policies, including whether there are multiple primary policies that respond to" the Torres and Regolodo claims.
Thereafter, by letter dated May 16, 2006, C F reiterated its denial of coverage, and advised Ward that the March 9, 2006 "exchange" from Ward regarding the Dagati Action did not constitute "notice" of such claim; that Ward's March 15, 2006 letter did not request any action by US Fire or advise that it is to serve as a tender to US Fire; and that US Fire's denial of coverage was not untimely.
The submissions indicate that by correspondence dated May 5, 2006 to Ward, North Shore Risk Management ("North Shore") informed Ward that the Inscorp Policy was issued with no specific construction sites listed, the intent of which was to provide an unimpaired aggregate for each construction site BFC was working on. Referring to the Declarations page, North Shore stated that the list of locations were for owned locations and not for construction sites. North Shore attached the premiums charged for the locations, which had "lessor's" risk codes, showing that the locations were not construction related. Thereafter, on June 27, 2006, North Shore reiterated to Ward that the "per project aggregate limit" endorsement contained in the Inscorp Policy was issued with no specific construction site to provide an unimpaired aggregate for each construction project that BFC worked on, with an attached endorsement "# CG2503" to confirm the foregoing. It was North Shore's position that Inscorp did not make a condition to coverage that each construction site upon which BFC worked had to be listed.
By correspondence dated October 3, 2006, North Shore attached an email dated September 23, 2006 from Inscorp's program administrator, Inter-Reco, which stated that "When issuing policies with this endorsement [CG25030397] on behalf of INSCORP, Inter-Reco purposely leaves this box blank. This is the endorsement that Inter-Reco uses to facilitate an aggregate per project. . . .To clarify, it is the intent of Inter-Rico that simply attaching endorsement CG25030397 to the policy signifies that the aggregate applies to each and every project."
In January 2007, Torres was settled for $650,000 as follows: (1) Inscorp agreed to contribute $575,000, without prejudice to its position that the Inscorp Policy had only $200,000 in remaining aggregate limits; and (2) US Fire agreed to contribute $75,000, without prejudice to its disclaimer for late notice and its claim that the Inscorp Policy had not been exhausted.
On January 31, 2007, counsel for Inscorp notified BFC and C F that the Inscorp Policy had been exhausted as a result of the settlement in Torres, and that as a result, Inscorp was tendering to US Fire and BFC the defense of the Regolodo Action. US Fire has refused to fulfill its coverage obligations under the US Fire Policy.
Inscorp's Motion
Inscorp argues that its Policy clearly provides that the coverage provided therein is subject to a $2,000,000 General Aggregate limit. It is undisputed that Inscorp made indemnity payments under the Inscorp Policy totaling in excess of $2,000,000. The Inscorp Policy has been exhausted because the $2,000,000 general aggregate limit has bee used up. Further, the "Designated Construction Project General Aggregate Limit Endorsement" providing for a separate $2,000,000 per project aggregate limit of liability does not apply to the settled claims, because there are no construction projects listed on the Endorsement or in the declarations to the Inscorp Policy as being applicable to this Endorsement. In addition, the six sites listed on the declarations to the Inscorp Policy are sites owned by BFC and were not involved in any of the claims settled by Inscorp.
Furthermore, US Fire is responsible to indemnify Inscorp for the payments Inscorp made in excess of the General Aggregate limit, i.e., $375,000 toward the settlement in Torres. In addition, Inscorp tendered to US Fire the defense of the Regolodo Action as a result of the exhaustion of the Inscorp Policy. US Fire's refusal to defend BFC in the Regoldo Action resulted in Inscorp having to continue to provide a defense to BFC. Thus, US Fire is obligated to reimburse Inscorp for any defense costs incurred subsequent to the exhaustion of the Inscorp Policy.
US Fire's Cross-Motion
US Fire cross moves for summary judgment dismissing this action, arguing that documentary evidence establishes that BFC's claim to coverage under the US Fire Policy is barred due to its failure to notify US Fire of the Torres and Regolodo actions in a timely manner pursuant to an express condition of the US Fire Policy requiring "prompt notice." US Fire argues that BFC knew in August 2005 that the Torres Action could potentially trigger coverage under the US Fire Policy, in light of the Supreme Court's Order permitting Torres to amend the Bill of Particulars to include additional allegations of extremely serious injuries. Yet, US Fire did not receive notice of the Torres claim until April 20, 2006, almost eight months later. Similarly, while BFC was named as a defendant in the Regolodo Action in 2004, US Fire did not receive notice of this claim until April 20, 2006. In addition, the record indicates that there is available coverage to BFC under other primary policies, namely a Reliance National Insurance policy and Transcontinental policy, and thus, the US Fire excess policy is not triggered. US Fire points out that with respect to the Reliance Policy, the US Fire Policy provides that if any underlying insurance policy is not collectible because of bankruptcy or insolvency of the insurer, the US Fire Policy "shall apply as if the underlying insurance were available and collectible." Furthermore, the $2,000,000 separate general aggregate limit of coverage contained in the Inscorp Policy applies so as to provide coverage regarding the Torres settlement and defense of the Regolodo Action. In any event, Inscorp's motion is premature as there is outstanding discovery regarding the issue of whether the Inscorp Policy contains a separate per project aggregate limit. New York courts have held that insurance contracts are to be interpreted according to the reasonable expectations and purposes of ordinary businesspeople when making ordinary business contracts. The language contained in the Designated Construction Project(s) General Aggregate Limit Endorsement is ambiguous. Thus, the Court can consider the correspondence from North Shore and Inter-Rico, two entities involved with the procurement and issuance of the Inscorp Policy, and determine that the parties intended that a separate per project aggregate limit would apply for each construction project. US Fire submits the following documents, indicating that the Inscorp Policy contains a separate general aggregate limit: (1) Inter-Rico quote dated December 6, 2000 to BFC refers to a "per project aggregate"; (2) a Large Contractor Application for BFC issued by North Shore refers to the Policy as a per project aggregate; (3) an Insurance Binder refers to a "per project aggregate"; (4) a Confirmation of Insurance from Tri-City Insurance Brokers, which refers to the Inscorp Policy as including a "per project aggregate" attachment; (5) an Inter-Rico Binder lists a "per project aggregate." Moreover, outstanding discovery, including a deposition of Inscorp, is required on the issue of the separate per occurrence limit for construction projects. Issues of fact also exist as to the parties' intent on how this endorsement should apply.
Opposition to Cross-Motion
Inscorp argues that its Policy unambiguously limits the coverage to scheduled projects, and that US Fire should not permitted to introduce extrinsic evidence simply to raise an ambiguity.
The claim that BFC gave late notice of the claim has nothing to do with US Fire's obligation to take over once the aggregate limit of the Inscorp Policy is exhausted. Under Section IV of the Inscorp Policy, Inscorp was not required to give notice of any claim to US Fire. Further, the communications from Inscorp were not notices of a claim on behalf of the insured, but simply notices advising BFC and Inscorp that the Inscorp Policy would shortly be exhausted.
In any event, Inscorp's notice was sufficient to trigger US Fire's obligation to promptly disclaim coverage, and US Fire failed to so disclaim within the short time-frame required under New York law. US Fire received notice of the Torres and Regolodo Actions on April 20, 2006, through emails to C F dated March 6 and March 9, 2006. C F received the letter of March 15, 2006 concerning such Actions, and the pleadings in Regolodo, on March 16, 2006. US Fire's delay of almost 50 days after it first received such notice is untimely as a matter of law.
Further, the per project aggregate clearly and unambiguously does not apply to the settled claims. The words of the Endorsement have a definite and precise meaning, and have no reasonable basis for a difference in opinion. However, in the event the Court decides to consider the extrinsic evidence, Inscorp should be given leave to address and provide its own contrary evidence regarding intent.
Finally, there are no issues of fact, and no need to depose Inscorp's representative, since there is no ambiguity in the Inscorp Policy.
Reply in Support of Cross-Motion
US Fire argues that the insured, BFC, has a duty to notify an insurer, including an excess insurer, of a claim or suit. BFC's failure to timely notify US Fire bars BFC's claim for coverage.
Further, nothing in Inscorp's March 6 and March 9, 2006 emails indicate that the Torres and Regolodo claims would exhaust the primary Policy limits and/or trigger excess coverage. In an email dated March 15, 2006, Inscorp's claims administrator states "I don't know if [US Fire] is monitoring the other two claims." Additionally, the March 15, 2006 correspondence merely suggests that the aggregate limit might be used up for the Torres Action. And, the March 16, 2006 facsimile does not suggest the US fire Policy is being implicated. Thus, US Fire's disclaimers, issued one week after receiving the April 20, 2006 correspondence, were timely.
Analysis
To obtain summary judgment, the proponent must make a prima facie showing of entitlement to judgment as a matter of law, by advancing sufficient "evidentiary proof in admissible form" to demonstrate the absence of any material issues of fact (CPLR § 3212 [b]; Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853; Zuckerman v City of New York, 49 NY2d 557, 562; Silverman v Perlbinder, 307 AD2d 230, 762 NYS2d 386 [1st Dept 2003]; Thomas v Holzberg, 300 AD2d 10, 11, 751 NYS2d 433, 434 [1st Dept 2002]). Thus, the motion must be supported "by affidavit [from a person having knowledge of the facts], by a copy of the pleadings and by other available proof, such as depositions" (CPLR § 3212 [b]). A party can prove a prima facie entitlement to summary judgment through the affirmation of its attorney based upon documentary evidence ( Zuckerman, supra; Prudential Securities Inc. v Rovello, 262 AD2d 172 [1st Dept 1999]).
Alternatively, to defeat a motion for summary judgment, the opposing party must show facts sufficient to require a trial of any issue of fact (CPLR § 3212 [b]). Thus, where the proponent of the motion makes a prima facie showing of entitlement to summary judgment, the burden shifts to the party opposing the motion to demonstrate by evidentiary proof in admissible form the existence of a factual issue requiring a trial of the action, or to tender an acceptable excuse for his or her failure to do so ( Vermette v Kenworth Truck Co., 68 NY2d 714, 717; Zuckerman v City of New York, supra, 49 NY2d at 560, 562; Forrest v Jewish Guild for the Blind, 309 AD2d 546, 765 NYS2d 326 [1st Dept 2003]; Zuckerman, supra at 562). Mere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient ( Alvord and Swift v Steward M. Muller Constr. Co, 46 NY2d 276, 281-82, 413 NYS2d 309; Fried v Bower Gardner, 46 NY2d 765, 767, 413 NYS2d 650; Platzman v American Totalisator Co., 45 NY2d 910, 912, 411 NYS2d 230; Mallad Const. Corp. v County Fed. Sav. Loan Assn., 32 NY2d 285, 290, 344 NYS2d 925; Plantamura v Penske Truck Leasing, Inc., 246 AD2d 347, 668 NYS2d 157 [1st Dept 1998]).
Initially at issue is the interpretation of the General Aggregate Limit provisions in the Inscorp Policy.
"Section III-Limits of Insurance" provides that
1.The Limits of Insurance shown in the Declarations and the rules below fix the most we will pay regardless of the number of:
a. Insureds;
b. Claims made or "suits" brought; or
c. Persons or organizations making claims or bringing "suits".
2. The General Aggregate Limit [of $2,000,000] is the most we will pay for the sum of:
* * *
b. Damages under Coverage A, except damages because of "bodily injury" . . .
* * *
5. Subject to 2. or 3. above, whichever applies, the Each Occurrence Limit is the most we will pay for the sum of:
a. Damages under Coverage A; . . .
* * *
Because of all "bodily injury" and "property damage" arising out of any one "occurrence."
Under the Endorsement entitled "Designated Construction Project(s) General Aggregate Limit," the Policy is modified as follows:
A. For all sums which the insured becomes legally obligated to pay as damages caused by "occurrences" under COVERAGE A (SECTION I) and for all medical expenses caused by accidents under COVERAGE C (SECTION I), which can be attributed only to ongoing operations at a single designated construction project shown in the Schedule above:
1. A separate Designated Construction Project General Aggregate Limits applies to each designated construction project, and that limit is equal to the amount of the General Aggregate Limit shown in the Declarations.
However, the "Schedule above" does not list any construction project. Above paragraph A, appears the following:
SCHEDULE
Designated Construction Projects
(If no entry appears above, information required to complete this endorsement will be shown in the Declarations as applicable to this endorsement).
The interpretation of an insurance policy's terms is a question of law for the court ( Seaport Park Condominium v Greater New York Mut. Ins. Co. ,39 AD3d 51, 828 NYS2d 381 [1st Dept 2007]; Chimart Assoc. v Paul, 66 NY2d 570, 572-573, 498 NYS2d 344). As with the interpretation of any contract, the unambiguous terms of an insurance policy must be accorded their plain and ordinary meaning ( Teichman v Community Hosp. of W. Suffolk, 87 NY2d 514, 520, 640 NYS2d 472; 2619 Realty v Fidelity Guar. Ins. Co., 303 AD2d 299, 300, 756 NYS2d 564, lv. denied 100 NY2d 508, 764 NYS2d 235; West 56th St. Assoc. v Greater NY Mut. Ins. Co., 250 AD2d 109, 112, 681 NYS2d 523). An insurer is entitled to have its contract of insurance enforced in accordance with its provisions and without a construction contrary to its express terms ( Broad Street, LLC v Gulf Ins. Co. , 37 AD3d 126, 131, 832 NYS2d 1, 4 — 5 [1st Dept 2006]). If, however, there is ambiguity in the terms of the policy, any doubt as to the existence of coverage must be resolved in favor of the insured and against the insurer, as drafter of the agreement ( Broad Street, LLC v Gulf Ins. Co. , 37 AD3d 126, citing Westview Assoc. v Guaranty Natl. Ins. Co., 95 NY2d 334, 339, 717 NYS2d 75; United States Fid. Guar. Co. v Annunziata, 67 NY2d 229, 232, 501 NYS2d 790).
A contract of insurance is ambiguous if the language therein is susceptible of two or more reasonable interpretations ( Broad Street, LLC v Gulf Ins. Co. , 37 AD3d 126, citing State of New York v Home Indem. Co., 66 NY2d 669, 671, 495 NYS2d 969; Matter of Ideal Mut. Ins. Co., 231 AD2d 59, 63, 659 NYs2d 273 [1997]), whereas, in contrast, a contract is unambiguous if the language has "a definite and precise meaning, unattended by danger of misconception in the purport of the [agreement] itself, and concerning which there is no reasonable basis for a difference of opinion" ( Broad Street, LLC v Gulf Ins. Co. , 37 AD3d 126 citing Breed v Insurance Co., 46 NY2d at 355, 413 NYS2d 352; see also Greenfield v Philles Records, 98 NY2d 562, 569-570, 750 NYS2d 565; Bethlehem Steel Co. v Turner Constr. Co., 2 NY2d 456, 460, 161 NYS2d 90 ["[m]ere assertion by one that contract language means something to him, when it is otherwise clear, unequivocal and understandable when read in connection with the whole contract, is not in and of itself enough to raise a triable issue of fact"]).
The provisions in the Inscorp Policy at issue could not be clearer. None of BFC's construction projects are listed in the Schedule. Further, it is uncontested that the six sites listed on the Declarations to the Inscorp Policy are sites owned by BFC and not construction projects. Thus, the sites listed on the Declarations to the Policy are applicable to this separate Endorsement. As the subject provisions of the Inscorp Policy are clear and unambiguous, and reasonably susceptible to only one meaning, consideration of parol evidence of the parties' course of conduct or to determine the parties' intent is impermissible ( National Abatement Corp. v National Union Fire Ins. Co. of Pittsburgh, PA , 33 AD3d 570 , 824 NYS2d 230 [1st Dept 2006]).
Therefore, based on a reading of the subject provisions, the Court determines that the Inscorp Policy provides for coverage up to a $2,000,000 General Aggregate Limit, and the Designated Construction Project General Aggregate Limit Endorsement does not apply to the claims at issue herein.
However, Inscorp failed to establish, as a matter of law, that US Fire's obligation to provide excess coverage was triggered. Excess or umbrella policies do not contribute to a loss until the limits of the underlying primary policy have been reached ( Steyr-Daimler-Puch A.G. v Allstate Ins. Co., 151 AD2d 942, 543 NYS2d 538 [3rd Dept 1989] citing State Farm Fire Cas. Co. v LiMauro, 65 NY2d 369). Under its Policy with BFC, US Fire agreed to:
[P]ay on behalf of the insured for that amount of loss which exceeds the amount of loss payable by underlying policies described in the Declarations, but the Company's obligation hereunder shall not exceed the limit of liability stated in Declaration 6.
According to the US Fire Policy Declarations, two insurers were listed on the "Schedule of Underlying Insurance": (1) Transcontinental for the period of July 22, 2000 through July 22, 2001 with per occurrence limits of $1,000,000 and $2,000,000 in the general aggregate, and (2) Reliance National for a coverage period of March 15, 1999 through March 15, 2002, with per occurrence limits of $1,000,000 and $2,000,000 in the general aggregate. Since excess coverage is implicated only upon the exhaustion of primary insurance ( Liberty Mut. Ins. Co. v Insurance Co. of State of Pennsylvania , 43 AD3d 666, 841 NYS2d 288 [1st Dept 2007]), and the record does not indicate that the underlying policies were exhausted, it cannot be said that US Fire's obligation to indemnify Inscorp for the payments Inscorp made in excess of its Policy limits has triggered.
With respect to US Fire's cross-motion to dismiss for failure to provide timely notice, US Fire's Policy provides that "in the event of occurrence, claim or suit," BFC was obligated "to see to it that We [US Fire] receive prompt written notice of any occurrence, which may result in a claim." In the event a claim is made or suit is brought against BFC, BFC "must see to it that WE receive prompt written notice of the claim or suit" and "Immediately send US copies of any . . . summons, or legal papers received in connection with the claim or suit." Additionally, the US Fire Policy provides that
"A notice given by, or on behalf of, the insured, or written notice by, or on behalf of, the injured person or any other claimant, to any licensed agent of our in New York State with particulars sufficient to identify you shall be deemed notice to us."
Furthermore, "if an underlying insurance is stated in Item 5 of the Declarations, is not collectible because of bankruptcy or insolvency of the insurer, this policy shall apply as if the underlying insurance were available and collectible."
Under this provision, US Fire was entitled to prompt written notice of the underlying claims. It is well settled that when an insurance policy requires notice of an occurrence or action be given promptly, that means within a reasonable time in view of all of the facts and circumstances ( The Doe Fund, Inc. v Royal Indem. Co. , 34 AD3d 399, 825 NYS2d 450 [1st Dept 2006]). Courts have found even relatively short periods of unexcused delay in giving notice to be unreasonable as a matter of law ( id.; see Deso v London Lancashire Indem. Co. of Am., 3 NY2d 127, 164 NYS2d 689 [51 days]; US Pack Network Corp. v Travelers Prop. Cas. , 23 AD3d 299 , 808 NYS2d 153 [6 months]; Heydt Contr. Corp. v American Home Assur. Co., 146 AD2d 497, 536 NYS2d 770, lv. dismissed 74 NY2d 651, 542 NYS2d 520, 540 [131 days]). The requirement of timely notice to the insurer is a condition precedent to coverage ( Paramount Ins. Co. v Rosedale Gardens, 293 AD2d 235, 239, 743 NYS2d 59. Without a valid excuse, failure to satisfy this requirement vitiates the policy ( Security Mut. Ins. Co. of NY v Acker-Fitzsimons Corp., 31 NY2d 436, 440, 340 NYS2d 902).
With respect to the Regolodo Action, Regolodo was allegedly injured on July 23, 2001 at a BFC construction project. On March 16, 2006, Inscorp's representative, Ward, provided C F the summons and complaint in the Regolodo Action, and advised C F that the aggregate limit in the Inscorp Policy was likely to be exhausted. The summons and complaint described the nature of Regolodo's claim. Likewise, on March 16, 2006, Ward forwarded a letter to US Fire's representative, which indicated the nature of the Torres Action, and expressly stated that the general aggregate limit was likely to be exhausted up on the payment of judgements or settlements. Thus, the occurrences giving rise to the Torres and Regolodo claims were provided to US Fire on March 16, 2006.
The timeliness of an insurer's disclaimer is measured from the date it first receives information that would disqualify the claim ( Matter of Allcity Ins. Co. v Jimenez, 78 NY2d 1054, 576 NYS2d 87). US Fire did not issue its disclaimer until April 28, 2006, over 40 days later ( 2002 West 16th St. Tenants Corp. v Public Serv. Mut. Ins. Co., 290 AD2d 278, 736 NYS2d 34 [1st Dept 2002] [defendant had no need to conduct an investigation before determining whether to disclaim. Defendant's 30-day delay in disclaiming coverage was therefore unreasonable as a matter of law]). Although BFC failed to promptly notify US Fire of the Regolodo and Torres claims, timely notice of disclaimer must be given by an insurance company even where the insured has not given timely notice of the occurrence ( Continental Cas. Co. v Employers Ins. Co. of Wausau , 16 Misc 3d 223, 839 NYS2d 403 [Supreme Court, New York County 2007], citing AIU Ins. Co. v Investors Ins. Co. , 17 AD3d 259, 260, 793 NYS2d 412 [1st Dept 2005]). Here, the operative date is March 16, 2006, and US Fire failed to explain the basis for its failure to respond to the correspondence it received on March 16th. Therefore, US Fire's cross-motion to dismiss the complaint is denied.
Based on the foregoing, it is hereby
ORDERED that the motion by plaintiff and cross-motion by defendant US Fire are denied; and it is further
ORDERED that plaintiff shall serve a copy of this order with notice of entry upon all parties within 20 days of entry.
This constitutes the decision and order of the Court.