Decided December 19, 2005.
Alan C. Kelhoffer Esq., Lambert Weiss New York, NY, for Defendant-Third Party Plaintiff.
Regis E. Staley Jr. Esq., White, Quinlan Staley, L.L.P., Garden City, NY, for Third Party Defendant.
Plaintiff sues defendants to recover for lacerations she sustained in an altercation on defendants' business premises, the News Room Sports and Jazz Bar, at 854 Gerard Avenue, Bronx County, October 4, 2003. Defendant-third party plaintiff Triangle Realty-Southeast sues third party defendant Sirius America Insurance Company for a declaratory judgment that Sirius America owes a duty to defend Triangle Realty under its insurance policy. C.P.L.R. § 3001. Triangle Realty, claiming Sirius America's breach of contract, breach of the implied covenant of good faith and fair dealing, and waiver and estoppel, moves for summary judgment. C.P.L.R. § 3212(b).
The complaint in the main action claims that plaintiff Mumford was injured due to defendant Triangle Realty's negligent ownership, operation, and maintenance of defendant's premises. The parties do not dispute that the insurance policy issued by Sirius America to Triangle Realty entitles it to Sirius America's defense and indemnity coverage of negligence claims against Triangle Realty. Sirius America disclaims coverage based on a policy exclusion applicable to assault and battery claims. For the reasons explained below, the court concludes that Triangle Realty is entitled to a defense by Sirius America in the main action and grants Triangle Realty's motion for summary judgment in the third party action. C.P.L.R. §§ 3001, 3212(b).
II. NOTICE OF DISCLAIMER
On March 31, 2004, Sirius America acknowledged its receipt of Triangle Realty's claim for coverage of plaintiff's injury October 4, 2003. On May 26, 2004, Sirius America first notified Triangle Realty of a "DENIAL OF COVERAGE." Aff. of Alan C. Kelhoffer, Ex. I at 1. This notice, which the parties also do not dispute, refers to and quotes an "ASSAULT AND/OR BATTERY EXCLUSION" that is not in the parties' insurance contract. Based on this exclusion, Sirius America advised Triangle Realty "that there is no coverage for this loss." Id. at 2.
On September 16, 2004, in a further undisputed notice to Triangle Realty, Sirius America declined to reverse or rescind "our disclaimer dated May 26, 2004." Kelhoffer Aff., Ex. L at 1. This notice includes the correct "ASSAULT AND BATTERY EXCLUSION" in the parties' policy and acknowledges that the exclusion quoted in the earlier notice of May 26, 2004, was not the same. Id. at 3. The correct exclusion provides:
that no coverage shall apply under this policy for any claim, demand or suit based on Assault and Battery, and Assault and Battery shall not be deemed an accident, whether or not committed by or at the direction of the insured.
Given these undisputed notices, Triangle Realty maintains that Sirius America did not timely disclaim coverage based on a policy exclusion applicable to this insured. New York Insurance Law § 3420(d) requires that if
an insurer shall disclaim liability or deny coverage for death or bodily injury arising out of . . . any . . . type of accident occurring within this state, it shall give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured. . . .
Triangle Realty contends not that Sirius America's May 2004 notice was untimely, but that because it referred to and was based on policy terms that did not apply to this insured, the notice was ineffective. While Triangle Realty maintains that Sirius America's September 2004 notice simply adhered to the May 2004 disclaimer, insofar as the September 2004 notice constituted a valid substitute disclaimer referring to the actual terms in the parties' insurance contract, Triangle contends that this later notice was untimely.
A. Applicability of Insurance Law § 3420(d)
Sirius America maintains that because plaintiff's claim is based on an assault and battery on her, the claim falls outside that part of the policy extending coverage and is not a covered "occurrence," Kelhoffer Aff., Ex. G § I(a)(1), rendering a disclaimer pursuant to Insurance Law § 3420(d) unnecessary. Sirius America's own initial May 2004 notice, however, acknowledges that the insurer has the duty to defend the insured against a suit for damages and to pay those damages the insured is obligated to pay for "bodily injury" to which the insurance applies. Kelhoffer Aff., Ex. I at 2. Sirius America does not suggest that plaintiff's injury occurred off the insured premises or at a time when the insurance did not apply. See, e.g., Tagney v. Burke, 21 AD3d 367, 368 (2nd Dep't 2005). This duty to cover damages for bodily injury caused by an "occurrence" is under the "Insuring Agreement" part of the policy. Kelhoffer Aff., Ex. G § I(a)(1). "`Occurrence' means an accident. . . ." Id., Ex. G § V(12). See Technicon Elecs. Corp. v. American Home Ins. Co., 74 NY2d 66, 74 (1989); Markevics v. Liberty Mut. Ins. Co., 278 AD2d 285, 287 (2nd Dep't 2000), aff'd, 97 NY2d 646 (2001); Penn-America Group v. Zoobar, Inc., 305 AD2d 1116, 1117 (4th Dep't 2003). The part of the policy providing that "no coverage shall apply . . . for any claim . . . based on Assault and Battery, and Assault and Battery shall not be deemed an accident," is under an "EXCLUSION ENDORSEMENT" after the Insuring Agreement. Kelhoffer Aff., Ex. L at 3.
A disclaimer pursuant to Insurance Law § 3420(d) is unnecessary only if the policy, by containing no provisions covering the claimed loss, does not contemplate coverage in the first instance, so that requiring coverage upon a failure to disclaim timely would create coverage where there never was any. Tribeca Broadway Assoc. v. Mount Vernon Fire Ins. Co., 5 AD3d 198, 200-201 (1st Dep't 2004); Crespo v. City of New York, 303 AD2d 166, 167 (1st Dep't 2003); Seneca Ins. Co. v. Naprawa, 294 AD2d 183, 184 (1st Dep't 2002); National Union Fire Ins. Co. of Pittsburgh, Pa. v. Utica First Ins. Co., 6 AD3d 681, 682 (2nd Dep't 2004). A disclaimer pursuant to § 3420(d) is necessary where the policy does contain a provision covering the claimed loss, but for an exclusionary provision, and denial of coverage is based on a policy exclusion without which the claim would be covered. Markevics v. Liberty Mut. Ins. Co., 97 NY2d at 649; Worcester Ins. Co. v. Bettenhauser, 95 NY2d 185, 188-89 (2000); Penn-America Group v. Zoobar, Inc., 305 AD2d at 1117; Sphere Drake Ins. Co. v. Block 7206 Corp., 265 AD2d 78, 80, 82 (2nd Dep't 2000).
Plaintiff's bodily injury claim falls squarely within the Insuring Agreement, the policy's coverage provisions, and is covered unless the claim falls under the specific policy exclusion for claims based on assault and battery. Sirius America's denial of coverage, by the notice's plain terms, is predicated expressly on this designated exclusion endorsement to the policy. Id. at 80. Where the insurer relies on a designated exclusion to remove the claim from coverage, rather than a total absence of coverage, the insurer must deny coverage on the basis of this exclusion in compliance with Insurance Law § 3420(d). Markevics v. Liberty Mut. Ins. Co., 97 NY2d at 649; Worcester Ins. Co. v. Bettenhauser, 95 NY2d at 189-90; Columbia Cas. Co. v. National Emergency Servs., 282 AD2d 346, 347 (1st Dep't 2001); Sphere Drake Ins. Co. v. Block 7206 Corp., 265 AD2d at 80. Noncompliance with Insurance Law § 3420(d) by failing to disclaim effectively or timely is "dispositive" and precludes later reliance on a policy exclusion to deny coverage or otherwise avoid the insurer's obligations under the policy. Worcester Ins. Co. v. Bettenhauser, 95 NY2d at 190. See id. at 189; Siagha v. National Fire Ins. Co of Pittsburgh, Pa., 306 AD2d 60, 62 (1st Dep't 2003); Paul M. Maintenance, Inc. v. Transcontinental Ins. Co., 300 AD2d 209, 212 (1st Dep't 2002); Benjamin Shapiro Realty Co. v. Agricultural Ins. Co., 287 AD2d 389 (1st Dep't 2001).
B. Effectiveness of the May 2004 Notice
When an insurer notifies its insured of a disclaimer of coverage, the notice must apprise the insured of the grounds for the disclaimer, "with a high degree of specificity," so the insured may adequately assess whether the disclaimer will be effective. General Acc. Ins. Group v. Cirucci, 46 NY2d 862, 864 (1979); Paul M. Maintenance, Inc. v. Transcontinental Ins. Co., 300 AD2d at 212; Hazen v. Otsego Mut. Fire Ins. Co., 286 AD2d 708, 709 (2nd Dep't 2001). See Maroney v. New York Cent. Mut. Fire Ins. Co., 10 AD3d 778, 781 (3rd Dep't 2004), aff'd, ___ NY3d ___, 2005 WL 2777579 (Oct. 27, 2005); Benjamin Shapiro Realty Co. v. Agricultural Ins. Co., 287 AD2d 389; Lancer Ins. Co. v. Philadelphia Indem. Ins. Co., 12 AD3d 641, 644 (2nd Dep't 2004). A disclaimer based on an erroneous policy provision that does not apply to the insured is ineffective. Id.; Hazen v. Otsego Mut. Fire Ins. Co., 286 AD2d at 709.
Sirius America admits in its September 2004 notice that the May 2004 notice is based on a provision from a policy form different from the one used in Triangle Realty's policy and therefore inapplicable to Triangle Realty. This difference is not a merely technical error.
The exclusion terms relied on as removing plaintiff's claim from the policy's coverage are far broader than the correct terms quoted above. Rather than simply excluding claims based on "Assault and Battery, . . . whether or not committed by or at the direction of the insured," Kelhoffer Aff., Ex. L at 3, the incorrect terms relied on exclude both:
Assault and/or battery committed by any person whosoever, regardless of degree of culpability or intent and regardless whether the acts are alleged to have been committed by the insured or any officer, agent, servant, or employee of the insured or by any other person
Any actual or alleged negligent act or emission [sic] in the:
IV. Reporting to the proper authorities . . . or
of a person for whom the insured is or ever was legally responsible, which arises from any actual or alleged assault and/or battery.
Id., Ex. I at 2 (emphases added).
Those terms would exclude an injury arising not just from an assault or battery allegedly committed with the requisite intent for that conduct to be actionable, Wende C. v. United Methodist Church, NY W. Area, 4 NY3d 293, 298 (2005); Jeffreys v. Griffin, 1 NY3d 34, 41 n. 2 (2003); Charkhy v. Altman, 252 AD2d 413, 414 (1st Dep't 1998); Bastein v. Sotto, 299 AD2d 432, 433 (2nd Dep't 2002); see Anastasis v. American Safety Indem. Co., 12 AD3d 628, 629 (2nd Dep't 2004), but also from the negligent or even non-negligent wielding of a dangerous instrument, without the requisite intent or culpability for the attacker's liability. Moreover, those terms broadly exclude an injury from an alleged assault or battery where Triangle Realty's management or employee allegedly was negligent in controlling the circumstances. Both those types of situations are closer to the allegations in plaintiff's complaint than the situations encompassed by the more limited exclusion actually contained in the applicable policy.
The quotation of erroneous exclusion terms in Sirius America's May 2004 notice misled its recipients to focus on irrelevant circumstances not the focus of concern in this litigation. This erroneous, irrelevant information failed to comply with Insurance Law § 3420(d), rendering the May 2004 notice ineffective to disclaim or deny coverage. Lancer Ins. Co. v. Philadelphia Indem. Ins. Co., 12 AD3d at 644. See DiGuglielmo v. Travelers Prop. Cas., 6 AD2d 344, 346 (1st Dep't 2004); American Ref-Fuel Co. of Hempstead v. Employers Ins. Co. of Wausau, 265 AD2d 49, 54 (2nd Dep't 2000).
C. Timeliness of the September 2004 Notice
Even if Sirius America, after one misleading, ineffective notice, is not precluded from later relying on the correct policy exclusion to escape liability, Worcester Ins. Co. v. Bettenhauser, 95 NY2d at 189-90; Paul M. Maintenance, Inc. v. Transcontinental Ins. Co., 300 AD2d at 212; Benjamin Shapiro Realty Co. v. Agricultural Ins. Co., 287 AD2d 389, the later September 2004 notice would be untimely. Sirius America's basis for denying or disclaiming coverage was readily apparent and known to the insurer when it issued its May 2004 notice, before delaying four months more until issuing a notice including the correct exclusion terms applicable to Triangle Realty. First Fin. Ins. Co. v. Jetco Contr. Corp., 1 NY3d 64, 69 (2003); West 16th St. Tenants Corp. v. Public Serv. Mut. Ins. Co., 290 AD2d 278, 279 (1st Dep't 2002); Republic Franklin Ins. Co. v. Pistilli, 16 AD3d 477, 479 (2nd Dep't 2005); 79th Realty Co. v. Wausau Ins. Cos., 7 AD3d 507, 508 (2nd Dep't 2004). The insurer bears the burden to explain the delay. First Fin. Ins. Co. v. Jetco Contr. Corp., 1 NY3d at 70; Republic Franklin Ins. Co. v. Pistilli, 16 AD3d at 479. Sirius America offers absolutely no explanation, nor could it offer an acceptable explanation given the information obviously available to the insurer nearly four months previously. Id.; 79th Realty Co. v. Wausau Ins. Cos., 7 AD3d at 508. The delay between May 26 and September 16, 2004, even disregarding the period before May 26, is unreasonable as a matter of law absent any explanation. C.P.L.R. § 3212(b); NY Ins. Law § 3420(d); First Fin. Ins. Co. v. Jetco Contr. Corp., 1 NY3d at 70; West 16th St. Tenants Corp. v. Public Serv. Mut. Ins. Co., 290 AD2d at 279; American Ref-Fuel Co. of Hempstead v. Employers Ins. Co. of Wausau, 265 AD2d at 54.
III. COVERED EVENT
Even if Sirius America's May or September 2004 notice was timely and effective to deny or disclaim coverage, the correct, applicable policy terms do not exclude all plaintiff's claims. While Sirius America maintains that the assault and battery on plaintiff was not an occurrence covered under the parties' insurance policy, plaintiff does not allege she was injured due only to an assault and battery.
An insurer's duty to defend liability claims is broader than its duty to indemnify actual liability and requires defense of an entire action even if only one claim may fall within a policy's indemnity coverage. Town of Massena v. Healthcare Underwriters Mut. Ins. Co., 98 NY2d 435, 443-44 (2002); Agoado Realty Corp. v. United Intl. Ins. Co., 95 NY2d 141, 145 (2000); Continental Cas. Co. v. Rapid-Am. Corp., 80 NY2d 640, 648 (1993); Fitzpatrick v. American Honda Motor Co., 78 NY2d 61, 65 (1991). Of course if the applicable policy exclusion encompassed negligence claims, such as negligent hiring, supervision, or provision of security akin to Triangle Realty's negligent operations claimed by plaintiff, such an exclusion would relieve Sirius America from providing a defense. Towne Bus Corp. v. Insurance Co. of the State of Pa., 295 AD2d 272, 273 (1st Dep't 2002); Handlebar Inc. v. Utica First Ins. Co., 290 AD2d 633, 635 (3rd Dep't 2002); Sphere Drake Ins. Co. v. Block 7206 Corp., 265 AD2d at 80. Although the applicable exclusion does not encompass negligence claims, it still would relieve Sirius America from defending plaintiff's claims were they based only on an assault and battery, even if other parties and not Triangle Realty engaged in the intentional attack, Agoado Realty Corp. v. United Intl. Ins. Co., 95 NY2d at 146; U.S. Underwriters Ins. Co. v. Val-Blue Ins. Co., 85 NY2d 821, 823 (1995), and Triangle was implicated only by its negligent operations. Mount Vernon Fire Ins. Co v. Creative Hous., 88 NY2d 347, 352-53 (1996); Perez-Mendez v. Roseland Amusement Dev. Corp., 305 AD2d 166 (1st Dep't 2003); Dudley's Rest. v. United Natl. Ins. Co., 247 AD2d 425, 426 (2nd Dep't 1998).
In contrast, plaintiff alleges that another party may have been responsible for wielding or setting in motion the instrument that cut her, but did so negligently and unintentionally, by conduct that would amount to mere negligence and not the intentional conduct required for an assault or battery. Wende C. v. United Methodist Church, NY W. Area, 4 NY3d at 298; Jeffreys v. Griffin, 1 NY3d at 41 n. 2; Charkhy v. Altman, 252 AD2d at 414; Bastein v. Sotto, 299 AD2d at 433. See Anastasis v. American Safety Indem. Co., 12 AD3d at 629. Nor does plaintiff claim only that she was assaulted and battered. Instead, the complaint's first cause of action alleges that intoxicated persons were caused "without warning or provocation to stab the Plaintiff." Kelhoffer Aff., Ex. A ¶ 79 (emphasis added). This cause of action alleges neither any intent by the person or persons stabbing her, nor an express assault or battery implying the requisite intent. Wende C. v. United Methodist Church, NY W. Area, 4 NY3d at 298; Jeffreys v. Griffin, 1 NY3d at 41 n. 2; Charkhy v. Altman, 252 AD2d at 414. Depending on the circumstances leading up to plaintiff's contact with a sharp object, a stabbing might be an intentional battery, or might be entirely inadvertent, and requires Sirius America's defense notwithstanding the assault and battery exclusion. Anastasis v. American Safety Indem. Co., 12 AD3d at 629-30; Essex Ins. Co. v. T-Birds Nightclub Rest., 229 AD2d 919, 920 (4th Dep't 1996).
While plaintiff's second cause of action in her complaint includes intentional conduct and assault and battery, this cause of action also includes unintentional conduct and being "cut, stabbed, sliced," as well as "beaten," distinct from intentional conduct and being "assaulted" and "battered." Kelhoffer Aff., Ex. A ¶ 90. Plaintiff
was caused to be negligently, intentionally, wrongfully, willfully, maliciously and with gross negligence physically assaulted, beaten, battered, cut, stabbed, sliced and was caused to sustain severe and permanent injuries.
Id. (emphases added). See id. ¶ 92. Although plaintiff may make the mistake of alleging these various forms of conduct in the conjunctive, rather than the disjunctive, evidence of only negligent cutting, stabbing, or slicing would sustain her second cause of action. Even if "inartfully" pleaded, Leon v. Martinez, 84 NY2d 83, 88 (1994); DeMicco Bros., Inc. v. Consolidated Edison Co. of NY, Inc., 8 AD3d 99, 100 (1st Dep't 2004), those allegations, by themselves, manifest the elements of a cognizable claim of negligently caused injury. C.P.L.R. § 3211(a)(7); Polonetsky v. Better Homes Depot, 97 NY2d 46, 54 (2001); Leon v. Martinez, 84 NY2d at 87-88; Gamiel v. Curtis Riess-Curtis, P.C., 16 AD3d 140, 141 (1st Dep't 2005); Skillgames, LLC v. Brody, 1 AD3d 247, 250 (1st Dep't 2003). This evidence of only negligent conduct would not sustain an assault or battery claim. Trott v. Merit Dept. Store, 106 AD2d 158, 159-60 (1st Dep't 1985); Allstate Ins. Co. v. Schimmel, 22 AD3d 616, 802 NYS2d 810, 811 (2nd Dep't 2005); Schetzen v. Robotsis, 273 AD2d 220, 221 (2nd Dep't 2000).
Unlike cases where the facts alleged support only purposeful infliction of injury, such as chasing the victim, taking aim, and swinging or firing a weapon, plaintiff's allegations in her second cause of action plausibly support a viable negligence claim and not just an intentional assault or battery claim. Slayko v. Security Mut. Ins. Co., 98 NY2d 289, 293 (2002); Allstate Ins. Co. v. Zuk, 78 NY2d 41, 44-45 (1991); Perez-Mendez v. Roseland Amusement Dev. Corp., 305 AD2d 166; Deetjen v. Nationwide Mut. Fire Ins. Co., 302 AD2d 350, 352 (2nd Dep't 2003). See U.S. Underwriters Ins. Co. v. Val-Blue Ins. Co., 85 NY2d at 823; Allstate Ins. Co. v. Mugavero, 79 NY2d 153, 160-61 (1992); Trott v. Merit Dept. Store, 106 AD2d at 160-61; Smith v. New York Cent. Mut. Fire Ins. Co., 13 AD3d 686, 688 (3rd Dep't 2004). A reasonable interpretation of plaintiff's claims is that plaintiff was injured by intoxicated persons handling a sharp instrument at Triangle Realty's premises. See Technicon Elecs. Corp. v. American Home Ins. Co., 74 NY2d at 73-74. This injury is not necessarily "inherent in" the alleged conduct, in contrast to a sole allegation that persons affirmatively engaged in a physical altercation with plaintiff or allegation of child molestation. Allstate Ins. Co. v. Mugavero, 79 NY2d at 161; Tagney v. Burke, 21 AD3d at 368; Smith v. New York Cent. Mut. Fire Ins. Co., 13 AD3d at 688.
In any event, plaintiff's first cause of action alone requires Sirius America's defense of her entire action. Town of Massena v. Healthcare Underwriters Mut. Ins. Co., 98 NY2d at 445-46; Agoado Realty Corp. v. United Intl. Ins. Co., 95 NY2d at 145; Deetjen v. Nationwide Mut. Fire Ins. Co., 302 AD2d at 352; Essex Ins. Co. v. T-Birds Nightclub Rest., 229 AD2d at 920. See Allstate Ins. Co. v. Mugavero, 79 NY2d at 162; Smith v. New York Cent. Mut. Fire Ins. Co., 13 AD3d at 687; Pennsylvania Millers Mut. Ins. Co. v. Rigo, 256 AD2d 769, 770 (3rd Dep't 1998). Absent assaultive conduct, plaintiff retains a cause of action for a negligently inflicted injury from the wielding of a sharp instrument that stabbed, sliced, or otherwise cut her.
In sum, Sirius America has not rebutted Triangle Realty's showing that plaintiff's allegations suggest "a reasonable possibility of coverage," Continental Cas. Co. v. Rapid-Am. Corp., 80 NY2d at 648, even though her claims ultimately may prove to be outside the policy's coverage. Fitzpatrick v. American Honda Motor Co., 78 NY2d at 65-66; Allstate Ins. Co. v. Zuk, 78 NY2d at 45; Villa Charlotte Bronte v. Commercial Union Ins. Co., 64 NY2d 846, 848 (1985); City of New York v. Certain Underwriters at Lloyd's of London, England, 15 AD3d 228, 230 (1st Dep't 2005). The complaint's allegations are susceptible of an interpretation that falls within the policy's coverage and outside the assault and battery exclusion. Villa Charlotte Bronte v. Commercial Union Ins. Co., 64 NY2d at 848; Maroney v. New York Cent. Mut. Fire Ins. Co., 10 AD3d at 780, aff'd, 2005 WL 2777579; City of New York v. Certain Underwriters at Lloyd's of London, England, 15 AD3d at 230-31. See Technicon Elecs. Corp. v. American Home Ins. Co., 74 NY2d at 73-74.
To recapitulate, Sirius America's May 2004 notice was ineffective to disclaim or deny coverage. Even if Sirius America later could rely on its September 2004 notice, it was untimely. Finally, even if the May or September 2004 notice was timely and effective to deny or disclaim coverage, the policy terms do not exclude all plaintiff's claims. For each of these reasons, defendant-third party plaintiff Triangle Realty is entitled to summary judgment on its claim that third party defendant Sirius America is obligated to defend Triangle Realty in the main action and to indemnify Triangle Realty for any judgment there that falls within the parties' insurance policy coverage. Consequently, Sirius America is obligated to reimburse Triangle Realty for its reasonable attorneys' fees and expenses in defending the main action and is estopped from disclaiming or denying coverage on a further ground. C.P.L.R. §§ 3001, 3212(b).