Summary
In Town of Smithtown v National Union Fire Ins. Co. (191 AD2d 426 [2d Dept 1993]), the plaintiffs commenced a declaratory judgment action seeking a declaration that their insurers were obligated to defend them in four actions brought by various school districts.
Summary of this case from Bro. Jimmy's BBQ, Inc v. Am. Intl. Gr.Opinion
March 1, 1993
Appeal from the Supreme Court, Suffolk County (Brown, J.).
Ordered that the order is reversed insofar as appealed from, on the law, with costs, and that branch of the defendants' cross motion which was for summary judgment on behalf of American International Group, Inc., is granted, it is declared that American International Group, Inc., has no duty to defend or indemnify the plaintiffs, and the matter is remitted to the Supreme Court, Suffolk County, for a new determination with respect to the plaintiffs' motion for a protective order.
The plaintiffs brought this declaratory judgment action seeking a determination that the defendants had a duty to defend them in four actions brought by various school districts in Suffolk County, for their alleged failure to timely disburse tax money in accordance with the Suffolk County Tax Act (hereafter the SCTA) over a six-year period. Upon receiving the complaints, the plaintiffs notified the defendants of the lawsuits. The defendants thereafter disclaimed coverage, in part, due to failure to give notice of the claims "as soon as practicable". The instant litigation ensued.
Compliance with a proper notice-of-claim provision in an insurance policy is a condition precedent to all of an insurer's duty under the policy, including the duty to defend (see, Empire City Subway Co. v. Greater N.Y. Mut. Ins. Co., 35 N.Y.2d 8; Commercial Union Ins. Co. v. International Flavors Fragrances, 822 F.2d 267), and the insurer need not show prejudice before it can assert the defense of noncompliance (see, Unigard Sec. Ins. Co. v. North Riv. Ins. Co., 79 N.Y.2d 576, 581; Security Mut. Ins. Co. v. Acker-Fitzsimons Corp., 31 N.Y.2d 436, 440; Reliance Ins. Co. v. Garsart Bldg. Corp., 131 A.D.2d 828, 829). An insured's good-faith belief of nonliability, however, may excuse or explain a seeming failure to give timely notice of a claim against it as long as the belief is reasonable under the circumstances (see, Merchants Mut. Ins. Co. v. Hoffman, 56 N.Y.2d 799, 801-802; Security Mut. Ins. Co. v. Acker-Fitzsimons Corp., supra, at 441; Reliance Ins. Co. v. Garsart Bldg. Corp., supra, at 829).
We find that the allegations in the underlying complaints demonstrate that there may be an issue of fact concerning whether or not the plaintiffs should have reasonably been aware that a violation of the SCTA might possibly give rise to a claim of coverage under the policy. We therefore reverse so much of the order as granted summary judgment to the plaintiffs. Further discovery should be conducted on this issue. In this regard, we note that an order directing that discovery remain confidential with respect to third parties might be appropriate to resolve the plaintiffs' concern that compliance with discovery might prejudice their defense in the underlying actions.
We further find that the contract of insurance was entered into by the Town of Smithtown and the National Union Fire Insurance Company and that the plaintiffs have failed to allege or tender proof that the parent company, American International Group, Inc., exercised complete dominion and control over National Union Fire Insurance Company in this matter. Thus, liability of the parent company for the contractual obligations of its subsidiary may not be imposed (see, Carrier Communications Corp. v. Cellular Tel. Enters., 189 A.D.2d 848; Pebble Cove Homeowners' Assn. v Fidelity N.Y., 153 A.D.2d 843; Eastern States Elec. Contrs. v Crow Constr. Co., 153 A.D.2d 522). We therefore grant that branch of the defendants' cross motion which was for partial summary judgment on behalf of American International Group, Inc. Thompson, J.P., Sullivan, Miller and Santucci, JJ., concur.